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As the cited research reveals, while their decisions may have an impact across the organization, the results can be mostly be attributed to luck. They are bein
by dvtv75 10y ago
As the cited research reveals, while their decisions may have an impact across the organization, the results can be mostly be attributed to luck. They are being paid astronomical amounts not for being smart, not for ability to read the markets, nor for hard work, but simply for being able to convince someone else that they are responsible for being lucky.
- gnicholas 10y agoThe fact that some outcomes are driven by luck does not mean that there isn't still a very large difference from small differentials in skill/experience/dedication. Imagine a company with $100M in annual revenue and an annual growth rate between 10 and 20 percent. On average, the growth rate would be 15% (say), and skill of the CEO could have some impact that pushes it up or down 10% (that is, ±1.5%). The difference between 13.5% an 16.5% represents a $3,000,000 revenue differential. The impact on profits is likely much higher (due to fixed costs of production, which exist in nearly all industries). So even if you take the research findings as true, it still makes sense to prefer an executive with more skill, experience, and dedication. Even if 90% of outcomes are driven by luck, the 10% that he or she contributes is still meaningful.