CEO personality is correlated to company culture, but what works for one organization may not serve another, defying the notion of a universal chief executive archetype.
The finding comes from a new paper by academic leaders from Stanford (Calif.) Graduate School of Business and Massachusetts Institute of Technology in Cambridge, who used a natural language algorithm with earnings call data to assess the personalities of 460 CEOs at more than 300 companies through the Big Five model. They then analyzed 1.2 million Glassdoor reviews written by employees to calculate the firms' organizational cultures, including factors such as collaboration, execution and performance.
The Big Five model measures traits of openness, agreeableness, conscientiousness, extraversion and neuroticism. In their analysis, each of these five traits was correlated with nine dimensions of organizational culture. For instance, extroverted CEOs were associated with agility, collaboration and execution. Agreeable CEOs were linked to flexibility and internal focus.
"Although the larger picture suggests that extraversion and agreeableness have the most positive effects on organizational culture, the perfect combination of CEO personality traits does not exist," according to an article on the study from Stanford GSB. "Each of the nearly infinite combinations of the Big Five comes with trade-offs — boosting one trait consequently diminishes another. This means that the ideal personality of a CEO will largely depend on their company."
In line with this takeaway, researchers' analysis found personality patterns by industry. CEOs in healthcare tend to be more agreeable, altruistic and compromising; those in finance and insurance are the opposite. Tech CEOs have lower levels of conscientiousness than their counterparts in manufacturing.
"A personality of a leader that might work in one situation might be exactly the wrong personality in another situation," Charles O'Reilly, PhD, study author and professor of organizational behavior at Stanford Graduate School of Business, said. "Leaders who are very open-minded and creative can be great for companies whose strategy is to be innovative. They could be terrible in companies where the strategy is to be cost-conscious and incremental."