General Managerial Skills Research Articles

The Dark Side of CEO Ability: CEO General Managerial Skills and Cost of Equity Capital

The Dark Side of CEO Ability: CEO General Managerial Skills and Cost of Equity Capital

Are They Different? CEOs Made in CEO Factories

We find that over 20% of CEOs appointed at S&P 1500 firms from 1992 to 2010 came from 36 CEO factories. CEOs originated from CEO factories, factory CEOs, have significantly higher cumulative abnormal returns at the appointment announcement than do non-factory CEOs. We show that CEO factories provide unique leadership development opportunities through which executives acquire general managerial skills. In their first three years, factory CEOs tend to discontinue large, underperforming segments, improve the performance of remaining segments, and invest heavily in R&D. As a result, firms hiring factory CEOs exhibit better long-run performance and award greater CEO compensation.

Managerial Ability and Firm Performance: Evidence from the Global Financial Crisis

We use the financial crisis as a natural experiment to investigate the impact of managerial ability on corporate investment for 2747 U.S. non-financial firms. We find a positive relation between pre-crisis managerial ability and crisis period investments. This occurs because of the capacity of firms with higher pre-crisis managerial ability to secure greater financing and to keep their firms less vulnerable to financial constraints, which in turn help mitigate severe underinvestment problems evident during the financial crisis. Interestingly, the positive relation between managerial ability and investment holds only for firms with CEOs who have general managerial skills rather than firm-specific skills. Finally, we find that the stock market positively evaluates crisis period investments, yet this effect is solely evident among firms characterized by high levels of pre-crisis managerial ability.

Logistics and supply chain education and jobs: a study of UK markets

Purpose – The purpose of this paper is to examine the curriculum design of logistics and supply chain management (LSCM) undergraduate courses offered by selected UK higher education (HE) institutions and compares them with employers’ job requirements in the UK. Design/methodology/approach – Desk-based research involving content analysis of 22 selected undergraduate LSCM courses from 18 UK HE institutions and job advertisements from an online recruitment web site during 12 weeks in 2011-2012. Findings – In general, LSCM recruiters highlighted the importance of professional skills and general management knowledge rather than specific LSCM subject knowledge. Work experience is important even at the entry level. As the roles become more senior, as indicated by higher salaries, more LSCM subject knowledge and work experience is required. The findings indicate an imbalance between the undergraduate curriculum and employer needs. Only some of the LSCM undergraduates programmes investigated provided such a balance of curriculum design. Research limitations/implications – This paper is based on published information in web sites and also job adverts. More studies of the detailed syllabuses for the courses and the overall learning experiences of students are required. Practical implications – This paper highlights the importance of general managerial skills and professional skills to meet the needs of employers. Graduates are expected to be able to manage and acquire additional LSCM knowledge when required indicating the importance of continuing professional development. Originality/value – The methodology of this paper takes advantages of the availability of up-to-date “live” data via the internet. As a result, this study provides new insights into the LSCM employer requirements for three salary brackets, from entry level to senior level, and it indicates the “right” balance of curriculum design for LSCM graduates in the present days.

The dark side of CEO ability: CEO general managerial skills and cost of equity capital

CEOs with substantial general managerial ability (generalist CEOs) possess a substantial share of organization (human) capital and have different risk-taking incentives than do their counterpart specialist CEOs. Using an index increasing in CEO general managerial skills as a proxy for general managerial ability, we find that investors require higher returns from firms featuring CEOs who have profuse general managerial ability. Furthermore, expected returns are significantly increasing with CEO general managerial ability in firms with high organization capital, that belong to M&A-intensive industries and that have complex operations, high agency problems and high anti-takeover provisions. These findings are consistent with arguments that organization (human) capital has significant expected return implications and that CEOs with higher general managerial skills may lead to higher agency problems, feature different risk-taking incentives and be more costly to retain in times of need.

Dark Side of CEO Ability: CEO General Managerial Skills and Cost of Equity Capital

CEOs with substantial general managerial ability (generalist CEOs) possess a substantial share of organization (human) capital and have different risk-taking incentives than do their counterpart specialist CEOs. Using an index increasing in CEO general managerial skills as a proxy for general managerial ability, we find that investors require higher returns from firms featuring CEOs who have profuse general managerial ability. Furthermore, expected returns are significantly increasing with CEO general managerial ability in firms with high organization capital, that belong to M&A-intensive industries and that have complex operations, high agency problems and high anti-takeover provisions. These findings are consistent with arguments that organization (human) capital has significant expected return implications and that CEOs with higher general managerial skills may lead to higher agency problems, feature different risk-taking incentives and be more costly to retain in times of need.

Is CEO Human Capital Related to Firm Performance?

The global economy experienced continuous growth from 2002 to 2007 until the U.S. subprime mortgage crisis caused instability in worldwide stock markets. Simultaneously, global CEO turnover continued to fall to 13.8 percent in 2007. In contrast, the CEO turnover rate in Australia increased to 18 percent in 2007. The purpose of this paper is to determine whether the type of CEO human capital investment is associated with firm distress which sequentially is associated with firm performance. The empirical study of Australian listed firms (2005-2008) shows that the probability of bankruptcy is negatively associated with CEO’s general human capital and that firm distress is a significant determinant of CEO turnover. A CEO with more valuable firm specific human capital is less likely to be replaced/leave which in turn is associated increasing subsequent financial performance. Increasing financial performance is associated with decreasing investment in general human capital. These results are important because they imply that CEO firm specific experience is more important for increasing firm performance than general managerial skills despite the fact that recent research suggests that general human capital has increased in importance over firm-specific human capital.

The market for CEOs: An empirical analysis

We investigate empirically a market-based explanation for the rise in recent years in external CEO hiring and compensation and find, consistent with the market-based theory, that firms in industries relying on general managerial skills are more likely to hire CEOs externally than firms in industries relying less on such skills. We show that firms relying on internal CEOs have on average higher profits than external-CEO firms and that the difference in profits decreases as general skills become more important in the industry. We relate managerial skills to compensation and show that CEO general skills induce better firm performance and higher compensation.

The Market for CEOs: An Empirical Analysis

We investigate empirically a market-based explanation for the rise in recent years in external CEO hiring and compensation. Consistent with the market-based theory, we find that firms in industries relying on general managerial skills are more likely to hire CEOs externally than firms in industries relying less on such skills. We show that firms relying on internal CEOs have on average higher profits than external-CEO firms and that the difference in profits decreases as general skills become more important in the industry. We relate managerial skills to compensation and show that CEO general skills induce better firm performance and higher compensation.

Generalists versus specialists: Lifetime work experience and chief executive officer pay

We show that pay is higher for chief executive officers (CEOs) with general managerial skills gathered during lifetime work experience. We use CEOs' résumés of Standard and Poor's 1,500 firms from 1993 through 2007 to construct an index of general skills that are transferable across firms and industries. We estimate an annual pay premium for generalist CEOs (those with an index value above the median) of 19% relative to specialist CEOs, which represents nearly a million dollars per year. This relation is robust to the inclusion of firm- and CEO-level controls, including fixed effects. CEO pay increases the most when firms externally hire a new CEO and switch from a specialist to a generalist CEO. Furthermore, the pay premium is higher when CEOs are hired to perform complex tasks such as restructurings and acquisitions. Our findings provide direct evidence of the increased importance of general managerial skills over firm-specific human capital in the market for CEOs in the last decades.

Do General Managerial Skills Spur Innovation?

We show that firms with chief executive officers (CEOs) who gain general managerial skills over their lifetime work experience produce more patents. We address the potential endogenous CEO-firm matching bias using firm-CEO fixed-effects and variation in the enforceability of non-compete agreements across states and over time during the CEO’s career. Our findings suggest that generalist CEOs spur innovation because they have skills that can be applied elsewhere should innovation projects fail. We conclude that an efficient labor market for executives can promote corporate innovation by providing a mechanism of tolerance for failure.

Generalists versus Specialists: Lifetime Work Experience and CEO Pay

We show that pay is higher for CEOs with general managerial skills gathered during lifetime work experience. We use CEOs’ resumes of S&P 1,500 firms from 1993 through 2007 to construct an index of general skills that are transferable across firms and industries. We estimate an annual pay premium for generalist CEOs — those with an index value above the median — of 19% relative to specialist CEOs, which represents nearly a million dollars per year. This relation is robust to the inclusion of firm- and CEO-level controls, including fixed effects. CEO pay increases the most when firms externally hire a new CEO and switch from a specialist to a generalist CEO. Furthermore, the pay premium is higher when CEOs are hired to perform complex tasks such as restructurings and acquisitions. Our findings provide direct evidence of the increased importance of general managerial skills over firm-specific human capital in the market for CEOs in the last decades.

The Rise in Executive Compensation - Consequence of a ‛War for Talents‛?

The rise in executive compensation has triggered a great amount of public controversy and academic research. Critics have referred to the salaries paid to managers as “pay without performance”, while defenders have countered that the large salaries can be explained by a “war for talents”. This research tests whether a war for talent provides an explanation. The rise in executive compensation in recent years is explained by the assumption that, over the past decades, general managerial skills have become more important relative to firm-specific knowledge for the production of managers. A shift toward transferable managerial skills requires higher compensation, particularly in large firms, to attract and retain managerial talents. Relying on an internationalized and deregulated managerial labor market, i.e. the Swiss banking sector, the empirical findings confirm that a shift toward transferable managerial skills in large firms is indeed an explanation for the rise in executive compensation. However, the shift towards transferable managerial skills in large firms does not improve firm performance, giving no supporting evidence for a war for talent. It is discussed how transferable managerial skills may used to legitimize higher compensation at the top, e.g. by promulgating definitions of talent in elite labour markets.

Generalists versus Specialists: Managerial Skills and CEO Pay

We study whether the rise in CEO pay in the last decades is explained by an increase in the relative importance of general managerial skills. We construct an index of general managerial ability using detailed information on a CEO’s industry background, experience as top executive, and educational training. We find a positive relation between the general ability index and CEO pay using the sample of S&P 1,500 firms in the 1993-2007 period. This relation is driven by both industry mobility and experience as a top manager and is mostly pronounced among diversified firms. We find a 10% pay premium by comparing the actual CEO’s pay to the pay of a portfolio of CEOs who are specialists in the industries that match the CEO’s industry experience. Furthermore, we provide evidence that CEO pay increases the most when firms hire a new CEOs from outside the firm and switch from a specialist to a generalist executive. Our findings suggest that a rise in the importance of general relative to firm-specific managerial skills helps to explain the rise in executive pay.

An Empirical Study of HR Factors as Determinants of Talent Management

An organization's ability to learn and translate that learning into action rapidly is the ultimate connpetitive business advantage. One key corporate responsibility is to enable people to use and develop their individual talents. Organizations must ensure that people can fulfill their needs and find their potential in their work experience. Jobs should be designed to match people's talents. Contributions to the quality of the workplace are highly valued. Organizations should provide a complete range of HR services including HR consulting, HR technology and HR outsourcing. Some organizations, like Infosys', are already using Human Capital Management (HCM) practice to help clients differentiate and achieve operational excellence. The present work represents how the organizations can bring right kind of talent at the work place and how that talent can be retained. Through literature survey eleven factors contributing to talent management have been identified which are: creativity&resourcefulness, problem solving&decision making, communication, team building, entrepreneurship, leadership, general managerial skills, learning ability, performance measurement, career development, inspirational capabilities. Various statistical tests like inter item analysis, correlation analysis, multiple regression are performed to examine the relationship between different factors and talent management on a sample of 100 trainees of ACC who were attending their training program at Indian Institute of Technology, Roorkee. The results reveal that among all other factors inspirational capability is the prime factor contributing to talent management. On the other hand organization should put in more effort to creativity and innovativeness as these are the essential ingredients in the current global competitive environment for any organization to survive. Based on this study a model for talent management is suggested.

Accreditation program design: a survey of supply chain professionals

PurposeThe purpose of this paper is to report results of a survey in support of re‐designing the Purchasing Management Association of Canada (PMAC) professional accreditation program, the Certified Professional Purchaser (CPP).Design/methodology/approachA questionnaire was developed, embedded in e‐mail messages via hyperlink, and transmitted to the PMAC membership. The questionnaire included 54 topics, tools and techniques for supply chain management (SCM). Over 2,000 PMAC members commented on CPP program design, by returning the questionnaire electronically. Data analysis culminated with a principal components analysis of the 54 items, from which seven distinct components emerged.FindingsThe paper finds that PMAC members lack a common view of SCM. While 63 percent have adopted a broad SCM perspective; 37 percent have a more narrow perspective. However, the most important topics for supply chain professionals are robust across the perspectives. These topics pertain to general managerial skills (e.g. communication, leadership and relationship building); rather than specific functional or analytical tools and techniques.Research limitations/implicationsWhile the current study focuses exclusively on Canadian supply chain professionals, it would be very interesting and worthwhile to expand this research to other geographic locations.Practical implicationsA renewed CPP program, taken out of the somewhat narrow and tactically‐oriented purchasing area – and into the broader and more strategic SCM space, seems to be in order. The survey provides valuable information to support design and development of this new program.Originality/valueBased on electronic survey returns from more than 2,000 supply chain professionals, insights are gained into various perspectives on SCM, along with important knowledge (topics, tools and techniques) for effective SCM.

CEO Appointments and the Loss of Firm-Specific Knowledge - Putting Integrity Back into Hiring Decisions

A rarely studied trend in corporate governance is the increasing tendency to fill CEO openings through external hires rather than through internal promotions: Kevin J. Murphy and Jan Zabojnik (2004) show that the proportion of outside hires has doubled and their pay premium almost quadrupled over the last thirty years. Assuming that general managerial skills are becoming more important relative to firm-specific skills, the authors conclude that competition in the managerial labor market establishes optimal contracts. In our model and our empirical analysis we question this explanation by assuming that over the past decades the dishonesty of the predecessor has become relatively more important for the appointment decisions of firms. We conclude that outside hires are a suboptimal trend because external candidates even step up the regression of integrity in firms: As nobody has an incentive to invest in firm-specific knowledge, not only the performance of firms drops, but also the remaining integrity.

CEO appointments and the loss of firm-specific knowledge - putting integrity back into hiring decisions

A rarely studied trend in corporate governance is the increasing tendency to fill CEO openings through external hires rather than through internal promotions: Kevin J. Murphy and Ján Zábojník (2004) show that the proportion of outside hires has doubled and their pay premium almost quadrupled over the last thirty years. Assuming that general managerial skills are becoming more important relative to firm-specific skills, the authors conclude that competition in the managerial labor market establishes optimal contracts. In our model and our empirical analysis we question this explanation by assuming that over the past decades the dishonesty of the predecessor has become relatively more important for the appointment decisions of firms. We conclude that outside hires are a suboptimal trend because external candidates even step up the regression of integrity in firms: As nobody has an incentive to invest in firm-specific knowledge, not only the performance of firms drops, but also the remaining integrity.

CEO Pay and Appointments: Putting Integrity Back into Hiring Decisions

A rarely studied trend in corporate governance is the increasing tendency to fill CEO openings through external hires rather than through internal promotions: Kevin J. Murphy and Jan Zabojnik (2004) show that the proportion of outside hires has doubled and their pay premium almost quadrupled over the last thirty years. Assuming that general managerial skills are becoming more important relative to firm-specific skills, the authors conclude that competition in the managerial labor market establishes an optimal compensation contract. In our model we question the last explanation and argue that it is the balanced mix of external market control and internal firm control that establishes compensation contracts, which may be approximately optimal.

Competencies Needed for Managing a Multicultural Workgroup

This study was designed to assess the competencies needed for a manager to manage a multicultural group of subordinates. Given the multicultural nature of today’s workforce, it has become increasingly important for managers to take into account how cross-cultural differences may affect their management practices. Open-ended semi-structured interviews were conducted in order to derive the competencies used by managers who are already managing a multicultural group. From content analysis, five key themes emerged comprising 27 sub-themes. The results suggest that the competencies needed are cultural empathy, learning on the job, communication competence, general managerial skills, and personal style. Hence, selection, training and development, and performance appraisal practices may be focused on identifying and/or developing these competencies, in order for managers to effectively manage a multicultural workforce.