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29 JUNE 2017
What makes a high-performing CEO?

by Owen Skae: Director of Rhodes Business School.

Consider this red flag: according to the Conference Board (a global, independent business membership and research association), approximately 25% of CEO departures in Fortune 500 corporations from the year 2000 to 2013 were involuntary.

A study by PwC of the world’s largest 2,500 companies, estimated that forced turnover at the top, resulted in lost market value of $112 billion. These CEOs fell short of the performance required by board members and majority investors.

These and other facts were cited in the May-June 2017 issue of the Harvard Business Review, in an article titled ‘What Sets Successful CEOs Apart’. It is co-authored by the founder and co-leader of the CEO Genome Project, Elena Lytkina Botelho, who is a partner at ghSmart, a leadership advisory firm, together with Kim Rosenkoetter Powell, co-leader of the CEO Genome Project and a principal at ghSmart, and Stephen Kincaid and Dina Wang, both principals at ghSmart.

The CEO Genome Project was led by a team of psychologists and economists who aimed to get to the bottom of this CEO fallout problem by researching the key attributes of high-performing CEOs who keep their jobs. The study was based on 2 000 American CEOs in all the major industry sectors.

It turns out that board members and directors are part of the problem. They do not always select CEOs astutely enough, as the authors explain:

When we compared the qualities that boards respond well to in candidate interviews with those that help leaders perform better, the overlap was vanishingly small. For example, high confidence more than doubles a candidate’s chances of being chosen as CEO but provides no advantage in performance on the job.

Another example is that CEOs with a costly past, where they made a major mistake or had some major blowup that ended their job, did not jeopardise their chances of being selected again. To the contrary, the majority of them landed the next top job – something we see happening all too often in South Africa.

The research team also discovered that ‘educational pedigree’ did not count in high-performance selections, as only 7% of the CEOs studied had an undergraduate Ivy League degree.

So what does count? What they found is that CEOs need to demonstrate four key behaviours, which should inform board selections. They are:

Making decisions with speed and conviction

High-performing CEOs are decisive and clear about their plan. A lack of clarity and indecisiveness is a recipe for disaster. Incorrect decisions can always be changed or the path adapted. In short, doing something is better than doing nothing at all.

Engaging for impact

High-performing CEOs have a strong sense of the organisation’s stakeholders and they understand how their demeanour and body language can affect their entire organisation, particularly in tough times. They have a good sense of what people are thinking, they believe in “giving people voice” but they don’t always strive for consensus. They know when they need to make the call and when they need to listen to others or delegate. It’s a fine balance but this is what makes them so effective even if they don’t win the popularity contest.

Adapting proactively and anticipating the future

High-performing CEOs always think long-term but are proactive about adapting their goals whenever necessary in the short- and medium-term. CEOs who proactively adapt are up to seven times more like to achieve their goals. Setbacks are not considered failures; they candidly review them, address them, and learn from mistakes.

Delivering reliably

The research team maintains this is the most powerful of the four behaviours, as a track record of consistently reliable delivery makes a CEO twice as likely to be chosen and a staggering 15 times more likely to succeed. Stakeholders want a steady hand and employees trust reliable leaders who follow through on their commitments; who mean what they say and say what they mean.

In the article the authors explain that these behaviors sound deceptively simple. But the key is to practice them with maniacal consistency, which our work reveals is a great challenge for many leaders.

It makes sense but what about qualities like integrity and work ethic? At the end of their article, the authors briefly raise these, and make the following comment:

Those [qualities] are critical in screening out clearly unsuitable candidates, but they will not help you separate the best from the rest. Consider that 100% of low-performing CEOs in our sample scored high on integrity, and 97% scored high on work ethic.

Their lack of exposition here means this paragraph is easily misread, as is the paragraph about confidence.

All high-performing CEOs require confidence, but it might be a quiet confidence as opposed to a show of confidence that lacks depth.

In the same vein, ALL high-performing CEOs require integrity and work ethic in addition to the four behaviours; I would argue more so than ever before as people have lost trust in corporations and CEOs.

This paragraph does not mean that if you have integrity and work ethic you will only be a low-performing CEO. To the contrary, if CEOs or any leaders cut corners where these qualities are concerned, sooner or later it will catch up with them and impact on the organisation that has entrusted them to do a good job, lead with integrity and demonstrate a strong work ethic. Consider the fallout from the Eskom CEO appointment.

For me, what this paragraph emphasises is that low-performing CEOs need to pay far more attention to the four key behaviours while retaining their integrity and work ethic. You cannot only be a nice guy with wonderful integrity but dither over decisions and actions or paper over cracks without addressing the root cause. If you do this, you are going to lose people and performance.

It all comes back to leadership development, which includes examining what being responsible, responsive and effective means. We need to debate what sets successful CEOs apart, not only according to what board members and majority investors think, but according to the six capitals set out in King IV Code, namely: financial, manufactured, intellectual, human, social and relationship, and natural capital, all of which are equally important.

We further need to ask whether high-performing CEOs are using their abilities to make a difference to society. As KwaZulu-Natal businessman and cricket legend Tich Smith says, there are so many successful people but how many are doing something significant?

Smith is the founder of Lungisisa Indlela Village (LIV) (www.liv-village.com) on the outskirts of Verulam, which provides homes and education for orphaned and vulnerable children. His Section 21 company has paid for the feeding of thousands of children, he has established over 30 crèches and paid for the schooling of hundreds of orphaned children.

The LIV model is based on long-term cluster foster care, where the children have a sense of belonging in a homely environment. The houses are built in clusters surrounding a communal play area. Each home has a fully trained House Mother, who may bring two biological children, in addition to her six foster children, placed through the Department of Social Welfare.

Smith is making a difference to society and significantly contributing to improving the lives of others. In South Africa, in great or small ways, we all need to take on the responsibility of improving the opportunities for our fellow South Africans, and especially our young people. Many of our CEOs are committed to this and hopefully more will follow, adding another special dimension to what high performance really means.

This article appeared in Leadership, Edition 382, June, 2017. It is reproduced with their permission.
Useful resources:

Rhodes Business School
The essence of Rhodes Business School is ‘Leadership for Sustainability’ and our vision is to be the business school of choice for those aspirant leaders and managers who are committed to applying sustainable business practices. Visit our website.

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