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Brain circuits

Can I really be said to be adding value as a leader? 3 questions to ask yourself

Published 5 April 2021 in Brain circuits • 2 min read

In an increasingly competitive world, firms are constantly seeking new ways to grow and remain profitable. We attribute the success of companies (relative to similar firms in the same industry and country) to decisions taken “by the firm” and do so based on the supposition that these are frequently determined by leadership skills.

On the other side of the coin, corporate failures have become tantamount to leadership failures. This all explains why companies spend millions developing their leadership teams, making sure that they select the right individuals to manage the business, and paying high salaries to top executives to ensure that they retain the best talent.

The dominant belief is that there is a significant relationship between CEOs and performance. As such, corporate underperformance and failure are usually laid at the door of “bad leaders”.

The impact of leaders is contingent upon how we decide to define “impact”. If impact is team cohesion, worker motivation, or employee satisfaction, it is easy to find ways for leaders to be “impactful”.

However, this is not the reason why boards spend millions of dollars hiring the best senior executives. Shareholders and customers understand impact to mean the ability of leaders to create and capture value: to increase revenues, market share, profitability and – ultimately – stock price performance.

The exercise

What do you think makes senior executives impactful? Take a minute or two to jot down some ideas before reading on.

Our research has shown that, besides having an outstanding ability to manage their teams, the most valuable executives are:

  • Able to navigate through crises by understanding the dynamics of globalization.
  • Able to beat competitors by navigating through myriad different regulations and business contexts.
  • In the know about what is happening, not only outside of their companies, but also outside of their industries. In other words, good leaders are those who master the external drivers of a company’s performance: macroeconomic cycles, regulatory trends, globalization and pandemics included.
Good leaders are those who master the external drivers of a company’s performance: macroeconomic cycles, regulatory trends, globalization and pandemics included.
- Arturo Bris

Now for step 2

Take every opportunity to ask yourself as a senior executive, your board of directors, your shareholders, your customers and your employees the following 3 questions:

  1. Do I understand the current economic reality?
  2. Do I focus too much on my team, and too little on the external world. Otherwise put, do I look outside the window?
  3. Am I able to operate in different institutional environments, and am I really resilient to change?

How else do you see adding value as a leader? Feel free to use the Comments section below.

Further reading

The Halo Effect: . . . and the Eight Other Business Delusions That Deceive Managers (New York: Free Press) by Phil Rosenzweig

Authors

Arturo Bris - IMD Professor

Arturo Bris

Professor of Finance at IMD

Arturo Bris is Professor of Finance at IMD. Since January 2014 he is also leading the world-renowned IMD World Competitiveness Center. He is Program Director of the Navigating Fintech Innovation and Disruption program.

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