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How much CEOs matter to firm performance:
"Do CEOs matter?" has been a perennial question in management discourse. But "the CEO effect" has been notoriously difficult to isolate -- a moving target caught in the slipstream of dynamic forces that shape firm performance.
So Morten Bennedsen, INSEAD Professor of Economics and the André and Rosalie Hoffmann Chaired Professor of Family Enterprise, along with colleagues Francisco Perez-Gonzalez (ITAM and NBER) and Daniel Wolfenzon (Columbia University and NBER) decided to find out how much CEOs matter by measuring the impact on firm performance when a CEO is absent, specifically, hospitalised.
They find, in a forthcoming paper, "Do CEOs Matter? Evidence from Hospitalization Events", soon to be published in the Journal of Finance, that the financial ramifications of CEO hospitalisation are significant.
Based on data of nearly 13,000 Danish SMEs between 1996 and 2012, Bennedsen and his co-authors find that five-to-seven day hospitalisations sent firm profitability tumbling by 7% in the year of illness. Longer hospital stays of 10 days or more wreaked even deeper damage, lowering operating return on assets (OROA) by a full percentage point.
Journal Reference
Morten Bennedsen, Francisco Pérez-Gonzalez, Daniel Wolfenzon. Do CEOs Matter? Evidence from Hospitalization Events, The Journal of Finance[$] (DOI: 10.1111/jofi.12897)
See also: Phys.org
[Source]: INSEAD research
(Score: 4, Insightful) by Runaway1956 on Tuesday April 07 2020, @02:06AM (4 children)
Superstars, not so much. Business has gone far astray in it's quest for superstar managers. Funny thing that managers pitch themselves as the single most important cog in the machine.
If your CEO isn't replaceable on short notice, then you are doing something seriously wrong. If there is anyone in your organization who is indispensable, you're wrong, wrong, wrong. From the next-to-lowest to the highest position, that person's immediate subordinate should be competent, and ready to step up and take over the next higher position. Ideally, there should be a couple of people ready to step into any position.
Unfortunately, we don't have a lot of managers around these days. Instead, management has been replaced with a cadre of MBA's whose goal is to milk the system.
(Score: 2, Disagree) by The Mighty Buzzard on Tuesday April 07 2020, @03:02AM (3 children)
You know the difference between a company run by competent management and badass management? Amiga vs. Microsoft. Yeah, the difference matters if you want to be something other than an also-ran.
My rights don't end where your fear begins.
(Score: 5, Touché) by Runaway1956 on Tuesday April 07 2020, @04:23AM (2 children)
So, uhhhh, parasitic practices distinguish badass management? Rent seekers and the like demonstrate badassery?
(Score: 4, Informative) by krishnoid on Tuesday April 07 2020, @05:38AM
When it comes to extracting money out of customers, government, ecosystem, etc. for the financial benefit of shareholders of a corporation ... yeah? Let them start actually sentencing some actors to the corporate death penalty because they've found to be not working in the public interest, then that might start changing the story.
(Score: 2) by The Mighty Buzzard on Wednesday April 08 2020, @02:42PM
No, I mean employing lots of people vs. employing none.
My rights don't end where your fear begins.