Companies & Industries

Why the Next Mary Barra May Be a Long Time Coming


Illustration by Jaci Kessler

Mary Barra made corporate history seven months ago when she became the first female chief executive officer of a major global carmaker. Yet for all the gains women at the highest levels of U.S. companies have made, most are still in the wrong jobs if they want to follow Barra’s career path.

That’s because unlike Barra, who’d been in charge of General Motors’ (GM) product development for two years before her appointment, a majority of top-ranked women at companies in the Standard & Poor’s 500-stock index aren’t in the kinds of operational jobs—think division heads or senior managers in charge of key product lines—that usually lead to the corner office. Rather, 55 percent of them are in functional roles—top lawyers, finance chiefs, and heads of human resources—according to data compiled by Bloomberg.

About 94 percent of the S&P 500 CEOs held senior operations positions immediately before ascending to the top job, and the relative scarcity of women overseeing product lines or entire businesses has slowed their advance to the pinnacle. The data suggest that the next generation of female executives is not positioned to capitalize on the growing recognition by many companies, including Google (GOOG) and Apple (AAPL), of the lack of diversity within their executive ranks.

Recruiters say women are left off the CEO track at numerous points during their corporate careers. Young women lack female role models who have flourished within operations, so they tend to start in functional or support positions such as human resources. Later, boards—which remain predominantly male—often fail to identify promising female executives who can be moved into operational slots.

Dawn Lepore, now a director at multiple companies, says she probably wouldn’t have been hired as CEO of Drugstore.com in 2004 if she hadn’t first run a Charles Schwab (SCHW) unit. “It’s very hard to move from a functional role to a CEO job,” she says. “You usually can’t just go from CFO or head of marketing to CEO. More women need to get into these operating jobs. The fact that I’d run a revenue unit with revenue of $1 billion made a huge difference.”

Women make up about half of the total U.S. workforce. The 24 female chief executives in the S&P 500 today, although a record, is still less than 5 percent of the total. In the layers just beneath the top job, women account for about 8 percent of the five highest-paid executives at each S&P 500 company, according to 2013 proxy filings. About 70 of those top-ranked non-CEO women were in operating jobs, based on data compiled by Bloomberg.

To produce female CEOs, more corporations must make a conscious effort to spot future leaders early in their careers and push them toward operational jobs, according to management experts. Boards also need to actively groom more female presidents, chief operating officers, and heads of units who will become role models for the next generation.

In other words, more Mary Barras. An engineer by training, the 52-year-old spent more than 30 years at GM, where she gained increasing responsibilities, including as a plant manager and vice president for manufacturing engineering.

Another example is Susan Cameron, who returned from a three-year retirement to retake the top job at Reynolds American (RAI) in May. From 2001 to 2004 she was CEO of tobacco company Brown & Williamson before it combined its U.S. businesses with Reynolds, where she was CEO from 2004 to 2011. She’ll remain the Reynolds chief after it completes its $25 billion purchase of rival Lorillard (LO).

Other recent appointments to CEO include two female former COOs: Lockheed Martin’s (LMT) Marillyn Hewson and General Dynamics’ (GD) Phebe Novakovic. “Women need to get into these line roles, demand it, and focus on it as their career path,” says Lepore, who is now a director at AOL (AOL), RealNetworks (RNWK), and Coupons.com (COUP), and a past director at Wal-Mart Stores (WMT) and EBay (EBAY).

Many companies fail to think far enough in advance about future CEO candidates, says John Wood, vice chairman at executive recruiter Heidrick & Struggles. Doreen Wright, former chief information officer of Campbell Soup (CPB) and Nabisco (MDLZ) and a board member at Crocs (CROX), says not enough is being done to get women promoted up the specific operational rungs of the career ladder. “It’s not the step of the president to CEO; it’s the step before that,” says Wright, who wasn’t personally interested in the top job. “There’s plenty of women, so why aren’t they making it to the business [unit] president role? That’s the problem.”

Women often become head of nonoperational business functions because they started in those areas. “I don’t think there is a bias. A lot of companies are specifically looking for women to put into these jobs,” says Wood, who has helped place more than 200 CEOs and directors. “If you haven’t been thoughtful about evolving and developing your talent, you may find that you narrow your choices beyond what you should if you had more actively managed people getting new assignments.”

“The question is, do women opt into those jobs or is that where people allow them to succeed because it’s OK to have an HR person who is a woman?”—Julie Dunn

The lack of operational experience is also hurting women’s chances to sit on boards in the S&P 500, where female directors account for 18 percent of the total. Companies rarely pick heads of HR to be directors, says Julie Daum, who leads the North American board practice at executive-recruiting firm Spencer Stuart.

“People have been talking about it for a long time, and clearly nothing has changed,” says Daum, who has recruited directors for major corporations including General Electric (GE), Amazon.com (AMZN), and Wal-Mart. “The question is, do women opt into those jobs or is that where people allow them to succeed because it’s OK to have an HR person who is a woman?”

Facebook (FB) COO Sheryl Sandberg’s book Lean In is resonating with women precisely because not enough of them are taking the risk and getting to operational jobs, says Jane Stevenson, who leads the global succession practice at recruiter Korn Ferry (KFY). “Generally speaking, when a man gets into a new job, he’s already thinking about the next job and what he needs to get the next job,” Stevenson says. “Women, on the other hand, when they are appointed to big jobs, are out to prove they deserve to be in the job they’re already in. That presents a different way of looking for career progression.”

There are signs of change. At the turn of the century, the S&P 500 had six female CEOs, and the total didn’t rise above 10 until 2006, according to Spencer Stuart. The female ranks reached 24 after Barbara Rentler’s promotion at discount retailer Ross Stores (ROST) in June. Eleven of those CEOs took their jobs after 2011.

24

Number of female CEOs at S&P 500 companies

Two notable female exceptions to the prescribed operational career path to the CEO office: PepsiCo’s (PEP) Indra Nooyi was chief financial officer before taking the top job, as was Lynn Good at Duke Energy (DUK). They are among the 6 percent of S&P 500 chief executives—men and women—who had a nonoperational job immediately before their accession to the top spot, according to data from executive compensation consultant Equilar.

Women need all the role models they can get to succeed, says J. Veronica Biggins, managing director at Philadelphia-based Diversified Search and a director at Southwest Airlines (LUV): “Only recently have women been able to see other women in roles where they could say, ‘Wow, I could be the CEO of this company.’ ”

The bottom line: Women make up almost half of employees at S&P 500 companies but only 5 percent of CEOs.

Green is Detroit bureau chief for Bloomberg News.

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