Streamline Training & Documentation: Who You Gonna Call?

Friday, June 30, 2006

Who You Gonna Call?

Where should an organization look for leadership talent?

A recent study by Korn/Ferry International¹, an executive search firm, indicates that turning to people with military experience is apt to pay off. In their summary of the study's results, Korn/Ferry report:

Companies led by CEOs with military experience have outperformed the S&P 500 Index over the past three, five and 10-year periods by as much as 20 percentage points ...

[The study] also found that CEOs with military experience tend to last longer in the job. CEOs with military experience have an average tenure of 7.2 years, while CEOs without military experience have an average tenure of 4.6 years.

The study found that the 59 companies on the S&P 500 headed by CEOs with military experience provided an average annual shareholder return of 21.3% over the three-year period ending September 2005, versus 11.0% for the S&P 500 Index during the same time. For a five-year period, the ex-military CEOs provided a 9.5% return while the Index provided a -10.7% return, and for a ten-year period, the ex-military CEOs provided a 12.2% return versus a 9.4% return for the S&P 500 Index.

Featuring both a quantitative analysis of companies in the S&P 500 led by CEOs with backgrounds in the U.S. military, as well as qualitative in-depth interviews from four ex-military CEOs – Clayton Jones of Rockwell Collins; Michael Morris of American Electric Power; Michael Jordan of Electronic Data Systems; and Steven Loranger of ITT Industries – the study suggests that deft management of stressful situations during real-world military operations may well enhance performance in a corporate environment.

From their four interviews, Korn/Ferry conclude that "leadership skills learned in military training enhance success in corporate life" (although it is always necessary to acknowledge that correlation can't prove causality). Furthermore, officers in the military are able to get hands-on experience in leadership earlier in their careers than is generally possible for people in civilian organizations.

The six leadership traits that Korn/Ferry's interviewees identified as most important were:

Learning how to work as part of a team — Steven Loranger of ITT "cites the US Navy 'Plan of the Day' as an effective method for keeping team members informed and engaged. 'The plan of the day was the absolute bible.'"

Organizational skills, such as planning and effective use of resources — As Michael Jordan of EDS noted, "The essence of being an officer is to figure out how to deploy forces and resources to get something done. From a management standpoint, that is one of the really great lessons."

Good commuinication skills — Michael Morris of American Electric Power reports that he learned "the willingness to listen and formulate an opinion that incorporates as many people's ideas as possible."

Defining a goal and motivating others to follow it — Steven Loranger comments, "Something you learn in the military that is fundamental in business is a sense of mission. You got very, very focused on your objectives. It was clear what the objective was and what constituted success and failure."

A highly developed sense of ethics — "Steven Loranger says that the military teaches honesty, integrity and 'doing the right thing.'"

The ability to remain calm under pressure — Clayton Jones of Rockwell Collins "credits the Air Force's Red Flag exercises, which simulate combat experiences, with teaching him flexibility in strategy and tactics, as well as the importance of being able to use only the tools at one's disposal to carry out a mission."

The interviewees emphasized that their experience as officers in the military exposed them to the practical how-to's of cultivating the above traits.

Korn/Ferry sum up by comparing MBA and military training:

Both the military and graduate schools of management provide somewhat similar training, such as their emphasis on case studies or analytical tools. [But as] EDS's Michael Jordan puts it, "The MBA gives you tools and familiarity, but it doesn't put you in a real-world situation."

A junior military officer (JMO) can enter a company and run a department "the way an MBA has no clue how to do," he says. An advantage of the JMO is that he understands organization and discipline and has experience with planning, organizing and following up in a methodical and thorough manner, according to Jordan. "An MBA teaches you the analytical side, but not the people management side. That comes with experience."

A caveat: After about 10 years as a military officer, further experience in the miliary does not seem to add significantly to leadership smarts, probably because after a decade or so, the political aspects of the military begin to loom larger. Also, there are certain skills that typically are not developed in depth in the military, such as marketing, sales, finance, entrepreneurship, and managing multiple objectives.

You can read the full Korn/Ferry report, "Military Experience & CEO's: Is There A Link?" here (pdf).

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¹ The report of the Korn/Ferry study was written and edited by staff of the Economist Intelligence Unit — Tim Duffy and Dan Armstrong, respectively.

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