If you’re one of the 55 S&P 500 companies CEOs appointed in 2018, or one of the hundreds of CEOs of privately owned companies recently promoted or hired, you might already have figured out a vexing fact: Very little of what you thought or were told about the role of the CEO is actually true.
Here’s a scenario I recently encountered with the CEO of a financial services company: Before his appointment, he was told by the board that there was strong support for a strategy that was being developed, that his team was performing well and that customers were loyal and stable. Fast forward 18 months, and the CEO had to replace his chief financial officer and the senior vice president of strategy, lost a big customer due to inconsistent pricing and found himself fighting a rearguard action when a promising new technology failed to launch on schedule. The CEO went from feeling enthusiastic about his role to wondering how he would survive another six months of grumpy customers and deflated executives.
These situations might seem unusual, but they’re not. In my experience, most boards tend to portray an opportunistic view of the business to prospective CEOs, or they can be simply unaware of the operational weaknesses that exist inside the organization. Conversely, many CEOs (in particular first-time CEOs) tend to underestimate the challenges inherent in taking over a new executive team and organization.
How can newly appointed CEOs mitigate the risks they face as they start chipping away at the challenges thrown at them? Here are three simple rules for CEOs to observe during their first few months on the job, which will help set the stage for short- and long-term success:
Rule one: Replay the tape.
To land your new role, you likely had upwards of 15 interviews that included expensive dinners with board members, perhaps a confidential chat with the departing CEO and meetings with other executives and investors. While these conversations were important and meaningful, it’s now time to replay the tape.
This means it’s time to go back to your notes and see where there are gaps or conflicting information between what you heard and what competitors, customers or financial analysts have to say. A second conversation with each board member might be required for you to ask follow-up questions, dig into financial or operational issues that were simply not raised during the selection interviews, and find out which key players were not part of early discussions who should now be involved. Now it’s time for you to reflect on what you heard — and most importantly, what you didn’t hear — in order to grasp the true reality of the business.
Rule two: Trust your instincts on big decisions.
Being new in a role requires the ability to withhold making big decisions until you’ve gathered all the facts, while occasionally making big plays out of the gate. Conventional wisdom would suggest that you hold off on making big calls early. But it’s also important for you to recognize that the reason you were given the CEO role is that you could bring a fresh perspective, set of experiences and leadership abilities to decision making.
During his first week as the CEO of Ford, Allan Mulally learned that the company had ditched the Taurus from its line up of vehicles, and he immediately reversed that decision. Mulally believed that the Taurus brand was worth something, and he directed the Ford design team to build a brand-new Taurus. From my perspective, Mulally did this based on intuition: He knew in his gut that this was the right call. Whether you’re a new or seasoned CEO, you must rely on your intuition to make these calls early on.
Rule three: Define what success looks like.
Perhaps the most difficult task of newly minted CEOs is to define what success will look like. Quite often the board will tell the CEO that their job is to “turn the company around” or “help us compete in the digital space” without painting a holistic picture of what success should look like. I much prefer the approach of defining what success will look like from the perspective of key stakeholders, including the board, the executive team, employees, customers and investors. You might throw in other external stakeholders such as suppliers or partners, but those five are a good starting point.
Here’s what you get from defining success through the eyes of stakeholders, as opposed to a finance or operations lens:
• You automatically need to frame success in terms of how that stakeholder sees the organization today, and where it should be one or two years out. This forces a conversation with each stakeholder about how you got to where you are and what needs to happen to reach the desired state.
• It forces you to realize that your role as CEO is as much about managing the competing interests of stakeholders as it is about strategy and execution. What looks good to investors, for instance, might not be the same as what looks good to an executive team. Success to one might mean increased dividends, while the other might see success as implementing a new enterprise resource planning system.
• You are less likely to make short-term decisions to meet performance improvements to the detriment of longer-term goals. As CEO, you should be viewing success as a multiyear cycle of accomplishments, rather than a marathon that leaves you or the organization exhausted after 12 months.
In my experience, the odds of failure are often higher for CEOs who are brought in from the outside than those promoted from within. But I believe applying these three rules will help ensure you conclude your first year in the office with as much finesse as you tackled the interviews that got you the job.
By Eric Beaudan
Author believes that a more precise understanding of what exactly gives someone good judgment may make it possible for people to learn and improve on it. He interviewed CEOs at a range of companies, along with leaders in various professions. As a result, he has identified six key elements that collectively constitute good judgment: learning, trust, experience, detachment, options, and delivery.
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