The Wall Street Journal-20080130-BUSINESS- Consulting Stints Can Actually Aid CEOs

Return to: The_Wall_Street_Journal-20080130

BUSINESS: Consulting Stints Can Actually Aid CEOs

Full Text (836  words)

It has been 30 years since Robert Kidder worked at McKinsey & Co., but he still describes that early career experience as "life- defining." His stint as a management consultant taught him a style of logical thinking that proved invaluable in later jobs as chief executive of Duracell and Borden Chemical, he says.

Maybe it is time to let go of the jokes portraying consultants as glib, clueless apostles of PowerPoint, who have yet to hold "real" jobs. Lots of onetime consultants are getting the last laugh, landing posts as CEOs of sizable corporations.

Consider John Donahoe, the new CEO at online-auction house eBay, who spent more than 20 years at Bain & Co. Or look at Hubert Joly, a former McKinsey consultant who is about to take the top job at travel- industry titan Carlson. In fact, companies ranging from insurer Aon to gift maker Russ Berrie have picked ex-consultants as their CEOs.

Working at a consulting firm has long been regarded as a great way to learn high-level strategy, which could be helpful in all kinds of later jobs. But offsetting doubts have been plentiful, mostly about consultants' ability to master the ingenuity, tact and persistence needed to get big ideas carried out.

Former Honeywell CEO Lawrence Bossidy crystallized that concern in 2002, when he and consultant Ram Charam co-wrote the best-selling management book "Execution." The authors contended that former consultants and other executives without front-line experience can flounder when managing key lieutenants or making delicate pricing decisions.

"They have never been tested in mobilizing line people to execute," Messrs. Bossidy and Charam wrote. "They haven't had the experience that develops business instinct." The authors' remedy: move such people into operating jobs gradually, so they have time to build their missing skills.

Reinforcing that point, John Wood, an executive recruiter at Spencer Stuart, says he favors a two-step career progression for ex- consultants. Their first corporate job should be in a familiar area, such as strategy, where they can gradually learn how a big company really functions. Once they have absorbed that lesson, they can be promoted into big operating jobs and do well, he says. Rush a career, and the risk of failure increases.

The past 15 years have produced plenty of examples to support the Bossidy/Wood point of view. The most successful ex-consultants tend to follow career paths similar to that of Louis V. Gerstner Jr., who packed in plenty of operating experience between his early days at McKinsey and his eventual triumph as the CEO of International Business Machines. By the time they ran entire companies, their consulting jobs were just small entries on their resumes.

Longtime consultants who enter corporate careers near the top don't always fare as well. Kevin Rollins spent 12 years at Bain and then joined Dell in 1996 as a senior vice president. He became CEO of the computer company in 2004 and was eased out last year. Dell widened its product line substantially during Mr. Rollins's tenure, but its reputation for customer service suffered, and efforts to diversify didn't pay off as hoped.

Both Messrs. Gerstner and Rollins declined to talk about their careers.

These days the constantly changing demands of the CEO's job may play to ex-consultants' strengths. Steve Ellis, world-wide managing partner for Bain, notes that many of Bain's alumni end up as CEOs for companies controlled by private-equity firms. These firms were active acquirers until the market turmoil of recent months.

Such CEO placements are a good match, Mr. Ellis says. Private-equity firms want decisive action that can boost shareholder value in a hurry. They prize consultants' ability to see the big picture and shake free of long-established but perhaps less-than-optimal ways of doing things.

Furthermore, in the rough-and-tumble world of private equity, new CEOs don't need to win popularity contests.

It is a different story, though, for eBay's new boss, Mr. Donahoe. While he and eBay's former CEO, Meg Whitman, previously worked together at Bain, that connection doesn't much matter now. His success depends heavily on how well he can sustain the loyalty of eBay's sellers: a vast, free-spirited and hard-to-manage group.

Spend time with Mr. Donahoe, though -- as I did back in his Bain days -- and it is clear that he has long defied the stereotypes of an aggressive consultant. Back at Bain, he praised junior members of his team. He played down his own consulting skills. He defined his job as helping other people do good work.

Keeping eBay growing as fast as Wall Street wants won't be easy. On an investors' conference call last week, Mr. Donahoe talked about using more fixed-price sales instead of auctions, about improving user feedback and adjusting eBay's pricey fees. Those steps might help. None sounds like an elixir.

But Mr. Donahoe's how-can-I-help personality may benefit the company -- or at least buy him more time to maneuver. And if he turns out to be a capable CEO, maybe he'll warrant at least a footnote in the next edition of "Execution."