Challenges of a CEO
It gives you a warm feeling to realise that you have become a CEO. What most don’t realise is that the aftermath of the appointment can be a nightmare. Gone are the opportunities and the luxury of blaming someone or some people for missing a deadline.
A CEO has very much to do in forming opinions in the minds of employees, i.e., feel like working in heaven vs. working in hell. It is common to hear people say, “I don’t care about going to hell anymore… I already work there five days a week.”
Well, in my book, CEO is not a position or status. It is a responsibility. It is a responsibility that demands the right blend of spirituality, humour, understanding, humility and discipline.
“Leading a company now demands that the chief executive officer take on the mantle of chief diplomat, chief talent officer and chief image manager, in addition to his or her more traditional responsibilities,” says Stephen A. Miles, Vice Chairman of Heidrick & Struggles and head of the firm’s Leadership Advisory Services. Miles sees 10 major challenges for CEOs in 2011:
1. Moving from “business case” to “social business case”
“As companies weigh decisions such as entering a new market or embarking on a multi-jurisdictional acquisition, the ‘business case’ must now be viewed through a new lens: how will this business decision impact the country/region/state/province they are going into? It is no longer enough for companies to simply make a good business case or meet the ‘legal requirements’; they must make the case to the local stakeholders that this move will benefit the target community, who may have concerns about, for instance, the environmental impact. On the flip side, the transformation of developing local economies due to a major corporate presence can then affect the original business case: new unionisation and increasing wealth may impact the decision as to whether to grow operations in the area or call into question whether the original business case was a sound one.”
2. Stepping into the role of “ambassador”
“Related to the development above, we are seeing that the CEO must actively engage with politicians and regulators around the world. The CEO must be conversant on policy – be it financial regulation or healthcare reform – that affects his or her company and industry. Policy makers or regulators do not want to speak with delegates, but to the CEO. Given this, the CEO must act as diplomat and build these relationships him – or herself. Only unusually qualified delegates – such as a former top politician who still carries much influence – can effectively step into this role and supplement the CEO.”
3. Repairing the corporate image problem
“One of the many lasting legacies of the financial crisis will be the image of corporations around the world as ‘bad,’ a view that politicians and shareholder activists have taken hold of with developments such as the Dodd-Frank Act. In this environment, CEOs in all industries – not just financial services – must work assiduously to repair their reputations among the media, regulators, investors, and the public at large. One way of doing this is through earnest CSR. Taking corporate social responsibility seriously not only helps to balance out the negative press, but also jibes in particular with the priorities of today’s younger employees – another important constituent that companies must consider. CEOs must do this without losing focus on their corporate strategy and mission.”
4. Making the board an ally
“With first Sarbanes-Oxley and then the global financial crisis, corporate boards have stepped in to become more ‘executive,’ instilling themselves further into the role of scrutinising and interrogating management. The CEO must build a strong relationship with these key stakeholders and bring them on a ‘journey’ against his/her (or their) desired initiatives, operating with transparency. If you treat the board as your enemy, you will get the enemy you deserve! Conversely, treating the board as a partner along a strategic path will only help your cause.”
5. Building a global leadership pipeline
“It is incumbent upon every CEO to ensure that he or she has a robust and ‘global’ pipeline of talent throughout the organisation, especially at the senior-most levels, and that multi-year succession is regularly discussed at the management and board levels. It is critical that investment in these programs is a priority regardless of the economic cycle – they cannot be ‘fair weather’ programs. As the recent survey that Heidrick & Struggles conducted with Stanford’s Rock Centre found, 51% of companies cannot name a CEO immediately if needed, and 39% have no internal candidates whatsoever. To that end, it is important that CEOs encourage their boards to recruit directors with succession expertise and experience, and to help make the all-important issue of succession a top corporate priority.”
6. Grappling with China
“If their company isn’t there already, almost every CEO is eyeing China – either as a consumer market or supply chain base. But partnerships there can carry much risk. As the joint venture partners in China begin to learn and then take over the technological developments and processes introduced by their Western partners, these Western companies may be uninvited to the party. Chinese companies, supported by their government, are aggressively acquiring intellectual property, and are increasingly looking to go it alone in competing on the world stage. CEOs must thus be aware that they may be creating competitors if they enter into a JV in China – and manage this risk accordingly.” What is going on now is the ‘Chinafication’ of Europe and the US.
7. Understanding shifting employee values
“Managing the demographic changes as baby boomers move into retirement and ‘millennials’ come up through the ranks is something no CEO should overlook or just delegate to HR. The CEO needs to understand the motivations and values of his or her workforce in order to leverage organisational capabilities. He or she must also know the risks involved in a less ‘loyal’ employee base who may not, for instance, be as willing to move for a job as were the ‘company people’ in previous generations. The need for constant real-time feedback and sharing of information is something new. Software applications like Rypple allow CEOs a vehicle to communicate deeply across the organisation in a reciprocal manner.”
8. Operating in a world of social media
“Today’s CEO is coming to realise that potentially all of his or her decisions and actions are broadcast in real time on company blogs or on Twitter and Facebook. Instead of being a ‘victim’ of this new exposure, CEOs must embrace and become part of the new media social discourse. Indeed, carefully leveraging this new medium instead of running away from it can do much to help tackle other challenges, such as combating negative public opinion and forging a dialogue with younger employees.”
9. Driving diversity
“We have now spent decades talking about diversity, and it is now time to move from a compliance-based approach to one where we truly build (and value) diverse companies and boards. As part of their greater engagement with recruiting and talent management, CEOs will need to drive diversity in their organisations rather than making this an HR issue. A number of countries are taking a legislative view regarding gender diversity on boards (UK and Australia), and are set to begin to mandate the percentage of female directors that must be on boards. With the combined drivers of a renewed call for quotas and the growing business case in support of diversity, the CEO will be expected to take concrete action steps toward creating a diverse workplace.”
10. Managing a globally distributed leadership team
“A corollary to a more diverse and more geographically diffuse management team is the complexity of actually managing a team that is so spread out. Expatriate programs – in which companies send executives abroad for experience – carry the risk of having those employees scooped up by competitors, erasing the value of the company’s investment unless you have an equally robust repatriation program. As attrition rates continue to rise for these expatriates, CEOs must think differently about where a division is led or who should lead it. Increasingly CEOs are thinking locally. Hiring local teams around the world has two distinct advantages – the local executives may be more likely to stay with the company and they may also be better able to compete with any local competitors who emerge on the market.”
The next generation of workers don’t care. They’ve seen what happened to mom and dad in the last two years. Who can they count on/trust? CEOs will need to work extra hard to attract and retain ‘Millennials’ who tend to want to move up quickly or move on.
College degrees are no longer a guarantee for a better quality of life and higher income like our parents’ generation, so kids are not attending or finishing college. Is this a problem? CEOs may need to rewrite their job specifications. Maintaining momentum in the slow growing market the only solution is innovation.
Eking out growth in an uncertain economy
After a few years of abysmal performance, CEOs are focused on growth in 2011, and the million dollar question will be how to boost profits, talent, trust and loyalty in a low-growth to no-growth environment.
“Organisations need to build new muscles, and to do this, their leaders must focus on how they can alter their current business models to focus on unexpected future trends,” says Jim Haudan, CEO of Root Learning.
The last thing a CEO wants is to leave his company vulnerable to another economic downturn. One solution, suggests James Pajakowski, Executive Vice President of Risk Solutions at Protiviti: “Invest in innovations that provide a foundation for the future, while protecting the business from exposure to financial crisis over the next few years.”
Phil Lieberman, president and CEO of Lieberman Software sums up the dilemma: “There are dual possibilities – a double dip recession and strong growth in 2011. Do I plan for growth or defensive economic planning?”
Preparing for – and reducing – employee flight
“Get ready for musical chairs,” warns management consultant Nancy Keene. As the economy improves, history suggests that turnover will increase. Dealing with disillusioned, overworked employees must be a priority.
“Unmotivated, unfocused or uncommitted workers are a liability. They jeopardise the corporate brand and threaten survival and profitability of a company,” says Terry Hawkins, founder of business training firm People in Progress.
To reduce those risks, showing real CEO appreciation can be a smart strategy. Hawkins recommends that CEOs try making unannounced visits to work sites or impromptu telephone calls to line employees. Face-to-face communication with staff, whether casual chats or more organised events, helps everyone feel like they’re being heard.
Equally important, to retain top performers, create and communicate plans for their professional progression, and make sure your company is paying salaries at or above the market standards.
Acknowledging the customer is boss
In a world of eroding customer loyalty, customer retention must be a top-down, high priority, companywide mission, explains Robert Bloom, author of ‘The New Experts: Win Today’s Newly Empowered Customer at Their 4 Decisive Moments’.
Surrendering to social media
The power of social media is enormous, and it affects every aspect of a company, says Jeff Platt, CEO of Sky Zone Indoor Trampoline Park. “Do not fear social media, embrace it. It cannot be ignored. Monitor it, be proactive,” he adds. The big winners will be those who harness social media to drive sales, corporate alliances, partnerships and other business development initiatives. “Social media can become a strategic avenue to communicate to your key stakeholders,” says Peter Boni, CEO of Safeguard Scientifics.
Keeping pace with regulation
And global regulatory guidelines are even more daunting. “CEOs must pay attention to the regulatory environment because the process of staying in compliance and managing the increasing costs of compliance become more challenging as the complexity of the environment increases,” says Pajakowski. More governments bring strong regulation to support respect for the environment.
Protecting against increased risks
From a strategic standpoint, CEOs will have to think about risk as integral to enterprise management. “Taking the time to work with [the] management team about strategic risks and thinking outside the box about risks is key. CEOs should weigh risks that could cause the business to fail, as well as risks that could create the most value and competitive edge for the organisation,” says Maureen Errity, Director of the Deloitte Centre for Corporate Governance.
Watching your reputation
Protecting the reputation and image of companies and brands will be a growing priority. “WikiLeaks and similar incidents have shown that merely allowing for the market, or customers, to establish the reputation for your company is not enough. It takes a strategic approach to external and internal corporate communications to lay the foundation for a transparent and ethical company,” says Gary McCormick, Chairman and CEO of the Public Relations Society of America.
Some websites worth researching are:
(The writer is the Managing Director and CEO, McQuire Rens Group of Companies. He has held regional responsibilities of two multinational companies of which one was a Fortune 500 company. He carries out consultancy assignments and management training in Dubai, India, Maldives, Singapore, Malaysia and Indonesia. He is a much sought-after business consultant and corporate management trainer in Sri Lanka.)