Case Study: Value of a CEO

Excerpt from Analyzing Alibaba’s Magic by Jae C. JungYasheng Chen.

CEOs have ridiculous pay and get a lot of praise. Most of us know that they run the company, but do we actually understand what they do? What value they bring other than a pretty face to the brand?

According to McKinsey, “What the CEO controls—the company’s biggest moves—accounts for 45 percent of a company’s performance.” What a CEO does on a day-to-day basis varies too much to place a single description of the job, however, the commonalities include building the strategy, building the team, and shaping the company culture. Here is an example of the value CEO’s bring to a company through the case study of Alibaba’s founder and CEO Jack Ma.

Alibaba chief executive officer Jack Ma is a visionary who is fluent in English and understands the direction of China’s government policies. He has a long-term vision (a 30-year plan), can quickly adapt to new directions, and efficiently communicates his vision and encouragement to employees and investors.

Jack Ma persuaded 17 entrepreneurs to help start Alibaba in a small apartment in Hangzhou. He also successfully enticed senior managers at Goldman Sachs, SoftBank, and Yahoo, and other venture capitalists.

Ma also brought to Alibaba experience as a government official, where he learned essential skills in navigating China’s bureaucracy, corporate policies, and compliance.

Arguably, Jack Ma’s environment—an institutional void—made him a more influential leader. As some experts contend, uncertainty in his business environment enhanced the CEO effect by disrupting established patterns of corporate behavior, and by allowing greater managerial discretion and less oversight.