Organizing for America | Josh Keller's Blog: Executive Experience: Lets turn to real research on managers

Executive Experience: Lets turn to real research on managers

By Josh - Jan 19th, 2008 at 6:56 pm EST

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One of the ironic aspects of the mainstream media’s debate about Clinton vs. Obama or Clinton & Obama vs. Republicans is that they frame the choice as change vs. experience without looking at actual empirical research on executive tenure. The best example is David Broder’s piece that talks about the Dem’s lack of executive experience.

http://www.realclearpolitics.com/articles/2008/01/dems_lack_the_executive_experi.html

I am a PhD in Management and have finally decided I had enough of people making claims that aren’t true. This is what the Management literature (where they actually conduct empirical research on firms) says:

A. The impact of CEO tenure (a proxy for Brody’s “Executive experience”) on firm performance is mixed—some good, some bad, some depending on context.

B. Diversity and International/Cross-cultural experience is now being treated as a key positive.

First, about CEO tenure effects:

1.    No clear support that tenure is good for firm performance. Instead, it depends on the environment. In a stable environment, CEO tenure is good. In a dynamic environment, CEO tenure is bad.

Henderson, A., Miller, D., & Hambrick, D. (2006, May). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447-460.

I believe that our world of globalization, technological change, environmental destruction and terrorism would put the president’s environment in the category of “dynamic”.

2.    The environmental impact relates to CEOs behaving differently depending on tenure. CEOs with longer tenures are more likely to follow similar practices and are less likely to change practices. They follow old norms. This is good if the old practices work, but not in a changing environment.

Finkelstein S, Hambrick DC. 1990. Top-management team tenure and organizational outcomes: the moderating role of managerial discretion. Administrative Science Quarterly 35(Sept.): 484–504.

3.    A counter-intuitive aspect of CEO tenure is that CEOs with longer tenure may take more risks. This is because they are more confident in their decisions. Risks can be good for firms. Not necessarily for countries. This may explain Iraq more as a result of Cheney & Rumsfeld’s experience and less of Bush’s inexperience—although Bush’s lack of judgment certainly contributed.

Simsek, Zeki. 2007. CEO tenure and organizational performance: an intervening model. Strategic Management Journal 28(6): 653-662.

Meanwhile, there are two growing areas of research that speak well for Obama.
1.    Top-Management Team Diversity
2.    International/Cross-Cultural Experience

Obama talks a lot about bringing in diverse perspectives. And more and more research is pointing to the positive effects of diversity in the top-management team.

Knight, D., Pearce, C., Smith, K., Olian, J., Sims, H., Smith, K., et al. (1999, May). Top management team diversity, group process, and strategic consensus. Strategic Management Journal, 20(5), 445.

And a growing amount of research is pointing to the positive effects of international experience of the CEO on firm performance for multinationals. Given the growing importance of the “multinational” in US affairs, this seems to apply well to the President. Look at what we had with George Bush...

Carpenter, M., Sanders, W., & Gregersen, H. (2001, June). BUNDLING HUMAN CAPITAL WITH ORGANIZATIONAL CONTEXT: THE IMPACT OF INTERNATIONAL ASSIGNMENT EXPERIENCE ON MULTINATIONAL FIRM PERFORMANCE AND CEO PAY. Academy of Management Journal, 44(3), 493-511.

And despite the laughs about Obama’s experience in Indonesia, some researchers are beginning to look at multicultural experience and cultural intelligence (which comes at an early age) on the ability to perform as a manager. Obama’s life has been shaped by his experience as a bicultural child (African & Kansan), living in Indonesia, growing up in Hawaii (with a mixed population of Whites, East Asians and Polynesians), going to an Ivy League school and working the streets of Urban Chicago. He has been exposed to MANY cultures. And this provides a basis for cultural intelligence, which allows people to both understand and navigate in a multicultural environment (which is the world the President is in now, both domestically and internationally).

Ang, S., Van Dyne, L., Koh, C., Ng, K., Templer, K., Tay, C., et al. (2007, November). Cultural Intelligence: Its Measurement and Effects on Cultural Judgment and Decision Making, Cultural Adaptation and Task Performance. Management & Organization Review, 3(3), 335-371. Retrieved January 18, 2008, from Business Source Complete database.

Johnson, J., Lenartowicz, T., & Apud, S. (2006, July). Cross-cultural competence in international business: toward a definition and a model. Journal of International Business Studies, 37(4), 525-543.

I am not going to pretend that a CEO of a firm and the President is the same thing. But neither should the folks like Broder (or the Clinton campaign, for that matter). At least when I’m talking about comparisons to firms, <strong>I’m citing real studies</strong>.

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