Expert-led companies perform better

Jul 20 2012 by Brian Amble Print This Article

Organisations are more successful if they are led by individuals who have real, hands-on experience of its core business rather than simply being effective general managers.

That's according to researchers from London's Cass Business School and the University of Sheffield who argue that firms led by 'expert leaders' perform better than firms where general managers are at the helm.

The findings are based on an analysis of every Formula One motor race staged over the last 60 years which revealed that teams whose leaders started their careers as drivers or mechanics have won twice as many races as those headed up by professional managers or engineers with degrees.

"Former top drivers, like Jean Todt [who led Ferrari to 13 Formula One World Championship titles], consistently turn into successful Formula One bosses, even when accounting for factors such as the resources available to each team," said co-author of the study, Dr Amanda Goodall of Cass Business School.

But this is not just true in motor racing, she argued. Expert leaders make better managers because of their deeply ingrained technical knowledge, which helps them to formulate more effective tactics and intuitive strategies.

"Is it important that the CEO of McKinsey was an outstanding consultant first? Should the BMW boss be an engineer? Are doctors better at running NHS hospitals? We would argue, 'yes'," said Dr Goodall.

"Over the last three decades, managerialism has become pervasive. Major blue chip firms have shifted away from hiring CEOs with technical expertise, towards the selection of professional managers and generalists.

"The swing of the pendulum has gone too far - leaders should first be experts in the core business of their organisations, whether they are bankers, hospital administrators, restaurateurs or technology innovators. Being a capable general manager alone is not sufficient."

Another reason for the success of expert-led organisations is that 'expert leaders' command greater credibility among teammates, having worked on the floor themselves. Their reputation and track record can also help in luring other talented personnel to join them.

"We can see why comparative newcomers like Red Bull, led by ex-driver Christian Horner, and Sauber, run by former mechanic Peter Sauber, are doing so well in Formula One. These teams may not have a 50-year history like Ferrari but they are led by hands-on experts with deep intuition," Goodall said.

The authors tested their theory on Formula One as the similarities in size and capabilities of the teams allowed more precise comparisons to be made. The small teams also made it easy to assess the influence of leaders.

The study results held true even when the authors accounted for the type of circuit, the fame of the constructor team, the year of the race, and the number of cars in each competition.

Dr Goodall conducted a previous study of 300 hospitals in the US which found that hospitals run by doctors outperform those run by managers.