What becomes a CEO most (Part 2)

I promised in an earlier post to revisit a study, publicized by David Brooks, about what characteristics seemed to make for the most successful CEOs.

The study is actually from July 2008, by Kaplan, Klebanov and Sorensen. It set out to compare the relative contribution to CEO success of what the study calls “execution” skills versus “interpersonal” skills.

The study concludes, in part:

[S]uccess and performance are more strongly correlated with execution-related skills than  with interpersonal and team-related skills, conditional on hiring a CEO.  In other words, CEOs with the execution-related skills of a Jack Welch appear more successful than CEOs with the more team-related skills of Jeff Immelt.

So I reviewed the study and tried to put aside how badly Brooks interpreted it. I already did that rant.

The first thing to point out is the authors’ study sample, and their definition of success. The leaders they evaluated were 316 candidates for the CEO job at companies funded through private equity — either VCs or leveraged buy-outs (LBOs); the main measure of their success for purposes of the study was whether they got the job. In that respect the study may tell us more about what private equity firms think matters in a CEO than they do about what actually works and doesn’t work.

(Which off the bat reminds me of a comment I once heard at venture capital event, that VCs were like a Kindergarten soccer game: the ball rolls one way, and all the kids chase after it in that direction; the ball rolls the other way, and all the kids chase after it again. The VCs in the room laughed and nodded. But I digress.)

Even between the LBOs and VCs, there were differences:  “Buyout CEOs score higher on characteristics related to a broader range of managerial and executive functions while VC CEOs appear to score higher only on characteristics related to intelligence and vision.”

To the extent the study measures performance success, it looks only at factors it concedes are “coarse.” Performance success means a good exit or good press; failure means being fired, going bankrupt, or getting bad press. By these measures, the authors conclude “Success tends to be positively related to execution-related skills, particularly for LBO CEOs, and tends to be
unrelated or negatively related to team-related skills, particularly for the VC CEOs.”

But the part of the study I dwelled on, were the distinctions the study makes to categorize skills as either “execution” or “interpersonal” — the key distinction in the study:

[W]e informally refer to characteristics as interpersonal / team-related, neutral, and execution-related.  Based largely on the factor analysis we describe below, we refer to “Develops People,” “Treats People with Respect,” “Calm,” “Flexibility,” “Listening,” “Open to Criticism,” and “Teamwork” as interpersonal or team-related skills.  We view “Removes Underperformers,” “Efficiency,” “Aggressive,” “Moves Fast,” “Persistence,” “Sets High Standards,” “Proactive,” “Work Ethic,” “Holds People Accountable” as execution-related skills.  We classify “Network,” “Hires A Players,” “Follows through on Commitments,” “Organization,” “Brainpower,” “Analytical,” “Strategic,” “Creative,” “Attention to Details,” “Integrity,” “Enthusiasm,” “Writing,” “Oral Communication,” and “Persuasion” as neutral or mixed.

These are some fascinating distinctions. Spend a few seconds picking out a skill and see how the authors categorize it.

And see that the study basically does not measure the contribution to success of CEO skills like organization, analysis, and attention to detail… or like enthusiasm, communication, and persuasion. Those are considered “neutral” skills. (So why did Brooks say the study reported those skills don’t matter? (Oops. I said it again.))

“Follow through” is neutral, not an execution skill.

“Holds people accountable” and “removes underperformers” are scored as execution skills, not an interpersonal skill, like “develops people.” A bias toward firing instead of building?

Finally —  but fundamental for the purposes of this blog — the study also treated “integrity” as a neutral skill. The study just doesn’t evaluate if integrity is good for business, or not.

So if you like to talk up mission and values, you don’t need to feel daunted by this study.