INTERVIEW
With the "NEWS &
OBSERVER"
http://www.newsobserver.com
Vicki
L. Parker asked
ART's Managing Director to
comment on the short tenures of today's CEO's
Question
1: There seems to be a high
turnover of CEO's. Why do
they only stay on the job
for a short time?
ART:
"This is an excellent question
and it is not easy to
generalize for all companies
or industries. Often Boards
are thinking too short term.
Often a US Board's collective
emotional highs and lows are
based on lifting stock share
prices, so if a CEO isn't
raising the stock price every
single day, the CEO's job
could be jeopardized. It just
isn't easy to come up with
ways to constantly raise stock
prices.
"Another reason
for the brief tenures of many
CEO's is that they were
brought aboard specifically to
solve one problem or to
accomplish one narrow task -
turn around sales, bring in a
key new customer or market,
add a CEO to the management
team whose track record would
be more attractive to
investors in an IPO, or be the
key person to help with a
merger or acquisition plan.
These arrangements are often
understood by both parties at
the beginning to be largely
for a single-purpose
objective. If both come into
that situation frankly, it
could be a fruitful
relationship for all
concerned.
"A third category
of short tenures I would
characterize as mutual errors
or bad judgments made by the
Board and the CEO. This almost
always occurs when a Board
hires a person because of
buzzwords in the CEO's resume
that suggest quick-fixes to
their problems. For example, a
startup or medium sized
company might hire a person
from a famous-name large
company, just because that
linkage is “gold” to the
investment community. However,
it may be possible that a
person who did well at a very
large company might not know
how to do things well at a
small or medium sized company.
Some multi-billion dollar
firms are run in very lean
business units where general
managers are very hands-on,
while other very large firms
even in the same industry are
exceptionally bureaucratic and
a CEO from that world might
not know how to function at
their best in such a scaled
down role. A frightening
number of companies hire CEO's
who were friends or school
chums, and these hires often
do not work out. Past
friendships or common social
ties are not strong enough
standards of analysis in
judging the suitability of
candidates for modern global
corporations, especially for
posts as critical as CEO.
Personal chemistry just is not
sufficient grounds to hire a
CEO, but that is done very
often, to the exclusion of
other factors.
"A fourth
category I would reserve for
the CEO's who talk big but who
often disappoint. In my
opinion, a CEO who describes
themself as 'visionary' has a
good chance of fitting into
this category. If someone else
sees you as visionary, that's
OK, but describing yourself as
'visionary' suggests to me
several large character flaws
- insecurity cloaked in
egotism, and the possibility
that if one sees oneself as
visionary, then one might
actually be close-minded to
coworkers, shareholders,
customers, and competitors.
When I see a CEO's resume that
starts off saying how
visionary they are, I put that
resume to the bottom of my
list of serious candidates. I
want to see in a resume
tangible evidence of results -
revenues improved, growth, new
markets created and developed.
Every meaningless adjective
used by the CEO that is meant
to impress without providing
tangible evidence, I consider
a demerit against that
candidate.
"When we look at
candidates for searches such
as this, we are mostly looking
at a CEO's employment history.
We want to see evidence of
successes in good times and
evidence of durability and
resilience in hard times. We
want to see creativity and
entrepreneurialism. We believe
that evidence of past
competencies in similar
business models offers the
best objective rationale for
judging if someone might fit a
client's needs. We want to
look at a candidate's natural
and logical career path,
because if a particular job
does not seem to be in sync
with one's long term career
goals and tastes, there is
strong likelihood that that
person will not be long at
that new job.
Question
2: What are some of the
challenges new CEOs face?
ART:
"The first challenge is that
the incoming CEO must be able
to win over the existing
senior management team,
probably 90% of whom believe
that they should have been
chosen as CEO and are
disappointed with their firm
passing them up. Many members
of the management team also
might have been loyal to the
last CEO or be of a
discredited management style
that is considered part of the
reason for firing the last
CEO. Most of these managers,
at least for a while, will
need to be won over. In most
cases, they are going to be
good and useful managers that
the new CEO will need. To
instill confidence in these
important managers, the CEO
will at first need to be a
good listener. This is where a
self described 'visionary' CEO
needs to shut up and learn
from the people who have been
with the company. If the
incoming CEO is not a very
good two-way communicator,
then it is possible that many
perfectly good managers will
bail out of the company just
when they are most needed
during the transition. If
morale is not boosted when a
new CEO comes in, I think that
the mission of the new CEO is
going to be far harder, and
that might end up as a shorter
stay for the CEO.
"The second
challenge is to convince often
jumpy shareholders that they
made the right choice in the
CEO. This is the most
difficult challenge, because
when someone wants a CEO to
suddenly make their stock
prices rise, bad mistakes can
be made. If there is this kind
of immediate pressure, then
the CEO might think to create
some kind of quick media buzz
of press releases or to make a
dramatic sounding move. This
kind of pressure at some
companies can be unrelenting,
and if it all just looks like
insubstantial PR, rather than
improvements, the stock market
can be harsh, and one’s tenure
could be brief.
"If we ask
ourselves why the tenure of
CEO's tends to be short, it
might be because it is not
very practical to have the
chief decision maker for a
corporation have their job at
the mercy of the immediate
whims of investors whose money
comes and goes and who might
not really be fully committed
to the long term picture at
the corporation. There is a
psychic burden on a CEO whose
job is wedged between one
universe of people working at
a company with their careers
and hopes depending upon the
company, and another universe
of essentially constantly
changing strangers who want a
fast return on profits. This
is the dilemma of the American
CEO today."
Question
3: Does this hurt or help
the company?
ART:
"It is good for there to be
accountability to
shareholders. It is necessary.
The shareholders are the
owners of the corporation,
whoever they may be, and they
should have the right to want
to see their investments be
profitable. The fast and
flexible movement of capital
in the US also helps create
businesses, finance new
industries, and create much
economic growth. Sometimes a
short stint for a
single-purpose CEO is the best
way to straighten the course
of a company that is troubled,
but I tend to believe that
short tenures of American
CEO's are a symptom of a
socioeconomic disease, rather
than a good sign of business
success or of checks and
balances.
"It is necessary
to keep in mind that today's
American corporate models
might not be successful in a
world where companies in other
regions are better organized,
somewhat less immediately
greed-centric, and therefore
more ready to succeed in
winning customers and new
markets than shortsighted US
firms might be. In general,
European and Asian
corporations try to be
organized for the long term.
One can have pride in running
a real company whose investors
want the company to grow and
last for decades. A real risk
for American corporations is
when they decide that it is
faster to make money by
selling their existing assets
than to take a longer term
approach and make products
that more people would want to
buy in more places. I think
that a lot of the best CEO's
are ready to work hard and
build great businesses, but if
the attention span of
investors is too short, then
so might be the longevity of
the best CEO’s."
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