If profits aren’t measuring up to expectations, it’s time to look at how the financial behavior styles of the executive team factor in!
There’s a vital connection between executive behavior and company profitability. That’s why having a reliable way to measure the financial behavior style of the CEO and leadership team is so important. Until now, the only way to gather that information was through personally completed individual psychometric assessments. But, with the introduction of our Digital Scan technology, leaders, boards, and investors can get an instant read on the potential for businesses to reach financial objectives without individual participation.
To demonstrate the power of this new AI-driven tech, we used it to gather behavioral insights for nearly 5,000 key executives from S&P 500 firms…and can tell you which financial behaviors are behind their proven success!
"Reliably knowing today's decision-makers' financial behavior will inform you about future financial performance."
Pegasus Ratings Report, August 2024
Our analysis, which is detailed in the Pegasus Ratings Report, confirms that certain leadership financial behavior competencies directly influence firm profit. When the CEO and key executives have a strong combination of all six of the competencies listed below, they have the greatest potential for growth and profitability.
Operational Leadership Capability
Having a balance in these competencies is the key to an effective leadership team.
Leadership Financial Performance
Higher scores in these competencies equate to higher predicted financial performance.
The chart below (Figure 8 – Pegasus Ratings Report) shows how a leader’s relative strengths in these particular areas can drive profitability. Looking at Financial Goal Drive, for instance, we can see that for each 4% increase in this competency, there was a 21.5% increase in profits! It’s important to remember, however, not to stack the deck with carbon copies. A team with diverse qualifications will almost always outperform one with a more homogenous behavioral mix.
Learn More: Financial Behavior Traits of the World’s Top Executives
When it comes to operational leadership capability, there is a lot of discussion about whether results or relationships have the most power to drive the bottom line. Our study revealed that Results Drive plays a significant part in increasing profits. In the chart below (Figure 6 – Pegasus Ratings Report), you can see that 71.31% of S&P 500 executives have a strong Results Drive. And, if you refer back to Figure 8 above, you can see that with each 4% increase in Results Drive, the outcome was a 7.38% increase in profits.
However, we also learned that having an engaging organizational culture that provides high psychological safety also improves profits. Referring to Figure 8 again, you can see that for each 5% increase in Relationship Engagement, the research suggests that companies can expect an 11.43% increase in profits. So, leaders can gain significant competitive advantages by investing in a stronger people-centric organizational culture…coupled with a strong focus on results. This is especially important to consider as you work to balance the executive team as a whole.
Learn More: Top Execs Reveal the People-Profit Balance
A company’s CEO can have a profound impact on the direction and culture of the organization. Authority Bias plays a large role in that influence, especially since they often serve as chairman of the board and directly report to the board on company performance regardless of their board position. The graph below (Figure 12 – Pegasus Ratings Report) shows the chairman status of the S&P 500 CEOs in our August 2024 study.
According to our research, three behavioral styles account for 81% of these CEOs. And, as it happens, these same styles tend to evoke a high degree of Authority Bias.
These CEOs are naturally going to exert a more dominant influence over their business’s financial behavior and culture. The chart below (Figure 13 – Pegasus Ratings Report) shows just how much Authority Bias can be expected for each unique behavioral style.
So, when you consider the predominance of these behavior styles at the top of organizations, and then factor in Authority Bias fueled by a combination of their style and board position, you start to get the picture.
An organization eats the behavior of the CEO!
Learn More: The Pervasive Influence of the CEO
We have scientifically proven that having the optimal mix of all six leadership financial behavior competencies significantly contributes to increased company profitability. But three of them are more directly connected to financial value creation, and therefore of prime importance to investors. They are Innovation Focus, Fiscal Control, and Financial Goal Drive.
In the graph below, (Figure 9 - Pegasus Ratings Report), you can see how having Initiators, Strategists, and Reflective Thinkers on the executive team can improve a company’s financial value trajectory.
Possible Trajectories Considering Innovation Focus, Fiscal Control, and Financial Goal Drive
The Pegasus Ratings System, powered by our Digital Scan technology, provides what Morningstar Ratings, Bloomberg, and fundamental analysis cannot provide. It gives you an unbiased measurement to reliably predict which CEOs and leadership teams will succeed in creating financial value!
Learn More: Investors Have a New Tool to Predict Future Profitability
If your company or your investments aren’t where you want them to be, it’s time to take a closer look at leadership behavior competencies. DNA Behavior will partner with you in this process, offering tools and insights to help you evaluate or enhance executive teams.
Contact Us if you’d like to review an executive team. We’ll help you uncover growth opportunities and maximize potential profits.
We also encourage you to read our full analysis of the S&P 500 teams…and see how we’ve ranked them for future profitability!
*This information is based on an independent and unbiased psychometric behavioral assessment conducted with a unique "digital scan" process, without direct leader participation, based on proven publicly available data points.
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