The more peculiar the CEO’s name, the more unusual the company’s strategy?

It is the ideal state if the strategies are just right.

David Zhu of Arizona State University and two researchers used the data of the US Social Security Administration to assess the frequency of common names, and then compared the results with the names of the CEOs of 1,172 listed companies and the company’s financial data over the past 19 years. . Analysis shows that the more peculiar the CEO’s name, the more different the company’s strategy from industry norms. The conclusion is: CEOs with unusual names have extraordinary strategies.

The more peculiar the CEO's name, the more unusual the company's strategy?

Zhu Hongquan: Psychological research has shown that people with uncommon names are seen as different from ordinary people early on. Since the establishment of our own cognition is largely dependent on connections with others, children who are regarded as outsiders will internalize these cognitions and think that they are different from other children. This kind of cognition will follow them into adulthood, and those who become CEOs often seem to be unique in their strategic choices.

HBR: However, people with unusual names are often teased or bullied when they are young. They will subconsciously show obedience, rather than maverick.

Zhu Hongquan: In the short term, this is true. Uncommon names may cause negative reactions and damage the self-image of some people. But over time, many people overcome these challenges and rebuild their self-esteem. Of course, not everyone has the confidence to show their differences. But CEOs are usually very confident people, so they are more likely to try to stand out compared to other people with uncommon names.

HBR: How does research measure strategic differences?

Zhu Hongquan: We studied the six ways that companies allocate resources: advertising density, inventory level, purchase of new sites and equipment, research and development intensity, non-productive expenditures, and financial leverage. These will have a major impact on the company’s performance, and there is a high probability that the CEO is managing it. For each dimension, we calculated the absolute difference between the annual distribution level of a given company and the industry average. We standardized and aggregated these scores to arrive at a comprehensive score for strategic uniqueness. If the CEO’s resource allocation in these dimensions is far from the industry average, then the company is somewhat unique.

HBR: A ​​CEO with a special name, how special is his strategy compared to his peers?

Zhu Hongquan: It depends on how rare the name is. By comparing rare and generally rare names (such as Eric and Mike), we find that the former’s strategy is on average about 4% more unique than the latter. The more unusual the name (such as Ellen), the greater the difference.

HBR: Has the maverick strategy succeeded?

Zhu Hongquan: We did not investigate this, but this is an interesting question. Leaders pursuing a unique strategy need to overcome many challenges, including questions about whether the strategy is reasonable. Overall, existing research shows that strategies that are too differentiated may be as harmful as strategy convergence. It is the ideal state if the strategies are just right.

The more peculiar the CEO's name, the more unusual the company's strategy?

HBR: Are there other factors that cause leaders to behave differently?

Zhu Hongquan: If people have unusual backgrounds or professional experiences, they may also tend to make unconventional choices, right? Research is limited by many factors, such as educational background, work experience, gender, company size and performance, and the characteristics of the board of directors. Even if these factors are taken into consideration, we will get the same result. We also considered race and country of birth. Both of these factors may affect how common names are in the United States, but they do not necessarily make people think they are different from their peers. This effect still exists, but we did find some evidence that it is weaker among CEOs born elsewhere.

HBR: Are there other factors that exacerbate or weaken the rare peculiar effect of CEO names?

Zhu Hongquan: Three things will have an impact. First, the confidence level of the CEO. We measure it by observing how leaders exercise stock options, because previous research has shown that CEOs who have more options in exercising options are more confident in the future of the company than CEOs who have already cashed in. When self-confidence changes from one standard deviation below the average to one standard deviation above the average, the impact of unusual names on strategic uniqueness can be enhanced by 48%. CEOs with low self-confidence usually choose to comply with industry norms-essentially hiding their knowledge of their own uniqueness.

The second influencing factor is the working environment of executives. When an industry is booming, it provides companies with more opportunities to pursue a differentiated strategy, and you can win in many ways. But when the industry is in recession, strategies that don’t take the usual path will have a higher risk of failure, so the CEO’s actions will be constrained. By tracking the sales of the industry year-on-year, we have calculated the growth capacity of each industry. Compared with industries whose growth capacity is one standard deviation below the average level, in industries whose growth is one standard deviation higher, the influence of name on strategic uniqueness is 95% greater.

But the biggest limiting factor is the power of the CEO—whether the CEO also serves as the chairman of the board of directors, as well as their tenure relative to the directors, the number of shares held by the company, and so on. We believe that the more power a CEO with an unusual name has, the more likely it is to implement an unusual strategy. The deviation of the standard deviation from the average affects the fluctuation of 144%.

HBR: What does this mean for the company’s board of directors to appoint a CEO? Should they consider the candidate’s name?

Zhu Hongquan: This may be an effective measure for selecting the desired leader. If the board needs a new leader to make a facelift, choosing someone with an unusual name may help. The board does not have to provide many incentives, the CEO will naturally want to draw a unique route. Conversely, if the company’s strategy deviates too far from the industry average, appointing the common “James” or “Jennifer” may help.

When cultivating the next generation of leaders, the board should also pay attention to other names. If they hope that the company will have some major changes in the next 10 years, it may be wise to give managers with rare names more opportunities for development.

HBR: What about employees? Should I worry that my editor-in-chief is named Adi?

Zhu Hongquan: We only studied the CEO. However, leaders with unique names want to show their uniqueness, and this will have an impact on the people involved. When their strategy succeeds, they may get greater rewards; if their strategy fails, they may have greater losses. So there will be more uncertainty. At the same time, CEOs with rare names may be more willing to accept employee ideas and make improvements to products and processes. In the supplementary analysis, we found that their company has more innovative activities than other companies.

Competitors should also consider relevant research. If the person in charge of a competitor’s company has a unique name, it’s more likely to take actions you’ve never seen before. This leader may inject many surprises and new energy into the competitive environment. 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-more-peculiar-the-ceos-name-the-more-unusual-the-companys-strategy/
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