Why Can’t Anyone Find a Good CEO?

Leadership gurus can’t agree on what makes a great c-level executive. But they don’t have the data—and we do. Keep reading, board members.

By Steven N. Kaplan, Ph.D., and Morten Sorensen, Ph.D.

When you boil it down, boards only have one job: Pick a new CEO. The problem? They don’t do it particularly well.

Boards regularly replace underperforming CEOs, activist investors continue to appear and agitate for new head honchos, and in our research, we found that even private equity investors are disappointed in their choice of CEO roughly 50 percent of the time.

Board blunders still occur despite all that’s been written about the “ideal CEO.” In Good to Great, Jim Collins identifies the great CEO—the level 5 leader—as a person with unwavering resolve and humility who hires the right people and gives credit to others while accepting blame. In Authentic Leadership, former Medtronic CEO Bill George argues that CEOs should “establish long-term, meaningful relationships” and stay grounded while integrating all aspects of their lives.

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Then you have Leadership BS, in which Jeff Pfeffer counters with data that suggests the best leaders aren’t always authentic and employee-focused. Instead, they build their power base, master influence, eschew popularity contests, and adapt.

With so much conflicting insight and evidence, it’s no wonder picking a CEO is so difficult. What’s a board to do?

Simple: Keep reading. We evaluated a large sample of candidates for c-suite positions—CEOs, CFOs, COOs, and others. We know who was hired, who succeeded, and how CEOs differ from other c-level executives. And we have a good idea which of those differences are associated with subsequent success.

The Data

Our research uses detailed assessments of more than 2,600 c-level and executive job candidates who were evaluated by ghSmart, a firm that assesses top management candidates. The hiring companies varied from publicly traded firms, to those owned by venture capital or private equity, to other privately owned companies.

The assessments are based on structured interviews with candidates of roughly 4 hours in duration. They’re usually 20- to 40-page mini-biographies that include detailed information and assessments of the candidates’ lives and careers.

Almost all the assessments included ratings on 30 specific dimensions that included leadership, personal, intellectual, motivational, and interpersonal characteristics ranging from “hires A players” and “develops people” to “persuasion,” “attention to detail,” and “open to criticism.”

Who Becomes a CEO Now?

We used a statistical technique called factor analysis to create a more manageable set of four factors that explain a large amount of the variation in the original 30 dimensions. CEO candidates differed significantly on these four factors from other executives. Further-more, when we tracked the career paths of executives who weren’t CEO candidates, we found that execs who scored higher on these same four factors were more likely to become future CEOs:

1. General ability (talent): Executives who scored high here tended to score high on many different characteristics.

2. Execution: Holding talent constant, this factor contrasts execution skills with characteristics associated with interpersonal skills and being agreeable. Candidates with high execution scores get high grades on aggressive, moves fast, proactive, and holds people accountable. Candidates with low execution score higher on treats people with respect, open to criticism, listening skills, and teamwork.

3. Charisma: Candidates high in charisma have high grades for enthusiasm, persuasion, aggressive, and proactive.

4. Creativity and strategy: Candidates high in this factor have high grades for strategic, creative, and brainpower.

We then looked at which CEO candidates were hired for the jobs for which they were assessed. Again, relative to other executives, the hired CEOs scored above average on all four factors. In fact, they had greater talent on average than the CEO candidates who weren’t hired.

While still above average on execution, the CEOs who were hired were more agreeable than candidates overall. In other words, on the margin, boards tended to move toward candidates with better interpersonal skills who weren’t quite as strong on execution.

Who Becomes a CEO Later?

In a follow-up test, we took all the non-CEO candidates and followed their careers through LinkedIn and other sources. We then determined which of these executives became CEOs later in their careers.

The results stayed the same: Even though they weren’t CEO candidates in our sample, those executives who had higher general ability scores, higher execution scores, higher charisma scores, and higher creative and strategic scores were significantly more likely to become CEOs later.

Relative to other executives, CEOs are more talented, execution-oriented, charismatic, and creative and strategic. That said, when considered for the job, more agreeable skills help you get hired. These results also indicate that these characteristics can be measured—at least by professional assessment firms.

Who Succeeds as CEO?

Now that we know what skills increase the likelihood someone becomes a CEO, here’s the next question: Which of those skills, if any, make that person more likely to succeed?

We addressed this question using a subset of our assessments. We looked at more than 300 CEOs who were assessed for jobs at private equity and venture capital–funded companies and found out which candidates were hired as CEOs and how they performed. We measured performance by a combination of asking the investors, judging the success or failure of the investments, and seeing whether the CEOs were removed from the companies.

Performance was strongly positively related to the execution: Individual variables that mattered included ones like efficient, persistent, proactive, sets high standards, holds people accountable, as well as creative and strategic variables like analytical and brainpower. Performance was not related to interpersonal or agreeable variables like treats people with respect, open to criticism, listening skills, and teamwork.

These CEOs aren’t like those de-scribed by Jim Collins and Bill George, but rather, the leaders envisioned by Peter Drucker in his 1967 book, The Effective Executive. Drucker wrote that effective execs utilize time efficiently, focus on contribution, make strengths productive, do first things first, and make effective decisions. These are all execution or strategic elements.

When we present these results, we’re asked whether they generalize outside of private equity. While we need additional research to reach a definitive answer, there are several reasons why we’re confident they do.

First, Drucker was writing about executives of all kinds—public company, private company, and nonprofits. Second, our large sample results using the 2,600-plus assessments to determine CEO characteristics hold equally well for the public company executives in that sample. Third, the ghSmart team has reached similar conclusions to ours.

Finally, there’s evidence that execution matters a great deal throughout the organization. In The Progress Principle, Teresa Amabile and Steven Kramer studied a number of teams inside seven companies and discovered the most important determinant of employee satisfaction wasn’t money, recognition, interpersonal support, or clear goals—it was progress. Organizations with CEOs who execute make progress.

And consider some of the more successful CEOs of recent years. Amazon’s Jeff Bezos, Apple’s Steve Jobs, and Microsoft’s Satya Nadella are three extremely successful leaders with three very different personalities. Bezos and Jobs aren’t generally considered to be particularly agreeable or humble, but all three have been very effective at both execution and strategy. And their results speak for themselves.

What Does This Mean for Boards?

Our results have three major implications. First, in choosing a CEO, boards should primarily look at candidates with track records of execution, creativity, and strategy. Boards should be particularly wary of candidates who have great interpersonal skills but no track record of execution. We suspect some boards mistakenly hire candidates they like personally, but who do not execute.

Second, boards and companies looking to identify potential CEOs and other c-level talent should look for executives who execute, are creative and strategic, and have some charisma. These leaders are likely to emerge as top candidates, or go elsewhere to do so.

Finally, boards and companies should consider using professional assessment firms to assess their c-level talent. Our results suggest those assessments include data that might just determine whether you find your brilliant leader for the next 20 years, or go back to the drawing board in 6 months’ time.

Steven N. Kaplan, Ph.D., is a professor of entrepreneurship and finance at the University of Chicago Booth School of Business. An associate editor of the Journal of Financial Economics, he con-ducts research on issues in private equity, venture capital, entrepreneurial finance, corporate governance, and corporate finance.

Morten Sorensen, Ph.D., is a professor of finance at Copenhagen Business School in Denmark. His area of research focuses on private equity, venture capital, and entrepreneurship, emphasizing the value created between investors and portfolio companies.