Sunday, May 7, 2017
Is Experience Overrated
Is Experience Overrated
In this months issue of Harvard Business Review, we read about fascinating new research by Jeffrey Cohn, of the executive search firm DHR International, and J.P Flaum, of the consulting firm Green Peak Partners. They have studied the CEO hiring practices and philosophies of 32 private equity firms. Why examine these companies selection processes for bringing new CEOs on board? Cohn and Flaum argue that these firms are different than most publicly traded companies, because the private equity partners have far more skin in the game than the board members of most public firms. Thus, the private equity partners worry a great deal about getting the hiring decision wrong.
What did these researchers find? First and foremost, Cohn and Flaum argue that, "Experience is overrated." Heres an excerpt from the Harvard Business Review feature on their research:
When filling a CEO position, there’s comfort in hiring someone with prior CEO and industry experience. But the first criterion can dramatically narrow the pool, and the second can yield candidates who are so familiar with the industry that they’re hidebound or likely just to recycle the strategic playbook from their last job. Similarly, overemphasizing quantifiable success in prior positions can be misleading, because results are often a function of “right place/right time” or organizational or team factors rather than one individual. And even within an industry, different competitive positions can demand very different skills—cost cutting versus product innovation versus business model change, for instance. The researchers write, “Past accomplishment and current challenge is rarely an apples-to-apples comparison.” Many of the interviewees said that over the years, they’ve become more open to “nontraditional” candidates who lack degrees from blue-chip schools and haven’t checked the usual boxes in a career progression. One put it this way: “You need someone who can come into a new situation and pick up the fundamentals quickly. A great athlete…is more important than someone with years of experience in an industry.”
You need to be careful about the conclusions you draw in this case. I dont think private equity firms believe that experience does not matter. They have concluded that experience is overrated. I think that is probably true in many circumstances. Why? As the excerpt above states, past success may not simply be a function of individual skill. It may have to do with "right place/right time" as well as a series of organizational and team factors that contributed to high performance.
Moreover, I would argue that experience can be a curse as well as a blessing in many situations. Successful people do get trapped into believing that they have discovered a "formula" for managing that can be applied in all future situations. Years ago, Chuck Knight, the former CEO of Emerson Electric, visited my class. He had retired after several decades at Emerson, during which time the firm enjoyed remarkable success. A student asked him, "Mr. Knight, if you were asked to lead a Silicon Valley firm today, would you apply the highly celebrated Emerson strategic planning process that you employed with much success for years?" He replied, "I probably would try, and I probably would fail... and so, Ill stay retired." Everyone laughed. However, he made the powerful point that it would be so enticing to try to apply his winning formula in that new job, but the context would be so different. That same formula would not be ideal in that new circumstance. However, most leaders has a tendency to rely too heavily on what worked for them in the past. Thats the potential curse of experience.
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