Bad CEO leadership causes companies to fail, according to new GSU study

When big companies hit the skids, their leaders often point the finger at something – or someone – other than themselves.

But the reality is bad leadership can push distressed companies over the edge, causing them to fail, while excellent leaders can help lift troubled companies faster from problems such as regulatory scrutiny, according to a new study co-authored by a Georgia State business professor.

“CEOs often play the blame game and say that things are beyond their control,” said Martin Grace, professor and associate director of the Center for Risk Management and Research in the J. Mack Robinson College of Business at Georgia State University.

He added, “But great CEOs are more efficient and when under scrutiny, they can influence a company, lowering the probability of a company failing.”

In the report, “Dupes or Incompetents: An examination of management’s impact on firm distress,” Grace and co-author Tyler Leverty of the University of Iowa, tracked 12,000 insurance companies because that industry is in the business of taking on risk, and distress is relatively frequent and severe, even in good economic times. It’s also a great laboratory because industry CEOs frequently move around.

The study looked at such factors as company performance during financial distress and how well the CEO was able to marshal a firm’s resources efficiently and move it away from regulatory scrutiny or potential failure.

Researchers found excellent CEOs were able to remove their firms from regulatory scrutiny eight to 16 times faster than poor leaders. In insurance companies going out of business, a more talented CEO showed a better return on the firm’s assets by up to 10 cents on the dollar.

The study looked at performance of companies between 1989 and 2000. The majority of the data for the study came from the 1989 to 2000 National Association of Insurance Commissioners Property-Casualty (NAIC) annual statement database. Other data is from the A.M. Best Company’s “Key Rating Guide,” and the U.S. Bureau of Labor Statistics.

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What Brands Will Succeed and What Brands Will Fail

/PRNewswire/ -- Home buying, the iPod and Las Vegas are among those that will benefit in the current economic climate, according to a predictive model developed by Stealing Share, http://www.stealingshare.com/.

Those successes are among the 25 predictions based on the Comprehensive Model for Persuasive Human Communications that examined the changing preferences of consumers in the current economic climate.

"What companies must understand is that, no matter the situation, someone will win and someone will lose," said Tom Dougherty, CEO and President of Stealing Share. "Right now, most brands are not communicating in ways that resonate with consumers in today's current economic crisis. That's one reason why most are failing and market leaders are holding their positions. But opportunity is there."

According to the model, others who will succeed are: Hewlett-Packard, Wal-Mart, Toyota, Walgreens, Wii, Bank of America, Wendy's, The New York Times Sunday edition and Verizon.

Among those who will be hurt most by the economy: the iPhone, NASCAR, airlines, office superstores, the NBA, AT&T, diet foods, Starbucks, daily newspapers, GEICO, Pepsi and Apple laptops.

The model reached those conclusions by applying the eight fundamental motivators in human behavior to see how they change depending on current and developing situations, such as today's economic climate.

The model takes into account the emotional intensities of the primary motivators - Affirmation, Leadership, Comfort, Change, Community, Desires and Scope - within any changing situation, economic or otherwise, to predict and formulate messages and offerings that will resonate most strongly with target audiences.

For example, in a healthy economy, consumers tend to look for the "best" option, which is why companies that market a better product or experience (Starbucks, GM) tend to struggle in tough times when consumers are looking for the "right" option (Wal-Mart, Campbell's Soup) that suggests a more appropriate way.

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