Future Directions
Financial Analyst
In partnership with Oliver Wyman Leadership Development, CLST conducted 45 interviews with financial analysts around the globe to learn how the strength or quality of leadership plays into the analysts’ evaluation of the firm. We discovered that estimating the quality of leadership was even more important in companies and industry sectors with substantially higher degrees of strategic freedom and controls to make decisions impacting a firm’s performance. In a follow-up study, working with Forbes research and surveying 305 financial analysts around the globe, the initial findings noted above have now been corroborated and expanded. The net result is that analysts’ evaluation of leadership indeed matters and can account for 20% or more of the changes in their estimation of a firm’s value.
New Research
Recently, the CLST worked with several researchers around the world to examine if emergent entrepreneurial leadership was heritable. What we discovered was that for males entrepreneurial leadership had zero heritability considering the entire working life-span, while for women it was near 50%. The authors speculated that the high heritability associated with women entrepreneurs is likely due to potential biases in business against woman entrepreneurs. Specifically, certain traits that help woman to be successful today, may become less important over time, moving the overall amount of heritability associated with being an entrepreneurial leader down closer to males
Latest Research by Executive Director of CLST
Authentic leadership and Environmental Sustainability
We are completing a 90 country study of over 200 manufacturing facilities around the world. We measured the leadership of each of these manufacturing units in terms of their authentic leadership and then followed up to get measures of employee voice, commitment, unit productivity, water usage in manufacturing, electric usage and waste. We found that manufacturing plants led by leaders who were rated as being more authentic by their followers, had employees who felt their voice or opinions were heard, were more committed to the organization and innovation, had more productive facilities, which also had a more positive impact on their environment—lower waste, water usage and electricity.
Social Media Impact on CEO Dismissal
Employees are important stakeholders of firms because they are directly engaged in strategy implementation, and thus are critical to firm success. Accordingly, we theorize that employees’ views can impact the assessment of CEOs by boards of directors beyond firm financial performance and security analysts’ recommendations. Specifically, we hypothesized that employee approval of a CEO’s leadership is predictive of a board’s CEO dismissal decision, particularly when there is relatively higher firm financial performance, more positive security analyst recommendations, and lower CEO power. Using longitudinal data from 338 firms and 1,252 firm-year observations between 2010 and 2018, we found empirical support for the above predictions. Our theory and supportive findings have important implications for research and practice regarding employee/stakeholder engagement, strategic leadership, and corporate governance.
What is the Impact of Self-serving CEO Accounts on Analysts
Evaluations of Firms.* Although holding oneself accountable is deemed important for effective leadership, CEOs tend to demonstrate a self-serving tendency when reporting their company’s performance to the financial community. Leaders do so by providing internal accounts for favorable performance and external accounts for unfavorable performance. The effects of this strategy on the financial community’s judgments of a company’s value, however, is frequently mixed. Guided by the actor-observer perspective, we propose that observers (i.e., analysts) are likely to provide higher forecasts for firms whose CEOs attribute unfavorable organizational outcomes to internal factors like themselves, and favorable outcome.