Judging leaders by their long-term results, rather than short-term hype is the most-common sense solution when analyzing how effective CEOs are in their positions. Harvard Business Review’s 2016 ranking of the 100 Top Performing CEOs has incorporated new metrics and tools to measure executives’ performance, adding 33 new CEOs to the list, having 30 CEOs remain for the third year in a row, and ranking the same CEO as number 1 for a consecutive year.
How does one rate a CEO?
Turns out, it’s more of an objective art.
Rating CEOs is more of an objective art as HBR fine-tuned its performance measuring metrics. In addition to incorporating the environmental, social, and governance metrics of a company (ESG) from firms like Sustainalytics, HBR drew from CSRHub, a service that aggregates ESG data and gives feedback on areas of improvement to a company. Through these methods, offering more objective insight into leader performance, one is able to understand the effectiveness of an entire career, rather than drawing conclusions from quarterly ratings.
The ranking gives insight into what shareholders could consider when selecting C-Level members. Given the hire-and-fire feel of the job (in 2015, the turnover rate of global CEOs was 17%), it’s essential to find indicators for success. Amongst the 100 ranked CEOs, the average tenure has been 17 years and churned out an annual return of 20.2%.
It’s important to note that many of these high-performing CEOs do not have “traditional” business backgrounds. The top spot, belonging to Lars Rebien Sørensen, studied forestry. 24 of the ranked CEOs were engineers by trade. For those selecting talent, it’s not about finding the leader with the “right credentials”, but rather foreseeing the longevity based on past performance—even if in other industry.
How to judge a CEO (according to the experts)?
According to Elena Botehlo, a partner at ghSMART, a consulting firm, weighs in to Harvard Business School on what traits set great CEOs apart.
1. Usually have had a major career blow up.
Botehlo cites an interesting find: CEOs that had a major career event occur, like being fired, were more likely to be recommended to be hired. In fact, 45 percent of CEOs in Botehlo’s survey of hundreds of participants. Why? Boards and companies want to someone who has been tested and seen the rough side of the road. To be back in the role, they will have usually have had to prove their worth again, making them smarter (hopefully) in the climb up.
2. Know perseverance
This ties in with creating a comeback after a major blowup. A CEO has to have a certain must-do-it-ness. They plod on despite the hardship. Think of well-known business leaders like Steve Jobs or Thomas Edison, who kept innovating despite numerous and considerable setbacks. Perseverance is not something one is a born with; it’s a honed virtue.
3. Make “tough calls”
Being the boss comes with a set of challenges. It often means making some tough decisions, like laying off employees, cutting product features, or knowing to step aside. They make the right calls by rising above the “noise” and can be lasered focus on what needs to happen. They head straight to the core of a tough issue and know how to find the answer — even if they don’t know it quite yet. Great CEOs know how to prioritize and how to commit to enacting the best decision for the company.
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