Sometimes CEO selection can seem like a mystery to outsiders, a game of hit and miss, an art more than a science. New research, however, sheds light on the process: smaller boards tend to pick generalist CEOs over specialists.

A statistical analysis of thousands of data points by a team of academics based around the world reveals that smaller boards tend to eschew the benefits of specialist expertise to plump for all-rounders.

In a report on the research the team says the behaviour appears to be driven by the store of experience already present on a board.

“A lack of diverse experience in a small board with fewer directors makes it more necessary to hire a CEO with a broad range of professional experiences,” the report says.

The “generalist” nature of CEOs was measured using an index that weighs attributes such as the number of positions a CEO has held, the number of different companies they’ve worked at, industries and experience in a “multi-division conglomerate”.

Board size and CEO selection

Other research has looked at the size of boards and its relationship to topics such as strategy, but this is among the earliest to look at the relationship between board size and the process of picking an executive leader.

But why would small boards pick generalists over specialists? The writers suggest large boards have a greater range of expertise and experience and are therefore more equipped to offer advice: their backgrounds may “substitute for the CEO’s diverse experience”.

Smaller boards on the other hand may lack diversity of experience or expert knowledge and as a result need more of a generalist CEO to compensate. The research team writes that “generalist CEOs with greater managerial ability may help overcome smaller boards’ constraints using the external connections they established previously.” And this is because generalists possess a wider experience across firms and sectors which offer access to a bigger network and, potentially, a new customer base.

The insight could help direct CEOs towards boards that might appreciate their skills and experience much more. “Our findings may guide generalist CEOs who seek a job change; they may focus on firms with smaller boards as they need more of their abilities.”

Impact of top executives

A good deal of CEO research has surfaced in recent months. Last month a survey from search firm Heidrick & Struggles found that chief executives that “intentionally” target corporate culture enjoy double the compound growth rate of other companies. Ian Johnstone, a partner at H&S says: “The global pandemic caused turmoil within many organisations and it seems those who have maintained a focus on culture during the uncertainty will be better positioned for future success.”

Another study, however, cast doubt on the ability of CEOs. Conducted by the IMD World Competitiveness Centre and entitled A Bullshit Job? A Global Study on the Value of CEOs, the study concludes that the impact of executives in the top role is overestimated. They write that “CEOs only improve value in good companies, but destroy value in underperforming firms.”

This latest research, however, focuses on CEO selection drivers more than performance. Whether they know why or not, smaller boards tend to set their sights on generalists. That may be useful, but it may also leave boardroom diversity and skills unaddressed. As the writers point out, it may also mean those boards are better at monitoring than they are at advising their CEOs.