David Zhu of Arizona State University and two co-researchers used Social Security Administration data to assess the frequency of given names in the United States and then mapped the results against the first names of the CEOs of 1,172 public firms and financial data on those companies over a 19-year span. Their analysis showed that the more uncommon a CEO's name was, the more the organization's strategy deviated from industry norms. The conclusion: CEOs with unusual names pursue unusual strategies.
Professor Zhu, defend your research.
Zhu: Studies in psychology show that people with uncommon names are identified early on as being different from their peers. And because we develop our self-conception largely in relation to others, children viewed as outsiders in that way will internalize those perceptions and see themselves as different from other kids. That sticks with them into adulthood, and it seems that those who become CEOs often express their distinctiveness in the strategic choices they make.
Harvard Business Review (HBR): But people with unusual names are often teased or bullied as kids. Surely that would make them want to conform, not stand out.
A: In the short term, yes — having an unusual name can spark negative reactions that harm someone's self-image. In time, though, many people overcome those challenges and rebuild their self-esteem. Not everybody develops the confidence to exhibit their differences, of course. But CEOs are generally very self-assured individuals, so they might be more likely to try to stand out than other people with uncommon names.
Q: How did you measure strategic distinctiveness?
A: We looked at six ways in which companies allocate resources: advertising intensity, inventory level, purchases of new plant and equipment, R&D intensity, nonproduction overhead and financial leverage. All have a strong effect on a firm's performance, and all are likely to be under the CEO's control. For each dimension, we calculated the absolute difference between what a given firm allocated and the average allocation of all other firms in the same industry in each year. We standardized those scores and added them up to arrive at a composite measure of strategic distinctiveness. If a CEO's resource allocations across those dimensions are very different from the industry averages, the company is doing something pretty unique.
Q: How much did the unusually named CEOs' strategies vary from those of their peers?
A: It depended on the oddity of the name. Comparing chief executives with slightly uncommon and slightly common names — an Eric versus a Mike, say — we found that the strategies of the former were about 4% more distinctive, on average, than those of the latter. As the names got more unusual — as you looked at an Elon, for example — the gap widened.
Q: Did the distinctive strategies pan out?
A: We didn't investigate that, but it's an interesting question. A leader pursuing a unique strategy needs to overcome a lot of challenges, including questions about whether that strategy is legitimate. Overall, existing research shows that departing too much from peers' strategies can be harmful, as can pursuing a strategy that is too similar. You want your strategy to be moderately different.
Q: Couldn't other factors encourage a leader to march to a different drum? If people had unusual backgrounds or career paths, they might also tend to make unconventional choices, no?
A: We controlled for numerous factors, including education, work experience, gender, firm size and performance, and characteristics of the board. Even after taking those things into account, we got the same results. We also controlled for ethnicity and country of birth, both of which could influence name uncommonness in the United States without necessarily making people think they are different from their peers. The effect was still present, but we did find some evidence that it was weaker among CEOs born elsewhere.
Q: Were there any other factors that heightened or diminished this uncommon CEO name effect?
A: Three things had an influence. First, CEO confidence. We measured that by looking at how leaders exercised their stock options, because prior research indicates that a CEO who retains more exercisable options is more confident about the future of the company than a CEO who cashes in. The effect of an uncommon name on strategic distinctiveness was 48% stronger when confidence levels changed from one standard deviation below the mean to one standard deviation above it. CEOs with low levels of confidence often chose to conform to industry norms — essentially hiding how unique they believed themselves to be.
The second influencing factor was the context in which executives were operating. When an industry is prospering, there are more opportunities to pursue differentiated strategies; you can thrive in many ways. When it's declining, there's a high risk that an unusual strategy will fail, so the CEO's actions are constrained. By tracking year-to-year industry sales, we calculated each industry's capacity for growth. Uncommon names had 95% more influence on strategic distinctiveness in industries whose capacity for growth was one standard deviation above the mean than in industries where it was one standard deviation below the mean.
But the biggest moderating factor was the CEOs' power — whether chief executives also served as board chair, how long they had been in office relative to their directors, how much company stock they held, and so on. The more power an uncommonly named CEO had, we reasoned, the greater the likelihood of pushing an unusual strategy through. The change in effect between the standard deviations from the mean here was a whopping 144 per cent.
Q: What does all this mean for how corporate boards handle CEO appointments? Should they be thinking about candidates' first names?
A: That could be an effective tool in selecting the type of leader that's desired. If a board wants a new leader to shake things up, appointing someone with an uncommon name will probably help. The directors won't have to provide a lot of incentives; that executive will naturally want to chart a unique course. Conversely, if a company's strategy has strayed too far from the industry average, appointing a James or a Jennifer could help.
Boards should also pay attention to other managers' names as they're grooming the next generation of leaders. If they anticipate that the company will need some major changes in the next 10 years, giving people with unconventional names more development opportunities could be a smart move.
Q: What about employees? Should I worry that my editor-in-chief is named Adi?
A: We studied only CEOs. But leaders with uncommon names who want to demonstrate their uniqueness can affect all types of stakeholders. There could be bigger rewards if their strategies succeed — and bigger losses if they fail. So there's apt to be more uncertainty. At the same time, uncommonly named CEOs might be more receptive to creative ideas from employees and to product and process improvements. In a supplementary analysis, we found that their firms engaged in more innovation activities than others did.
Competitors should also think about these findings. If the head of a rival firm has a distinctive name, he or she is more likely to make a move you haven't seen before. That leader might inject a lot of surprise into the competitive environment — and a lot of new energy, too.
- Harvard Business Review