Leadership Thoughts | Issue #131
John Maxwell says leadership is influence, nothing less, nothing more. We have always assumed that leaders play a significant role in determining an organization's culture, but until recently, there was little research to back up this claim. M.E. Yancosek Gamble, an associate professor at Fairmont State University and doctoral student in the class I teach at Saint Francis University, posted an article on LinkedIn by Charles O'Reilly called, CEO Personality: The Cornerstone of Organizational Culture?
The article shared a study that examined the connection between the personalities of 460 CEOs in 309 firms and organizational culture. They found that personality and values were strongly linked to forming a culture, with a stronger correlation when the CEO had been in charge for a more extended period.
The Study
Scholars and practitioners have known for decades that an organization's culture is linked to outcomes, innovation, and employee satisfaction. Also, it is clear that the leaders of organizations determine the culture. Perhaps the seminal scholar in organizational culture, Schein, says this directly:
"One cannot separate the process of leadership from the process of building culture" (2010, p. 171).
What is organizational culture, and how does leadership impact it? Different fields of study provide additional definitions. However, for the scope of this discussion, we define it as a combination of values and norms that guide the behavior within the organization. It can be seen as a social control system that provides directions on how to act in accordance with descriptive and injunctive norms. In other words, the set of rules dictates behavior in the organization.
From an academic viewpoint, some researchers have proposed ways that leaders might influence their culture, such as talking to people, handing out incentives and penalties, hiring particular employees, and creating organizational systems. But the issue remains: What makes a leader decide to communicate one message instead of another, pick certain personnel over others with similar qualifications, or set an example by exhibiting certain habits rather than others?
Studies propose that a CEO's attitudes, personality, and values can impact strategic decisions, organizational performance, and other outcomes. Research in this area has linked CEO traits to results like corporate social responsibility and innovation. However, these studies don't account for how individual characteristics influence the overall system. The authors of this article hypothesize that the leader's temperament is transmitted through the company culture, which then affects organizational outcomes. In other words, the CEO's personality impacts their typical behavior patterns, shaping the organization's culture. The figure below outlines the progression.
Previous research has typically examined the connection between the five character traits and leadership. It has been assumed that an individual possesses more or less of these traits, which may result in improved leadership performance. This study employed the Big Five personality variables to gauge a person's personality.
CEO Extraversion. Extraverts are enthusiastic, assertive, active, and optimistic. They are seen as outgoing and energetic.
CEO Agreeableness. Agreeable individuals are altruistic, warm, generous, trusting, and cooperative. They are typically seen as modest, helpful, and willing to compromise.
CEO Conscientiousness. Conscientiousness includes self-discipline, dependability, responsibility, deliberation, achievement orientation, and concern for following established rules.
CEO Openness to Experience. Individuals scoring high on openness to experience are characterized by traits such as imagination, un-conventionality, autonomy, creativity, and independence.
CEO Neuroticism. People who score high on neuroticism tend to be anxious, insecure, emotionally unstable, defensive, and upset by minor threats or frustrations. Those who are low on neuroticism are seen as calm, relaxed, and secure.
This research presents two significant advances in the field of organizational culture. Firstly, it gives us an understanding of where organizational culture comes from. Many experts agree that senior leadership is vital to constructing a company's culture, and their actions and statements give cues on what is highly valued and how people should act. Until this study, there was no indication of why leaders may behave differently. This study suggested, and the results demonstrate, that a CEO's personality and personal values can influence the company's culture significantly; these correlations were stronger than expected, which suggests that the CEO's character might be a key factor behind an organization's culture.
The research supports prior studies that link executive personalities with business success, such as profitability, mergers and acquisitions, corporate social responsibility, and strategic choice. These investigations show a connection between leaders' traits and achievements but don't explain how they have an effect. This work points to the possibility that the influence may be moderated by culture, meaning that alone, it may not be the leadership traits that result in higher performance but its capacity for shaping a positive corporate environment.
Two things stand out from the research findings. First, the Big Five personality variables may be associated with an organizational culture based on the context. Still, we believe three traits are especially relevant to this study: conscientiousness, agreeableness, and extraversion. More conscientious people are likelier to have cultures that focus on rules and processes rather than flexibility and innovation. This is according to Herrmann and Nadkarni (2014), who found highly conscientious CEOs were less likely to introduce pertinent changes. On the other hand, those with more agreeable personalities (trusting and warm) will create more agile and innovative work environments. Extraverted CEOs tend to emphasize collaboration, operational excellence, and flexibility over innovation.
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