Accounting for Failure
Traditional views of company leadership are being called into question.
The conventional wisdom that has long guided the appointment of chief executives, particularly the preference for accountants over marketers, is no longer sufficient to meet today's complex challenges.
Historically, many boards have favoured appointing accountants to top executive positions. The rationale behind this preference is multifaceted. Accountants bring a deep understanding of financial management, budgeting, and cost control. In an era where financial stability is paramount, this expertise is highly valued. Additionally, accountants are trained to identify and mitigate financial risks, a skill set crucial for the long-term sustainability of a company. With their knowledge of regulatory compliance and corporate governance, accountants ensure the organization operates within legal and ethical boundaries. The analytical and problem-solving abilities of accountants can be applied to various aspects of business operations, making them versatile leaders. There are numerous examples of successful CEOs with accounting backgrounds, reinforcing the belief that this path leads to effective leadership. In times of economic uncertainty, the conservative and stable approach of accountants is often seen as a safe bet.
While the strengths of accountants as CEOs are clear, there are significant downsides to this traditional approach. A primary criticism is that accountants often prioritise cost-cutting measures, which can demotivate staff and lead to resignations and redundancies. This focus on financial efficiency can sometimes come at the expense of innovation and growth. Marketers, on the other hand, bring a growth-oriented mindset. They are more likely to focus on expanding market share, innovating products, and enhancing customer experiences, which can inspire and motivate employees. The conservative approach of accountants may not foster the innovative culture needed to stay competitive in rapidly changing markets. Companies need leaders who can drive change and adapt to new technologies and consumer behaviours.
Appointing marketers to top executive positions offers several advantages. Marketers are inherently focused on growth. They understand market trends, consumer behaviours, and the importance of innovation. This growth-oriented mindset can drive the company forward. Marketers prioritise the customer experience, which is crucial in today's consumer-driven market. A customer-centric approach can lead to higher customer satisfaction and loyalty. Marketers often bring a more inspirational and motivational leadership style, which can energise the workforce and create a positive company culture. Marketers are adept at adapting to changing market conditions and consumer preferences, making them well-suited to lead in dynamic and uncertain environments.
The ideal scenario for modern company leadership is a balanced approach that combines the strengths of both accountants and marketers. This can be achieved through creating a leadership team that includes both financial experts and marketing strategists, providing a comprehensive perspective that addresses both financial prudence and strategic growth. Encouraging cross-functional training and development can help leaders from different backgrounds understand and appreciate the strengths of their counterparts. Emphasising holistic decision-making that considers financial, operational, and strategic aspects can ensure that the company is well-rounded and prepared for various challenges.
There are a number of examples of where accountant type thinking? ruined once successful companies. Kodak's lack of foresight and innovation led to Kodak's eventual bankruptcy in 2012. Similarly, the company's leadership of Toys “R” Us, a once-iconic toy retailer, focused on financial restructuring and cost-cutting, and failed to invest sufficiently in e-commerce and customer experience. This approach ultimately led to the company's liquidation in 2018.
Here in New Zealand, Ralph Norris, who served as CEO of Air New Zealand from 2002 to 2005, came from a banking background at ASB Bank and Commonwealth Bank of Australia. Norris implemented a series of cost-cutting measures and financial restructuring initiatives aimed at improving the airline's financial position. These measures included reducing staff and routes, which, while intended to stabilise the company financially, also led to a decline in customer service and morale among employees. Rob Fyfe, who succeeded Norris as CEO of Air New Zealand in 2005, had a diverse career history, including roles in sales, customer service, and operations. His leadership was characterised by a strong focus on customer experience, innovation, and strategic growth, which helped to turn around the airline's fortunes and position it for long-term success.
It’s crucial for boards to recognise the limitations of traditional leadership models and embrace a more diverse and inclusive approach to appointing chief executives. By doing so, companies can foster innovation, drive growth, and create a motivated and inspired workforce.
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