Correlation Between CSR and Brand Strength

Posted by Cynthia Figge

Cynthia Figge’s SB’13 Plenary speech “New Insights into the Correlation Between CSR and Brand Strength”  

Hello! I’m so grateful to be meeting with all of you, and celebrating my 7^th year at SB sinceWhy are we all here? Because we believe that a company that invests in sustainability increases its brand value, right? I’m going to unveil some research that proves the relationship between brand and CSR is even more profound than we thought — around the world, across industry type, and company size.

Even more exciting, last year, that correlation more than doubled in strength.
My company, CSRHub, the world’s largest aggregator of global CSR information, ran five years of our data against the data of Brand Finance, the global brand analyst headquartered in London.

With our overlapping datasets, we analyzed over 1,000 companies, and  for 2012 we got a .28 correlation between brand strength and CSR. This seemed extraordinary.

So we tested the data. My co-founder at CSRHub is a self-admitted geek with degrees in physics and astronomy, and a Harvard MBA (where we met) and he knows his regression. He looked at F values. He split the data in two groups. Tested the combined effect of outliers. He tested for spurious relationships. He ran regressions with third factors such as enterprise value and market cap. Over all these trials, the correlation holds. 28% of brand strength is related to CSR performance.

Let’s dig in and discover which CSR factors may be driving brand strength.

 
We looked at each of the twelve factors in CSRHub’s model. This chart is ranked by the four categories employees, environment, community and governance. Look closely at the subcategories in light blue. One of the highest correlations is between brand and Environment Policy and Reporting. This is not at all surprising given the environmental crisis – and companies tend to communicate about this in their sustainability reports. They also tend to communicate about products and leadership ethics, the two bottom blue stripes.  But the highest correlated subcategories are all employee issues. Employee engagement and word of mouth seem to be extremely important in creating brand value.

Most astonishing to us was our analysis over time. When we looked back over five years of data, this is what we found:

 
Brand strength to CSR correlation has suddenly strengthened in the last year, doubling in 2012 over 2011. The relationship stayed relatively constant over the previous 4 years. Then in 2012 that correlation more than doubled.

Why? Perhaps we are reaching critical mass. Consumers are more aware of sustainability. It’s been in the press more. More sustainability websites like CSRHub are out there. NGOs are talking more about the role of corporations in their success. My son just graduated from college and he takes sustainability as a driver of business success for granted.
Why is this important?

 
You’re the one audience that really gets the implications of this data. CSRHub and Brand Finance have proved a deep link between CSR and brand strength. There is DRAMATIC ROI for sustainability. And that ROI is increasing rapidly. My take is that more companies see sustainability as the breakthrough platform for strategic advantage.  After strategic sustainability consulting for 17 years I believe we may be at the edge of big shift.

Cynthia Figge is a forerunner, thought leader and speaker on the corporate sustainability movement. As the co-founder and COO of CSRHub, Cynthia’s team provides free corporate sustainability ratings on over 7,300 publicly-traded and private companies worldwide. In addition to CSRHub, Cynthia is the co-founder of EKOS International, one of the first consultancies to integrate sustainability and corporate strategy. She has crafted corporate sustainability strategies for a host of major organizations, including BNSF, Boeing, Coca-Cola, Dow Jones, and REI. Cynthia also serves as an advisor to SNS Future in Review, Board Director of Compassionate Action Network, and served as President of the Board of Sustainable Seattle. She has an MBA from Harvard Business School. Prior speaking engagements in corporate responsibility have included SRI Basecamp, Future in Review, Sustainable Brands, and SRI in the Rockies.

Find the Coaching in Criticism

by Sheila Heen and Douglas Stone

 
Feedback is crucial. That’s obvious: It improves performance, develops talent, aligns expectations, solves problems, guides promotion and pay, and boosts the bottom line.
 
But it’s equally obvious that in many organizations, feedback doesn’t work. A glance at the stats tells the story: Only 36% of managers complete appraisals thoroughly and on time. In one recent survey, 55% of employees said their most recent performance review had been unfair or inaccurate, and one in four said they dread such evaluations more than anything else in their working lives. When senior HR executives were asked about their biggest performance management challenge, 63% cited managers’ inability or unwillingness to have difficult feedback discussions. Coaching and mentoring? Uneven at best.
 
Most companies try to address these problems by training leaders to give feedback more effectively and more often. That’s fine as far as it goes; everyone benefits when managers are better communicators. But improving the skills of the feedback giver won’t accomplish much if the receiver isn’t able to absorb what is said. It is the receiver who controls whether feedback is let in or kept out, who has to make sense of what he or she is hearing, and who decides whether or not to change. People need to stop treating feedback only as something that must be pushed and instead improve their ability to pull.
 
For the past 20 years we’ve coached executives on difficult conversations, and we’ve found that almost everyone, from new hires to C-suite veterans, struggles with receiving feedback. A critical performance review, a well-intended suggestion, or an oblique comment that may or may not even be feedback (“Well, your presentation was certainly interesting”) can spark an emotional reaction, inject tension into the relationship, and bring communication to a halt. But there’s good news, too: The skills needed to receive feedback well are distinct and learnable. They include being able to identify and manage the emotions triggered by the feedback and extract value from criticism even when it’s poorly delivered.
 
Why Feedback Doesn’t Register

 What makes receiving feedback so hard? The process strikes at the tension between two core human needs—the need to learn and grow, and the need to be accepted just the way you are. As a result, even a seemingly benign suggestion can leave you feeling angry, anxious, badly treated, or profoundly threatened. A hedge such as “Don’t take this personally” does nothing to soften the blow.

Getting better at receiving feedback starts with understanding and managing those feelings. You might think there are a thousand ways in which feedback can push your buttons, but in fact there are only three.

 
Truth triggers are set off by the content of the feedback. When assessments or advice seem off base, unhelpful, or simply untrue, you feel indignant, wronged, and exasperated.
 
Relationship triggers are tripped by the person providing the feedback. Exchanges are often colored by what you believe about the giver (He’s got no credibility on this topic!) and how you feel about your previous interactions (After all I’ve done for you, I get this petty criticism?). So you might reject coaching that you would accept on its merits if it came from someone else.
 
Identity triggers are all about your relationship with yourself. Whether the feedback is right or wrong, wise or witless, it can be devastating if it causes your sense of who you are to come undone. In such moments you’ll struggle with feeling overwhelmed, defensive, or off balance.
 
All these responses are natural and reasonable; in some cases they are unavoidable. The solution isn’t to pretend you don’t have them. It’s to recognize what’s happening and learn how to derive benefit from feedback even when it sets off one or more of your triggers.
 
Six Steps to Becoming a Better Receiver Taking feedback well is a process of sorting and filtering. You need to understand the other person’s point of view, try on ideas that may at first seem a poor fit, and experiment with different ways of doing things. You also need to discard or shelve critiques that are genuinely misdirected or are not helpful right away. But it’s nearly impossible to do any of those things from inside a triggered response. Instead of ushering you into a nuanced conversation that will help you learn, your triggers prime you to reject, counterattack, or withdraw.
 
The six steps below will keep you from throwing valuable feedback onto the discard pile or—just as damaging—accepting and acting on comments that you would be better off disregarding. They are presented as advice to the receiver. But, of course, understanding the challenges of receiving feedback helps the giver to be more effective too.
 
1. Know your tendenciesYou’ve been getting feedback all your life, so there are no doubt patterns in how you respond. Do you defend yourself on the facts (“This is plain wrong”), argue about the method of delivery (“You’re really doing this by e-mail?”), or strike back (“You, of all people?”)? Do you smile on the outside but seethe on the inside? Do you get teary or filled with righteous indignation? And what role does the passage of time play? Do you tend to reject feedback in the moment and then step back and consider it over time? Do you accept it all immediately but later decide it’s not valid? Do you agree with it intellectually but have trouble changing your behavior?

When Michael, an advertising executive, hears his boss make an offhand joke about his lack of professionalism, it hits him like a sledgehammer. “I’m flooded with shame,” he told us, “and all my failings rush to mind, as if I’m Googling ‘things wrong with me’ and getting 1.2 million hits, with sponsored ads from my father and my ex. In this state it’s hard to see the feedback at ‘actual size.’” But now that Michael understands his standard operating procedure, he’s able to make better choices about where to go from there: “I can reassure myself that I’m exaggerating, and usually after I sleep on it, I’m in a better place to figure out whether there’s something I can learn.”
 
2. Disentangle the “what” from the “who”If the feedback is on target and the advice is wise, it shouldn’t matter who delivers it. But it does. When a relationship trigger is activated, entwining the content of comments with your feelings about the giver (or about how, when, or where she delivered the comments), learning is short-circuited. To keep that from happening, you have to work to separate the message from the messenger and then consider both.

Janet, a chemist and a team leader at a pharmaceutical company, received glowing comments from her peers and superiors during her 360-degree review but was surprised by the negative feedback she got from her direct reports. She immediately concluded that the problem was theirs: “I have high standards, and some of them can’t handle that,” she remembers thinking. “They aren’t used to someone holding their feet to the fire.” In this way, she changed the subject from her management style to her subordinates’ competence, preventing her from learning something important about the impact she had on others. 

Eventually the penny dropped, Janet says. “I came to see that whether it was their performance problem or my leadership problem, those were not mutually exclusive issues, and both were worth solving.” She was able to disentangle the issues and talk to her team about both. Wisely, she began the conversation with their feedback to her, asking, “What am I doing that’s making things tough? What would improve the situation?”
 
3. Sort toward coachingSome feedback is evaluative (“Your rating is a 4”); some is coaching (“Here’s how you can improve”). Everyone needs both. Evaluations tell you where you stand, what to expect, and what is expected of you. Coaching allows you to learn and improve and helps you play at a higher level.

It’s not always easy to distinguish one from the other. When a board member phoned James to suggest that he start the next quarter’s CFO presentation with analyst predictions rather than internal projections, was that intended as a helpful suggestion, or was it a veiled criticism of his usual approach? When in doubt, people tend to assume the worst and to put even well-intentioned coaching into the evaluation bin. Feeling judged is likely to set off your identity triggers, and the resulting anxiety can drown out the opportunity to learn. So whenever possible, sort toward coaching. Work to hear feedback as potentially valuable advice from a fresh perspective rather than as an indictment of how you’ve done things in the past. When James took that approach, “the suggestion became less emotionally loaded,” he says. “I decided to hear it as simply an indication of how that board member might more easily digest quarterly information.”
 
4. Unpack the feedbackOften it’s not immediately clear whether feedback is valid and useful. So before you accept or reject it, do some analysis to better understand it.

Here’s a hypothetical example. Kara, who’s in sales, is told by Johann, an experienced colleague, that she needs to “be more assertive.” Her reaction might be to reject his advice (“I think I’m pretty assertive already”). Or she might acquiesce (“I really do need to step it up”). But before she decides what to do, she needs to understand what he really means. Does he think she should speak up more often, or just with greater conviction? Should she smile more, or less? Have the confidence to admit she doesn’t know something, or the confidence to pretend she does?
 
Even the simple advice to “be more assertive” comes from a complex set of observations and judgments that Johann has made while watching Kara in meetings and with customers. Kara needs to dig into the general suggestion and find out what in particular prompted it. What did Johann see her do or fail to do? What did he expect, and what is he worried about? In other words, where is the feedback coming from?
 
Kara also needs to know where the feedback is going—exactly what Johann wants her to do differently and why. After a clarifying discussion, she might agree that she is less assertive than others on the sales floor but disagree with the idea that she should change. If all her sales heroes are quiet, humble, and deeply curious about customers’ needs, Kara’s view of what it means to be good at sales might look and sound very different from Johann’s Glengarry Glen Ross ideal.
 
When you set aside snap judgments and take time to explore where feedback is coming from and where it’s going, you can enter into a rich, informative conversation about perceived best practices—whether you decide to take the advice or not.
 
5. Ask for just one thingFeedback is less likely to set off your emotional triggers if you request it and direct it. So don’t wait until your annual performance review. Find opportunities to get bite-size pieces of coaching from a variety of people throughout the year. Don’t invite criticism with a big, unfocused question like “Do you have any feedback for me?” Make the process more manageable by asking a colleague, a boss, or a direct report, “What’s one thing you see me doing (or failing to do) that holds me back?” That person may name the first behavior that comes to mind or the most important one on his or her list. Either way, you’ll get concrete information and can tease out more specifics at your own pace.

Roberto, a fund manager at a financial services firm, found his 360-degree review process overwhelming and confusing. “Eighteen pages of charts and graphs and no ability to have follow-up conversations to clarify the feedback was frustrating,” he says, adding that it also left him feeling awkward around his colleagues.
 
Now Roberto taps two or three people each quarter to ask for one thing he might work on. “They don’t offer the same things, but over time I hear themes, and that gives me a good sense of where my growth edge lies,” he says. “And I have really good conversations—with my boss, with my team, even with peers where there’s some friction in the relationship.

They’re happy to tell me one thing to change, and often they’re right. It does help us work more smoothly together.”
 
Research has shown that those who explicitly seek critical feedback (that is, who are not just fishing for praise) tend to get higher performance ratings. Why? Mainly, we think, because someone who’s asking for coaching is more likely to take what is said to heart and genuinely improve. But also because when you ask for feedback, you not only find out how others see you, you also influence how they see you. Soliciting constructive criticism communicates humility, respect, passion for excellence, and confidence, all in one go.
 
6. Engage in small experimentsAfter you’ve worked to solicit and understand feedback, it may still be hard to discern which bits of advice will help you and which ones won’t. We suggest designing small experiments to find out. Even though you may doubt that a suggestion will be useful, if the downside risk is small and the upside potential is large, it’s worth a try. James, the CFO we discussed earlier, decided to take the board member’s advice for the next presentation and see what happened. Some directors were pleased with the change, but the shift in format prompted others to offer suggestions of their own. Today James reverse-engineers his presentations to meet board members’ current top-of-mind concerns. He sends out an e-mail a week beforehand asking for any burning questions, and either front-loads his talk with answers to them or signals at the start that he will get to them later on. “It’s a little more challenging to prepare for but actually much easier to give,” he says. “I spend less time fielding unexpected questions, which was the hardest part of the job.”

That’s an example worth following. When someone gives you advice, test it out. If it works, great. If it doesn’t, you can try again, tweak your approach, or decide to end the experiment.
 
Criticism is never easy to take. Even when you know that it’s essential to your development and you trust that the person delivering it wants you to succeed, it can activate psychological triggers. You might feel misjudged, ill-used, and sometimes threatened to your very core. 

Your growth depends on your ability to pull value from criticism in spite of your natural responses and on your willingness to seek out even more advice and coaching from bosses, peers, and subordinates. They may be good or bad at providing it, or they may have little time for it—but you are the most important factor in your own development. If you’re determined to learn from whatever feedback you get, no one can stop you. 

Sheila Heen and Douglas Stone are cofounders of Triad Consulting Group and teach negotiation at Harvard Law School. They are the coauthors of the forthcoming book Thanks for the Feedback: The Science and Art of Receiving Feedback Well (Viking/Penguin, 2014), from which this article is adapted.

This is a great story!!

A GINGHAM DRESS

A lady in a faded gingham dress and her husband, dressed in a homespun threadbare suit, stepped off the train in Boston , and walked timidly without an appointment into the Harvard University President's outer office.

The secretary could tell in a moment that such backwoods, country hicks
had no business at Harvard & probably didn't even deserve to be in
Cambridge .."We'd like to see the president," the man said softly.

"He'll be busy all day," the secretary snapped.

"We'll wait," the lady replied.

For hours the secretary ignored them, hoping that the couple would finally
become discouraged and go away.

They didn't, and the secretary grew frustrated and finally decided to
disturb the president, even though it was a chore she always regretted.

"Maybe if you see them for a few minutes, they'll leave," she said to him!

He sighed in exasperation and nodded. Someone of his importance obviously didn't have the time to spend with them, and he detested gingham dresses and homespun suits cluttering up his outer office.

The president, stern faced and with dignity, strutted toward the couple.

The lady told him, "We had a son who attended Harvard for one year. He
loved Harvard. He was happy here. But about a year ago, he was accidentally killed. My husband and I would like to erect a memorial to him, somewhere on campus."

The president wasn't touched. He was shocked.

"Madam," he said, gruffly, "we can't put up a statue for every person who
attended Harvard and died. If we did, this place would look like a
cemetery."

"Oh, no," the lady explained quickly. "We don't want to erect a statue .
We thought we would like to give a building to Harvard."

The president rolled his eyes. He glanced at the gingham dress and
homespun suit, then exclaimed, "A building! Do you have any earthly idea
how much a building costs? We have over seven and a half million dollars in the physical buildings here at Harvard."

For a moment the lady was silent. The president was pleased. Maybe he
could get rid of them now.

The lady turned to her husband and said quietly, "Is that all it cost to
start a university? Why don't we just start our own?"

Her husband nodded. The president's face wilted in confusion and
bewilderment.

Mr and Mrs Leland Stanford got up and walked away, traveling to Palo Alto,
California where they established the university that bears their name,
Stanford University, a memorial to a son that Harvard no longer cared
about.

You can easily judge the character of others by how they treat those who
they think can do nothing for them.

A TRUE STORY by Malcolm Forbes

Get the Most Out of Executive Coaching

 

Remember “light bulb” jokes? My favorite was, “How many shrinks does it take to change a light bulb? One, but the light bulb must want to change.” It’s true: Unless or until a person decides to commit to change wholeheartedly, no coach can help move him or her one-millimeter off the dime.

 

Worse yet is the fact that, unlike light bulbs that lack the capacity for self-deception, humans bamboozle themselves all the time. Whether it’s a smoking cessation program or working with a coach to improve management skills, people claim they want to change or drop dysfunctional behaviors from their lives, but then fight like Ninja warriors to defend them. Worst of all, irrespective of how intelligent or professionally powerful a person is, it is a virtual certainty that after embarking on a change process, they will be partially or fully derailed by the feeling, “Better the devil I know than the devil I don’t know.”

The reason why backsliding on our ostensible commitments to change is so common is because most change is the result of compliance to a demand, incentive, or threat. “Lose weight or you’ll suffer a heart attack” coming from an M.D. is a directive most folks won’t ignore. Unfortunately, when incentivized to change in this manner falling off the wagon is common because our motivation wasn’t to change, it was to avoid a premature death.

Psychologists who have studied intrinsic and extrinsic motivation since the 1970s — most notably, Professor Edward L. Deci — demonstrate that when a person acts in response to extrinsic motivators — the promise of money; the threat of punishment — commitment to a behavior is short-lived. This is why when the cat’s away, mice will play. Mice don’t want to change their behavior, i.e. playing games, but they do when cats are present. However, since change (the cessation of play) was instigated by an extrinsic force — Tabby — if Tabby isn’t monitoring the mice, thse rodents instantly revert to form.

What, then, should you do if you think you want to change and, like so many of your peers, put your faith (and a huge financial commitment) in a coach? Is it possible to develop an authentic commitment to executive coaching through sheer willpower alone? No. But what you can do is develop a mindset — i.e. new “automatic” cognitive messages — that will help you counter your own resistance to change. 

What follows are the exercises I use most often to help new clients initiate coaching with the best mindset possible. If, prior to the onset of coaching you experience the attitude adjustments they are designed to foster, the change process should be profoundly less anxiety- and resistance-provoking for you than it is for those who dive in unprepared. 

1. Ask yourself, “Cui bono?”
Recall a golf lesson or the clumsiness you suffered during an introductory yoga class. Now recall how you responded when the club pro or yogacharya gave you critical feedback. No big deal, right? Well if you’ve never been to an executive coach, I guarantee that the first critique you receive will not be a NBD experience. Why? Golf or yoga are peripheral to an executive’s definition of self. Being a stellar manager is central, so when someone pokes that realm of your self-concept the usual reaction is “ouch!”

The best way to reduce the possibility of being stung by an executive coach’s constructive critical feedback is to remind yourself that it is (a) not ad hominem and as such, (b) comparable to the club pro’s efforts to correct your slice. To do this with ease, learn to employ the Latin phrase “Cui bono?” — literally, “as a benefit to whom?” — after each critique you receive. The rational portion of your brain knows that no competent coach would gratuitously put you down. Now you need to train the more primitive, more reactionary parts of your brain to think that way too. By making “Cui bono?” the mantra you bring to assessment sessions with your coach, you can learn to accept that any and all feedback from him or her is intended to be helpful, not hurtful.

2. Be sure you wouldn’t rather hire a cheerleader than a coach.
Many consultants and coaches know that they can build lucrative client bases by treating protégés the way Little League coaches deal with their pre-teen charges: Everything the kid does evokes a “good job” or “atta boy!” 

The problem with an automatic “good job” reaction is that it is useless and often — even by pre-teens — seen for what it is: Balm for under-developed egos. An 11-year-old with burgeoning self-esteem would much rather hear “keep your eye on the ball” after striking out than “good job,” but if you want to hear cheering regardless of how you perform, caveat emptor. An ethical coach doesn’t bring pom-poms to meetings with clients, so hire to your needs.

3. Learn the difference between participation and commitment.
Having spent 30 years as a psychotherapist and coach, I can assure you that acting the role of a “participant in a change process” is not nearly the same as being committed to actually changing yourself. Many people claim to be involved in a change process when, in fact, they are holding their true selves in abeyance. Years ago, many gay men married women because they held the deluded belief that the process of being part of an intimate heterosexual dyad would change who they were. In time, virtually all discovered that suppression doesn’t work and that role-playing without conviction has no chance of effecting change.

Coaching cannot change you one iota unless or until you’re really committed — until you have skin in the game. Before I work with a client who needs to make major changes, I share the aphorism my baseball coach once told me to drive home the distinction between authentic commitment vs. going through the motions: “There’s a huge difference between participating in baseball and being committed to it; it’s like a bacon and egg breakfast. The chicken participates in the breakfast. The pig, on the other hand, was fully committed.”

Since you won’t change unless you really want to, and nothing — not the highest-priced coach or public declarations about your intention to change (which, presumably, will humiliate you if you fail) — will help you to succeed, it behooves you to learn how to thwart your worst tendencies in advance of tackling change. This is what cartoonist/philosopher Walt Kelly, in his possum persona, Pogo, was referring to when he said, “We have met the enemy and he is us.” If you accept this fact of life, coaching — and every other change process you initiate — will become surprisingly simple.

Steven Berglas

A faculty member of Harvard Medical School’s Department of Psychiatry and staff member of McLean Hospital for 25 years, Dr. Steven Berglas is now an executive coach and corporate consultant based in Los Angeles, CA.

CEOs are Terrible at Management

 

 

Yahoo CEO Marissa Mayer: Is she listening to eople management, people inside her company? (Image credit: Getty Images via @daylife)

A new study shows that CEOs are doing a lousy job when it comes to people management. The study, a joint project by the Center for Leadership Development and Research at Stanford’s Graduate School of  Business, Stanford’s Rock Center for Corporate Governance and The Miles Group, a consulting firm in New York that focuses on C-suites and corporate boards, found that both CEOs and boards are overly focused on the bottom line, at the expense of mentoring and engaging their boards. The survey polled 160 CEOs and directors of North American public and private companies.

One of the questions to boards of directors: Rank the top weakness of your CEO. “Mentoring skills” and “board engagement” tied for first place. “This signals that directors are clearly concerned about their CEOs’ ability to mentor top talent,” said Stephen Miles, CEO of The Miles Group, in a statement. “Focusing on drivers such as developing the next generation of leadership is essential to planning beyond the next quarter and avoiding the short-term thinking that inhibits growth.”

It makes sense to me that boards are preoccupied with financial measurements. But the study found that the attention given to talent development and mentoring was at rock bottom. The survey asked boards and CEOs about the weighting they give to various aspects of CEO performance. The most important thing, rated at 41%, was “accounting, operating or stock price performance.” The weighting given to people performance was incredibly low, with “succession planning” getting just a 5% rating and and “workplace safety” just 2%.

The researchers say that CEOs need to reach beyond numbers and care about people management. Two other statistics from the survey that underline how disengaged CEOs are from concern about employees: When asked about their CEOs’ greatest strengths, 70% rated “decision-making skills” at the top. At the bottom: 27% said “compassion/empathy,” 23% said “mentoring skills/developing internal talent” and just 23% said “listening skills.” The lowest-rated skill was “conflict management.” Likewise, when asked about CEOs’ biggest weaknesses, 24% said “mentoring skills” and 22% said “sharing leadership/delegation skills.”

Also striking is the fact that a sizable majority of directors (83%) and boards (64%) agree that the CEO evaluation process should rely on a balanced approach between financial performance and nonfinancial measurements. “Unfortunately, the truth of the matter is that the CEO evaluation process is not that balanced,” said Stanford’s David Larcker, co-director of the Center for Leadership Development in a statement. “Amid growing calls for integrating reporting and corporate social responsibility, companies are still behind the times when it comes to developing reliable and valid measures of nonfinancial performance metrics.”

More results from the study:

-          Directors don’t rate their CEOs highly. Only 41% of directors say their CEO is in the top 20% of their peers and 17% say their CEO is below the 60^th percentile.

-          A sizable minority, 10%, say they have never evaluated their CEO.

-          CEOs who are evaluated, agree with the marks they get. “Shareholders have to wonder at the objectivity of the evaluation process,” said Larcker. “It’s hard to believe that boards are pushing CEOs on their evaluations if they pretty much agree with their evaluation.”

-          Many directors forgive CEOs for legal and regulatory violations. This is one of the most striking results of the study. When asked about unexpected litigation against the company, a significant minority of directors, 27%, said that it would have no impact on a CEO’s performance evaluation, while 24% said that regulatory problems would have no impact. Shouldn’t CEOs be held accountable for legal and regulatory lapses? At least directors were unforgiving about ethical violations and a failure to be transparent with the board. A full 100% said their CEOs would get worse performance evaluations in the face of ethical problems.

I agree with the study’s authors that in the ideal world, CEOs would care about people management and they would be grooming successors to step in should something go awry. But I also understand boards’ and bosses’ preoccupation with the bottom line.

Also I can think of two recent examples of companies where the CEOs left abruptly under unexpected circumstances and the companies reached outside for replacements who, thus far, have arguably done a good job—better, perhaps, than someone from inside would have done. At Yahoo last year, Scott Thompson had been CEO for just four months when activist investor Daniel Loeb, who opposed Thompson’s appointment, sent a letter to the board revealing that Thompson had lied about his credentials. Thompson, who was an outside hire from PayPayl, had zero time to groom a successor, so Yahoo reached outside again and hired Marissa Mayer from Google. Though she’s been in the post for just a year and may still hit roadblocks in her efforts to revive the struggling company, Yahoo’s stock has risen from $15 when she took the helm to $26.

Another example: Struggling big box retailer Best Buy lost its CEO, Brian Dunn, suddenly last April after his inappropriate relationship with a female subordinate came to light. An insider, director G. Mike Mikan, served as interim CEO for four months. Then the company hired Frenchman Hubert Joly, who had been running a Minneapolis travel company called Carlson. Though Best Buy’s stock fell from $20 when Joly came on board to $11 in January, he has managed to revive the company’s fortunes and bring the share price back up to $26. It’s not clear that an insider could have done a better job.

Maybe I’m guilty, like directors and CEOS, of focusing too much on the bottom line here, but in the end, that’s what shareholders value. Though I agree with the Stanford study authors that in an ideal world, CEOs would channel more of their energy toward listening to the people inside their companies and developing talent from within.

  Susan Adams Forbes Staff

How to Create a Winning Team

Assembling a winning team is every manager’s dream. But what do we know about what it takes to get there?

I’ve studied this question quite a bit in the context of sports, and in particular the world of soccer (or, as it is known outside the US, football). As a business school professor, I’m interested not just in what makes for winning teams on the field, but also which ones are most fortunate off the field. Both results are needed to ensure lasting success, which seems so elusive in a world in which one lucky goal (or worse, one bad call by a referee) can make all the difference.

Acquiring stars
One approach is to focus on attracting superstars in their prime, and build a team around those accomplished professionals. In soccer, clubs like Real Madrid and, more recently, Manchester City live and die by what I call a “superstar-acquisition” model. Having stars on your team improves the odds of winning matches, of course, but it also can be tough to manage team dynamics, and it certainly does not guarantee championships. Tellingly, both Real Madrid and Manchester City lost out on their domestic league titles this year.

But what betting on stars does seem to ensure, my research shows, is an increase in revenues. Having one or more of the very top players on board strengthens the club’s brand as a top-notch soccer club, which fuels a variety of revenue streams, from ticket sales to television rights, sponsorship, and merchandising. That capital, in turn, puts the club in a better position to compete for the next big player. Real Madrid is a case in point: it currently is the world’s most valuable sports franchise, and it got there largely because of investments in superstars that appealed to fans across the globe.

Developing talent
Many teams don’t have the means to participate in the arm’s race for talent, especially those in smaller markets. Smart clubs that find themselves in that predicament take the opposite approach: they develop talented players, teach them the skills they value, integrate them into their team over time, and maybe even embrace the fact that they will some day leave for greener pastures. In soccer, teams like Boca Juniors in Argentina and Ajax in the Netherlands are known for having such a “talent-development” model.

They recruit promising youth players, often before they are teenagers, and have much-touted systems in place to develop those players into superstars. Some stay at the club and make it into the first team. Ultimately, though, a select few top players will be sold to wealthier clubs. The resulting transfer money – sometimes tens of millions of dollars -- is fed back into the club to fund the talent factory. The club’s cachet of having its players reach the top of their profession helps build its brand as a developer, allowing it to again recruit the most talented youngsters, and so the process repeats itself.

A talent-development strategy can pay off, too – on and off the field. Ajax won its third Dutch league title in a row last week, and it has seen its financial performance improve accordingly. The club knows it could see its best players leave this summer, as happened last year, but new talent is already waiting in the wings, and the turnover is actually helpful for them. Yet it is hard to imagine that even the best talent developers from smaller countries can consistently beat their wealthier rivals on the field in (more lucrative) international competitions. The gap between the elite soccer clubs and the rest of the field seems to be widening.

Caught in the middle
Many clubs fall somewhere in the middle of the spectrum between the two models, of course, and they can do extremely well, too – for instance, FC Barcelona and Manchester United have combined developing young players and betting on established stars to great effect over the years. Both teams secured domestic trophies this season, and both are strong global brands in the business of sports. (I'll dive into this model in an upcoming post, I promise.)

Three rules
In the end, it’s not the type of model that necessarily dictates success on all fronts. Instead, it's the execution of each model that matters most. Three simple rules about managing talent go a long way -- in soccer and beyond:

1. Pick a talent strategy. It is vital to make a clear decision about how you intent to compete. In other words, make a call about which talent model will be yours.

2. Be consistent. As with any strategy, frequently changing course can be problematic. Successful teams stick with one approach over an extended period, and grow stronger over time.

3. Make sure that your talent strategy fits your overall business model. If you are relying on talent development, structure your business in such a way that you benefit when the talent you have nurtured leaves, for example by having the right contracts in place. Similarly, if you concentrate on acquiring superstars, ensure that you are set up to collect the associated rewards, too, for instance by building a strong merchandising arm.

Anita Elberse is the Lincoln Filene Professor of Business Administration at the Harvard Business School. Last year, she wrote an acclaimed case study on Sir Alex Ferguson, British soccer’s most successful manager ever, who traveled to Boston to speak in her class. In October, she will release her first book, “Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment.”