Do chief executives actually affect organizational performance? What are the key issues?

Yes and no. In large scale bureaucratic organizations like government agencies and some companies, the entrenched culture may be stronger than the will of a change-oriented manager. Or the new executive may be there for other reasons than to implement change. In those organizations, the “masses” below have seen leaders come and go and they “know” that this, too, shall pass. So like the Gulf Stream is largely unaffected by the surface waves, the organization’s performance changes not. Consider the American Veteran’s Administration for one. And many large American private companies.  

A change oriented, powerful, high energy executive can make a difference for good or bad. Bob Nardelli from GE went to Home Depot and famously almost ruined the company before he left—getting btw some $200mm for his failed efforts. Asset strippers like “Chainsaw Al Dunlap” can kill an organization—by intent. A few enlightened CEO’s like Jim Goodnight at SAS Institute can create fantastically successful companies that everyone wants to work for—and resist the pressures of would-be public investors who would never want to pay for on-site health clinics and elementary schools.

So yes, a leader can make a huge difference in performance both for good and for ill. IMO IME a wise executive has and can articulate a robust “charter” for the organization beginning with a simple, one sentence purpose/mission statement. IMO executives who cannot outline a robust charter are negligent.

Further, IME there are people in authority (who may or may not be leaders) who want the top job for the benefits and perquisites. Type I in my view. Type II leaders don’t care about that stuff, rather they have a laudable mission they want to accomplish. I trust the latter, not the former.

Then there’s the deep-seated white-hot topic of the purpose of capitalism. Most business schools have taught the core VABE of “maximizing profits.” IMO this has become an obsolete and morally defunct core VABE. The reason is that historically executives pursued this purpose at the expense and abuse of the Commons.

The “Commons” are all the things that every person, every department, every company, and every government worldwide share. Namely, air, water, soil, flora, fauna, and the underprivileged. We ALL share a responsibility to protect rather than abuse the Commons in which we ALL live. So for me, the core VABE of capitalism should be “maximizing sustainable profits” by which I mean profits that protect not abuse the Commons. This would change many things like product design, supply-chain management, packaging, and notably end-of-life disposal of products. (Like the piling up of used up, rusted Japanese cars in Central Africa.,)

“Conservative capitalists” resist this notion vehemently claiming that everything is contained in the stock price. Not so. It’s demonstrated historically that unless someone (governments and unions) put pressure on corporations they will go to extraordinary and Commons-abusing lengths in the search for one more percentage point of profit margin.

An executive who has a robust charter and pursues maximizing sustainable profits is IMO a leader for the present and the future.

Finally consider the CEO of a highway construction business in Indiana who sold his business for $200 million. He promptly gave each of his 100 employees (secretaries, truck drivers, pavers, machine operators etc) $1 mm each. When asked why on earth he would do that he noted that they had done all the work, all he’d done was organize them. AND he still had $100 mm, what did he need with more? IMO that man was/is a “net contributor” not a “net extractor/taker” as most managers seem to be. We often forget that Adam Smith said that capitalism depended on men of good character—which to me meant that they cared about their communities and being net contributors, not abusers of the Commons and net takers.