The forced turnover of chief executive officers costs shareholders about US$112 billion in lost market value annually, a 2014 PwC study of the world’s 2,500 largest companies showed. Selecting the right CEO is the job of company directors, who need to ensure that they choose wisely. With so much at stake, appointing a CEO to head a company should include an assessment of the personal qualities each person brings to the role.
However, what actually leads to high performance and the unrealistic, yet pervasive, stereotype, which is shaped in large part by the official bios of Fortune 500 leaders, is still the person most often selected for the role. The typecast ‘successful’ CEO is a charismatic six-foot-tall white man with a degree from a top university, who is a strategic visionary with a seemingly direct-to-the-top career path and the ability to make perfect decisions under pressure.
The CEO Genome Project, a 10-year study investigating the qualities of successful CEOs, uncovered something different about the image. Its goal was:
‘to identify the specific attributes that differentiate high-performing CEOs (whom we define as executives meeting or exceeding expectations in the role, according to interviews with board members and majority investors deeply familiar with the CEOs’ performance). Partnering with economists at the University of Chicago and Copenhagen Business School and with analysts at SAS Inc., we tapped into a database created by our leadership advisory firm, ghSmart, containing more than 17,000 assessments of C-suite executives, including 2,000 CEOs. The database has in-depth information on each leader’s career history, business results, and behavioral patterns. We sifted through that information, looking for what distinguished candidates who got hired as CEOs from those who didn’t, and those who excelled in the role from those who underperformed.’
The research findings challenged many widely held assumptions.
- Introverts are slightly more likely to surpass the expectations of their boards and investors when compared with extroverts.
- Virtually all CEO candidates had made material mistakes in the past, and 45% of them had had at least one major career blowup that ended a job or was extremely costly to the business.
- More than 78% of that subgroup of candidates ultimately won the top job.
- Educational pedigree (or lack thereof) in no way correlated to performance – only 7% of the high-performing CEOs in the study had an undergraduate Ivy League education, and 8% didn’t graduate from college.
While boards respond well to high confidence candidates for CEO appointments, but the research shows that confidence offers no discernible advantage in job performance.
The most important discovery was that successful CEOs tend to demonstrate four specific behaviors that prove critical to their performance. When boards choose candidates who embody these qualities, they significantly increase their chances of hiring the right CEO.
The Four Behaviors
While it is rare to find a candidate who exhibits all four behaviors, the research indicated that those who showed one trait to a high degree with a combination of the other traits to a lesser degree, are the more likely to be successful leaders.
The behaviors described sound simple, but when practised with consistency can transform a leader into a successful CEO.
- Deciding with speed and conviction.
High-performing CEOs do not necessarily make great decisions every time; rather, they are more decisive than others. They make decisions earlier, faster, and with greater conviction. They do so consistently – even amid ambiguity, with incomplete information, and in unfamiliar domains.
The data showed that people who were described as “decisive” were 12 times more likely to be high-performing CEOs.
- Engaging for impact.
Once CEOs set a clear course for the business, they must get buy-in among their employees and other stakeholders. It was found that strong performers balance keen insight into their stakeholders’ priorities with an unrelenting focus on delivering business results. They start by developing an astute understanding of their stakeholders’ needs and motivations and then get people on board by driving for performance and aligning them around the goal of value creation. CEOs who deftly engaged stakeholders with this results orientation were 75% more successful in the role.
CEOs who engage stakeholders do not invest their energy in being liked or protecting their teams from painful decisions, both those behaviors are commonly seen in lower-performing CEOs.
Instead, skilled CEOs gain the support of their colleagues by instilling confidence that they will lead the team to success, even if that means making uncomfortable or unpopular moves. These CEOs do not shy away from conflict in the pursuit of business goals. The ability to handle clashing viewpoints also seems to help candidates advance to the CEO’s office.
- Adapting proactively.
CEOs who excel at adapting are 6.7 times more likely to succeed. CEOs themselves say that this skill is critical. Most CEOs know they have to divide their attention, but adaptable CEOs spend significantly more time—as much as 50%—thinking about the long term. Other executives, by contrast, devoted an average of 30% of their time to long-term thinking.
CEOs who have a long-erm outlook are more able to predict the shifts that could be meaningful to the future of their company.
- Delivering reliably.
The ability to reliably produce results is possibly the most powerful of the four essential CEO behaviors. In the sample, CEO candidates who scored high on reliability were twice as likely to be picked for the role and 15 times more likely to succeed in it. Boards and investors prefer a steady hand, and employees trust predictable leaders.
Teams want to follow a leader they can trust. Consistency is a quality that invites people to trust.
While the extensive research conducted indicates some of the qualities that top CEOs exhibit, it does not preclude those who have yet to establish themselves as having these qualities from being highly valuable and skilled CEOs. These traits are all skills that can be learned over time, however, a natural tendency towards decisiveness, engagement, proactivity and reliability are the traits that likely placed the candidate before the board in the first place.