“A company cannot afford one bad apple on the top management team in order to financially perform its best,” says Amy Colbert, professor of management and organizations and the Lloyd J. and Thelma W. Palmer Research Fellow in the Tippie College of Business.
The characteristics of a CEO and the effects one has on a company has long been studied and analyzed in the field of management. However, as noted in Colbert’s paper, “Personality and Leadership Composition in Top Management Teams: Implications for Organization Performance,” the complexity of creating and carrying out the strategic decisions of an organization are much too large to fall onto one individual. Instead it requires the collective ability and motivation of a team of leaders within the firm.
Researching top management teams is limited due to the difficulty of accessing whole teams, she says. Colbert and her co-authors expand this research with their paper. The authors propose that personality traits and leadership styles of both the CEO and top management team have strong effects on organizational performance and commitment. The five broad traits tested in the study were conscientiousness, emotional stability, openness, extroversion, and agreeableness. Although other traits affected the results, conscientiousness significantly outweighed them all.
Conscientious executives are persistent, disciplined, and achievement-oriented individuals, Colbert says.
“Such traits are fundamentally related to performance outcomes in many, if not all jobs,” she says.
Colbert’s study concluded that the member with the lowest level of conscientiousness was the strongest correlation to the company’s performance. Such a strong connection exhibits the importance of having every team member possess a high level of conscientiousness level.
“The results of the study reveal the importance of a quality selection process not just for those being hired into the company but more specifically being chosen for the top management team,” Colbert says.
According to Colbert, traits like conscientiousness can simply not be developed well enough by the company and need to be embedded in the employee early on in order to maintain financial success. Financial success is based on ratios including return on average assets, net worth to total assets, delinquent loans to total loans, and net charge-offs to average loans, she says.
The study also examined the effects of transformational leadership by both the CEO and top management team on a company’s outcomes. Although the results showed a stronger correlation with the CEO than the management team as a whole, it presented a strong connection. Although the study notes that transformational leadership is easier to develop within the company, the strong correlation assures companies that such development is crucial in developing a successful top management team.
Personal Psychology awarded Amy Colbert and her team the “Best Paper Award” in 2016 two years after the paper had been published. The journal intentionally waited to award her paper so they could determine how much it was downloaded and citied in other academic papers. The goal of the award is not simply to honor a quality paper but to also recognize one that has an active impact on the field.
Contrary to other academic papers, Professor Colbert’s team used in-depth surveys completed by a variety of union management teams. Colbert believes it was the combination of such strong research and the different stance taken on top management teams that contributed to winning the prestigious award.