1Richard Ivey School of Business
University of Western Ontario
London, Ontario, Canada N6A 3K7
2Center for Creative Leadership
8910 University Center Lane, 10th Floor
San Diego, CA 92122-1085
Boulevard de Constance
77305 Fontainebleau Cedex, France
Telephones: Ivey: 519-661-4170, CCL: 619-453-4774, INSEAD: 33-1-6072-4142
Faxes: Ivey: 519-661-3485, CCL: 619-453-6154, INSEAD: 33-1-6072-4223
To determine if rater discrepancies are related to CEO effectiveness and organizational financial performance, others' ratings versus self ratings on a measure of CEO leadership and management skill were compared. Financial success of CEOs who rated their leadership skill consistently higher than others' rated them, was compared with the success of CEOs who rated themselves equal to or lower than others.
This study used the Entrepreneurial Performance Indicators (EPI)SM: Leadership Survey that measures 20 dimensions of leadership and management skill (Eggers, Leahy & Churchill, 1996). This survey was administered to 112 organizations to gather the frequency and quality of CEO behavior as measured by these 20 scales. A total sample of 1003 raters was collected. Rater distribution was: 1) "self" ratings are the CEO's own perceptions [N = 112]; 2) "others" ratings are the perceptions of direct reports [N = 450] and subordinates [N= 441]. Companies in this sample were stratified for industry, geography and gender to resemble the population of small businesses in the United States.
Three CEO self-perception trends were compared: 1) CEOs who rated their skills higher than direct reports and subordinates; 2) CEOs who rated their skills the same as direct reports and subordinates; and 3) CEOs who rated their skills lower than direct reports and subordinates.
There were significant differences in the CEO's self-perceptions and others' perceptions of that CEO. Small, low-growth companies showed the greatest discrepancies between CEO self ratings and others' ratings across all 20 EPI Leadership Survey dimensions. These CEOs consistently rated their skill levels higher than others rated them. Higher performance organizations showed less discrepancy between CEO self ratings and others' ratings. CEOs leading organizations in the 75th percentile, consistently either underrated their skill level as compared to others or rated them the same as others.
It seems those CEOs who are continually questioning their abilities (underraters) appear to be the higher performers when compared to those who do not. These findings have implications for better understanding the development of CEO leadership in entrepreneurial organizations. They also have implications for potentially predicting a CEO's ability to successfully adapt to multiple phases of development as their organization grows. Our study provides evidence that a CEO's overrating of their own ability is related to lower performance both at the individual and organizational level. Thus, it is important for entrepreneurs to be open to feedback from direct reports and subordinates and not discount their ability to provide useful performance-oriented information. CEOs may be in danger of overestimating their leadership and management skills-skills that research indicates are linked to organizational financial performance.