Not All Leaders Are Created Equal

I’ve always been interested in self-awareness as a leader’s capacity to take stock, to reflect, and to look at things defining a bigger perspective. But after I spoke withClaudio Fernández-Aráoz for my video series Leadership: A Master Class, I learned another reason why self-awareness is crucial for effective leadership. Here’s what Claudio had to say.

“We often think about self-awareness as the basis for developing our self-control, self-regulation, and social awareness. Our relationship management is based on those three clusters.

But self-awareness is also crucial for job allocation. Some people are outstanding for some jobs, and they are lousy for others. One of the most dramatic examples I’ve seen was in wonderful research done by Boris Groysberg and Nitin Nohria from Harvard on GE alumni. General Electric has not only a reputation of being an outstanding company, but it’s a talent factory. If you look at the profile of the Fortune 500 CEOs, the largest individual group are Harvard MBAs, and the second largest individual group are GE alumni.

Because it’s such a source of outstanding leaders, they were often recruited from General Electric into CEO positions of other companies. Each time a senior executive leaves GE to become the CEO of another company, instantly the market value of this new company spikes at least by one billion dollars, and in some cases by up to 10 billion dollars.

These two professors analyzed a group of 20 GE alumni. They found that the market value of a company always spiked once they hired this great executive from General Electric. But then they watched what happened over the next three years. They calculated the net person value of the value created, industry-adjusted, so that they could compensate for any factors in the sector.

They found that about half of these great GE executives created great value and the other half actually destroyed value.

And what was the reason for that? They weren’t always the right leader for the job. First, they may not have been a strategic fit. Some people are good for start-ups, some for turnarounds. Others are good for managing a cyclical business.

Second, they may not have been a good organizational fit. There are some organizations that focus on the long term, while others are focused on the short term. There are some organizations that are hunters; others are farmers. There are some organizations that are team oriented; while others value individuality. There are some organizations that develop people from within. There are some organizations that grow through mergers and acquisitions, while others grow organically.