What is a 'CEO' anyway?
I started writing the what is “x” anyway series to examine words that have become so ubiquitous as to render them useless. I began to review the source academic definitions and then layer in more recent observations to find a workable definition.
I have been fortunate to meet and work with leading CEO’s in corporate America and the start up world. There is no panacea in understanding of what a CEO is, if anything it is one of the least understood roles in the company both internally and externally.
A CEO has overall responsibility for creating and implementing the strategic direction of an organization. Moreover, she or he is responsible for articulating the company’s vision and values and leads to make the organization's vision a success. As the CEO typically reports to the Board and investors, managing these relationships is also a key part of the role.
With this is a responsibility to navigate the competitive landscape, new growth opportunities, customers and markets and increasingly, to innovate for survival. Setting the strategic direction and communicating this effectively is one of the most critical pieces of the role.
Harvard Business Review recently published a ranking of the 100 best CEO’s – the study recognises consistent and long-term performance with several data sources. The top 100 became CEO on average at the age of 44 with a tenure of 17 years, they delivered on long-term strategies generating 20.2% annual return.
Myopia permeates every aspect of business today whether due to political volatility, or irrational markets. Consistent performance necessitates the ability to withstand such pressures. Martin Sorrell of WPP highlights the need for CEO’s today to be able to navigate this volatility stemming in particular from growing pressure from “short termism”.
So what are the common characteristics, if any, of the top performing CEO’s? A study conducted between 2000-2006 titled “Which CEO characteristics and Abilities Matter” found that CEO success correlated more strongly to resoluteness, execution and 'overconfidence-related' skills than to interpersonal-related skills. The study was based primarily on CEO's involved in PE transactions.
This result makes sense during the halcyon days pre 2008 but we’ve learnt a few lessons since on characteristics that override this. During my first week at Columbia Business School, I’ll never forget the words of one professor “some of you will rise to the top and when you get there some will go to jail”. No-one is immune. You only have to read Enron's Jeffrey Skilling profile to understand what he meant.
What stuck with me thereafter was ‘integrity as foundational to performance’. In my time as a Manager at Deloitte and later in start up world, the highest performing CEO’s only reinforced this view. Integrity was not something that could be faked long term and it permeated every aspect of the CEO's business, as did the lack thereof.
“Everything we do has to be grounded in an assessment of not only the financial implications but whether it aligns with our values and brings us closer to realizing our purpose as a company” LARS REBIEN S?RENSEN,
It also ties directly to value setting as indicated by HBR's top ranking CEO Sorensen – values shape the acceptable norms and behaviours of a company. Post-2008, purpose and empathy are also playing a more integral part of the role. High performing CEO’s know how to balance this with the resoluteness described in earlier empirical studies.
It is not easy to be a high performing CEO because this balance is tough to achieve. You have to demonstrate one characteristic then the opposite and know when and in what measure to exercise each. Those that have mastered it are highly sought after. I believe it is increasingly important for teams to understand the role and find better ways to facilitate upwards feedback to improve both organizational and CEO performance.
As a leader, I am tough on myself and I raise the standard for everybody; however, I am very caring because I want people to excel at what they are doing - Indya Noori, CEO Pepsico
More from the "What is 'x' anyway series?" below. Any words that are thrown around a lot and you'd like to explore? Let me know in the comments below. Wishing you a Happy 2017.
What is an 'Entrepreneur' Anyway?
Follow me on twitter @kajalnyclon and LinkedIn for more on the “what is x anyway” series. I am on a quest to help the best European companies successfully expand their businesses in the US with Growth-hub.us
Sources and Recommended Reading
1?. Who are the best performing CEOs in the World? HBR, November 2016
2. Which CEO characteristics and Abilities Matter? Kaplan, Klebanove, Sorensen, Columbia Business School Research
3. What does a Chief Executive Officer Do? The Balance