Tag: Leadership

Successful CEOs Share These Six Attributes (hint: Communication is Key)

Successful CEOs Share These Six Attributes (hint: Communication is Key)

Successful CEOs possess each of the attributes described below. This is an unscientific analysis based upon my prior experience covering and acquiring companies (equity research analyst; M&A executive) as well as my current role as founder of CEORater.
It is important to recognize that while these attributes are qualitative in nature they do impact the bottom-line.

1.) Communication:

Effective communication is the most important attribute for CEOs to embody. Our lead photo is that of Steve Jobs, the Great Communicator.  

  • Great CEOs are great communicators: Great CEOs communicate effectively to shareholders, customers and most importantly – employees!
  • Get your reps in: Jack Welch used to say that when he got sick of hearing himself repeat a particular message he knew that message was starting to take root with employees. Rocky Marciano knew the best way to maintain his edge on fight night was hard sparring during training camp.
  • Coach the coaches: Want a force multiplier effect in your organization? Coach your direct reports.

2.) Accountability:

Great CEOs hold themselves and direct reports (and by proxy all employees) accountable. Do not confuse accountability with intolerance for it is important to encourage smart risk.  

Don’t shoot to kill: Sales person misses sales target. OK fine, no variable compensation reward for the period. What behavior will change as a result?

  • Is there a communication breakdown in the sales process?
  • Where is the pipeline weak?
  • How are we engaging with customers and subsequently ingesting and disseminating that sales intelligence? Is that information circulated not only across the Sales organization but with Product Management?

If behavior changes for the better – i.e. improved communication – the miss may have been worth it.

3.) Employees First:

The tried and true principle of taking care of your own first. In return employees will take care of customers. The benefits trickle down to shareholders. 

Past and present CEOs that put employees first:

  • Sam Walton, Walmart;
  • Aron Ain, Kronos;
  • Jack Welch, GE;
  • Tony Hsieh, Zappos;
  • Bernie Marcus and Arthur Blank, Home Depot;
  • Reed Hastings, Netflix;
  • Scott Scherr, Ultimate Software 

Don’t confuse “taking care” of employees with free lunch, coffee bars and foosball tables. Those trivial items may help at the margin, but at the end of the day employees want to be recognized and rewarded for successful missions – both large and small.

4.) Intellectual Curiosity:

Intellectual Curiosity is an attribute we have paid increasing attention to as of late as we began our CEO Personality Analytics effort this May (“Personality Analytics: Technology CEOs Analyzed“)

Our experience is that intellectually curious CEOs are never satisfied (that’s not to say they are perpetually dissatisfied). They are relentless about “what comes next?” and “what aren’t we doing that we ought to be?”

  • Intellectually curious CEOs are more likely to solicit feedback from direct reports.
  • They are motivated to find the truth, not to have their opinions validated.
  • Intellectually curious CEOs are more likely to consider and deploy creative strategies and tactics to deliver customer value.
  • They view obstacles as opportunities rather than impediments.
  • Intellectually curious CEOs create “adaptable” cultures capable of flexing their business model as customer dynamics and competitive landscapes change.

5.) Long-Term-Oriented:

We consider long-term to mean 10 years or more. Similar to the “time value of money” principle where investment decisions made today can have an enormous impact in the out years, capital allocation decisions made today can impact a given company’s competitive positioning and operations in significant and unimaginable ways 10-20 years in the future.

  • Amazon (AMZN): As recently as a few short years ago analysts beat up Amazon for re-investing profits when AMZN appeared to be close to achieving operating profit break-even. Those investments made over a 24-year period (primarily in physical distribution) have paid off handsomely, enabling Amazon to offer same-day delivery service for a mind-boggling number of products. A competitive “moat” if I’ve ever seen one.
  • SS&C Technologies (SSNC): Founder, CEO Bill Stone and his team have taken a measured, strategic approach over the years to augmenting the “core” business with a series of reasonably valued strategic acquisitions. This strategic approach has enabled the company to build the deepest and broadest product and services portfolio across the financial services industry in non-discretionary product areas such as portfolio accounting. Early in the company’s life-cycle certain acquisitions may have seemed somewhat inconsequential. However, 30-plus years and $13 Billion of market cap later the company is the leading Financial Technology provider with solutions that address back, middle and front office workflows across the Financial Services industry.

6.) Trustworthy:

No love without trust. One could also use the word “transparent” to describe a CEO that exhibits consistent behavior whether engaging with a senior executive, a front-line staffer or a customer. We opted for the word “trustworthy” because at the end of the day employees typically describe their CEO as someone they “trust” or don’t trust.

Why is it important for CEOs to be trustworthy? If employees don’t believe you “have their back” – they are less likely to break theirs – for you or for the company.

Communication Breakdown

 

 

Centralized Operating Models Don’t Work. Even for The Narcissist CEO.

Centralized Operating Models Don’t Work. Even for The Narcissist CEO.

To Centralize is to Oppress

This article focuses on centralized business models and why they don’t work. Ben is our anti-hero who learns this lesson the hard way.

We Detest Centralized Business Models for Several Reasons:

1.) The centralized model assumes that corporate headquarters knows best.

Could there be a more arrogant assumption? For any company of size (let’s say $500 million of revenue and greater) – especially those with multiple business units – how could the remote C-Suite possibly know what is best for customers, product managers, product designers, engineers, customer service reps..?  Answer: it doesn’t. The men and women who eat, sleep and drink their business 24x7x365 know best.

2.) The myth that centralized models are more efficient and productive.

Sure, just like the federal government is efficient and productive. Let’s run an experiment.

Scenario 1 – Decentralized Model:

  • Peter, Head of Robotics Sales, reports exclusively to Amy, GM of the Robotics business unit.
  • Donna, Head of Cloud Services Sales, reports exclusively to James, GM of Cloud Services.
  • Richard, Head of Enterprise Software Sales, reports to Lisa, GM of Enterprise Software.

Scenario 2 – Centralized Model:

Meet Ben, Tyrell Corp. CEO. Advocate for Centralized operating models.

Tyrell Corp’s new CEO – Ben – decides he wants to reorganize the company in an effort to boost operating efficiency. Rather than hold his GMs accountable and raise performance expectations, Ben decides one day while riding his stationary bike (complete with VR headset), that centralization is the silver bullet that will lead Tyrell to glory. Heck, it worked at ACME Command & Control where he was CEO until the Board ousted him.  “ACME’s demise wasn’t my fault” Ben told himself.  How could he know that within a year of reorganizing ACME around a centralized operating model all of ACME’s best people would leave? Surely this was an unfortunate coincidence.

Once implemented, Ben has no doubt that Tyrell Corp. will be well on its way to having best-in-class revenue growth, EBITDA margins and a soaring stock price. Surely CNBC, Bloomberg and Fox Business will want Ben to participate in the media car wash of meaningless 7-minute interviews to tell the world how he did it. Ahhh, Ben will have his day in the sun with a sizable equity grant on the other side.

  • Under this new centralized operating structure, Peter is the Head of Sales for all three business units and reports to Ben. Only, there are no longer three distinct business units. Boundaries, the corporate reporting structure, responsibility and accountability are either amorphous or non-existent.
  • Donna and Richard are no longer with Tyrell as their positions were eliminated. Peter is smart, energetic and has a promising future thinks Ben. If he dedicates himself Peter will undoubtedly generate superior Sales performance compared to Donna and Richard. “After all, how valuable could Richard’s 12 years of Enterprise Software experience be? He was expensive. So what if Donna helped launch AWS (as one of its original employees). Nobody understands the cloud anyway. She was expensive overhead as well.” Ben tells himself.
  • Amy, James and Lisa are also gone. “Who needed three GMs? They were glorified, overpaid administrators” Ben complains to his wife Confida.

Ben contemplates recruiting his former ACME colleague Marcel to Tyrell to fill a president or COO role Ben is thinking of creating. The rationale for recruiting Marcel was two-fold:

  • One, Marcel likes to get his hands dirty in the operation. “The Devil is in the details”, “Communication is critical” “I’d love to meet for a drink but I’m flying to Omaha to check on the new widget line”… Marcel enjoyed doing the things that Ben didn’t care to do. All of the little things that employees and customers appreciated but that weren’t terribly sexy, that didn’t lead to glossy puff pieces in Fortune magazine.
  • However, the real reason Ben wanted to recruit Marcel – although he didn’t want to admit it to himself – was because what if the centralized strategy were to take a bit longer than anticipated? What if the unthinkable were to happen and the strategy ultimately failed? What if it was ACME all over again? “Marcel could take the fall” Ben thought to himself. He had a contingency plan for everything. Ben grabbed his phone and made haste for the elevator. The Vanity Fair party was about to start. It would be a great photo op, especially now that his hair transplant had filled in nicely.
Tyrell Corp.
3.) Centralized models lack accountability:
  • Who reports to whom is never clear in a centralized model.
  • Who to reward is never clear in a centralized model.
  • Who to hold accountable is never clear in a centralized model.
Aftermath

Needless to say things didn’t work according to plan for Ben.

Marcel did join Tyrell, but left three quarters later when the significantly larger Wallace Corp. recruited Marcel for the newly opened CEO post. Wallace’s Board had recently removed its CEO who had deployed a centralized strategy similar to Tyrell’s. After 12 consecutive quarters of deteriorating results the Board had enough. Marcel implemented a decentralized operating model at Wallace. Sales flourished. EBITDA margins even more so. Customer NPS scores were through the roof. Two years later Wallace used one quarter’s free cash flow to acquire floundering Tyrell Corp. Wallace also had Robotics, Enterprise Software and Cloud Services divisions. Post acquisition close, Tyrell was absorbed into those divisions.

Coincidentally, Donna, Richard, Amy, James and Lisa were all now thriving at Wallace Corp. Even Peter bailed ship on Ben. Although rather than jump to Wallace he decided to form a new company – Omni Consumer Products – which would one day spin out Cyberdyne Systems and the vaunted Skynet AI.

Wallace Corp Towers (Tyrell Corp. in foreground)
Ferruccio Lamborghini – A Leadership Model Built On Trust & Creativity

Ferruccio Lamborghini – A Leadership Model Built On Trust & Creativity

Ferruccio Lamborghini

For the Lamborghini Countach – the successor to the revolutionary Miura (our header image) – Ferruccio Lamborghini chose three of Lamborghini’s best and brightest. Then he did something revolutionary – he left them alone.

early model Lamborghini Countach

Openness and Adaptability

Elements of Lamborghini’s leadership style – openness and creativity – are congruent with our recent CEO personality research, particularly as it relates to dynamic, fluid segments of the technology industry (think Artificial Intelligence and Autonomous Driving) where creative approaches to problem-solving and adaptability are key success factors.

The Wall Street Journal recently published an article detailing the process by which Lamborghini brought the Countach to life. To access the article as it appeared in the WSJ  CLICK HERE

Our recent CEORater Podcast on the subject is below.

 

Even more on the Miura (we all have favorites) courtesy of Petrolicious – “The Lamborghini Miura Is Still Untamed”

 

Ferruccio Lamborghini
Ferruccio Lamborghini
Ferruccio Lamborghini with his tractor, Countach (L) and Miura (R).
Ferruccio Lamborghini and his Miura

Movement & The Entrepreneur: A Conversation with Greg Walls of PE28

sc-hlth-0506-exercise-for-the-brain-20150430

Often the best advice one could give an entrepreneur is to “just do it“. “It” could be an idea/project/NewCo or it could be a discreet task. As entrepreneurs our business is our baby. As such, we want perfection. Perfection – while a noble aspiration – is not practical. Entrepreneurs must take action with imperfect information and limited data points – particularly if that which we are creating is paradigm-shifting. People won’t “get it” initially. Thus, it’s critical to get “it” out there. Let people use it, poke it, try to break it, have fun with it. The entrepreneur and team may then collect feedback, refine “it” and repeat the cycle (i.e. the feedback Loop) continuously. In my experience I’ve found that when I’m physically moving (left foot, right foot, walk, jog, run) I’m most creative. Ideas for new opportunities, creative solutions and everything in between rush through my temporal lobe like San Francisco 49ers fans rushing for the exits. Below is a link to a recent CEORater Podcast that took place this summer with fellow entrepreneur Greg Walls of PE28. Enjoy: CEORater Podcast Ep. 21 Movement & The Entrepreneur

Senior Leadership Teams Influence A Company’s Success (or lackthereof) More Than Any Other Variable

 

Andy-Grove

For those whom don’t know, the photo is of late/great Intel early employee (technically not a co-founder) and former CEO Andy Grove.

What is the most important factor in identifying companies that will be successful over time? Answer: the senior leadership team.

Quality leaders should be offended when they are referred to as “managers”.  Effective senior leadership teams don’t “manage” – they “lead”.

Quality senior leadership teams have a greater influence on a given company’s success (however you want to define it) than any other one variable.

End market you say? Quality teams will capitalize on strong end-markets and have the courage to exit weak end-markets even when it may be politically difficult to do so.

Quality teams set the culture. Quality teams insist on hiring quality people and won’t sacrifice quality to satisfy a growth expectation.

Quality teams will push back on board members who have overly aggressive growth expectations that may jeopardize the company’s foundational core.

Quality leadership teams will pursue new, exciting product initiatives that have promise – even when data points and milestones are few during the early days of that product’s life cycle. Even when doing so may mean cannibalizing the core and pissing off investors.

Nobody said it was easy.