Choosing the Right Type of CEO – Asrar Qureshi’s Blog Post #1332
Dear Colleagues! This is Asrar Qureshi’s Blog Post #1332 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to pharmaveterans2017@gmail.com for publishing your contributions here.
Preamble
This blog post is based on a Harvard Business School Working Knowledge article. Link to the article at the end.
When a Company Needs a Leader but Gets a Manager: The High Cost of Choosing the Wrong CEO
When a company appoints a new chief executive, its board usually looks for an impressive track record, extensive experience, strong qualifications, and a history of business success.
These are sensible criteria. But there is another question that may be even more important: Does this company need the kind of CEO this candidate is equipped to be?
A business struggling with uncertainty, rapid change, and competitive threats may need a leader who can set direction, inspire people, build relationships, and guide strategic transformation. A company facing operational inefficiency, inconsistent quality, or weak internal controls may need an executive who can bring discipline, improve processes, and ensure reliable execution.
The two roles overlap, but they are not identical.
The research offers an important lesson for boards, business owners, and senior executives: appointing a capable person is not enough. The right person must be appointed for the right organisational circumstances.
What did the research discover?
The study, CEO-Firm Matches and Productivity in 42 Countries, examined how CEO characteristics align with the requirements of the companies they lead.
The researchers distinguished broadly between two types of chief executives:
– Leader CEOs, who devote greater attention to strategic issues, external relationships, and interactions with senior management.
– Manager CEOs, who focus more heavily on operational matters, production, and the efficient execution of established processes.
The study found substantial productivity differences when the CEO’s style did not fit the organisation’s requirements.
THE COST OF A CEO–COMPANY MISMATCH
Minus 20% – When a company needs a leader but hires a manager, it may lead to lower productivity compared with a company whose leadership needs are correctly matched.
Minus 15% – When a company needs a manager but hires a leader, it may lead to lower productivity when the executive’s style does not suit the company’s requirements.
Plus 9% – Potential productivity gain from better matching. The study estimates that eliminating CEO mismatches could raise productivity by 9% across the firms in its sample.
The findings do not establish that leaders are inherently better than managers, or vice versa. They show that effectiveness depends partly on whether an executive’s strengths correspond to the challenges facing the organisation. This distinction is crucial because companies frequently promote people based on past performance without adequately considering how the demands of the next role will differ.
Understanding the difference between leadership and management
Leadership and management are often used interchangeably, but the research highlights why distinguishing between them matters.
Leadership: Deciding where the organisation should go. A leader focuses on direction, change, and the future. Typical responsibilities include:
– Developing a clear vision and long-term strategy.
– Anticipating changes in markets, technology, and customer expectations.
– Building relationships with investors, regulators, customers, and other stakeholders.
– Inspiring senior teams to embrace change.
– Making difficult decisions when the future is uncertain.
Management: Making the organisation work effectively. A manager focuses on execution, coordination, and operational performance. Typical responsibilities include:
– Establishing efficient processes and systems.
– Managing costs, budgets, and resources.
– Maintaining quality and productivity.
– Monitoring performance against targets.
– Ensuring that people understand their responsibilities and deliver results.
These are complementary capabilities, not mutually exclusive personality types. Effective CEOs generally need both. The difference lies in where they concentrate their attention and which capabilities are most important at a particular moment.
A company facing disruption may suffer if its CEO spends too much time supervising daily operations and too little time preparing for the future. Conversely, a company with weak operational discipline may suffer if its CEO spends excessive time discussing vision while basic execution remains unreliable.
The best CEO is not necessarily the person who excels at everything. It is the person whose strongest capabilities address the company’s most important needs.
Why context matters more than a successful track record
One of the most powerful insights from the research is that success in one organisation does not guarantee success in another. Consider a chief executive who has spent years improving a large, established manufacturing business. The company operates in a relatively predictable market, its products are well established, and its main challenges involve costs, quality, and operational efficiency. This executive may be highly effective in that environment.
Now imagine appointing the same person to lead a business facing technological disruption, changing customer preferences, aggressive competitors, and an urgent need to develop new products. The executive’s strengths may remain valuable, but they may not be sufficient. The new company requires strategic experimentation, external engagement, and the ability to mobilise people around an uncertain future.
The reverse is equally possible. A visionary executive who excels at launching new businesses may struggle to run a mature organisation that needs tighter cost control, stronger processes, and consistent execution.
This is why boards must look beyond reputation, previous job titles, and impressive financial results. They must understand the circumstances in which a candidate succeeded and determine whether those circumstances resemble the challenges the new company faces.
The board’s most important responsibility: Diagnose before selecting
The research has significant implications for boards of directors and business owners.
CEO recruitment often begins with a candidate profile: years of experience, industry knowledge, qualifications, previous positions, and measurable achievements. These criteria are useful, but the process should begin with a different question:
What does this organisation most need from its next CEO?
A board should assess at least five areas before making an appointment.
1. Strategic position: Is the company growing, stagnating, losing market share, or facing fundamental disruption?
2. Operational performance: Are its systems, processes, quality standards, and financial controls working effectively?
3. External environment: Does the business face major regulatory changes, new competitors, technological shifts, or changing customer expectations?
4. Organisational capability: Does the company have a strong senior team, a healthy culture, and the skills required to execute its strategy?
5. Immediate priorities: Does the company need transformation, expansion, operational recovery, or consolidation?
The answers should determine the CEO’s required capabilities.
Boards should then assess candidates against those requirements, using evidence from previous roles, structured interviews, references, and relevant assessments. This approach reduces the risk of choosing a candidate simply because they are well known, personally impressive, or successful in a different business context.
Sum Up
The research discussed by Harvard Business School challenges a common assumption in corporate governance: that a successful executive will be successful wherever they go.
The evidence suggests otherwise. When a company’s needs and its CEO’s capabilities are poorly matched, productivity can suffer significantly. The solution is not to declare leadership superior to management, but to understand when each capability matters most.
Both leadership and management are essential. The challenge is knowing which deserves priority, when, and in what combination.
Concluded.
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