New CEO Data on Hard Skills vs Soft
February 1, 2009
The researchers found that 225 of the candidates were subsequently hired or promoted for the jobs in question. They contacted the hiring organizations for comment on the performance of the executives. For those considered ‘most successful’ they then examined the attributes common to all of them.
The article reported that the traits found to matter most are ‘hard skills’ such as results orientation, persistence, attention to detail, efficiency and analytical skills. Soft skills were ranked less important and thus the title of the article.
The actual study is available online. It is called Which CEO Characteristics and Abilities Matter (Kaplan, Klebanov and Sorensen, 2007). In reading it, here’s what caught my attention.
• First, the results of this study cannot easily be generalized. The study focused on private equity firms that have bought organizations, loaded them with debt and are in a big hurry to improve operating results. Their primary concern is what gets done and at what speed rather than ‘how’ it gets done. Building consensus, developing teams and other such soft skills are far less important than the results themselves (think Robert Nardelli at Chrysler). Also, having spent considerable time evaluating the firms before acquiring them, it is also likely that the private equity firms have fairly strong notions on what needs to get done and thus the ability to execute their plan is key. This translates into hiring for attributes such as ‘moves fast’, ‘industry knowledge’, ‘follows through on commitments’, ‘removes underperformers’, ‘efficiency’, and ‘sets high standards’.
• The study reveals that venture capitalists value a different set of attributes than private equity organizations. They hire for ‘integrity’, ‘aggressive but respectful’, ‘brainpower’, ‘written communications’, ‘teamwork’, ‘achieving EBIT targets’ and ‘SAT scores’. This also makes perfect sense. VCs appreciate the complexity of realizing the potential of unproven start-ups and value those attributes associated with ‘figuring it out’. It is also likely that they hired ghSmart to evaluate candidates to replace the previous CEO who, as often happens failed to figure it out. Execution is important but less so if they cannot solve the fundamental start-up puzzle.
• In examining the venture capital data, the researchers state, “one might interpret this result as indicating that the quality of the business idea is more determinative of outcomes than the initial quality of the management team in early stage companies”. This is interesting as it raises the whole issue of good CEOs in bad companies and vice versa. In the tech sector headhunting world, one-time successful CEOs are often given free-passes going forward despite valid questions about their actual contribution to the outcomes of their previous companies. Similarly, competent CEOs often pay a large career price for the myriad of factors that might have contributed to the demise of their previous employer.
• The study reports that of all of the candidates hired, 45% were considered successful, 37% were considered not successful and 18% had mixed success. Given ghSmart’s reputation as one of the premier assessment firms for the private equity and venture capital communities, these statistics minimally attest to the complexity of the hiring world in which we all play.
• The researchers conclude by stating that the results are consistent with Collins book Good to Great who suggested that Level 5 CEOs have unwavering resolve, are fanatically driven, exhibit workmanlike diligence and build strong teams. However their results do not appear to be consistent with Collins’ other findings that successful CEOs exhibit modesty, give credit to others and take blame on themselves. Given that Collins looked at the determinants of long term success, these findings may also make perfect sense.