CEO Behavior and Firm Performance is the result of collaboration between economics experts from the London School of Economics, the University of Oxford, Columbia University and the Harvard Business School. More than 1,000 CEOs were surveyed across six of the top ten largest world economies (Brazil, France, Germany, India, the United Kingdom and the USA).
For the purposes of the study, a CEO was defined as the highest representative of a company with executive powers who is also responsible to a board of directors. The researchers recorded all activities of the CEOs during the week and also whether these activities were planned or not. Machine learning then defined the most important behavioural differences.
The learning algorithm focused on how to explain the CEOs behaviour by dividing them into two groups. It turned out that their behaviour generally corresponded to the difference between managers and leaders as defined by John Kotter. The behaviour of individual CEOs was then assessed as a certain ratio of both types.
What do CEOs do?
- They spend a quarter of the days alone, e.g. handling e-mails.
- 10% of their days are devoted to personal matters and 8% to travelling.
- The remaining 56% of their days are spent with at least one other person, mostly at scheduled meetings.
- Most often they visit the departments of production, marketing and finance, plus, outside the company, clients and suppliers.
Are leaders better than managers?
An analysis of the two types of CEOs in relation to the financial performance of companies showed that the more productive and more profitable companies are led by CEOs who show a greater element of leadership behaviour. This, however, does not mean that the leader type CEO is better for every business.
Leaders are more successful as CEOs of larger companies and companies operating in more complex sectors. Managers, on the other hand, are better CEOs of smaller firms in less complex sectors with a high share of routine activities.
Whether a manager or a leader is a more suitable CEO cannot therefore be judged without considering the size of a company and complexity of its activities. A manager in the role of a leader (and vice versa) may have a negative impact on the company's performance.
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