The #1 Thing That Determines Your Company’s Profitability

As the CEO, you sit at the helm, driving strategic decisions and shaping the trajectory of your organization’s success. New research out of the Harvard Business Review suggests that by looking at where CEOs spend their time can influence the profitability of their firms.

To generate the data, researchers looked at how CEOs structured their entire work week, including times they are not in the office. The activities reviewed were categorized by the number of people it took place with, where, whether it was planned ahead of time, etc. In essence, researchers tried to determine precisely what it is that differentiates the most successful CEOs from the rest.

When 1,000 CEOs from top companies, in six countries, were surveyed the results were quite telling:

• 56% with one other person, mostly involving scheduled meetings
• 25% of the day spent alone, usually responding to emails
• 10% handling personal matters
• 8% doing business-related traveling

When the bulk of the meeting time was reviewed more in-depth, researchers found that operations (35%), marketing (22%), and finance (17%) departments required the most meetings.

What does this data mean for CEOs?

After compiling the survey responses, conducting in-depth interviews, and reviewing the financial positions of each firm, the evidence suggested that CEOs could be divided into two types – leaders and managers.

It was concluded that CEOs who took a more high-level leadership approach were more effective than those that assumed a more hands-on managerial role. And, this distinction was important in assessing their company’s profitability. When the financial performance was factored in, researchers found that CEOs who perform more leadership functions (meaning they are not directly involved in departmental day-to-day activities) tended to have more productive and more profitable companies.

This research suggests that investing your time, as the CEO, into more strategic-related tasks that help to coordinate executive teams and keep the company, as a whole moving forward toward achieving business goals, may be the best use of time. This can also fluctuate depending on the size and growth stage of your organization. Smaller or early-stage companies may need CEOs that are able to balance both a leadership and managerial position. However, the research points to effective leadership as being a key component to help your company grow and remain profitable within your industry.

Do you agree or disagree with these findings? What other CEO-related factors do you think should also be considered? We welcome your insight on this topic. Share your thoughts on our Facebook or LinkedIn pages.