While some argue that no one person can determine the fate of an enterprise, research shows a CEO’s personality quirks can send shockwaves through an entire organization.
Psychologists debate whether—and to what degree—the personality of a CEO (and by extension his or her leadership style) influences organizational outcomes. Some argue that CEOs by themselves can only have a small impact on group fortunes; such factors as industry performance and overall business environment, they say, matter more. But common sense, not to mention Miller’s Disney, tells us leaders set the tone, influencing an organization’s structure, strategy and culture.
“Does personality matter? We’ve seen that charismatic CEOs are more likely to be retained than their non-charismatic peers in the face of poor company performance. “
Dominant CEO traits
The five-factor model is a psychological tool used to discern the effects of personality. Those five factors: conscientiousness, emotional instability (i.e., neuroticism), agreeability, extraversion and openness. (Miller, for example, measured high on neuroticism.) A widely cited 2003 study in the Journal of Applied Psychology titled “The Impact of Chief Executive Officer Personality on Top Management” examined the “Big Five” personality traits to support the researchers’ hypothesis that (a) CEO personality does impact the “top management team,” and (b) the functioning of that team in turn impacts the organization as a whole by replicating the prevailing culture down the chain.
More interesting, though, was how exactly each CEO trait impacted the organization:
- Conscientiousness CEOs identified as dependable, responsible and valuing structure were associated with teams that also placed a premium on legalism and a sense of control over their environments.
- Neuroticism CEOs labeled anxious, compulsive, defensive, and thin-skinned ended up with factional teams that featured weak leadership and inflexibility.
- Agreeability CEOs who exuded warmth, trust and fostered cooperation had cohesive teams amid a decentralization of power.
- Extraversion Dominant leaders who were gregarious and forcefully communicated opinions spawned management teams that exhibited similar traits.
- Openness CEOs who “reward team behavior that is intellectually flexible” were blessed with teams that valued risk taking and out-of-the box thinking.
CEOs at work
What’s more, CEOs’ personalities often precede them. Researchers recently found that when a potential CEO’s “performance signals”—concrete knowledge of past organizational successes or failures—are either unknown or unclear, candidates with more charisma are likely to be chosen over those with less. When performance signals are clear, however, the “charisma advantage” evaporates. The study also found that, once hired, charismatic CEOs are more likely to be retained than their non-charismatic peers in the face of poor company performance.
The Takeaway: When a leader looks around and sees organizational trouble, he/she may want to next look in the mirror to see its source. They say the fish rots from the head. “They” are not wrong.