Tag: CEO

Leading a Business: The 3+1 Roles of the CEO

We had an event this week in Madrid with Dan Wertenberg, a Vistage Chair from the USA as the speaker.

What is the Role of the CEO?

He shared an interactive and valuable 90 minute session with the gathered CEOs about the 3+1 roles of the CEO.

  1. Chief Strategy Officer
  2. Chief Team Builder
  3. Chief Sales Officer
  4. Lead the Financial Institution

The 3+1 “non-Delegatable roles” of the leader.

Chief Strategy Officer

The single most important question of strategy is “Who is our customer?” Dan shared the learnings from the PIMS study, done in the 1960s and 1970s in the US… looking at all the factors that lead to business success.

One of the big findings of the study was that a factor that repeatedly correlated with profitability – whether the business was the dominant provider to a market segment… essentially the #1 or #2 competitor in a market.

Strategy is fundamentally about deciding which market can we be the dominant, world class, excellent provider to this customer group. The question for a business leader: “who do we serve?” and also “who do we not serve?” Dan told us that every CEO should take their leaders out for at least 4 days each year to work together on defining with ever more clarity the profile of the ideal customer.

Chief Team Builder

The CEO is responsible for building the team. Dan shared with us that we as human beings are poor at selecting talent. Interviews are not a great way of predicting an individual’s future performance in a role.

We are not good selectors of talent, but we are all capable of identifying the factors that will make it unlikely that someone will succeed, or fit with the current team. Dan suggests that we actively de-select individuals who will not fit with our organisation, and then select only from those that remain.

The second part of team building is rapidly dealing with underperformance. If a CEO does not deal with underperformance (for whatever reason), it sends a message to the whole team that underperformance is acceptable.

Chief Sales Officer

An organisation that has the ability to scale and become great needs to have a sales process that is consistent, repeatable and structured. If there is a consistent sales process, then an organisation can scale up. If sales depends on certain individuals or the right day of the week… you cannot systematically grow the business.

The CEO should also personally play an active role in any large sales process of the company… involving themselves personally in some of the meetings.

The CEO should also ensure that every 6 months, they find a way of having lunch or dinner with the CEOs of the 10 biggest customers… to learn about them and to show the importance of their business.

Leader of the Financial Institution

Dan shared that a CEO is running 2 connected but somewhat distinct organisations… the operating business… and the financial institution behind the business.

As the financial leader, the CEO needs to ensure that there is a rolling 12 month projection of income statement and balance sheet. The CEO then needs to look at how we are performing against that plan. All variations are interesting… often we pay attention to negative variation… but the lessons that can be learnt from the positive variations are extremely important… as they are the source of identifying tactics that can be scaled up.

What do excellent CEOs do? (according to McKinsey research)

A company has only one ultimate decision maker: the CEO.

The CEO is the only person in a company without peers. No other individual holds such a full and final responsibility for the company. The CEO is the most powerful and sought-after title in business, more influential than any other. The CEO takes the company’s biggest decisions. These decisions account for 45% of a company’s performance.

This power and influence comes with a heavy burden.

The role of CEO can be all-consuming, lonely, and stressful. Just 3 out of 5 new CEOs live up to expectations in their first 18 months… and many CEOs struggle with their quality of life (health, family relationships, friendships) in the face of the pressures they face.

I run Vistage in Spain. Vistage is the world’s leading CEO coaching organisation. Over more than 60 years, Vistage has worked closely with CEOs to take and implement better decisions which enhance their performance and increase their quality of life.

The following post draws heavily from a recent McKinsey article “The mindsets and practices of excellent CEOs“.

The Biggest regret of CEOs

I spend time with hundreds of CEOs each year. They are good people and they want the best for the good people around them. This makes it extremely personally challenging for them to deal with underperformance. They like the people around them. They want to give them lots of opportunities. They feel that it is a personal failure when someone close to them repeatedly underperforms expectations. They give more time. They allow for environmental factors. They wait and hope.

The single biggest regret of CEOs is not dealing quickly with underperformance.

In my work with CEOs through Vistage, over half of all of our work is about the current and future performance of the people and teams that surround the CEO. We challenge CEOs to stop waiting for underperformance to fix itself.

The Differentiator between Great and Good CEOs

According to McKinsey, the distinction between good CEOs and the great CEOs is the ability to focus.

Great CEOs place “big bets”. They focus on the top 3-5 most important initiatives. They dedicate 90% of their time, energy, resources to the 5 most important projects. They say “no” often. They don’t allow their time to fill up with many different activities and different priorities.

The Good CEOs avoided this level of focus. Their prioritisation of what is truly important is less clear. They are involved in many initiatives. They allow their agenda to fill up and try dedicate a couple of hours each week to the most important projects. They try to fit the important initiatives in around their “day job” of running the company.

The Great CEO has delegated the running of the company to an effective leadership team. They have made themselves unnecessary for operating the company today, so they can dedicate themselves to building the company of the future.

Jeff Bezos says that he spends 5% of his time running the company, and 95% of his time building the future company.

The Job of the Great CEO (according to McKinsey)

What specific behaviours can make current CEOs most effective? This is a summary of the McKinsey article linked above.

The Great CEO’s job has 6 main elements.

  1. Setting the Strategy
  2. Aligning the Organization
  3. Leading the Top Team
  4. Working with the Board
  5. Being the face of the company to external stakeholders
  6. Managing one’s own Time and Energy

1. Setting The Strategy

Objective: Focus on Beating the odds…

  1. Vision: reframe what winning means, where do we want to be in 5, 10 or 15 years?
  2. Strategy: make bold moves early
  3. Resource allocation: stay active, top performers actively & quickly move resources to their strengths

2. Organisational Alignment

Objective: Manage Performance and Health

  1. Talent: match talent to value
  2. Culture: go beyond employee engagement
  3. Organisational design: combine speed with stability

3. Leading the Top Team

Objective: Put dynamics ahead of mechanics

  1. Teamwork: show resolve
  2. Decision making: defend against biases
  3. Management processes: ensure coherence

4. Board Engagement

Objective: Help directors to help the business

  1. Effectiveness: promote a forward looking agenda
  2. Relationships: think beyond the meeting
  3. Capabilities: seek balance and development

5. Being the face of the company

Objective: Center on the long-term “Why?”

  1. Social purpose: look at the big picture
  2. Interactions: prioritize and shape
  3. Moments of Truth: build resilience ahead of a crisis

6. Managing one’s own time and energy

Objective: Do what only you can doceo

  1. Office: manage time and energy
  2. Leadership model: choose authenticity
  3. Perspective: guard against hubris

If you liked this post, you will also like The CEO’s Guide to Boards and The CEO’s 7 Leadership Laws During Times of Uncertainty.

Photo credit: fauxels on Pexels.com, Liza Summer on Pexels.com, SplitShire on Pexels.com

The CEO’s Guide to Boards

Our Vistage Spain call today had “The Role of the Board” as our theme. This post gathers together some of the valuable resources shared by the group.

The HBR Article Building Better Boards from May 2004 came highly recommended by the leaders of today’s workshop, much of the content below comes from that article.

What does a High Performing Board do?

“The board has two vital roles: Craft a strategy and hire & fire the CEO”

Terry Neill

The quote above is from my father who has spent over 15 years as a board member on 4 global corporate boards, he continues to serve on a number of charity and university governance boards. I like the clarity and focus of that statement. The board can help in many areas, but it has two non-delegable tasks.

The following are my notes from Professor Herman Daems’ session on the IESE Advanced Management Program.  His course is “The role of the Board of Directors in Evaluating and Selecting the Strategy”.  

Dr Herman Daems is professor at University of Leuven and visiting professor at Harvard Business School, and currently he is the Chairman of the Board at BNP Paribas Fortis SA/NV.  He has been part of many public, private and charitable boards over his career.

Herman Daems: What does the board actually do?

  • Develop an Ambition for the Company – an ambition is not a strategy.  An ambition might be to “Climb Everest”.  A strategy would be the specific path to gather the necessary resources and execute the climb of the mountain.
  • Find the Leadership to develop a Strategy to realise the ambition – management must develop strategy.
  • Approve a strategy – Important to be clear that a board does not make the strategy, only approve that the leadership’s strategy supports the Company Ambition.
  • Provide Resources (Financial and Human) – importantly the board establishes the dividend policy
  • Balance the Power of Differing Interests (shareholders, management, employees, government, public) – board members must have general business experience.  Specialist members do not make good board members.  Board must make collective general business decisions, not just good specific decisions.  Individual members must have credibility and be willing to raise their hand and make an impact.
  • Monitor and Control Strategy – the board plays a much greater role on controlling strategy than on deciding the strategy.  Management will rarely say that their strategy is not working.  This is where the board is really necessary.
  • Control the use of Resources, control the risks involved – see next item…
  • Assume responsibility for the actions and risks of the company – The Board of Directors have “collective responsibility” for the actions and risks of the company.  Members are not personally responsible.  Some legal attempts to hold a finance expert or an audit committee member personally responsible have always been pushed back by courts on the basis that board is collective responsibility.  In banking crisis, some executives have been held personally responsible, but in no cases have board members been found personally responsible.

Checklist: Tasks of the Board

The following is a checklist of all the areas where a board can provide input, leadership and critical push-back for the management team.

The high performance board contributes positively to management decision making in the following 9 areas of strategy, operations, people management and capital structure.

Strategy

  • Strategic Direction
  • Strategic Plans
  • Strategy Implementation

Strategic Transactions

  • Major Investments
  • Portfolio Change (M&A)

Operations

  • R&D
  • Manufacturing
  • Marketing and Sales
  • IT

Human Resources and Organisation

  • Leadership Development
  • non-CEO executive compensation
  • human capital
  • Organisation
  • Corporate Culture

Financial Management

  • Financial Strategy
  • Capital Structure
  • Liquidity Management
  • Dividend Policy
  • Financial Reporting

Risk Management

  • Entreprise Risk Management
  • Ethical Perfomance and Compliance
  • Audit

External Relations

  • Brand Positioning and Integrity
  • Shareholder Relations
  • Legal and Regulatory
  • Other Constituencies

CEO Effectiveness

  • CEO Performance Appraisal
  • CEO Compensation
  • CEO Succession

Corporate Governance

  • Board Effectiveness
  • Director Selection
  • Director Assessment

How Engaged should the Board be?

At different times, the board may play a more or less engaged role in day to day operations. The directors and the CEO should have a conscious explicit agreement about which of the following levels of engagement are appropriate to the current context.

  • Passive – uninvolved, often under complete control of the CEO
  • Certifying – reviews and approves strategy, sometimes meets without the CEO being present
  • Engaged – contributes to strategic development, recognises their responsibilities to oversee CEO and company performance
  • Intervening – engaged and contributing actively in specific areas of the business, convenes frequent meetings
  • Operating – setting strategy, taking decisions, running day to day business operations; fills gaps in management experience

What does a Board Member Do?

A good board member will have two important elements: independence and competence. Independence is that they are free to take a contradictory stance and question the CEO and management. Competence can be judged in the following list of areas where board members need to bring capabilities to the table:

Knowledge of Key Areas

  • Strategy
  • Finance
  • Industry
  • Risks
  • Shareholders
  • Business

Understanding of Role

  • Relates well to Management
  • Knows Role
  • Prepares Well

Quality of Input

  • Insightful
  • Curious
  • Logical
  • Persuasive
  • Valuable

Contribution to Interaction

  • Effective with Others
  • Constructive
  • Listens
  • Engages

Further Resources

The Job of the CEO

This is a 30 minute interview I conducted with Waldemar Schmidt, past-CEO of a 250,000 employee global company. He shared insights about the role of the CEO:

  1. How to get the CEO role
  2. How to be a good CEO
  3. How to end your time as CEO and
  4. What to do next.

Watch the Interview

View on YouTube: The Job of the CEO

About Waldemar Schmidt

Waldemar Schmidt

Waldemar Schmidt, past-CEO of ISS, a 250,000 employee global facilities services business.

Currently on the Boards of 28 companies, London Business School Advisory Board, Professor at Copenhagen Business School, Executive in Residence at IMD.

Author of 4 books including “The Job of the CEO“. Note: all book Royalties are donated to the Waldemar Schmidt Scholarship for (Brazilian) students at the international MBA Programme at Copenhagen Business School.

Highlights from the Interview

  • 1:49 What is the Job of the CEO?
  • 3:18 Know Products, Numbers, Customers
  • 4:30 Management and Leadership
  • 5:35 Taking Good Decisions
  • 12:40 The Calendar of the CEO
  • 15:07 What do you do after being a CEO?
  • 16:45 Why did Waldemar step back from the CEO role?
  • 18:10 Advice to a 55 year old ex-CEO
  • 19:55 Networking as a CEO
  • 21:18 How to Build Relationships with top Head Hunters
  • 23:20 130 dilemmas that CEOs will face in life and business
  • 23:50 The worst enemy of great leadership: Arrogance

Further Resources

The Job of the CEO – Book Contents

  1. the Job of the CEO
  2. Characteristics and Skills of Great Leaders
  3. Examples of Successful CEOS’ Education, Nationality and Career Paths
  4. Self-assessment Tests
  5. Reflect, Evaluate and Decide Whether the Job of the CEO Is Right for You
  6. Planning Your Career if a CEO Career Is Not Right for You
  7. the Essence of Career Planning
  8. Career Planning
  9. Your Personal Brand
  10. How to Work With Executive Search Firms
  11. Your Pre-CEO Jobs
  12. How to Manage Your First CEO Job
  13. How to Manage Your Next CEO Jobs
  14. How to Manage Your Dream CEO Job
  15. How to Successfully Exit From Your Final CEO Job
  16. Decline or Revival?
  17. What Do You Do if You Lose Your CEO Job?
  18. Retirement or a New Career?
  19. How to Manage Your Second Career
  20. How to Manage Your Third Career
  21. How to Manage Your Work-life Balance
  22. How to Deal With 130 Critical Career and Job Issues

Buy the Book

Note: all book Royalties are donated to the Waldemar Schmidt Scholarship for (Brazilian) students at the international MBA Programme at Copenhagen Business School.

How does Jeff Bezos spend his time?

Jeff Bezos of Amazon has a very clear view on how to dedicate his time as a leader of his business:

  • Time working on the Future
  • Time working in the Present

How does Jeff allocate his time?

50/50?  80/20?  90/10?…

What do you think is the allocation of time that Jeff aims for himself?  What is the allocation of time in your life as a leader?  Watch the video for Jeff’s answer.

(If you want to skip all the introduction and go straight to Jeff’s answer, go to 3:05 in the video or click Jeff Bezos’ ideal allocation of CEO time)

If you liked this idea from Jeff Bezos, check out Amazon: Why Jeff Bezos banned Powerpoint and Jeff Bezos on High Standards (and why you don’t achieve your goals).

CEO Leadership Success: The 3 Rules from the Turnaround Masters at Sequoia Capital

This video is about Sequoia Capital and their 3 rules for success in leading a business.  They make leadership feel very simple.. but it works. They have 30 years of track record of successfully taking on and turning around businesses.

Their rules are:

  1. 30/30
  2. 80/20 &
  3. the golden rule: 90/10.

More on Leadership

What does the Board do?

This post describes Corporate Boards –

  1. What do they do?
  2. How do I join one? and
  3. What are my responsibilities as a Director?

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization, which can include a non-profit organization or a government agency or corporation.  In a stock corporation, the board is elected by the shareholders and is the highest authority in the management of the corporation. The board of directors appoints the Chief Executive Officer (CEO) of the corporation and sets out the overall direction for the company.

What does the Board do?

Professor Herman Daems is teaching today on the IESE Advanced Management Program.  His course is “The role of the Board of Directors in Evaluating and Selecting the Strategy”.  Dr Herman Daems is professor at University of Leuven and visiting professor at Harvard Business School, and currently he is the Chairman of the Board at BNP Paribas Fortis SA/NV.  He has been part of many public, private and charitable boards over his career.

I wrote a few notes as I sat at the back of the classroom.  What does the board actually do?

  • Develop an Ambition for the Company – an ambition is not a strategy.  An ambition might be to “Climb Everest”.  A strategy would be the specific path to gather the necessary resources and execute the climb of the mountain.
  • Find the Leadership to develop a Strategy to realise the ambition – management must develop strategy.
  • Approve a strategy – Important to be clear that a board does not make the strategy, only approve that the leadership’s strategy supports the Company Ambition.
  • Provide Resources (Financial and Human) – importantly the board establishes the dividend policy
  • Balance the Power of Differing Interests (shareholders, management, employees, government, public) – board members must have general business experience.  Specialist members do not make good board members.  Board must make collective general business decisions, not just good specific decisions.  Individual members must have credibility and be willing to raise their hand and make an impact.
  • Monitor and Control Strategy – the board plays a much greater role on controlling strategy than on deciding the strategy.  Management will rarely say that their strategy is not working.  This is where the board is really necessary.
  • Control the use of Resources, control the risks involved – see next item…
  • Assume responsibility for the actions and risks of the company – The Board of Directors have “collective responsibility” for the actions and risks of the company.  Members are not personally responsible.  Some legal attempts to hold a finance expert or an audit committee member personally responsible have always been pushed back by courts on the basis that board is collective responsibility.  In banking crisis, some executives have been held personally responsible, but in no cases have board members been found personally responsible.

 

How do you get onto a Board?

“People often ask me ‘I’d like to make a change in my career and play a role as a board member.’  I first ask how much money they are making now.  I don’t want your role as a board director to be the significant source of income for your life.  If you are dependent on this income, you are not going to be a good director.” Herman Daems

In most countries, board members can be fired at will.  You do not want to depend on this income.

There are 5 specific reasons why you might be appointed to the board of a company:

  • You represent a shareholder or stakeholder of the company – you represent a reference shareholder, a private equity company, a venture capitalist, a strategic owner
  • You bring specific knowhow or capabilities to the board – technological, financial, market knowledge, legal
  • You bring a specific experience – you are a former CEO or a director in other companies
  • You have a reputation for reliability, independence; you bring reputation to the company – …also you are always contactable (crisis happens on Sundays, board is like fire service…  emergencies happen)
  • You have access to a relevant network for the company

 

What is your role on the Board?

  • It is important to find an equilibrium between the interest you represent and the company interests.  A board member is responsible to all stakeholders.  Take into account the specific traditions, structures, culture of this board.
  • Come well prepared
  • Ask questions, be critical… but solution oriented.  Directors who are always critical start to lose engagement with management.
  • Do not get stuck into details (do not become a shadow executive) – do not try to prove how smart, wise you are
  • Be aware of your legal and societal responsibilities
  • Speak your mind
  • Be courageous, remain friendly

Further Reading

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