The spirited executive

Citation

Ali, A.J. (2009), "The spirited executive", International Journal of Commerce and Management, Vol. 19 No. 3. https://doi.org/10.1108/ijcoma.2009.34819caa.001

The spirited executive

Article Type: Editorial From: International Journal of Commerce and Management, Volume 19, Issue 3

Business leadership

The debate over whether or not chief executive officers (CEOs) make a difference in a firm’s evolution and market performance takes on added value in an era of economic crisis and financial meltdown. This is not to suggest that the subject of leadership is important only when there is a crisis. Rather, it indicates that leadership is increasingly becoming a pivotal factor in differentiating competitive corporations from all the rest in the marketplace. This is because leaders play crucial roles in defining reality and designing and shaping events. In an era of uncertainty and fear, it is the leader’s role to instill confidence, inspire, and rally followers behind specific and achievable goals.

In a competitive environment, business organizations face immediate challenges and have few options to improve performance and strengthen market position. In fact, the pressing competition and market expectations necessitate that business leaders assume extraordinary tasks to confront changing conditions and strategically position the firm. Failure to do so demonstrates a vacuum in leadership.

Though corporations usually confront ongoing and emerging market competition and difficulties, the challenges might not be the same irrespective of industry, place, and time. The magnitude and nature of the challenges differ accordingly. For example, some industries during the current economic crisis have not been affected that much and some firms within these industries have thrived (e.g. Amazon, health and counseling institutions; boom in lawsuits benefiting lawyers at big law firms; software companies which produce programs for banks preparing for lawsuits related to the US subprime mortgage crisis experienced an increase in their sales, etc.). Nevertheless, business leaders in these industries should not lose sight of the nature of changing economic conditions and rethink their priorities and unfolding possibilities.

Leadership is a process of influence which is inherently shared in nature. This is especially true in business organizations where it is usual for CEOs to interact with immediate subordinates and followers directly and indirectly to sustain productive relationships and improve performance. In pursuing these two primary goals, business leaders attempt to articulate and persuade followers to espouse a common purpose while reinforcing ethical conduct. In recent years, the latter has become increasingly impossible to succinctly express and or sustain, resulting in major corporate scandals and the collapse of major corporations. This development brings forth the questions, “What are the needed CEO’s characteristics and abilities?” and “Are these characteristics invariably applicable irrespective of the industry, place, and era?”

On May 19, 2009, the New York Times (Brooks, 2009) concluded that the “market doesn’t really care” that much for CEOs who are open-minded, sensitive, and are well-rounded persons. And that being flexible, team-oriented and empathetic are not necessary qualities for effective CEOs. Such conclusions are a fatal mistake and represent a tragic misunderstanding of the role of CEOs, and for this matter of leadership, in building sound and competitive organization in the global marketplace.

The preceding Times’ conclusion is based on a study by Kaplan et al. (2009) entitled, “Which CEO characteristics and abilities matter?” The study concluded that, “on the margin, execution-related attributes, not team-related attributes seem to drive success.” There are methodological and conceptual errors in the study and subsequent conclusions. Methodologically, the sample is entirely drawn from CEO candidates for companies involved in buyout and venture capital transactions. These firms are funded by private equity firms where immediate financial results are usually sought. Certainly, these participating executives do not resemble the orientations and priorities of the population. Likewise, the study was based on interviews conducted from 2000 to 2006. As we indicated in Vol. 18 (3)(Ali, 2008), this era was labeled, “the wink-and-nod” where senior mangers “want results,” at any expense and with no details. Senior managers blindly promoted the “good news,” ignored negative ones, and proudly celebrated inflated, if not illusionary, performance. This culture has led to a financial meltdown and the collapse of certain economic institutions. Of course, the aspects of such culture would appeal to the author of the paper in the New York Times who is a leading neoconservative. Neoconservatives aggressively pursue profit maximization, selfishness, and deregulation.

Conceptually, Kaplan et al.’s (2009) research has two flaws: an inadequate definition of success and attributing complete validity to the quality of attention to details. Success was defined in narrow terms. A CEO was classified successful if he/she led the company or another company to a clearly favorable exit such as an initial public offering or sale to another company. This definition focuses on short-term results at the expense of long-term viability of the firm and its role in the market. In addition, because it is based solely on financial return with no concern for the long-term and building an innovative or competitive firm, success is divorced from its meaning which is characteristically linked to effectiveness. That is, efficiency is not and should not be a substitute for effective conduct and purposeful-based performance where the survival, viability, and growth of the firm are the only appropriate measure for success. This is especially true as perspective on what constitutes a leader or leadership changes over time. Fortune magazine (Taylor, 2009), for example, argues that Rick Wagoner, former General Motors’ (GM) Chairman and CEO, was considered one of the most successful business leaders for years. Fortune stated that Wagoner could be one of the GM’s greatest leaders had he retired on January 1, 2008 instead of March 29, 2009. The magazine, listed among Wagoner’s achievements, his successful historic agreement with the United Auto Workers to reduce the burden of pension and health care costs, to make its hourly labor costs more competitive, and his initiation of the consolidation of GM’s North American operations after a century of balkanization. This means that a historical and broad perspective of the meaning of success is needed as organizational accomplishment is not an isolated and an independent situation. Rather, it is an on-going process that eventually leads to positioning a firm strategically and enhancing its ability to render valuable services to its employees, customers, and the society at large.

Likewise, there is a serious flaw in treating given attention to detail as a pivotal trait for CEOs. Undoubtedly attention to detail may be an important quality and could play a crucial role in improving performance. However, there have been inconsistent conclusions regarding the significance of inclination toward details in organizational life. In fact, history evidences that there were CEOs and political leaders who did not show that much interest in detail. For example, Steve Ross, the Chairperson of Time Warner, was known for his aversion to detail (Cohen, 1992). Nevertheless, he was considered one of the most famous and successful CEOs in the USA. By contrast, Bill Gates, a highly competent CEO, is known for his considerable attention to details and spending hours pondering important business matters. Unlike Ross who was a hands-off CEO, Gates is engaged and deliberate.

Similarly, in politics, President Jimmy Carter liked details and so did Bill Clinton. In contrast Presidents Ronald Reagan and George W. Bush were known for their preference for brief reports and outlines. Like business CEOs, these presidents exhibited different preferences for details. Nevertheless, experts and ordinary people judge them differently and such judgment may not correspond closely to their preferences to details. In fact, there is a striking difference between Reagan and Clinton in their inclination toward details, though they are both treated in history books as effective leaders.

The New York Times made an argument that qualities which are necessary for politicians (e.g. charisma, charm, personal skills, etc.) have limited value for business leaders and that successful CEOs are “often not that most exciting people to be around.” The Times appears to suggest that politicians cannot be successful CEOs and vice versa. This claim lacks credibility. Robert McNamara, George Schulte, Robert Rubin, and James Wolfensohn, for example, have been successful business executives who, later in life, moved into politics and were celebrated politicians.

By definition, leaders exercise influence, have a vision, and are effective in achieving goals. This requires a fine balance between human skills (e.g. team builder, motivator, communicator, empathetic, caring, etc.) and task concerns (e.g. setting goals and desired performance standards, persistence, commitment to achievement and change, disciplined in meeting deadlines, etc.). That is, leadership neither exists in a vacuum nor is independent of followers and surroundings.

Both Kaplan et al. and the writer of the Times’ paper, Brooks, ignore the fact that leadership encompasses both practical and idealistic concerns. The first focuses on performance while the second underscores the necessity for inspiration and imagination while maintaining creativity and commitment, sustaining competitive and cooperative spirit, and challenging subordinates to do their best in meeting goals.

The claim that dullness and selfishness are a virtue and human relation skills, sensitivity toward others, and serving the greater good are not important traits for business leaders manifests a lack of understanding of the role and function of leadership and that of business in society. Limiting the role of CEOs to that of financial performance and making money is imprudent and dangerous thinking.

Abbas J. Ali