In his latest article titled – Managing across the Corporate Life Cycle: CEOs and Stock Prices!, Aswath Damodaran discusses the mythology surrounding great CEOs. Here’s an excerpt from the article:
It is no surprise that most people are convinced that there is a template for a great CEO that applies across companies, and that boards of directors in search of new CEOs should use this template.
That perspective also gets fed by books and movies about successful CEOs, real or imagined. Consider Warren Buffett, Jack Welch and Steve Jobs, very different men who have been mythologized in the literature, as great CEOs.
Many of the books about Buffett read more like hagiographies than true biographies, given how star struck the writers of these books are about the man, but by treating him as a deity, they do him a disservice. The fall of GE has taken some of the shine from Jack Welch’s star, but at his peak, just over a decade ago, he was viewed as someone that CEOs should emulate.
With Steve Jobs, the picture of an innovative, risk-taking disruptor comes not just from books about the man, but from movies that gloss over his first, and rockier, stint as founder-CEO of Apple in the 1980s.
The problem with the one-size-fits-all great CEO model is that it does not hold up to scrutiny. Even if you take the HBR and McKinsey criteria for CEO success at face value, there are three fundamental problems or missing pieces.
First, even if all successful CEOs share the qualities listed in the HBR/McKinsey papers, not all people or even most people with these qualities become successful CEOs. So, is there a missing ingredient that allowed them to succeed? If so, what is it?
Second, I find it odd that there are no questionable qualities listed on the successful CEO list, especially given the evidence that over confidence seems to be a common feature among CEOs, and that it is this over confidence that allows them to take act decisively and adopt long term perspectives.
When those bets, often made in the face of long odds, pay off, the makers of those bets will be perceived as successful, but when they do not, the decision makers are consigned to the ash heap of failure.
Put simply, it is possible that the quality that binds together successful CEOs the most is luck, a quality that neither Harvard Business School nor McKinsey can pass on.
Third, there are clearly some successful CEOs who not only do not possess many of the listed qualities, but often have the inverse. If you believe that Elon Musk and Marc Benioff, CEOs of Tesla and Salesforce, are great CEOs, how many of the Harvard/McKinsey criteria would they possess?
You can read the entire article here:
Aswath Damodaran – Managing across the Corporate Life Cycle: CEOs and Stock Prices!
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