Wrapping up his first year as CEO, Eric feels that he’s just beginning to get his feet wet. He expected surprises and for the most part was prepared for them. In general he is pleased with the company results although there’s always room for improvement. His board has been cooperative and he has managed to build a few key alliances and supportive relation-ships with some of the most influential members. But he can’t help feel a bit of irritation with their seemingly constant needs for attention and information. It’s hard to run the company when your key lieutenants spend most of their time tracking down numbers and compiling reports for the board. It’s also irritating that many of the board members have only a superficial understanding of his business and the way it really runs. He could have been much more effective had he not been forced to fight a constant stream of regular fires and a couple of potential major crises this year. And of course the never-ending increases in governmental regulation and “assistance” has been a massive burden and distraction. It’s no surprise that he hasn’t been able to really reflect on the appropriate strategies to deal with a quickly changing competitive and technological landscape. But it appears that people have accepted him and have been willing to line up and follow his direction. That’s been gratifying and certainly made his transition easier. However, he is keenly aware that one or two missteps or bad decisions could have a major impact on his ability to maintain their confidence and to continue to lead effectively. He now realizes Shakespeare’s wisdom: “Uneasy lies the head that wears the crown.” But overall, it’s been a good year and he knew what he was getting into when he signed up. Next year, he plans to get a little closer to the ideal expressed by Chinese philosopher Lao Tze a few thousand years ago:
‘A leader is best when people barely know that he exists, not so good when people obey and acclaim him, worst when they despise him. Fail to honor people, they fail to honor you. But of a good leader, who talks little, when his work is done, his aims fulfilled, they will all say, ‘We did this ourselves.’
Barry Switzer, legendary Oklahoma football coach, is reported to be the source of the quote, “He was born on third base and thinks he hit a triple.” Granted, there are people who are born into or who marry into successful business families and wind up running the company. Some of these people are very successful due to their own efforts, but some also remind us of Switzer’s quote. And there are some people who are particularly good at managing getting promoted on the basis of their political skills. But if you’ve had the interest and taken the time to read this far, you’ve probably been successful, or will be successful, due in large measure to your own efforts.
As a CEO, you will hopefully find that the rewards are great. You are also likely to find, however, that there are unexpected burdens and unintended consequences akin to those noted in the introductory article.
The CEO, more than the other top officers, is always on stage and is always held to a higher standard of behavior. Forget this at your peril. Yes, there is a great deal of adulation and admiration for the person at the top. But there is also suspicion, envy and hostility just beneath the surface. Some CEOs sense this on an intuitive level, and might feel a certain amount of guilt or dread as a result. However, others are blind to it, and believe the flattery and the positive press they get merely for having arrived at the position. But as soon as they stumble, they quickly become aware of the precariousness of public opinion, especially if they’ve stepped on too many people on the way up.
Karma is a bitch. To make it worse, and as Ayn Rand pointed out, people despise the good for being good. Of course, people who are successful, especially those who succeed due to their own efforts, are copied and admired; but they are also objects of envy and resentment.
In general, CEOs don’t fail because of a lack of brainpower, motivation, or sense of vision. It’s usually more mundane than that. Of course, the wrong strategy at the wrong time can derail a CEO and the company. But more often it’s just lack of execution. And lack of execution can make it look like the strategy was flawed. People who make it to the top office can be tempted to assume their hard work is over. When that becomes the case, they are likely to start trying to protect their position rather than doing real work. At that point, they are in for a rude surprise. The heavy lifting in this case involves making tough decisions: making sure that all commitments are delivered according to promise, building strong executive teams, holding people accountable, and making the numbers. Failure to install the right people in the right jobs, or failure to address people problems quickly enough, creates a certain blueprint for disaster.
Authors Ram Charan and Geoffrey Colvin have studied successful and ineffective CEOs. Their findings, presented in their article Why CEOs Fail, echo our earlier observations about the characteristics of good people in general (the I-Competencies):
• Integrity, maturity and energy
• Business acumen
• Judgment of people
• Organizational savoir-faire
• General mental ability, intellectual curiosity, and a global mindset
• Great judgment
• An exceptional drive for results and accomplishment
• Strong motivation to grow and to apply new knowledge
So what happens to the lucky (?) few who do make it to the top spot? Be careful what you wish for. Professors Michael Porter, Jay Lorsch and Nitin Nohria summarize their observations on unexpected consequences and surprises when one reaches the top spot in their article, Seven Surprises for the CEO. Although their studies are generally focused on public companies, most of these concepts apply across the board. Below is a summary of their observations, and advice on how to handle them.
You can’t run the company
External pressures and volume of internal demands are much greater than before. In addition, even though your functional knowledge might have been instrumental in getting you to this position, you can’t rely as heavily on it now. You must realize that there are real gaps in your knowledge and expertise, and you have to balance the dual role of Mr. Inside vs. Mr. Outside. Despite the power of the CEO’s position, there’s often a sense of uselessness or lack of real influence.
You can give orders, but it comes with a high cost
Giving orders ultimately triggers defensiveness and resentment because it erodes the authority of your people. If you must constantly overrule their decisions, that’s a sign of your failure to communicate accurately and effectively.
It’s hard to know what’s really going on
You’re bombarded with data, and much of it is unreliable. By the time the information has reached you, it has been filtered to excess.
You’re always sending a message
Everything you say and do is scrutinized, analyzed, amplified, and interpreted. Not only that: it’s often misinterpreted, sometimes drastically.
You can’t think out loud anymore
CEOs find that it’s very difficult to manage the internal and external constituencies, while giving a consistent and truthful message.
You’re not really the boss
If you’re running a public company, the board has ultimate power. Managing those relationships is a drain, even when they’re very good. Even though you thought you’d be calling the shots now, you can’t stop managing upwardly. Before, you had only one boss. Now there might be ten or more, most of whom have little real knowledge about your business; but you can’t ever let your board members feel uninformed. You need to actively develop and drive the relationships, so you can transform meetings with them into participatory, collaborative discussions rather than show-and-tell sessions.
If you’re running a private company, even if you’re the sole owner, you still must depend upon many people over whom you have little or no direct control for ultimate success. Another complicating factor is the increasingly onerous regulatory climate, at least in the US. Due to an excessive governmental appetite for control, facilitated by flawed cultures at a few large companies and their (supposed) regulating authority organizations, CEOs and boards now have to deal with such obstacles as Sarbanes-Oxley. The steady stream of new regulations and threats of litigation make boards even more dysfunctional, so conventional board management strategies don’t apply as well now as before.
Pleasing the shareholders is not the goal
Shareholders and analysts have a short-term mindset. They come and go. The CEO needs to keep the long term in view. The goal is to create sustainable economic value. High stock prices will eventually collapse without a fundamental competitive advantage, and long-term profitability is what matters.
You’re still only human
So don’t believe your positive press or other sources of flattery. You simply can’t do everything well. This is the most draining job, physically and emotionally, that you’ll ever have, and there’s no such thing as balance. There are only trade-offs. Your relationships with family and friends will change, so don’t get so caught up in your legacy that you lose sight of everything else.
What does this mean to the CEO during daily activities? The implications of these observations offer guidelines for successfully navigating the tricky leadership and political waters that are the stuff of every CEO’s life.
First, the CEO must lead by managing organizational context, not day-to-day operations. Many new CEOs feel worthless and powerless – entering the office with a strong pull to do something. Being active and involved is what made them successful up to this point. Now their power comes more from the symbolism of their words and behaviors as from their direct efforts to manage.
Second, the position doesn’t automatically confer the ability to lead, nor does it provide a guarantee of loyalty. The power to really lead and transform must be earned, and can be easily lost if the vision isn’t convincing or if actions are different from the values espoused. Success depends on the ability to enlist voluntary commitment and make people want to follow you.
The CEO and top executive team set the tone and define the organization’s culture and values through words and actions. They demonstrate how to behave.
Finally, failure to recognize you are human, and not omnipotent, results in arrogance, exhaustion, and a short tenure. Take care of business: but also take care of yourself.
CEOs typically fail because of a lack of execution, not because of a lack of vision. The CEO is always on stage, and is always held to a higher standard of behavior. There are sometimes unpleasant surprises at the top, most of which revolve around having less control than anticipated.