Are electric utility CEOs up to the challenges posed by today`s era of radical change? Do they have the background and skills needed to lead the multi-faceted transition from monopoly markets to competition? Or must the profile of a successful electric utility CEO change significantly as the industry evolves?
“The answer is yes on all counts,” explained Bob Shields, managing director of the Electric Utilities Practice of executive recruiting firm Spencer Stuart. Shields spearheaded The Electric Utility CEO of Today-and Tomorrow report, which included extensive research into the backgrounds of CEOs of the 80 largest investor-owned utilities. “Our study shows that while successful leaders can hail from any background, a new type of electric utility CEO is emerging whose experiences may provide many of the tools needed to manage this rapidly changing industry.”
Classic vs. nontraditional CEOs
Historically, the vast majority of electric utility CEOs have been recruited out of college and worked their way up to the top spot. This is still true for 64 percent of the CEOs studied, dubbed “classic” CEOs by Spencer Stuart. But recent changes driving the industry have also prompted 36 percent of these utilities to seek “nontraditional” CEOs whose backgrounds include experience in other industries.
Nontraditional CEOs were most likely recruited into a utility from a position in finance, law, government or the military and display markedly different backgrounds from classic utility careerist CEOs. First, all nontraditional CEOs have worked outside the utility industry. None began his career as an engineer, and less than one-fifth worked in operations at some time. This is a sharp contrast to classic CEOs, more than one-third of who began their careers in engineering, and nearly one-third of who worked in operations.
In addition, the average nontraditional CEO joined his current company 10 years later than classic CEOs and became chief executive two years earlier. Nontraditional executives are also more likely to hold graduate degrees than classic CEOs-55 percent vs. 46 percent.
Interestingly, none of the CEOs of the 80 largest utilities has any international experience.
“The question is, do nontraditional CEOs herald a new model of electric utility leadership?” said Shields. “While the CEOs with whom we discussed our findings feel that fundamental leadership traits like strategic vision can arise from any background, they also point to several areas of expertise that are likely to define the successful electric utility CEO of the future.”
The electric utility CEO of the future
Based on decades of recruiting experience and on input from electric utility CEOs, Spencer Stuart`s report details five core abilities that will be critical to the success of utility CEOs in the future.
Financial expertise. Five years from now, utility CEOs will focus less on operations and more on legal and financial concerns. Nontraditional CEOs already exhibit expertise in these areas-57 percent have worked in finance at some point during their careers, and 43 percent have worked in law. In comparison, 42 percent of traditional CEOs have finance experience; only 26 percent have legal experience.
Competitive industries experience. Experience in competitive industries will help utility CEOs navigate through radical transitions, as well as build and strengthen relationships with customers.
Strong communication and management skills. CEOs will need to interface with Wall Street analysts and investment bankers, supervising the transformation of their shareholder base into a more risk-oriented group. They will also need to motivate and inspire employees to high levels of performance.
Technology savvy. Over the next five years, utility CEOs will need to make the transition from managing “metal, mass and hydraulics” to managing “miniaturized, electronic and information technology.” Leadership`s focus will move from leveraging generation and transmission assets to managing information and customer relationships for competitive advantage.
International experience. Utility CEOs of the future will be well served by gaining some degree of international experience. As the utility industry globalizes, many organizations will grow by establishing or acquiring generation or other assets around the world.
“Today, most electric utilities are fairly similar,” Shields continued. “But as each utility identifies a strategy for the future- generating, distributing or marketing power -the demands on and profiles of their CEOs is likely to diverge considerably. Utilities` needs will become more specialized, and identifying the right individual to become CEO will be even more challenging and more important.”
A copy of The Electric Utility CEO of Today-and Tomorrow is available by contacting Carole Shifman at 312-649-0371 or via e-mail at email@example.com.