Companies with humble CEOs perform better: Study

Photo credit: Pedro Ribeiro Simões. Image via Tech in Asia
In Silicon Valley, arrogance and ruthlessness are often seen as traits of successful CEOs. They’re trade-offs packaged with the positive qualities necessary for their start-up’s success, like two sides of the same coin. Apple’s Steve Jobs is a prime example.

But a study analysing data from 105 small and medium enterprises in the US hardware and software industry has found that the opposite could be true. Humble CEOs often create better financial returns for their companies.

Conducted by researchers from the National University of Singapore (NUS) and Arizona State University, the study will be published in the peer-reviewed Journal of Management.

The researchers defined humility as people’s orientation toward accurately appraising their own strengths and weaknesses, which causes them to self-improve and appreciate the strengths and contributions of others.

They then posit that humble CEOs tend to encourage others to participate in decision-making and eliminate destructive self-interest and politics, all in favor of attaining a shared goal.

This causes the top management team in the company to become more collaborative. The gap in power between humble CEOs and the top management is therefore reduced due to “a more balanced division of executive labor.”

Rewards allocation is more egalitarian too, with a lower pay disparity between the humble CEO and top management, which keeps the latter more motivated.

As a result, companies with a more cooperative atmosphere tend to execute well in the present and plan judiciously for the future. Firms mired in bitter infighting often make irrational decisions as everyone would be concerned about protecting their viewpoint while filtering out contradictory information.

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