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"Never before has the job of the Chief Executive Officer been more challenging. Never before have Chief Executive Officers been more exposed--and, in fact, there might be no more endangered species than the Chief Executive Officer of today."
G. Kliesterlee, President, Royal Phillips Electronics, Koninklijke Philips Electronics N V., Philips UK.
Beleaguered Chief Executive Officers, Chief Operating Officers, Senior Managing and Representative Directors and Managing Directors have it tough these days. In a less predictable economic climate, they are expected to be visionaries, change agents, diplomats, spokespersons and, at the same time make smart strategic moves for returning outstanding revenues and making sure that their enterprises, employees, and stakeholders are distinguished corporate citizens in geographic locations around the world. All the while, their decisions and salary packages are scrutinized as never before.
No wonder more than half the senior executives in a recent poll said they don't want to be a Chief Executive Officer today. Yet opportunity can be snatched from the jaws of despair. This is a good time for CEOs, COOs and Managing Directors to do the following:
CEOs are operating in a zero trust, zero tolerance era. Until trust is earned, it is difficult to regain the confidence of Wall Street, FTSE, CACA, DAX, NIKKI, Toronto Stock Exchange, BOVESPA, and BOLSA, disgruntled investors, and the board. In cases of broken relationships or broken organizations it is necessary to start from scratch.
The problems run deeper than questionable accounting practices and the greed of former luminaries; addressing them requires wide-scale change and transformation. And it's the Chief Executive Officers' and Managing Directors' responsibility to see a clear way forward and lead the transition.
CEOs in general have been mostly talk and few visible outcomes. Problems such as board makeup and financial transparency are on the road to resolution. But still CEOs and Managing Directors are succumbing to the pressures to manage for the short term, despite the fact that excessive use of stock-option programs and an extreme focus on immediate and next quarter's earnings are what created many of the problems. Management needs to look again and regain the strategic balance of business growth from both a short-term and a long-term perspective with business and organizational renewal.
Unreasonable expectations and the struggles to deliver in the short term drove many companies to find ways to meet or beat earnings forecasts. When they ran out of performance they pushed the accounting envelope. To project 15 to 20 percent organic growth every year in a global economy of 2-4% growth was a judgment of emotion. Yet senior management, including Chief Executive Officers, Chief Operating Officers, Division Vice-Presidents and Managing Directors, signed off on these targets and expectations about earnings growth year after year, quarter after quarter, month after month.
The quarter-to-quarter focus creates an enormous number of internal upsets and inefficiencies. Examine the last two or three weeks of any company's quarter and one finds unusual shipping, sales, and revenue patterns. Such bookkeeping creativity is not sustainable. Sooner or later a lagging stock price catches up to earnings.
But are the financial markets ready for real-world earnings forecasts? Are analysts and investors and other stakeholders capable of looking past the quarterly earnings to a firm's long-term prospects? Not unless executives have the skill and the guts to be the bearers of both truth and strategic mission.
The best way through is to lead the way back to making more money. The CEO and MDs have the authority by virtue of his/her role, but real leadership is earned by deeds.
The CEO cannot shoulder all the leadership in the company. In the rapidly chamging corporate climate, leadership is needed at all levels-in fact, the business must become a "company of leaders" if it is to be sustainable into the future. Recent surveys report that business leaders view investing in leadership development as a greater priority in the wake of layoffs, economic downturn and the less predictable growth. Still, it's a challenge to find top performers, hone them for leadership for results roles, and retain them once they have risen through the ranks.
In searching for future leaders, CEOs, Managing Directors and COOs and Directors are better off looking not for clones of themselves, but for people who embody new skills and competencies. The next wave of leaders are different from their predecessors; they are rooted more in a sense of personal achievement, in service to the vision and values of the enterprise, and less in the acquisition of power, luminary status, and financial gains. These talented, energetic and seasoned performers want the financial rewards that success brings, but they prefer better quality of life to more money.
A Conference Board survey of European executives revealed that one-third of women executives, as compared to just 25 percent of their male peers, aspire to top jobs. The untapped pool of women executives remains, in many areas of the world, a rich and valuable source of leadership material.
Gone are the days when a board seat was a low-profile and part-time reward for service and past accomplishments. Board seats are irrefutably--and perhaps permanently--more time-intensive than ever before. Recruiting members with the time, energy, courage, and insights to be truly excellent board members is another challenge for CEOs, MDs, Division and Business Unit Vice Presidents
The Board of Directors is charged with overseeing the future direction and management of the company. It is not to the CEO's advantage to pick directors who agree with, or have a symbiotic relationship with, the company's top executives. Checks and balances, as we have seen, are necessary to keep companies from going off track. A Managing Director and Chief Executive need to seek out board members from various industries who have the wisdom, commitment to profitability and detachment to keep management on its toes. By the same token, the CEO and MD need to keep the board informed about the latest developments, both positive and negative, and actively seek the advice that the board is being paid to give.
The disruption of world economies through market downturns and scandals has flung open the door for far-reaching change. For COOs, MDs and CEOs, it can be a door of opportunity to create not only value for shareholders and other stakeholders but real longer-term transformation as well. The challenge for CEOs is to stay aligned to the business's vision and purpose, to stay connected to stakeholders, and to create lasting enterprises in the face of pressure to enhance share performance. This means they have to manage today for tomorrow.
In companies in the US, Europe, Japan, South Korea, Taiwan, Southeast Asia, Australia, India, Russia, South Africa and South America, Managing Directors, CEOs and their equivalents face media labels of "plunderer of the environment" and "destroyer of human rights." The timing is right to act on the model of corporate responsibility. The Managing Director, Chief Executive, Senior Managing and Representative Director and Executive Board may also have to make extraordinary efforts to convert the organization's culture from one of entitlement to one based on deliverables: creating a new industry, finding customers and providing them with real value. In accomplishing these ends, CEOs have to retain the core competencies, passions, and resourcefulness of their high performance teams and workforce-the most basic stakeholder.
It all takes courage, resilience and good governance. The best corporate, private company and government agency leaders are those who have strong values, earned credibility, and the determination to sustain both.