Divisional CEOs seeking high performance must balance the dynamics of their own region or division with the demands of Group, while also navigating a digital world that has radically changed the customer and employee experience. Our Divisional CEO Retreat, held last week in association with Accenture and Santander, brought together leaders from a range of businesses to discuss how some of these pressures can be handled.
A key theme to emerge was the importance placed on regional or divisional CEOs being able to juggle the demands of multiple stakeholders. Oliver Benzecry, Managing Director of Accenture’s UK and Ireland business, explains that the insecurity that has pervaded domestic and international markets, especially post-financial crisis, has made, what he calls ‘agility’ an essential quality.
“What has definitely changed is the sheer level of uncertainty, so your ability to set out a strategy and stick to it is very limited,” he says. “That means the journey aspect of this is even more important as you need to have a sense of direction but you have to be prepared to change based on what you find at any given point in time. Not only do you have to be more agile and deal with emergent strategies, but actually you need to be much more proactive in communicating with stakeholders.”
For Lucy Dimes, CEO for UK and Ireland at telecoms concern Alcatel-Lucent, one stakeholder group is sacrosanct: the customer. “I always come back to the notion that what’s best for the customer must be what’s best for business, and that’s why I make sure I spend the majority of my time with customers and trying to minimise the internal or inward ‘pull’.”
Andrew Heath, President of Energy at engine maker Rolls-Royce, observes that a lack of customer focus was the reason why his team wasn’t performing when he took up his current role. “I inherited a business four years ago that was losing money and had taken an approach to cut costs, but it had lost its way with customers,” he says. “The senior team had lost respect and trust from the rest of the organisation, because those who were dealing with customer issues every day on the front line saw that the approach the business was taking wasn’t the right one.
“As a new divisional CEO, you need to confront the issues, set out the challenge and communicate your strategy clearly in order to find that eureka moment where the team becomes aligned to it.”
Another theme to emerge from the Retreat was the degree to which divisional CEOs are able to champion tactics specific to their division or region, which might be at odds with or at least an interpretation of the Group strategy.
For Lucy, it is important not to be subservient to the whims of head office. “I’ve developed a ‘constructive maverick’ style, managing the demands of our Paris HQ but pushing back when I’ve felt the ‘corporate standard’ didn’t work for our local differences or requirements,” she says. “This has helped to build trust and cohesiveness inside the UK as my team know I will support them and not just comply for an easy life, but I’m careful to challenge constructively and only when it really matters.”
Mike Ellwood, Managing Director of Corporate Banking at Santander, takes up Lucy’s note of caution: “You’ve always got the challenge of what’s right for the regional business that you’re running and whether that plays to the wider group or corporate strategy. It’s a balance and therefore going off and pursuing something that might be high risk in innovation terms and that might threaten the wider group might not be the right thing to do.”
This safeguarding of local autonomy and success can be taken to extreme lengths. For Bruce Cox, Managing Director of Rio Tinto Diamonds, it meant deciding on a radical move to divest the diamonds business from its FTSE 100 parent. He explains: “We tried to execute a lot of M&A opportunities, but we could never land a deal that was transformational enough to make us more relevant inside Rio Tinto. We needed the capital to expand the business and it became clear it wasn’t going to come, so the management team and I went to the board and explained that, from a portfolio point of view, the diamonds business will never have the critical mass that’s required to make a difference inside Rio Tinto and the capital base is being eroded, so we think it’s better to find a new potential investor.”
Communication, communication, communication
It’s a multi-faceted position, requiring not only the ability to interpret, apply, work within and sometimes challenge Group strategy, but also to engage employees and a potentially diverse customer base. On top of this, there have also been dramatic shifts in terms of speed of execution brought about by a multichannel world. All this points towards the need for divisional CEOs to be supremely accomplished communicators, not least in a world heavily influenced by ‘new media’.
There are also dramatic shifts in terms of speed of execution brought about by a multichannel world. Oliver says: “It’s now no longer good enough only to have business acumen as a CEO. Without being deeply technical, you need to be able navigate the digital world as it fundamentally reinvents the customer and employee experience, your processes and how you operate your value chain. It’s as much a part of the business for a CEO as worrying about the next product or service.”
For Leendert Den Hollander, CEO of Young’s Seafood, which is part of the Findus group, an appreciation of the customer’s need for quick and transparent information was brought into sharp focus last year when news of the horsemeat scandal erupted on social media. “In a world of social and digital media…everything is real time, nothing can wait,” he says. “We had to deal with consumers’ questions, concerns and enquiries – obviously that was the priority – and with retailers because recalling a product is a lot of work for retailers as well… Not responding accurately and timely enough with statements and positions could lead to speculation in the press.”
When a crisis hits, divisional CEOs must lead from the front by juggling the various channels of communication while also responding to stakeholders personally. “I chose to lead a small team directly, freeing up my diary and locking myself in a room when needed with the PR people that we appointed, and working closely with a small team at Findus that was available 24/7,” says Leendert. “[Reputation] is something that I feel you can’t delegate because you are dealing not only with the reputation of the Findus brand but also that of the Young’s company.”
Whether you’re handling a crisis or setting out a new direction for the division, clarity of communication is vital. Bruce says: “You need to listen to the concerns of employees and debate the issues with them directly… Vision planning is a social process for which you need the buy-in from employees and they should absolutely be able to influence the outcome and rewrite the future culture of the business.”
A new breed of leader
A team will only be able to deliver high performance if it comprises engaged and energised employees. Rick Haythornthwaite, Chairman of MasterCard, says: “When looking to develop a high performing team you need to consider how you can stir passion in your people. Often it’s about taking that team and getting down to the actionable stuff, part of which means investing time and energy in getting each individual to understand what he or she is really committed to. It’s often not other people that are the problem but that individual’s absence of real fire and a lack of commitment to a clear future that is getting in the way… All of this stuff is what gets me up in the morning and it’s the difference between getting something done in a year or in a month.”
Often this will require a regular appraisal of the team’s strengths and weaknesses. Andrew comments: “I like to build quite close association with the people that work for me. The personal engagement and commitment is important. But you need to protect yourself ruthlessly, too, and while I do value individuals, I will constantly appraise my team to see if they are doing the things they need to do, and whether they are doing things in the right way. If they are not, you need to deal with it because, if you get the right people around you, the business runs a lot faster and the relationships you build with those individuals are more sustaining and enjoyable.”
It boils down to a modern leadership style that requires CEOs to adapt according to new circumstances. Indeed, your relative success in this at a regional or divisional level may ultimately dictate if you’re suitable for the Group CEO role.
Carl-Peter Forster, Non-executive Director at IMI plc and the former Group CEO of Tata Motors, says: “If you have a very much controlling management style, it could well not be a sustainable way of working in the Group CEO world. You have to decide how to behave… [and] what the agenda for your team, yourself, your business really is. It’s ever more important to shape, define and put out an agenda people believe in and sometimes it’s quite tricky to find that.
“You have to find an approach that resonates… with your team and which is strong enough to pull the business forward and which guides your actions for the years to come.”
Ultimately, the ability to communicate clearly to different stakeholders, inspire the individuals around you, champion your cause and adapt to changing circumstances, are the hallmarks of any great leader.
These qualities are absolutely essential for divisional CEOs to deliver high performance in the 21st century.