Among all the factors that can affect how an enterprise performs, especially crucial are the attitudes and behaviors exhibited by chief executive officers in charge of running the company. For instance, people often credit Jack Welch for General Electric’s success and Zhang Ruiming for creating China’s Haier. How do corporate leaders in China usually behave? And what kind of impact do their behaviors have on their companies?
Professors Wang Hui of Beijing University, Xin Rong of China Europe International Business School and Xu Shuying of Arizona State University in the U.S. recently completed a thesis on the behaviors of corporate leaders in China and their impact on both employees and companies’ performance.
To do the CEO leadership analysis, the three scholars first interviewed 65 mid- to high-level corporate managers in industries ranging from high-tech to services to manufacturing. The questionnaire had an open-ended question: What kind of leadership characteristics does your CEO present? Each interviewee had to list at least five answers.
The 65 interviewees came up with 312 answers, which then were categorized by the scholars into nine characteristics most commonly presented by corporate leaders in China. Those include setting a reasonable vision for the enterprise; keeping a close eye on enterprise operations; being good at motivating employees; being adept at handling all kinds of relationships, including those with the government; being creative and adventurous; being caring; being authoritative; being charismatic and being moral.
To further ensure the credibility of the survey, the researchers grouped the 45 most frequently-given answers into a second questionnaire. They then asked 542 MBA students whether those answers fit what they think of the CEOs at their own companies.
Based on the answers from the second questionnaire, the three scholars came up with a new set of common qualities presented by Chinese CEOs. Those qualities include vision setting, operation monitoring, creativity, communication, caring and authoritativeness. They refer to those who have the first three qualities as “task-oriented” CEOs since those qualities all center on corporate performance. The researchers view those who have the last three qualities as “relationship-focused” chief executives since those qualities all relate to the goal of motivating employees.
Following the two surveys, the scholars then examined how those leadership qualities can affect corporate performance and employee morale. This analysis had two parts. First, the scholars interviewed high-level managers from 125 companies (which were different from those interviewed for the first survey) on the kind of leadership behavior their CEOs present and their corporate performance. The survey used five criteria to measure corporate performance, including net profit growth, sales increases, capital growth, employee morale and market share.
At the same time, the scholars also surveyed more than seven hundred employees from each of the companies on whether they feel they receive support from their companies and are treated fairly. A total of 739 questionnaires were returned, representing 84.46% of all the participants in the survey.
Improving Company Morale
After grouping the leadership characteristics cited by the 125 high-level managers into six categories, the three scholars adopted the “structure equation modeling” method to measure the relationship between CEO behavior and corporate performance and employee attitudes. Their conclusion: “Task-oriented” chief executives who have a reasonable vision for their companies, keep a close eye on their operations and have the desire to be creative tend to have a direct and positive impact on their companies’ performance. But “relationship-focused” chief executives who emphasize communication with employees as well as their own authority tend not to have a direct impact on their companies’ performance.
In addition, the study shows that the more active the employees are, the better the company’s performance. The researchers pointed out that although “relationship-focused” CEOs don’t have a direct impact on their companies’ performance, they tend to greatly influence employees’ working attitude. In particular, CEOs who are communicative and caring can help improve employee morale. However, CEOs who like to flaunt their authority can only discourage employees and make them less loyal to the enterprise. As a result, “relationship-focused” chief executives tend to have an indirect impact on their companies’ performance through influencing employee morale.
Commenting on their conclusions, the three scholars noted that “the research further proved the relationship between CEOs’ vision setting and enterprise monitoring capabilities, and corporate performance, something already established in academic studies in the West. But the research also brings about something that remains rarely mentioned in China, which is the importance of creativity to corporate performance.”
Meanwhile, in terms of “relationship-focused” CEOs, the scholars said their qualities of being communicative and caring reflect the unique Chinese culture that puts a heavy emphasis on harmony in human relations. However, their research also shows that CEOs who like to flaunt their authority can actually harm corporate performance. If that is the case, why do so many Chinese corporate leaders choose to be like that?
The scholars explained that this might be a reflection of the traditional Chinese way of managing developed within family-owned businesses, which is being authoritative as well as caring and generous. “Many CEOs in China view that kind of managing to be good for their enterprises, but our research proved contrary,” the scholars said. “In terms of what role that kind of management behavior plays in companies in the West, that will be a cross-cultural research topic.”