Early on in my career, one of my professors shared a maxim I’ve tried to remember. He said, “the thing about leadership is that it inherently attracts the wrong kind of people.” Leadership carries with it a platform, a spotlight that shines brighter as an individual moves higher. A lot of people are drawn to leadership for the sake of that spotlight. Many organizations justify the spotlight; if the CEO is being interviewed on primetime news, they reason, then that has to be good for the company. The CEO is the face of the company and if he gets attention then so does the company.
Recent research points to a flaw in those assumptions. Professors Ulrike Malmendier and Geoffrey Tate recently examined the links between CEO status and firm performance. The researchers designed a paired comparisons study, examining CEOs who were recently given a status boost in the form of CEO awards from the media against a near-identical set of CEOs in similar industries who did not receive such awards.
They found that firms with award-winning leaders tended to underperform their comparison pair in terms of operating and stock performance. Ironically, as the firm’s performance was dropping, the CEOs compensation increased as a result of their status. In addition, the CEOs in the studied tended to spend less time leading their firm and more time engaged in high-status activities like writing books, giving speeches and sitting on outside boards. In total, it appears that trusting a “superstar” strategy has negative consequences for the organization.
Celebrity leaders may quickly develop into falling stars.
There is hope, however, as the firms in the study who showed strong corporate governance and well-defined shareholder rights did not experience a performance drop when their leaders won awards. Those firms did not appear to buy into the hype that the superstar leader alone would increase their performance. Instead, they made sure proper checks, balances, and monitors were in place to keep their celebrity leader from leading himself astray.
|David Burkus is the editor of LDRLB. He writes, speaks, and serves on the faculty of management at Oral Roberts University’s College of Business.|