Why Good CEOs Are Lucky CEOs
What determines who ends up leading companies and whether they are successful? asked Walter Frick. Researchers have long tried to isolate whether CEOs have certain abilities that predict success, but a slew of recent studies confirms that “no single trait or skill” stands out. Instead, study after study finds that “luck plays a very large role.” One examination of more than 3,000 CEO turnovers between 1993 and 2009 found that executives were significantly more likely to be fired “for factors well outside their control,” such as market downturns or industry-specific challenges, rather than for missteps of their own.
Another study of military aptitude tests in Sweden, where service was mandatory between 1970 and 1996, showed that men who went on to become CEOs typically scored above average, but their results were not much higher than those men who went into medicine, law, or engineering. “Perhaps the most sweeping indictment of the idea that CEOs’ careers are shaped by skill” comes from a 2014 paper that calculated that CEO skill probably accounts for just 5 per cent of a company’s performance. “CEOs are, overall, a talented bunch, but that’s not what separates them from other professionals, nor is it the main reason their firms succeed or fail.”
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