Four Different CEO Types and How To Deal With Them

by Prof. Dr. Henning Zülch | June 17, 2020
Knowing which kind of CEO type you're dealing with can be very helpful. We explain how to classify and interact with leaders.

How leaders style their public image – and how much of it is actually true

This article was first published on manager magazin (in German).

Financial communication can be simple, as long as leaders apply some basic rules: clarity, consistency, decision relevance and authenticity. However, if we look at the prefaces to annual reports signed (and allegedly written) by CEOs, one may doubt their professionalism. Do CEOs write to please, or does their communication style match with the goals and values of the firm – or at least their personal ones? There is a legitimate reason to doubt.

Do leaders actually mean what they say?

Based on a collaborative study by Kirchhoff Consult, HHL Leipzig Graduate School of Management and Precire Technologies, it has been shown that CEOs’ tone impacts capital market estimates. The study examines all prefaces published with the annual reports of DAX companies from 2015 to 2017. A corporate or personal identity is seldom found to be reflected in CEO communication, i.e. a similar language profile over the years. Instead, profiles are found to often change over the years – even in firms without changes in the CEO position.

Consequently, many firms lack an internally consistent profile or tone from the top. Sometimes, prefaces may even appear contradictory to brand identities or publicly promoted firm philosophies. This leaves readers confused: is a given CEO in touch with his or her own firm? Is he or she able to adequately fill his or her role as its major figurehead? On a side note: the examined CEO letters were all signed by male CEOs. Jennifer Morgan is the first female CEO since her appointment to Co-Chair SAP’s management board in 2019 (see FAZ, Oct-11, 2019).

Companies are not fully aware of how their communication may actually be perceived.

The fact that such questions are being asked is a sign of missing credibility in the corporate leader and the firm itself. However, companies are not fully aware of how their communication may actually be perceived. Specifically, they underestimate the power of artificial intelligence (AI) to reveal such apparent deficits in the external presentation as well as its underlying structures.

Today, sophisticated tools for computational linguistics are able to identify complex patterns in written or spoken forms of language. They enable researchers, journalists, analysts and others to pin down speakers’ (or writers’) communication strategies, to see through them, discount them or develop other counter-strategies against them. In the mentioned study, the interdisciplinary team managed to reveal four types of images that CEOs often create in their prefaces – and how much of them are actually credible. So, here they are: The four CEO types!

The four CEO types

In order to understand the future significance of AI in financial communication, it is necessary to understand how CEOs position themselves in the prefaces of DAX companies’ annual reports. In a study conducted by HHL Leipzig Graduate School of Management in cooperation with Kirchhoff Consult, four different CEO types and their communicative profiles were identified:

CEO type #1: The Statesman/Stateswoman

He/She is a natural networker and narrates from an outside-in perspective. He/She knows how to present his/her firm and its stakeholders as a whole. For the Statesman/Stateswomen, long-term performance, the realization of win-win potentials and sustainability are key. He/She poses the question of his/her and his/her firm’s ‘license to operate’. The success of the company is not an end in itself, but only of importance in the context of its environment.

His/Her remarks consistently include the advantages for different stakeholders and present them as equally relevant to the firm’s advantages. He/She is devoted to proclamations of corporate social responsibility matters. For him/her, trust plays a central role in the continued existence of the company. His/Her choice of topics and argumentation structure reflects his/her special role understanding: For him/her, to lead is to serve.

CEO type #2: The Engineer

This type looks at the company like an engineer looks at an engine: he/she sees the machine as a whole and, at the same time, as the sum of its parts. This capacity for abstraction shapes his/her language, which is exact, precise and complex throughout. His/Her narrative is, above all, a factual analysis, but not overly reserved. Comments on the course of business have a clear logical structure.

In his/her communication, prospective information and the extrapolation from past and current experiences is of paramount importance. His/Her natural terrain therefore includes topics such as change within the company and its long-term strategy. The Engineer’s insights reveal his/her in-depth understanding of complex, emergent relationships. The Engineer is an architect of the future.

CEO type #4: The Entrepreneur

The Entrepreneur talks about performance – especially his/her own. His/Her language often appears positive and confident, and the emphasis on personal success is highly evident in the narrative. The Entrepreneur is less concerned with financial figures than with presenting the company as a collective of achievers that exceeds its customers’ expectations and positively impacts their future. The Entrepreneur likes to talk about the future, as long as it is tangible.

Consequently, he/she is less concerned with abstract strategies and more with the right decisions that the company has already made today in order to be successful tomorrow. In his/her communication, the Entrepreneur prefers calm, clear language and a comprehensible style. The reference to corporate values and virtues is important, especially to innovation and creative drive. For him/her, business is always about the next big thing.

CEO type #4: The Highscorer

He/She strives for success and, like a competitive athlete, prefers to measure success by hard numbers. His/Her narrative often emphasizes the development of KPIs, especially if they are of financial nature. From his/her perspective, the success of a company depends on a few core competencies: The performance of its products on the market, its financial robustness and its efficiency. What is special about the Highscorer’s perspective is his/her awareness that the company is not the only player in the market, but that it must be able to compete against strong competitors.

This characterizes his/her language, which often appears tough and reveals both his self-confidence and a strong willingness for confrontation, but is also characterized by brevity and concentration on the essential. His/Her communication is designed to be recognized as someone who is outperforming his competitors. This is the main reason why his/her language often expresses a natural sense of control and authority. The Highscorer wants to convince and plays to win.

Given the increasing importance of AI analysis tools […], it is therefore essential for capital market-oriented companies to pay more attention to the effect of their CEOs’ preface.

What CEOs need to be aware of

Whichever CEO types are represented, it often has nothing to do with his or her personal character. Astonishingly, year by year, the communication focus and attributes in CEO communication change, making it difficult to constantly typecast DAX leaders in their respective ‘roles’ they played in the previous year. Is this due to the inconsistent leadership style of the German CEO types or are their speechwriters just incapable of creating a consistent profile for them?

These are the questions that will be at the center of the discussion concerning the authenticity and credibility of companies. Given the increasing importance of AI analysis tools and their influence on capital market decisions, it is therefore essential for capital market-oriented companies to pay more attention to the effect of their CEOs’ preface (and their public appearances) and to give them a distinct and consistent communication profile that represents them in an authentic and credible manner. Most importantly, the profile should embody the values of the company.

It is that simple!