Tuesday, September 3, 2013

4 Most Important Jobs of a CEO

When we entered the 21st century, few expected so much change after a decade. We are beleaguered with technology advances that take us to new heights each day, erratic economic cycles and global competition. In addition, companies have grown to enormous mega corporations, larger than ever in history. And in the times of knowledge workers, covert information, once privy to only the C-suite, is readily available given globalization and widespread social media. Overlooking it all are CEOs who have become the latest
target for media witch-hunts.

For too long, CEOs followed the same model of previous generations. Command and control was the mindset. Furthermore, the CEO positioned himself to be the smartest in the corporation and responsible for having the ‘right’ answers. However, in the day of the knowledge worker, CEOs of tomorrow must transform with the times. 

Ironically enough, influential titans like Henry Ford and Andrew Carnegie were well known for not having all the answers. They surrounded themselves with some of the most brilliant people who could supply them with the answers they were seeking.

With examples like Ford and Carnegie, CEOs of tomorrow are in a greater position to leverage people smarter than themselves because of the proliferation of knowledge workers. Except, the question remains: what allows knowledge workers to perform their best? In short, the answer is organizational culture. While culture is important, a successful culture does not manifest on its own.   

In fact, fear resides throughout most enterprises as everyone clings to their jobs. People are afraid of downsizing, outsourcing or innovations that make jobs obsolete.

And while innovation can ensure perpetuity of the enterprise, the process of trying new endeavors is risky. Anything outside the norm is considered malignant to profits and must be immediately extricated. At the same time, the business is surrounded by pressure for results.

Therefore, it is the onus of CEOs to create a successful culture. Social anthropologists say culture is a network of conversations. What are employees, suppliers, investors, the media, etc. saying about the company?

In the normal everyday way of doing business, common sense would say that the most important job of a CEO is to increase shareholder value. That has been the number one conversation in the C-Suite. While this is extremely important, creating a successful culture comes first. The culture creates the environment for success. Depending on the goals of the CEO, he or she will have to create a successful culture that supports a start up with an 18-month exit or a mature enterprise moving to its next level of success.

Nonetheless, oftentimes there is too much emphasis on profits and shareholder value. A successful culture, on the other hand, is predicated on many factors. However, there are several that are critical:

  1. Getting the right people on the bus
  2. Generate revenues
  3. Innovation – built in mechanism that changes corporate culture and drives innovation
  4. Capital

These factors are not responsible for the culture; they kind of dance or move with the culture. The culture allows for it to happen in a successful or unsuccessful way.

Getting the right people on the bus – Even though culture is the number one priority of a CEO, it becomes a greater challenge with the wrong people on board. The normal way of hiring people is to look at the person with the best skills and the most experience. This does not guarantee the right person. It could mean a hard worker. However, their values may contradict the culture. It is more important to look for the person that has values that match the culture. Skills can be taught. Values are much more difficult to teach.   

Generating revenue – Aside from the Dot COM businesses, no revenue usually means no future.  For most businesses, generating revenue exists as a result of selling products or services. Revenue is the result of a valuable offering that sells at a price the buyer is willing to pay. However, most organizations have non-customers who do not buy. Understanding why those non-customers do not buy can be an eye opening experience and the catalyst for new products and services – untapped markets.

InnovationIn the words of Walter Lippman, “When all think alike, then no one is thinking.”

Innovative action is change to the full and disrupts the status quo. Yet for many companies, change implies chaos and terror from the unknown. Policy remains, “If it ain’t broke, don’t fix it.” Those who take risks and fail are punished, work in organizations that have unspoken policies which say don’t innovate here. Those same companies are structured to play a game of follow the leader.

In other businesses, the lines of communication do not support the outliers or innovators. Ideas are killed at some stage because marketing and distribution refuses to cooperate. As a result, innovation struggles to go from idea, to development, to testing, marketing and distribution. The enterprise is not set up to collaborate when an endeavor is outside of its core competency.

Another destroyer of innovation happens because people are good at seeing what’s in front of them. When you ask people to imagine a future that does not exist and the role they will play in that future, they make many assumptions that can be contrary to the visionary. Most often the thought is that they will not have the skills and competencies to justify their existence in the organization. And they may not know how to acquire those skills fast enough to remain relevant. Therefore, innovation can be a threat to their very survival as an employee. As a result, it is better to kill a project that requires new thinking and new skills.

Because of the human challenge, innovation must begin in a vacuum. A new enterprise must be created to do 2 things: 1. Create the platform for a new culture before change is forced from the outside. 2. They must be responsible for creating new products, processes and services. That vacuum would serve as an internal mechanism for driving change and innovation. Once they have a prototype, the rest of the organization must be instructed to support and nurture the prototype.

In most corporations, the innovators are swallowed by the dominant culture. If done as an incubator, the CEO sends a message that she is serious about innovation and culture change. The incubator is given a chance to create a life of its own. As a result, the innovators can effectuate change in the dominant culture.

To do that, the incubator would have to be responsible for inventing a new language for products and services as well as the processes for getting things done. It would not be responsible for infusing the ‘right’ culture. They would have to be a built in mechanism for creating a culture that is appropriate for the future. This could change every 3-5 years. 

This incubator team should have a dotted line to the CEO. The CEO should give and receive continuous feedback. That way, ideas do not stall or run out of resources.

Ultimately, innovation is not a spur of the moment inspiration: it is a choice. If we never take a chance, nothing will change.

Capital – Raising capital is essential for an enterprise that is designed to exist perpetually. Whether it is instituting an incubator or geographic expansion, it will require more cash than is on hand. Becoming a publicly traded corporation can raise capital. While an expensive proposition in terms of time and money, the pay off can be high. At the same time, there are many other investment vehicles from private equity, VCs and hedge funds; all providing organizations with the financial leverage to exploit opportunities that would have been stalled at the idea stage for lack of capital to fund the idea. 

While there are many issues for the CEO to focus attention, these four items can give an organization a competitive edge, especially when the CEO has created a successful culture.

What do you think? I’m open to ideas. Or if you want to write me about a specific topic, let me know. 

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