What motivates the modern-day CEO?
What do organisations want from their leaders?
Can an individual CEO make a difference to an entire company?
Mark: When talking to leaders about what they are looking for in a role, salary is often the last thing that they will mention. Even then, it’s usually a cosmetic thing – as long as they aren’t paid less than they were before. What CEOs are really looking for is the challenge, the opportunity to make a difference and the ownership for strategy and delivery that comes with the role. They want the chance to deliver the next 7 years of an organisation’s history. Within that you would expect one very big challenge, combined with a host of little ones. Running parallel to this, recruiting organisations tend to have a pretty specific brief of what their strategic objectives are over the coming years, and they want someone who can help meet those ambitions.
Kit: I agree that the majority of people we speak to in leadership roles want to make a difference, whether that’s a very large organisation with a market capitalisation of billions and tens of thousands of staff, or a small entrepreneurial business trying to disrupt an existing marketplace in order to grow. Business leaders want to see that there is a job to be done and make a change. They want to leave the organisation in a stronger place than they found it and take personal responsibility for that.
Julian: While part of a CEO’s role is about maintenance and management, companies mainly want someone to set a broad direction and tone for the business. For the individuals, it comes down to the two or three really big calls they are required to make over a five-year period. Someone who mostly gets these decisions right earns their pay.
Identifying and recruiting these people is both an art and a science. A lot of it is based on previous track record; calibrating what they have done before with what needs to be done going forward. Discovering whether they have similar experiences and backgrounds that will give them insight in to what is required of them. And, whether they can understand or learn the dynamics within a particular market, therefore enabling them to spot opportunities going forward. This means companies are looking for a combination of intellect, strategic ability and versatility – especially if a CEO is coming fresh into a new sector.
The due diligence is based principally on thorough referencing. Finding out what particular characteristics an individual brings, what they are good at and what they are bad at. No one is perfect but you need to understand the weaknesses in order to understand what the potential pitfalls could be, and how that relates to the specific remit of the role.
Julian: The Great Man Theory of whether one individual can shape the culture and direction of an organisation is tarnished. There are figures such as Churchill, Napoleon and Stalin who have dictated events by sheer force of personality throughout history, but it is rare. In today’s joined- up, more complex world it becomes less common.
Within the corporate world companies have cultures and systems irrespective of the CEO. The CEO can be expected to set tone and direction, but can they control what happens on the ground in a large organisation that employs 100,000 people? The recent furor around the degree of responsibility senior management has for what happens much lower down an organisation at HSBC, or with the LIBOR and FOREX rigging scandals is a case in point.
Although there are always exceptions, one is struck by the degree of continuity within some of the most established large multi-nationals, with CEOs often recruited from within. Executives are groomed over many years and eat, breathe and dream the same culture as the departing CEO. The individual becomes synonymous with the culture of the organisation. These companies are very good at steady evolution.
Where the theory falls apart is when you have disasters, like the big banks over the previous 5 years. In these situations the entire culture has gone so drastically wrong that it has tarnished a generation of management. Boards have to make a statement of intent by bringing someone in from the outside with a mandate to introduce change. However, the ingrained habits of a large organization and difficulty of culture change means a CEO needs time to make an impact. The analogy with changing course on a super tanker is apt. But the received wisdom today is that a CEO should have a natural lifespan within one organisation of no longer than 6 years. Accordingly there is a danger that even the best CEO can only really skim the surface.
Smaller companies, FTSE 250 down, generally don’t have the scale or breadth to develop and nurture people over 20 years. As a result it is more likely they will recruit externally. Because these companies are smaller, a CEO is generally more able to get their hands fully around the organisation and shape the direction and vision.
Kit: Increasingly in large companies it’s not a one-person situation, it is about the quality of the team and the way the strategy is set and executed. And it’s not static, it’s a constantly moving target; you could put together the perfect team, then six months later market circumstances dictate that you need a different set of skills and experience.
Yet, it is often said that it is lonely at the top, and if you look at the people that a CEO depends on, to some extent those are all compromised relationships to some extent. While it is important to have a strong relationship between the CEO and the Chairman, there is a limit to which a chief executive will open-up to the person whose ultimate job is to hire and fire them. The same goes for the CFO. A good CEO will have a very strong relationship with their CFO, and they will depend on each other and complement each other well. But, when you look at the number of CFOs that become CEOs, it is quite likely that person has got their eyes on the top job, which can inhibit truly impartial decision-making and advice sharing.
From a Chairman’s perspective it is up to the CEO to put in place a set of relationships that is going to enable them to be successful – which might even be family and friends. It may even be a mentor. The mentoring and coaching industry has grown significantly. New CEOs are now mentored by more experienced CEOs and finding advice and support that way. But ultimately, it is lonely at the top and if a CEO can’t handle that, they are in the wrong job.
Odgers Berndtson has evolved over the last 40 years and is now present in 29 countries spanning The Americas, Europe, Middle East & Africa and Asia Pacific. The organisation is characterised by private ownership and national knowledge, but with all the advantages of global reach and mutual understanding borne of specialist practices operating worldwide and so servicing a number of client relationships internationally.