Alex Lukianov, former CEO of NuVasive, Inc.—the $2 billion manufacturer of spinal implants—has left the building.
A few weeks before, Keith Valentine left the position of president of NuVasive although he is an advisor to the new CEO.
The two departures are unrelated but they may signal a turning point, we think, at NuVasive.
Importantly, many of the original managerial team that built NuVasive remain including Pat Miles, now NuVasive’s president and chief operating officer.
Expense Reports and Personnel Issues
Alex Lukianov’s departure from NuVasive was not by his choice, apparently.
Speaking for NuVasive’s board, Jack R. Blair, lead independent director of the Board, said in a press release issued on April 1: “The results of an independent investigation overseen by the Board of Directors revealed that Alex had not complied with certain of the Company’s expense reimbursement and personnel policies. Although the amounts involved appear to be immaterial to the Company’s financial results, his actions in this regard were not representative of the high standards by which NuVasive operates. We believe this leadership transition is appropriate and in the best interests of the Company and all of our stakeholders. We appreciate the positive contributions Alex has made to the Company and wish him well in his future endeavors.”
Corporate Leadership
When Alexis Lukianov joined NuVasive in 1999 (two years after it was founded) the company had no sales and was losing about $6 million a year. The next year NuVasive sold $52, 000 of classic spine fusion products—and lost $14 million.
Today, 16 years later, NuVasive employs 1, 500 people, is the third largest spinal implant supplier in the world with annual sales in excess of $760 million and has a market value of more than $2 billion.
Alex Lukianov was NuVasive’s charismatic CEO during this entire period.
The news that Lukianov has been asked to relinquish his position at the firm is both sobering and surprising. We have great affection and admiration for Lukianov and the entire NuVasive family, so we know these are very difficult times for all concerned.
Hearing this news, however, did prompt some reflection about the broader issue of leadership.
NuVasive is a very different company from the struggling firm Lukianov joined in 1999. With 1, 500 employees and a $2 billion market cap it’s certainly a more stable firm but it is also a company with substantially more restrictions on managerial decision making.
In some ways, larger public companies like NuVasive feel more vulnerable and therefore act in more defensive ways than start-up firms. Boards of such companies think in terms of the tens of thousands of people who depend on these managers for at least some portion of their economic livelihood. And with all of these assets—people, intellectual property, sales, earnings and that large bank account—there is simply more to lose. So the rules of managerial behavior are not only well proscribed, but carry consequences when they are not followed.
Here is how Wells Fargo analyst Craig Bijou characterized Lukianov’s departure in his research report to institutional investors:
“With Alex’s resignation and COO Keith Valentine’s recent departure, the two primary drivers of NUVA’s culture have now left the company. Although the departures are not related, we believe that there will be a change to the culture. While the cultural change could lead to some disruption, we believe that the remaining leadership such as Pat Miles and Matt Link has the confidence of surgeons and the industry. We view the perceived cultural change as positive because NUVA appears to be transitioning to a more mature culture as it has moved from a small spine player to the #3 spine company in the world.”
It will be hard to imagine NuVasive without Valentine or Lukianov. Their personalities were stamped on NuVasive. Without them does NuVasive’s culture mature in some way and, if so, is the Cheetah an endangered species?
Corporate Culture and CEO Leadership
Different leaders are needed at different stages of a company’s development.
In their seminal meta-analysis of the impact of CEO personality and corporate culture (The Promise and Problems of Organizational Culture: CEO Personality, Culture, and Firm Performance) authors Charles O’Reilly, David Caldwell, Jennifer Chatman and Bernadette Doerr from Stanford, Santa Clara University and UC Berkeley, respectively, had fascinating insights.
Their conclusion? “Taken together a clear picture emerges showing that CEO personality is significantly related to organizational cultures: CEOs with a personality that is more open to experience have cultures that emphasize adaptability; CEOs who are more extraverted but less agreeable and more neurotic have more results-oriented cultures; and CEOs who are more conscientious have more detail-oriented cultures.
Here are four questions these top researchers asked as part of their research.
- Are CEOs who are higher on extraversion (optimistic, energetic, prefer interactions with others) more likely to be associated with corporate cultures that are (a) more results oriented, and (b) more collaborative?
- Are CEOs who are high on agreeableness more willing to compromise and avoid conflict and therefore have cultures that are more collaborative and less results orients?
- Are CEOs who are high on conscientiousness (have a tendency to control impulses and tenaciously pursue goals) more likely to be associated with cultures that are detail-oriented, results-oriented and higher in integrity?
- Are CEOs who are high on neuroticism (emotionally unstable and upset with minor threats or frustrations) more likely to be associated with cultures that are less results oriented and less collaborative?
The Answers From the Study
Here are some of the results the authors found from their research as they were attempting to answer these questions.
“After controlling for these differences and firm size, the results reveal a number of significant relationships between CEO personality and firm culture, providing support for the general hypothesis that variations in CEO personalities will be associated with differences in organizational culture.”
Specifically, the researchers found that:
Question #1: CEOs who were more extraverted (gregarious, assertive, active) had cultures that were more results-oriented.
Question #2: More agreeable CEOs (trusting, compliant and compassionate) were associated with less results-oriented cultures.
Question #3: CEOs who were more conscientious (orderly, disciplined, achievement-oriented) had cultures that were more detail-oriented.
Question #4: CEOs who were higher on neuroticism and less emotionally stable were more likely to have cultures that were less results-oriented.
Discussion
In terms of NuVasive, the culture that the original team fostered and built was characterized both internally and externally by such catch phrases as “Speed of Innovation, ” “Performance Culture” and the image of the Cheetah. It resulted in a remarkable string of truly innovative products and a sales growth trajectory that placed NuVasive well on the way to $1 billion in sales.
Hopefully, the culture that created NuVasive will continue to deliver the kind of performance that made the company so successful.
However, NuVasive’s duty as an organization is more than just to maximize profits. There’s more—like appropriate corporate controls and corporate governance. In short, NuVasive’s definition of performance may start to expand as a result of these changes. In the future, performance may come to encompass every stakeholder, the perhaps overly restrictive regulatory accountability requirements and more efficient use of SG&A.
O’Neill, et al.’s study of CEO personality and corporate culture had, we think, two important conclusions and implications.
First, CEO’s personalities do affect organizational culture and performance. And no single, specific CEO personality is right every time or for every stage in a company’s life. Perhaps, in certain circumstances, a board may prefer a more extraverted CEO who is otherwise low in agreeableness and neuroticism. Or, alternatively, a company may need someone who is more detail-oriented who is highly conscientious. Or, as a third possibility, a company may need a CEO who can build not only revenue growth but also employee attitudes.
Second, the perception of a CEO’s personality is extremely powerful. This study really enforced the notion that top executives are intensely scrutinized by employees, board members, shareholders and Wall Street analysts. CEOs need to be aware of the impact they have on culture and the people around them.
NuVasive’s Future
NuVasive’s future is nominally in the hands of its Board and more specifically in the hands of Greg Lucier, a member of the company’s Board of Directors since 2013. Lucier is now NuVasive’s chairman and interim CEO. He was formerly chairman and CEO of Life Technologies. Lucier built Life Technologies into a $4 billion revenue company and eventually sold it to Thermo Fisher Scientific in 2013 for about $14 billion.
So far, Wall Street’s reaction to Lukianov leaving is mixed. And NuVasive’s market value is down about 5% since the announcement.
So we think there will be a period of settling down and sorting out. And it’s hard to imagine that NuVasive’s culture of speed and innovation will go away, but it may have new aspects to it and those will, no doubt, reflect the new CEO’s personality.
