Making it as a First-Time CEO

Comm update_29 October1All eyes are on you as a first-time CEO. No matter how experienced you think you are, there will be aspects of the role that take you by surprise. It’s why many new CEOs take the opportunity to assess the business, looking to build an accurate picture of performance by meeting different stakeholders. Once you’ve got to grips with the various realities, the pressure will be on to act decisively.

“On my first day, I was very conscious that when I walked into the office everybody was looking at me thinking, ‘Well, who is this guy?’” comments Howard Kerr, Chief Executive of standards and training provider BSI Group. “They were saying, ‘We’ve seen the company announcement and we’ve seen his CV, yet, from what we can tell, he’s got no obvious credentials for this job.’”

Mike Turner, Chairman of engineering concern GKN and former Group CEO of BAE Systems, comments: “What was new to me and surprised me the most was the rigour of the external communications with the shareholders. I thought you just went along with your finance director and that the focus would be on your earnings.

“Frankly, they’re not that interested in the past, they want to know about the future: where’s the growth coming from, do you have a clear strategy and, above all, are you delivering that strategy successfully?”

Often an adjustment period is needed to deal with the greater visibility and profile. Tony Cocker, Chief Executive of energy concern E.ON UK, says: “I’d been working for the company in Germany and it was completely out of the public spotlight. So, when I came back to the UK I was intellectually but not emotionally prepared for the pressure of dealing with the… perception of mistrust of energy companies from the media, some politicians, consumer organisations and many customers.”

Sarah Boyd, CEO of retail chain Guardian Health & Beauty, Singapore, which is owned by Asian retail group Dairy Farm, comments: “I was surprised by the sheer number of decisions that I was faced with. But it was more about the fact that the majority of those decisions were being made based on gut feel, rather than using good quality data and analytics.

“I was absolutely terrified because people were asking me to make decisions on things for which I had no frame of reference, and I found that incredibly uncomfortable for a while.”

First impressions

So, what should be on the agenda for those who are new to the role in those first 100 days? The most common pieces of advice fall into three areas:

  • Spend time assessing the business internally in order to separate fact from fiction;
  • Meet external stakeholders, such as customers, suppliers, analysts and advisors, to get an idea of how the company is perceived;
  • Once the period of assessment is over, be decisive.

A good starting point will be to sit down with the chairman. Lord Stuart Rose, Chairman of online grocer Ocado Group and former CEO and Chairman at retailer M&S, says: “The relationship between a CEO and Chairman is absolutely built on trust and mutual understanding. For example, when discussing my recovery plan for Marks & Spencer with the Chairman, he just said, ‘Right, well I’m backing you’. “It was about giving me time and keeping the board and the shareholders off my back, while I focused on getting the job done. Every chief executive must crave a hugely supportive chairman and every chief executive who is any good deserves one, until he proves [otherwise].”

Greg Morgan, Director at search firm Warren Partners, comments: “I think, crucially, you need to agree with the Chair on what your objectives for the first 100 days are going to be. [You then need to] establish, again, in consultation with the Chair and the board, what your strategic and operational priorities are… and work to define them so that everyone is [in agreement].”

What they say

Don’t underestimate the value of talking to people in the business during these early days. Sarah comments: “For a retail CEO, certainly, it’s about working in-store for a period of time and spending as much time as you can with the people on the ground who are actually delivering the results for you. After all, you can’t start adding value at a more senior level until you really understand what’s happening.

“If I’d come into this business and said, ‘Tell me how our stores are run,’ and I just sat in my office… I would have been so far from the truth of what actually happens in-store.”

Tony says: “You absolutely need to take the time… to meet and listen to colleagues at all levels, as well as customers, very early on. You’ve got to prioritise listening so you get a much better feel for the organisation in your first 30 days.”

Understanding external stakeholders is increasingly a key part of the CEO’s role. Greg comments: “Going the extra mile in terms of your due diligence is probably the distinguishing feature of people that do it well. The incoming CEO must talk to advisors to the business, people that are no longer with the company and, of course, customers, investors and analysts.”

Howard says that he did “an awful lot of travelling around” to make a concerted effort to speak with those on the frontline and to deal with customers: “In my case, because I was coming into a business and a new industry, I didn’t come with any preconceptions, so I came in being genuinely curious.”

It’s about absorbing as much information as possible and carefully choosing how to relay the messages you think will have the biggest impact. “You’ve got to prioritise listening to colleagues but then also listen to customers and other external stakeholders,” says Tony. “I remember the first newspaper I sat down with was The Sun [the UK’s most popular tabloid], which was a deliberate decision because many more of our customers read The Sun than the Financial Times.”

Lights, camera, action

Once a CEO has developed their own view on strategy, it’s time to ring the changes. Mike says: “Get your direct reports, your team right, and have your head of communications in attendance at your executive committee [meetings]. He or she has to know what’s going on in the business and [likewise] you can make sure the key messages are getting out to all employees, especially around the company strategy. It’s a real failure when employees say, ‘I don’t know what the company strategy is’.”

Howard comments: “[In my case] the executive team was, to a large extent, not really fit for purpose, so I had to replace the HRD, the legal director and the FD. I also had to move a couple of regional directors around, so there was quite a lot of change required…

“Basically, I didn’t have enough evangelists on my team to support me on the messages I wanted to convey and to help me execute the strategy.”

When speaking to former CEOs, a familiar refrain is that, in retrospect, decisions could have been made at a greater pace. Lord Rose says: “When I look back and assess the mistakes I’ve made, it’s always about not acting quickly enough. Whether that’s not firing somebody or not pushing a plan through forcefully enough, there’s always the question: could I have gone faster?”

Put simply, the spotlight will be on a new CEO to show real leadership. “You’ve really got to energise yourself, but triply energise the team who are working for you, because if you don’t [motivate] the team, you don’t get the job done,” adds Lord Rose.

I hope to see you soon

Matthew

www.twitter.com/criticaleyeuk

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A Flatter, Faster and Fitter Business

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Strategic, board-level decisions often fail because they are ground down in the corporate machine. While senior executives must be smarter at overcoming this by engaging middle managers and explaining why certain decisions have been taken, there is also a bigger, systemic question that needs to be addressed around organisational design and culture so that the best ideas are driving a business forward.

Martin Hess, VP of Enterprise Services at IT concern Hewlett Packard, says: “We have taken out tiers of management to flatten the organisation’s structure, because one of the biggest frustrations is that decisions taken at the top basically don’t hit the bottom. Too many tiers of management dilute the message that comes from the top, so you’ve got to find ways in which you can communicate decisions that avoid that dilution.”

It does appear that a point has been reached whereby traditional structures, be they hierarchical or matrix, are proving increasingly inadequate for global businesses. If that is the case, anything that can simplify and bring transparency to the decision-making process should be welcomed.

Julian Birkinshaw, Criticaleye Thought Leader and Professor of Strategy and Entrepreneurship at London Business School, comments: “All organisations use, to some extent, business models and management models that they don’t question and have inherited. These are based on order and control, but this ends up constricting an organisation’s ability to function…

“There are alternative models emerging which are bottom-up, relying more on the ability of people to make decisions for themselves and working out a mode of operating that is successful.”

Informed decisions

Much has been written about how data and analytics can inform choices. While there has undoubtedly been a step-change in this field, it shouldn’t be seen as some kind of panacea for making tough calls. Martin says: “You’ve got to avoid the process whereby you filter only the information that supports that decision.

“It’s not a weakness to change. You make decisions based on the data… then you’ve got to create a model that is permeable, allowing other data sources to come in that might influence that decision going forward.”

The focus must be on flushing out any false assumptions you may have.

Simon Dawson, Associate at leadership and organisational change consultancy Transcend, says: “Be aware and open about your biases, both personal and organisational, that might come into play in decision making, whether it’s in interpreting data or having a gut feel about what to do.

“That might include being tainted by negative previous experience; the different perceptions of risk; whether levels of optimism are realistic or how people perceive themselves and each other.”

Caroline Brown, CFO of consulting and software service concern KBC Advanced Technologies, emphasises the need to balance data with personal judgement.  “I’m afraid I tend to go with the gut feel and really interrogate the data that doesn’t agree with that,” she says.

“I’m very sceptical about data most of the time. I wouldn’t go as far as to say [I pick the data that I agree with]… but data that is in contradiction of the gut feel gets interrogated thus, because it starts with the wrong assumptions and probably the wrong inputs as well.”

The volume of information now available means that executives can become lost in an endless maze of data analytics as they attempt to make the ‘right’ decision. “Companies which look at data and are obsessed by it can find themselves in a state of ‘analysis paralysis’,” warns Julian. “They get stuck in inaction, whereas the next era is one of action and conviction.”

For Geraint Anderson, CEO of electrical systems manufacturer TT electronics, it’s a matter of course to be working to clear data points but, he says, “it’s ultimately about whether I feel it’s the right thing to do… then making sure that I can back that up with data where possible”.

The right results

The crux for effective decision-making in any organisation comes down to leadership. “When decisions fail to take hold within an organisation it’s mostly down to culture and lack of communication around the context for the decision,” says Caroline.

Geraint says: “I keep HR directly informed and share and develop decisions and the direction with the rest of my team, bringing them together on a regular basis to assess whether we are still on the right track. It’s vital that you’re coherent and bring decisions together as a team and are not just being dictatorial.”

The common mistake is to announce a change, not communicate it clearly and then fail to revisit it on a regular basis. Clodagh Murphy, MD of Eclipse Internet, a division of KCOM that provides communications services to small and medium-sized businesses, comments: “Decisions often get taken in boardrooms and are cascaded out as ‘just do it’, without taking the time to explain the context of why the decisions have been taken…

“We’ve had bottlenecks where, to some extent, the capability of some of the middle managers just isn’t there to articulate the messages effectively… [and] we’re doing quite a bit around people development to try and overcome some of that.”

If decisions do appear to keep getting ‘stuck’ in a business, ultimately a CEO will need to see this as indicative of a more ingrained weakness around the leadership team, the culture and organisational model. At present, many companies are at a stage of reassessment, wondering how to reduce complexity so that everything is moving faster, but in a way that is based on clearly established values.

According to Julian, “we have now reached a point where an emphasis on collective knowledge has led to sterile decision making, devoid of emotion… Organisations now need to marry knowledge and emotion”.

It may prove to be an unbeatable combination.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk 

5 Key Challenges for CEOs

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The insecurity of the CEO is rarely discussed. To the outside world, the leader of a business will be able to find inspiration when ideas seem thin on the ground, effortlessly demonstrating that they have it all under control when talking to customers, shareholders, employees and the media. It’s something of a conjurer’s trick, concealing their own entirely natural questions and concerns about strategy, people and what the future holds.

It takes discipline to keep a cool head when others around you are losing theirs. As part of our latest filmed series, The Challenges of the CEO, in association with IBM, we spoke to a range of leaders to get behind the facade and find out what’s really been playing on their minds.

1) Leadership as Performance Art

While not wanting to be known as a court jester, leaders need to combine substance with a style that makes people believe in what’s being said. Paul Matthews, CEO for the UK and Europe at insurer Standard Life, says that “the challenge for any business today is to get its employees [engaged] and to understand what’s different about what their company does”.

Flashes of inspiration and the ability to inspire will go hand-in-hand. Paul Budge, UK & Ireland Managing Director at consumables distributor and outsourcing business Bunzl, says: “[Managers and staff] have got to feel they’re in control and they’re empowered to run their business, so my role now is far more one of winning hearts and minds and getting people to do things because they think that it’s a good idea.”

Andrew Heath, President of Energy at engine maker Rolls-Royce, says it “comes down to making sure that we have a clearly articulated and communicated strategy that people can align to”.

2) Going with Gut Feel

For every CEO, there is the dilemma of looking at what the data is telling you versus going with your instinct. Paul Molyneux, President and CEO of Sharp Electronics in Europe, says: “As you develop in the CEO role it’s important that you can prove your ‘gut feel’ through information, because you have to be able to explain and defend important decisions in order to take people with you…

“[But] my own personal mistakes in the past have been when I took too long to make a decision, particularly around people, where your gut feel can often provide the right answer for you quite early on.”

Stephen Bates, Senior Vice President of Global Enterprise and Government Accounts at smartphone maker BlackBerry, agrees: “My view is to make the best call you can in a timely enough way that the information can be ratified and executed with the information you’ve got to hand, and try not to get distracted by constantly assessing the situation.”

3) Knowing When to Step Back

Limited time, combined with enormous amounts of complexity, means that a CEO cannot keep trying to do everything (dabblers are the worst kind of leaders).

Simon Calver, CEO of retailer Mothercare, comments: “You have to stop doing stuff. The way I like to think about it is you have to be on the business not in the business, because you have people that do the detail day by day.”

As the newly appointed Group CEO of the soft drinks business Nichols plc, it’s something that Marnie Millard has quickly realised is essential to be successful in the role. “It’s about learning to take a step back and listen to the executive team around you, particularly when you’ve been involved in a large commercial arena where you become very used to ‘doing’.

“You need to be able to coach people and allow things to evolve through discussion a lot more than directing individuals, because at this senior level there’s a lot of experience around the table which you need to be able to tap into… You need to listen to your trusted senior executive team.”

4) Strategy & Execution

For divisional and regional CEOs, the pressure is always on to take group strategy and make it fit locally. Phil Smith, Vice President and Chief Executive for the UK and Ireland at Cisco Systems, says: “With any company, whether you are a divisional CEO or you’re running a function within a company, you have to decide where you get best advantage.

“Although the constraints you’re put under can be frustrating, you’ve also got to realise the scale that the company gets is based on a level of corporate consistency… Working within the constraints is part of the skill of the job.”

The biggest overarching challenge for Sharp Electronics’ Paul Molyneux is the need to meet the expectations “of the centre”. He explains: “In Japan, in particular, the culture is ‘if it’s not down on paper, it doesn’t exist’… once the plan is approved then the expectation is that it’s delivered absolutely in line with the plan. But we don’t always have the ability to control the external environment, we do get variances, so we might have to go back and re-manage expectations.”

5) A State of Flux

High-growth markets, innovation and technology, rebuilding trust, an ageing population – these are just some of the items on the agenda of both seasoned and virgin CEOs.

Ashok Vaswani, CEO of Retail and Business Banking at Barclays, comments: “From the external perspective, the expectations of society on big corporations have changed quite dramatically. Keeping up with those expectations is becoming more and more important, whether you define ‘society’ as customers, prospects, regulators, media or the government… getting the purpose of your company out there, how it really makes a difference to society, is becoming a more important aspect of everything we do.”

A similar point is made by Simon: “One thing you need to be conscious of when you work in a well-recognised brand is that your reputation is everything… With social media and the speed of consumer response… reputational integrity, especially when you work in a business like Mothercare that looks after mums and babies, is absolutely crucial.”

Paul Matthews of Standard Life says: “As CEO, I have to represent all of our stakeholder groups, and they are each looking for different things. Customers want to shop around and pay the cheapest prices they can, but shareholders want me to invest as little as I need to in order to pay them as good a dividend as I can pay and provide stability for them. I can’t provide stability if my customers are behaving in a different way every day, every week, every month.”

In this context, according to Paul, “success is about getting customers, advisors, regulators, staff and shareholders into a place where they feel they are taking something out of the relationship”.

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It’s not unusual for leaders to talk up having good people around them, but over recent years you sense they really do need quality individuals and have appreciated the combined effort it’s taken to navigate the strategic and operational uncertainties. Jason Dies, General Manager of IBM‘s Global Process Services in Europe, and part of IBM Europe’s Leadership Team, comments: “The broader scope of the CEO role is seen as significant and the need to surround yourself with the brightest and most diverse talent is more important than ever.”

Pragmatism, decisiveness, and a keen eye for risk, will all stand a CEO in good stead, along with an appetite to keep learning and discovering new ways to overcome the countless challenges out there. “The worst thing you can do in this environment is get yourself bent out of shape about the things you can’t control,” says Phil. “Deal with the world the way it is, rather than the way you would like it to be.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk