Why are so many ceos engineers

I’ve come to almost exclusively invest in founder-CEOs that are or were engineers. Or at least — where the co-founder CTO is a true equal partner to the CEO. I’ve found that works equally well.

Why?

Well to get something off the ground,

You need to build it. If you can’t help here in the early days, you better be a darn good salesperson.
You need to recruit a great engineering team. Why at least in the early, pre-revenue days, do they want to work for a CEO that can’t also ship product? Maybe only if you have already done it before.
You usually need to understand how and where technology is going. You don’t need to be an engineer to do this, but most “salespeople” CEOs can’t pull this off. At a minimum, you need to have steered a product from nothing to success to pull this off.
You need to be able to build if not a jaw-dropping product, then at least, a very state-of-the-art one. Want to outsource it instead? How, in this day and age, you are going to build a great product that way, I don’t know.

How do you do this, if the CEO isn’t at least a pretty good engineer? It takes, best case, a lot more money. Maybe 3x-5x more money to get it off the ground. You need to pay up to recruit a “technical co-founder” and then she often will bring in 2x the engineers, at a higher price, than an engineer CEO. Or worse, it’s outsourced to someone or a team that just isn’t great.

There are exceptions, many of them. But usually, there is an amazing (in terms of cleverness, if not always pure skillset) CTO from Day 1. And often. Salesperson CEOs burn a lot more money getting to $1m and $5m-$10m ARR.

After that, maybe it doesn’t matter as much. Maybe. But still, I’ve found the SaaS startups without a strong technical background in the founders just … iterate more slowly. If either the CEO or the CTO wasn’t at one point a great engineer or at least a super-smart hacker, they just don’t know how to iterate quickly. How to be super agile. And the super agile startups just pull ahead as the years go on.

I look at the 25+ seed investments I’ve done. The unicorns and decacorns? All run by ex-engineers as CEOs, or, business CEOs that have a true CTO co-founder. It’s just too tough otherwise, in my experience.

Published on February 1, 2022

When you look to develop the leadership talent in your organization, where do you go? Many companies look to sales, marketing, finance, or operations to find their next leaders. According to the latest research though, they may be looking in the wrong direction.

Harvard Business Review (HBR) just released their list of the Best-Performing CEOs in the World. They judged CEOs based on hard data like increases in shareholder return and market capitalization. They also looked at the long term, considering the performance of CEOs over their entire tenure. One interesting result from their report was that 24 out of the top 100 CEOs in the world are engineers. In fact, on the top of their list was Jeffrey Bezos of Amazon, an engineer who does not even have an MBA.

Finding engineers in the top spot of market-leading companies shouldn’t come as a surprise. Earlier studies by executive recruiting firm Spencer Stuart came to similar conclusions. In looking at the educational background of S&P 500 CEOs, they found 33% of the CEOs had undergraduate degrees in engineering while only 11% were in business administration.

So the question is, why do engineers make great CEOs? It might make sense that engineers rise to the CEO role in technology companies but HBR found strong performing engineer-CEOs at non-engineering companies like Anheuser-Busch InBev, Intercontinental Exchange, and Sampo. So it’s clear engineers possess certain characteristics that make them well suited for the role of CEO.

The education and experiences of engineers is unique. With a strong emphasis on math, science, and technology, engineers are called upon to design, build, create, improve, and influence just about everything we use in modern society. This puts engineers on the front lines of solving challenging problems and doing the things that others say can’t be done. It’s no surprise then that engineers elevate to leadership positions where their unique background and experience can be used to improve the broader business. Writers on this topic suggest there are three unique characteristics that engineers bring to the CEO role:

1. Engineers have a practical, pragmatic orientation. Nitin Nohria, dean of Harvard Business School, explains that, “Engineering is about what works, and it breeds in you an ethos of building things that work—whether it’s a machine or a structure or an organization. Engineering also teaches you to try to do things efficiently and eloquently, with reliable outcomes, and with a margin of safety. It makes you think about costs versus performance. These are principles that can be deeply important when you think about organizations.”

2. Engineers are analytical and are problem solvers. A recent American Society for Quality (ASQ) survey showed 69% of respondents felt analytical thinking, organizational skills, and problem solving were key attributes for running a successful company. Systematic problem solving is at the root of engineering. It’s also the foundation of what makes a great CEO. Engineering skills include analytical thinking that, at the CEO level, allows for better informed decision making. Engineers tend to be more organized and logical, considering the full consequences of a decision before making a commitment.

3. Engineers are both detail orientated and architectural thinkers. Michael Lovell, chancellor of UW-Milwaukee says that, "One of the things we learn in engineering is to be a systems-level thinker, so that we see a very big picture in how adjusting one area affects and impacts downstream other areas. That's really important when you're running a large, complex organization. If something gets to [the CEO] level, it's not an easy problem to solve. [They] need to look at all of the variables before making a decision. It's a thought process."

The other interesting conclusion HBR found was that, when a company looked to hire a CEO from the outside, they typically looked for someone with an engineering background. James Citrin who leads Spencer Stuart’s North American CEO practice stated that, “When boards are making decisions, and they know it’s riskier going outside, it often gives them comfort if a candidate has studied engineering.” Citrin says it’s specifically because engineers excel at architectural thinking and logical problem solving.

When looking to develop the next great leaders in your company, are you ignoring the engineering department? Engineers are proving themselves to be strong, capable CEOs who are leading many of today’s top global companies. Smart business leaders recognize this fact and are including engineers in their leadership development programs.

See more of my thoughts on Business and Leadership on my blog at bravozululeadershipblog.com.

There is a similarity between Amazon and Blue Origin CEO Jeff Bezos, Apple’s Tim Cook, Alphabet’s Sundar Pichai, AMD’s Lisa Su, General Motors’ Mary Barra, and NVIDIA’s Jensen Huang.

These days, the heads of some of the most successful companies in the world have one thing in common. They are engineers.

For those who aspire to one day become the CEO of a company, an MBA – a Master of Business Administration degree – used to be the way to go. But this is no longer so true. Harvard Business Review used to publish an annual list of the top 100 best-performing CEOs.

In 2018, they found that for the second year in a row, there were more CEOs with engineering degrees than MBAs. 34 compared to 32. Some had both. Getting an MBA can come with a hefty price tag.

Top graduate schools like the University of Pennsylvania’s Wharton or Harvard Business School will set you back more than $200,000. Now, some CEOs are telling you to save your money.

In an interview with the Wall Street Journal, Elon Musk even said, “I think there could be a lot of companies running MBAs”. He believes that people with business degrees spend too much time in board meetings when their focus should be on the product.

The thinking is that if the product is good then so will the profit. In Musk’s case, that means building great electric cars at Tesla or the great reusable rockets at SpaceX. That’s where being an engineer is helpful.

Their background in math, science, and technology allows engineers to design, build, manufacture, and improve their products. And they can help solve challenging technical problems that might otherwise sabotage their dreams.

Technically, Musk has degrees in physics and economics, not engineering. He is a self-taught engineer who reads books to learn about rocket science.

When engineering consultant Sandy Munro interviewed him for his YouTube channel, Monroe Live, he said it was Musk’s knowledge that sets him apart. I was blown away. I’ve seen dozens of CEOs. I’ve never seen a CEO or president who knows more about the product. That technical know-how that comes with an engineering background goes a long way towards building better products.

Just ask Microsoft engineer Satya Nadella who became the CEO. When he took the top position in 2014, he had to figure out a way to make Microsoft relevant as it faced an onslaught from Apple. Now we need to make Microsoft a success.

The software company struggled to thrive under the leadership of its predecessor, Steve Ballmer. Its products were far from revolutionary. The Surface was the answer for the iPad, Windows Phone, and iPhone. Ballmer has degrees in math and economics from Harvard, which helped balance the books, but didn’t do much when it comes to innovation.

When Nadella took over, he turned to Microsoft – moving its software to non-Windows devices. For example, bringing Microsoft Word to the iPad and iPhone. They also expanded their cloud business Azure which has become the biggest rival to Amazon’s AWS.

In his first email to employees as CEO, Nadella wrote: “Our industry doesn’t respect tradition – it only respects innovation.” That innovative spirit of engineering saved Microsoft. But it’s not easy. It requires risky steps and failure should not be accepted.

As the American inventor, Thomas Edison famously said: “I haven’t failed. I’ve only found 10,000 ways that won’t work.” British engineer, James Dyson, knows a thing or two about never giving up. He got frustrated when a vacuum he had in the house was losing suction.

So he decided to build a better vacuum himself. He spent 15 years working with over 5,000 different prototypes for the bagless design. The payoff for his persistence was a multi-billion dollar company that bears his name.

To be successful, Dyson was invested in the finer details of his company. Engineers aren’t afraid to be involved in day-to-day business—especially when it comes to getting hired. Amazon is notorious for having tough interviews.

Bezos, who holds a degree in electrical engineering and computer science, used to personally meet every candidate in the early days of Amazon. He used to ask strange questions like: How many gas stations are there in America?

He was not behind the correct answer but wanted to see if the candidate had an analytical approach to come up with an informed response. Bezos once said that setting the bar high for hiring was the single most important factor in the success of an online retailer.

It’s no surprise that engineers have made it to the top of the tech industry, which has seen explosive growth over the years. But they are also doing well in non-tech companies. Like Jeffrey Sprecher, CEO of the holding company that owns the New York Stock Exchange.

He has a degree in Chemical Engineering. I’ve never had a job that had anything to do with chemistry, but the discipline I got there taught me about problem-solving and business. Engineers are very good at solving problems and this is the key to everything from building a bridge over a river to designing a rocket to go to Mars.

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