CEOs Need Tougher, Not Softer, Skills to Succeed

Executive candidates rated high for efficiency, proactiveness, and persistence are far more likely to succeed as CEOs, said Steve Kaplan, Neubauer Family Professor of Entrepreneurship and Finance. “Individual characteristics or skills do map into CEO success,” Kaplan said during a panel at the 56th Annual Management Conference at Gleacher Center on May 16. “The skills that matter are of the harder or tougher variety, rather than the softer skills.”

Kaplan described research in which he found that successful business ventures are generally the result of good ideas — not good management — despite much theorization to the contrary. “Should you bet on the jockey or the horse?” he said. “On the margin, I tell my students, ‘Bet on the horse.’”

Two separate pools of data of more than 150 successful startups revealed essentially the same findings, both for those funded by venture capital and those funded otherwise, he said. “The specific human capital, i.e., the people, are a lot less stable than the businesses,” Kaplan said. “Companies grew dramatically but business lines remained stable. People change more substantially.”

Bad management does not necessarily kill a good idea because personnel can be changed, he said. However, a bad idea is rarely overcome by a good management team, Kaplan said. “On the margin, spend more time doing due diligence on the business,” he said. Venture capitalists tend not to say they picked the wrong business but often say their biggest mistake is not firing a CEO soon enough, Kaplan said.

Such investors often struggle with what to do if a business is not succeeding with a good management team, he said. “Many VCs pride themselves on working hard to fix the business – ‘If at first you don’t succeed, try, try again,’” Kaplan said. “I would say, ‘If at first you don’t succeed, quit, quit at once.’ If the business is not materializing, you’re not likely to fix it.”

--Phil Rockrohr