Companies with humble chief executive officers (CEO) enjoy higher Return on Assets (ROA), according to new research by the NUS Business School.
In a recent study examining the relationship between CEO humility and company profits, Dr. Amy Ou Yi, Assistant Professor of Management and Organization, found a positive link between CEOs rated as ‘humble’ by their chief financial officers (CFOs) and their firms’ ROA.
The research paper has just been published online in the Journal of Management. The study examined 105 firms in the United States’ computer software and hardware industry, with CFOs reporting on their CEOs’ humility through a nine-item survey. The survey included questions such as “My CEO actively seeks feedback, even if it is critical”, “My CEO acknowledges when others have more knowledge and skills than him/her”, “My CEO takes notice of the strengths of others”, and “My CEO is willing to learn from others”.
The survey questions were aimed at identifying CEOs who possess the traits of humility, including being more self-aware, of not only their strengths but also their weaknesses; being open to feedback and improvement; appreciating others’ strengths and contributions; being driven by collective missions that are greater than self-interest; and being willing to forego their personal self-glory for the greater good of the company.
“The implications of our findings are significant. It is typically assumed that the humble person is not assertive, lacks confidence, and the ability to motivate others. At worst, humility has been equated with being weak. Our study challenges that belief, showing that humble CEOs are more than just nice to work with and they are able to deliver extraordinary firm performance,” said Dr Ou.
She added: “The constantly changing world demands at least two sets of skills from companies and the CEOs who lead them. One is the ability to be innovative, to explore and discover new opportunities. The second is the ability to exploit the existing resources within the company. The balance is important. Humble CEOs are able to create highly integrative top management teams who tap into both skill sets, allowing the firm to adopt an ambidextrous strategic orientation. Such teams collaborate better, share information openly, make joint decisions, and work towards a shared vision.”
The full research paper can be downloaded at http://jom.sagepub.com/content/early/2015/09/21/…