What makes a good CEO?

 It’s the dogged but diffident leader who will succeed

DAVID BROOKS, xtra@mediacorp.com.sg

SHOULD CEOs read novels?

The question seems to answer itself. After all, CEOs work with people all day. Novel-reading should give them greater psychological insight, a feel for human relationships, a greater sensitivity toward their own emotional chords.

Sadly, though, most of the recent research suggests that these are not the most important talents for a person who is trying to run a company. Steven Kaplan, Mark Klebanov and Morten Sorensen recently completed a study called Which CEO Characteristics and Abilities Matter?

They relied on detailed personality assessments of 316 CEOs and measured their companies’ performances. They found that strong people skills correlate loosely or not at all with being a good CEO. Traits like being a good listener, a good team builder, an enthusiastic colleague, a great communicator do not seem to be very important when it comes to leading successful companies.

What mattered, it turned out, were execution and organisational skills. The traits that correlated most powerfully with success were attention to detail, persistence, efficiency, analytic thoroughness and the ability to work long hours.

In other words, warm, flexible, team-oriented and empathetic people are less likely to thrive as CEOs. Organised, dogged, anal-retentive and slightly boring people are more likely to thrive.

These results are consistent with a lot of work that’s been done over the past few decades. In 2001, Jim Collins published a best-selling study called Good to Great.

He found that the best CEOs were not the flamboyant visionaries. They were humble, self-effacing, diligent and resolute souls who found one thing they were really good at and did it over and over again.

That same year Murray Barrick, Michael Mount and Timothy Judge surveyed a century’s worth of research into business leadership. They, too, found that extroversion, agreeableness and openness to new experience did not correlate well with CEO success. Instead, what mattered was emotional stability and, most of all, conscientiousness — which means being dependable, making plans and following through on them.

All this work is a reminder that, while it’s important to be a sensitive, well-rounded person for the sake of your inner fulfilment, the market doesn’t really care. The market wants you to fill an organisational role.

The market seems to want CEOs to offer a clear direction for their companies. There’s a tension between being resolute and being flexible. The research suggests it’s more important to be resolute, even at the cost of some flexibility.

The second thing the market seems to want from leaders is a relentless and somewhat mind-numbing commitment to incremental efficiency gains.

Charismatic CEOs and politicians always want the exciting new breakthrough — whether it is the SUV or a revolutionary new car. The methodical executives at successful companies just make the same old four-door sedan, but they make it better and better.

These sorts of dogged but diffident traits do not correlate well with education levels. CEOs with law or MBA degrees do not perform better than CEOs with college degrees. These traits do not correlate with salary or compensation packages. Nor do they correlate with fame and recognition. On the contrary, a study by Ulrike Malmendier and Geoffrey Tate found that CEOs get less effective as they become more famous and receive more awards.

What these traits do add up to is a certain ideal personality type. The CEOs that are most likely to succeed are humble, diffident, relentless and a bit uni-dimensional. They are often not the most exciting people to be around.

For this reason, people in the literary, academic and media worlds rarely understand business. It is nearly impossible to think of a novel that accurately portrays business success. That’s because the virtues writers tend to admire — those involving self-expression and self-exploration — are not the ones that lead to corporate excellence.

For the same reason, business and politics do not blend well. Business leaders tend to perform poorly in Washington, while political leaders possess precisely those talents — charisma, charm, personal skills — that are of such limited value when it comes to corporate execution.

Fortunately, America is a big place. Literary culture has thrived in Boston, New York and on campuses. Political culture has thrived in Washington. Until recently, corporate culture has been free to thrive in such unlikely places as Bentonville, Omaha and Redmond.

Of course, that’s changing. We now have an administration freely interposing itself in the management culture of industry after industry. It won’t be the regulations that will be costly, but the revolution in values. When Washington is a profit centre, CEOs are forced to adopt the traits of politicians. That is the insidious way that other nations have lost their competitive edge. THE NEW YORK TIMES

WEEKENDXTRA

From TODAYOnline.com, Business – Weekend, 23/24-May-2009

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