CEOs and Organizational Models

by Virgil R. Carter

As a CEO (or aspiring CEO), have you reached the conclusion that understanding your organizational model can help you reach more effective (and satisfying) leadership? The 2010 study of CEOs by Booz & Company, reported in Strategy+Business, sheds some light on the subject. I know, we’re in the non-profit sector, but we want to expand our awareness and learning as much as possible don’t we? How much applies to your situation?

This year’s findings identify four categories of organizations and management:

1. Holding: Distinguished by an arms-length approach to managing subsidiary activities. CEOs have a minimal degree of involvement in operational decisions. CEOs focus on “portfolio management”, while second-tier executives run daily business.

2. Strategic Management: CEOs and other senior executives are engaged in strategy development with subsidiary leaders, who have the accountability for business operations.

3. Active Management: CEOs and senior executives participate with close guidance and expertise, but leave direct operational management up to subsidiary units.

4. Operationally Involved: While execution remains within the subsidiary area, CEOs and senior executives play key roles in cross-unit capabilities, expertise, human resources and strategic decision making.

According to the Booz study, the organizational model clearly appears to influence CEO experience and tenure in the position. For example, the tenure in operationally involved organizations was markedly shorter and riskier. By comparison, the tenure of a CEO in a holding organization was a third longer than a CEO of an operationally involved organization. In addition, the study indicated that CEOs in operationally involved organizations are much more likely to depart during their first four years. For the full study, click here.