The CEO of a company affects its performance, for better or worse. Steven N. Kaplan, Mark M. Klebanov, and Morten Sorenson, in their paper “Which CEO Characteristics and Abilities Matter?” [available here], conducted research to determine exactly which skills and character traits a CEO should have in order for a business to succeed.
The study assessed 300 CEOs from companies conducting private equity (PE) transactions between 2000 and 2005, and looked at their "hard skills" (e.g., aggressiveness, speed, follow-through) and "soft skills"(e.g., listening, creativity, team skills) and which made the most difference. According to their paper, successful CEOs are resolute to the point of overconfidence, with hard skills mattering a great deal more than soft skills. Such CEOs’ companies perform better than those with CEOs described as "good listeners."
Hard skills a successful CEO should possess, according to this study:
- Have High Standards
- Hold People Accountable
These results have two implications. First, CEO talent or skills appear to be measurable and those talents appear to matter. Second, on the margin, soft skills appear to be over-emphasized in hiring decisions.
We note two caveats. First, the CEOs in our sample work for companies funded by venture capital and buyout investors. We cannot say whether these results generalize for all companies. Second, our results do not necessarily mean that soft skills are unimportant. It is possible that the CEO candidates needed to have a certain level of those skills to be credible candidates or to be hired. However, once the candidates have that level of skills and are hired, greater soft skills are irrelevant or negative on the margin.I would love to see the authors follow up with another study looking at non-PE firms to see if the results remain the same.