In an era of digital disruption and political change, excellent chief executive officers are needed more than ever.
Business leadership in times of change isn’t the only reason. Differences in the quality of CEOs has a huge impact on the companies they lead, their shareholders, and their employees. A study done several years ago by the Harvard Business Review of more than 3,000 CEOs found that the top 100 of them increased shareholder value 1,385% during their stint and augmented the market value of their companies $40.2 billion, on average.
This not only sounds excellent, it can be seen just how excellent it is by looking at the performance of the 100 CEOs found on the bottom of the list. The time in office of the bottom 100 resulted in a 57% loss of shareholder value and a market value decline of $13.6 billion.
So what characteristics do great CEOs have that more average or poor CEOs do not? Those characteristics fall into two categories – personal traits and elements that indicate a successful tenure.
What Personal Characteristics Do Great CEOs Have?
The current Harvard Business Review also contains a study of CEO characteristics. What differentiates great ones from those in the middle tier?
First, the study defined excellence in CEO-ship as 5% compound annual growth rate during the person’s time as chief executive.
Excellent CEOs were much more likely to demonstrate comfort with risk if it was appropriate for their business and much more likely to act decisively and capitalize on potential opportunities. Indeed, the authors characterize these two qualities as the “essence” of a CEO personality. Both indicate a comfort with decisive business strategy.
Six other traits manifested in the personality profiles of highly successful CEOs: 1) ambition and resilience; 2) original thought; 3) future orientation and an ability to visualize it; 4) team-building ability; 5) active communication; and 6) the ability to move others to action.
Somewhat surprisingly, excellent CEOs also manifest a combination of focus on others, outcomes, and businesses as a whole rather than themselves and clarity about what is substantive and what is not. The author’s choice as exemplary of this quality was investor Warren Buffett, who spends more than three-quarters of any given day, by his own account, learning about other companies and market environments.
Great CEOs: What Do They Have and Do
The 2013 HBR study focused not on personality traits, but other qualities and attainments of CEOs.
Their findings? Well, while individual cases may obviously vary, in general insiders to a corporation fare better than outsiders. MBAs perform better than people without the degree. The type of industry and sector makes no difference to whether a given CEO performs well, middling, or poorly.
Finally, there is not a correlation between doing well in business and having initiatives for social or environmental benefit. CEOs that have these may be great CEOs or poor ones. No matter what their ranking is, it is not these programs that contributed to it.