Chief Executive Officers are frequently caricatured as cocky and narcissistic people who do it all their own way, with regrets too few to mention and no hesitancy in biting off more than they could chew. Yet our new study in the Journal of Management Studies entitled “I Did it My Way” challenges this common depiction of the CEO as an egotistical person whose inflated sense of self leads to bold, high-risk strategies that disregard external factors. We argue that this characterization of CEOs is overly simplistic and often inaccurate, and instead distinguish a CEO’s positive self-regard based on an authentic evaluation of their capabilities and personality with negative egotism defined by hubris, narcissism and overconfidence.

How can one spot the difference? A tell-tale sign of whether a CEO has gone over the line between valuable confidence and dangerous overconfidence is when they start to disregard the feedback they are getting and pay less attention to what’s happening elsewhere in their industry.

Executive Positive Self-Regard

The study by researchers based in the U.S., UK and Taiwan revolves around whether a CEO’s personality is characterized by high core self-evaluations (“CSE”) in which they form a positive but realistic view of their competence, and are self-assured, emotionally resilient, and responsive to changing situations. CEO self-regard rooted in high CSE is conceptually distinct from an inflated sense of self based on narcissism, hubris, or overconfidence as the latter can lead organizations to pursue grandiose strategies with little regard for the alignment of strategy to situation. The study is based on analyzing the personalities and risk-related actions taken by a panel of 106 CEOs of publicly traded US companies over a six-year period.

CEOs need confident personalities to make high-stakes decisions and deal with varied stakeholder groups looking to them for direction. But the study draws a distinction between CEOs who push this over the edge because of overconfidence—which is the common depiction in both popular media and academic literature—and CEOs who listen and adjust their decisions based on the feedback they receive. The latter are calculated in their pursuit of strategic risks to make decisions that set their company up for success.

CEOs are notoriously reluctant to participate in surveys. Because of this, the study assessed the personalities of CEOs based on 7,000-word information packs assembled from multiple sources including speeches, interviews and letters to shareholders using a measure encompassing 11 adjectives ranging from determined and stable to dissatisfied and self-pitying.

Strategic Risk Taking

The study concentrates on two key forms of risk—risk with the allocation of strategically important resources (such as R&D spending or long-term debt) and strategic nonconformity (strategies in key operations that are novel and differentiated from rival firms). Strategic nonconformity involves sizeable risk because it is costly, prone to failure, and subject to skepticism from investors, customers, and staff.

Resource allocation risk taking is evaluated on a metric capturing research and development spending, capital expenditure, and the value of long-term debt. Strategic nonconformity is measured on deviation from industry-level means in six categories including R&D intensity, plant and equipment newness and financial leverage.

A Contingent View of Risk Taking

We found that CEOs with high levels of CSE are calculated risk-takers who pursue or temper risk taking depending on their particular market’s characteristics. These high CSE CEOs pursue risky resource allocation strategies in environments with intense competition and low dynamism, while being more restrained in highly concentrated industries and highly dynamic environments. Conversely, these CEOs pursue nonconforming strategies to differentiate themselves from competitors in highly dynamic environments, while conforming to tried and true strategies in less dynamic environments. Our study provides a new perspective on CEO’s positive self-regard highlighting the implications for adaptive as opposed to maladaptive strategic behavior. CEO s whose positive self-regard emanates from high CSE are self-assured, yet responsive and adaptive to changing situations.

So while Frank Sinatra famously sang that “I’ll state my case, of which I’m certain”, our research finds that CEOs who listen, adjust and adapt—CEOs who don’t always do it their way—often chart the best course down each and every highway.

Acknowledgement: The authors thank Charles Goldsmith from the University of Cambridge for his guidance and contributions to the development of this blog.