The three Leadership qualities that matter most (CEO or otherwise):
1.) Have a Point-of-View: It is essential to have a point-of-view. Right or wrong time will tell. For example, if a Board of Directors is looking to fill a CEO role, a CEO candidate ought to have a point-of-view in terms of a broad strategy as well as tactical execution. Where is the industry headed? How to leapfrog the competition? How best to provide value to customers? How best to creatively leverage technology? These are important elements to contemplate and have a position on.
2.) Communicate Effectively: Communicate a consistent message to your Board of Directors, to shareholders, to employees (your direct reports in particular – coach the coaches) and to customers. Effective communication means tailoring your message to your audience. Effective communication means actively repeating and refining your message until your audience absorbs its content. Effective communication also means active listening.
3.) Be Transparent: Effective leaders consistently portray the same image, the same persona to multiple cohorts – family, friends, colleagues, board members, customers and strangers.
Our recent CEORater Podcast episode on the subject:
I’m puzzled by the mess that is GE. The Company recently removed former CEO John Flannery after only 14 months at the helm only to replace him with a Board member (Larry Culp). I was a fan of Flannery’s effort to decentralize operations and to divest non-strategic businesses. However, I did not agree with all of his choices. Perhaps GE’s Board did not either. It is clear that the Board and Flannery did not operate in lockstep. Therefore, it would seem that GE’s Board performed little due diligence prior to promoting Flannery to CEO. Here are a few thoughts for corporate boards to contemplate prior to hiring a CEO.
1.) Executive Recruiters are there to get a deal done. Executive recruiters exist to get paid. Too often recruiters rush to fill vacant CEO posts with acceptable candidates in order to quickly realize their fees. The proper approach is to invest the time required to ensure CEO candidate fit. To this point, I’ve yet to see an executive recruiter publish statistics about median CEO tenure for assignments they’ve filled.
2.) Corporate Boards ought to adopt a more data-driven approach to ensuring CEO fit.
a.) Relationships are only the tip of the spear. Relationships are great to leverage when initially casting a wide net to identify CEO candidates. However, that is only the beginning of the process. Simply because “Person A” knows “Person B” does not qualify Person B for the CEO job. Consider GE for example. Flannery was hired by the company in 1987 and held a number of senior posts before becoming CEO in August 2017. I assume plenty of people knew him at a superficial level, but did anyone at the Board level “know” him at a substantive level?
b.) Candidate due diligence is often overlooked or an afterthought. Due diligence consists of more than talking with a few people and conducting a background check.
c.) Collect candidate data that matters. In the case of GE – why didn’t the Board ask Flannery to submit a plan for fixing GE as part of the recruiting/ diligence process? Instead, the company promoted Flannery to CEO where he then embarked on a 100-day tour to inform his grand strategy for repairing GE. This should have been part of diligence. Do not pass go, do not collect $200 until you show me something as a Board member that I can hang my hat on.
Things Will Get Worse for Facebook Before They Get Better. A Second Act Is Required. Our thesis is simple. User growth has slowed and in the recent June quarter declined. We expect this trend to continue in the near-term as the following factors negatively impact Facebook’s business. Declines in User Trust and Engagement: The Cambridge…
“CEO Tenure Is Getting Shorter..” the Wall Street Journal writes. Research indicates that the optimal tenure is 4.8 years. Median CEO tenure at large cap companies was five years in 2017, one year less than the median in 2013 (Equilar). To quote the article, “Xueming Luo, professor at Temple University’s Fox School of Business and one of the authors of a widely cited 2012 study, said CEOs are most effective in the initial years because they are more open to outside opinions and less risk-averse. ‘The search for external knowledge tends to end.’ ”
We believe the above is consistent with CEO personality research, particularly that of David Larcker and Charles O’Reilly who use the Big 5 personality model as the underpinning of their research.
The personality trait “Openness” speaks to Dr. Luo’s point in the WSJ article. Openness: “CEOs who score highly in this area are intellectually curious, value uncommon thought processes, are creative thinkers, are less prone to selective perception bias, exhibit strategic flexibility and encourage experimentation and risk-taking.”
See our full report – “CEORater Big 5 Personality Analysis“.
The CEORater Technology Founder CEO Index outperformed its peer group Year-to-Date through September 18th 2018.
The CEORater Technology Founder CEO Index returned 32.3% and 28.5% on a Weighted and Unweighted Stock Price Return basis respectively (click here for detail) during the January 2nd 2018 – September 18th 2018 period.
The S&P 500 Information Technology (TKR: S5INFT) returned 16.0% on a Weighted basis over the same period.
The Powershares S&P 500® Equal Weight Technology ETF (TKR: RYT) returned 16.6% on an Unweighted basis over the same period.
Cryptocurrency firms fell from grace (Chain and Lightyear merged to form Interstellar) as valuations and expectations got too far ahead of themselves for both the various “coin” firms as well as for blockchain – the distributed database technology that enables digital currency transactions. We are long-term bullish on each – particularly blockchain.
The crypto space isn’t the only sector that grew overheated as reality has set in to the autonomous vehicle space. Apparently robot cars won’t be shuttling all of humanity to and fro by 2025. We expect that autonomous vehicle startups will suffer a materially adverse impact to their respective valuations.
The two technology hype scenarios got us thinking about previous technology hype cycles. Thus, we created the TEK2day, CEORater “Technology Hype Curve” to visually represent an all too familiar pattern as it relates to hyping new technologies. Click HERE to download the Technology Hype Curve graphic.
Opportunity Cost for Active Managers Is High Institutional investors typically contemplate opportunity cost within the context of portfolio returns, individual stock returns and ROIC. What however is the opportunity cost associated with pursuing a broken business model versus correcting course? The capital markets are filled with smart people and smart machines. It is more difficult than ever…
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Every founder CEO begins as a “creator”. Not every founder CEO graduates from “creator” to “builder”. Creators eventually self-implode (Elon Musk, Tesla and Travis Kalanick, Uber) whereas other founders are able to scale over the long-term. For example, Microsoft founder Bill Gates and Amazon’s Jeff Bezos are builders (We provide a list of Builder CEOs…
SaaS Companies and Subscription Revenue Models Every company can learn from SaaS (“Software-as-a-Service”), companies. My first exposure to SaaS companies was the first self-proclaimed “SaaS” company – Salesforce.com. This was early in my banking career around the time of Salesforce’s 2004 IPO. Today, Salesforce is a $110 Billion-plus market cap behemoth. Every company – regardless…