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Mark Hulbert Archives | Email alerts
Oct. 7, 2011, 12:01 a.m. EDT
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” Steve Jobs was one of a kind.
I say this not just because it is obvious (though it is), or because saying so is a fitting tribute to his unique accomplishments (though this is true too).
I say so also because his success was so phenomenal that it's had the unfortunate consequence of creating a cult of the superstar CEO. If only we can find another Steve Jobs to ride in on a white horse and save us, corporate managers and investors in effect tell themselves, then our companies can thrive and prosper as Apple /quotes/zigman/68270/quotes/nls/aapl AAPL -0.23% did.
It's a seductive fairy tale, as tantalizing as Cinderella is to impressionable young children.
But the evidence is not very encouraging. More often than not, the hunt for a white knight is a path to corporate mediocrity.
Companies that search for superstar CEOs to transform their businesses usually end up disappointed, according to MarketWatch's Mark Hulbert. Laura Mandaro reports.
That at least is the clear conclusion to emerge from research conducted by Jim Collins, the author of a number of best-selling books about what makes companies great. Particularly fascinating are the findings he reported in his book "Good To Great," published a decade ago.
For that book, Collins identified companies in the Fortune 500 whose shares, at some point since the early 1960s, went from merely keeping up with the market itself to outperforming it by a margin of at least 3 to 1 over a period of at least 15 years. He then constructed a control group of similar companies that never underwent this transformation from good to great.
Collins found that the mediocre companies were far more likely than the great ones to appoint superstar CEOs as white knights. In fact, Collins told me in an interview a few years ago, more than two-thirds of these mediocre companies "tried the outside savior model, and it didn't work."
In contrast, more than 90% of the good-to-great companies appointed their CEOs from within, and those CEOs hardly met the criteria of being a superstar: They remained largely unknown to the outside world.
From this and other findings, Collins concluded that "bringing in a white knight to be CEO is a recipe for mediocrity."
A profoundly similar conclusion was independently reached in another book published around the same time as Collins'. This one, by Rakesh Khurana, a professor of leadership development at Harvard Business School, is entitled "Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs." The title says it all.
None of this is meant as criticism of Steve Jobs, of course. If anything, it shows how impressive "” and unique "” his achievements were.
But this body of research does raise some hard questions about the recent, high-profile CEO searches at other companies. Hewlett-Packard /quotes/zigman/229301/quotes/nls/hpq HPQ +4.99% is one good example, where to great fanfare Meg Whitman recently was named CEO. Whitman, of course, is the former CEO of eBay and the losing candidate a year ago for the California governorship.
Click here to learn more about the Hulbert Financial Digest.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
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Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now. Collapse
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