Inside Business: Cult of the boss fails the academic test
Sunday 24 May 1998
And nowhere has this cult of the business leader as personality been more encouraged than the United States, where companies themselves and a business press eager to humanise what can be a dry subject have combined to make chief executives into household names.
So it might seem a little odd for a business school academic to attempt to damp down this particular fire. But not only does Randall Peterson of the Johnson School of Management at Cornell University claim that effective senior management teams play a greater role in company success than charismatic chief executives, but the research backing it up has been named one of the year's best papers by the Academy of Management.
Mr Peterson, a social psychologist who wrote the paper with Pamela Owens and Paul Martorana of the University of California at Berkeley, claims that business success is largely down to a combination of a strong chief executive and senior management team. Contrary to popular perceptions and much business reporting, strong CEO personality traits alone have little connection to strong financial returns for the company. Even strong CEOs can have their efforts undone by dysfunctional senior management teams.
In successful companies the CEO fosters healthy group dynamics among his immediate subordinates, allowing them to mobilise the energies and talents throughout the organisation to overcome key problems and create opportunities for growth. In particular, successful top management teams have both a "directive" leader and greater openness to new information.
"Disney's Michael Eisner and Coke's [the late] Roberto Goizueta had strong, consistent and clear visions for their companies, but they were also open to criticism and made successful adjustments when advised their case had altered," says Mr Peterson.
For example, Mr Goizueta had said his job was not to be right, but to produce results. Mr Peterson points out that this kind of attitude led to strong management teams that knew ideas would be heard, weighed and acted upon by their CEO. On the other hand, Lee Iacocca rallied Chrysler with both a vision and a willingness to listen, "but when success made him a celebrity, he stopped listening to his management team and the company found itself in trouble again".
There is a tendency, Mr Peterson says, either to overstate the role of the CEO as the star or to say that the CEO hardly matters. "Our findings suggest a synthesis of these factors, that the CEO's personality plays an important role when it is able to mesh with or foster similar strong values among his core group of lieutenants - the senior management group which reports directly to him. In today's steadily less hierarchical and more flattened organisation, having personality traits that enable you to manage and operate in teams will be essential for executives in profitable and growing companies."
Having examined nine leading companies that had gone through both good and bad times from the late 1970s to the early 1990s, the researchers found that successful companies had "healthy group dynamics". Besides directiveness and openness to new information, they had a sense of control, optimism, group cohesiveness, a willingness to take risks, strong ethics and decentralised decision making.
On the other hand, group dynamics in weak organisations "veered towards the pathological". Executives froze when faced with problems, postponed difficult decisions and failed to delegate authority. With executives primarily interested in themselves and determined not to become the next to fall out of favour, loyalty to the company was minimal.
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