For full disclosure, I have been a pilot for 14 years and a CEO for 31 years. So, the answer is clearly YES, from my point of view. Before earning my pilots license, I was very passionate about skydiving and did over 600 jumps from somewhat ‘perfectly good aircraft’. Sitting right seat in the jump plane encouraged my interest in flying. The other contributing factor was my girlfriend – now my wife Kathi – was looking for a sport that we could both enjoy. The one time I got her to jump out of an airplane, she forgot to breathe. In addition to flying and skydiving my other passions are underwater photography and scuba diving. This rounds out the trifecta for high risk sports from a life insurance point of view. They have no sense of humor or adventure.
Interestingly enough I have found that many other pilots also enjoy scuba, and many pilots are also CEOs or VPs and top managers at their companies. The one thing they all have in common is “controlled risk.”
All three of these sports are 3D. Thus, they are exponentially more challenging than most ground-based 2D sports. For most in these groups, they need that challenge to keep them engaged and interested. I took up underwater photography because just scuba diving became boring – the challenge now was to get the best framed photo of something, instead of just seeing something. I took up formation flying to keep engaged and continue to refine my flying skills after completing all the standard certificates – private, instrument, multi-engine and commercial pilot certifications and ratings. When you are flying 150kn with multiple aircraft within three feet of your wing – it keeps your attention.
So, Stephen, we get the point – you like a challenge. But why does that make you a better CEO? Well, last week I ran across this research in a pilot blurb. They said it, so it must be so …
Researchers from Notre Dame University’s Mendoza College of Business and from the University of Oregon have confirmed it: Pilots make better leaders, especially in the corporate setting. In a study that compared the relative success of 179 companies led by CEOs who are pilots and 2,900 led by those who are not, researchers found that pilot-led companies tend to do better, by some benchmarks, than those who don’t fly. “These CEOs tend to complete acquisitions that are more successful than those completed by non-sensation seeking CEOs,” Notre Dame Professor Matthew Cain said. “Their creativity and novelty seeking characteristics lead them into deals that improve the growth prospects of their firms.” The researchers say it’s in those CEOs’ genes to take calculated risks that can lead to better prospects for their companies and it works for the same reason many of them ride motorcycles, skydive and fly aircraft. The same genetic predisposition can also lead to a host of other less noble pastimes.
The so-called Sensation Seeking Scale developed in the 1970s measures behaviors exhibited by “sensation seekers” and flying fits a category of that type of personality. Sensation seekers are also prone to habitual drug use, sex, psychopathy, risk-taking and cognitive innovation. Taking on the challenge of running a big company tends to bring out the best, rather than the worst, facets of the personality type and the result can be greater personal and business success. “Firms led by CEOs who are pilots exhibit corporate policies that differ substantially from those led by non-pilots,” Cain said. “For example, CEO pilot-led firms are more likely to engage in mergers and acquisitions, have more debt in their capital structure -– meaning higher leverage and greater overall stock return volatility. Thus, thrill-seeking CEOs bring a certain element of this personality trait into the executive suite, as reflected by more aggressive corporate policies.”
OK, there may be some downsides to the “Sensation Seekers” personality as stated above. However, I would propose that this personality’s primary skill is managing risk and reward better than others.
When risk is properly managed, it’s not really a significant risk. Because it is risky in the eyes of others, it offers greater rewards. Flying a plane, driving a car or riding a bike are all riskier than walking but the reward is traveling a greater distance in less time. Actually when friends ask me about the risk of flying, I tell them the most risky part of the trip is the car ride to and from the airport, and I mean it. To become a pilot you need 100+ hours of training and continuing education. You have to pass a written, verbal and flying exam and be reevaluated every 2 years including getting a full medical exam. How much training to you think the driver next to you in the fast lane received before they got their license? I expect they have not received any training since, except for maybe comedy traffic school to get rid of a ticket.
Owning your own business or being a CEO is very risky. There are significant demands on your time and resources. You have to think on your feet, see things from multiple angles and make daily decisions that could affect hundreds of employee and partners. One of the things you will be confronted with is choosing or upgrading and implementing a business software system.
Implementing a new business system (ERP, CRM, HRMS) is full of risk for someone who has never done it before. It’s like doing open heart surgery on yourself. If it’s done badly you are in significant danger of losing the business. An experienced team of consultants with thousands of implementations for companies in different industries on your side minimizes those risks. I will be blogging a series of entries on managing the risk of an ERP or CRM implementations over the next month. I hope you will join me as I quantify those risks and offer solutions to mitigating them.
What are your thoughts about CEOs and risk taking? Are CEOs that are risk takers or risk-averse better CEOs?