Do 'Leader' CEOs Run More Profitable Companies Than 'Manager' CEOs?

November 30, 2017

[shutterstock]

Visionary CEOs who lead from above tend to be more effective than hands-on, managerial CEOs, says a new study that examined survey data from more than 1,000 CEOs and their companies’ financial performances.

When comparing behavioral styles of “leader” CEOs versus “manager” CEOs, Harvard Business Review found evidence suggesting that, on average, leader CEOs run more productive and profitable companies than their manager counterparts.

Manager CEOs spend more time visiting production plants, interacting with employees and meeting with clients and suppliers. Leader CEOs, meanwhile, spend their workdays interacting with C-suite executives, meeting with internal and external stakeholders, communicating and planning. Leader CEOs are more often found in larger firms and complex, skill-intensive industries. For their part, manager CEOs tend to run smaller and somewhat simpler organizations, such as those characterized by routine tasks.

Still, plenty of manager CEOs operate successful firms, the study found. Some companies need great “in the weeds” managers as CEOs, while others require high-level, vision-setting communicators. Performance differences between the two styles might sometimes be attributable to imperfect fits between CEOs and the firms they run.

With more managers than leaders in the study’s sample and perhaps in the overall CEO market, managers sometimes end up in leader roles, and thus undermine a firm’s performance. Companies have to understand and find the right fit between a CEO’s leadership style and what the organization requires to succeed, the study found. —Greg Beaubien