Raising CEO Longevity

In my youth, CEOs hung around till they retired. Today, the tenure of CEOs continues to drop to a point where their longevity is less than an NFL coach. Show me a company or even a country in trouble, and I'll show you a CEO who is about to be fired. Strategy, vision and mission statements are dependent on the simple premise that you must know where you're going. No one can follow you if you don't know where you’re headed. Many years ago, in a book called The Peter Principle, authors Lawrence Peter and Raymond Hull made this observation: "Most hierarchies are nowadays so cumbered with rules and traditions, and so bound in by public laws, that even high employees do not have to lead anyone anywhere, in the sense of pointing out the direction and setting the pace. They simply follow precedents, obey regulations and move at the head of the crowd. Such employees lead only in the sense that the carved wooden figurehead leads the ship." Perhaps this pessimistic view of leadership skills has led to the explosion of hundreds of books dealing with leadership, most of them being downright silly. There's advice on whom to emulate (Attila the Hun), what to achieve (inner peace), what to study (failure), what to strive for (charisma), whether to delegate (sometimes), whether to collaborate (maybe), Americas secret leaders (women), the personal qualities of leadership (having integrity), how to achieve credibility (be credible), how to be an authentic leader (find the leader within) and the nine natural laws of leadership (don't even ask). In fact, there are 3,098 books in print with the word "leader" in the title. To me, how to be an effective leader isn't worth a whole book. Peter Drucker gets it into a few sentences. "The foundation of effective leadership is thinking through the organization's mission, defining it and establishing it, clearly and visibly. The leader sets the goals, sets the priorities, and sets and maintains the standards."
First, how do you find the proper direction? To become a great strategist, you have to put your mind in the mud of the marketplace. You have to find your inspiration down at the front, in the ebb and flow of the great marketing battles taking place in the mind of the prospect. It's no secret that most of the world’s greatest military strategists started at the bottom. And they maintained their edge by never losing touch with the realities of war. Karl von Clausewitz did not attend the best military schools, did not serve in the field under the best military minds and did not learn his profession from his superiors. Clausewitz learned his military strategy the best way and the hardest way--by serving in the front line at some of the bloodiest and most famous battles of military history. The unpretentious Sam Walton traveled to the front lines of every one of his Wal-Mart stores throughout his life. He even spent time in the middle of the night on the loading docks, talking with the crews. Unlike "Mister Sam," many chief executives tend to lose touch. The bigger the company, the more likely the chief executive has lost touch with the front lines. This might be the single most important factor limiting the growth of a corporation. All other factors favor size. Marketing is war, and the first principle of warfare is the principle of force. The larger army, the larger company, has the advantage. But the larger company gives up some of that advantage if it cannot keep itself focused on the marketing battle that takes place in the mind of the customer. If you're a busy CEO, how do you gather objective information on what is really happening? How do you get around the propensity of middle management to tell you what they think you want to hear? How do you get the bad news as well as the good? If you don’t get the bad news directly, bad ideas can flourish instead of being killed. One possibility of finding out what's really going on is "going in disguise" or poking around announced. This would be especially useful at the distributor or retailer level. In many ways this is analogous to the king who dresses up as a commoner and mingles with his subjects. The reason: to get honest opinions of what's happening. Like kings, chief executives rarely get honest opinions from their ministers. There's just too much intrigue going on at the court. The members of the sales force, if you have one, are a critical element in the equation. The trick is how to get a good, honest evaluation of the competition out of them. The best thing you can do is to praise honest information. Once the word gets around that a CEO prizes honesty and reality, a lot of good information will be forthcoming. Another aspect of the problem is the allocation of your time. Quite often it is taken up with too many activities that keep you from visiting the front. Too many boards, too many committees, too many testimonial dinners. According to one survey, the average CEO spends 30% of his or her time on outside activities--and spends 17 hours a week preparing for meetings. Since the typical top executive works 61 hours a week, that leaves only 20 hours for everything else, including managing the operation and going down to the front. No wonder chief executives delegate the marketing function. But that's a mistake. Marketing is too important to be turned over to an underling. If you delegate anything, you should delegate the chairmanship of the next fund raising drive. David Packard of HP fame once said, "Marketing is too important to be left to the marketing people." Long ago, Drucker advised that since the purpose of a business is to generate customers, only two functions do this: marketing and innovation. All other functions are an expense. He was absolutely correct. If you're a CEO, keeping your job will depend on how good you are at marketing and innovation. - (Branding Strategy, 19 Sep 07)

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Recession Survival - How to Outrun a Tsunami

March 12, 2009 — Facing the most destructive economic climate in decades, America's C-level executives are using a variety of standard-issue business strategies to steer their companies through the recession. Some have immediately turned to layoffs to reduce costs, some are trying to restructure debt, and others are utilizing pay cuts and hiring freezes to keep their businesses afloat.

Many, however, are unable to take decisive action, hampered by panicked shareholders and board members. One CEO was recently heard to say, "We're all looking at this huge tsunami heading straight for us, and it's so big and moving so fast that their attitude is 'There's no point even putting on waders.'"

Yet in the midst of all these actions and reactions, there is one management tool that many CEOs have overlooked during this financial crisis: operational improvement.

In essence, operational improvement (or process reengineering) is an activity that intensively focuses on the processes and systems of a business (production, supply chain, sales, cost control and capital expenditures) to examine opportunities for removing those elements that do not add value, or ones that create unnecessary cost. It isn't about strategy, capital expenditure or IT; it's about the human element of business processes and their improvement.

The benefits of such reengineering efforts are immediately apparent: wasted activity is reduced, productivity is increased, employee performance is enhanced. But, most importantly, the process releases working capital and can drastically improve a company's EBITDA figures.

The Need for Speed

This concept is well established in the Total Quality Movement from the 1990s and in current methodologies such as Lean, Kaizen and Six Sigma. CEOs usually hire firms of management consultants to help them develop such a program. More ambitious chief executives form internal "operational excellence" teams in an attempt to drive operational improvements using their own people.

So why is such a proven business improvement methodology being overlooked now?

According to Doug Wano, U.S. president of Proudfoot Consulting, the conventional forms of process improvement programs all lack one crucial element for being able to help a business survive the recession — speed of installation. "The problem is," says Wano, "CEOs can't afford to wait around for two years until the company's operational excellence program delivers the tangible cost savings it promised. They need operational improvements to deliver P&L results now!"

So how does a CEO add speed to process improvement programs? What's the missing ingredient? Wano continues: "The secret is in the execution. CEOs need to hire consultants who have a proven track record of frontline implementation of the process improvements they recommend. It isn't enough to write a big report recommending a list of business improvements, then walking away. Successful and accelerated process improvement only happens when the consultant sticks around to work side-by-side with the workers to embed the new behaviors. That's a pretty rare skills set. Not many consultancy firms can deliver on that requirement."

Wano adds that companies can release working capital and enhance their EBITDA within three to four months using this intensely focused approach to process improvement.

Utilizing process improvements as a tool to release working capital and improve productivity is a concept echoed by Jerry Jasinowski, former CEO of the National Association of Manufacturers. Jasinowski says: "Protection of the balance sheet by focusing on cash requires firms to reduce working capital and cut back on excess inventories quickly and dramatically. It's kind of a bridge to the process improvement points. Difficult economic times provide an opportunity for accelerating process improvement activities."

Bottom Line for CEOs?

Get back to basics by taking a deep dive through every aspect of your business operations: sales, marketing, customer service, supply chain, manufacturing, transportation and energy usage. Bring in a specialist, either internal or through the services of an operational consulting firm. Listen to what they say and take a long, hard look at the potential financial and productivity benefits they present.

But don't "green-light" the project until the consultants can prove that they are going to put "boots on the ground" and work alongside your frontline supervisors and employees day after day to embed the behavioral change necessary to deliver sustainable process improvement. And they need to show that their implementation will accelerate the delivery of real financial benefits in months, not years.

Concludes Wano: "That accelerated pace of delivery is now more crucial than ever. The recession is here, it's real, and its true scale is only now being realized. CEOs must choose to act, and choose a course of action that brings real cash benefits in the shortest possible time. Accelerated operational improvement offers CEOs a way to fight back and not only survive this recession, but better position their companies for the economic upturn."

(By Farzad Keshvargar)
Farzad Keshvargar is an executive vice president for Proudfoot consulting, an Atlanta provider of operational management consulting.

IBM Global 2008 CEO Study: CEOs Battle to Keep Up With the Pace of Change

LONDON & ARMONK, NY - 06 May 2008: The IBM Global CEO Study, the largest study of chief executives ever conducted, today reveals a dramatic increase in the number of global business leaders who see important change ahead, and also highlights how the ability to absorb and manage change is widening the gap between winners and losers in the global economy. CEOs reported a surprising level of optimism about change as an opportunity to build new competitive advantage. Overall, 83 percent of surveyed CEOs expect substantial change in the future, an increase of 28 percent in just two years. However, CEOs report their ability to effectively manage change is increasing at a far slower pace.

Collectively, CEOs set their organization's ability to manage change 22 percentage points lower than their expectations for the level of change they will have to manage - - a ‘change gap’ that is widening.

CEOs point specifically to their own customer base as the source of the most important changes they will have to address, as two new and more demanding classes of customers emerged: the ‘information omnivore’, and the ‘socially-minded’ customer. Of all the trends identified in the study, surveyed CEOs plan their most substantial increases in investment in response to these customer sets.

The IBM Global CEO Study, based on face-to-face interviews with 1,130 CEOs from 40 countries across 32 industries, is designed to capture insights on how the challenges CEOs face today will impact the future of business. The study, titled “The Enterprise of the Future,” was conducted by IBM Global Business Services in conjunction with the Economist Intelligence Unit.

“The enterprise of the future accepts change as a permanent state in an organization. Those CEOs who demonstrate the capacity to manage major change know they can beat the competition by reaching new classes of customers, and making bold moves to shift business design around principles of global integration,” said Ginni Rometty, senior vice president, IBM Global Business Services. “And it's clear that out-performers are distancing their enterprises from the competition based on their organizational capacity to take advantage of change.”

The Rise of the Information OmnivoreThe “information omnivore” craves all types of information and often broadcasts its views and expectations worldwide via the Internet. These customers are swapping passive roles for much deeper involvement. “Consumers” are becoming “producers,” often creating entertainment and advertising content for their peers, while demanding flexibility and responsiveness from companies with whom they choose to do business. Although these customers are more demanding, the majority of CEOs do not see them as a threat, but as an opportunity for differentiation based on meeting the heightened expectations of this group, and capitalizing on new market opportunities that will emerge.

Overall CEOs are planning a 22 percent increase in investments in the next three years to serve these more sophisticated and demanding customers.

The investment is even more pronounced among financial out-performers. CEOs of firms with higher net profit margin growth indicate that investments targeted at information omnivores will increase 36 percent over the next three years. The majority of these new investments will be dedicated to new operational capabilities that improve collaboration and product innovation, and that are more oriented to transparency and tailored to specific market segments.

The study shows the impact of the information omnivore is driving investment in every major geography. In Europe, CEOs indicated they plan a 23 percent investment targeted at these customers over the next three years, a 20 percent jump from the previous three years. In North America, CEOs plan a 19 percent investment – jumping 27 percent over the same time period. Asia Pacific CEOs plan a 16 percent investment – a 20 percent jump -- and Latin America CEOs indicated a 16 percent investment -- jumping 18 percent over the last three years.

The Rise of the Socially-Minded CustomerCEOs agreed that customer expectations around corporate social responsibility (‘CSR’) are increasing, and that CSR will play an important role in differentiating an enterprise in the future. Customers are coalescing around organizations’ CSR profile – including, but not limited to “green” initiatives -- and are increasingly demanding socially-minded products, services, and even supply chains.

CEOs indicated that while customers have always cared about societal issues, those concerns are now more frequently turning into action as the more socially aware customer evaluates an enterprise’s CSR profile before making purchasing decisions.

To better understand and reach the new socially-minded customer, CEOs plan to increase their investments by 25 percent over the next three years, the largest percentage increase of any trend identified in the study.

The study shows that while increasing CEO concern about environmental issues has doubled over the past four years globally, this concern is not evenly distributed worldwide. Asia Pacific and European CEOs lead the world in focusing on environmental issues, followed by the Americas.

CEOs also revealed that CSR reputations are also an important tool to attract and retain employees. They are also recognizing that their organizations are being held mutually accountable, along with the public sector, for the socioeconomic well-being of the regions in which they operate.

Overall, the CEOs see opportunities in CSR and are using it for their competitive advantage. They indicated that CSR is critical to maintaining current market share..

Global Integration
The study revealed that fundamental shifts in expectations from these more demanding customers and the increased purchasing power in emerging markets are driving major changes in the business models of organizations worldwide. CEOs plan bold moves around business designs that facilitate faster and more extensive collaboration on a worldwide scale, and rapid reconfiguration when new opportunities appear.

Eighty-six percent of the CEOs surveyed plan substantial changes in the capabilities that distinguish leading organizations – their knowledge and asset mix. CEOs expect to carefully calibrate business model designs based on principles of global integration, which includes global searches for sources of expertise, resources and assets that can help it differentiate. In addition, to take advantage of global integration opportunities, 75 percent of the CEOs intend to actively enter new markets and 85 percent of the CEOs intend to partner to capitalize on global integration opportunities.

About the Global CEO Study
The findings of this report are based upon a series of interviews conducted by IBM in late 2007 and early 2008. A total of 1,130 CEOs, business and public sector leaders from 40 countries participated in structured interviews. IBM consultants conducted more than 1,000 face to face interviews, with the remainder conducted by The Economist Intelligence Unit (EIU).

Participants represent private and public sector organizations across a variety of industries and geographic locations. Nineteen percent are companies employing more than 50,000 employees while 22 percent have less than 1,000 employees. The Global CEO Study is conducted on a biannual basis, and provides a benchmark and a blueprint for global business trends.

(IBM)

Survival and the CEO

Long ago Peter Drucker, the father of business consulting, made a very profound observation that has been lost in the sands of time:
"Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."
Today, when top management is surveyed, their priorities in order are: finance, sales, production, management, legal and people. Missing from the list: marketing and innovation. When one considers the trouble that many of our icons have run into in recent years, it is not easy to surmise that Drucker's advice would have perhaps helped management to avoid the problems they face today.

Ironically, David Packard of Hewlett-Packard fame once observed that "marketing is too important to be left to the marketing people." But as the years rolled on, rather than learn about marketing and innovation, executives started to search for role models instead of marketing models.

Tom Peters probably gave this trend a giant boost with the very successful book he co-authored, In Search of Excellence. Excellence, as defined in that book, didn't equal longevity, however, as many of the role models offered there have since foundered. In retrospect, a better title for the book might have been In Search of Strategy.

More recently, the popular method-by-example book has been Built to Last by James Collins and Jerry Porras. In it, they write glowingly about "Big Hairy Audacious Goals" that turned the likes of Boeing, Wal-Mart Stores, General Electric, IBM and others into the successful giants they have become.

The companies that the authors of Built to Last suggest for emulation were founded from 1812 (Citicorp) to 1945 (Wal-Mart). These firms didn't have to deal with the intense competition in today's global economy. While there is much you can learn from their success, they had the luxury of growing up when business life was a lot simpler. As a result, these role models are not very useful for companies today.

There is a growing legion of competitors coming at new businesses from every corner of the globe. Technologies are ever changing. The pace of change is faster. It is increasingly difficult for CEOs to digest the flood of information out there and make the right choices.
But a CEO can have a future.

The trick to surviving out there is not to stare at the balance sheet but simply to know where you must go to find success in a market. That's because no one can follow you (the board, your managers, your employees) if you don't know where you're headed.

How do you find the proper direction? To become a great strategist, you have to put your mind in the mud of the marketplace. You have to find your inspiration down at the front, in the ebb and flow of the great marketing battles taking place in the mind of the prospect. Here is a four-step process to pursue:
Step 1: Make Sense In The Context
Arguments are never made in a vacuum. There are always surrounding competitors trying to make arguments of their own. Your message has to make sense in the context of the category. It has to start with what the marketplace has heard and registered from your competition.
What you really want to get is a quick snapshot of the perceptions that exist in the mind, not deep thoughts.
What you're after are the perceptual strengths and weaknesses of you and your competitors as they exist in the minds of the target group of customers.
Step 2: Find The Differentiating Idea
To be different is to be not the same. To be unique is to be one of its kind.
So you're looking for something that separates you from your competitors. The secret to this is understanding that your differentness does not have to be product related.
Consider a horse. Yes, horses are quickly differentiated by their type. There are racehorses, jumpers, ranch horses, wild horses and on and on. But racehorses can be differentiated by breeding, by performance, by stable, by trainer and so forth.
Step 3: Have The Credentials
There are many ways to set your company or product apart. Let's just say the trick is to find that difference and then use it to set up a benefit for your customer.
To build a logical argument for your difference, you must have the credentials to support your differentiating idea, to make it real and believable.
If you have a product difference, then you should be able to demonstrate that difference. The demonstration, in turn, becomes your credentials. If you have a leak-proof valve, then you should be able to have a direct comparison with valves that can leak.
Claims of difference without proof are really just claims. For example, a “wide-track” Pontiac must be wider than other cars. British Air as the “world’s favorite airline” should fly more people than any other airline. Coca-Cola as the “real thing” has to have invented colas.
You can’t differentiate with smoke and mirrors. Consumers are skeptical. They’re thinking, “Oh yeah, Mr. Advertiser? Prove it!” You must be able to support your argument.
It's not exactly like being in a court of law. It’s more like being in the court of public opinion.
Step 4: Communicate Your Difference
Just as you can’t keep your light under a basket, you can't keep your difference under wraps.
If you build a differentiated product, the world will not automatically beat a path to your door. Better products don't win. Better perceptions tend to be the winners. Truth will not win out unless it has some help along the way.
Every aspect of your communications should reflect your difference. Your advertising. Your brochures. Your Web site. Your sales presentations.
There's a lot of hogwash in corporate America about employee motivation. Brought to you by the "peak performance" crowd, along with their expensive pep rallies.
The folks who report to you don't need mystical answers on "How do I unlock my true potential?" The question they need answered is, "What makes this company different?"
That answer gives them something to latch on to, and run with.