Experience is back

National | Investors shun young CEOs; customers feel the need for speed; and big companies fret about ethics

Issue: "Bush wins one," June 9, 2001

Step aside, youngster
The day of the "faux CEO" is over. While the dot-com explosion and tight labor market of the 1990s combined to turn some recent business majors into six-figure executives, venture capitalists who fund startup firms have returned to demanding experienced CEOs. "The faux CEO was incredibly bright, a great marketer or spokesperson, but had no real hard-core operational experience," said Michael Rolnick, a partner at ComVentures, a $1.2 billion venture company in Palo Alto, Calif. Many young guns in new online businesses became leaders because they understood technology, not because they were experienced managers. Also, the sheer number of new firms-many of them spawned by the Internet frenzy and kept temporarily afloat by a buoyant economy-was greater than the number of seasoned executives. So venture companies took chances on younger, less experienced players. For awhile, that worked, but the failure of so many startups has made evident the need for veteran leadership in the areas of personnel, strategy, and finance. Executive candidates now face tougher questioning about real-life experience, as well as intensive reference-checking and a more thorough review of business credentials, particularly those related to financial management. "Investors are now hoping to salvage their ailing investments by hiring management teams that ... know how to weather market downturns and manage core operations," said Nick Efstratis, a partner at Utah-based Wasatch Venture Fund. Mr.Rolnick agrees: "A twenty-something CEO is a turnoff today." Cost-saver turns costly
As Web commerce has picked up speed, so have customer expectations: Two years ago, Internet users said they'd be happy if a company answered an online inquiry or complaint within 24 hours, according to New York-based market-research firm Jupiter Media Matrix. That figure has since shrunk to six hours, a target few businesses seem able to meet. Retailers and financial services companies are coming closest: About half the companies in each industry respond to questions such as those concerning order status or product quality within six hours, Jupiter says. About one-third of non-retail companies answer customer e-mail within three days, while 1 in 4 firms doesn't answer e-mail inquiries at all. That's up from 1 in 5 last year. Internet-commerce analysts had predicted companies could save money and build loyalty by providing customer service online, but inefficient Web service may be having the opposite effect. "Poor e-mail service alienates consumers, and forces them to initiate a second contact via more costly channels, including the phone," said Jupiter analyst David Daniels. Jupiter doesn't recommend that businesses serve people better by adding more people; instead the company suggests minimizing the need for more human staff by adopting "Natural Language Processing" (NLP) technology. NLP is e-mail response software that "learns" to formulate and send customized computer responses to individual human questions. Most businesses, Jupiter says, can use NLP to provide tailored answers to about half of common online customer-service inquiries without using any human customer-service intervention at all. For example, airlines like American and United have successfully used the technology to provide computer-generated answers to routine questions about flight status and frequent-flyer programs. The system routes more complex questions, such as those involving payment information, to human representatives. Aiming at ethics
CEOs of companies with fewer than 100 employees are more confident of their firms' ability to implement ethical business practices than are CEOs at companies employing more than 500 people. That's according to a new survey of 43 technology-firm chief executives conducted by Marymount University and the New Jersey-based strategy firm Digital Focus. The survey revealed that more CEOs of small companies feel their employees are honest with one another, that a high level of trust exists within their organizations, and that people within their firms treat one another respectfully. But more CEOs at large companies admitted that while they wanted such an ethical environment at their own firms, they weren't confident in their ability to actually make it happen.

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Lynn Vincent
Lynn Vincent

Lynn is a senior writer for WORLD Magazine and the best-selling author of 10 non-fiction books.


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