When an organization hires a top executive, there’s a lot on the line in terms of performance, employee morale, and the bottom line. So any quantitative data that might help predict the chances of executive success is important news. Organizational consulting firm Green Peak Partners commissioned a study, “What Predicts Executive Success?” that was conducted by a research team at Cornell University's School of Industrial and Labor Relations.
The study explored the leadership styles, backgrounds and track records of 72 senior executives across 31 companies (half of them with C-level or President titles) at public, venture-backed, and private-equity sponsored companies. The researchers found that harsh, hard-driving, “results-at-all-costs” executives actually diminish the bottom line, while self-aware leaders with strong interpersonal skills deliver better financial performance.
Dr. John Hausknecht, Cornell Assistant Professor, stated, “We know very little about what predicts executive success—it is extremely rare to gain access to detailed pre-hire candidate information and short- and long-term indicators of executive performance for this many individuals. Much of what has been written about the predictors of executive success is based on personal anecdotes or conventional wisdom rather than scientific evidence.
J.P. Flaum, Managing Partner at Green Peak Partners Boards, stated that investors and search executives may need to adjust their criteria for screening potential leaders: “Our findings directly challenge the conventional view that ‘drive for results at all costs’ is the right approach. The executives most likely to deliver good bottom line results are actually self-aware leaders who are especially good at working with individuals and in teams.”
“A key takeaway is that soft values drive hard results—and that companies and their investors need to put more effort into evaluating the interpersonal strengths of potential leaders. Evaluating technical competence alone isn't enough,” said Dr. Becky Winkler, Principal at Green Peak.
More specifically, the study revealed:
- “Bully” traits that are often seen as part of a business-building culture were typically signs of incompetence and lack of strategic intellect. Such weaknesses as being “arrogant,” “too direct” or “impatient and stubborn” correlated with low ratings for delivering financial results, business/technical acumen, strategic intellect, and, not surprisingly, managing talent, inspiring followership, and being a team player.
- Poor interpersonal skills lead to under-performance in most executive functions. Executives whose interpersonal skill scores were low also scored badly on every single performance dimension.
- Leadership searches give short shrift to “self-awareness,” which should actually be a top criterion. A high self-awareness score was the strongest predictor of overall success. “Executives who are aware of their weaknesses are often better able to hire subordinates who perform well in areas in which the leader lacks acumen,” said Dr. Winkler.
- Experience at many different companies is not a plus. The more organizations an executive worked with early in his or her career, the lower the people management rating. “Executives who change jobs frequently are often trying to outrun a problem, and that problem often has to do with how they ‘fit’ in the workplace,” Mr. Flaum explained. “Job hoppers also lack perspective on the outcome of their leadership decisions,” he said, “as they typically leave before the changes take effect.”
- People with multiple siblings tend to be better leaders. Executives who have more siblings were rated highly in their ability to manage people and drive results. Mr. Flaum remarked: “No one says it better than Bank of America CEO Brian Moynihan, who is quoted in USA Today: ‘Having seven siblings [gave me]... a unique background in understanding what competition is.’”
The solution: refocus
“There are limits on the degree to which someone can improve his or her basic ability to interact well with others, which means that focusing on interpersonal skills when selecting the right candidate becomes critical. The challenge is that these qualities often aren’t revealed by standard tests and interview techniques,” said Dr. Winkler. “Therefore, what’s really needed is a change in focus: boards, private equity general partners, and management teams need to focus not only on what executive candidates do, but also on how they do it.”
“The most important step boards and investors can take is to become more aware of the culture of the companies they own and run,” she added. “Context matters. It’s not enough for an investor or director just to sit in on board meetings, which has been the inclination. They need to understand how people interact in the company, and make sure that those interactions are positive and truly supporting the bottom line.”
While interpersonal skills are difficult to learn, boards and investors should look for senior executives who are teachable at some level. Dr. Winkler concluded, “Once again, it comes down to that quality of self-awareness—if you can select for that, there may be performance benefits across all categories.”
To learn more about the study, visit http://greenpeakpartners.com