Coaching Tip: The Leadership Blog

CEO Transition

With an understanding that the death of Henry Ford was the best thing to happen for the Ford Motor Company, I recently asked a Metro Detroit CEO, who had stated his plan to "die in office," if his company had a realistic succession plan.  His response was unconvincing.

Of course, this is not an easy time to nurture a new generation of corporate leaders.  Yet, the need for top talent is growing.  A record 1,484 U.S.-based chief executives left their jobs in 2008, according to outplacement firm Challenger, Gray & Christmas.  Many more could step down this year as losses mount.

What's striking about many emerging CEO candidates is that they were identified as promising early on and given opportunities to prove themselves.  Their careers highlight the critical importance of an oft-ignored management priority: succession. 

Impact of CEO Departure

Is there any systematic way to tell if a change in top leadership will help or hurt in the long run?

Academics who have studied the impact of hundreds of CEO changes say there are a few key factors investors should consider.  According to University of Maryland assistant professor Cristian L. Dezso gleaning useful guidance requires a sophisticated analysis.  After reviewing 1,329 CEO changes at major companies from 1980 to 2000, he found that the setting was as important as the change.  A key variable was whether companies had erected anti-take-over defenses such as poison pills or staggered board elections.  In instances where takeover defenses were extensive, the forced departure of a CEO led to significant outperformance by the company over the following three years.

When a company is harder to acquire, there is less pressure on management to improve results, Dezso explains.  "If a CEO and board of directors implement these kinds of provisions, the disciplining force coming from outsiders is reduced."  But when management-friendly board forces a CEO out, it shows that enough pressure for improved performance has developed within the company, leaving an opening for the new CEO to have a big positive impact.

University of Michigan professor E. Han Kim looked at the question form a slightly different angle.  He focused on a CEO's hold on the top job.  He rated chief executives on three sources or merit, and corporate structures, like stacking the board of directors with friends.  CEOs who held on to power thanks mainly to structural advantages hurt the company performance, but those who gained stature through their abilities improved the company.  CEOs who owned more than 25% of a company's shares tended to hurt performance. 

Such results should help shareholders decide whether to flee or stay when a CEO leaves, Kim says.  His paper, "Is CEO Power Bad?" which includes yardsticks for measuring structural and ability-based staying power, can be found on Kim's page at the University of Michigan's website.

Source: BUSINESSWEEK, May 11, 2009

The Art of Nonachievement

Most business books focus on how leaders can achieve more.  How can you do more, better…and faster?

This article takes the opposite tack: how and why, as leaders, you should sit and be still.

Psychologist Daniel Goleman, an authority on emotional intelligence in organizations, calls this the leadership paradox in Primal Leadership  by Daniel Goleman, Richard Boyatzis & Annie McKee (Harvard Business School Press):

“For leaders, the first task in management has nothing to do with leading others; step one poses the challenge of knowing and managing oneself.”

This includes:

·         Connecting with deep values that guide

·         Imbuing actions with meaning

·         Aligning emotions with goals

·         Keeping motivated, focused and on task

Honing the skills of awareness leads to mindfulness — becoming aware of what’s going on inside and around us on several levels.  Mindfulness is living in a state of full, conscious awareness of one’s whole self, other people and the context in which we live and work.

Chief Executive Officer (CEO) Recruitment

Chief executives recruited from outside a company earn significantly more in their first year than those promoted from within, according to a new study.

Executive-pay tracker Equilar Inc. found that external hires in 2007 and early 2008 received median compensation of $6.6 million, 65% more than the median $4 million for internally promoted CEOs.   The compensation figure includes salary, cash bonuses and equity incentives.  Compensation experts say outside hires tend to be paid more to offset the risks and costs of leaving one company for another, including lost benefits and equity.

The new study examined an unusually broad set of companies--nearly 1,300 across three major Standard & Poor's indexes.  On average, outsiders were paid more at all companies, regardless of size.  In the S&P 600 SmallCap Index, external recruits were paid a median of $3.6 million, more than twice the $1.6 million paid to internal successors.

Of the nearly 1,300 companies surveyed by Equilar, 136 replaced their CEOs last year, including 38 that hired outsiders.  Small companies turned outward most often, probably because they lag behind larger organizations in succession planning, says Tim Sparks, president of Compensia Inc., a San Jose, CA, compensation consultancy.

Gaining Leadership Expertise by Spending Time in Non-Core Roles

Firms that direct senior executives to spend more time on their non-core job roles, see higher levels of performance, according to a survey by the University of Michigan's Ross School of Business.  According to the survey of 378 Michigan-based executives, the average participant spend about 45 percent of his or her time on core job responsibilities and 55% in other areas: in project-based teams, enhancing individual career skills, developing innovative ideas or processes and working to support the overall company.

Those who spent just 36 percent of their time on core roles actually managed a higher-performing company than those who spent 50 percent of their time on core roles, according to the study. 

"Leaders are pulled in various directions and that is why executive coaching is such a popular service these days, " says Jim Mitchell, senior vice president and general manager of Lee Hecht Harrison in Michigan.  "If you don't take risks and are concentrating on those core roles that have an executive at his or her desk all day, you might be missing some good business opportunities."

Source: Michigan Business at www.mbizreview.com and The Wall Street Journal, July 28, 2008

CEO and HR Priorities

Has your chief executive officer (CEO) crafted a leadership style that centers on authenticity; that means constantly communicating with employees about the company's important issues?  Does your CEO try to get across what s/he's like as a person, what s/he values (like spotless ethics, emotional maturity), and the vision s/he has for the organization?  Rather than avoid the animosities, communication breakdowns, and jealous flare-ups on the CEO's executive team--as well as his or her own defects--does the CEO confront them head on?

If the answer to all the above questions is "yes," then your CEO has gotten over the CEO Disease by working with a personal leadership coach to become more self-aware and able to allow his or her leadership perceptions to evolve.

There is an old Yiddish proverb that applies to every organizational leader: "The fish always sinks at the head."   The leader with CEO Disease doesn't know the smell that he or she is spreading throughout the organization.  The personally coached CEO discovers what smell he or she is spreading across the corporate culture and works to make it a productive and positive scent.

Leadership Succession Planning

                        

CEO turnover has increased sharply in recent years. C-Suite leaders are failing sooner and falling harder, leaving companies in turmoil.  At all levels, companies are short on quantity and quality of potential leaders.

There’s something wrong with leadership development practices.  Organizations are facing unprecedented challenges in finding successors for top jobs — and worse, so many leaders fail shortly after landing their positions.

Leadership matters. It motivates people beyond their limitations, unleashes energy and gives people direction, synchronizing their efforts.  Financial results define where a company has already been.  In contrast, leadership is a key indicator of the company’s prospects. 

CEO Hiring Tips

Don't assume that past success is a predictor of future success. 

As Chief Executive Officer (CEO), an executive will face a whole new set of personalities and conditions.

• Investigate a candidate's integrity and interpersonal skills as part of a thorough background check.  Conduct extensive and confidential discussions with former associates.
• In interviews, ask candidates how they have handled setbacks and challenges in the past, as well as personal interactions.
• In examining the course of a candidate's promotions, pay close attention to how the candidate reacted when given new responsibilities that significantly increased his or her power.
• Determine how much of an executive's career success has been based on favorable economic and industry conditions and the support of colleagues, and how much has been based on the executive's individual efforts.  Pay close attention to how candidates performed when industry conditions were bad. Note: bad industry conditions are an excellent time to build market share.
• Each finalist for the CEO position should be provided with a detailed job preview.
• Be clear about ethics. Provide as much information as possible to finalists about how the board expects shareholders, employees, customers and other stakeholders to be treated.
• Offer the new CEO a reasonable compensation package.  Once the CEO has demonstrated a high level of competency and integrity, the compensation package can be improved.

It's easy to spot a bad CEO once the damage is done but spotting flaws before hiring can reduce the likelihood of hiring a dysfunctional leader.

Source: The Wall Street Journal, December 1, 2007

High C-Suite Expectations

Chief Marketing Officers (CMOs) have always struggled to justify their existence.

Jeff Jones, who was the chief marketing officer at Gap for two years before leaving to run ad agency McKinney, says he discussed 22 CMO positions over five months.  Not one, he says, spelled out coherently what he would be accountable for.  CMOs last 26 months on average these days, says recruiter Spencer Stuart, vs. 44 months for CEOs.

"CMOs are expected to deliver instant results," says Mark Jarvis, Dell's CMO since October.  "It makes for a deadly cocktail of high expectations, resistance, and complexity."  The CMO job is a lot more complicated and arduous than it was just a few years ago.  And that, say recruiters and CMOs, helps explain the high turnover.

Building a brand is a long-term process that requires patience and incremental change.  But CEOs operate at a time when investors fixate on quarterly or monthly results as never before.  Corporate bean counters, who have long deemed marketing a squishy discipline, increasingly are demanding data to prove that a CMO's strategy is valid.

Few chief marketers understand the importance of being accountable more than James Farley.  When he left Toyota Motor recently and joined Ford as global CMO, Farley knew he'd probably fail if his job had no hard connection to monthly sales--every automaker's report card.  He also understood that Ford's regional operating chiefs might fight global marketing strategies from a CMO with no skin in the game.  So Farley asked CEO Alan Mulally to give him responsibility for sales in the company's most difficult market, the U.S.  That way, he'd be in the same pressure cooker as his peers.  Now, when Farley tries to globalize the Ford brand strategy, he'll have more credibility.  "Being accountable for sales in the U.S.," says Mulally, "will make the team tighter."

Source: BusinessWeek, December 10, 2007

Mindset Matters

Open and Closed Mindsets

Everyone has two basic mindsets: open or growth, or closed or fixed.

1.      One mindset is open to growth and learning, believing one can always do better.

2.      The closed mindset is entrenched in the belief that natural talents and abilities predetermine success.

With an open mindset, people believe they can always learn more, do more and improve. They are confident, yet humble enough to work harder to expand their potential. They accept criticism as important feedback, not a personal insult.

With a closed mindset, people believe success is based on their innate talents; thus, they shouldn’t have to work hard. They think their abilities are set in stone: Either you have them or you don’t. You must prove yourself over and over again, trying to look smart and accomplished at all costs. This is the path to stagnation.

Which mindset do you have about your own intelligence?

1.      Your intelligence is something very basic that cannot change much.

2.      You can learn new things, but you can’t really change how intelligent you are.

3.      No matter how intelligent you are you can always improve.

4.      You can substantially change how intelligent you are.

Statements 1 and 2 reflect closed-mindset thinking. Statements 3 and 4 indicate an open mindset. Where do you fall on the spectrum? You can fall somewhere in the middle, but most people lean in one direction.

CEO Disease

Eminent psychologist Howard Gardner (Extraordinary Minds, 1997) points out that exceptional people have a special talent for identifying their own strengths and weaknesses. They have open minds and are willing to take in feedback about their own deficiencies so they can improve themselves and their organizations’ performance.

A closed mindset leads to “CEO disease,” characterized by information that’s filtered and distorted so only good news reaches the top. The executive team often plays its part by feeding the CEO’s ego. The problem is, people who use their CEO status to preen are always looking for the next self-image boost. They seldom think about fostering long-term corporate health.

In Good to Great: Why Some Companies Make the Leap…and Others Don’t (2001), Jim Collins writes about the type of leader who takes companies to greatness. They’re not larger-than-life, charismatic types who ooze big egos and self-proclaimed talent. Rather, they’re self-effacing individuals who constantly ask questions and have the ability to confront the most brutal answers. They look failures in the face, including their own, while maintaining faith that they’ll succeed in the end.

These executives have an open mindset:

1.      They aren’t continually trying to prove they’re better than others.

2.      They don’t emphasize the pecking order, with themselves at the top.

3.      They don’t claim credit for other people’s contributions.

4.      They don’t undermine others to feel powerful.

Instead:

1.      They are always trying to improve.

2.      They surround themselves with the most able people they can find.

3.      They look squarely at their own mistakes and deficiencies.

4.      They identify the skills that they and their companies will need in the future.

Recovering From a Closed Mindset

The power CEOs wield allows them to create a world that caters to their need for validation. It shields them from bad news, and it encourages them to drink the Kool-Aid of their companies’ success, despite any warning signs.

There is, however, a cure for CEO disease. Anyone can change his or her mindset.  It requires conscious practice and vigilance, as well as a willingness to be open to learning and changing.

Think of something you need to do or want to learn. Is there a problem you’re forced to confront? Now, make a concrete, specific plan. For example: “At 9 a.m. tomorrow, I’ll make that call and set that appointment to discuss the situation.  I’ll ask questions and receive feedback, without acting defensive. I won’t make excuses.  I’ll take in information, be receptive and thank others for their input. I can decide what to do later.”

Detailed plans that cover when, where and how you’re going to do something lead to high levels of follow-through and increase your chances of success. Even if you have negative feelings, you must carry through with your growth-oriented plan.

How to Grow Your Mindset

Are you in a fixed or growth mindset in your workplace?  Ask yourself the following questions, which will encourage an open mindset:

1.      Do you feel people are judging you, or are they helping you develop?

2.      Are there ways you could be less defensive about your mistakes?

3.      Could you profit more from the feedback you get?

4.      Are there ways to create more learning experiences for yourself?

5.      How do you act toward others?

6.      Where’s your focus: on your power or your people’s well being?

7.      Do you ever reaffirm your status by demeaning others?

8.      Do you ever try to hold back high-performing employees because they threaten you?

9.      Do you consider ways to help your people develop on the job through mentoring or coaching?

10.  Do you think about how you can treat your people as collaborators and encourage teamwork?

11.  Are you aware of elitism?

12.  Do you try to create a culture of self-examination, open communications and teamwork?

13.  Are you aware of signs of groupthink?

14. How can you encourage alternative views and constructive criticism?

Successful CEO Traits

What are the traits that chief executive officers (CEOs) of successful companies share?

A new study suggests that hardnosed personal traits such as persistence and efficiency count for more than "softer" strengths like teamwork or flexibility.  The study, by three University of Chicago business school professors, draws on detailed personal assessments of 313 CEO candidates to present a starker view of good leadership's ingredients.

Of these candidates, 225 were hired.  Their subsequent performance fuels most of the study's conclusions.  "We found that 'hard' skills, which are all about getting things done, were paramount," says lead author Steven Kaplan, a professor of finance and entrepreneurship.  "Soft skills centering on teamwork weren't as pivotal.  That was a bit of a surprise to us."  Among the high-scoring traits: following through on commitments, hiring Grade A players, analytical skills and setting high standards.

One open question is whether the data, which looked primarily at buyout-company CEOs, apply to bosses at public companies, as well.  By contrast to early-stage turnarounds of under-managed companies, public-company CEOs may need more soft skills to manage relations with wide shareholder bases and other diverse constituencies.

Here are five CEO traits that correlate most closely with business success at buyout companies:

Persistence, Attention to detail, Efficiency, Analytical skills and Setting high standards

Source: The Wall Street Journal, November 19, 2007