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The Role of a CEO

June 21, 2016
CEO1

Since the world has changed on us so much, shouldn’t the role of the CEO also change? I have been thinking about this for a while and only yesterday in conversation with a friend, did it crystallize into a form that I was able to clearly articulate.

As we move forward in a VUCA world, a CEO needs to:

  1. Have a strong sense of the outside, of the shifting competitive landscape and to develop a sense of emergent disruptive forces. 
  2. Manage the present but more importantly, prepare the organizational capability and culture for the future
  3. Manage emergent strategy
  4. Manage key sources of capital and agility i.e. board, investors, analysts, PE partners

However, if you were to ask any CEO how much time they would devote to the above in totality, the answer (for about 80% of them) would be 20% of the time – for all 4 activities.

So what is today’s CEO busy doing?

  1. Managing the present takes up a majority of the CEO’s time. The QSQT (Quarter se Quarter tak) i.e. quarterly earnings pressure is the biggest bane in the CEO’s life today. Everyone from the board to the investors to the analysts are focused on ensuring this numbers continues to grow quarter on quarter. Any slack results in reduced share prices and doomsday announcements. A slack of 3 quarters in succession and you might well be asked to leave.
  2. Managing the leadership team. CEO’s spend an inordinate amount of time managing resources, managing across silos, making key decisions on an operational basis. This job belongs to the CEO’s direct reports, who must be adult, mature and aligned so that they collectively own the big picture and run the day to day operations of the business, leaving the CEO with adequate time to focus on the strategic and the external environment.

So what’s a CEO to do?

  1. Ownership of the operational P&L: Fully delegate the achievement of the P&L to the Leadership Team (LT) i.e. his Direct Reports. The LT should present P&L achievement to the board and take full accountability. The CEO’s role is to play facilitator and step in to aid decision deadlocks or resource prioritization but as an exception and not a rule.
  2. Be accountable to the board for culture and capability building. The CEO’s core  KRAs should focus on developing organizational and leadership capability with an eye on the future. Spending time on articulating the competitive strategy, deriving the capability set from this and then ensuring leadership and culture development to meet the capability needs should form a large part of the CEOs focus. The board should hold the CEO accountable for future sustainability as the steward of the organization. However, too many boards hold CEOs accountable for managing the present, thus diluting their focus and limiting their vision horizons.
  3. Develop a strong sense of the external environment. This includes not just competitors but also adjacent industries, macro-economic indicators, socio-political factors, socio-technical advances, emerging disruptors. It also involves maintaining strong relationships with analysts, investors, industry peers and consultants.
  4. Developing external clout via membership with industry bodies and regulatory authorities in order to hone their ability to influence the direction of the industry. As we move forward, environment and regulations will play a major role in competitive differentiation both from the PoV of consumers and government. CEOs will need to be strong in this area.
  5. Being digital. Please notice, I used the term “Being” digital. This means CEOs must be digitally savvy, must be active consumers/users of emerging and mainstream digital technologies. This will enable to understand the power of digital as a consumer and enable deep insight into how they can leverage this personally and for their organization. Just being informed is not enough. Being disconnected is suicide.

 

What gets measured gets done. What gets reviewed, gets done well. Boards would do well to follow these adages and redefine what they hold a CEO accountable for.

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3 Comments leave one →
  1. June 22, 2016 11:48 pm

    A global issue that you describe quite well! Given how quickly the landscape keeps changing, CEOs that want to sustain results over the long-term must understand how to implement emergent strategy. They are in a difficult position because in most cases they must push back on a board and shareholders who are pressing for short-term results. They must both build their board while being accountable to it. A challenging, but not impossible task. Thanks for another thought-provoking article. I always enjoy your writing!

    • gurprrietsiingh permalink*
      June 24, 2016 12:22 pm

      Well said, Jesse, I think the key malaise is that most organizational owners (PEs, Shareholders, Pension funds etc.) have moved to wealth-creation as the primary driver of their engagement and interest. As a result, long-term focus on sustainability and commerce is trumped by the need to make immediate gains which results in share-buy-back, divestment, outsourcing all of which are non-commercial methods to increase short-term stock price so that a few individuals can profit either financially or in terms of power.

      Organizations come into being and continue based on the fundamental contract to provide a service or a product at a cost that leaves them a profit. That mindset is history today.

      What do you think about this?

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