Managing Director Qualifications & Skills

What Qualifications Are Needed To Be a Managing Director?

Managing Directors are the leaders of businesses. They are responsible for the company’s strategic direction, all critical decisions that affect the company and are the business’s public face. Managing Directors, therefore, need to have experience covering every business function and the ability to handle every aspect of corporate management confidently.

Given the vast skill requirements for managing directors, it is unsurprising that only the most senior executives and those with the best performance track records can hope to become MDs. It is an aspirational goal for many corporate executives and requires a lifetime of achievement and learning.

A Brief Note on Terminology

Corporate titles used by businesses around the world are not standardised. For example, a company’s top management structure in the United States might differ from the United Kingdom, and both might vary from what a German company uses. Some countries have a dual board system where a CEO heads the executive board, and the Chairman runs the supervisory board.

Traditionally, the company board appoints a managing director to run a business’s overall operations, distinguishing the MD from a Chief Executive who only automatically becomes a board member. However, this distinction only sometimes applies, and the managing director terminology. For example, banks usually have hundreds of managing directors, just senior-level executives reporting to the CEO.

However, for this discussion, we are explicitly using the term Managing Director to mean the overall head of the business.

Academic Qualifications and Certifications

There are no specific or standardised requirements for academic background training for managing directors. But most are expected to have undergone an MBA course from a top-tier university. MBA courses cover business aspects like finance, sales and marketing, operations, HR and IT. Such studies are, therefore, relevant for senior leadership positions, and managing directors must be masters of all trades.

Sometimes, even an MBA needs more, and top-tier universities offer specialised executive courses to highly experienced individuals. These courses are designed for leaders with over 15 years of experience and only cover specific leadership topics.

Yet, this does not guarantee that a professional will ever become a managing director. After all, the number of managing director positions is limited, and hundreds of candidates are running for that role. However, without a tremendous academic pedigree, the chances of becoming a managing director of a large company are low.

Work Experience

Managing directors have at least 15 to 20 years of experience working in a similar business, which can be much higher for large companies with thousands of employees. The experience is usually required in some related businesses so the managing director can transition smoothly. However, there are many exceptions because leadership, vision and the ability to drive that vision can sometimes be more critical than domain-specific experience.

But it is just different from the amount of work experience considered. Even more important is the quality of work experience that the Managing Director possesses. Managing directors have stellar performance track records spanning several decades. They must be masterful at all the activities they perform. Experience hones the skills, but the personal ability is increasingly important in such senior-level positions.

What Skills Do Managing Directors Need?

This question might be better as “What skills do “managing directors don’t need?” because the skill requirements are almost endless. Managing directors need to be experts in virtually every business function. Although other professionals assist them, they still need intricate knowledge because the ultimate decision-making responsibility is theirs. For example, consider a situation where two top-level executives disagree. A managing director would need to resolve that disagreement and take a decision requiring being fully aware of the problem from both perspectives.

Leadership

More than anything else, it is the leadership required of a managing director. Leadership here means the ability to motivate and guide others, the capability to make tough decisions based on whatever information is available, the ability to handle crises, the ability to understand the perspectives of others and serving as the public face of the corporation.

Strategic Insights

Managing directors are the ones ultimately responsible for guiding the ship. The managing director must make strategic decisions like mergers and acquisitions, new product launches, changing business strategies, undertaking massive capital expenditures, and targeting a new customer segment.

Strategic insights are necessary not only for new projects but also for the business’s day-to-day operations. The managing director provides the direction for the company to move in. For example, the Managing Director of a software business might make sense to switch product delivery to a cloud-based model or something of that nature.

Keeping Everyone Happy

If this is a broad mandate, that is intentional because that is what managing directors do. MDs must manage both internal and external stakeholders. Internal management requires handling the various department heads and all company employees. External stakeholder management requires dealing with shareholders, vendors, regulators, government departments, competitors, potential acquisition targets, material suppliers and contract manufacturers, creditors and banks, the media, customers and anyone else interested in the business.

Making and Following Rules

The managing director and the board of governors are responsible for charting the company’s internal governance and compliance policies. These guidelines have to be within the legal framework of the country that the company is located in but often tend to go a lot deeper than that and cover aspects unique to the business. For example, a company may set a policy that disallows providing credit above a certain threshold to a single creditor or requires all employees to undergo quarterly training.

The managing director must also ensure that all follow these policies and report on all governance issues to the board and other relevant stakeholders.

Optimising Business Operations

This, again, is a broad mandate as the optimisation of business operations requires cross-functional experience and a multifaceted approach. For example, the managing director might ask the finance department to increase the financial leverage to enhance profitability. The MD might then ask the operations department to reduce defect rates by implementing a new training regime. A call may follow this to the procurement department to lower material costs by negotiating a new contract with another vendor. Finally, the HR Department might have a task to provide training to increase productivity across the board.

These examples highlight the need for managing directors to have experience in multiple fields, which is only possible if they have worked in one or more of these areas and accrued valuable expertise throughout their careers.

Find out more about what being a managing director is all about:

The following articles cover the Job Description & Profile, Salary & Pay, Qualifications, CV Template & Examples, and How to Become one.

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