No company has a stronger incentive to spot great CEOs than Blackstone, the world’s largest private equity firm.
It owns all or part of more than 200 portfolio companies, each of which must have a CEO who will be on the hook to double or triple Blackstone’s equity in just three to six years—a heavy lift. It’s little wonder then that Blackstone takes extraordinary measures to judge CEO candidates through structured interviews, psychometric tests, simulations, and much more. For decades, PE firms used a specific and seemingly logical formula for choosing portfolio company CEOs: Find someone who possessed hard skills—administrative, financial, sometimes technical—with a spotless record of delivering results no matter what it takes. But Courtney della Cava, who oversees talent for Blackstone’s portfolio companies, says an emphasis on experience and results with little regard for how they were achieved has given way to a hunger for qualities like empathy, humility and self awareness.
“We’re realizing that success and failure hinge primarily on these skills,” della Cava tells Fortune. “The hard truth is, there is nothing soft about soft skills.”
Blackstone isn’t alone. In today’s environment of an uncertain economy, geopolitical crises, and a stock market that has gone nowhere in two years, it might plausibly be time to hire CEOs who kick butt and take names. Yet it isn’t. Experts told Fortune that in publicly traded companies as well as those in the PE world, appreciation of a more compassionate skillset is only increasing.
Cathy Anterasian, a CEO succession expert at the Spencer Stuart executive search firm, believes it’s those soft skills qualities that separate the best from the rest. “What will differentiate the great, the strong CEOs, will rest with their humility and awareness to understand the more complex context of their role,” she says.
The self-aware CEO
The trend of hiring leaders with deep human skills was already underway when the pandemic arrived and turbocharged it.
Until then, CEOs were still supposed to be confident, informed, prepared, and firmly in charge. Then, suddenly, employees were looking to their leaders for answers no one had. Workers were worried not just about their livelihoods but also about their lives, requiring CEOs to connect in an emotional way for which many were not prepared. Laxman Narasimhan, then CEO of Reckitt Benckiser Group, now Starbucks’ CEO, told Fortune at the time: “I found the magic in an organization is about being super down to earth, letting people see you for who you are, with all the vulnerabilities that you face.” Rose Gailey, a consultant at the Heidrick & Struggles executive search firm, encapsulated the change when she said: “Humanity came to the fore.”
As with other societal changes in the pandemic like increased e-commerce and remote work, this one isn’t going away. At the foundation of today’s CEO ideal is self-awareness. It’s “really about, are you self-reflective?” says Jeffrey Hull, who coaches executives and oversees the Institute of Coaching at McLean Hospital in Belmont, Massachusetts. “Do you recognize that there are different perceptions of who you are and what you stand for?” Leaders who can answer “yes” are more likely, among other things, to know when they’re talking too much and listening too little. With growing self-awareness, they listen more and even listen differently. “There’s a hierarchy,” says Dick Patton, a CEO expert at the Russell Reynolds search firm. “Many CEOs listen to win. As they become more comfortable and more successful leaders, they listen to fix. And the highest form is listening to learn.”
Deep self-examination doesn’t always come easy to hard-charging CEOs. That’s one reason more CEOs are hiring personal coaches, which is a notable shift. “When I started coaching 20 years ago, it was very much a remedial activity,” says Hull. “Most of my early assignments were for the troublemakers. They were the rainmakers, but they were also toxic. That has fundamentally changed.” For today’s self-aware, humble, vulnerable CEOs, having a coach just seems logical.
To skeptics, all such talk may seem not just warm and fuzzy, but also soft and squishy. For decades, CEOs and the boards of directors that hired them prized toughness above all. (Fortune even ran articles about “America's Toughest Bosses.”) But a recent paper supports today’s CEO ideal. Researchers at the University of Pennsylvania, the University of Waterloo (Canada), and Wake Forest University, who studied “intellectual humility,” found that the more people can recognize the limitations of their own beliefs and knowledge, the more likely they are to make good decisions. Specifically, they’re “better able to differentiate between strong and weak arguments, even if those arguments go against their initial beliefs,” the study finds. They’re more likely to scrutinize misinformation. They’re more motivated to learn, and they learn more. Their followers also appreciate it: “Leaders who are higher in intellectual humility are also higher in emotional intelligence and receive higher satisfaction ratings from their followers.”
Companies are now trying to identify potential CEOs who have those highly valuable soft skills, but it isn’t easy. “I’m like an anthropologist trying to really understand humans,” says della Cava. “Humans are complex.”
She puts CEO candidates through structured interviews—not the loosey-goosey tell-me-about-yourself kind—and gives them tests to measure their knowledge, personality, or cognitive skills. She uses “forensic referencing,” checking with a broad range of people the candidate has known. The final interview is a working session with the board of directors of the portfolio company for which the candidate might become CEO. The candidate has been briefed extensively and may be expected to talk about strategy, vision, or risks. “We learn more about them in 90 minutes or two hours than we did in all those cumulative hours” spent on other assessment tools, della Cava says. Together, those tools reveal skills of self-awareness, humility, and empathy, yielding a rounded picture of the candidate.
The system is “wildly predictive and wildly valuable,” she says, but “it doesn’t scale.” Maybe someday AI will streamline the process. For now, assessing potential CEOs remains slow and expensive.
Satya Nadella vs. Steve Jobs
It’s worth remembering that while leadership principles may be eternal, the weighting of each principle can change with the times.
Consider two tech CEOs: Steve Jobs and Satya Nadella. As Microsoft’s CEO for nearly 10 years, Nadella has been stunningly successful, increasing the company’s market value from $314 billion to $2.8 trillion. Anterasian cites him as a standout example of a CEO who, like most CEOs, has a substantial ego, but who also exhibits humility and self-awareness.
Jobs, as Apple’s co-founder and longtime CEO, was an all-time great entrepreneur and innovator, but no one would ever have called him humble. Some of his greatest admirers would acknowledge that he could be an egotistic jerk (and they might use a more pungent term). His greatness is beyond dispute. But he died 12 years ago and worked his magic in a different world.
“It's just not viewed as cool anymore to be a Steve Jobs-type character,” says Hull. “It used to be what you would aspire to be, but that has lost its cachet.”
