A recent article by Walter Frick in The Harvard Business Review spotlights research that raises some uncomfortable questions about company leaders.
First, are most people in the C-suite there because they’re tremendously talented and intelligent — or are they only decently talented and intelligent, and their success is fuelled by other factors?
And second, is it possible that a company’s success or failure has virtually nothing to do with its CEO’s abilities?
A recent study suggests cognitive ability isn’t the be-all-end-all for company leaders.
For the study, researchers looked at a population of Swedish men who were drafted into the military between 1970 and 1996. (Military service was mandatory in Sweden during this time, so the sample includes pretty much all men who were born then.)
At the time that they were drafted, all the men took a test that measured different types of cognitive ability, including verbal comprehension and inductive reasoning, and were interviewed in person.
The researchers also had data on the types of careers that each man pursued and their compensation. A total of 26,000 men in the sample became CEOs of companies.
Results showed that, in general, the CEOs were indeed smarter than average — but not by that much. For example, the median CEO of a large company fell in the top 17% of the population in terms of cognitive ability.
That means there are many men in lower-ranking roles, or in other occupations such as medicine, law, or engineering, who are smarter than the CEOs.
“While CEOs are smarter than average, they are not as smart as one could infer from the prior literature,” the researchers write. “Swedish CEOs do not belong to the ‘cognitive elite’ comprising the top 5% of individuals.”
Compared to the cognitive tests, performing well in the interview was a slightly stronger predictor of becoming a CEO. The researchers say that a successful interviewee shows persistence, emotional stability, and initiative-taking, among other qualities, so it’s possible that these traits are more meaningful than intelligence when it comes to professional achievement.
Those findings are similar to the results of other research published more than a decade ago, which found that intelligence is a pretty poor predictor of who becomes a business leader. Instead, that research suggests, many traits are important to leadership, including the motivation to persist and the dominance to convince others.
Frick cites another recent study that suggests CEOs have only a minimal effect on their company’s performance.
To test this theory, study author Marcus Fitza looked at the 1,425 largest US firms from 1993 to 2012. He created simulated sets of data that would reflect the firms’ performance if it was determined entirely by chance. Then he compared that data to the firm’s real performance.
Results showed that over 70% of the so-called “CEO effect,” or the CEO’s influence on the company’s performance, was attributable to chance.
Taken together, these studies suggest that CEOs are generally smart and talented, and in some cases their ability meaningfully affects their companies’ performance.
And yet most CEOs aren’t geniuses — at least not compared to people below them and in other occupations — and their overall impact on their companies’ performance is smaller than we might think.
On the other hand, there is some evidence that cognitive ability has a lot to do with your professional success. Research by Duke’s Jonathan Wai found that Fortune 500 CEOs tend to fall into the top 1% of cognitive ability — or at least that they’re likely to attend elite academic institutions.
Clearly, there’s a need for further research on this topic. In the meantime, don’t assume your CEO is necessarily smarter than you are, but don’t fault her cognitive shortcomings for all your organisation’s troubles either.
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