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What Do CEOs Actually Do? - Ideas for Leaders
Idea #081

What Do CEOs Actually Do?

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KEY CONCEPT

What does your boss actually do all day? Most of us will have pondered over this question at some time or another! We may be justified in doing so too, as how a CEO spends her/his time — and with whom — can have a direct impact on their productivity and their organization’s success. This Idea will help bosses prioritise their working hours for maximum impact. 


IDEA SUMMARY

In this idea, faculty from the London School of Economics, the European University Institute, Columbia Business School and Harvard Business School set out to uncover the mystery of what CEOs do all day by collecting information on how they allocate their time between different work activities. By developing a diary recording time allocation over a pre-selected work week, they looked at a sample of 94 CEOs from leading Italian companies in various industries. Personal assistants were roped in to recording this information, noting down all activities that lasted longer than 15 minutes and detailing their characteristics.

"We had no way of knowing what we were going to find… We went in with the curiosity of trying to understand the life of a CEO," says one of the researchers, Raffaella Sadun.

They found that the vast majority of a CEO's time — around 85% – was spent working with other people through meetings, phone calls, and public appearances; on the other hand, only 15% was spent working alone. Of the time spent with others, only 42% was with "insiders" (i.e. employees or directors), 25% with insiders and outsiders together, and 16% with only outsiders. Examples of “outsiders” include suppliers, investors, consultants, etc.

This distinction between time spent with insiders and outsiders is important; an analysis of the correlation between time use, managerial effort, quality of governance and firm performance shows that time spent with outsiders is, on average, less beneficial to the firm and more beneficial to the CEO. Moreover, CEOs tend to spend more time with outsiders when firm governance is poor.


BUSINESS APPLICATION

These findings are significant as not all of the time a CEO spends with outsiders will help a firm, especially if the CEO and the company's interests are not aligned. Therefore, it is worthwhile for CEOs to pay closer attention to what they do with their time, looking particularly at the nature of their interactions (i.e. insiders vs. outsiders) to evaluate whether it is being spent productively or not. This will help them ensure overall success for the firm in the long run.

It may appear that spending more time with outsiders is important or beneficial to such success; however, in this study, for every 1% gain in time spent with at least one insider, productivity advanced by 1.23%. On the other hand, time CEOs spent with outsiders had no measurable correlation with firm performance. Therefore, it is in the interests of boards to question where a CEO’s time is spent. This is also supported by the finding that CEOs of well-governed firms tend to work longer hours too.

"There are some industries where a CEO really needs to be outside, so we don't need to be proscriptive, but if you were taking these results literally it would tell you that since a CEO's time is constrained, he should be mindful of the time spent with his own employees," advises Sadun.


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Idea conceived

February 1, 2011

Idea posted

Feb 2013
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