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White Papers & Articles::  Corporate Governance | OECD Principles of Corporate Governance
Chief Executive Role | Teams and Teamwork | Performance Appraisal Systems

The Role of Today's Chief Executive

From a book by Peter Wildblood

Today's chief executive of any medium to large size, private or public, organisation, is in an increasingly difficult position. It is doubtful whether many of them are able to do more than "cope" in the short to medium term.

The problem stems from two key issues facing today's CEOs; the essential isolation of their position, and the exponential increase in the extent and pace of change with which they have to cope. Together, these two factors take their toll on even the worthiest and most experienced of chief executives.

CEOs today are often lonely, distanced both from the organisation's "owners" and his or her key management support. What is more, they are rarely close enough to the general customer base from whom the livelihood of the organisation ultimately depends.

Managers are paid on "performance" and chief executives in particular are rewarded extremely well, based on their performance agreements. Boards of directors expect, quite rightly, that their chosen chief executive will perform. Indeed the costs to them as individuals if they do not, can be quite horrendous.

Governments too, are setting performance criteria for their senior staff. Though they are often loose and ill defined, the trend is welcome.

In these circumstances it is a rare CEO who "confesses" to his or her board of directors that there is any uncertainty about a particular course of action. Similarly a chief executive who talks with senior management without a clear view of what is required runs the risk of being perceived as "ill informed" or "indecisive".

It takes rare courage to open oneself to the vulnerability of genuine uncertainty. This is particularly so when one is faced with a significant growth in the complexity of operating a business, based on the exponential rate and growth of change faced in today's international climate.

National and international markets, economic and political conditions, currency fluctuations, local community standards, environmental conditions, internal dynamics, intellectual, social and ethical considerations, are all subject to either subtle yet significant movement in some circumstances and violent and sudden "sea changes" in others.

The only genuine constant in today's organisational environment is change itself.

So, organisations, small and large, work related or social and community in nature, all need to adapt to external change. After all bridges and tall buildings are built to stand the stresses of changing external weather and environmental conditions. Why not organisations.

From time to time, organisations need to be able to make significant changes of direction as a result of internal imperatives. In other circumstances change is driven externally. When internal and external forces act at the same time, as is most often the case, the level of complexity increases markedly.

Coping with the complexity of guiding an organisation in reaction to change is an immensely difficult undertaking for a CEO. It is hard enough to see the need with requisite accuracy and to set an appropriate course. It is difficult for many to do so without losing an essential flexibility also required. It is also difficult to sell the need and the course to be taken without resorting to a "big stick" approach. For the vast majority it is well nigh impossible to do so in an effective and lasting way so that the people responsible for bringing about the change can understand it and carry it forward.

The need, therefore, is to provide an environment in an organisation in which change can and does occur "as a way of organisational life". Indeed the premise here is that, until the environment inside an organisation is conducive to change, no decision about change, will be truly effective or lasting.

Certainly change must be forced in circumstances where there is some form of immediate response required.

A receiver appointed to an organisation under threat of bankruptcy, must make fairly hard-nosed decisions involving considerable change to the organisation. If these decisions satisfactorily maintain the organisation in existence, the changes made will have formed the basis of further change.

A business owner facing a revenue shortfall, cashflow problems, or a changing or declining market, should take similar hard-nosed decisions.

The problem is that CEOs are chosen for their position because they have succeeded in a previous position, either in that organisation or in another considered relevant.

The criteria for the appointment are almost always based on the material needs of the role. They ignore, or minimise, the importance people play in achieving objectives: bottom line results, cashflow, return on investment, inventory control, marketing, sales, product development and investment ratios. All these are essential elements of effective management. None of them can be achieved without the people within the organisation.

As a rule, organisations reward performance and promote people with "technical" skills, rather than for their skills in harnessing the positive energies of the people with whom they work. Both are equally important.

As the business world emerges into the 21st Century, businesses of all sizes are undergoing a radical re-examination. The value of the "front line" is receiving more and more emphasis. Middle management ranks are diminishing in number, if not disappearing entirely as organisations become flatter. "Quality" is the sina qua non of personal and organisational success - the basis of customer satisfaction and of competitive advantage.

People with vision and the capacity to draw colleagues to them in a unified, commonly agreed direction are more sought after than the more technical people of the twentieth century.

At no time has it been more important for people leading organisations to look to the twin skills essential to personal success: the technical skills of their own position, and the relationship skills necessary to harness the creative energies of their colleagues.

Our obsession with the more readily quantifiable, our penchant for dealing with people as objects (human resources), the growing complexity of our environment on this planet and the rate of change particularly in the speed with which we process "information", are responsible for the position in which most CEOs find themselves.

It is rare indeed that a chief executive is able to perform with real distinction meeting the needs of his or her employees while keeping investors and directors comfortable with the performance of the organisation. It's almost as if it were "Mission Impossible".