Big-name CEOs commanding outsized remuneration packages were once thought to be the best type of leaders to drive the performance of their companies, lifting the numbers along by sheer force of their equally outsized personalities.
Yet, all that perception was turned on its head when the global financial crisis of 2008 struck. “Many people were panicking. They didn’t know why the crisis was happening,” says Amy Ou Yi, assistant professor of management and organisation at the National University of Singapore Business School, in an interview with Enterprise. “Many of the bigego CEOs of Lehman Brothers and other Wall Street firms were blamed. They were drawing lots of compensation even though their companies were doing badly.”
Overnight, some of these big names became the object of scrutiny and disdain by the public, the media as well as business school researchers and management gurus as they tried to analyse what made these CEOs behave the way they did. They also blamed the CEOs for the collapse of their companies, associating them with negative terms such as “narcissism”, “hubris” and “overconfidence”.
Surveying the debris from the financial crisis, Ou wondered whether there were other CEO leadership characteristics that could have a more positive impact on their organisations. This led to her formulating her hypothesis and conducting a multi-stage research based on the other extreme: the impact of CEOs who show humility in their companies, demonstrating traits such as being virtuous, moral, ethical, participative, empowering, and a servant leader.
The result was her thesis “Humble CEOs’ connections to top management team integration and middlem managers’ responses”. This paper, published recently in the journal Administrative Science Quarterly, concludes that CEO humility has a positive impact on the management hierarchy among of dozens of privately held China-based companies. Specifically, a humble CEO will result in the top management team’s working more tightly together, which in turn creates the perception among the next layer down — the middle managers — of empowerment as part of company culture. This leads to work engagement, effective commitment and job performance.
Not omnipotent
To be sure, the concept of the “humble CEO” is not new and has been studied by top management gurus such as Peter Drucker and Jim Collins. But what Ou did in her study was to find out how CEO humility affected the performance of the company.
Such a study is important because a humble CEO might be better suited for the current business environment, which is uncertain and complex like never before and sometimes described with the acronym Vuca, or “volatile, uncertain, complex and ambiguous”. Thus, instead of saying, “I know everything”, CEOs should recognise that they are not omnipotent and say, “I need to work with my associates so that we can figure out what’s going on”. In the meantime, they should respect them and empower them to work better, says Ou, who holds a doctorate from the University of Arizona and worked in companies such as Swire Properties Ltd in Hong Kong before moving to academia.
Ou says current and former CEOs who do not belong to the “big ego” category include John Mackey of organic produce retailer Whole Foods Market Inc, Eric Schmidt of Internet giant Google Inc and Jeff Bezos of Amazon.com Inc, the world’s largest online retailer. “If you look at their conversation with other people on how they manage companies, they come across as humble,” she says.
While it is tempting to draw a link between a humble CEO and financial performance, Ou’s paper focuses on the dynamics within privately held mainland Chinese companies. A related, but separate, study is being drafted and has established positive links between the level of humility of CEOs of American IT companies and their return on assets, she adds.
For the present study, a total of 63 CEOs, 328 top management team members, and 645 middle managers were surveyed. Ou explains that while large, listed corporations, which tend to be state-owned giants, would offer more quantifiable data that can be linked to performance, she chose to focus on privately held companies that are relatively smaller, as state owned enterprises (SOEs) have various other levels of governance and regulation, which can dilute the results of CEOs’ decisions.
More than half of the companies are in service or trading industries, while 41% are manufacturers. The headcount of the companies vary from less than 100 to 12,000, with most about 1,000. The companies have been in business for as few as six years to as long as 56 years. The CEOs’ average age is 41.7 years, perhaps reflecting the fact that 71% of them are the companies’ founders; their average tenure as CEOs is just under eight years.
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