There is a myth that just changing people in the seats with people of different skin colors, gender identities, and religions is the win when it comes to inclusion and diversity. While it is a first step, it is not the final step or the benchmark of a world-class leadership team or company. Yet still, in retained search, there is a preference given to “Ivy League” pedigree and MBAs based on the opinion that they are the best candidates.
The perception that only elite schools produce elite leaders needs to die and be introduced to the data accountability culture. Even under the old rules, which only measured, how well a Chief Executive executed on delivering a return on investments for shareholders, the Ivy league graduates and MBA degree holders were not the top leaders. Harvard’s October 2014 report found that only 29 out of the 100 best performers had MBAs. And only half of the 29 MBAs had earned a degree from an Ivy League school.
In 2019, Institutional Investor decided to research whether MBAs made better CEOs. The conclusion, “We [Verdad Research] found no statistically significant alphas — despite testing every possible school with a reasonable sample size. MBA programs simply do not produce CEOs who are better at running companies.”
The second question Institutional Investor researched was whether a CEO’s early track record predicts later performance? The conclusion, “There is almost no persistence in CEO performance. The observed number of CEOs in each category is indistinguishable from what we would expect if the process were entirely random.” The conclusion should not be surprising considering the speed of change over the past decade that saw legacy companies disrupted, bought or bankrupted.
The Ripple effect of this institutionalized elitism is that it cements and continually reinforces the wall that prevents companies from building an inclusive workforce. And data shows that by not hiring top talent versus elite talent they are in many cases hurting EBITA and Revenue.