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What to glean from Fluor’s promoting its General Counsel to CEO

May 20, 2019
Chemical Value Chain

Fluor has confirmed Carlos Hernandez as its CEO. He was previously named interim CEO in early May after the David Seaton resigned following disappointing Q1 results. As Fluor’s stock price is currently just under $30, down from $43 just prior to this latest announcement and down from $79 in 2014, this is about more than just Q1 results.

While there’s no indication of improprieties, everything communicates. The choice of a new CEO speaks volumes about the board’s direction.In general, the choice of a General Counsel suggests a defensive posture. We’ll see if that’s the case here.

There’s an argument to be made that the days of business school-trained general business managers are fading even faster than Fluor’s viability. That argument suggests the future belongs to specialists and that those starting careers should pick one area in which to become experts.

Maybe. But I’m not sure.

You do know the difference between a generalist and specialist. Don’t you? A generalist is someone who knows less and less about more and more until eventually they know nothing about everything. A specialist is someone who knows more and more about less and less until eventually they know everything about nothing.They are both useless in the extreme.

There’s clearly value in building an expertise in something. At the same time, at some point in every senior leader’s career, they need to learn how to manage people doing jobs they can’t do themselves. That is the essential difference between functional and general management.

Perhaps the future belongs not so much to the specialists as to those that can lead diverse specialists.

Strategically Valuable Specialties

As discussed in my previous article on accelerating through a strategic point of inflection, each company should have one and only one over-arching strategy: design, product, deliver or service. If the overall leader is going to have a specialty, it should probably be the one most aligned with the organization’s overall strategy:

  • Design-focused organizations could be led by design specialists.
  • Production-focused organizations could be led by engineers.
  • Delivery-focused organizations could be led by master-logisticians.
  • Service-focused organizations could be led by customer-service experts.

Alternately, sales and marketing experts can help boost top-line growth.

Or, you can turn to a functionally-trained leader with the right mind-set to lead the whole organization. Even then, whether they come out of finance, HR, IT, legal or anywhere else, they’ll need to enable design, enforce production, enroll others in distribution, or act as the chief customer experience officer in service.

Hernandez at Fluor

This brings us back to Fluor. Got to assume Fluor’s board is scared. (If they’re not scared, they should be replaced.) They need someone they can trust to protect them against further downside.

Fluor is one of the world’s largest engineering, procurement, fabrication, construction and maintenance companies, offering integrated solutions for clients’ capital projects.​​​​​ Seems like the heart of the company is designing, building and maintaining big stuff. This naturally leads to an engineer at the helm.

That’s not the direction the board went. They went with the lawyer. Hernandez’ success is going to be dependent on his ability to apply his governance and compliance skills to production management.

Note I chose the word “management” deliberately. Managers direct and coordinate. Leaders inspire and enable. (More on that here.) Expect Hernandez to manage. Hopefully well.

Implications for you

If you’re the board, get ahead of the curve. Your most important job is to choose the CEO. Be clear on the long-term future capability plan. Know what type of company you’re trying to build. Identify and develop people that can be the right leaders of that organization. Move them across functions so they can inspire and enable the most important specialists.

If you’re managing your own career. Do your own future capability plan. Think through what capabilities you want to develop over time. Pay particular attention to the balance of specialization and general management. If you choose to be a specialist, great. If you choose to be some sort of general manager, be deliberate about your steps to get there.

By George Bradt

Source: Forbes

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