What makes a great CEO?
It’s not just about leadership or commercial acumen, there’s much more to it than that
IGoogled ‘top CEOs in the world’, and the search threw up names such as Jeff Bezos, Tim Cook and Warren Buffet. But that’s misleading, because it infers you have to be running a giant corporation to be in this league of greatness. I’m happy to say I’ve worked with many fantastic CEOs who head charities, startups, family companies and organisations with revenues of under a million dollars. According to research by McKinsey and Company, 30 per cent of the success of a company is down to historical investments, debt and past decisions. Around 25 per cent of the success is due to market and geographic conditions and 45 per cent is attributed to the current CEO. Of course, if a CEO has been in the same role for say more than five years already, then perhaps that CEO could claim the (historical) 30 per cent also.
In McKinsey’s research, only three out of every five CEOs live up to the role in their first 18 months. The resounding feedback from CEOs is that neither an MBA nor other academic qualifications prepare you quite as well as actually being in the role. There are some obvious traits that typify the role, such as leadership, commercial acumen and risk management, but you won’t be surprised to discover that there is much more to it than that.
A GREAT CEO…
Sets strategy. To remove ambiguity, a CEO must ensure that everyone in the organisation knows why the company exists, where it’s going, who is responsible and what each person has to do to get there. A clearly defined North Star and strategy is essential to shape that.
Aligns organisation and culture. The CEO will shape and model a culture that pays respect to the heritage of the business, the aspirations of the shareholders, the market dynamics and the behaviours that reflect the best chance of success. It’s about going deeper and focusing on the drivers of what engages your people.
As part of the annual budgeting and planning process, a CEO should reassess the most appropriate structure to deliver the strategy. This isn’t just about moving existing names around the chessboard, but instead it starts with asking ‘what does the most effective organisation chart look like?’. As a result, that might involve making some very tough decisions about key people.
Leads the top team. As a facilitator, the CEO must ensure that the top team works as one. Keep an eye on the rhythm that shows itself in decision-making, meetings, communications and personal traits. Is the team the right size? Is it diverse? Are individuals working together effectively outside of team meetings?
Keeps the board engaged. The role of a board is to oversee and guide long term efforts to create value and ensure risk is managed. In doing that, they should be independent and have good governance. The CEO should collaborate with the board to keep it appraised of progress and that it is forward-looking. The CEO should also make recommendations for a diverse mix of skills on the board, especially to support gaps at an executive level.
Manages external relations. The CEO will often be called on to be the public face of the company. Knowing its impact on society and the wider community is therefore essential. And it should be able to communicate effectively the ‘why’ of the business.
Manages time. In addition to all the obvious leadership skills, a great CEO needs to organise their time effectively. Delegation is also key.
THE LAST WORD
Even if your leadership style is to be consultative and inclusive, being a CEO can be quite lonely and stressful at times. You will have to make tough decisions on your own. And if you’re the CEO of a small business, you may well be CEO and every other major position all rolled into one. And that’s hard.