What Makes a CEO Successful?
A new analysis turns
up some surprising negatives.
For
finance chiefs who have their sights trained on the corner office and want to
develop their skill-sets accordingly, here's a provocative notion: treating
people with respect and being a good listener may not be all that important
to becoming a successful CEO.
That seems to be the case at
private-equity-backed firms, at least, according to a recent study by Steven
Kaplan, a professor at University of Chicago's Booth School of Business, and
co-authors Mark M. Klebanov of Ziff Brothers Investments and Morten Sorensen
of Columbia Business School. In fact, for some CEOs of PE-backed firms, such
interpersonal skills were linked to their undoing
"If
you read the management literature, you basically want your CEO to be
everything," says Kaplan, "but we wanted to find out which
variables mattered more for performance." The researchers analyzed
independent assessments of more than 300 CEO candidates (some of whom were
incumbents) for PE-backed firms by ghSmart between 2000 and 2006. The
assessments, usually in the form of four-hour interviews, included ratings on
over 40 different dimensions, including leadership and motivational ability,
intellect, integrity, and interpersonal skills.
Kaplan
and his colleagues then used regression analysis to compare the scores of
those who were ultimately hired against the outcome for their firms (which
were either leveraged-buyout or venture-capital situations): whether it went
public or bankrupt, was sold for a high price or poor one, or, in the absence
of other data, received good press or bad.
It turns
out that all candidates who were hired scored highly on general leadership
skills, making it hard to tease out factors that were most important to
getting a CEO job in the first place. But those candidates who scored highly
on various measures of aggressiveness turned out to be the most successful
chief executives, as measured by leading the company to a profitable exit or
receiving a higher valuation or favorable press.
The
differences between those who scored highly on such factors and those who
didn't were stark, according to Kaplan. "If you were rated high on being
efficient, you succeeded more than 85% of the time; if not, you succeeded
less than 50% of the time," he notes. (Only about a third of the sample
garnered such high ratings.) Two other key aggressiveness attributes were
being persistent and being proactive: those who rated highly in those
categories were about twice as likely to succeed as those who didn't.
At the
same time, interpersonal skills, such as being a good listener and being open
to criticism, bore no consistent relationship to business success and were
often negative factors, particularly at venture-capital firms. Those who
scored highest on listening skills, for example, were less successful than
those who rated lower. Those who rated very highly on being open to criticism
were often successful, but those with the next highest-ratings were the least
successful.
"Team
skills are not bad," comments Kaplan. "But if you just have those
without the action orientation, you don't get anywhere."
Interestingly,
while the PE-backed companies tended to hire incumbent CEOs, incumbency
didn't have an effect on success. Gender also didn't seem to make a
difference. Although women are often pegged as excelling on interpersonal
skills but being less aggressive, their scores tended to be similar to the
men's in the study, along with their likelihood of being successful, says
Kaplan.
Other
experts say the study's results resonate, although the limited data set makes
it hard to extrapolate the findings across all types of companies. Walt
Williams, an executive recruiter who now specializes in recruiting executives
for PE-backed firms after years of working with larger firms, says the
results make sense for the companies studied. With many PE firms looking to
get out of an investment within three to five years, most "already have
a game plan in place, so what they care about is management's ability to
execute their strategy," says Williams. Both CEOs and CFOs "come in
knowing that it is not a lifetime job, and that the clock is ticking."
At
larger, more-established companies, however, Williams says that a bias toward
action over collaboration may be more counterproductive. "You have a
much broader set of constituents you have to think about, and usually less of
a need to make radical change, compared to a company about to go
bankrupt," he says, so "the only way you can get things changed is
through team-building skills to get [other employees] on the same page."
Meanwhile, finance chiefs should
keep honing their interpersonal skills, recruiters say. "People skills
are particularly important for CFOs" as the role evolves to be more
focused on operations and business strategy, says Cindy Kraft, owner of
CFO-Coach.com, because "you don't gain that knowledge of the operations
without talking to people." And without the ultimate power of the CEO,
"you have to get buy-in for your ideas," says Joel Garfinkle, of
Garfinkle Executive Coaching. "For long-term success, you can't just
bulldoze through."
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