My CEO Life

I was recently thinking about what makes a great person in the business i run and the common trait that kept coming to mind was PASSION.

It seems to me that my team members who are truly great are those that display unflagging passion for what they do.  They don’t focus on what is in it for them, they focus on what they want to achieve for the business.

It was then interesting when i read a recent article that compared GE’s approach of rating people as either in the top 20% or bottom 10% with hiring people that are passionate.  It basically proposed that simply rating people based on quantitative measures may miss the one vital ingredient – passion.

I agree with this.  I think you need to employ passionate people as they will go above and beyond, they will more often than not make the right decision, and they will be very loyal allowing you to change the direction of the business.  The other good thing about passionate people is that they will tell you what they really think.  This allows you to get true and honest feedback from all parts of the business.

So the lesson i have learned is that sometimes a person may not be a top performer but if they have passion that is well intended and well directed you should probably work hard at finding the right role for them in the business rather than letting them go.

I recently wrote on what makes a great CEO.  Well someone has asked “why do CEO’s fail?”

I think you can look at this on three dimensions – structural, skill, and ego.

Structural

Some CEO’s are running businesses that are doomed from the start.  They are operating in industries that are structurally challenged or have poor economics or have massive competition.  To win in these games requires a CEO to be brilliant and, lets face it, if you are brilliant, you wouldn’t take the job in one of these industries / businesses in the first place.

Bottom line — no matter what you do you are doomed!

Skill

Sometime people are appointed to a CEO role and it is beyond them.  They have been very successful in their functional discipline however when you move them across to running the complete business, they fail because it is just too hard and they don’t have the cross-functional skill sets to either keep the team on track or to add value to all parts of the business.

In these circumstances, they either focus on what they know and let parts of the business wither or they try to add value when they don’t know what they are doing and either lead the business in the wrong direction or lose the faith of their senior management team.

Ego

This is my favourite.  It is all about the CEO who doesnt know what he / she doesnt know.  They are all about themselves, about being the leader of a business and not necessarily acting in the best interests of those around them.  Some become media stars and end up distancing themselves from the employees of the business and are more worried about their personal brand than building the business.  These guys often fall apart when times get tough and they dont really know what to do … see skill above

Here is a great question

“i am doing a project for school and it says pick your dream job and describe the requirements for that job…i choose the ceo of microsoft and its hard to find the requirements needed…so if you could please help me!”

Firstly, i am doing my dream job.  I love running a business, building new things everyday, competing like mad and working with a great team to change our little part of the world.

So what are the requirements to be a great Chief Executive?  (Not a simple question)

My first thought is that there is no template.  Each CEO has a different way of doing things and they probably come from very different back grounds.

However i believe that there are common traits among great CEO’s – these are:

Vision

Great CEO’s have an absolute clarity in their vision for the business.  The clearly define where the business is going and then ensure that everything they do is in that direction.  The are as much successful for what they do as they are for what they don’t do – ie what do they say NO to.

Passion

Passion is critical to the success of any business and passion starts at the top.  Great CEO’s work like mad, love what they do, don’t really care about how much they get paid and take everything very personally.  It is their business, their baby and they want nothing to get in their way of success.

Leadership

Great CEO’s have amazing leadership.  They know how to get the most out of people without even really trying.  The motivate and incent people by their presence.  They are sometimes larger than life in a business and the earn the respect of those around them.

Decisive

I also think great CEO’s are decisive.  They use the information they have and the input from their people to make quick decisions that most times (8 out of 10) are right.

Politics

Great CEO’s stamp out politics in business.  It is all about letting the cream rise to the top and to ensure that the best ideas and people win the day.  This is hard to acheive but creates amazing value when it does.

Long Term

I think great CEO’s take the long term view to their business.  For them it is not about tomorrow or the next quarter, it is about the long term future – what the business looks like in 5 – 10 years.

Ethical

Finally, and probably most importantly, great CEO’s are ethical in everything they do.  Enron, Worldcom and co didn’t have great CEO’s for a reason.

The bottom line is that a fish rots from the head.  Therefore if this is true, the corollary is true – great business start with a great CEO.

I was recently asked the question about who are the top paid CEO’s in the world.  The basic answer to the question is “i don’t know” but a quick search of Google turned up the Forbes Magazine top US CEO pay packages.

Richard Fairbank from Capital One Financial topped the list with a lazy $250m per annum.

To see the full list, go to http://www.forbes.com/lists/2006/12/Rank_1.html

I had a question from Stacey

I am taking an online college course and my teacher has given us a discussion topic “Do you believe U.S. executives are overpaid?”  I was wondering if you could help me and tell me why they get paid as much as they do. It would really help me out.

So do i think they are overpaid – well YES and NO.  So … why yes and no?

I think that some may be overpaid and this therefore creates a stigma over all CEO’s.  Many CEO’s earn around $500k, have equity in the business, are madly passionate about the business’ success, sacrifice alot (including family) and create jobs for many employees.  These are not the CEO’s who are earning $20m for a year.

The second point i would like to raise is that sometimes the bonus criteria that lead to large CEO payments don’t appear to be well thought through.  You often hear of a CEO getting paid a $5m bonus but the share price has dropped 25% during the year.  When you hear this, you have to wonder what was going through the minds of the Board when they put the bonus criteria in place.

The final point i want to make is that being a CEO is not a simple job.  You are constantly balancing the requirements of a board, share holders, the market, customers, amd employees.  You have to deliver growth and be measured each and every quarter.  You will be scrutinized by everyone and have no one to talk to.  If you make one mistake you are out and your career is over.

A final comment … i think golfers, footballers, basketball players, actors etc are all over paid in comparison to CEO’s.  Do any of the above create jobs, create a long lasting business, or help put the food on the plate of families?

Now this is a tricky question as it depends on the business the CEO is running. The CEO of a not for profit will have some different skills versus a CEO of a large corporate versus a CEO of a government body verus the CEO of a small business. So instead of being specific, i will talk about the general skills that i believe make a good CEO.

Here are my initial thoughts

• Clarity of vision (and its communication) is critical. Without this, who cares. The ability to set a clear future for the business and to articulate this in such a way that all employees get it and are passionate about it is make or break.
• Passion – ok this is not a common one but i believe that if the CEO does not truly and passionately believe what is happening then no one will. Passions sometimes make the plausible possible.
• Curious mind – you have got to be extremely curious about everything. You need to ask questions – not matter how silly – to question. Trust your intuition.
• A great bullshit meter – you have got to have great intuition as to what is happening and when people of pulling the wool over your eyes. If you dont have this, people will be forever managing upwards. I hate that.
• A feel for numbers – you have to have a natural feel for numbers. No matter what we want to think, numbers make a business work. You need to know what the numbers are and where they are going. It allows you to have cadid conversations with the management team.
• Candor – this is critical. Dont beat around the bush – say it as it is. It something is great, tell the team or the person involved. If something sucks, do the same. Being politically correct just sends the wrong message to the business.
• Strategic mind – this is a little harder. You need to be able to think strategically about the business so that you can help put in place the right initiatives to drive towards the vision.
• Being prepared to change – three year plans are rubbish in fast moving businesses. At best we can plan one year with a fair degree of certainty. However we often get that wrong. Be prepared to change. Go with your instincts and modify (not 100% change) your direction when needed.
• Communication – the CEO has to be able to clearly communicate to all people. Whether it is to a group of 300 people or one on one. Get out there, press the flesh with employees, make them feel wanted (and mean it) and make sure your message is clear and strong and CONSISTENT!!
• Bias to action and decisive – i think that these two skills are the most critical. Make a decision AND GET ON WITH IT

And what doesnt make a good CEO?

• Connections - connections doesnt make you good, just connected. Having friends in high places doesnt make a good CEO.
• Political awareness – who cares if you can play politics. It doesnt mean squat to customers or the market.
• Money – in some markets having money helps you become a CEO, but it doesnt make you a good CEO. How many second and third generations have got it very wrong.
• Ego - lose it or lose the business. Employees are not fools and they wont want to work for an egomaniac.
• A degree – just being educated does not make you a good CEO. I have done an MBA, it was interesting and i learned to tell the lecturers what they wanted to hear!

So … there are my thoughts. I would love to hear other.