HR News & Trends, Leadership

The Fall of CEO Energy – and Why It’s Bad For Business

HR Blog on TLNT: From the Energy Files

CEO energy is trending down. This is bad for business.

Energy of other leaders (other C-suite leaders and VPs) is trending up. This is a good news.

These new findings come from The Leadership Pulse, which has been running since 2003. In this research, we run short pulse surveys with leaders around the world.

The Leadership Pulse measures leader energy at work, and it is supplemented with a second topic. With over 1 million data points on energy, the data show that optimized energy drives high performance.

3 reasons why CEO energy is lagging

The latest findings lead to the question: Why is CEO energy trending down (since mid 2011)?

Since reviewing the data, we have examined the reasons why CEO energy seems to be dwindling. Three potential answers are arising from this work.

  1. CEOs are being fired or quitting at higher rates than in the past. It’s hard to not notice the what seems daily news about CEOs resigning or being terminated. CEOs are being scrutinized by their boards; the economy had not picking up at the rate many were expecting, and with expanded reporting and regulations, CEOs are being monitored and measured in ways different from in the past.
  2. What they learned in the past is not working today. I hear this a lot from people in C-suite jobs. The leadership lessons learned are not providing the secrets to success they need. Much management knowledge is based on a model of business and competition that has changed dramatically in the past few years, and it’s hard for CEOs to know what will work.
  3. The focus on short-term is making the CEO job not interesting. In addition to the energy data, in the last Leadership Pulse we also asked a series of questions about business drivers. These are practices or assets governed by the business that drive company performance. We ask about business factors such as cash flow, leadership, product, long-term strategy, and culture. These business drivers impact bottom-line firm performance.

The trend data show that what’s important for performance has evolved from culture, strategy, innovation and leadership to short-term cash flow and short-term strategy. The move from long to short-term makes the CEO job less interesting. Short-term cash flow can be optimized by laying people off and reducing investments in things that drive long-term performance. It doesn’t take great skill to engage in these types of short-term focused behaviors.

Getting a fix on the future

What explains the positive energy of the rest of the leadership team?

Our preliminary explanation is the factors negatively affecting CEOs may be leading to increased confidence in the rest of the leadership team. Short-term cash flow provides comfort. After years of stress, knowing money is in the bank can enhance confidence and energy.

What’s the future to hold? We worry not only because CEO energy is down, but because of the emphasis on short term, potentially at the expense of long term thinking and investing.

Our research indicates that innovation, long-term strategy, culture and people may not be demanding the attention they need. The only things that predict long-term survival, stock price growth and earnings growth are the people, culture and innovation. Longer-term performance and winning are about creating competitive advantage that cannot be easily copied. Laying off, reducing expenses and forgoing investment in innovation are all factors that anyone can do.

You need CEO energy to win the long-term competitive game. The focus on short term has been necessary. For longer-term growth, however, we need CEOs who can steer their organizations forward in a tough environment.

Let’s not assume that CEOs are “OK” because the team is doing well; we see in the data this is not the case.

One more short-term metric that should be added to the board’s arsenal is the energy of the CEO as well as the drivers of CEO energy.

Theresa M. Welbourne, PhD, is the FirsTier Banks Distinguished Professor of Business and Director of the Center of Entrepreneurship at the University of Nebraska, Lincoln. She is also the founder, President, and CEO of EEPulse Inc., a human capital technology and consulting firm in the energy business -- optimizing and directing human energy for growth and innovation. She also is an adjunct professor with the Center for Effective Organizations at the University of Southern California. Theresa was awarded the 2012 Academy of Management Distinguished HR Executive Award (for contributions in research, teaching and practice). Contact her at theresa@eepulse.com .