How to Be Loved as a CEO

Pan Demetrakakes
October 5th 2016
Retail Leader
Be a company founder or work your way up, create career opportunities, don’t draw excessive pay, and above all, foster a good culture.
Crudely put, that’s how to get esteem and loyalty from your employees as a CEO, according to a recent report and survey from Glassdoor, a job resource and recruiting website that specializes in employee-generated company ratings. The report, “What Makes a Great CEO?”, is based on roughly 1.2 million CEO approval ratings the site received for approximately 70,000 U.S. employers. Some of the correlations were based on long-term observations of 816 CEOs of 690 large public companies.
Glassdoor studied correlations between CEO approvals and a multitude of factors. One of the most basic was type of industry. Retail had the lowest-rated CEOs of all industry segments, with an average approval rating of 61.4 percent. (The overall average rating was 67 percent; the highest was for real estate, at 76.1 percent.)
Several factors might account for this, says Glassdoor chief economist Andrew Chamberlain, one of the report’s authors. Retail tends to lag other segments in profitability, career opportunities and general employee satisfaction, all of which correlate with CEO approval, he says. “However, there are several counter examples we can point to, including highly-rated CEOs in the retail industry such as Costco’s Craig Jelinek (92 percent approval), who is on Glassdoor’s Highest Rated CEOs list for 2016,” he adds.
Satisfaction with the job in general has the strongest correlation with CEO approval, according to the report. “In the eyes of many employees, CEOs are ultimately held accountable for workplace culture, making overall employee satisfaction emerge as a clear driver of CEO approval ratings,” the report says.
Profitability was also a factor, although the correlation was not as strong as for general satisfaction with the company. This relationship was “statistically noisy with many outliers—suggesting many other factors are influencing CEO approval ratings as well,” the report says.
One of these was how the CEO got his or her job. High approval ratings were given most frequently for CEOs who founded the company; next most for those who were promoted from within; and least for those who were hired from outside. The study also looked at the correlation between the length of time a CEO has held the top job, and rises or drops in his or her rating. It showed that for both founders and externally hired CEOs, approval tended to drop the longer they stayed in office, but for internally promoted CEOs, it tended to rise.
Internally promoted CEOs may be higher rated because they epitomize opportunities for advancement, Chamberlain says. “A CEO who has worked her way up is a great example of one who will inherently value career opportunities,” he says. “Our research clearly shows that when workers see an upward career path for themselves in the company, that they credit the CEO for creating those institutions that allow good workers to advance. Our data show that you simply cannot become a highly rated CEO without paying attention to career opportunities and compensation for your workforce.” Career opportunities had a significant effect on CEO ratings, with a one-star (out of five) improvement in perception of opportunities leading to a 3.1 percent improvement in CEO approval.
CEO pay also was a factor. The research showed that as pay, expressed as a percentage of the company’s total assets, went up, approval went down. However, the relationship was not linear and indeed showed a slight positive trend in the middle range, suggesting, the report said, “that the correlation between executive compensation and CEO approval is not simple.”
To access the full report, click here.