Leadership Success: Evaluating CEOs based on Financial and ESG Metrics

This article discusses the evaluation of CEOs based on financial and ESG metrics, challenges faced by leaders in balancing these metrics, and how leaders should address these challenges. It also highlights the success stories of top CEOs like Pablo Isla, Sir Martin Sorrell, and Jensen Huang.

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LEADERSHIP SUCCESS
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Introduction
The role of the CEO’s in the modern business is not only about driving the firm to
success through financial progress. The additional responsibilities of the modern day CEOs
include the regulation of the corporate responsibilities that the company bears to the society
(Sbs.ox.ac.uk, 2018). The evaluations of the modern CEOs are determined by their ability to
bridge the gap between their thought process and the company activities. Although, the
experiences of the CEOs play a major role in the company, according to Colbert, Barrick and
Bradley (2014), the modern trends of leadership expect the CEOs to develop with time. The
following discussion takes into consideration the Harvard Business Review’s ranking of the
world’s best CEOs. The discussion takes into account, Pablo Isla, the CEO of Inditex, whose
visionary ideas have led the company to success over the years. The discussion also focuses
on Sir Martin Sorrell, who has been leading his company WPP with exemplary ideas for over
more than 33 years. Jensen Huang, the CEO of NVIDIA is another prominent CEO, whose
philanthropic nature has enabled him to make the difference in the role of a leader. The
discussion further highlights and analyses the different factors that are considered while
evaluating the effectiveness of the CEOs. The discussion also focuses on the importance of
the financial and the environmental, social and governance metrics for determining the CEOs
and the different challenges that can be faced by them and how the leaders can address those
challenges.
Discussion
1. In today’s turbulent world, how should the success of CEOs be evaluated?
The founder of Amazon, Jeff Bezos, can be considered the world’s best CEO if only
the company’s financial progress is taken into account. This factor had been detrimental in
making him the world’s best CEO in 2014, according to the Harvard Business Review

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(Hbr.org, 2018). However, the scenario has changed since then and the reviewers have started
taking into consideration several other factors in determining the effectiveness of a CEO. In
2017, though Amazon remains one of the top grossing companies in the world, Jeff Bezos’
position has declined from number one to number seventy-one in 2017 (Hbr.org, 2018). It is
very difficult to determine the exact role of the CEO, as they are involved in several actions
at the same time. According to Pablo Isla, the number one performing CEO in 2017
according to the Harvard Business Review, “Every day is like the first day- full of surprises”
(Hbr.org, 2018). This clearly explains that the CEO has number of responsibilities to look
after and execute them with the proper insight and planning.
If the discussion is to be on determining the role on which the CEOs are evaluated,
then for the better understanding, these roles can be divided into six different factors, which
can roughly compartmentalize their roles and their effectiveness (Sherman & Young, 2016).
Firstly, a CEO is a person who heads the company operations and is responsible for the major
decisions of the company. Hence, it is very important for the CEO to have a proper vision of
the company’s objectives. According to Barrick, Thurgood, Smith and Courtright (2015),
these visions can include the corporate strategies, the values of the company, and the
corporate responsibility of the company and the commitment of the company towards the
stakeholders.
The second role that is detrimental for the evaluation of the CEO of a company is the
choice of the human resource of the company (Sherman & Young, 2016). It has been heard of
many CEOs saying that the most important part of the company is the human resource of the
company. Hence, it is very essential to evaluate the choice of the human resource of the
company for the effectiveness of its competitive strategy. As has been suggested by Lisic,
Neal, Zhang and Zhang (2016), a company may be hiring talented professionals for the
growth and development, but the most essential thing in this process is determining whether

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the choice of the human resource puts the company in a competitive advantage over the
others. While the task of human resource acquisition is the responsibility of the human
resource management, the primary responsibility falls upon the CEO who should look after
the planning and determining the full potential of the team so that the company can have a
full competitive advantage over the others.
Thirdly, the CEO is responsible for the procurement of sufficient capital and other
resources for the company. Capital and other financial resources are very essential for the
proper running of a company. The resources can be generated from both external and internal
sources of the company. Carmeli, Tishler and Edmondson (2012), believes that the
responsibility of the CEO is to identify the needs and requirements of the company. A further
analysis of these issues can help the CEO to understand these requirements and organize the
arrangement of the capital and other financial resources so that there are no shortages in the
resources. Shortages in resources can lead the company to miss many challenges. On the
other hand, Eisenbeiss, Van Knippenberg and Fahrbach (2015), believes that the CEO can be
judged on the ability of assuming the right choice of advice for the company and acting
accordingly.
The fourth aspect on which a CEO is evaluated is by the ability to develop the work-
culture in a company. As has been suggested by Sherman and Young (2016), it is highly
essential for the CEO to analyse the working environment and develop a work-culture that is
beneficial both for the company, the employees and the stakeholders. This type of positivity
can help the company to grow and develop. However, if the CEO is unaware of the working
environment, then a work-culture might develop automatically and after a period of time, the
CEO, being unaware of the fact loses control over the working environment. This leads to the
deterioration of standards of the company which proves harmful for the company in the long
run.

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The fifth and final aspect on which the performance of a CEO is determined is the
ability to take decisions and perform well. Hartnell, Kinicki, Lambert, Fugate & Doyle
Corner (2016), believes that being the head of the company, the ability to take the final
decision falls on the CEO. It is essential for him, to understand and analyse all he situations
that are related to the decision and the overall impact that the decision can make both on the
company and as well on the society. This can lead to the formation of a sustainable decision,
which can guarantee a good performance from the CEO.
2. What are the challenges of focusing on just financial metrics to the long term
success of organizations?
According to the Harvard Business Review, the financial reports of a company are the
true reflection of a company’s success only in a utopian world. The different stock prices or
the revenue charts can reflect the company’s success but in the real world, it is essential to
judge the decisions which led to the figures of the financial statement. As has been suggested
by Boehm, Dwertmann, Bruch and Shamir (2015), relying solely on the financial metrics
hence, can prove to be harmful for the actual evaluation of the success of the CEO as it will
leave out many major decisions. Secondly, the financial metrics brings a comparison between
two companies, but the figures are not always detrimental in judging the success of the
company. The unofficial reflection might create confusion in the actual evaluation process
and might overlook the areas of decision making which are in the actual need of change.
Regardless of the heap of changes, corporate accounting stays unclear. The
organizations keep on finding approaches to determine the framework, while the
development of online stages has drastically changed the focus of competition for all
organizations. This status report takes a deeper look into the advancements of money related
announcements but at the same time considers the effect of the new standards administering

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income acknowledgment, the determined expansion of informal execution measures, and the
difficulties of the evaluation of the other sources.
For example, the top performing CEO of 2017, Pablo Isla, has been responsible for
the successful growth of Inditex since 2005 when he had taken power as the CEO of the
company (Hbr.org, 2018). His success is reflected in the financial metrics of the company,
but at the same time it is to be considered that there are several other factors which have led
to this success. As has been discussed earlier, if the success had been solely measured on the
financial metrics, the number one CEO would have been Amazon’s Jeff Bezos, who is
currently ranked seventy one. Now the question arrives that what has made Pablo Isla the
number one CEO. The answer lies in the fact that he has taken several measures which has
sustainably developed the company’s success rate. Isla has focused on the opening of stores
of the company which is now calculated to be an average of one store a day. However, he has
always remained away from the limelight and avoided being present on the opening events.
His particular focus is on the management of these stores. His small gestures have turned into
a huge organizational work-culture and have put Inditex on the global market. Moreover, he
is also said to be committed to stop all chemical use in the Inditex factories by 2020, which
also reflects his concern for the environmental impact.
Similarly, Sir Martin Sorrell is one of the most iconic CEOs to have graced the
position. Having served as the CEO of WPP, the world’s largest advertising agency, for over
33 years, Sorrell established the idea of a responsible CEO. He is second in the Harvard
Business Review in the year 2017 (Hbr.org, 2018). According to Sorrell it was improper for
the agencies or organizations to focus only on the financial gains, and forget the true purpose
of the organization. When he referred to the advertising agency, he said that the media houses
were losing the originality and the authenticity of the content in order to compete with the
other agencies. The degraded content, in no way did justice to the reputation of the company.

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Sorrell believes that the reputation of the company depends on its quality and not solely on its
financial achievements.
A similar idea has been reflected by another successful CEO of the 2017 Harvard
Business Review, Jensen Huang (Hbr.org, 2018). The founder of NVIDIA has always
focused on the different aspects of a business besides the financial gains. It is evident that for
the CEOs of such high stature, financial gains are the primary part of their success but for
Huang, it is the additional efforts that make the difference. For example, NVIDIA is one of
the largest computers Graphics Company in the world, earning billions of dollars as revenue,
but what put Huang on the top list is not only the financial success but the philanthropic side
of the company. Huang is known for philanthropic activities and NVIDIA stands from the
rest of the organizations for its philanthropic standpoint. The corporate responsibility that
NVIDIA bears for the society, to give back something for the betterment of society, makes
Huang different from the other CEOs. This aspect even creates a positive work-culture in the
organization which helps in its further growth and development.
3. What are the challenges leaders face in balancing financial and ESG
performance metrics? Drawing on current leadership research (in the last 5
years), discuss how leaders should address these challenges.
The different organizations have different ways of evaluating and incorporating the
ESG metrics along with the financial metrics. According to García-Morales, Jiménez-
Barrionuevo and Gutiérrez-Gutiérrez (2012), these incorporations have their impacts on the
investments and capital procurements, which indirectly achieves the financial gains for the
company. While there are no particular frameworks yet for the technical analysis on how
these metrics are balanced against each other, these factors solely depend on the judgement of

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the CEO. Herein, comes the expertise, decision-making abilities of the CEOs who try to
identify and analyse the events, and accordingly balance the incorporation of the metrics.
According to Ng and Sears (2012), the more technical aspect of these incorporations
include the formations of sustainability boards in the organizations which can periodically
monitor the different sustainability reports and inform the CEO of the present condition of the
organization. This is a more reasonable method which can help the CEO to understand the
problems and the requirements more effectively. This understanding can help the CEO to
determine the amount of investments to be made accordingly. However, there are certain
challenges that the CEOs need to keep in mind while determining the metrics for the
development of the organization.
Firstly, it is very essential to understand the type of sustainability the company is
focusing upon. As has been suggested by Vaccaro, Jansen, Van Den Bosch and Volberda
(2012), the diverse sustainability objectives and its impacts are very important to be
identified. The CEOs must identify the type of sustainability the company is targeting and
balance accordingly so that the positive externalities can be properly channelled in the right
direction.
Secondly, it is important to determine the sustainability value. According to O’Reilly
III, Caldwell, Chatman and Doerr (2014), while some organizations believe to value
sustainability in terms of financial benefits, there is no particular framework to value the
amount of sustainability. If a mechanical approach is taken towards it, then it becomes very
difficult to determine the essentiality of the sustainability measures. However, it is the CEOs
who can determine the effectiveness of the sustainability with a practical approach to the
requirements and problems. This approach can decrease the risk factor and enable a positive
effect on the execution of the metrics in the business operations.

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The third and the most important factor is the far-sightedness of the CEOs. As has
been suggested by Wilderom, van den Berg and Wiersma (2012), while there are several
departments and teams in an organization, which determine the effective running of the
organization by constantly monitoring and analysing data and other case studies, it is the
CEO who makes the difference. The primary ability of the CEO is to determine whether the
data or the case studies have put them in a competitive advantage over their competitors. This
requires more practical knowledge than theoretical knowledge. The long-tern experience and
the self-development with the modern requirements makes a good CEO effectively balance
every sustainability requirement of the company.
Conclusion
The above discussion highlights the key characteristics of a successful CEO. The
evaluation of a CEO highlights different points other than the financial gains of the company,
such as vision and decision-making abilities. Moreover, the discussion also focuses on the
importance of the financial and the environmental, social and governance metrics for
determining the CEOs and the different challenges that can be faced by them and how the
leaders can address those challenges. The key characteristics of some of the most successful
CEOs have been taken into consideration. It can be concluded from the essay that a
successful CEO is determined not only by the financial gain that the leadership has given to
the company but also the overall sustainable development that has been achieved in the given
time period.

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