What qualifications are needed to be a managing director?
Managing directors are the leaders of businesses. They are the ones responsible for the strategic direction of the business, all important decisions that affect the business and are the public face of the business. Managing directors, therefore, need to have experience covering every business function, and the ability to handle every aspect of corporate management with confidence.
Given the vast skill requirements for managing directors, it is unsurprising that only the most senior executives and the ones with the best performance track records can hope to become managing directors. It is indeed an aspirational goal for many corporate executives and one that 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 what is used in the United Kingdom and both might be different from what a German company uses. Some countries have a dual board system where the executive board is headed by a CEO and the supervisory board is headed by the Chairman.
Traditionally speaking, a managing director is a company director who is appointed by the company board to run the overall operations of a business. This distinguishes the MD from a chief executive who doesn’t automatically become a member of the board. However, this distinction is not always followed, and the managing director terminology is used very loosely in some cases. For example, banks usually have hundreds of managing directors who are just very senior-level executives who report to the CEO.
However, for this discussion, we are specifically using the term managing director to mean the overall head of the business.
Academic qualifications and certifications
There are no specific or standardised requirements when it comes to academic background training for managing directors. But most of them are expected to have undergone an MBA course from a top tier university. MBA courses cover several different business aspects like finance, sales and marketing, operations, HR and even IT. Such courses are therefore relevant for senior leadership positions and managing director must be masters of all trades.
Sometimes, even an MBA is not considered enough though and specialised executive courses are offered by top tier universities to highly experienced individuals. These courses are designed for leaders with over 15 years of experience and only cover specific leadership topics.
Yet, even all of this does not guarantee that a professional will ever reach the designation of a managing director. After all, the number of managing director positions is limited and there are hundreds of candidates running for that role. However, without a great academic pedigree, the chances of becoming a managing director of a large company are low.
Managing directors are usually expected to have at least 15 to 20 years of experience managing a similar business. This can obviously be a lot higher for large companies with thousands of employees. The experience is usually required in some related business so that the managing director does not have a tough time transitioning. However, a lot of exceptions are also made because leadership, vision and the ability to drive that vision can sometimes be more important than domain-specific experience.
But it is just not the amount of work experience that is considered. What is even more important is the quality of work experience that the managing director possesses. Managing directors are expected to have stellar performance track records spanning several decades. They must be masterful at all the activities that are expected to be performed by them. Experience obviously hones the skills, but personal ability plays an increasingly important role for such senior-level positions.
What skills do managing directors need?
This question might have been better phrased as, “what skills do managing directors don’t need?” because the skill requirements of managing directors are almost endless. Managing directors need to be experts at almost every business function. Although they are assisted by other professionals, they still need to have 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 which would require being fully aware of the situation from both perspectives.
Here are some of the most important skill requirements for managing directors:
More than anything else, it is the leadership that is 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.
Managing directors are the ones ultimately responsible for guiding the ship. Strategic decisions like mergers and acquisitions, new product launches, changing business strategies, undertaking massive capital expenditures, targeting a new customer segment, etc. must be made by the managing director.
Strategic insights are not only necessary for new projects, but also in the day-to-day operations of the business. The managing director provides the direction for the business to move in. For example, the managing director of a software business might decide that it might make sense to switch product delivery to a cloud-based model or something of that nature.
Keeping everyone happy
If this seems like a broad mandate, then that is intentional because that is what managing directors are expected to do. MDs must manage both internal and external stakeholders. Internal management requires handling the various department heads and all employees of the company. 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 who has any interest in the business.
Making and following rules
The managing director, along with the board of governors, is responsible for charting the internal governance and compliance policies of the company. 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 which disallows providing credit above a certain threshold to a single creditor, or a policy which requires all employees to undergo quarterly training and so on.
The managing director also must ensure that these policies are followed 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. This might be followed by a call to the procurement department to lower material costs by negotiating a new contract with another vendor. Finally, the HR Department might be a task to provide training to increase productivity across the board.
This example highlights the need for a managing director to have experience in multiple fields. This is only possible if the managing director has worked in one or more of these areas and accrued valuable experience over the course of his or her career.
Find out more about what being a Managing Director is all about.
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