Classical Investing (Part 9)

In running a company, is it better to be feared or loved?

A recent study asked just this question. Are successful managers ones who focus on execution: budgets, goal-setting, accountability-or team-building: building consensus, having listening-skills, and developing mutual respect?

Ideally, you would have both: a goal-oriented boss who listens to his people respectfully and proceeds to get the job done: ahead-of-schedule exceeding the standards, with no drama. But often those skills are mutually exclusive. On a scale of being conscientious or agreeable, one side or the other will dominate.

The study evaluated 258 companies and rated their CEOs on 30 different items, from attention to detail to SAT scores. They then followed the performance of these companies over several years. And guess what? CEOs with “hard” skills tended to outperform those with “soft” skills.

This should come as no surprise. 400 years ago Machiavelli wrote that it is far better to be feared than to be loved. A prince ought not to mind having a nasty reputation, because he will provide, through strong leadership, a far more humane state than a chief who is too lenient and allows disorder or rebellion to go unchecked.

Thus, the “heartless” S.O.B. who leads a company to financial success is far kinder to his subordinates than the easygoing chief who allows his firm to stagnate or fail. Something to think about when we evaluate the management the companies we invest in.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-12T10:57:32+00:00 August 30th, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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