Who needs chief executives?

It's reported that ITV are struggling to find a new chief executive. Which raises the question: why do companies need chief executives?
Here, there's a large gap between reputable economics and managerial ideology. The ideology talks of leadership, motivation and strategy.
Mainstream economics, though, takes a different view. It (for example this paper by Oliver Hart and John Moore) says the role of chief executives is to co-ordinate complementary assets so as to maximize their joint value - synergies, in management-speak.
Motivation, however, needn't come from bosses at all. This paper (pdf) by Enrico Moretti and Alexandre Mas shows that peer pressure from co-workers can do that.
Nor is it obvious that chief executives are necessary or sufficient to  drive strategic change. For one thing, if a new strategy were obviously desireable, it could be adopted by sub-CEO company managers, via wisdom of crowds effects. And for another, genuinely new products and processes are often embodied in brand new firms, rather than by existing firms changing direction. Organization capital is inflexible, as Boyan Jovanovic discusses here (pdf) and here (pdf).
All this has applications not just to trivial matters like corporate structure, but to the important business of football. Proper economics says the role of Steve McClaren should not be leadership and motivation - that can come from anywhere - but ensuring that the team performance is greater than the sum of its parts. And this is something he and his predecessor have so far failed to do.   

Comments

[james higham]

...Nor is it obvious that chief executives are necessary or sufficient to drive strategic change...Chris, I see where you're coming from and that's your eco-view but it seems to be the old 'benevolent despot v mediocre democrat' argument. If the CEO is really good, he/she can work wonders in the company - I've seen it happen.

[Jack]

Is this a bit like saying you don't need a farmer because plants and animals grow on their own?

There is a real coordination problem and real conflicts over resources.

CEOs, Capi de Capo, Emperors, Kings, Prime Ministers, Fund Managers, Football managers, Judges, team captains and Governors are ubiquitous. Where are the alternatives?

Also it would be easy to underestimate the extent to which some good CEOs operate systems of the kind that you describe.

[chris]

Sorry, chaps, you're making a a common mistake. You seem to think the case for CEOs is based upon what good ones can do. But most CEOs by definition aren't good. My question is: what does the average CEO do for a company?
Jack - I wasn't at all decrying the importance of coordination. Quite the opposite. It's under-rated relative to the heroic functions that CEOs like to give themselves.

[Jack]

Fair enough. Too much skepticism though and they wouldn't be able to co-ordinate things, that is the myth might be the point, even if it is only a myth.