Unraveling the Myth: Are Today's CEOs Really Better Leaders
Using two decades of leadership assessments, what can we learn about the quality of CEOs and C-level leaders?
Are CEOs Getting Better? The Surprising Truth About Leadership Development
In a world where global leadership development training is estimated to cost a staggering $3.5 billion annually, one might expect to see a noticeable improvement in the quality of CEO candidates over time. But is this investment paying off? A recent study by Yann Decressin, Steven Kaplan, and Morten Sorensen challenges this assumption, offering insights that may reshape how we think about leadership development and CEO selection.
The CEO Performance Paradox
Measuring CEO performance is notoriously difficult. Unlike the clear-cut world of sports, where we can easily determine the fastest runner or the highest jumper, CEO performance is highly contextual. A CEO who excels in leading a high-margin luxury brand might struggle at the helm of a low-margin retailer. The highest performers are often those most 'fit' for their specific environment.
Given this challenge, the researchers took an innovative approach. Instead of attempting to measure on-the-job performance, they examined changes in CEO candidate assessments over time. This method allows us to gauge whether the pool of potential CEOs is improving, which should reflect the effectiveness of leadership development efforts.
The Complexity of Leadership Assessment
Assessing leadership potential is a bit like trying to predict the weather. Just as meteorologists use multiple data points to forecast weather patterns, HR practitioners use various assessments to gauge leadership potential. But like weather predictions, leadership assessments become less reliable the further into the future we try to predict due to non-linearity.
This complexity mirrors the challenges we've previously discussed regarding IQ tests and other universal measures of intelligence. As we explored in a recent blog post, intelligence is an extremely complex phenomenon that defies simple quantification. The same can be said for leadership ability. Both involve emergent properties, nonlinear relationships, and are heavily influenced by context. Just as IQ tests struggle to capture the full spectrum of human intelligence, even these more comprehensive CEO assessments face limitations in predicting leadership effectiveness across diverse organisational contexts. This underscores the need for nuanced, multi-faceted approaches to leadership assessment and development.
The Study: A Deep Dive into CEO Characteristics
The research team analysed over 4,900 executive assessments conducted between 2001 and 2019. Using factor analysis, they identified four key dimensions of executive characteristics:
General ability
Execution vs interpersonal skills
Charisma vs analytical skills
Creative/strategic vs detail-oriented skills
Key Findings: A Surprising Trend
The results paint a picture that may surprise many in the HR and leadership development world:
Decline in overall ability: CEO candidates in the later period (post-2009) showed lower overall ability scores.
Shift in skill balance:
More execution-oriented, less interpersonal
More analytical, less charismatic
More detail-oriented, less creative/strategic
No evidence of increasing 'soft skills': Despite popular belief, there was no trend towards increased interpersonal or 'softer' skills among CEOs over time.
Clustering of talent: A strong positive correlation in general ability was found between CEOs and other executives assessed for the same company.
Changing corporate objectives: Increased demand for skills in organic growth, operations, and strategy, with decreased emphasis on staffing skills.
Implications for HR Practitioners and Leaders
Reassess leadership development programmes: If these programmes aren't improving the overall quality of CEO candidates, it's time to re-evaluate their effectiveness and focus:
-How much of your leadership development programme is linked to clear requirements that reflect your environment? Or is it off-the shelf?
-How much of your leadership development is embedded learning vs out of context leadership away day programmes?
Prioritise selection processes: With the quality of candidates potentially declining, robust selection processes become even more crucial.
Talent clustering: Recognise that high-performing leaders tend to work together. This might influence recruitment and team-building strategies. Why do we hire singular roles and not teams?
Limitations and Considerations
While the study provides valuable insights, it's important to consider its limitations:
Single data source: All assessments were conducted by one firm (ghSMART), which could introduce bias.
Sample composition: Later years saw an underrepresentation of public companies, with more data coming from VC-backed firms. VC-backed companies have specific requirements to increase the assets value, meaning the context they are recruiting to might not be representative of the wider CEO pool.
Subjective assessments: While structured, the assessments rely on subjective evaluations.
Correlation vs causation: The study can't prove that higher assessment scores lead to better CEO performance.
Reflection…
This research challenges us to reconsider our assumptions about leadership development and CEO selection. Are we investing in the right areas? Are our development programmes truly enhancing the skills that matter most for organisational success?
As HR practitioners and leaders, we must ask ourselves:
How do our leadership development programmes align with these findings?
Are we balancing analytical skills with creative and strategic thinking in our talent development?
How can we enhance our selection processes to identify the best candidates in a potentially declining talent pool?
Should we be focusing more on creating environments that attract and retain high-performing leadership clusters?
The path forward isn't about abandoning leadership development, but about refining our approach based on empirical evidence. By critically examining our practices and aligning them with research findings, we can work towards creating more effective leaders and, ultimately, more successful organisations.