In the past, primary emphasis was placed on financial and operations acumen— still, obviously, important— but today the vanguard of innovators in the sector increasingly appreciate a CEO’s people leadership skills for achieving the above-market returns investors expect.
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Yet, Stanford economist Nicholas Bloom, who has tried for twenty years to determine the characteristics of the most effective corporate leaders, cautions, “You look at the data, there’s ten different recipes for success. Sure, there are some people who are better than others, but it’s damn hard to tell what it is.
For CEOs in the Launch stage, practicing the arts of observation and listening is crucial.
The study analyzed the fortunes of nearly four hundred CEOs appointed to the helm of S&P 500 companies within the decade of 2004 to 2014. A set of the fifteen most effective early moves was identified. And out of those, the highest performers relied most on these five: operational improvements, launching new products, improving customer relationships, increasing employee engagement, and culture change.
In all cases, an essential truth is that the CEO is still the one primarily in charge of running the company. The PE firm provides an idealized model of the transformation process, and the CEO brings the wisdom of experience in how to actually manage the messier, human process of execution.
Improving the performance of companies that are performing fairly well is now the predominant objective, and PE firms have learned that a CEO’s people leadership abilities are the vital complement to strength in finance and operations for this new frontier of performance improvement.