Tag Archives: competence

Perception of CEOs’ Non Verbal Leadership Behaviors Affect IPO Valuations, Predict Financial Performance

Elizabeth Blankespoor

Elizabeth Blankespoor

Favorable first impressions of CEOs can affect new companies’ valuations and can predict near-term performance.

Perception of CEO non-verbal behavior during IPO road show presentations was associated with higher valuations at each IPO stage, found Stanford’s Elizabeth Blankespoor, Greg Miller of University of Michigan, and University of North Carolina’s Brad Hendricks.
These findings underscore the importance of road show presentations and presenters’ credibility to investors, underwriters, analyst, and financial media.

Greg Miller

Greg Miller

Blankespoor’s team noted that for most investors, the road show is the first time they see the CEO in the two-week interval between setting the initial proposed price and determining the final offer price.
As a result, Blankespoor and colleagues posit “a tight link between perceptions and valuation.”

Participants in their investigation were hired through Amazon’s Mechanical Turk, a crowdsourcing task website, to view videotapes of CEOs presenting IPO roadshow, then to rate the speakers for competence, attractiveness, and trustworthiness.

Brad Hendricks

Brad Hendricks

At least 40 people viewed each series of 30-second video clips from 224 actual road show presentations between 2011 and 2013, with modified audio to muffle words while retaining vocal pitch and rhythm.

After controlling for other factors that could affect stock price like CEO age, experience, and education, companies with higher-rated CEOs on a composite score of competence, attractiveness, and trustworthiness ratings received a larger price increase for the proposed offering price and the revised price for secondary markets.

Mechanical TurkFor each 5% increase in CEO composite perception score, the final market price was 11% higher, and CEO perceived competence and attractiveness had a significant impact on firm valuation.
However, trustworthiness alone had no effect.

These initial perceptions also correlated with companies’ early performance, based on stock prices up to 12 months after the IPO, suggesting that “…investors … glean real additional information about the CEO from … nonverbal behavior and … perceptions of management are signals for firm value.”

Gotham Research GroupBloggers as well as traditional media outlets are important arbiters of CEO reputation.
In a commissioned analysis of 10 well-known institutional bloggers by the Gotham Research Group, perceptions of CEO authenticity were significantly related to bloggers’ evaluations of CEO competence and performance.

Candor, bluntness, fearlessness, specificity, plain words, examples from stories, warmth, frequent contact with customers and employees, and acknowledging challenges and worthy competitors are all essential to setting a credible tone, according to this report.

Weber ShandwickIn fact, Public Relations firm Weber Shandwick noted that 49% of company reputation is attributed to CEO reputation, and 60% of market value is attributed to company reputation.
Perception of a CEO, the firm argues, has significant influence on market value, underscoring empirical findings by Blankespoor’s team.

-*What non-verbal behaviors and attributes signal “leadership” and “executive presence” to you?

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Role Pioneers May Encounter “The Glass Cliff”

Sally Ride

Sally Ride

Marissa Mayer

Marissa Mayer

Holding a role usually occupied by the other gender can lead to significant media coverage, such as Sally Ride’s selection as an astronaut or Marissa Mayer’s appointment as CEO of Yahoo while in the later stages of her first pregnancy.

However, incumbents of roles usually held by people of the other gender can evoke harsh judgments about competence and suitability for leadership roles, according to Yale’s Victoria Brescoll and Erica Dawson with Eric Luis Uhlmann of HEC Paris.

Victoria Brescoll

Victoria Brescoll

This effect was most noticeable when both male and female leaders in “gender-incongruous” roles made minor errors in experimental studies.
Both male and female evaluators judged minor mistakes as indicators of role incompetence when male and female leaders held jobs typically performed by the other gender.

Erica Dawson

Erica Dawson

Brescoll, Dawson and Uhlmann suggested that “gender-incongruous” roles are seen as “ambiguous” by observers, leading to uncertainty, and negative assessments to “restore implicit order.”
The team referred to this rater bias as the “glass cliff effect.”

The researchers concluded that “the high status and senior leadership achieved by both men and women in gender-incongruent roles is fragile, vulnerable and unstable.”

Eric Luis Uhlmann

Eric Luis Uhlmann

This effect may be due to both the role’s gender incongruity and high status.
An earlier blog post highlighted Alison Fragale’s demonstration that higher status individuals are judged more harshly than lower status people when they make the same mistakes.

Alison Fragale

Alison Fragale

Her team at University of North Carolina found that observers in two experiments attributed greater intentionality, malevolence, self-concern to the actions of high status wrongdoers – and recommended harsher punishment for the same actions that earned lower status people “the benefit of the doubt.”

Although Brescol, Dawson and Uhlmann did not offer recommendations to mitigate the risks of being a pioneer in holding non-traditional job roles, Fragale’s team found that high status wrongdoers could protect from the impact of subsequent mistakes by demonstrating, warmth and concern for others and engaging in charitable giving.

Other strategies to consider include:

  • Cultivating strong executive alliances and sponsorship
  • Assembling a risk mitigation team to provide expert messaging during a crisis, focusing on external attributions of the error
  • Balancing demonstrated competence with the “humanness” of a small error
  • Offering plans for future action unrelated to the error to demonstrate decisive leadership and action-orientation.

-*What approaches are most effective to mitigate “The Glass Cliff”?

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Women’s Likeability – Competence Dilemma: Overcoming the Backlash Effect

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Power of “Powerless” Speech, but not Powerless Posture

Assertive speech is assumed to signal competence and power, pre-requisites to status, power, and leadership in the U.S. workplace.

Alison Fragale

Alison Fragale

However, University of North Carolina’s Alison Fragale demonstrated that warmth trumps competence in collaborative team work groups.

Fragale studied “powerless speech,” which has been believed to make a person seem tentative, uncertain, and less likely to be promoted to expanded workplace roles.
She defined “powerless speech” as including:

  • Hesitation: “Well” or “Um”, as known as “clutter words”
  • Tag questions: “Don’t you think?”
  • Hedges: “Sort of” or “Maybe”
  • Disclaimers: “This may be a bad idea, but … “
  • Formal addresses:“Yes, sir” or “Yes, ma’am”

In collaboration-based work teams, “powerless” speech characteristics are significantly associated with being promoted, gaining status and power.
Interpersonal warmth and effective team skills are valued more than dominance and ambition by team members and those selecting leaders for these teams.

Paul Hersey

Paul Hersey

In contrast, “powerful” speech does not feature these characteristics, is more effective when the task or group is independent and people are expected to work alone.

Ken Blanchard

Ken Blanchard

As in Paul Hersey and Ken Blanchard’s Situational Leadership, Fragale concludes that communication style should be tailored to group characteristics.

Li Huang

Li Huang

Likewise, INSEAD’s Li Huang  and Columbia’s Adam Galinsky with Stanford’s Deborah Gruenfeld and Lucia Guillory of Northwestern University demonstrated the impact of “powerful” body language – also called “playing big” –  on perceived power.

Adam Galinsky

Adam Galinsky

Although assuming “larger” postures is associated with credibility and authority, some situations benefit from assuming “smaller”, less powerful postures to establish warmth or to acknowledge another’s higher status.

Lucia Guillory

Lucia Guillory

As noted in an earlier post, Women Get More Promotions With “Behavioral Flexibility”, careful self-observation and behavioral flexibility based on situational requirements are effective foundations to establish group leadership.

-*How do you monitor and adapt “powerless” speech to work situations?

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Interpersonal Envy in Competitive Organizations and the “Search Inside Yourself” (SIY) Antidote

Workplace envy is rarely discussed, although it is a logical outcome of competition for scarce resources:  Recognition, advancement, power, reputation, compensation in explicit or implicit organizational “tournaments.”

Jayanth Narayanan

Jayanth Narayanan

National University of Singapore’s Jayanth Narayanan, Kenneth Tai, and Daniel McAllister broached the near-taboo of workplace envy as an inevitable outgrowth of social comparison and related “cognitive dissonance” in attempting to self-regulate or return to emotional and equity “homeostasis.”

Daniel McAllister

Daniel McAllister

They differentiated malicious envy from benign envy and argue that the latter can drive performance through emulating admired outcomes.

This process, called firgun in Hebrew, is characterized by happiness, envy, and support of others, and is positively related to organizational success.
Mudita in Buddhist texts, refers to similar feelings of vicarious joy at another’s success and good fortune.

Hidehiko Takahashi

Hidehiko Takahashi

Narayan and team posit that envy is pain at another’s good fortune, and Hidehiko Takahashi’s team at Japan’s National Institute of Radiological Sciences demonstrated that the social-emotional pain of envy is a variation of the physical pain experience.

Their fMRI study found that the emotional pain of workplace envy is physically manifested in activation of the brain’s anterior cingulate cortex.

Nathan DeWall

Nathan DeWall

As such, Nathan DeWall of University of Kentucky and colleagues reported that Tylenol™ reduces behavioral and neural responses associated with social pain in two fMRI studies.

Narayanan argues that envy exerts its differential effect on workplace behavior through each individual’s specific:

  • Core self-evaluations (self-esteem, self-efficacy, locus of control, and neuroticism),
  • Referent cognitions” regarding warmth, likeability, and competence of the envied  person
  • Perceived organizational support

Workplace envy, they argue, can affect:

  • Social undermining
  • Prosocial behavior
  • Job performance

Narayanan and team proposed that those with higher self-esteem are less prone to negative workplace behaviors when experiencing on-the-job envy.

They propose that people are less likely to socially undermine the envied individual when the envied person is viewed as both warm-likeable and competent.

Similarly, they suggest that people who think their organization values them and their work, and supports their work and career development efforts are less likely to decrease job performance when envious at work.

Chade-Meng Tan

Chade-Meng Tan

Search Inside YourselfGoogle’s Jolly Good Fellow ChadeMeng Tan proposes the mindfulness-based program “Search Inside Yourself” (SIY) as a way to self-manage workplace envy and other painful social experiences, by developing skills in:

  • Trained attention
  • Self-knowledge and self-mastery
  • Creating useful mental habits.

-*How do you manage workplace envy when you notice it in yourself or others?

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