A New Paradigm For Evaluating CEOs In The Age Of Creativity

Hershey H. Friedman
City University of New York (CUNY) – Department of Business Management

Miriam Gerstein
Brooklyn College

April 12, 2016

Abstract:

We are no longer an industrial economy characterized by assembly lines; we are now in a knowledge economy where creativity is what matters and the old ways of running a firm simply do not work. Using the value of the stock as a way of measuring CEO performance makes no sense and can actually destroy an organization. This paper discusses a new paradigm for rating CEOs that includes factors that provide long-term value such as employee engagement, diversity, building a learning organization, corporate social responsibility, and the reputation of the organization.

Number of Pages in PDF File: 46

Keywords:

A New Paradigm For Evaluating CEOs In The Age Of Creativity – Introduction

Globalization, the knowledge economy, and the Internet have made it imperative to throw out the rule book when it comes to organizational leadership. Scholars are referring to the time period in which we live as the conceptual age, digital age, age of chaos, age of flux, and/or global Internet Age. One thing is clear, the rules of conducting business are no longer the same. Unfortunately, “most big firms still have a factory mindset oriented to economies of scale” (Denning, 2012). This type of thinking is a good way to destroy a healthy company. Today’s competitive business environment is characterized by an increasingly rapid rate of change producing a morphing business environment that has to focus on continuous innovation. Safian (2012) coined the term “generation flux” to explain how the “dizzying velocity of change in our economy has made chaos the defining feature of modern business.” Hirt & Wilmott (2014) highlight how digitization is “rewriting the rules of competition” making it very easy for an existing firm to become the next Blockbuster.

Digitization often lowers entry barriers, causing long-established boundaries between sectors to tumble. At the same time, the “plug and play” nature of digital assets causes value chains to disaggregate, creating openings for focused, fast-moving competitors. New market entrants often scale up rapidly at lower cost than legacy players can, and returns may grow rapidly as more customers join the network (Hirt & Wilmott, 2014).

Pink (2006: 3) believes that “the defining skills of the previous era –‘left-brain’ capabilities that powered the Information Age — are necessary but no longer sufficient.” The skills that are valuable today, in the Conceptual Age, include such factors as creativity, empathy, happiness, and meaning. Friedman & Friedman (2015) provide a technology timeline that demonstrates that the number of innovations today is staggering and more than at “any time in human history” and conclude: “… by examining the above timeline, it will become obvious that the job of corporate leaders today is to foster creativity.” The key asset of an organization is its intellectual capital, i.e., the knowledge, abilities, and talent of its employees. In seeking to control a seemingly out-of-control environment, scholars are suggesting that we look to paradigms from biological systems, which seem to manage chaos by being “adaptable, resilient, and capable of generating perpetual novelty” (Taylor, 1994). In 2009, The Economist surveyed 349 executives from all over the world and found that 90% identified organizational agility as a “core differentiator in today’s rapidly changing business environment” (Economist Intelligent Unit, 2009).

It is becoming clear that leaders that do not have the ability to tap into this creativity and transform their organizations so that they are adaptable, nimble, creative, and innovative, can doom their firms to obsolescence (Raphan and Friedman, 2014; Friedman & Lewis, 2014). Carr (2010) cites a 60-country survey of 1,500 CEOs and public leaders who were asked which were the most important leadership qualities. Creativity was ranked first (60% indicated that it was the most important leadership quality); integrity was second (52%). The Management Innovation Exchange (2012) sponsored a “hackathon” in which hundreds of management innovators attempted to find major management problems that prevented companies from thriving in today’s environment. They found that some of the major problems included: an unwillingness to adapt to the rapidly changing world; preference for doing things the old way; a lack of experimentation; insufficient resources devoted to develop a culture of creativity; too much bureaucracy; and ineffective leadership which lacks vision and does not encourage creativity.

A New Paradigm For Evaluating CEOs In The Age Of Creativity

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