Decision Matrix Analysis

Making a Decision by Weighing Up Different Factors

(Also known as Grid Analysis, Pugh Matrix Analysis, and Multi-Attribute Utility Theory)

Imagine that your boss has put you in charge of taking on a new outsourced IT supplier. You've already identified several different suppliers, and you now need to decide which one to use.

You could decide to go with the low-cost option. But you don't want to make your decision on cost alone – factors such as contract length, underlying technology, and service levels need to be taken into consideration. So how can you make sure you make the best decision, while taking all of these different factors into account?

Decision Matrix Analysis is a useful technique to use for making a decision. It's particularly powerful where you have a number of good alternatives to choose from, and many different factors to take into account. This makes it a great technique to use in almost any important decision where there isn't a clear and obvious preferred option.

Being able to use Decision Matrix Analysis means that you can take decisions confidently and rationally, at a time when other people might be struggling to make a decision.

How to Use the Tool

Decision Matrix Analysis works by getting you to list your options as rows on a table, and the factors you need consider as columns. You then score each option/factor combination, weight this score by the relative importance of the factor, and add these scores up to give an overall score for each option.

While this sounds complex, this technique is actually quite easy to use. Here's a step-by-step guide with an example. Start by downloading our free worksheet. Then work through these steps.

Step 1

List all of your options as the row labels on the table, and list the factors that you need to consider as the column headings. For example, if you were buying a new laptop, factors to consider might be cost, dimensions, and hard disk size.

Step 2

Next, work your way down the columns of your table, scoring each option for each of the factors in your decision. Score each option from 0 (poor) to 5 (very good). Note that you do not have to have a different score for each option – if none of them are good for a particular factor in your decision, then all options should score 0.

Step 3

The next step is to work out the relative importance of the factors in your decision. Show these as numbers from, say, 0 to 5, where 0 means that the factor is absolutely unimportant in the final decision, and 5 means that it is very important. (It's perfectly acceptable to have factors with the same importance.)

Tip:

These values may be obvious. If they are not, then use a technique such as Paired Comparison Analysis  to estimate them.

Step 4

Now multiply each of your scores from step 2 by the values for relative importance of the factor that you calculated in step 3. This will give you weighted scores for each option/factor combination.

Step 5

Finally, add up these weighted scores for each of your options. The option that scores the highest wins!

Tip:

If your intuition tells you that the top scoring option isn’t the best one, then reflect on the scores and weightings that you’ve applied. This may be a sign that certain factors are more important to you than you initially thought.

Also, if an option scores very poorly for a factor, decide whether this rules it out altogether.

Example

A caterer needs to find a new supplier for his basic ingredients. He has four options.

Factors that he wants to consider are:

• Cost.
• Quality.
• Location.
• Reliability.
• Payment options.

Firstly he draws up the table shown in Figure 1, and scores each option by how well it satisfies each factor:

Figure 1: Example Decision Matrix Analysis Showing Unweighted Assessment of How Each Supplier Satisfies Each Factor

Factors:	Cost	Quality	Location	Reliability	Payment Options	Total
Weights:
Supplier 1	1	0	0	1	3
Supplier 2	0	3	2	2	1
Supplier 3	2	2	1	3	0
Supplier 4	2	3	3	3	0

Next he decides the relative weights for each of the factors. He multiplies these by the scores already entered, and totals them. This is shown in Figure 2:

Figure 2: Example Decision Matrix Analysis Showing Weighted Assessment of How Each Supplier Satisfies Each Factor

Factors:	Cost	Quality	Location	Reliability	Payment Options	Total
Weights:	4	5	1	2	3
Supplier 1	4	0	0	2	9	15
Supplier 2	0	15	2	4	3	24
Supplier 3	8	10	1	6	0	25
Supplier 4	8	15	3	6	0	32

This makes it clear to the caterer that Supplier 4 is the best option, despite the lack of flexibility of its payment options.

Key Points

Decision Matrix Analysis helps you to decide between several options, where you need to take many different factors into account.

To use the tool, lay out your options as rows on a table. Set up the columns to show the factors you need to consider. Score each choice for each factor using numbers from 0 (poor) to 5 (very good), and then allocate weights to show the importance of each of these factors.

Multiply each score by the weight of the factor, to show its contribution to the overall selection. Finally add up the total scores for each option. The highest scoring option will be the best option.

Note:

Decision Matrix Analysis is the simplest form of Multiple Criteria Decision Analysis (MCDA), also known as Multiple Criteria Decision Aid or Multiple Criteria Decision Management (MCDM). Sophisticated MCDA can involve highly complex modelling of different potential scenarios, using advanced mathematics.

A lot of business decision making, however, is based on approximate or subjective data. Where this is the case, Decision Matrix Analysis may be all that’s needed.

О контроллинге как идеологии управления

Контроллинг как идеология управления, в лице своих адептов, с одной стороны позиционирует себя как принципиально новое, универсальное средство решения всех задач, а с другой, фактически, в той или иной степени, интегрирует в себя достаточно известные принципы управления предприятием.

Это хорошо видно из некоторых определений и характеристик контроллинга:

• «Контроллинг — концепция системного управления компаний, в основе которой лежит стремление обеспечить ее долгосрочное эффективное существование»
• «Контроллинг — это система управления будущим»
• «Контроллинг имеет дело, прежде всего, с количественными показателями и критериями»
• «Функция контроллинга — координационная (системная)»

В концепции контроллинга преобладают совершенно правильные утверждения:

• Компания — это экономическая система, имеющая определенные стратегические цели. Цели должны быть явно сформулированы. Стратегические и тактические цели должны быть синхронизированы (взаимоувязаны) – система целей должна быть многоуровневой. Цели должны быть оценены количественно, для обеспечения непрерывного контроля степени их достижения.
• В компании должен быть построен и непрерывно контролироваться процесс оптимального использования ресурсов на пути к достижению поставленных целей.
• В компании должна быть внедрена философия доходности, ориентация мышления на рентабельность, непрерывный контроль и сокращение издержек. Должны быть выбраны индикаторы (показатели) эффективности использования ресурсов. Система показателей должна быть многоуровневой. Выбраны нормативные значения этих показателей.
• В компании должна быть поставлена система планирования деятельности направленная на достижения выбранных значений показателей (достижения целей и эффективности использования ресурсов).
• В компании должен быть создана система сбора информации необходимой для расчета контроля отклонений выбранных показателей от нормативных значений. Информационная система должна обеспечивать покомпонентный анализ причин вызвавших отклонения. Для чего сбор информации осуществляется не только по балансовым единицам, но и любым объектам контроллинга – центрам финансового учета, видам продукции, сегментам рынка, бизнес-процессам, внутренним заказам и т.п.)
• По результатам контроля осуществляется регулирующее воздействие на процессы протекающие на предприятии, либо откорректированы планы и значения показателей.

По таким правилам работают все бизнес-единицы и предприятие в целом, образуя многоуровневую систему управления. Кроме того, на предприятии формируется служба контроллинга (штабная) и контроллеры в подразделениях с функциональным подчинением.

Различают стратегический и оперативный контроллинг.

Стратегический контроллинг

Его лозунг можно сформулировать как Делать правильное дело.

Функции — Выработка целей, стратегий и задач.

Показатели — потенциалы успеха: внешние (доля рынка, рост рынка, рыночная стоимость компании…) и внутренние (продуктовые, операционные, ресурсные – материальные, информационные, кадровые, управленческие.

Временной горизонт — долгосрочный, хотя и не всегда: стратегия касается наиболее существенных компонент бизнеса, его структуры, направлений развития, что может, например в период кризиса, изменяться достаточно быстро!

Стратегическое планирование — это выработка принципов действий и путей достижения целей.

Техники и инструменты стратегического контроллинга:

• SWOT-анализ, Портфолио-анализ, GAP-анализ
• Make or Bye-анализ, анализ логистических цепей
• Кривая опыта, кривая жизненного цикла
• Анализ конкуренции, анализ потенциала

Стратегический план — это выработка интегрированной системы целенаправленных действий.

Стратегический учет или Стратегический контроль направлен на раннее предупреждение отклонений, управление по слабым сигналам.

Оперативный контроллинг

Его лозунг можно сформулировать как Делать дело правильно

Функции — достижение конкретных целей и решение задач

Показатели — результаты (прибыль, рентабельность, ликвидность...)

Временной горизонт — относительно краткосрочный

Он охватывает все функциональные области с последующей интеграцией:

• Контроллинг оперативного маркетинга (исследования и продвижение) – контроль результатов – эффективность работы на сегментах (объект контроллинга – перевод в прямые затраты), эффективность маркетинговых мероприятия / затрат на них
• Контроллинг логистики — поставки, оценка эффективности закупок / затраты на закупки, логистический анализ производства и т.п.
• Финансовый контроллинг — поддержание рентабельности и ликвидности предприятия, сбалансированной структуры капитала (правила Коссе), план-баланс и потоков по видам деятельности, текущий (средне и краткосрочный) бюджет, объединяющий (интеграционный) по видам деятельности и выплат-платежей, поддержание ликвидных резервов для ликвидации дефицита (коэффициенты ликвидности и т.п.)
• Контроллинг инвестиций — проект контроллинг, т.е. оценка и оперативное управление инвестиционными проектами

Техники и Инструменты:

• АВС-анализ, XYZ-анализ
• Анализ по точке безубыточности
• Метод расчета сумм покрытия
• Финансовый анализ
• Факторный анализ

Оперативный управленческий учет и контроль — система выбранных показателей должна предоставлять менеджерам информацию о том, как идет продвижение к намеченным целям. Кроме того, система должна предупреждать об выявленных проблемах — препятствиях на пути этого продвижения и сигнализировать об ухудшении ситуации.

Взаимодействие стратегического (а) и оперативного (б) контроллинга может быть символически представлено как зубчатая передача:

а) Путь наверх — поиск и выбор пути развития
б) Путь вниз — реализация плана

Таблица 1 дает сводную картину отличий двух видов контроллинга:

Таблица 1

Признаки	Стратегический	Оперативный
Организационная иерархия	Высшее руководство	Все уровни с упором на средний
Неопределенность	Существенно выше	Меньше
Вид проблем	Проблемы слабо структурированы	Относительно хорошо структурированы
Горизонт	Долгосрочные и среднесрочные аспекты	Среднесрочные и краткосрочные аспекты
Информация	В основном из внешней среды	В основном внутри предприятия
Альтернативы	Широкий спектр	Спектр ограничен
Охват	Концентрация на отдельных важных позициях	Все функциональные области с последующей интеграцией
Детализация	Невысокая	Относительно большая
Индикаторы	Потенциалы успеха	Эффективность и риски: прибыль, рентабельность, ликвидность и т.п.

Системы показателей оценки деятельности предприятия в контроллинге должны отражать результативность деятельности и быть ориентированы на прогнозирование будущей деятельности и принятие решений.

Среди финансовых показателей в контроллинге различают показатели:

• Логико-дедуктивные: Дюпон, Pyramid Structure of Ratios, ZWEI и т.п.
• Эмпирико-индуктивные: например, раннего прогнозирования возможной неплатежеспособности предприятий (Бивер, Альтман, Camel – для банков)
• 
  

В целом, идеология контроллинга на новой информационной основе еще раз привлекла внимание к следующему принципу менеджмента:

«Реализация всех контуров управления компанией должна осуществляться в соответствии с полным управленческим циклом».

Примечание

Правила Коссе (бизнес-правила западных банков):

• Общая задолженность предприятия (долгосрочная, среднесрочная и краткосрочная) не должна превышать более чем в 2 раза величину собственного капитала (или 2/3 от пассива баланса)
• Долгосрочная и среднесрочная задолженности не должны превышать сумму собственного капитала.

Если любое из условий не выполнено — предприятию могут отказать в кредите. 

Benchmarking leadership development goals

One of the popular techniques that people with good leadership skills used in the early years of the Total Quality Management movement was to send their employees to visit other organizations that had a reputation for doing something extremely well. Xerox sent a team of people who were working on a process to speed distribution of its products to Domino’s Pizza, an early pioneer in speedy delivery of its product. Benchmarking was a powerful way to get employees to see for themselves a better way to approach a task, without the leader’s being the one to go collect the information and bring it back to the group.

As organizations mature, an attitude of “we know best” or “this is how we’ve always done it” often creeps in. This “we know it all” attitude is the antithesis of the “learning organization” that is actively looking for new and better ways.

Leaders often initiate discussions about performance with individuals when there is an obvious problem. This could include things not being done on time. Or it could be that tasks are being accomplished in a less than professional manner. Often the leader may raise these performance deficiencies with the entire team in a staff meeting. This doesn't need a how to be a good leader primer!

But is that the only time to have performance discussions? What if the leader initiated a performance discussion with the team when things were going quite well? What if the leader asked for the team members’ ideas about how things could be even better? This is a leadership goals act of the highest order.

Think of how you might initiate such a conversation with your group.

Leadership development goals: Identify Peak Performers in the Organization

One powerful technique that people with leadership characteristics use is to ferret out the individuals already within the organization who are unusually fast or good at what they do. For some reason, these people are often ignored, and their improved processes and techniques help them to perform well personally, but are never adopted by others. When high performers are not recognized or rewarded for their exceptional performance, their performance will usually gradually decline.

Worse yet is when leadership communication single out their favorites and ignore every other individual or team. When trying to improve the performance of any group of individuals or any team, a good question to ask is, “Which individuals (or what teams) are doing this extremely well? Let’s identify these people or teams and seek their permission to observe them, interview them, and have them become the trainers for new people coming in.”

Utilize Team Dynamics and Support to Achieve Stretch Goals

Many individuals with leadership traits have discovered that having the team set its goals collectively can be a powerful technique. Invariably, one or more of the team members would like to reach higher. They toss out potential goals that the manager would be wary of proposing, but having such a goal come from one of the team members makes it infinitely more appealing. Many managers have found themselves in the position of attempting to scale back the team’s ambitions. That’s usually a much more favorable position than trying to radically lift the sights of individuals or the team. We encourage leadership development programs to experiment with this technique. Prior to a team meeting in which you toss the challenge of establishing a goal or target for the completion of a project to the team, write down what you would have proposed had you done this unilaterally. Then compare that to what the team decides on.

Why does this succeed so frequently? We know that people support decisions that they helped to make. When the team has an active part in the decision process, everyone on the team is more committed to making it succeed. The acceptance of a decision is a huge part of its success, and having the team make the decision collectively adds one more important dimension. Now the team members are holding one another accountable for doing what is required to meet the target that they collectively set.

Improve Processes and Remove Bureaucracy

Another technique that people with leadership qualities use to raise the bar is to challenge individuals or teams to streamline the processes that they use. Seldom do you find complex systems in organizations that can’t be improved if people will take the time to map out the current process in some detail, then look for places to eliminate unnecessary steps or generally streamline the entire process.

The airline industry has saved millions of dollars by moving from paper tickets to e-tickets. Direct deposit payroll checks have been a real boon to both corporations and their employees.

In order to really improve processes, people need to ask more lofty questions. Getting a 10 percent increase in productivity on a process can typically be done by people just working a little bit harder. Asking for a 50 percent improvement forces the team to consider entirely new approaches. Bureaucracy is often so embedded that it is considered off limits to change or improvement. Great leaders look everywhere for opportunities.

Celebration and Reward

Regardless of how committed your team is, if a lofty goal is achieved, celebration and rewards for the individuals and the team need to be carefully considered. Teams have to celebrate victories even at important milestones along the way to the ultimate goal. Of course, most organizations are not finished when a major objective is reached. In fact, most of the time, that objective is quickly followed by yet another. So when it is time for the team members to give all that they can for the next hard-to-achieve goal, they need to look back and feel that they were appropriately recognized and rewarded for their extra effort and performance. Otherwise, why would they do it again? Stretch goals deserve stretch rewards and ought to be celebrated in a way that is appropriate for your organization.

Most people are willing to put forth a reasonable amount of effort, but at some point they hold back and look for ways to conserve energy. We probably learn this from our physical limitations. After you have been holding your breath for a period of time, the instinct and desire to breathe are very strong. Even though most people could hold their breath longer, the instinct wins out. For most of us, when we are asked the question, “Did you give all that you had to give?” the honest answer is no. There is a great deal of conserved energy in every organization. Setting stretch goals can release some of that conserved energy, bringing increased productivity and success to the organization. The great side effect of getting people to stretch is that when people accomplish challenging objectives, they are happier about their jobs and more pleased with themselves.

Some people may assume that all team members will be overjoyed at being given a very challenging objective. However, those with experience know they will not be. There will often be some complaints, groans, and criticism for the leadership characteristics list. But if you follow the principles outlined in this post, this could eventually be one of the best memories people have and something that fills them with pride and confidence for years to come.

What is Outside-In Marketing?

Outside-in marketing is the practice of learning the language of your clients and prospects and building messages for them on (and in) their terms. This might seem like an obvious thing to do, but until recently, it was rarely practiced in industry. Typically, marketers have sought to differentiate their products by branding them with clever names and marketing them with novel messages. Let’s call this inside-out marketing, to distinguish it from what we are attempting to promote in this blog.

If you’ve ever suffered through a radio commercial at three times the normal volume for a local car dealership where the announcer races through three minutes of script in 30 seconds, you’ve experienced inside-out marketing. One of the biggest goals of inside-out marketing is to get attention—to get the audience to wake from its reverie to actually listen, watch, or read the message in front of them.

Inside-out marketing worked in the days of captive audiences, who passively watched TV or read periodicals. Perhaps it worked when events were the center of marketing campaigns and those who attended events were captivated by pomp and circumstance. But inside-out marketing does not work in digital media. Digital audiences are not captive. They are in control. They reject attempts to spam them with information they don’t want.

Any attempt to do this can do more harm than good. If you want to be effective in digital marketing, you need to engage with clients and prospects on their terms. You need to build trust with them by providing the information they need when they need it. And you need to continuously prove to them that you will not violate this trust by trying to force them to do business on your terms.

The good news is that clients and prospects actually tell you what they want by searching for things in Google, Bing, and other search engines. Throughout this blog, we refer to anything the searcher types into the search box as a keyword. The second piece of good news is that they tell you what they think about what they want in social media. All you need to do is gather the data and mine it to better address what clients and prospects need from your marketing activities.

Gathering the data might be the easy part. Everybody has access to search keyword tools, such as Google Keyword Planner. Most of us can find more conversations through social listening tools, such as Salesforce’s Social Studio (formerly Radian6). The challenge lies in analyzing the data we find. When customers enter a keyword, what exactly are they looking for? We assume that they’re looking for something related to the topic expressed by the keyword. But exactly what do they want? And what do they need to do with the information once they get it?

It is not helpful to merely offer encyclopedic amounts of information. You must help prospects take action to actually solve their problem with the information you help them find. But what actions do they want to take? How can you learn this from a few simple search keywords and some social conversations?

You are not serving your client if you merely mine the data. Clients expect you to recommend the right things for them to do. They want to be told what to do, in words of two syllables or less. They might be experts in what they do, but they are not experts in what you do—until you make them so.

We will start to answer these questions in this chapter and continue throughout the blog. To answer these questions, we want to more strongly differentiate outside-in from inside-out marketing. Table 1-1 shows the differences. As we refine the definition of outside-in marketing, we can begin to answer how to do it.

Is Outside-In Marketing Really That Different?

The ideas discussed so far in this chapter seem like Marketing 101—all the same things we have always done with offline media. And, indeed, there are similarities. Direct marketers, for example, have long used customer insights and optimization metrics to improve results over time. Copywriters have for many years built audience personas and written audience-centric copy. And advertisers have always tried to place ads at the decision point for their audience.

Direct Marketing: Push vs. Pull

When you consider the psychology of direct marketing, you realize that it is fundamentally different from outside-in marketing. Leaving junk mail and other spammy methods aside, the best direct marketers use facts about the target audience to try to understand what they need and push it to them. In that respect, it is outside-in, right? Well, not exactly.

For example, James recently moved and had to notify the U.S. Postal Service of his change of address. When he opened the envelope from the Postal Service, it was full of ads for home improvement centers, insurance firms, and other businesses commonly frequented by those who have recently moved. After he moved, he received the same ads in direct mail that had been included in the envelope. Not only did those companies know he probably would need to do business with companies like the ones in the ads, but they knew how to reach him most effectively, by repeating the ads multiple times. In psychology, this is called priming—repeating the same message multiple times to get a desired result. Direct marketers have used this technique successfully for decades.

The key difference between outside-in and (well-done) direct marketing is in the word push you probably noticed. Direct marketers push messages to those who are somewhat likely to be interested in them. They don’t wait for the audience to tell them that they are in fact interested. They are willing to concede that they might get only 1% response for their direct mail campaigns. But, even if they do, they will get a solid return on investment. So they push messages and hope for the best. In the process, they effectively spam the other 99% of their audience. And they don’t care.

The reason they get the ROI is that you are an audience that is somewhat captive to their messages. You can’t choose not to receive your mail. When you open your mail box, there might be a check or an important letter or card. There will also be the direct mail pieces. You can choose to recycle them instantly, but you must at least look at them. In short, you must “opt out” of them. A small percentage of users don’t opt out. These are the ones who give direct marketers their ROI.

Digital marketers have tried the push model from the beginning. But it never worked very well. Why not? Because web users are not a captive audience. They “opt in” to only the information they want to consume. You could say that opting out, such as deleting an email or abandoning a web page, is a lot like recycling a piece of direct mail. The difference is that you can keep sending direct mail to the same customer even after he has recycled 100 pieces, hoping to hit the mark with some of them, but web users are always moving and seeking information rather than waiting motionless for information to find them. It’s always been called “surfing” for a reason. Automated spam filters constantly evolve for a reason.

Other techniques can cross the line from “welcome” to “spam,” also. Readers believe that they have developed banner blindness and do not even see display ads. But marketers now retarget ads by showing display ads informed by searches and other activity. And people do seem to notice them, whether they click on them or complain about them. Whether these ads are “welcome” or “spam” depends on how relevant they are to the reader, but they are at least more relevant than random display ads.

Once a digital marketer violates the trust of the audience, which is based on allowing them to opt in rather than forcing them to opt out, they never come back. Over time, relying solely on push marketing in the digital world is a losing proposition, as your user base slowly dries up. Websites become ghost towns. Email newsletters end up in spam folders. And social platforms die.

While all this might seem obvious to some people, others might reasonably object, saying, “One man’s pushing is another’s sharing. If the content is good, why can’t you push it?” And that is the real question here. What kind of sharing violates the trust of the audience, and what kind increases it? Every marketer  must make the decision between spamming and sharing and must realize that spamming does have real consequences.

It’s not that push marketing never works. And we aren’t trying to get you to stop all push marketing. We are trying to persuade you that employing solely push techniques causes you to send more and more emails, to buy more and more display ads, and to blanket your audience with more and more interruptions. If 99% of them are not interested, eventually your audience will find ways to tune it all out. That said, it is also true that you need to prime your audience to help them discover you. If your content is high quality, sharing it will be welcome—and that’s what you are aiming for.

If you learn what your audience needs and pull them into your experiences through search and social media, you will develop a loyal audience—and ultimately get better results. Users who are allowed to “opt in” to messages are prequalified as interested parties. They will spend some of their precious time and attention exploring your site to get answers. Once you gain their trust, you can begin to subtly influence them to try (and ultimately to buy) your products and services. We usually refer to this content-first approach as content marketing.

Unlike push techniques that must start by getting attention from your audience, pull techniques require paying attention to your audience. Because you can’t  pay attention to every single audience member, you analyze data as a way to know them. That’s the essence of outside-in marketing—using data to focus your content marketing.


https://thoughtleadershipzen.blogspot.com/2016/05/what-is-outside-in-marketing.html

The Key Traits that Separate CEOs from other Senior Executives

There are two traits that stand out when it comes to the “essence” of the CEO personality: an ability to embrace appropriate risks and a bias toward acting and capitalizing on opportunities. In other words, a CEO is significantly less cautious and more likely to take action when compared to other senior executives.

By: J.P. Donlon

What separates the merely good CEO from an outstanding performer? In today’s world of digital disruption, with markets rapidly changing and companies being upended by startups, getting this question right has become more important than ever.

In an effort to do just this Russell Reynolds Associates, in partnership with Hogan Assessment Systems, led a research effort to measure the impact of leadership on a company’s growth. The effort was spearheaded by RRA’s Dean Stamoulis who leads the search firm’s Center for Leadership Insight.

RRA and HAS chose an in-depth approach using a proprietary psychometric database of 200 global CEOs using the results of three well-established psychometric instruments: the Sixteen Personality Factor Questionnaire (16PF), which provides an overall measure of adult personality, including interpersonal skills, emotional factors, resiliency and communication style; the Occupational Personality Questionnaire (OPQ-32), which measures management and leadership style and behavior, including how people try to influence others, their approaches to innovative thinking, and self-motivation; and the Hogan Development Survey, which measures areas for development or potential derailing factors in managers and executives, including their decision-making style and independence of thinking.

They compared the trends with another global sample of 700 CEOs and with a separate sample of non-CEO executives in their proprietary database of 9,000 senior leaders. (To make the performance link, according to Stamoulis in the Harvard Business Review, the reseachers applied a quantitative hurdle of 5 percent compound annual growth rate during the CEO’s tenure.)

While the study confirmed that CEOs in general are more likely to be risk takers than other executives. They also found six other traits that differentiate the typical CEO from other executives on a statistically significant basis:

1. Drive and resilience
2. Original thinking
3. The ability to visualize the future
4. Team building
5. Being an active communicator
6. The ability to catalyze others to action

They did not find that leaders are consistently extroverted or self-promoting.

McKinsey’s thoughts
While this study is broadly accurate, there are other nuances that may be equally important. According to researchers at McKinsey the best-performing CEOs “move boldly and swiftly to transform their companies.” Michael Birshan, a McKinsey partner involved in a study of 599 CEO transitions, argues that, “chief executives in underperforming companies are much more successful in generating outsized returns if they pull multiple levers at once.”

For example, he says, “If you’re in an underperforming situation, use the whole playbook, throw the kitchen sink at it. The data shows that chief execs inheriting poorly performing companies, who made four or more strategic moves in the first two years, achieved, on average, annual TRS growth 3.6 percentage points ahead of peers. But their less bold counterparts who used one or two or three moves were only 0.4 percent ahead. So there’s a real difference if you’re behind in going bold and going hard.”

A third perspective
The good CEOs, says Ram Charan, a preeminent adviser to CEOs and boards, “know it takes more than analytics. They take in a lot of information from many sources and then crystallize a point of view. They sort and sift the information and select the handful of factors that matter most—usually no more than six—from the myriad possibilities. That’s what they’ll base their decision on. They cut through the complexity to get to the heart of the matter, without getting superficial. And they do it without losing sight of the customer.”

Clearly, there are definitive markers for best-in-class business leaders. They value substance and going straight to the core of the issue. They have a greater focus on the organization, outcomes, results and others than on themselves. But at the top of the list, observes RRA’s Stamoulis, “should always be the ability to embrace effective and appropriate risks and the ability to act on opportunities in high-stakes situations— especially when the “right” action is not initially clear. These are the headlining traits that separate CEOs from other senior executives.”