Persistence Is Best Predictor of CEO Success: Steven N. Kaplan
The death of Apple Inc.’s Steve Jobs has brought a lot of talk about the characteristics of the ideal chief executive officer.
One school of thought holds that successful CEOs are team players, good listeners and humble. In the book “Good to Great,” Jim Collins called such people “Level 5” leaders.
Yet Jobs and other superstars such as Jeff Bezos of Amazon.com Inc. and Facebook Inc.’s Mark Zuckerberg aren’t generally seen in those terms. In a recent article in the Wall Street Journal, Bezos was described as “not always a ‘nice’ CEO,” but rather as one who “can inspire and cajole but also irritate and berate.”
So which is the right model: The humble team player or the arrogant tyrant?
The main challenges in answering this question arise because most of the stories, and much of the research, about CEOs are backward-looking, that is to say they identify who has succeeded and then figure out which characteristics those CEOs had. The potential problem with this methodology is that hundreds of people may have had exactly the same characteristics, but only a few succeeded: the ones we know about through the stories. In other words, after-the-fact stories don’t always predict what qualities lead to success.
While much has been written about what makes a great corporate chief, there is surprisingly little systematic, objective work on the topic. Ideally, you would want to look at a group of CEOs before they were regarded as successful, meaning at the moment they were hired. You could classify the different abilities and characteristics they had when they took the job and then see which of those led to better performance.
In a soon-to-be-published paper in the Journal of Finance, Morten Sorensen, Mark Klebanov and I were able to conduct such an experiment. We obtained detailed assessments of more than 300 CEO candidates in firms funded by private-equity investors, both buyout and venture-capital firms. The assessments were carried out by a company called ghSmart, which interviewed each applicant and then rated that person on more than 30 specific characteristics and abilities.
We classified abilities into three categories. Some we called “hard” or execution-related, such as being efficient, aggressive, persistent and proactive. Some we called “soft” or interpersonal, such as being flexible, a good listener, open to criticism and a team player. And some fit neither category, such as being persuasive, organized, analytical and calm. (A methodological note: Hard and soft abilities appear to be independent in the sense that they are not correlated with other characteristics such as age or gender.)
We next determined whether the CEO was successful. To measure success, we used the investors’ evaluations of actual performance and of their investments’ financial return.
What did we find? Execution-related skills were the most important. The most successful CEOs were those who were persistent, efficient and proactive. Persistent leaders don’t give up. They stick with assignments until they are done. Efficient CEOs get a lot done in a short period of time. And proactive ones are self-directed and regularly bring in new ideas. Differences in persistence, efficiency and proactivity were meaningfully related to success.
For buyouts, CEOs who scored high in those dimensions succeeded 75 percent to 90 percent of the time. CEOs who didn’t score well succeeded less than half the time. Those are big differences. Some of the “in between” characteristics -- particularly being organized -- were related to success. The softer traits -- good listener, team player, and open to criticism -- didn’t matter.
Get Things Done
Why do we think we got these results and why do we think they are right? CEOs who are persistent, efficient and proactive get things done. Those who don’t display those skills don’t achieve results, even if they are good listeners, team players, and so on. And if a leader doesn’t get things done, their employees get frustrated or even leave, particularly the better ones.
When people hear these results, they usually ask if the patterns apply more broadly, for example outside of private equity, or for non-CEOs? While we don’t have the data to answer that definitively, we suspect the findings would be valid in other fields. Here are two reasons:
First, in a new book, Teresa Amabile, of Harvard Business School, studied what motivates employees and teams within organizations, what makes them most enthusiastic about their work. She finds that it isn’t money, recognition, interpersonal support or clear goals. Instead, employees are most positive when they make progress. And it is almost redundant to say that persistent, efficient, proactive CEOs make the most progress.
Second, when I described our study to a senior executive at a leadership-training organization, he said the results were consistent with what he had seen. He wasn’t surprised that we didn’t exactly agree with the findings of “Good to Great.” Instead, he referred me to a book written more than 40 years ago by Peter Drucker, one of the great management thinkers of the 20th century. His work was based on personal observation rather than large sample data analysis. In the book, “The Effective Executive,” Drucker wrote, “effective executives differ widely in their personalities, strengths, weaknesses, values and beliefs. All they have in common is they get the right things done.”
says effective executives share the following: They utilize time efficiently, focus on contribution, do first things first, and make effective, rational decisions. Those qualities are remarkably similar to the ones that mattered in our study.
Let’s return to the question of what to look for in a CEO. Level 5 leaders, while humble, showed unwavering resolve. In other words, they were persistent and proactive. And, there is no doubt that Jobs, while arrogant and perhaps even unpleasant at times, was persistent, efficient and proactive. Both types of CEOs can create the kind of progress that motivates employees, and succeeds.
(Steven N. Kaplan, a professor of entrepreneurship and finance at the University of Chicago Booth School of Business, is a contributor to Business Class. The opinions expressed are his own.)
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