Elena Botelho on What Makes a CEO

Ideas for Leaders #P026

Elena Botelho on What Makes a CEO

Key Concept

Elena Botelho grew up in Azerbaijan and Russia in a family of mathematicians and earned her MBA from Wharton. She has advised more than 200 CEOs and boards over two decades, first as a strategy consultant with McKinsey and currently as a partner at the consultancy ghSMART. She leads the CEO Genome Project - a collaboration between ghSMART and some leading universities, including Chicago and NYU that has analysed the largest CEO data set to identify the key characteristics that make up successful business bosses - which she discusses with Roddy Millar in this conversation.

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Transcript

Roddy Millar:    Hello, and welcome to this podcast from Ideas for Leaders. I am Roddy Millar. Our guest today is Elena Botelho. Elena started her career with accountancy firm, Anderson Worldwide, before moving onto AIG and then McKenzie and Co, and has been a partner since 2007 at the consulting firm ghSMART, rated as one of the top management consultancies in the US by Fortune Magazine this year.
    She supports major corporate and alternative investment clients globally, including Pfizer, IBM, Carlyle Group, and Berkshire, along with many others.
    At ghSMART, she leads extensive research on first time CEOs, which, with the collaboration of academics from Universities of Chicago and NYU, amongst others, she is distilled into the CEO genome project.
    The CEO genome project is founded on an in-depth analysis of a sample of over 2600 leaders drawn from a data set of 17000 CEOs and C suite executive assessments. With 13000 hours of interviews and two decades advising CEOs and executive boards, shows that CEOs are a much more diverse group than we might think. But that the successful ones do share four essential characteristics. They decide with conviction and speed, practice relentless reliability, are relationship masters, and are proactive in adapting to changing circumstances.
Roddy Millar:    This discovery was written up in a front cover article for Harvard Business Review last year and is now published as the book The CEO Next Door. Elena, welcome to the Ideas for Leaders podcast.
Elena Botelho:    Roddy, thank you for having me and thank you for this great introduction.
Roddy Millar:    The CEO genome project draws on an extraordinarily large data set. Can you briefly explain to us where that data comes from and how you got access to it?
Elena Botelho:    Absolutely. Yes. The data set and the analysis is definitely the secret sauce behind the book, The CEO Next Door. So our firm, ghSMART, since 1995, has been relied upon by boards, CEOs, leading investors, to help them on their most important leadership decisions. So as part of that, we've assembled a database of these 17000 leaders that we've analyzed very, very closely. And that database cuts across every company size from a Fortune 10 company to a $10 million company or a company employing 10 people, perhaps that might be owned by a private equity firm. So it's a very vast representation of different sizes of businesses. It represents every industry group.
    What's most unique is that this is the data. It's not scrubbed from public profiles, it's not based on a one hour, casual conversation where the person gets to tell you whatever they want. The same data that we used for this research behind the book, The CEO Next Door, is the exact same data used by our clients that they relied upon that data to make decisions on who should run the company, how the team is gonna work together most effectively, how to prepare somebody to be a CEO. They view that data to be highly reliable. Our clients report that our analysis is about 90% accurate in terms of predicting how individuals behave.
    So from what we've been told by leading academics, this is the widest and deepest data set on CEOs and C-suite leaders. So when you lead some of the insights in the book, they're really evidence based. They're powered by over 10 years of research based on the database and based on our client experience. It's really the first time ever, because typically, we devised ghSMART, team that devices boards, CEOs, the C-suite, so this is the first time that this type of information is available to anybody who cares to take a look at the book.
Roddy Millar:    So it's not publicly available then? 
Elena Botelho:    The data is not. No, the database is extremely proprietary and bound by very, very strict confidentiality rules. Absolutely.
Roddy Millar:    That 90% figure that you said on the success rate that comes out of those selections, that's pretty phenomenal by industry standards, I think. So what are you asking ...
Elena Botelho:    It is.
Roddy Millar:    ... that's different to what other people are doing? Is it just the extent of the information you're gathering? Or is there a particular set of data there that's different from other people?
Elena Botelho:    Yeah. Roddy, that's a great question. So the irony of it is, like many things in life, if you just looked at their questionnaire, if you will, or the interview outline, it looks deceptively simple. So it's simple, but not easy. If you think about the fact that our firm hires the very, very best, after I've joined, they started hiring the very, very best. Our acceptance rate of applications ... So we hire top performers from places like McKenzie, top consulting firms, highest performing business organizations, corporates, like GE, et cetera. And so we look at the candidates who are in the top 5% of their peer group and then we select less than 1% to join our firm.
    So we start with basically ... Frankly, we take the methodology that's been developed by our founder in 1995 and before that, that's been in place for a long time, we add the smartest people we can find, frankly. And this is all we do. So the secret sauce is as much in the actual structure of what we ask as it is in the fact that this is our area of expertise. It's a little bit like if you go to a top surgeon who masters this one particular condition, you know you're gonna be getting the best result.
    So that's really our practice. We're very focused in this one specific space. We don't do search. All of our advisory work is fully objective and fully independent. And the questions are fairly simple. And actually, if your readers are up for taking a look at two books rather than one, actually, it's fully open sourced. You can buy books written by our founder about 10 years ago now that was the best selling book at the time called Who?, which describes our interview methodologies. So there's nothing secret in the interview, per se, but it's all about the process and the people who do it.
Roddy Millar:    It's the analysis. 
Elena Botelho:    Exactly.
Roddy Millar:    I think the key finding of the research is that, in reality, very few CEOs are, and as you put it in the HBR article, that stereotypical, charismatic, six foot tall white man with a degree from a top university, who is a strategic visionary with seemingly direct to the top career path. In fact, they tend to be much less obviously gifted than that. But nonetheless, they've mastered those four key skills that I mentioned earlier, decisiveness, reliability, relationships, and adapting to change.
    Before we explore those, I'm interested to know if those are skills that are particularly special for CEOs or do you think they apply equally to anyone that wants to lead well?
Elena Botelho:    Yeah, Roddy, that's a great question. So we looked at two things in the study. We looked at who gets picked to become a CEO, so what helps you get hired in the CEO role, and then we did extensive analysis to understand what are the factors or behaviours that are statistically significant for actually being a high performing CEO. Right? Because let's face it, it's a big win to even get into the role. But ultimately, we should set our sights high. 
    So when we ran analytics with the SAS Institutes, with the University of Chicago, and looked at what sets apart those who excel in the CEO role, that's how those four behaviours popped up. Now, what we think the relevance of those four behaviours is, those are the behaviours that, statistically, were demonstrated to differentiate those who succeed from those who don't. So the facts speak for themselves. Those are highly relevant for CEO success.
    At the same time, the entire book is really structured as lessons from the most successful people in business, and we just picked CEOs because, arguably, they're pretty successful. That can be applicable to anyone's career. And a lot of the feedback we've gotten from readers as they've tested themselves on these behaviours, which we have a self-assessment you can take on our book website, and have tried to apply some of the lessons in the book is that no matter how early or how advanced you are in your career, these four behaviours can help you excel on the career path that you've chosen.
Roddy Millar:    We often see that with people going up the career ladder, getting promoted, that what got you hear won't get you there. 
Elena Botelho:    Absolutely.
Roddy Millar:    There seems to be a very different set of skills required for being at the top of the pyramid than reaching that, than when you're trying to climb your way up it. You need to perhaps get rid of your sharper elbows when you're at the top and be much more of encompassing and nurturing than you are perhaps when you're on that journey.
    And so I wonder if that, I mean, that fourth skill, adapting to change, is from the mental there that when you get to the top of the organization, if you do need to radically change what you are doing to what you have been doing before?
Elena Botelho:    You're absolutely right on adapting proactively and that actually, of the four behaviours, in the conversations we have in the board rooms today, the one that gets the most discussion is this need to adapt. Because again, whether you're a CEO or you're just coming up the ranks, your ability to rewire your behaviour, retool and change whether it's your business or just how you lead, is really, really critical for success. Because the one thing we can all count on in our lives is surprises. Right? And being able to adapt to the changes that either the external environment presents to us or just the need of "I was an individual contributor, I was a brilliant scientist and now I have to lead a group of scientists. So how do I lead differently?" So you're absolutely right. Ability to adapt is really important.
    And we found a trick in that, by the way. If you think your readers would benefit from this and listeners. So the interesting thing is when most of us think about what it means to adapt proactively, we're tempted to think of someone who just turns on the dime and aiming in the direction that the blow of the wind, which is not a positive quality. Or somebody who somehow has an uncanny vision for the future. Maybe they know, when none of us know, back a few years, a couple of years ago, nobody could have expected Brexit, right? But maybe these people somehow knew exactly how that would play out. Or nobody expected the outcome of the US presidential election. Well, maybe these people have somehow, just a better crystal ball.
    When we analyzed successful CEOs, we were surprised to find that they weren't necessarily the first to call the next play and they weren't necessarily ... Their crystal ball was good, was strong, but that's really not what set them apart. What did is exactly what you described earlier, which is they're able to proactively let go of some behaviours or businesses or approaches, models, that worked for them in the past but no longer work for them. Right? So the business examples of that abound and usually they're sad examples, whether it's Kodak whether it's Blockbuster. There's kind of a famous story of Blockbuster had many opportunities to buy Netflix and they didn't. So just because they didn't want to let go of their old business.
    So whether you're thinking about your habits, how you spend your time, who you spend your time with, is this ability to proactively reset your behaviour that really sets apart the CEOs that succeed.
Roddy Millar:    And one of the other things that comes up very strongly in the book is this thing about being able to select or put in a really good team around you and the importance of that. How does that relate to the ... Is that just the decisiveness issue or is that reliability or is ... There seems to be a judgment role in there too about making those kinds of decisions.
Elena Botelho:    Yeah. You've picked up on the very important theme in the book. So often, when we work with CEOs who have recently got appointed or who are in the running for the role, their biggest worry is often about the board. But actually, when we do the analysis, post, it's a couple of years once they've been in the role, 75% of them recall that their biggest mistakes were people mistakes. Either not moving quickly enough or not being decisive enough about people or putting the wrong people in the roles and not putting the right people that would allow you to execute on the business strategy.
    So that was surprising to us, because not only by the time you become a CEO, the one thing you've done time and again is build teams. But we find that continues to be the number one mistake in business and interestingly, leaders who otherwise may be very decisive and otherwise may put a lot of reliability mechanisms into their organizations. Look, when it comes to selecting people, we over rely on our gut feel. So not surprisingly, 75% of the mistakes are people mistakes.
    So no matter whether you're starting out your career in managing people for the first time or you're getting close to the top, if nothing else, really looking around yourself and thinking about, to your earlier point, have I retooled my own skills and my own behaviours and is the team that I have around me there because they've succeeded in the past or are they there because actually it's the best team for the future? Unfortunately, that's really hard to do.
Roddy Millar:    And internal appointment that becomes even more tricky, presumably.
Elena Botelho:    That's right. Because you're connected. Right. You have pre-existing relationships.
Roddy Millar:    The legacy there. Yeah.
Elena Botelho:    Exactly. Every time you get any promotion, doesn't matter whether it's CEO or not, you always feel a little bit unsafe. It's a risky time. You really want to show yourself. So the last thing you want to do is make bets on people that you don't know. So it's very tempting to bring in, as we call it in the book, the comfort blanket. "Oh gosh, this guy, he's had my back for the last 10 years, so he's gonna be the first person in the role." But are they actually the right CFO for you now that you're running an international division as they were when you were in the weeds in a domestic business? Not clear, but they feel safe. So beware of safe people bets.
Roddy Millar:    But you said that's to do with, and a lot of the mistakes are because people follow their gut reaction.
Elena Botelho:    Exactly.
Roddy Millar:    So are you saying that there is a, you should do the kind of assessments that you happen to specialize in in order to identify that?
Elena Botelho:    Yeah. I mean, look, our brains ... So yeah, our firm is still, for over 23 years of our firm history, the reason we exist and the reason we're constantly, we can grow fast enough to support our client demand is exactly because of what you described, which is more and more, leaders realize that their careers and the future of their business rest on their people decisions and that it's really hard to be objective unless you're truly objective and unless you're truly a third party. So that's how we've become the go to firm is because of this analytical approach. And the underpinnings, the why is very simple because while we all pick people, our brains have evolved over millions of years, not to pick people. They've evolved to pick mates or to avoid becoming food and find food. And that's what your gut is. Your gut is just millions of years of evolution applied to a decision that's in front of you. So it's really ironic when we sit with leaders and they talk about an investment they're making in technology or they talk about opening a new office or launching a business. Those tend to be very, very rational decisions. Then they talk about picking the next person and they try to do by gut.
    So you're exactly right. So that's what we're there for is we're there to help de-risk the most important people decisions as well as more broadly, support leaders.
Roddy Millar:    Sure. I get that. Now I'm interested. Obviously the focus and the title of the book is all around CEOs, but you do paint a picture of quite what an extraordinary job a CEO often is, certainly in these larger organizations. You've got a great quote from, I think, was it Jacqueline, who headed up a children's hospital?
Elena Botelho:    Yeah, it's Madeline Bell, who was the CEO of Children's Hospital of Philadelphia, yeah.
Roddy Millar:    And she was certainly overwhelmed by the fact that she's constantly in the spotlight and has all sorts of new responsibilities that she hadn't been aware of before and just the 100% on-ness of the role. 
Roddy Millar:    Yeah. You suddenly stop and pause and think "Well, yes, there's fame and fortune comes with being a CEO, but it's quite easy for that fame to turn to infamy if it doesn't go well." 
Elena Botelho:    That's for sure. Look up Starbucks. Right? Look up Southwest Airlines. Absolutely. Especially these days. Yep. You're only one bad Tweet away from infamy.
Roddy Millar:    Exactly. It's not necessarily a ‘life success’ route. If your interests are not 100% embedded in the organization. People who have got families and outside interests too. So is it a very particular person who needs to become the CEO and do you advise many people that they shouldn't be trying to do it?
Elena Botelho:    That's a very interesting question. So I think the big insight in our book is actually that there are a lot of different kinds of people that can rise to the top and be successful. I think we actually fight against this notion that there's only one type of person who can become a CEO. In fact, one of the interesting things, and we talk about this in the book, I think often, when you say the word CEO, the image that comes to mind is maybe that person in your grade school who was always trying to boss you around. Or that person in your university who was the first to the board with an answer. 
Roddy Millar:    The big man on campus.
Elena Botelho:    The big man on campus. Exactly. Or somebody who was really popular or whatnot. The reality is when we look at the data, it doesn't bear it out. There are lots of kind of people with lots of different kinds of motivations and profiles and many of them who have risen to become successful CEOs of large companies. Like we talked about Raj Gupta, for example, who led Rohm and Haas, it's a big industrial company, US based, that was bought by Dow Chemical awhile back. 
    He described his childhood and he even talked about "Elena, if you looked at my childhood, you wouldn't have found anything remarkable." SO I think what we actually hope the readers will take away from the book is that there isn't a one size fits all. There's also an interesting data point in the book. When we asked the successful CEOs how early did they know that they wanted to become a CEO, were they "destined for greatness?" 70% of them, 70% of them, so vast, vast majority, didn't really have any aspiration. It just wasn't in their consideration until very late in their career. So they got into the executive suite, so they became within an earshot of a CEO and it became relevant.
    Up until then, they were focused on moving the needle and advancing the business, on excelling and doing their best. So I hope, actually, what the readers will take away is look, whether or not you're going to become a CEO or even have any interest in becoming a CEO, the behaviours and other tips in the book about how do you advance in your career will help you get ahead. That's one. And second, if you happen to be in your first decade of your career, it actually doesn't matter at the moment. Just focus on excelling in the role you're in and maybe looking a couple of steps ahead. But looking all the way to the top of Mount Everest is probably, it might be interesting, but not necessarily that relevant at that point.
Roddy Millar:    At that stage. Exactly.
Elena Botelho:    And the other piece, again, that I think struck us from the analysis, when we started the analytics, we did not go out fishing for any particular hypotheses to prove or disprove. We approached it with a completely open book, unprompted. And what stuck with us is when we looked at the current path of CEOs and folks who got to the top faster, what was interesting is that they took risks. They really took big risks and those who did advanced to the top faster.
    So again, hopefully the messages that are relevant to anyone ...
Roddy Millar:    Risks of what kind? In their career choice or in a business commercial sense?
Elena Botelho:    Both, actually. You cannot be decisive without taking risks and we've found we uncovered in our analysis, looking at the folks who advanced faster than average, we uncovered that there were three particular types of choices they made in their career that helped them advance faster. I could share one of them if that's useful. So we called them career catapults. And it was fascinating, actually, because when we analyzed people who got to the top faster, we expected to see that they would have fancy MBA degrees and have gone to fancy companies like McKenzie, et cetera. 
    So about a quarter of them actually did have a top school MBA pedigree. 97% of them, so virtually every one, so 97% of them undertook one or more of these, what we call career catapults. And the one most common occur catapult was taking on something smaller, we call it go small to go big, taking a side step in their career at some point. 60% of the folks who got to the top faster, we call them career sprinters, at some point in their career, took something that may have at the time looked like a side step. There's stories we tell in the book about somebody was on track to lead an R&D organization, was going from running one group to a larger group to a larger group, and then all of a sudden, took a side step to go start something from bottoms up and something where success wasn't guaranteed by any stretch.
    So what we try to uncover in the book is help paint a picture of what kinds of ... In addition to the behaviours, which think of them as the muscles that you need to advance, what are the courses that you need to run to prepare yourself? Which paths seem to have the highest payoff potential? Obviously nobody can tell you anything for certain in this life, but we try to offer some ideas for readers for how they can make choices that are more likely to lead them to advancement.
Roddy Millar:    Okay.
Elena Botelho:    Those are some things that you would find there.
Roddy Millar:    Fantastic. So if readers are wanting to find out more, obviously they should read the book and the review that we'll be putting up on the website. But also, you've got the CEO genome project website as well. Is that right?
Elena Botelho:    Yeah. The easiest website to go to is CEOnextdoorbook.com. Or you can just find the book on Amazon if you're looking for a book. But on the CEOnextdoorbook.com, you will also find a self-assessment. So you'll be able to evaluate yourself on these four behaviours. Over 11000 leaders have done that. And you'll get some development suggestions as well based on your results. Again, the book, obviously, will give you the full set of ...
Roddy Millar:    The full depth about it.
Elena Botelho:    The full depth of it. Exactly. Exactly.
Roddy Millar:    Brilliant. Elena, thank you very much. That's been great speaking with you. And I think the insights from the book and obviously doing the assessment too, which I did do beforehand.
Elena Botelho:    Oh, you did? Could I ask you which one was your strongest? Which one was your strongest one? 
Roddy Millar:    I was best on decisiveness and less good on reliability, which surprised me. But I think that was doing the same ... It was more about having process in there than turning up with the goods at the end of the day. And I suspect I always try and do things different ways out of curiosity. 
Elena Botelho:    Yeah. Well, that's good. So you'll be actually surprised. So reliability, across over 11000 people who took the assessment, is actually the lowest rated skill. And in the books, the readers will find out that in some ways, reliability might be the most powerful skill to focus on. So that might be a good place to start if you wanted to work on something.
Roddy Millar:    I'd better work on that. Exactly. 
Elena Botelho:    Well, you've been very reliable in this conversation. We started on time. 
Roddy Millar:    Excellent. Well, that's what we aim for. Plenty of practice at that. So that's good. Elena, thank you very much indeed.
Elena Botelho:    Thank you, Roddy. Take care. All the best.
 

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