August 30, 2018 Written by: TS Grale

Recently, TS Grale worked with a manufacturing company around the movement of their Operations Director to the post of company Managing Director (MD). This project has involved an analysis of executive functions but also extensive succession planning.

Even though this planning is so vital to business continuity, it’s surprising how many companies don’t plan as effectively as they should. Preparing a strategy for what is a constant and ongoing challenge, should be fundamental to the pivotal roles within a business.

So, where do new MDs come from, and what experience do they have? Do manufacturing leaders generally come from a specialism like sales, operations, and finance, or are they business leaders by profession?

Well-rounded leaders

In 2016, LinkedIn analysed the career paths of approximately 459,000 of their global members who worked at a “Top 10 consultancy” between 1990 and 2010 and became a VP, CEO, MD or partner at a company with at least 200 employees. The results were fascinating.

One of the key findings was that changing a job function can be most beneficial to a career. However, changing industry can be less so. In their words:

“Working across job functions, like marketing or finance, provides the well-rounded understanding of business operations that are needed to become an executive. Each additional job function provides a boost that’s, on average, equal to three years of work experience. But switching industries — perhaps because of the learning curve or relationships lost — has a slight negative impact to moving up the corporate ladder.”

Often it can be tricky for individuals from a background like Marketing to be seen as capable of broader aptitudes.  It is therefore vital for those who have the ambition to attain MD status to gain significant and extensive industry experience.

Having excellent social and communications skills is equally important, as is truly understanding the value of culture, branding, and identity to get to grips with the essence of a company, its people, and its management.

Knowing your sector

There can be circumstances where a leap from one sector to another can be beneficial to all parties. Often this is during periods where interim leadership is required, such as during organisational change, and with this comes a fresh perspective without political baggage.

Usually, however, an up-to-date and firm understanding of a sector is essential, such as trends, competition, government policy, performance, and impact on an international level.  That said, this logic can often be taken too far with the belief that specific product or process experience is required which most believe is superfluous at this level of leadership.

Broadening experience beyond specialisms, such as taking on new roles or sitting on boards, has a more significant impact than moving between sectors. The most successful MDs havewidened their scope and taken on enhanced roles in the past, such as an appointment to a strategic committee or working group.

Others volunteer for project management or interim-management roles during recruitment proceedings, even on a temporary basis, to gain valuable leadership experience.

A “pedigree” education

This LinkedIn study also noted that advanced degrees like a PhD or Master’s degree in industry-specific disciplines – such as engineering or political science – can assist in the speed of ascension to an executive level.

However, these degrees don’t always provide the same boost as a Master of Business Administration (MBA). According to the data, obtaining an MBA of “pedigree” can be the net equivalent of having up to 13 years of work experience (no doubt a contentious way of quantifying an academic credential).

The Financial Times 2018 Global MBA Rankings is topped by big international names in the field of higher education, however, the UK is still well placed. The top ten UK destinations to acquire an MBA are currently:

  • London Business School (4thplace globally),
  • University of Cambridge,
  • University of Oxford,
  • Alliance Manchester Business School,
  • Warwick Business School,
  • City University Cass Business School,
  • Imperial College Business School,
  • Cranfield School of Management,
  • Durham University Business School,
  • Lancaster University Management School.

This internationally-recognised qualification enables employers to determine a prospective employee’s market value and salaries are often banded accordingly. They can also lead to a huge variety of roles at executive level, from business finance and corporate strategy, to management consultancy, research & development, and supply chain leadership.

UK universities now teach MBA students abstract theories and real-life business scenarios, and many invite C-suite guest speakers from the biggest brands today including HSBC, Shell, and Debenhams.

Developing financial acumen

As executive and leadership search specialists, we work with many firms in manufacturing, engineering, and industrial sectors, but also areas such as distribution, supply chain, consumer marketing, and retail.

Although we see a broad mix of candidates promoted internally and externally, there is often a desire for an MD to have a financial background. Other typical responsibilities include implementing policy, strategic planning, maintaining relationships with shareholders and the Board, overseeing financial operations, inspiring the management team, and taking accountability for company operations.

Having the skills to understand and interpret such data and the financial imperatives of an organisation to drive change is very attractive to a Board.  With uncertainties around Brexit, change planning, and cost-saving pressures, often Boards seek an individual within manufacturing or engineering but with financial experience at a top tier, to keep a firm grip on accounts.

As McKinsey & Company states in an article about functional leaders, financial leaders:
“…are often better at developing detailed strategies, have a deeper understanding of the drivers of business value, and can communicate that to investors. Extensive experience in budgeting and forecasting builds an appreciation of objective analysis.”

That being said, other business-critical priorities can impact on the type of leadership required. The needs of a business and even its five-year strategy can affect this decision, i.e. if digitisation is central to an organisation going forward, a top technologist may be appointed, or perhaps a wholesale rebrand may require an MD from a marketing background.

What are your experiences? Are there other ways in which  functional executives can become a genuinely aspirational MD? We’d love to hear your thoughts.

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