What Makes a Great CEO – be careful what you wish for!
The run up to our general election and the shenanigans of the past week, brought the leaders of the main parties to the fore. They are the CEOs of their respective parties. Likewise, Brexit headlines usually feature Boris Johnson and the coronavirus is linked to Xi Jinping. They too are CEOs of their own countries. It got me thinking about the role of a CEO in general and what it takes to be a great CEO of a commercial organisation in this changing world.
I Googled ‘top CEOs in the world’. You won’t be surprised that names such as Jeff Bezos, Tim Cook, and Warren Buffet topped the list. But that’s misleading, because it infers you have to be running a giant corporation to be in this league of greatness. I’m happy to say that I’ve worked with and bumped into many fantastic CEOs of companies of all sizes. I have been just as impressed by CEOs of charities, start-ups, family companies, organisations with revenues of under a million and those over four billion.
What are the criteria that determine greatness in CEOs? It’s easy to measure value in large public companies but mush less so in smaller organisations. According to research by McKinsey and Company, 30% of the success of a company is down to historical investments, debt and past decisions. 25% of the success is due to market and geographic conditions and 45% is attributed to the current CEO. Of course, if a CEO has been in the same role for say 5+ years already, then perhaps that CEO could claim the (historical) 30% also.
In McKinsey’s research, only three out of every five CEOs live up to the role in their first eighteen months. And the resounding comment from CEOs is that no MBA or other academic qualification, prepares you quite as well as actually being in the role. There are some obvious traits that typify the role, such as leadership, commercial acumen and risk management. But you won’t be surprised to discover that there is much more to it than that.
The Areas of Focus for a Great CEO
McKinsey and Company has extensive research built up over twenty-five years of working with CEOs of large corporations. Don’t be put off just because your organisation doesn’t have as many zeroes as the ones that get all the notoriety. Rather, learn from them and adapt them to your company.
To remove ambiguity, a CEO must ensure that everyone in the organisation knows why the company exists, where it’s going, who is responsible and what each person has to do to get there. A clearly defined vision (North Star) and strategy is essential to shape that.
The CEO might well agree this in a consultative and facilitative process, doing an analysis of company strengths, weaknesses, opportunities and threats (SWOT). S/he might also consult the board and other stakeholders, but the final sign-off on this must be made and owned by the CEO.
Research shows that CEOs that are promoted from outside act faster. So, if you’re a CEO promoted from within or in the role for some time, then ask yourself “what would an outsider do?”.
Align organisation and culture
The CEO will shape and role model a culture that pays respect to the heritage of the business, the aspirations of the shareholders, the market dynamics and the behaviours that reflect the best chance of success in a modern workplace. This is more than just about employee engagement. It’s also about going deeper and focusing on the drivers of what engages your people.
As part of the annual budgeting and planning process (and not just when s/he gets the role), a CEO should reassess the most appropriate structure to deliver the strategy. This isn’t just about moving existing names around the chessboard, but instead it starts with asking ‘what does the most effective organisation chart look like? As a result, that might involve making some very tough decisions about key people.
Lead the top team
As facilitator, the CEO must ensure that the top team work as one. Keep an eye on the rhythm that shows itself in decision-making, meetings, communications and personal traits. Is the team the right size? Is it diverse? Are individuals working together effectively outside of team meetings?
As with all teams forever and a day, norms can develop and groupthink becomes the enemy. Consider appointing individuals as conscientious contrarians on occasion, and encourage alternative dialogue. A facilitator can also serve that purpose very effectively without fear of reprisal.
Keep the board engaged
The role of a board is to oversee and guide long term efforts to create value and ensure risk is managed. In doing that, they should be independent and have good governance.
The CEO should collaborate with the board to keep it appraised of progress and that it is forward-looking. Lots of transparency and good communications leads to trust, which is essential for good relations. The CEO should also make recommendations for a diverse mix of skills om the board, especially to support gaps at executive level.
Manage external relations
The CEO will often be called on to be the public face of the company. Knowing its impact on society and the wider community is therefore essential. And should be able to communicate effectively the ‘why’ of the business.
To help with that, the CEO should know what’s going o =n at the front line. That might mean s/he pays unannounced visits to its company sites to get a real understanding. The CEO should have a plan for unforeseen crises should they arise.
In addition to all the obvious leadership skills, a great CEO needs to manage her/his time effectively. While s/he may be ultimately accountable for everything that goes on in the business, others will be responsible for getting things done. So delegation is key. Once you give the responsibility to others, don’t micro-manage. If you do, other things such reflection and thinking time will suffer.
Many of us in the workplace aspire to be a CEO someday. But I’d caution you to be careful what you wish for. Being a CEO of whatever type or size company is very demanding. Even if your leadership style is to be consultative and inclusive, being a CEO can be quite lonely and stressful at times. You will have to make tough decisions on your own. And if you’re the CEO of a small business, you may well be CEO and every other major position all rolled into one. And that’s hard.
It’s also like being in a fishbowl. The standards and expectations of various stakeholders such as shareholders, employees, the board, customers, the media – and yourself, are relentless. Every move you make is being watched and scrutinized by others. All that said, the sense of achievement and personal satisfaction of leading a great business is inspirational and only to be admired. But do seek an independent confidante if you think you’d get value from one.