Are CEOs Today’s Heroes?

Q: You hear the term “heroic CEO” a lot lately. Has the way CEOs are perceived changed over the last few decades?

Yes, and it’s a double-edged sword. Throughout history, not to be too professorial, society has turned to where the greatest element of distress is, and then looked for figures that somehow simplify a path to get through that area of distress.

At a time of war, we look at the models of great generals or diplomats. In the time of westward expansion, of course, the pioneer spirit was ascendant. At other times, when invention and technological explosion are predominant, we look to these tinkering entrepreneurial pioneers, as well as great scientists. The people in these roles take on a heroic aura. Little kids read biographies about them and the press exalts them. That’s what has happened with CEOs. Amidst wrenching economic dislocation, the business leader is a figure that can be decorated as heroic.

They’re heroic not because they are the most noble figures in society, but because they are fulfilling this societal need. Physicians are saving lives every day, and we don’t necessarily consider them heroic. Maybe we should.

This partly comes from the self-conception of the leader. There is something in the heroic myth that matters to these people. Part of that is a sense of heroic mission. They want the world to be different because they lived. They want to be a net producer rather than a net consumer. It might look to us like Ozymandias, because it’s quixotic to think any individual is going to have a lasting legacy. But they think they can.

Another element of the self-conception of heroism in a leader is heroic identity. The media often confuse the two, as do academics, but heroic identity has to do not with this immortal quest, but with how other life roles often atrophy as your business card becomes your identity. A psychologist at Harvard named Robert Kegan talks about how, through life, we’re embraced by institutions—childhood, school, family, jobs—and then we’re released and we’re free agents. We move between the institutions, and that’s how we develop, vacillating between those poles. These leaders don’t. They become captured by their job. Since that job means so much to them, sometimes we over-read their motivations as pure greed or vanity. That’s too simple. Sure, there are elements of that, without doubt. But as jobs start to define them in so many ways, their identity becomes tied up in these things, like the platoons of public relations people that insulate them, the Knicks tickets, and the floral arrangements for life.

The other side of this equation is the society’s conferral of heroic stature on the individual. Why society cares is an ancient story. Joseph Campbell has captured this in his work The Hero with a Thousand Faces, which was an inspiration to George Lucas and all kinds of popular culture. He’s controversial as an anthropologist in this world of postmodern cultural relativists, because he argues that across cultures, across centuries, across religions and continents, there is a myth of the hero that society looks for. And the hero has certain universal characteristics. We want heroes to present themselves as of humble origins. When you look at presidential candidates, they all talk about their hardships, so they can reach their audience, their constituency. And CEOs will also try to present a common touch, no matter how many people are on the running boards of the staff car with little flags flying as they get off and the carpets unfurl. Then someone tells the hero that they’re different—a parent, a teacher. They go out on the heroic quest, seeking to differentiate themselves from society. So they go on their odyssey. But they’re still not great heroes. It’s only when they have the crushing setbacks, the filtering moments in life, that then society really gets interested. In their own minds they’re heroic before that, but for us they’re only heroic when they have triumphed over life’s adversity.

That’s become hotter than ever. The venture capital community and the executive recruiters have recognized that their best bets have come from people who have failed, who have learned from setbacks, and who have been battle-tested. And that’s why these Jamie Dimon types have become so much the vogue. In the past, the biographies would sometimes glide over some of the realities of what made people great.

CEOs are as important now, I think, as they’ve ever been. They were important at the turn of the prior century, too—Rockefeller and Carnegie. But it was a double-edged sword then also.

Q: How do you start to look at the effects that this heroic dynamic ends up having on corporate performance?
It’s huge. Right now there’s a cadre of business school professors and administrators whose work has disputed the importance of individual leaders, which is a shrieking irony. A lot of the writing coming out has looked at how the economic sector drives results more than individual performance. Fine. Let’s hold all those utilities constant and say that the way this retailer performed was determined largely by the fact that it was a retailer. But let’s look at the retailers as a group; the individual leaders in all those retailers explain the difference relative to one another. That’s what matters.

There is a tendency in much of academia to see it as too reductionist to focus on individual leaders. But it’s extremely important for management schools to understand that individual leaders make a difference. Wherever you go in this world, if there’s a city square or a village commons, there is a statue there. And it’s very rare that it’s a statue to a committee. It’s usually a celebration of a bold, thinking individual.

Jeffrey A. Sonnenfeld, Senior Associate Dean for Executive Programs and Lester Crown Professor in the Practice of Management, Yale School of Management

Q: Like Ozymandias?
Yes, but they matter. The world is different because of figures like Roosevelt and Churchill and de Gaulle.

Alfred Chandler had the insight that if you hold everything constant, you find that who is running Coke versus Pepsi has an impact. Richard Tedlow wrote a book called New and Improved that takes a look at how, in consumer marketing, specific individuals changed the course of business. General Robert Wood was in the Canal Zone on a reserve assignment reading the U.S. Statistical Abstract out of boredom, and he thought, “Gee, look at this movement to the suburbs; the catalog business is not enough.” He took that realization back to Montgomery Ward and they didn’t go for it, and so he ended up transforming Sears.

It’s specific individuals, when everything else is held constant, that made a huge difference. You look at Verizon versus AT&T today, or you look at Ford’s great triumphs today—it matters who’s in charge. The resurgence of JPMorgan Chase. At our CEO Summit in June of 2007, Jamie Dimon said that Bernanke is wrong, that Paulson is wrong: Our problem is larger than a subprime real estate problem. He also said this problem is not being caused by Sarbanes-Oxley, when it was the rage at the time to complain about the killing of U.S. competitiveness because of over-regulation. He said our issue is not over-regulation. Our issue is mismanagement of risk and misperception of risk and mispricing of risk. And he said he was getting out of what he thought were poorly understood derivatives.

And people at our summit laughed at him. So between June of 2007 and October of 2007, he got out of almost 90% of these highly risky, poorly understood areas. That’s a single individual who pushed that to happen, and how much stronger was JPMorgan relative to Merrill Lynch or Lehman Brothers, Bank of America or Bear Sterns.

You get demonstrations of this all the time. Take a look at Tony Hayward, of course, with his maladroit moves at the head of bp or the missed opportunities of Akio Toyoda, versus the CEO of Mattel or the past CEO of Johnson & Johnson or David Neeleman when he was the head of JetBlue. These are people who can at a time of adversity come up with a path for the rest of us to follow. And society does and should celebrate those people as heroes. But when they really blow it, then we vilify them.

Now some people pick up on an old tradition—it goes back to Tolstoy or beyond—and complain that we overemphasize the great person theory of history. Tolstoy, in War and Peace, complained that we are loading way too much onto Napoleon. He’s more like a schoolgirl holding ribbons in her hands, thinking that she’s really holding reins controlling the steeds, when in fact Napoleon was carried by complex geopolitical world events. Well, we do simplify, but we create bosses as brands for a reason.


Q: Weighing the positive and the negative, does the heroic view of the CEO make it harder or easier for the CEO to be effective?
They have the potential to have greater influence, but for various complex reasons, they’re more reserved and less likely, individually, to take on a statesperson’s mantle. The great Second World War generation of business leaders created the Business Roundtable because they saw that issues such as global trade needed to be tackled in a systemic, collaborative way. The Business Roundtable was a very progressive force. They also individually engaged in these issues. Whereas today, because these leaders are perhaps too aware of the heroic stature that has been tossed their way, they’re reluctant to use the power—in part because of shareholder reactions and the litigious society we’re in. They have become much more likely to hide behind trade groups rather than individually speak out, unless they’re the sole proprietor or have a huge ownership stake as an entrepreneur.

They’re also far more insulated than ever. Ironically, this Woodstock generation that grew up being anti-authority and socially engaged is much harder to access. They have platoons of public relations people and they’re being very ill-served by many of their self-interested PR guardians and the business management firms that protect them. They give speeches that are platitudinous, drafted by others. It used to be that people in the media or people like me could call them at six in the morning and they would answer the phone in their office. It’s extremely rare that that happens now. If you get their direct emails, you can have late-night pen-pal chats with them, as I do with a number of them, but it takes a lot to break through to that stage. So they’re falling out of touch. With all the branding of the boss, there’s been a distancing from their constituencies.

Q: Is it possible to measure the performance of CEOs in an objective way?
We’ve done some research on 600 prominent CEOs, using a triangulated, multi-rater view from their management committees. We had to have at least four raters for each CEO to make sure we didn’t have somebody who was sycophantically kissing up to the boss or was trying to seek revenge. We asked about every element of what makes for great leadership according to the leadership scholars, and five factors came back as being most significant. One factor we called personal dynamism. It isn’t charisma so much as the backslapping, gregarious kind of salesmanship dimension. Some people do a very good job of this without necessarily being shallow cheerleaders. It’s the vivid nature of how they communicate and their personal accessibility, which goes against the grain of the overly insulated, over-protected PR-driven CEOs reading off of prepared scripts that I mentioned.

A second cluster of factors has to do with recognition of others, concern for the welfare of employees, knowing who’s around you. It goes beyond interpersonal emotional intelligence to a sort of collective empathy. A third factor has to do with authenticity, and what came out on that dimension was the moral model that they set and their credibility, the proverbial walking of the talk. Then the fourth category has to do with setting inspirational goals. It is stretching people, setting higher standards. The fifth and last one, which is an especially problematic one in recent years, is what we called boldness—prudent risk-taking. Swashbuckling recklessness created such problems recently that we now see boards are excessively cautious and we have historically unrivaled hoarding of cash. Neither extreme is ideal.

We then took a look at independent measures for how a business is performing in terms of their actual reported returns and the perception of the market through value. Both of those measures were affected 12 to 15% by these leadership qualities. We did this over a long time period—10 to 15 years.

One surprise that came out of this work is that there were diminishing returns from leadership over time. Candidly, some CEOs were staying on for 20 years and later in their terms it gets harder to have an impact. Look at Michael Eisner. In the beginning, he saved Disney. There’d be no Walt Disney today if it weren’t for him. Unfortunately, at the end, he didn’t leave the way he began. This is independent of how old they are—there’s too much ageism in society. But a lot of opportunities are lost when the CEO stays on too long.

Q: That seems to imply that well-managed succession is important. I know that’s a subject you’ve looked at a lot. And bringing in Joseph Campbell again, I think he would see a lot of problems there, since the hero’s end is always difficult.
So many of the self-styled heroes, the proverbial dragon slayers at the beginning of their careers, start to resemble the dragons themselves by the end of their careers. You can find this across cultures, whether it’s Saul or David in the Bible or various political leaders who start as freedom fighters and become dictators. As people stay on too long, they start to become part of the problem.

Q: Why don’t boards do more to encourage CEOs to plan a succession?
Nobody’s interested in this question of succession. It’s amazing that people on boards, as smart as they are, will do such dumb things.

It is the board’s responsibility to do something about this, and in most cases they just aren’t doing it. They’ve been taken out of the equation as they become preoccupied with the short-term, transactional view of the firm’s performance. And succession is a longer-term question, unless the company’s in a tailspin.

Beyond that, activist investors and shareholder activists have been moving to seize control from management, claiming there’s too much corporate cronyism. But what has happened as a consequence is, by driving all other management voices off the board, you build a greater dependency than ever on the CEO. Information is filtered through the pipeline of the CEO’s own eloquence and integrity. Sometimes you have honest CEOs who, by distraction or inelegant communications, don’t tell you everything you need to know. Sometimes they’re corrupt. True, you have outside consultants do hit-and-run PowerPoint presentations, but when they’re not there as equity partners at the table, they don’t count as much.

Virtually every major financial institution, two years ago, was being held hostage by its CEO. At Lehman Brothers, for example, they didn’t understand that they had a problem, because they had a hard-working, engaged, but highly imperfect CEO, Dick Fuld, with whom they had become enraptured. They had no other voices, and he was firing whole cohorts of cfos and others, and the board wasn’t getting access to the information they needed. So that is a real problem boards have. They need some voices of management there, accessible to the board all the time.

Some really well-managed companies from ups to DuPont to Dell to ge have decided to keep some management on the board.

Q: CEOs must have to deal with so much more complexity now than 30 years ago—in technology, in globalization, in the size of organizations.
It’s a real challenge. The multiunit nature of major corporations and the geographic sprawl and the size and the volume and volatility—these are all separate dynamics that make complexity so hard.

In addition to that, you have a problem that Richard D’Aveni of Dartmouth has called “hypercompetition.” This is a pervasive condition in which the environment is not only volatile and fast-moving, but in which the boundaries between industries are now vague. So you’re not quite sure who your customers and suppliers and competitors are. The current CEOs’ predecessors, and certainly their predecessors, didn’t operate in that world, so you don’t have the blueprint of a predecessor to guide you. You’re in a space where you’re not even quite sure, in terms of competitors and suppliers and vendors, who is upstream, who’s downstream, who’s lateral. Look at companies like ibm, Deloitte, and hp—they compete ferociously and they use each other extensively.

So CEOs need to keep learning. We’ve found that our CEO Summits, by bringing together a cross-section of leaders, can really facilitate exchange and learning from each other.

Q: How much does the CEO’s brand shape the identity of the company, and how much is it the CEO’s responsibility to communicate the organization’s identity?
I think it’s really important. Look at all of the examples where the actions of the CEO—whether you could describe them as embarrassing or inept—have really hurt the company’s brand. The boss represents the brand, the image, in a big way.

We have created heroic illusions and adornment for these leaders, but they’re co-conspirators in the whole process. And if they want to play in these leagues, they have to live that role now. Yes, they don’t have the freedom for indiscretions, however much that might frustrate them. If you want to have that sort of complexity in your character, don’t become the CEO of a public company now.

(Interview conducted and edited by Jonathan T.F. Weisberg)

[This article has been reproduced with permission from Qn, a publication of the Yale School of Management http://qn.som.yale.edu]