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CCUL Headlines: Industry Insights

Filene study reveals personality traits, leadership skills for a successful CEO

Wednesday, March 12, 2014   (0 Comments)
Posted by: Ben Rogers
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Hiring and developing a successful credit union CEO can’t be reduced to a formula. But the surprising results of a recent Filene Research Institute study could help guide your credit union in the right direction its next CEO search. At the very least, Filene’s 2013 research report, “Leading for Credit Union Success: The Roles of Personality and Practices in CEOs,” could eliminate some common misconceptions about the most important personality traits and leadership skills for a CEO to have.

Report author Murray Barrick, PhD, of Texas A&M University, says he was surprised how often personality traits seemed better predictors of credit union success, often more important than leadership skills or high-productivity work practices.

Here’s a brief description of each of the three variables measured:

Personality traits included extraversion (assertive, ambitious, sociable); conscientiousness (hardworking, achievement-oriented, detail-oriented); emotional stability (calm, confident, not prone to stress); openness to new experiences (imaginative, curious, open-minded to different approaches); agreeableness (cooperative, friendly, empathetic).

Leadership skills included relationship building, and the ability to complete tasks and plan/implement strategic change.

High-productivity work practices (HPWPs) are a collection of human resources practices that have shown to improve job satisfaction, reduce turnover, increase productivity and overall organizational performance. Examples include merit-based incentive pay; performance appraisals for coaching and to clarify goals/expectations; Internal/external equity in compensation; and involving employees in problem solving, increasing efficiency and overall performance.

The research also sought to determine how the variables—alone or in combination—of personality traits, leadership skills, and HPWPs predicted credit union success, which itself was broken down into three elements: transformational leadership behavior, employee engagement, and organizational performance.


Personality is more important than skills

Another surprise to the researchers was which personality traits were most important.

Some highlights:

  • A CEO’s overall personality traits were more important than leadership skills in two of the three success factors: organizational performance (48% of the overall predictors were personality traits, while 39% were leadership skills) and employee engagement (47% personality; 21% skills). The third measurement of credit union success, transformational leadership, leaned more heavily on the CEO’s leadership skills, with the top three predictors (plan/implement strategic change; relationship building, and task completion) accounting for 55% of the overall predictors of success.
  • The highest predictors of employee engagement, by far, were the use of high-productivity work practices (33%) and the CEO’s conscientiousness (32%)
  • The top two predictors of a credit union’s overall performance were the CEO’s emotional stability (30%) and the CEO’s relationship building skills (18%)

Here are the three measurements of credit union success used in the study, broken down by the variables most likely to predict them:


Success Measure: Organizational Performance (net worth to total assets; delinquent loans to total loans, net charge-offs to average loans, and return on assets)

30% Emotional stability (personality)
18% Relationship building (skill)
13% Overall employee engagement (success measure)
9% Task planning/completion (skill)
7% Conscientiousness (personality)
7% Transformational leadership (skill)
6% Agreeableness (personality)
5% Plan/implement strategic change (skill)
4% Extraversion (personality)
2% Openness to experience (personality)
1% HPWPs (Success measure)
48% Total personality traits
39% Total leadership skills


Success Measurement: Employee Engagement

33% High-productivity work procedures (success measurement)
32% Conscientiousness (personality)
12% Transformational leadership (skill)
5% Openness to new experience (personality)
5% Emotional stability (personality)
4% Task completion (skill)
4% Agreeableness (personality)
3% Relationship building (skill)
2% Planning/implementing strategic change (skill)
1% Extraversion (personality)
47% Total personality traits
21% Total leadership skills


Success Measure: Transformational Leadership

22% Plan/implement strategic change (skill)
17% Relationship building (skill)
16% Task completion (skill)
14% Agreeableness (personality)
11% Emotional stability (personality)
8% Conscientiousness (personality)
8% Openness to new experiences (personality)
4% Extraversion (personality)
55% Total leadership skills
45% Total personality traits


Three personality traits to recruit for and/or improve

Among the report’s recommendations is to develop a CEO’s strengths across three key personality traits: conscientiousness, emotional stability, and agreeableness. Although Barrick acknowledges that changing a CEO’s personality is unlikely, it’s possible to improve the behaviors captured by these traits.

Suggestions for improving behaviors include:

  • Set and publicly commit to fewer but more important goals (conscientiousness)
  • Manage stress levels through diet, exercise, relaxation, and visualization techniques (emotional stability)
  • Rely on inquiry, not just advocacy, and work to identify more effective ways to give feedback to others (agreeableness).

The report also recommends comprehensive 360-degree feedback reports every 18 months for executives, to give them a clear sense of their skills and behaviors.

Overall, we know there’s no one formula for a good credit union CEO—we can’t create them in a lab to match with these research conclusions. But watching for these key attributes can help you recruit the best executive talent, and train the people who are already leading your credit union.

Ben Rogers is the research director for the Filene Research Institute. Reach Ben at benr@filene.org.

 



About the Research

The report’s author was Murray Barrick, PhD, Professor, Paul M. & Rosalie Robertson Chair in Business; Director of Center of Human Resource Management at the Mays Business School of Texas A&M University. Barrick used a cross section of employees at 84 credit unions across the United States and Canada. At each credit union, his team asked for insights from four senior management team members, four middle managers, and four entry-level employees, plus the CEO.

Survey participants evaluated the CEO’s personality, critical executive competencies, leadership behaviors, and performance. The non-CEO participants were also asked to rate their level of work engagement at their credit union. To determine credit union performance, the survey assessed the average of four bottom-line ratios as objective measures of organizational performance: return on assets, net worth to total assets, delinquent loans to total loans, and net charge-offs to average loans.

For a copy of the report, click here.

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