Certain CEO leadership traits can be the sole determinant of whether a business is successful, as employees emulate behaviours from the top.
This is the finding of a new study by Koen Pauwels, Adjunct Professor at BI Norwegian Business School, which reviewed a variety of research on senior executives and found that variables such as confidence, political views, age, education and military background can have an impact on innovation and value creation within companies.
Confidence can mean creativity but too much is risky
The study shows that leaders with natural confidence can be more innovative in their role, leading to heightened creativity via a preference for change over routine. Elon Musk, CEO of aerospace manufacturer SpaceX and currently the richest person globally, exemplifies this leadership trait and has been confident enough to invest his own money into Tesla and SpaceX. However, high confidence can become problematic if a leader overestimates their ability to make all the decisions and fails to adhere to their other senior colleagues’ salient advice.
Having a military background can hinder progress
The research suggests companies led by those with military backgrounds are less likely to innovate and invest in R&D as military training emphasises subordination to authority, duty and self-sacrifice, which can lead to lower risk-taking. However, while risk aversion can limit company growth in some cases, it could be an asset in certain crises such as during times of wider market volatility.
Education can enlighten leaders
Some studies have found that companies are more innovative if their managers are highly educated. Specifically, senior managers with MBA degrees from well-respected business schools are more likely to pursue risks with innovative business models, leading in some cases to improved stock returns. Acquired business knowledge among ex-military leaders can prevent military training’s negative effects, such as an aversion to risk, which can stem innovation.
Younger leaders prefer investment over preservation
Younger leaders tend to spend more on R&D while older ones are more concerned about the firm’s financial safety and tend to invest less. Older leaders are also generally slower to learn new technologies and are less likely to seek growth through innovation.
Political values affect company innovation and CSR
Leaders with liberal values are more likely to innovate, while leaders with conservative values tend to dislike change. Companies led by Republican-leaning executives in the US, for example, also experience more internal conflict and spend less time on corporate social responsibility.
Dangerous hobbies can be a sign of genius
Leaders with risky hobbies may unnerve shareholders; however, many successful senior executives spend their free time engaging in risky activities in their free time. For example, Facebook co-founder Mark Zuckerberg hunts boar with a bow and arrow while Google co-founder Sergey Brin enjoys skydiving, roller-hockey and circus stunts.
Commenting on the research, Prof. Pauwels said: ”Those responsible for the selection of CEOs need to recognise that personality, demographics and experience are key factors in firm performance, including innovation and stock returns. They also need to be aware that characteristics such as overconfidence, military background and political ideology may also affect decision-making, innovation output and shareholder returns.”