by Sheila Moazzami - PER
15. December 2011 13:07
Greater than 50% of CEOs are unsuccessful in delivering a minimum of twice the investment; reports a study led by Professor Kaplan of University of Chicago School of Business. The million dollar question (or should I say billion dollar question?) for PE firms then becomes: How to ensure that portfolio companies are led by CEOs that are going to be successful?
The main characteristics identified in successful CEOs by Kaplan are: Pro-activity, Efficiency and Persistence. Whilst there are a number of ways of assessing the CEO’s competence in the area including psychometric profiling and interview, the use of a 360 degree feedback process proved to be an effective tool in detecting these three ‘golden’ traits, especially when used with employees up and down the organisation, customers and suppliers. Using open-ended questions such as the ones that follow, enabled the interviewer to assess the CEO’s competence in these three areas.
- How does he/she achieve his/her objectives? What exactly does he/she do?
- What are his/her personal strengths? In which areas does he/she really excel?
- How would you describe his/her leadership style?
- Can he/she handle criticism? How does he/she react to it?
Private equity firms might listen out for answers that indicate their prospective CEOs have the three golden characteristics. Efficiency requires the ability to produce significant output with minimal wasted effort, an example of which would be getting a lot done in a short period of time. A pro-active individual acts without being told what to do and brings new ideas to the company, therefore answers that show taking initiative and injecting fresh thinking into the organisation should be noted. Persistence is the demonstration of tenacity and willingness to go the distance to get something done, an example of sticking with assignments until they are done.
Notably, those with high scores on efficiency and pro-activity were associated with more than 40% higher probability of success compared to those with low scores on each trait. Ironically therefore, it is the big P(rocative) and the big E(fficiency) which are the key characteristics to look out for in a PE CEO.
Sheila Moazzami, Research Analyst at PER is commenting on the output from a workshop for PER and its clients run by Dr Sabine Dembkowski, Founder and Director of The Coaching Centre www.thecoachingcentre.com
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