Extroverts often seem to have the upper hand in business. They’re the ones commanding a room full of eager investors, selling employees on a new strategy, or boosting manager morale during a turnaround.
Yet research suggests that the operating performance of companies with more-extroverted CEOs is worse.
Harvard’s Ian D. Gow, Chicago Booth’s Steve Kaplan and Anastasia A. Zakolyukina, and Stanford’s David F. Larcker measure CEO extroversion by categorizing the words executives use during the question-and-answer portion of conference calls. This part of the call is more likely to be unscripted and therefore more indicative of a CEO’s personality than the executive’s prepared remarks.
According to the researchers, companies run by more-extroverted CEOs have lower returns on assets and lower cash flows, as reflected both at the time of the conference call and in the period afterward.
The researchers emphasize that their study doesn’t assess whether a CEO’s extroversion causes weaker operating results. Certain personality types may be drawn to particular industries, and boards of directors may seek executives with certain traits.
Still, the researchers have some ideas about why the negative relationship between extroversion and corporate performance might exist. Extroverts like to dominate, they note, and while extroverted CEOs can be energetic and forceful in communicating their ideas, they also are more likely to expect obedience. That expectation may not help companies make the best decisions.
Further, the researchers suggest, “short-lived enthusiasm of extreme extroverts can result in aggressive strategies that tend to be prematurely terminated.”
The researchers also examine the relationship between CEO language patterns and four other personality traits. They find that CEOs who are more open to experience run companies with higher spending on research and development as a percentage of sales.
Also, CEOs who rank high in conscientiousness—those who pay careful attention to detail—are more likely to be in charge of slower-growth companies.