After winning six Super Bowls with the New England Patriots, quarterback Tom Brady won an unprecedented seventh championship in 2021 with the Tampa Bay Buccaneers-raising questions about how much he needed Patriots head coach Bill Belichick to win his six previous titles.
In the business world, investors might be asking themselves something similar as Jeff Bezos transitions out of his role as Amazon’s CEO. Politicians have been subject to these discussions too: How much credit should presidents get for economic growth? How much blame do mayors deserve for spikes in violent crime?
A new study from University of Chicago Harris School of Public Policy Profs. Christopher Berry and Anthony Fowler challenges assumptions about leadership by investigating whether the decisions and actions of coaches, CEOs, and political executives at the national, state and local level materially change the course of events.
"From barstools to boardrooms, how much leaders matter remains a subject of impassioned debate and has fascinated scholars for centuries," said Berry, the William J. and Alicia Townsend Friedman Professor at Harris Public Policy and an expert in municipal governance. "Yet, despite universities offering advanced degrees in leadership and airport bookstores featuring bestsellers on the topic-implying that leaders very much matter-there is little evidence to suggest whether or not that is actually true."
Published in Science Advances , the study introduces an innovative method for statistically testing leader effects, which offers several advantages relative to previous approaches. The Harris scholars call the method "randomization inference for leader effects," or RIFLE. They outline the benefits of this new methodology and shows that the impact of leaders varies across fields. According to their study, leader effects are real, but their impact varies across different sectors, with the greatest impact of leadership seen in sports and the least in business.
Fowler, an expert on the politics of legislative policymaking, explained that "RIFLE has wide application, offering a framework to understand whether leaders matter in most instances, including school administrators, non-profit management, and others-any setting where there is an objective outcome of interest and leaders who serve different periods of time."
The study introduces new findings on CEOs, building on prior research about leadership from Berry and Fowler. Here’s more of what the scholars found, by sector:
Overall, across different sports and different measures of success, coaches explain as much as 30 percent of the variation in team performance.
- Football: NFL coaches affect points allowed and the point margin. They significantly affect the number of fumbles and penalties a team commits. Coaches matter more in college football than in the pros.
- Basketball: Coaches are highly significant in both NBA and Division I college basketball outcomes, influencing points scored, points allowed, point differential and victories.
- Baseball: MLB managers affect runs scored, runs allowed, run differential and victories. They have greater impact on runs allowed versus runs scored.
- Hockey: NHL coaches matter, although they matter much more for goals allowed than goals scored.
CEOs of major U.S. corporations
Aside from the single outcome of cash holdings, little evidence emerges to show that CEOs systematically affect the performance of their firms, including on measures such as return on assets (ROA), investment and cash flow. This could be because CEOs don’t matter, or it could be that firms have such effective practices for hiring and incentivizing CEOs that most perform similarly.
World leaders influence their economies. Dividing countries into three categories-those that were always democracies, those that were always autocracies, and those that changed their status at least once-some evidence exists showing moderate leader effects on the economies of autocracies and strong evidence of leader effects in transitional countries. The scholars found little evidence of leader effects in democracies, possibly because democracies more consistently select high-quality leaders or because strong institutions can partly counteract the effects of a bad leader.
Governors influence fiscal policy and crime, but not overall economic prosperities. Although governors differ in their abilities or appetites to raise and spend money, including federal aid, those differences do not translate into differences in state income and employment. Governors do, however, influence property and violent crime rates, but not because of their political affiliation. There is little effect on crime when comparing Democratic versus Republican administrations.
Mayors in the 100 largest U.S. cities exert little influence on some of the most important outcomes in a city-the economy, the size of city government, and crime rates. One possible explanation is that mayors lack control over governance and service provision within their jurisdictions.
Citation: "Leadership or luck? Randomization inference for leader effects in politics, business, and sports," Berry and Fowler, Science Advances, Jan. 20, 2021. DOI: 10.1126/sciadv.abe3404
--This story was first published by the Harris School of Public Policy.