Tall order: Are CEOs born with leadership traits?

New research reveals which men are likely to become the boss

Imagine you are on a board and have to appoint a high-achieving new chief executive officer. What constitutes the perfect candidate – excellent cognitive and non-cognitive skills, a strong education … and someone who is tall?

That may well be the answer – including the intriguing matter of height – according to a new paper from three researchers who have merged the data on the traits of more than one million Swedish men, measured at age 18 in a mandatory military enlistment test, with information on their service as CEOs of Swedish companies decades later.

In the paper, Are CEOs Born Leaders? Lessons From Traits of a Million Individuals, authors Renée Adams from UNSW Business School, Matti Keloharju from Aalto University School of Business and Samuli Knüpfer from BI Norwegian Business School make some key findings:

CEOs display considerably higher trait values than the population as a whole; the traits of large-company CEOs are on a par or higher than those of medical doctors, lawyers and engineers; CEOs of family companies show lower trait values than those of non-family companies; and there is a mismatch between the moderately high trait values of CEOs and the exceptionally high pay levels they achieve.

Above average, but not superstars

Adams, a professor and the Commonwealth Bank chair in finance at UNSW Business School, says the data – which covers males only – points to CEOs being smarter than most people in the population without being absolute standouts.

"They are above average, but not superstars," she says.

Large-company bosses, in particular, have higher cognitive and non-cognitive ability scores and are taller than typical members of the population, though they tend not to be exceptional in terms of their traits nor the combination of their traits.

For instance, the median large-company CEO belongs to the top 17% of the population in cognitive ability, and to the top 5% in the combination of cognitive, non-cognitive ability and height. Yet even these attributes do not guarantee a path to a CEO role.

During the seven-year sample period, the study finds there are more than 100 times as many men in managerial roles in the corporate sector who have better trait combinations than the median large-company CEO and who do not become a large-company CEO.

‘You can’t be too different to the system, otherwise you are ejected in your 20s and 30s’

BERNARD SALT

Fizzle like rockets

Leading demographer and KPMG partner Bernard Salt is happy to sit on the fence when discussing whether CEOs are natural leaders. He believes that while entrepreneurial geniuses such as Bill Gates and Mark Zuckerberg may have been born with special genetic gifts, most successful corporate CEOs rely on a combination of inherent talent and acquired skills.

"Leadership is a quality that is largely in people," Salt says. "[But] you can cultivate it so that there might be an element of it there from your childhood or your genetic structure, and given the right tutoring, the right environment and right circumstances, that can be fostered."

About a year ago, Salt pored over the CVs of the chief executives of the top 10 Australian and American businesses by market capitalisation. He found that they typically have two degrees, an MBA and proven success in a business division.

Endorsing the Swedish data of Adams and her colleagues, Salt takes the view that most corporate leaders tend to be generalists rather than stars because brilliant but volatile executives tend to be eliminated from the race to become a CEO.

"Like rockets they will fizzle out before they get to a sustainable altitude," he says. "You might be brilliant at this and insightful at that, but if you can't manage people or hang on to your PA, if people don't like working with you, if you can't string two words together, then you're not going to make it."

According to Salt, there is a "kill zone" for potential CEOs who are aged 38 to 42 – if they are not in the management chute by this stage then they are unlikely to ever make it. By about 38 they should have completed all the requisite education courses, including a masters and/or a stint at an American business school such as Harvard or Wharton.

Salt notes that there is a sweet spot for appointment as a CEO – in most cases the chief executives of Australia's top-10 businesses that he studied took the helm aged 44 to 55. They had come through the ranks and "understood the rules" of progression.

"You can't be too different to the system, otherwise you are ejected in your 20s and 30s," he says.

‘Personally I think it’s not actually the height [that matters] but perhaps it’s about confidence’

RENÉE ADAMS

Hitting pay dirt

Adams, Keloharju and Knüpfer find that executives who do make it to the top are comparatively well compensated. Median large-company CEOs, for example, belong to the top 5% of the population in terms of their cognitive and non-cognitive traits, but to the top 0.1% in pay.

This mismatch suggests that factors other than the traits studied in the research paper are at play in determining CEO pay levels. For example, the study could not measure soft skills such as people management or creativity, or even that some executives may simply be lucky to be in the right place at the right time.

What is clear, Adams notes, is that the bigger the business, the higher the cognitive skills the CEO is likely to have – and the higher the pay that person is likely to draw.

"If we know one thing about compensation … it's that the bigger firms pay more," she says.

Curiously, CEOs managing smaller firms and family firms typically have lower levels of cognitive and non-cognitive traits, particularly if they come from the founding family and have not set up the company themselves.

Adams says this finding may suggest that some family firms make compromises with the traits of their CEOs by limiting their selection of the leader to a narrow pool of family candidates. Despite this limitation, she says it does not necessarily stop the family businesses from enjoying long-term success.

"So family firms may not necessarily rely on cognitive skills but other traits we can't measure that are important."

 The big issue

Another fascinating finding in the paper is that most CEOs in Sweden have been relatively tall, with their height being two-thirds of a standard deviation higher than in the general population.

Adams admits the data is unclear as to what role height plays in the appointment of executives and that additional research is required on this issue. She doubts that height is routinely a key factor in the appointment of CEOs.

"Personally I think it's not actually the height [that matters] but perhaps it's about confidence," she says. "I just can't believe that height matters."

Salt believes factors relating to image, including height, can play a role in the ascension of modern leaders, whether they are politicians or corporate bosses.

"There are certain physical parameters that in a very visual way really matter today," he says. "You don't need to be a beauty pageant winner, but there are certain parameters that people raise an eyebrow to or find a reason to object to."

More important than physical qualities, according to Salt, is the desire of boards to select CEOs at a time that aligns with the candidate's career peak.

That is, if they are appointed when they are too old and the candidate has already had business success they may be risk averse, whereas an appointment in their mid-40s means the candidate is often primed to make their mark and do their best work. In an ideal world, Salt says most CEOs get five to seven years at the top.

"It should be the best corporate years of their life … And when they're done they get a good payout, go on a couple of boards and retire to Noosa and write their memoirs."

As to the question in the paper's title – Are CEOs born leaders? – Adams believes the research sways the argument towards the affirmative.

"I think it's fair to say that they are to some extent," she says.