From CEO to Senate: Why Some Executives Make Better Politicians Than OthersPublished: June 23, 2010 in Knowledge@Wharton
Growing numbers of top business executives appear to be running for political office. Among others, former CEOs Meg Whitman and Carly Fiorina recently won California primaries for governor and senator, respectively, while promising to use leadership skills and financial acumen honed at private corporations to solve thorny public problems. But experts on leadership and politics say that the leap from one world to the other is fraught with challenges. They warn that the ability to rise through the corporate ranks doesn't always translate into an ability to campaign for office. And managing a city or state, let alone entering a legislative body, has challenges and responsibilities that are much different than those of managing a for-profit business.
Michael Useem, a Wharton management professor and director of Wharton's Center for Leadership and Change Management, says some business-leadership skills translate well to the public sphere. "If you have held a prominent role in a substantial business you have learned how to mobilize, motivate and align the work of a lot of people. That ability is a learned skill. It's not natural for most people," he notes. "Equally importantly, as you've risen up in larger firms, you've had to learn how to communicate. You have to communicate persuasively with vision and mission and strategy in your voice." Adds Peter Cappelli, professor of management at Wharton and director of the Center for Human Resources: "General management skills help a lot in running anything, even a political campaign."
Business people who run for public office naturally maintain that their backgrounds are an asset in helping them understand how to run things, create jobs and work within financial constraints. Executives making the switch hope to benefit from the current economic environment and voter anger at traditional politicians. Connecticut Senate candidate Linda McMahon, former CEO of World Wrestling Entertainment, is typical. Her campaign's website boasts: "She isn't a career politician, but she is an outsider with 30 years of real life business experience who understands how to balance a budget and create jobs."
The strong record of New York Mayor Michael Bloomberg inspires many executives to believe that applying business skills to public management can make government work better, experts say. Many are motivated by a desire to give something back to society, and some who have left top corporate jobs crave a return to the spotlight. Business leaders are frequently embraced as candidates by political parties because they usually have substantial fortunes of their own or networks of wealthy potential donors to help fund campaigns. Whitman spent $71 million of her own money to fund her record-sized $81 million Republican gubernatorial primary campaign.
While precise statistics aren't available, it appears that business leaders are increasingly common among the ranks of would-be political leaders. Whitman, who was formerly eBay's chief executive, and Republican nominee for the U.S. Senate Fiorina, former CEO of Hewlett-Packard Co., are only the most prominent new entrants in the field. In Massachusetts, Charles Baker, a health insurance company CEO, captured the Republican nomination for governor. In Colorado, John Hickenlooper, a brew-pub founder who is now mayor of Denver, is running for governor as a Democrat. Ski resort entrepreneur Les Otten recently lost a bid for the Republican nomination for governor of Maine to a candidate backed by the Tea Party movement.
In Florida, Rick Scott, former CEO of health care giant Columbia/HCA , is surging in the polls against an establishment Republican in the race for the party's governor's nomination. Scott has spent more than $15 million so far, and is now regarded as the front-runner in the race. His success comes despite a scandal at the health care chain in the 1990s that resulted in $1.7 billion in company payments to the government over charges of Medicare fraud and payments to doctors. Scott was forced from his job at the time by the company's board of directors, but never faced any personal charges. On the Democratic side in the Sunshine State, investor Jeff Greene (a Harvard MBA) is strongly challenging for the Senate nomination.
Some business leaders have higher ambitions. Bain Capital co-founder Mitt Romney is a front-runner among Republicans eying a presidential campaign for 2012, following a largely successful term as governor of Massachusetts. Romney also sought the presidency in 2008. If he wins this time around, he would become the nation's second president with an MBA, following fellow Harvard Business School alumnus George W. Bush. Bush himself ran the Texas Rangers baseball club before becoming governor of Texas.
The American political system depends on constantly attracting new participants, experts note, but most elected officials have backgrounds in law or as political aides before they start running for low-level offices. Business executives generally plan to short-hop the process by running for top state or national offices. "All these business leaders shoot pretty high," says Marc Meredith, a political science professor at University of Pennsylvania. "You don't see them trying to become lieutenant governor or a state legislator."
At a time of economic pressure, business leaders may have skills that appeal to voters. Wharton insurance and risk management professor Kent Smetters, a deputy secretary in the Treasury department during the George W. Bush administration, says: "It's good to have people who we think of as running public institutions under private sector principles. They're used to thinking about benefits and costs, particularly marginal costs."
Kathleen Hall Jamieson, a professor of communication at the University of Pennsylvania's Annenberg School of Communication and co-author of the forthcoming book, The Obama Victory: How Media, Money, and Messages Shaped the 2008 Election, says that experience as a business leader can be a strong credential. "In tough financial times, the assumptions are that a CEO brings skills that are helpful in managing a state," she notes. Meeting a budget and managing to a bottom line both look attractive to voters. Many executives also boast success at creating jobs, an appealing claim at a time when many states have double-digit unemployment.
A Double-edged Sword
But Jamieson says such accomplishments can be a double-edged sword. "The question is: Can you manage an image of efficiency while still showing you're humane?" She notes that almost all executives have laid off workers at some point. Inevitably, some of those laid-off workers will pop up in opponents' commercials to counter the job-creation theme. Jamieson adds that there are many differences between the life of a business leader and the life of a government leader. "First of all, the corporate CEO is largely insulated from the public." Even in a consumer products company, top executives seldom deal with the consumers the way politicians, particularly during a campaign, must interact with voters. "There are layers and layers of communications and marketing people who manage the brand and the image of the CEO."
Moreover, the brand and the person are usually separate. Nobody judges the president of Caterpillar Inc. by how well he operates a back hoe. The CEO of Kmart doesn't have to buy clothes there. But in politics, "the brand is the candidate," Jamieson points out.
Even though CEOs are used to speaking to big crowds, and many have polished their communications skills during years of making presentations to investors and encouraging subordinates and sales forces, those abilities don't always translate to politics. "As a corporate CEO, you can control everything unless some scandal occurs," Jamieson says. Even CEOs who have faced severe criticism during their business careers -- like Fiorina, who was ultimately forced to resign from Hewlett-Packard -- always had the comfort of "talking to a highly educated group of people about a value they share. The audience brings assumptions about what is good -- like making a profit." CEOs running for public office can't assume that voters share the same set of values.
Leadership experts note that the disaster of the BP oil spill in the Gulf of Mexico has illustrated the risks well-meaning executives take when they speak to the press or Congress. Useem points to the angry reaction to the statement by BP chairman Carl-Henric Svanberg: "We care about the small people." While acknowledging that English is a second language for Svanberg, Useem says that politicians "have to be extremely savvy about the nuances." When running for office, he adds, communicating "requires a high emotional intelligence factor. You have to understand how you express your own emotions and understand how people react to what you say."
According to Jamieson, women executives benefit more from their business background than male executives do, because women suffer from a perception that they can't run large operations and don't understand finance. For a candidate for public office, a background as a business leader overcomes that perception. Jamieson's 1995 book, Beyond the Double Bind: Women and Leadership, explored the way women leaders are viewed. Women as candidates "benefit from the stereotype that women are more compassionate," she adds. Male CEOs have a harder time proving they care about people -- especially when they have a history of layoffs or ruthless takeovers.
Still, even for women, a long history as a leader may contain negative issues. For example, Whitman's compassion has been called into question as a result of reports of an altercation in which she forcefully shoved a subordinate. The parties involved have acknowledged there was an incident but have declined to detail the event. Jamieson notes that stories about "being harsh or rude to subordinates [are] more damaging to women executives." Whitman's campaign has featured commercials with enthusiastic subordinates endorsing her.
Even in areas where business skills look similar to those needed to run a government, politics can make things difficult. Meredith notes that CEOs running for mayor or governor may assume that working successfully with a board of directors gives them the experience needed to work with a legislator or city council. Not so, he says. "The board and the CEO have pretty similar goals" of growth and raising profits. "The legislative body will have a substantial number of people with different goals. It's a much more adversarial relationship." Business leaders, Cappelli says, "are used to telling people what to do -- when that's their leadership style -- and may do poorly in politics where the goal is to persuade voters to your cause." Legislators also need to be persuaded or negotiated with rather than ordered around.
One former CEO who became a governor says there is little similarity between the roles. Former New Jersey governor, Jon Corzine, who was once CEO of Goldman, Sachs, told Newsweek in February that politicians "don't have the flexibility you imagined. There's no exact translation." He pointed out that states are much bigger than any business. "It's 20,000 people versus nine million. I don't think candidates get the scale and scope of what governing is." Corzine was defeated for reelection for governor last fall by an anti-tax Republican, Chris Christie. Smetters, who followed the race, speculates that if Corzine "had come across as a fiscally conservative guy, trying to protect the taxpayer, he probably would have done a lot better. He under-utilized his business background."
Measures of success are also different. The metrics for a CEO are fairly clear -- such as boosting the stock price, at least faster than rival companies do. Government "is a more ambiguous world," Useem notes. For a strong leader, that can be good. "There's a lot of research that when the world is more ambiguous, the value of effective leadership is stronger. It puts a premium on the art of leadership."
Executives who struggle with the tyranny of a "quarterly report card" on earnings may welcome the longer-term focus that comes with four or six-year terms, Useem says. But the counterpoint is that "you don't have good interim measures of success." Indeed, some business people who go to work for politicians are frustrated to find that their operations are focused largely on daily issues driven by newspaper headlines rather than longer-term plans. In politics, CEOs also lack tools they are used to wielding. Useem notes that "you can't motivate people with payroll." Government salaries generally are set independent of a governor or mayor. While appointed officials may serve at the pleasure of the politician, most employees can't be fired, and legislators can only be threatened with opposition in the next election cycle.
Judging by the polls, many voters are growing increasingly frustrated with professional politicians. And examples like Bloomberg and Indiana governor Mitch Daniels, who once worked as a senior executive at pharmaceutical giant Eli Lilly, appear to demonstrate that some business people can lead significant change. Still, Meredith notes that "businesspeople who think they can just go in and shake things up will be disappointed."