ADVISING CEOS

CEO Excellence: In The Spotlight

CEOs need to achieve results faster than ever before. Their vertical climb is steeper. The spotlight is more intense. There is no grace period for today’s CEOs.

Suddenly everyone is looking at you. You can’t hide. Every word is scrutinized, every indicator of body language is interpreted. Your mood is contagious.

These days CEOs need to achieve results faster than ever before. The expectation is greater. Tenure is shorter.

In an isolated role, you need feedback and counsel from those who have a deep appreciation of what it feels like to be CEO.

The role of the CEO is unique. There are no peer roles in the organization. It is the most high profile role in a company and, for most, it is a high stress role as well as an isolated role. It can take its toll on the health and well-being of those who sit in this unique seat.

The challenge is defining and embracing CEO Excellence, aligning your strengths to that definition, and supporting your weaknesses by building a talented and aligned leadership team with complementary experience and skills.

The Work of the CEO

Only the CEO has ultimate accountability for these three enterprise-wide roles:

Strategy Culture Leadership Talent

Where are we now? Where are we going? Defined goals and structured plans—both near and long term.

Answering the fundamental strategic questions of any organization is the responsibility of the CEO. To get there requires the combined knowledge of a committed, aligned and talented group of leaders.

From there you can define the values and behaviors to aspire to and begin the long process of cultural change and alignment as needed.

The first question is not, “Who do we want to be?” Rather, “Who are we?” today. Our common DNA.

Are we effective at recruiting, developing, retaining and aligning talent?

Is succession truly a plan or just a document.

Are all the right people in all the right seats?

The 5 Essential Activities That Contribute To CEO Excellence

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Have a profile of your CEO role. How does the Board judge your performance? What results are expected of you? Your team? The company? What do others expect of you? Know your role and communicate it.

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Plan your onboarding. Think about the first 100 days. Are you prepared to make that first impression? How will you communicate? Where is the “low hanging fruit?” What are your personal priorities? What do you want to learn?

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Gather feedback constantly. This is tough to do for a CEO. Subordinates rarely want to give unvarnished feedback. Yet, research shows that being open to and gathering feedback is strongly correlated to leadership success. Create an anonymous multi-rater process (360) every 18-24 months. Gather informal feedback at the end of significant events.

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Find a small pool of trusted advisors. A former-CEO mentor can be helpful, especially for first-time CEOs. Use a coach or advisor to guide behavior. Find experts to help with specific leadership challenges such as a troublesome executive or a malfunctioning top team.

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Develop yourself as CEO. The role is unique. Development and learning needs to be uniquely customized to the world of the CEO.

Where Are You?

New or First-Time CEO Change Agent CEO Late-Stage CEO

No matter how prepared, no one can know what the top job is like. There is a need for accelerated learning.

We know that on their first day on the job, even their friends treat new CEOs differently. She or he quickly becomes isolated. Subordinates are reluctant to criticize. Honest and unbiased feedback is rare.

Statements you make, no matter how seemingly inconsequential, take on dramatic proportions. You thought you said “I think we should…,” but people around you hear “The CEO said we will…” Your voice gains volume.

You are the sole audience for every meeting or presentation you attend. It is almost impossible to tune out for even a moment. Wear and tear on you is significant.

Change Agent CEOs often concentrate on strategy in their first 12 months on the job. As a consequence, a logical next step is to introduce organizational, leadership or portfolio changes to stimulate growth and increase competitiveness.

Defining the desired state and assigning people to achieve it is the relatively easy part. What’s difficult is actually achieving the end-state successfully and with minimal collateral damage. Change is hard.

One-third of the people will be proactive supporters, one-third will sit on the fence, and the final third will find change very difficult. You need the top third to engage the middle third. Leaders found in the bottom third need to be addressed quickly.

People will never be satisfied with the amount of information you are giving them. So communicate, communicate, communicate. Then repeat. And repeat again.

The late stage CEO must prepare the organization for leadership transition and position it for future growth. Most CEOs wish they had started CEO succession planning earlier. It takes much longer to identify and prepare executives than you think.

They need to proactively engage with their Board and ensure that the Board has the best possible internal options to consider when the time comes for them to transition.

Don’t be afraid of the “horse race.” Explicitly developing a significant cadre of leaders for C-Suite roles not only avoids singling out 1-2 people, it also builds the future pipeline.

Don’t just seek to replace yourself. Think about the future CEOs beyond your successor. Develop leaders at all levels. The company’s CEO in 15 years might be someone who just recently completed a first-line supervisor assignment.

The River Strength Meter: CEO Excellence


WEAK MODERATE STRONG
Failing Struggling Coping Performing Succeeding Excelling

CEO Succession: Prepare, Prepare, Prepare

It is the most important job of any Board. Find the next CEO.

Yet, complacency by Boards is common. Many are just unprepared for managing CEO succession.

When unprepared, they tend to hire from outside. But, over the long-term, insider CEOs provide higher shareholder returns.

The Economics of CEO Succession


Why It's Important

CEO Transitions Are On The Rise

Average CEO tenure has declined to an average of 4.6 years.

CEOs are retiring at earlier ages.

CEO dismissal rate among S&P 500 was 23.8% in 2013.

Supply Dynamics Favor Internals

Insider CEO appointments among the top 2,500 global public companies increased from 71% in 2000 to 76% in 2013.

Internal CEOs return greater long term value to shareholders over time.

Transitions Can Be Risky

The average cost of replacing a CEO after 18 months ranges from $12m for small-cap to $52m for large-cap companies.

High profile terminations and sudden exits can cause share price downturns and reputational damage.

Preparation Protects Value

Executing a successful CEO succession is neither glamorous nor rocket science. It just takes time and hard work by the incumbent CEO, the board and the internal candidates who are developing the skills required to take the helm.

Succession planning is best achieved when high quality assessment and rigorous, intensive development is offered. The type of development must match the need and must be intense, varied and accelerated in nature.


Must Haves: Ask the Right Questions

Know what you need tomorrow, not just what’s available now. Don’t just ask, “Who’s ready to succeed the incumbent?” Also ask, “What does the company need in future CEOs, and do our first-, second- and third-generation internal candidates fit that profile?”

Experience matters. Don’t just ask, “How long until they are ready?” Also ask, “What specific experiences are internal candidates being given to prepare them for a job they’ve never done before?”

Know the external market. Don’t just ask, “Which executive search firm would we use if we went outside?” Also ask, “Which executives in other companies/industries fit best with our future CEO profile, and how likely would they be to come on board?”

Firsthand knowledge beats talent reports every time. Boards shouldn’t just ask for names of internal candidates; they should get to know them formally and informally, beyond presentations.

Don’t fear the horse race.

The River Strength Meter: CEO Succession


WEAK MODERATE STRONG
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