Be a CEO and get rich

WHEN I WAS YOUNG AND silly, I heard old folks say, "Nobody gets rich as an employee … unless he's a shenanigan or he does some hanky panky."

These days, becoming a CEO of a company is one way to amass wealth. This was my topic at ANC's " On The Money" Program, hosted by Edric Mendoza and Melissa Gecolea. The episode shall be aired July 8, 2013.

Perks

In big business, they say that 80 percent of the payroll goes to 20 percent of the people, while the remaining 20 percent is shared by 80 percent of the people. The CEO usually gets the lion's share of the executive salaries, benefits and perquisites.

The basic pay may not be staggering, but the bonuses, benefits and other perks truly differentiate and discriminate the CEO from the rest of the employees. Some of the executive packages are unheard of and perhaps beyond imagination of the great unwashed.

Despite the pressures and perils that come with the territory, the position of the CEO continues to be so alluring that most working people would work so hard and smart to get into that coveted corner office.

Can the company recover its huge investment in the CEO? Yes, considering that some of the components of the CEO's compensation are performance-based, pay at risk, and contingent on achievement of specific value-adding deliverables and stretch goals.

Iconic CEOs

In recent history, there were iconic CEOs worthy of mention. Jack Welch is one of the most successful business leaders. In his twenty years at General Electric, Welch took GE from a market value of $12 billion to over $500 billion. He practically set the standards for other CEOs on corporate restructuring, globalization, and how to take a traditional industrial and service company into the Internet Age.

Welch was legendary for creating a GE without any boundaries. Jeffrey Garten wrote that Welch turned GE into an organization with a culture in which ideas flowed freely from the division that made aircraft parts to the one that made light bulbs, from the subsidiary in Shanghai to the one in Cincinnati. But first, he had to tear down the existing barriers.

Welch said it more dramatically, "You have to think about that company as being a big house. The house has several floors. Think of each floor as a layer of management. Then there are interior walls. Think of them separating different divisions of the company. Then you get a hand grenade. Then you pull the pin. And then, you roll the sucker right through the front door of the house and blow up every floor and every wall."

There are other notable CEOs. Stephen Case was Chairman and CEO of AOL. After the merger with Time Warner, he sat on top of the world's largest communications conglomerate with over 22 million Internet subscribers, and reaches 65 million households. C. Michael Armstrong headed AT & T that had over 60 million customers. The revenues of Ford Motor Company, under William Clay Ford, Jr., exceeded the gross national product of most countries. Jorma Ollila headed Nokia when Nokia constituted over half the stock market capitalization of Finland and accounted for 25% of global sales of cellular phones. Michael Dell placed the customer at the epicenter of his operations.

In the Philippines, MVP and RSA are league-leaders with their game-changing moves that gave their conglomerates great prominence and profits, and changed the business landscape here. Of course, traditionalists Henry Sy and "Big John" Gokongwei laid the foundation for the empires that their children now head.

CEOs' Qualities

Certain qualities set the CEOs apart from ordinary people. Most CEOs have perspective - the ability to see both the forest and the trees. They are good at creating a vision of the kind of future they desire. Eventually, they create the future that is favorable for their organizations, their people and themselves. CEOs don't stop at having great and clear visions. A great vision, if not followed through with a great execution, remains simply a hallucination.

CEOs are great, inspirational communicators who can create buy-in and commitment of the whole organization to their business initiatives. They are usually adept in creating alignment inside the organization and with the outside world.

While IQ is important, EQ or emotional intelligence is even more desirable in CEOs. Problem solving is a great ability of the CEO. But the ability to see opportunities and turn them into value for the organization can lead to long-term competitive edge.

At the end of the day, a CEO is successful if he leaves the organization better than when he found it. Most CEOs stay for five years or so, some for ten to fifteen years. CEOs who stay for 20 years must continually reengineer themselves to be relevant to the times.

Developing CEOs

It takes ten years or more to develop and hone CEOs' competencies and prepare wannabes to assume the top post. At the start of a potential CEO's career, he or she begins to learn more of less. This means depth of expertise in one or two major functional areas. As he or she moves up the ladder, the potential CEO must learn less and less of more and more. To be a CEO, one must have more than working familiarity with the business and the industry. He must know the business intimately enough to change the rules of the game, or change the game itself.

Knowing the importance of the leadership continuity, most organizations today are implementing purposive and deliberate programs aimed at developing CEO skills among their core of leaders. Individualized development programs are usually in accordance with succession plans, where a few high potential names are listed. To be a serious aspirant for the CEO position, you must get into this elite list.

Large conglomerates have more sophisticated ways of identifying, developing and deploying CEOs. Companies can be either a product, process or people company. The company's dominant business strategy - operational excellence, product leadership, or customer intimacy - also helps determine the choice of the CEO.

In the 1990's, I worked with an oil refining and marketing company. The CEO, a marketing person, announced, "Henceforth, there will only be two types of employees here - those that are serving the customers directly, and those that enable this group." The people in the refinery that constituted majority of the employees could only take the statement with a grain of salt.

Herculean tasks

CEOs are human - not gods or demigods. Behind the façade of a self-confident executive is a person who does not know everything and has some insecurities and shortcomings. But the CEOs have to always put their best foot forward.

The CEOs tasks are herculean and are not for the faint of heart. As the market becomes more merciless and unforgiving, the CEO's tenure becomes shorter. The Filipino rank and file is the most highly protected species in this part of the world, more than the tarsier and the Philippine eagle. In contrast, the CEO is the easiest employee to ease out through the door.

In the past, the CEO's deliverables were pretty clear-cut - profitability, market share, financial viability, price earnings ratio, etc. In a global setting, the bigger challenge to the CEO was getting access to new geography. Today, thanks to the Internet and the ever-lower trade barriers, access has become increasingly cheap.

The real challenge now for the CEO is how to deliver more real value to customers than otherwise would be the case, as the company operates around the globe. The CEO now must find ways to develop more depth in all segments of the business, and link the various specializations of those segments.

Garten says of this new challenge, "Global companies will therefore need to be organized by centers of core capabilities and excellence. Of course, the precise formulas will vary by industry, but the best companies will develop great depth in certain products and services in parts of the world where talent and infrastructure are most conducive to it. From that base they will deploy those capabilities where and when they may be needed around the world."

For the CEOs today, the stakes are getting higher, but the challenges continue to escalate. In the past, it was a cinch that you'd be the CEO if you were the COO (child of owner).

(Ernie is the current Executive Director, and 1999 President, of the People Management Association of the Philippines, Chair of the AMCHAM Human Capital Committee, and Co-Chair of the TWG on Labor Policy and Issues of ECOP. He was recognized by PMAP as Diplomate in People Management (DPM) in 2011. He was also voted "Best Newspaper Columnist" by PMAP in 2011 and 2012. He is the President and CEO of EC Business Solutions and Career Center, a HR consulting firm. His books, "Life's Big Lessons" and "Life's Big Lies" are available at PMAP, tel. +632 726 1532 or at ernie_cecilia@yahoo.com)