Some firms' fertile soil grows crop of future CEOs

ByDel Jones, Usa Today

— -- Get that MBA degree and groom that Type A personality. But here's some additional advice for the ambitious: Land a job at Baxter International, Merrill Lynch or another leadership factory.

Then, work up and out.

The résumés of the successful have an arresting pattern. One in every five CEOs running the 1,187 publicly traded corporations with a market value of at least $2 billion have at one time held a job at one of just 20 companies. One in every 10 CEOs worked at one of eight companies. One in 27 have earned a paycheck at one of these two leadership factories: General Electric ge, with 26 CEO alumni; and IBM ibm, with 18.

GE, known for an intensive performance review process and the dismissal of workers who perform in the bottom 10%, is so well known for its executive alumni that some experts, including Good to Great author Jim Collins, say that the conglomerate's key product may be leadership. But an exclusive dive deep into résumés for USA TODAY by Capital IQ, a division of Standard & Poor's, found that while GE and IBM have produced the most CEOs, there are a few companies that offer better odds of getting to the top.

GE has a large workforce of 300,000, which means that its employees have had a 1-in-11,540 shot of becoming CEO of a $2 billion company. Odds at IBM, with 366,500 employees, have been 1-in-20,360. But McKinsey, with a workforce of 11,000 and 16 sitting CEO alumni, has offered a 1-in-690 shot, well ahead of second-place Deloitte & Touche, at 1-in-2,150.

McKinsey, Deloitte, PricewaterhouseCoopers, Ernst & Young and the now-defunct Arthur Andersen all rank in the Top 20 as CEO factories. But they're management consultants, which makes them fundamentally different animals from GE and IBM. They can recruit the top MBA grads, who hire on to help client companies solve knotty problems. Those who succeed earn reputations and a fast track to the top.

Even at some more traditional companies, the odds are better than at GE and IBM. Baxter International bax alumni have had a 1-in-4,365 chance at making CEO. Merrill Lynch mer, Motorola mot, Intel intc and Procter & Gamble pg also have produced more CEOs per employee than GE. IBM trails those companies, plus Honeywell hon, Novartis nvs, PepsiCo pep, Disney dis, ExxonMobil xom and Johnson & Johnson jnj.

"With numbers, you can make any point you want," says Susan Peters, GE's vice president of executive development and chief learning officer, who suggests GE's real odds might be higher, because just half of its employees are white-collar professionals.

PepsiCo's odds have been 1-in-12,925, putting it in 13th place, but alumni include seven Fortune 500 CEOs: Ronald Rittenmeyer at Electronic Data Systems eds; Brenda Barnes at Sara Lee sle; Steve Odland at Office Depot odp; Gary Rodkin at ConAgra Foods cag; David Novak at Yum Brands yum; Leo Kiely at Molson Coors Brewing tap; and Donald Knauss at Clorox clx. Microsoft's msft Steve Ballmer and eBay's ebay Meg Whitman both worked at P&G.

"Every year, we have regretted losses. Every year, we lose people we want to keep," says P&G CEO A.G. Lafley, who adds that those at the company routinely get calls offering more money and a loftier title.

Most stay. But Lafley takes some pride in P&G's alumni who have left, because it proves "We are a leadership engine and a talent machine."

The analysis shows that a "shocking" number of CEOs funnel through 20 companies, says Randall Winn, co-founder and managing director of Capital IQ.

Taking a different path

Despite the financial sector's size and clout, Winn said he was not surprised that only Merrill Lynch and Citigroup cwere in the top 20 leadership factories, because those employees often aspire to highly compensated jobs at hedge funds and private equity firms.

The study's weakness is that it's a look in the rearview mirror and may not best reflect today's leadership factories. The companies that groomed today's CEOs did so in decades past. Google's goog CEO, Eric Schmidt, came from Novell novl by way of Sun Microsystems java. But Baxter International in the 1990s was the CEO farm system for today's biotech industry, so Google could well be grooming tech CEOs of tomorrow, says Joe Moglia, CEO of TD Ameritrade amtd, who became a Merrill Lynch trainee after 16 years as a football coach.

Companies are like football programs, Moglia says, and the curse of successful head coaches is that the phones of the assistant coaches start ringing with job offers. "Success breeds success," he says.

CEOs who were fished from the best corporate streams cite other reasons why a few companies develop so much leadership. Few invest heavily in leadership training and development, they say, and only a few more excel at identifying highfliers and putting them into stretch assignments, both domestic and abroad. The other companies play it safe. They don't force young talent to sink or swim, so when it's time to find a leader, they look outside the company.

"If people aren't going after your people, you really aren't building a great company," says Yum Brands CEO Novak, a PepsiCo alumni.

CEO factories land the best graduates right out of school, but that's largely because they have established a track record of executive success. Stephen Bennett's mother wanted him to become a doctor, but her second choice was for him to land a job at GE because it produced leaders. Bennett spent 23 years at GE before becoming CEO of Intuit intu.

GE's alumni include the CEOs of Boeing ba, Fannie Mae fnm and Pfizer pfe. When Home Depot hd fired GE alumnus Bob Nardelli last year, they replaced him with Francis Blake, a GE alumnus. Nardelli soon righted himself as CEO of Chrysler. Other prominent GE alumni who did not make the list were Peter Loescher, CEO of German giant Siemens (a non-U.S. company) with 470,000 employees, and Tom Tiller, CEO of Polaris Industries pii (just under the $2 billion market-value minimum as of Oct. 25 that Capital IQ used when examining résumés).

GE is well known for its 52-acre leadership campus, known as Crotonville. But Bennett says he spent only 10 weeks of his 23 years at the campus. He says GE has mastered identifying and grooming talent.

Aart de Geus, CEO of Synopsys snps since 1994, was recruited by GE for his tech expertise, and worked there from 1982 to 1986. He was identified as "high potential" and spent some time recruiting college tech students for GE, conducting 16 interviews a day. He left GE when it got out of the semiconductor business, but found that GE so believed in his talent that it invested $400,000 in his idea for a start-up company. A few years later, when Synopsys went public, GE cashed out for $26 million, says de Geus, who predicts generations of GE alumni CEOs in the decades to come.

Mentoring newbies

Baxter didn't have anything like GE's Crotonville. Instead, it would recruit top MBA graduates under a program promoted by Bill Graham, who died two years ago at 94 after being Baxter's CEO from 1953 to 1980. Graham placed recruits as assistants to leading executives; those assistants would then be put in charge of an international operation as the company expanded. When Baxter started the program, annual revenue was $100 million. It was an $8 billion company when the program ended, says Wilbur Gantz, chairman of Ovation Pharmaceuticals, who had risen to be president of Baxter when he left after a 25-year career.

"I was a (Baxter) general manager when I was 28," says Tony White, a 26-year Baxter alumni and CEO of Applera abi since 1995. "Where else in the world could you get that? We'd go to general manager meetings, and there would be a bunch of early-thirtysomethings running subsidiaries." At Baxter, people were given freedom and allowed to make mistakes. "They didn't punish."

Most other Baxter alumni who are now CEOs also left the company in the 1990s, a decade when the program started by Graham wound down and was phased out, Gantz says. Baxter produced CEOs for Boston Scientific bsx, Covidien cov, Genzyme genz and other health care companies. Because Baxter alumni wound up running other health care companies, they're "deep in domain," GE alumni Bennett says.

GE rotated up-and-comers. GE CEO Jeffrey Immelt, for example, went from appliances to plastics to medical systems. GE alumni CEOs now run large companies in seven industries, which makes GE unique in its ability to nurture leadership "generalists," Bennett says.

However, Baxter spokeswoman Deborah Spak says Baxter is one of the most diversified companies in health care. Its portfolio spans medical devices, biotechnology and specialty pharmaceuticals, which provides diverse opportunities, she says.

"Baxter is a relatively well-kept secret, because it provides products and services primarily to health care providers, thereby making the company less visible to end consumers," says alumni Joe Herring, CEO of Covance cvd, a drug development service company with a market value of $5.6 billion and an ascending stock.

The company José Cofino runs isn't worth $2 billion, but he has an unusual perspective in that he worked at two CEO factories: PepsiCo and Disney. He's now CEO of Adir Restaurants, which franchises Pollo Campero. Cofino says PepsiCo was superior to Disney in leadership development because it didn't hire people with proven results, then try to mold them into something they're not. He says he learned PepsiCo's recipe when he was running Taco Bells in California. PepsiCo, which owned Taco Bell at the time, let him do market research and develop menu items specifically for his area, tasks companies typically do at headquarters.

The secret, says Cofino: "Give people their head, let them do their thing, and you can get amazing results."

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