US News reports on an academic study of the correlation between CEO charisma and corporate financial performance. Does charisma matter? The survey says … apparently not!

"In what is considered the most extensive analysis of its kind, the authors surveyed the top management teams at 128 companies averaging $6.5 billion in assets and 16,000 employees. They asked 770 high-level managers to rate their CEOs on five elements of charisma—dynamic leadership, exemplary leadership, concern and respect for others, high expectations, and willingness to take personal risks. Then the authors compared their findings with the companies’ actual financial results—stock returns, returns on assets, returns on sales, returns on equity, and sales growth—before and after the arrival of the CEO. The results were not what they expected.

"’If you look at it over the long term,’ says Agle, ‘there is no correlation.’ Charismatic leaders, in other words, have no effect on subsequent financial performance."

If charisma doesn’t matter, what does?

"The lesson here, for investors—and for would-be CEOs—is a positive one, in some ways. Animal magnetism, it turns out, isn’t everything. ‘Charisma is not necessarily the thing that’s going to bring your organization to the top,’ says Agle. ‘Experience and competence and regular leadership skills are sufficient.’ Memo to all of those boards of directors praying for the next Jack Welch: Even if he comes, he may not be able to build anything."

On the other hand, Jack’s charisma may be based on his success at G.E., success based on experience, competence and amazing leadership skills…

I’ve been searching for an article written by Jim Collins in the April 1999 issue of Inc. Magazine. The title was “When good managers manage too much.” What grabbed my attention was the tease on the cover, “How to know when you’ve hired the wrong person,” and the subtitle should have been, “And what to do about it!” The answer is, you get rid of them

Today, I came across an interesting entry on Don Blohowiak’s Leadership Now blog:

“What are the most pressing problems facing your business today?” That’s a question my good friend Michael Hudson, Ph.D., put to managers in a wide variety of businesses across the USA.

“Surprisingly,” Michael writes, “the most frequent answer is not recruiting or retaining people. It is, in fact, the exact opposite: How to get rid of the people who don’t belong.”

Blohowiak cites Hudson’s plan for “making sure you have the right people on the bus.” It’s a good approach, but very difficult to implement anywhere, especially in public enterprises. I wonder how Hudson and Blohowiak think about evaluating your team members for performance and values?