Successful CEOs of Private Equity Funded Ventures.

Leslie Pratch

University of Chicago

Jordan Jacobowitz

Northwestern University

SUMMARY

There is wide agreement that the quality of top managerial leadership greatly influences the success of any business. The character and personality of the leader can drive business outcomes. Leadership quality is more important in new ventures than in established companies. Private equity investors need to find and use the most effective tools.

                This paper argues that clinical psychological techniques can provide unique insights into the leadership quality of a prospective manager. We argue that private equity should learn how to become intelligent consumers of these methods. In particular, we believe that projective and semi-projective techniques provide the most valuable information. Using them in combination with more traditional evaluation tools should substantially increase the confidence that investors have selected the most capable executive thereby enhancing private equity returns in portfolios of new venture investments.

                We demonstrate in this article the application of the clinical method to 20 successful CEOs of private equity funded firms. These CEOs were examined in terms of their professional and personal development, and were also administered a battery of structured, semi-structured, and unstructured psychological tests. Findings indicated certain common characteristics across these individuals in terms of their intelligence, background, temperament, motivation, and overt coping tendencies. Differences were noted, however, on projective tests, suggesting diverse, latent capacities to deal with change and ongoing stress. Some evidence has already been found for the usefulness of these differences in differentiating successful from unsuccessful CEOs. These findings and their implications for investors are discussed in this article.

SUCCESSFUL CEOS OF PRIVATE EQUITY FUNDED VENTURES

Georges Doriot, the Harvard business school professor who in 1946 co‑founded American Development and Research, the first modern venture capital fund, famously told his students that he would rather invest in a B venture with an A person than in an A venture with a B person. Doriot’s thinking about what drives the success of a new venture is today a central feature of the venture capitalist’s professional identity. Many experienced venture capitalists and private equity investors, in fact, regard the quality of a CEO’s leadership as the decisive factor in a venture’s success. Their evaluation of the quality of a venture’s leadership is often the most important consideration in making investment decisions.

Compared to firms in stable industries, privately funded ventures typically operate under conditions of high stress, possess limited resources, and have short and possibly unforgiving time spans for achieving goals. In some cases, the market space for these ventures may never materialize. The leaders of these ventures often face operating environments more challenging than those faced by executives heading more established firms.

Investors need confidence in the CEO’s capacity to function in this environment. The CEO needs not only cognitive ability and functional skills, but also a generalized coping ability that allows him to utilize all his skills and experience. Can the CEO improvise to exploit unexpected opportunities and deal with threats? Is he or she at risk for avoidant or manipulative behaviors when timetables are not met, when plans need to be revised? Is the CEO willing to work with investors to resolve problems and address concerns? Predicting how a CEO is likely to perform under these conditions is one of the most difficult evaluations that private equity investors must make.

Investors typically try to predict the quality of an executive’s leadership by examining CVs, observing behavior during interviews, and checking references. This is the approach that firms use when determining which management trainees to hire. This approach works best in traditional corporate settings, where future conditions often repeat the past, and where the executive’s performance has little effect on the company’s bottom line performance. It has a hit or miss quality in terms of predicting an executive’s leadership under ambiguous, novel, or rapidly changing conditions, where the quality of the executive’s performance is not meaningfully different from the company’s overall performance. Given the enormous risks their ventures face, can private equity investors improve the accuracy of their predictions regarding the future performance of senior executives of their portfolio companies?

This paper argues that clinical psychology possesses methods that can help reduce the risk private equity investors face in selecting executives whose functioning is critical to the success of particular ventures in their portfolios. Investors need to become more intelligent consumers of these methods. They have every reason to use the most effective tools possible to make their predictions as accurate as possible.

In particular, we believe that semi-projective and projective techniques provide the most valuable information. Using them in conjunction with the more traditional evaluation tools should substantially increase the accuracy of executive selection and thereby enhance returns in portfolios of new venture investments. The insight offered by clinical psychology adds indispensable information that reduces the “prediction error” associated with selecting top executives.

Using a clinical psychology methodology, this paper reports on research on the psychological characteristics of successful CEOs of ventures funded by private equity. It is a first step to help venture capitalists improve their evaluation of potential leaders.

Here is an example illustrating the power of our approach. Shown a picture of a little boy sitting before a violin, one CEO told the following story to describe what he saw:

Here’s (he gave his own first name) at his early age in elementary school, studying and dreaming about what the future holds. As he looks back, he has fond memories of friendships that he enjoyed and is appreciative of the efforts everyone made to bring him to where he is today.

A second CEO told a different story in response to the same picture:

The little boy, we’ll call him Timmy, has just been given a violin and he is trying to learn how to play.  But he’s pretty much decided he’ll give it a chance.

What might these two stories predict about how these two executives would perform as CEOs of private equity funded ventures?

Before you read further, stop for a moment and jot down what you would predict. Later in this paper we lay out the clinical psychological interpretation of these two stories and relate them to actual outcomes. These stories reveal a great deal about the CEOs’ likely functioning. One private equity fund made the right decision in picking the CEO. The other probably wishes it had known more about the CEO’s functioning because in moving forward with him, it assumed far more risk than it likely was comfortable with. This CEO’s functioning led to an adverse outcome.

STRATEGIES FOR ASSESSMENT

Let us begin by reviewing the traditional tools used to evaluate senior management before summarizing our clinical approach.

There are many perspectives on leadership  – developmental, behavioral, cognitive – that psychologists use to examine why some managers, when promoted into positions of authority, perform better than others. Industrial and organizational psychologists use trait or behavioral approaches. Narrowly defined traits (for example, an individual’s dominance) have frequently been found to be situation specific. They have little ability to predict how well an individual will perform as a leader in a new or different situation. Similarly, approaches that look only at an executive’s overt behaviors (typical of the approach of executive coaches) are unable to predict how the individual will perform in novel conditions.

Private equity funded ventures often have operating environments unlike any their CEOs have previously encountered. Relying solely on an executive’s past performance, as conveyed by a CV and reference checking, is inadequate to predict how well this executive can perform in the future. Here methods borrowed from clinical psychology can help.

Our approach mirrors the perspective of the venture capitalist. We accept that individuals are complicated, idiosyncratic, and that they have qualities that manifest themselves in certain situations and not in others. Unlike approaches common to industrial/organizational psychology, where the candidate being assessed is easily reduced to a grade or a type, our approach requires the expertise of a clinical psychologist to make nuanced distinctions between two candidates who are superficially very similar.

Obviously, some of the variability in the success of private equity funded ventures is situational and some of it is luck. But we believe that much firm‑specific risk can be explained by the individual functioning of the CEO. To understand why a CEO was successful, we take into account such factors as motivation, stress tolerance, and perceived social supports such as marriage.

In the next section we outline the skeleton of the conceptual framework we use to integrate information that bears on whether a CEO can fulfill his investors’ expectations. We describe how we used this framework to assess CEOs in our study. We then discuss the findings of this research and their implications for how venture capitalists can improve their hiring and funding decisions.

THE CLINICAL ASSESSMENT STRATEGY

The approach we take looks at a CEO’s psychological functioning as it bears on workplace performance. In addition to looking at the public aspects of self (resume, experience, and achievements) we also look at private aspects  (motivation, family, values, conflicts, and fantasies) that affect workplace functioning. Our assessment strategy examines five areas:

1. Business Culture

Some highly capable leaders are better suited for larger corporate environments, not the less structured environment of a start up. Other CEOs function best only as long as the firm remains under a certain size. Understanding the business and managerial environment in which the CEO is expected to execute a corporate strategy is necessary before making predictions regarding an individual’s leadership in that context. Some of the factors we consider include the competitive environment, investors’ exit strategies, and organizational culture.

2. Intelligence, Work Skills, and Experience

The executive has to have the necessary functional skills and cognitive capability in order to perform the work of the role [i]. This dimension generally reveals itself on resumes and in interviews and reference checks. Venture capitalists and executive recruiters emphasize this dimension in screening senior management candidates.

3. Development

Understanding an executive’s past helps us articulate his public and private motivations and capabilities. Understanding an individual’s current developmental needs (for example, possible midlife concerns or thoughts of ultimate retirement) enhances the overall assessment of motivational priorities as they bear on predicting the quality of his leadership.

4. Personal Life Areas

We want to know how the individual handles non‑business aspects of life that affect his or her leadership – family, leisure, religious beliefs, for example. How does the person balance these aspects of life with his work life? What are the sustaining relationships and support systems outside of work?

5. Personality Structure and Dynamics

We look at different levels and functions of personality, conscious and unconscious, including motives, coping, interpersonal style, and integrity. By taking a sophisticated look at the individual’s personality, we are able to examine his motivation and capacity to carry out his work responsibilities.

To some extent, these five areas appear deceptively distinct. In fact, they overlap and interact, as, for example, past development shapes personality and intellectual functioning, and the latter two affect continued development and functioning in vocational and personal life domains. Therefore, these five areas are components of a global, holistic approach to understanding and predicting leadership, which we have branded the Active Coping Assessment^©. This approach marries two normally distinct approaches to evaluating executive capability. It combines the approach traditionally used by venture capitalists emphasizing an executive’s industry knowledge and functional expertise, with a clinical approach that explores less easily observed dimensions of the executive that bear on the ability to perform as expected.

METHOD AND PROCEDURES

                We contacted thirty leading private equity firms. Each firm was asked to nominate CEOs whom it regarded as having been successful leading one of its past or present portfolio companies. Fifteen firms nominated 25 CEOs. In the end, our sample included 20 CEOs nominated by twelve different firms. We left it to each firm to define for itself how the outcome measure of success was defined[ii], but every CEO ran a venture the investing firm regarded as a financial success:  The firm had either successfully exited the investment or had a reasonable expectation of doing so.

                In addition to the financial outcome, some investors defined success along a second dimension that turned on the quality of their relations with the CEO as a factor in the venture being successful. They noted their ability to raise concerns and resolve problems with the CEO in an open, straightforward manner, their perception of the CEO’s integrity, and whether they would want him as a CEO for another venture. Several investors cited the willingness of the CEO to share information and raise matters of concern in a timely way as being important factors in reducing the perceived risk associated with the venture.

                The CEOs (see Exhibit 1) headed firms in a well‑diversified range of industries, stage of company growth, and size of investment. The industries included pharmaceuticals, web‑based services, manufacturing, telecommunications, hospital management, and consumer products. The nature of the private equity investor’s involvement fell into four categories of funding during the CEO’s tenure:  start up/early stage (nine or roughly 50%); growth (six or roughly 30%); mature (one or 5%); LBO/turnaround (four or 20%). Of the 20 CEOs, six had successfully led venture‑backed firms more than once; 14 were first time CEOs whose tenure ranged from two to 15 years. It turned out that the sample divided almost equally between CEOs who were founders or part of the original management, and CEOs who were installed by the venture firms when or after the investment was made. Some of the CEOs came in to run start ups that had almost no revenues; others were asked to turn around companies that were under‑performing.

                Participation in the study involved the CEO giving us four hours for the assessment and two hours for feedback and discussion following the assessment. In all but two cases, the assessment was conducted at the executive’s place of work. (The other two cases were conducted at conference centers.)

                The assessment proceeded in line with the clinical assessment strategy described in the previous section. The particular operational details of the assessment is included in Appendix A.

The sample included nineteen men and one woman. The mean age of the participants was 50 years (S.D. = nine; range = 30-64 years). One participant was originally from India; the rest were native born Americans. All were married. All had at least a college degree. Eight of the 20 had some kind of advanced degree that ranged from an M.B.A. to a law degree to a Ph.D.

Findings

In the interest of stressing what readers find new and of most concern, we are reporting the findings on the first four of the five components of our model in Appendix B. We will integrate the findings in Appendix B with the findings below in a later stage when we discuss the implications of the findings for investors and our conclusions. We will focus here on the last component of our model, personality structure and dynamics, an area where investors have the least expertise in evaluating prospective CEOs.

Personality Structure and Dynamics

Self-Description of Motivational Priorities

The CEOs completed a psychometric self-report test that was designed to identify motivational priorities and patterns. This test was standardized with an American adult population. The test is comprised of twenty motivational scales and two validity scales. Each motivational scale represents a defined psychological need such as the need to achieve, socialize, direct others, and have fun. The validity scales assess any tendencies to represent the self in either an extremely negative or positive manner.

Validity scores of the CEOs indicated that they were within one standard deviation of the norm (average) of the standardized sample. Therefore, the CEOs did not display any extreme proclivities to present themselves as especially positive or negative. The scale indicative of a positive self-representation was higher than that of the negative self-representation, suggesting that overall these individuals tended to describe themselves in a manner considered socially and conventionally favorable.

Similarly, of the 20 motivational scale scores, all of the averages for the CEOs fell within one standard deviation of the normative mean. This pattern suggests that the group of CEOs is quite “normal” with regard to motivational needs.  Nevertheless, some needs approached exceeding the normative mean by one standard deviation and others approached falling one standard deviation below the normative mean.  Among the former group were needs for achievement, dominance, and exhibitionism. Among the latter were the needs for abasement (passivity and self-negation), autonomy (need to rebel and resist pressure to conform), understanding (interest in theoretical and abstract activities), and sentience (aesthetic appreciation). This pattern of motives indicates that the CEOs strive actively to accomplish difficult, pragmatic tasks by leading others in such endeavors.  The CEOs like being in the limelight and being praised for their accomplishments while they pursue goals that are socially acceptable, if not conventional.  They are not particularly interested in devoting time to theoretical and aesthetic endeavors.  Overall, these executives described themselves as being utilitarian, ambitious, loyal, and proud people, but not academic, philosophical, oppositional, or artistic-minded.

Coping Tendencies

                The CEOs were also administered a semi-structured instrument designed to assess coping tendencies.  Semi-structured instruments permit the evaluator to direct the candidate to particular content areas without limiting the choice of responses. Thus, we obtain a more spontaneous and less self-conscious and controlled depiction of self, at least in comparison to psychometrically structured and objective tests.  The particular instrument that was employed was designed to obtain information about the ability to define clear goals, identify realistic obstacles or challenges, actively strive to actualize goals and deal with obstacles in a manner that preserves and promotes self esteem and satisfaction.

                The CEOs’ mean score across all categories of this test was about one standard deviation above the expected average, that is, as a group the CEOs revealed very active coping tendencies.  This level of coping was validated by a second measure of global coping derived from this test. This second measure includes the scores on the particular categories as well as other indicators of defensive and passive coping.  On this second global measure, 50% of the CEOs were classified in the highest category of coping. This percentage can be compared to only 15% of the individuals from the original standardized population of this instrument.

Looking at the particular measures of this test, the CEOs exhibited great optimism, self-esteem and confidence, a consistent readiness to actively deal with problems, and an average capacity to articulate goals and recognize problems. In setting goals, they were prone to emphasize an overriding need to be successful in their endeavors; they were more interested in demonstrating their self-competency than in admiring the outcome of the endeavor itself.  This pattern was congruent with the findings on the objective self-descriptive test:  high exhibitionism and achievement motives but low needs for intellectual or artistic accomplishments. It appeared that their sense of satisfaction derived more from the validated feeling of being successful than the promotion of the product they were hired to develop.  Additionally, the semi-structured test indicated that they placed great value in maintaining harmonious and happy families.

                In defining perceived impediments, the CEOs seemed much more concerned with the behavior of others than with physical or instrumental deterrents. They complained of individuals who were not loyal, logical, dependable, communicative, cooperative, or honest. Given their high level of self-confidence and need for success, the CEOs basically viewed themselves as forthright and conscientious leaders with little tolerance for individuals who were unreasonable or incompetent. Overall, the CEOs could be characterized as proud, if not boastful, individuals who value hard work, strong families, trustworthy and direct colleagues and employees, optimism, and integrity.

Underlying Motivational and Coping Tendencies

                A story telling projective personality test was used to assess the presence of motives, interpersonal styles, conflicts, coping tendencies, and personality dispositions such as self-esteem, confidence, and conscientiousness that may or may not have been manifest on self-report instruments. Although it is possible to apply or construct reliable procedures to obtain scores for these areas, we used the projective test results qualitatively and clinically to yield an individualized personality profile for each subject. This profile aided in understanding how each individual CEO integrated psychologically (on conscious and unconscious levels) his or her past history, internal needs, and current external work, familial, and leisure life spheres.

We discovered a number of patterns, ranging from CEOs who were psychologically organized in a secure, resilient, and self-satisfied way to those who revealed underlying areas of defensiveness and vulnerability. We believe that those with the latter pattern are more limited in their abilities to function successfully in the business arena in a consistent and effective manner.  Depending on the specific profile, individuals in this latter group may falter in completing their work objectives if they encounter disrupting changes in either their work or familial situations.  Following we present a number of examples of this range of patterns.

                The first example is of a CEO who has managed to blend his personal ambitions for success with social and familial values.  His stories emphasize how characters recognize their interdependency upon others and how success is always a mutual enterprise, balancing the needs of self and others. His stories demonstrate congruency among his self-reported achievements in life, motives, core values, and personal desires. For example, the first story he created in response to a picture of a boy sitting before a violin was as follows.

Here’s (he gave his own first name) at his early age in elementary school, studying and dreaming about what the future holds. As he looks back, he has fond memories of friendships that he enjoyed and is appreciative of the efforts everyone made to bring him to where he is today.

Another story highlights the theme of  “one for all and all for one.” His response to a picture of two women and a man on a farm was as follows.

This is a story about the people and their relationships . . . . The family is working

the fields, providing for themselves, expecting another child. The older daughter is going off to school. To me it communicates the bonds that everyone has and the roles that everyone plays supporting each other and it looks like a happy family and for me the take away is the development of each person individually and yet as part of a family unit.

Finally, the sheer enjoyment of personal success and a pervasive sense of self-satisfaction is captured in the next story (recited to a picture of a man climbing a rope).

This is the story of a man who has the ability to climb up and down a rope. He found the dream opportunity performing in Cirque d’ Soleil, and even though he’s aging, he still performs today and feels a great sense of accomplishment that his body allows him to perform, and he’s very satisfied with his role.

A second CEO created different stories to the three pictures to which the CEO just described told his stories. This second CEO appeared just as content, successful, and resilient as the first but emphasized much more the personal needs of the stories’ central characters, and emphasized how success was tied to the perseverance and drive of the individual and not the collective support received from others. In fact, the message seemed to be that successful individuals must go beyond the expectations of others and pursue relentlessly their own goals.  One must respect others, but not let their desires or limitations serve as impediments for success and self-actualization. For example, to the picture of a boy playing a violin, this CEO told the following story.

Bobby was a young boy who had to take violin. His mother and father believed that he should learn culture. Bobby wanted to play sports. He religiously played the violin to fulfill his one-hour a day practice requirements and even an occasional recital; but his true love was the tennis courts. Finally, after struggling for ten years to play the violin, he won his first tennis tournament and went on to become a great tennis player. He never did learn to really enjoy the violin.

To the picture of farm people, this CEO revealed the need to go beyond environmental limitations and reverse the fear of becoming overwhelmed by circumstance by transforming it into glorious success.

“Life on the Farm” – a title. We lived on a farm in rural Kansas. As you can see my mother was pregnant. There were many children. We all had tasks to perform. It was our job to help raise the crops, tend to the livestock. It was all part of our upbringing but it made it difficult to get a good education. Elizabeth wanted to be student. She was a good student. She loved reading; she loved working with children, and she didn’t care a lot about the farm. She also resented the life that her mother had because she had to work so hard for so many hours a day. Elizabeth wanted to be better than that, to have more, to tour more places than just rural Kansas. So she worked on the farm to scrimp up enough money to finally attend a university outside the state. She went on to become a world-renowned poet, Elizabeth Browning. And now you know the rest of the story.

Finally, this CEO’s philosophy that perseverance and coping are the keys to success is clear in his story to the man climbing a rope.

Called “The Rope of Life.” As you can see from the picture, life is represented by a rope and how to climb it. The higher you go, the more mental and physical strength it requires. When your feet are on the ground and you are holding onto the rope, it is kind of like childhood. You have something to hold on to, to hold you up, and to orient you, and you have a stable foundation. But as you rise, pull-by-pull, kick-by-kick, it gets a little tougher. Sometimes you slide backwards. It actually burns your hands. Sometimes you bleed it’s so painful. But you know you can’t go back to the ground, you have to move on, so you try a little harder, you think about ways to deal with the pain and the stress and you realize you can move forward and upward, you have to make time for those sacrifices. Sometimes you don’t have time for eating, for sleeping.  In the end, it is worth it, but don’t let somebody tell you that you can let go of the rope; it’s easier, because when you have hit the ground it hurts and you have to start over.  So the moral of the story is:  plan your next move, focus, hang on, deal with problems at hand, and in the end you’ll achieve the heights of success.

In contrast to the CEOs just described, there were those whose stories revealed tendencies towards constriction, defensiveness, passivity, and uncertainty, despite the fact that they consciously described themselves as active, open, energetic, and confident individuals. This contrast suggested that they attempted to ward off weaknesses or self-doubts and defensively proceeded in life as if these parts of self did not exist. However, these individuals are at risk of encountering these partitioned sides of self when the internal and external means they use to distance them are challenged and overwhelmed. For example, a third CEO was eventually dismissed from his job for failing to inform his investors of a unionizing attempt by workers. Although he was initially deemed successful, his failure to resolve these labor-management tensions, forced his investors to oust him. His projective stories reveal in style and content the tendency to simplify complex situations, avoid conflict, and be passive before threatening situations. There is a failure to integrate interpersonal and self-motives.

To the card with a boy sitting before a violin, this CEO responded as follows.

The little boy, we’ll call him Timmy, has just been given a violin and he is trying to learn how to play.  But he’s pretty much decided he’ll give it a chance.

In that story, the main character does not possess an internal desire to play or achieve. His motivation is linked to accommodating himself to external impositions. There is no development of a plot, no other people are involved, feelings are missing, and there is no decisive end. The story lacks vitality.

In the following story about the people on the farm, the character is decisive in a way but does not find a way to blend her needs with the people she cares about.  A sense of sadness and self-justification pervades the ending.

The young woman has decided that or has been wondering whether or not she should stay home with the family in a traditional farm or should she go off and do something else and try and get an education; and since she is holding books, she is embracing an education; she will go off and do what she wants and forsake the family farm. She’s sad about that but she’s decided it’s the right thing to do.

The next story about the man climbing a rope, though happy sounding, demonstrates the way this CEO views things simply, avoiding perceiving or dealing with the potential stressors and intricacies of life.

The kid’s in gym class. He just learned how to climb the rope. He’s climbed the rope and he’s happy about it.

Finally, the next story (to a card showing a woman in a bed and a man standing with his arm on his forehead) reveals a basic sense of helplessness that may emerge at stressful times. The main character is paralyzed with worry, and there is no action or resolution.

The first thing that pops into my mind is that the woman is sick or in some other distress and the guy is distraught about it and doesn’t know what to do; is beside himself with worry.

The stories of a fourth CEO likewise reveal pervasive insecurities that underlie a self-presentation of confidence and success. The characters in the following stories feel pressured by others, struggle to remain on their feet, are driven by their fears, or find themselves “nakedly” embarrassed despite their efforts.

He’s looking at the violin and wondering why he can’t play it and is thinking about all the other things he could be doing if his parents didn’t say he had to play the violin and he wished it came easy to him so he could go on to do those other things, which is what he will do shortly and be much happier. The end.

She is wondering about her future and is so deep in thought that she doesn’t notice the strapping guy in the back or the Amish woman by the tree but she is deep in thought on a million things and then she trips and falls because she was deep in thought but then gets up again and continues on her way.

He read a brochure one day that challenged him to face his fears and he realized he was afraid of heights but given the introduction that he should face his fears, he decided to climb the rope nonetheless and when climbing the rope he found it was easier to be up high than he realized and he found that he enjoyed the view although he wished he had put some clothes on before climbing.

In summary, while the material from the developmental histories and objective tests revealed numerous similarities among the CEOs, the projective test data indicated differences on the more “private” domain of fantasy and inner life.  As reported in other places (Pratch and Jacobowitz, 1996, 1997, 1998), these differences can be important in making long-term predictions about the stability and course of coping, behavior, and leadership effectiveness.  The projective material helps both to differentiate among individuals who consciously report similar attitudes, behaviors, and achievements and also to tie together in a holistic fashion the various manifestations of personality across the different data collection instruments.

Implications for Investors

The psychological functioning of highly successful business executives has not received systematic scrutiny from researchers, particularly from the vantage point of how to select such individuals and predict their success. Our study, however preliminary, is one of the first and most extensive. We have uncovered a great many fresh insights, but given our present audience’s interests and concerns, we will confine our discussion to what private equity investors should take from the study. We will begin by describing the kinds of considerations that investors can explore in their interviews with potential CEOs and build toward the sort of deeper insights that only a clinical psychologist can elicit but which bear importantly on a CEO’s ability to deliver the results he claims he can. This presentation follows the model we presented earlier.

1. Business Culture

This study examined private equity funded ventures in a variety of industries and stages of growth, ranging from start ups to mature firms requiring a turnaround. Given their different business models, market conditions, and stage of organizational development, the fact that we found similarities in the CEOs’ personalities suggests that the conclusions of this study are generalizeable to many businesses funded by private equity investors. Where this research departs from our model is in not giving close attention to the specific fit between executive and corporate culture. Because the investors had already decided that the CEOs were successful, we assumed that there was a good fit between the CEOs and the role they were expected to fulfill, and therefore did not need to assess each particular business environment. If this were a complete psychological assessment performed on behalf of investors wanting to know the chances of a particular executive’s chances of being successful in a specific venture, we would analyze the corporate culture, including the team on which the executive would be expected to function as part of an effort to link the executive’s leadership to the characteristics of the setting.

2. Intelligence, Work Skills, and Experience

Given that 18 of our 20 executives had considerable experience prior to becoming CEO (see Exhibit B-1), that this experience was a factor in their being selected by their investors to head up the venture, we need to explore whether this experience was necessary for their success or whether it is an artifact of selection. We believe that experience had bearing on their success but without having strong coping and motivation, their chances of being successful would have diminished greatly. Many experienced executives, in fact, when placed in the top roles, fail to perform. A crucial dimension of a psychological assessment would be to gauge the executive’s path to success to determine how much an experienced executive’s success owed to his personal strengths that will be important in the success of the new venture (versus factors that are either not transferable or irrelevant to the job).

Two of our CEOs were first-time entrepreneurs. In the case of inexperienced executives or ones whose experience is not directly relevant to the new venture, a psychologist would assess their coping and motivation as a way to predict the executive’s ability to harness other strengths in lieu of experience, such as intelligence. In all of these cases, the psychologist’s clinical judgment is crucial for determining whether there is a good probability that the executive can deliver the needed results.

3. Development

The CEOs generally came from intact, upwardly mobile families with each parent playing a distinct role (see Exhibits B-2, B-3). The fathers were ambitious and hard working, and while they supported the family, the sons characterized them as distant. The mothers stayed at home to raise children and were described as the emotional center of the family. As the first born or first male child, the CEOs identified closely with their parents’ values while seeking to actualize their fathers’ aspirations in terms of status and wealth. This is an important source of the son’s motivation to achieve. We believe that the CEOs’ needs for achievement and integrity had their roots in their nuclear families and the surrounding cultural milieu.

The importance of the early nuclear family was manifest in the kinds of families that they created as adults (see Exhibit B-4). All described themselves as having successful marriages, with family life vital to their happiness and emotional equilibrium. They did not, however, describe themselves as having important household and child-related responsibilities. These were handled by their wives, whom they characterized as capable and independent. The CEOs married well-educated, intelligent women who devoted themselves to their families. To the extent the wife sacrificed her career ambitions in favor of her children and husband, we hypothesize that this becomes a powerful source that allows the CEO to achieve his own career ambitions.

The CEOs thus appeared emotionally nourished by the connection to a loving wife and family, while being free to devote themselves to work and career. Such a family life is important for explaining, in part, the career successes they have enjoyed. Competent but nurturing wives, who have primary responsibility for children and the household, become a means for the CEOs to recreate the psychological and emotional circumstances of their own upbringing. From this perspective, the CEOs use their wives to play a role similar to the one their mothers played, leaving them psychologically free to pursue career goals, much as their fathers had done. Such sharp distinctions between roles enable ambitious executives to focus on their careers while still meeting their basic developmental needs.

It should be noted that in the sample there is only one female CEO who was married to a successful executive but she had no children which certainly liberated her time to devote to her career. Given our findings, though, related to the men’s needs for nurturing wives, one would need to embark on a separate study investigating female CEOs to determine what familial constellation of personal lifestyles might contribute to the success of the CEO. Women might have very different dynamics for how to structure their lives.

Private equity investors would do well to consider whether a potential CEO of one of their portfolio companies has a private life arranged to support his career ambitions rather than having it be a distraction or a source of guilt or anxiety. We find that more experienced investors have learned to give the circumstances of a CEO’s family life appropriate consideration when making hiring and funding decisions.

4. Personal Life Areas

The CEOs’ lives revolved around work and family. They tended not to devote energy to activities that were not work or family related. This corroborates the above analysis that they have organized their lives to reflect the importance of success at work and family. The fact that none of the CEOs had powerful outside interests beyond family indicates that work itself is its own reward. Investors should seek executives who are motivated to succeed for its own sake – not for the lifestyle that it affords.

5. Personality Structure and Dynamics

Self-Described Motivation

When interviewed the CEOs appeared extroverted and forceful. They talked quickly and confidently, exuding energy – so much so that one is tempted to ascribe to them an inborn temperament of high energy and excitability. Individuals with such active temperaments generally require less sleep than other people as well as almost constant stimulation. They rarely tire. These CEOs channel their hyperactivity into achievement and execution.

On a self-report measure, the CEOs most salient motives were needs for achievement, exhibition, and dominance. They seek admiration; they strive to stand out; they want to guide and direct others. They need to be in the limelight and seek wealth and status as a way to show others how successful they are. They are not humble individuals willing to remain in the background. They are not contemplative, artistic, or academic types. Nor are they revolutionaries – they do not attack the system; to the contrary, they want mainstream conventional success. This motivational configuration is consistent with being a leader who is focused on achieving goals set by and valued by others.

Coping Tendencies

Our discussion to this point has focused on behaviors that are apparent to both investors and the CEOs themselves. We now consider the findings of the semi-projective and projective measures as a way to deepen our understanding of the CEOs’ functioning, in many cases revealing what is not apparent either to the investors or to the CEOs themselves, and in some cases, contradicting what the CEOs claim on self-report measures. This added level of insight as it compares to self-report data starts to give us a full understanding of the CEOs’ abilities to deliver on their ambitions.

At a self-report level, all 20 of the CEOs claimed to be strong copers. This is not surprising given how successful they were and the kinds of behaviors required of CEOs. The semi-projective measures of coping confirmed the CEOs’ self-characterization:  The majority received extremely high scores on a formal measure of active coping. This is further confirmation that they possess the kinds of resources that they need to carry out their self-described motives.

The semi-projective measures also added to our understanding of the nature of the CEOs’ achievement motive. In particular, the CEOs were not only active in temperament but also assertive and perfectionistic in their work style. They were extremely confident that not only could they achieve what they set out to accomplish, but they could accomplish what subordinates probably could not. Without being mistrustful of others or in any way paranoid, they were consistently critical of subordinates, holding them to high standards while dubious that they were actually capable of performing at that level. Nevertheless, they attempt to motivate subordinates to perform at their best. This becomes an exceptionally effective context for the venture achieving its goals and helps explain why several private investors who nominated the CEOs for this study mentioned they would consider backing the CEO in another venture.

When asked to define aspirations or goals, the CEOs typically emphasized a need for success and a fear of failure more so than a desire to develop or promote a particular product. Therefore, it appeared that their need for achievement was highly linked to their needs for exhibitionism and dominance in that they acquired great gratification out of personal success. Their focus was attaining the goals set for them rather than seeking pleasure in creating or developing or even selling a product for the inherent worth or social value of the product itself. They appear to be the quintessential entrepreneurs, intent upon meeting challenges successfully, regardless of what merchandise or services their efforts promote. It is this characteristic that motivates them to invest energy in time limited economic ventures.

Consequently, the CEOs are focused on achieving success in a way that dovetails with the interests of their investors. We saw no evidence that they pursued objectives that were not necessarily shared by their investors, such as, for example, perfecting their company’s technology in a way that did not have direct bottom line consequences. We surmise that such a focus distinguishes them from their firm’s chief technology officer and perhaps, less successful CEOs, who may be overly involved in the product or goals that are of no interest to their investors.

Of importance too, is that their focus on success goes hand in hand with a fear of failure and is a crucial element of their also showing evidence of having considerable integrity. Our CEOs associate failure with shame, and they do not want to be shamed. To the contrary, they want to be perceived as good and capable. Seeking to earn praise and avoid shame, be it from investors or their families or the outside world more generally, keeps them honest. It serves as a powerful ethical backstop to their behavior.

We can understand their strong ethical compass in terms of their acceptance of their parents’ values. They abide by the rules and need to come by their success in an honest and ethical way. By virtue of their strong coping they are able to act within this moral framework to do the right thing as opposed to doing the expedient thing. Once again we see the important role that early developmental experiences play in the fashioning of guiding motives and controls in the business behaviors and achievement of successful leaders.

Underlying Motivation and Coping

Up to now we have discussed the CEOs in terms of modal similarities. Underlying the tendencies our CEOs have in common are unique coping and motivational qualities that shape the individual character of their leadership. They show considerably more variability when we looked at the less conscious areas of personality functioning. By using projective measures, we are able to make fine-grained distinctions among CEOs who were externally very similar. Moreover, it is at this level of their functioning that we are able to predict the quality of their functioning when the success of the venture may be at stake.

The projective measures indicated that the 20 CEOs had personality structures that ranged from secure and resilient to those with underlying areas of defensiveness and vulnerability (50% of the CEOs assessed fell into the former category, 15% into the latter category, and 35% into an intermediate one). We believe that that those with noteworthy defensive and vulnerable patterns are more limited in their abilities to function in the business arena in a consistent and effective manner and pose risks to investors contemplating backing them. In fact, we suggest that weaknesses and blind spots in their functioning, meant that some CEOs enjoyed successes that could as easily be ascribed to luck and circumstance as their own leadership. Further, we believe that investors who funded their ventures unwittingly accepted more risk than they realized.

The ambiguous stimuli of the projective instruments mimic the kinds of pressures a CEO would likely encounter at work and enable us to see how candidates would respond to similar stresses in the workplace. For example, how do they perceive and react to uncertain business or social situations? How open and imaginative are they to seeing and dealing with conflict? Do they overcome opposition successfully? Is their coping defensive and reactive, or open and proactive? The instruments provide a wealth of detail that enable us also to understand why a particular executive might be successful in certain kinds of businesses and not in others. To the extent executives have Achilles’ heels in the quality of the leadership that they can supply at crucial times, projective measures allow us make predictions regarding the kinds of situations in which an executive’s leadership may be shaky.

The projective instruments act as the final validity check on what an executive asserts about his ability to deliver on his motivations as expressed on the behavioral and self-report level. They allow us to determine whether the image this individual presents to the world is based on a healthy, vibrant, active coping stance, or whether it is defensive, reactive, or compensatory, and likely to crumble when stressed. Projective measures, which require a clinical psychologist to administer and interpret, are powerful predictive tools for assessing an executive’s leadership[iii]. They allow us to build a comprehensive picture of an executive’s workplace functioning that a private equity investor would want to know before making a hiring or funding decision.

In the Findings section of this paper, we presented some of the projective test data for four of the CEOs. The first two examples represented individuals who we classified as reliably resilient. They revealed motivational and coping tendencies that were congruent on all levels of assessment. The operative leadership style of the two differed. One emphasized more “communal,” cooperative, and socially facilitating strategies of directing others, and the second, a more “instrumental,” directive, persevering, and commanding leadership style. While both are very active copers, they may be differentially successful, depending upon the particular culture and circumstances of the target business venture.

In contrast, the other two CEOs depicted in the Findings represented instances where past achievements and self-reported confidence hid deep-seated insecurities and lingering weaknesses in the coping domain. The first of these two used denial, avoidance, and over-simplification as a way of buttressing his surface optimism. Nevertheless, at times of threatening challenges, his passivity and paralysis emerged. As noted, this individual was eventually fired by the investor who had initially deemed him successful. The second vulnerable CEO appeared to be a person who, at least unconsciously, believed that he cannot meet others’ expectations of him, nor those of himself, and is prone to become too self-preoccupied, losing sight of his goals, and, even if successful, tends to feel ultimately a fraud. Recognizing that we cannot predict the timing or precise circumstances that would cause these individuals’ underlying insecurities to manifest themselves and perhaps adversely affect the ventures they are heading, with luck, their insecurities may never cause their venture any problems. Had we known in advance of the weaknesses in their functioning, we would have recommended against their being hired. This is an example of a risk investors need not face.

Conclusion

Although our assessment methodology is applicable to any corporate hiring decision, its utility is potentially the greatest with private equity funded firms, where the success of the CEO is not meaningfully different from the success of the venture he is leading. Investors regard themselves as capable of evaluating the prospects associated with unproven technologies or uncertain markets. But the investment’s success depends on management’s capability to deliver on those prospects. As skilled as investors are at evaluating managerial expertise, they have not relied on the most sophisticated methods to improve the robustness of their hiring decisions. This suggests that investors are assuming more risk than they appreciate. The approach described in this paper seeks to understand the CEO’s coping and motivation as they bear on the business demands the venture is likely to face. We believe this approach can help investors reduce their risk.

Investors have a forward-looking approach to evaluate technology and markets. But they often use a backward-looking approach to evaluate the quality of management. They focus on experience, credentials, and other factors gleaned from interviews. They exclude personality factors that bear importantly on the executive’s capacity to function in highly uncertain operating conditions.

Moreover, the executives likely even to receive scrutiny from private investors are individuals who have already excelled on the very criteria on which they are now being evaluated. The winnowing that first brings them to the attention of investors (e.g., executive recruiters and industry contacts) means that superficially, at least, all candidates will appear capable. This selection approach limits the range of behaviors being exhibited and makes it difficult to identify individual differences that will be meaningfully related to the quality of an executive’s future leadership. Investors need not limit themselves in this way.

The clinical approach described in this paper is the only methodology that addresses an executive’s likely functioning under conditions that cannot be reliably predicted. For example, when the business is under stress – when it faces threats or when it must respond to an unexpected opportunity –  do its executives have the flexibility to respond appropriately? Furthermore, our methodology examines behaviors that are difficult to observe in groups of executives who are candidates to be CEOs. This allows us to make fine-grained distinctions between superficially very similar individuals. To choose a manager is to make a prediction. Specifically, the choice “predicts” that the chosen managers will produce more value than any others. Clinical psychological analysis adds independent information that reduces the “prediction error” of top management selection.

Our research has already yielded guidelines concerning the desirable characteristics of executives likely to succeed as CEOs of private equity funded firms. With the caveat that there are exceptions to the general rules, it appears that to optimize success, venture capitalists and private equity ventures should select individuals who loosely fit the following profile: middle-aged, ambitious executives with strong academic records; who have at least 15 years experience in the targeted industry; and who have functional families – including educated and supportive wives. In terms of their upbringing, they will have come from traditional nuclear families where the father was ambitious and upwardly mobile and the mother nurturing and child-focused. The executive will have an extroverted, hyperactive temperament, with self-reported confidence and optimism. He will have needs to be exhibitionistic, perfectionist, and pragmatic, while possessing the capacity to articulate, analyze, and deal with both expected and unexpected obstacles in a manner that reflects a socially recognized sense of integrity.

Examining the CEOs of this study and other successful business leaders, we conclude that the above characteristics form a constellation, each characteristic interacting and supporting each other. We surmise that many candidates for senior management fail to meet the above profile. Instead, they have personalities that are deficient in one or more of these qualities. For example, a candidate could be extroverted but insufficiently ambitious, or be exhibitionistic but vulnerable to ethical lapses; or perfectionistic without being pragmatic or action-oriented; or consciously confident but unconsciously fearful and passive. Moreover, this general constellation can support many different leadership styles. For instance, in the analysis of the projective story-telling test, one leader integrated a communal or social orientation in his managerial style, while another relied on his forceful, charismatic, and inspirational personality to direct and motivate others. Additionally, particular organizational cultures could react differently to different leadership styles. A style appropriate for a biotech start-up may not work in a firm producing a commodity like corrugated cardboard boxes. These points suggest that effective selection requires the expertise of an individual who is familiar with both the business issues the investors regard as salient as well as clinical psychology[iv].

The business of venture capital and private equity investing is to exploit opportunities through the appropriate investment vehicle. The risk these investors face is considerable. The assessment methodology we have described represents the most powerful tool available to help investors reduce their risk in uncertain managerial capability. It identifies the executives with the psychological resiliency to function well under conditions of high stress. Having this knowledge prior to making a hiring or funding decision needs to be a standard element in an investor’s due diligence.

APPENDIX A:  MULTI-METHOD ASSESSMENT APPROACH

In accord with the assessment strategy we outlined at the beginning of our paper, our first step in the assessment is to understand the business culture and the job.

1. Business Role Diagnostic

We conduct in‑depth interviews with private equity investors to understand the role’s relationship to corporate strategy and objectives. What is the business context and competitive strategy? What are the critical business imperatives? What is the team that the person would join? What is the culture of the organization? What is the job – dimensions, nature, scope, timeframe, key relationships, principal accountabilities? What are the characteristics of an ideal candidate – functional skills, work experience, career flow? What are the trade-offs the firm would make for someone who is not ideal?

This information helps us understand the business culture and context in which the CEO is expected to operate. At different times, different organizations require different kinds of leadership. The assessment of a CEO is particular to the kind of venture, its stage in the organizational life cycle, the needs and interests of the venture capitalist, and the threats and opportunities the company faces.

2. Intelligence, Work Skills, and Experience

When individuals come to us for an assessment, they have already met the venture capitalist’s screens for industry knowledge and functional expertise. Even so, we will begin by again reviewing the candidate’s CV, asking him to explain inconsistencies, anomalies, turning points, and highlights of their career. This knowledge helps us build an understanding of the individual’s work skills and intellectual abilities. To provide a formal measure of general intelligence, we use an empirically validated non-verbal instrument intended to make distinctions among already very bright individuals.

3. Personal History Interview

We conduct a personal history interview, asking about original family setting, formative developmental experiences, and education. We also ask about the CEO’s current family situation and aspects of the CEO’s life that can affect functioning in the business arena. By examining the executive’s ability to balance and integrate different areas of his life, we are able to get a holistic view of his functioning. The personal history also allows us to identify the presence of salient developmental issues that may influence behavior in future and which can facilitate or inhibit managerial functioning critical to the venture’s success.

4. Structural Personality Assessment

Finally, we take what psychologists call a structural look at personality. We examine relations among different levels and functions of the individual’s self, including motives, coping, interpersonal style, values and integrity. Such a view allows us to begin to frame where there may be instabilities in the individual’s psychological functioning that can translate into adaptive problems at work.

Our assessment technique uses a combination of objective and projective techniques. Objective techniques refer to self-report statements that are classified using psychometric procedures. Projective tests reflect more indirect, symbolic, and more covert ways of self-expression that frequently are beyond the range of a person’s understanding. By using a combination of objective and projective techniques, we can observe how consistently the same conceptual variable (e.g., coping, motivation) appears across different levels of an individual’s consciousness. We characterize levels of consciousness in terms of the degree of awareness the individual possesses of personality strivings and functioning, ranging from overt and consciously controlled to covert and less consciously controlled. Behaviors which appear one way at levels subject to the individual’s conscious control often operate differently at deeper levels, where the individual has less (or no) control over their expression. Such discrepancies indicate that the individual is in a state of intrapsychic conflict or personality disequilibrium. Strivings beyond the range of the individual’s awareness may influence conscious feelings, cognitions, and actions. This is important to understand when making predictions about an executive’s future performance. Our assessment approach is described in depth elsewhere (e.g., Pratch & Jacobowitz, 1996; Pratch & Jacobowitz, 1998).

                To assess the structural dimensions of the self, we use three instruments. The first is a self-report objective personality test to measure motivational tendencies at a surface level of personality functioning. The second is a semi-projective sentence completion technique, which elicits a more spontaneous presentation of self. The third is a projective story telling technique, which taps even more covert, indirect, and less conscious revelations of self.

                Information gathered using these three instruments taken together allows us to determine the congruency or stability of an individual’s personality. Are the individual’s coping abilities manifest either behaviorally or in a self‑reported way congruent with other motives or drives, or are they in conflict? Knowing this is important because if the personality system is in conflict, the individual’s behavioral style may break down over time and cause instability in his or her leadership.

APPENDIX B:  FINDINGS ON INTELLIGENCE AND DEVELOPMENT

As mentioned in the body of the text, we are reporting in this Appendix the research findings as they bear on (1) intelligence, work skills, and experience, and (2) development, including family and socio-cultural background.

1. Intelligence, Work Skills, and Experience

As evaluated by the investor (see Exhibit B-1), all of the CEOs demonstrated the requisite level of functional skill and cognitive ability to perform in their jobs. The mean score on a nonverbal assessment of reasoning abilities was consistent with the authors’ research on M.B.A. students and medical students. The CEOs, however, tended to be considerably older than business and medical school students. This is significant because non-verbal intelligence scores tend to peak in the twenties and decrease gradually with age. We might hypothesize that had the CEOs taken the mental reasoning test in their twenties, they might have scored a standard deviation higher. In general, then, the CEOs are highly intelligent people.

This study made no formal evaluation of the quality of the CEOs’ functional skills (e.g., expertise in marketing, fundraising, engineering) and accepts the investors’ assessment that their skills in these areas were sufficient.

                In terms of their academic performance, all of the CEOs described themselves as having done well or exceptionally well in school. Only three had unconventional academic records that included flunking out or dropping out of college before eventually returning to graduate. All 20 of the CEOs had at least undergraduate degrees. Eight possessed an advanced degree (six M.B.A.s, one J.D., one Ph.D.). In general, they did well in school and moved on, with higher education having an instrumental purpose.

The sample was skewed towards executives who had extensive experience before becoming a CEO, with 16 out of 20 having 15 or more years experience before becoming a CEO of the present venture. The mean years’ relevant experience prior to becoming CEO was 18 (range = 0-36). That mean understates their business background because some of the CEOs had business experience that was not considered relevant.

                Ten had small venture experience, 15 had experience in corporate settings, and five had experience in both small venture and corporate settings. The kind of experience and the length of the experience indicates that they learned their management skills in a prior job. The CEOs with less experience were the two who worked in an internet sector. They were also the younger ones in the sample.

2. Development

We take two perspectives when we look at the individual’s development. The first relates to the executive’s past, how he came to be who he is. This helps explain the individual’s motivational system. The second perspective looks at the individual’s current state. It explores the developmental forces that are currently acting on the individual in order to understand the individual’s present behavior and possibly future behavior.

Family and Socio-Cultural Background

Formative Geographic Location.Twelve of the 20 (60%) executives had suburban upbringings, and eight (40%) had rural upbringings. None had urban upbringings. Given that few Americans have rural upbringings, that 40% of the sample had rural backgrounds is unusual. Without drawing any particular conclusions, we surmise this is an artifact of the sample. Overall, the executives’ backgrounds suggest that they were upwardly mobile in their socioeconomic status.

Race.Except for one CEO from India, the sample is comprised of American-born whites. Were this study to be undertaken a decade or two into the future, we would expect to see more non-white CEOs.

Family Structure.We looked at how many of the CEO’s came from intact families (parents were alive and in the family while the CEO was growing up) and how many came from broken families (only a single parent or a step parent where one parent died or left). Six of the 20 (30%) came from families that were disrupted by divorce or separation. For three of these six, the parents divorced shortly before the subject reached adulthood. In another case, the parents divorced and then remarried each other. In the fifth case where the parents divorced, the subject grew up with his father and stepmother. In case six, the father abandoned the family. None of the CEOs had a parent die during their childhood.

Interpreting this finding is tricky. With the divorce rate so much lower in the 1950s than today, many of the subjects may have grown up in households that experienced the kind of stress that nowadays would result in a divorce. Overwhelmingly, however, the subjects did not grow up in single parent households. (Only one of the 20 grew up in a single parent household.) They were socialized into stable families. Moreover, most of the CEOs experienced a very traditional family structure. They had stay-at-home mothers who were responsible for the family’s emotional well being and fathers whose responsibility was the family’s financial well-being. As will be seen later, they seemed to internalize these values and roles, and reproduced them in their own marriages.

Position in Sibship. Fourteen of the 20 were either first-borns or first males. Generally, first-borns or first males in traditional western cultures are reputed to be high achievers, identified with authority (parental) figures and high-strung (i.e., not easy going). They strive to achieve social, particularly, authority approval. The theory is that since they are the first born (or eldest male) the parents pay much more attention to their development, particularly regarding the pace and quality of their early developmental milestones. They are likely to be more exhibitionistic than later born children in an effort to live up to and meet parental expectations and gain their approval.  (Later born children are generally thought to be more peer-oriented less needy for parental attention than first-borns). First-borns, because of their identification with parents, generally try to lead others, or to serve as models for others as they grow older. They are the models that their siblings try to emulate (or rebel against).

Fathers’ Occupational History and Characteristics.Of the 20 CEOs, 10 had fathers with ascending careers, eight had fathers with stable careers, and only two had fathers with unstable/descending careers. Of the 10 whose fathers had ascending careers, six were successful entrepreneurs, and four rose to executive positions within large organizations. Of the eight whose fathers had stable careers, all were in civil service/middle management positions. It stands to reason that children where at least one parent has already been an entrepreneur would have less fear about risking a steady paycheck.

The CEOs did not grow up in wealthy families but in a culture of upwardly mobile ambitiousness. The fathers were described as moral, hardworking, authoritarian, and not emotionally close. In general, it appears that the CEOs’ fathers provided them with an identification figure that valued achievement, integrity, and self-reliance.

Mothers’ Occupational History and Characteristics.The mothers of successful CEOs tended to be reasonably well educated, tended to work before having children, and if they worked, stopped once they had children. Fourteen of the mothers were homemakers. Of the six who worked, only two had jobs that could be considered careers. These two mothers were both schoolteachers.

The CEOs generally described their mothers as intelligent, extroverted, stable, loving women. Fifteen of the 20 CEOs described their mothers as the heart of the family and moral center. Only five of the 20 CEOs described the mother as distant or emotionally unavailable.

In sum, while there are exceptions, the CEOs tended to be first born/oldest male from intact families. The family structure was conventional, with clearly differentiated gender roles. The father was the main income producer and force for ambition, the mother, the homemaker and moral force in the family. Noteworthy, there was a sharp contrast between a distant, career focused, stern father and a nurturing, caring mother. As we will flesh out later in this article, this pattern is important for understanding the success of the CEOs.

In addition, the father was described as moralistic in terms of work ethic whereas the mother was described as moralistic in terms of social morality. These CEOs come from families with a morality that was constantly communicated to them. They had a foundation of family, integrity, and ambition.

Current Family Setting

Marital History.In terms of their current families, all of the CEOs are married. All 20 CEOs married in their twenties or early thirties. Eight of the 20 were divorced but remarried. Of the eight who were on their second marriage, five regarded their first marriages as a youthful mistake; the other three divorces came after long marriages. (There is one woman in the study; what follows focuses on wives and not the husband of the one female CEO.)

Characteristics of Wives.Noteworthy, while all of the wives had college degrees, only four had full-time jobs. Of the four wives who worked, only two had careers independent of their husbands. None of the wives had high-powered careers with extensive demands. The CEOs described their wives as intelligent, educated, and stable women. They regarded them as non‑demanding, supportive, and enabling, yet admired them as very enlivening, effective individuals. They regard their wives as the center of the household.

Reviewing and comparing the ways the executives described their parents and wives, and themselves, one is impressed that they seemed to strive to recreate their families of origin with their marital families. The executives depicted themselves, and their fathers, as ambitious and conscientious men who value instrumental success and wholesome families. The executives described their wives and mothers as unique, energetic, and inspiring women who independently rule the homestead while passionately admiring and supporting their husbands. The traditional role differentiation between male (worker) and female (homemaker) was maintained and may play a crucial role in allowing the executives to expend much time and effort in their work (meeting their fathers’ expectations of them) while assuring a warm, caring, and loving home life (meeting their mothers’ expectations). Choosing the “right” woman (educated, attractive, and exuberant but home oriented) permits these men to establish a workable harmony between self development (work) and familial duties. Disruption in either area may cause them psychological distress.

Children and Leisure. Of the CEOs examined, 16 had children. Two did not have children and did not plan to have children. Two were in their thirties and had not yet started families.

While the CEOs indicated having many interests outside work and family, they devoted relatively little time to them. Their leisure activities tended to revolve around competitive sports and games where achieving, improving, and mastering are important components. These sports and games, however, tend to be country club types of activities, with many opportunities for socializing and networking. Even their leisure activities did not distract them from work. This indicates how focused on work these CEOs are.

Summary of Development

To characterize the CEOs psychologically, we find that they come from stable families with loving mothers and strong but distant fathers. They expressed admiration for their fathers but conveyed a sense that their fathers let them down. As a result, they developed a sense of independence; they do not need other people to achieve – they have confidence that they can do it themselves. They were able to accept the value structure of the distant father because the mother accepted them and valued them. One can argue that they became the image of the father to get the mother’s love. They gained confidence and a sense of self-esteem from the love of their mothers. The CEOs became more successful versions of their fathers without their competitive drive risking their relationship with their father. As adults, they wives serve as sources of nurture to help maintain this dynamic of success.

REFERENCES

Pratch, L., & Jacobowitz, J. (1996). Gender, motivation, and coping in the evaluation of leadership effectiveness. Consulting Psychology Journal:  Practice and Research, 48(4), 203-220.

_____________ (1997). The psychology of leadership in rapidly changing situations:  A structural psychological approach. Genetic, Social, and General Psychology Monographs, 123(2), 169-196.

_____________ (1998). Integrative capacity and the evaluation of leadership:  A multimethod assessment approach. Journal of Applied Behavioral Science, 34(2), 180-201.

Pratch, L., & Levinson, H. (2001). Executive Personality. 2001^st Century Leadership. Jossey-Bass.

[i] See, for example, Pratch & Levinson (2001), “Executive Personality” pp. 18-19.

[ii] To make this research more rigorous, we would need a definition of success that separates out the role and influence of the CEO from other factors that in hindsight bore importantly on the success of the venture – be they powerful technologies, effective business models, a strong supporting cast of other operating executives, market timing, or sheer luck.

[iii] In our research on coping and business leadership (Pratch & Jacobowitz, 1996; 1998), the highest correlations between measures of coping and leadership effectiveness were found at the level of the projective stories (r = .54, p < .001).

[iv] Making predictions about a high functioning executive’s performance under conditions that may not be easily described is a probabilistic, not exact science in which the psychologist’s clinical judgment and business knowledge are vitally important. Furthermore, the psychologist’s expertise must be informed by ongoing research. For example, the present study inadvertently focused on middle-aged males who grew up in rural and suburban areas of the United States in the 1940’s and 50’s. Individuals who grew up in the 1960’s and 70’s may have different nuclear family structures and values than those who grew up in the 1940’s and 50’s. Future research needs to investigate the personality characteristics of executives from completely different socio-demographic backgrounds (e.g., immigrant families, women, urban upbringing) than the ones we studied. Earlier research conducted by the present authors (Pratch & Jacobowitz, 1996) has already shown that women business leaders are likely to have different motives and personality characteristics than their male counterparts.