The CEO and the Accountable Organization
That lesson in leadership has stayed with me ever since, through graduate school, jobs in corporate America, starting and growing my own company. Through these experiences, I've discovered that effective leaders understand the many different roles they play within their organization. Even though their styles may differ, effective leaders understand how these roles uniquely affect their ability to inspire action and build trust.
So, as you read the following sections, think about how you approach these different roles. Which come naturally, and which do you struggle with? Which would you rather forget? While I discuss these roles from a CEO's perspective—and include specific recommendations for the chief executive—how you tackle the underlying issues will shape your effectiveness as a leader no matter where you are in the company's hierarchy.
CEOs make decisions with the collective interest of their organization at heart. That means people matter—they deserve an environment in which they are treated with dignity and respect. The people in an organization aren't just tools to get work done; they're not pieces on a chessboard to be played off one another. A company is the collective endeavor of people—without them, the computers and machinery stand idle and the business plans gather dust. The same is true for manufacturing firms, telecommunications providers, and any other business one can think of. As trite as it may sound, while the direction and strategy may come from above, it's the employees' passion and commitment that produce a superior product or service.
Because of this, the position of chief executive officer carries with it an enormous humanitarian responsibility. Profits cannot be put ahead of people. I believe that CEOs have a moral imperative to remember that their decisions affect the lives of everyone in the organization, and their families as well. As someone described it to me, "Great leaders view themselves as stewards. Great leaders see themselves as being in service to the people they lead." At a very fundamental level, this genuine sense of humility, compassion, responsibility, and respect for others inspires people's trust. As I look back to my freshman year in college, I had lacked all these virtues as an aspiring team leader.
But this responsibility also often places leaders in a difficult position, where the choice is between the lesser of two evils. Harvard Business School professor Joseph Badaracco calls these decisions "defining moments." Consider this example: One of your product lines is so unprofitable that it's driving the company into the ground. You have made the decision to eliminate the product line, and with it, you'll be laying off four hundred people at the first of the year. It's now just after Thanksgiving, and you haven't yet made the announcement, because your board has advised you to wait until after the holidays—a premature announcement would affect vendor orders for your other product lines in the coming year. You are approached at the holiday party by one of the people on the production line who had heard a rumor about the product being killed and is concerned about what to spend for this year's Christmas gifts. What do you do?
This situation represents a common dilemma that managers and leaders face. It also manifests itself in situations among colleagues. As Badaracco says, it's a choice between "right" and "right." Should you tell the employee the truth, so that he can responsibly budget for the holidays? Absolutely. Do you have a responsibility to the organization and its stakeholders to remain quiet, as a premature release of the news would negatively affect sales companywide? Definitely. Because people are involved, your role as humanitarian requires that you don't make these choices lightly. They are, indeed, your defining moments as a leader. Ultimately, right vs. right decisions are a test of the leader's integrity: they require a careful deliberation of the facts, considering of underlying moral principles and values, acting in accordance with those principles, and communicating the decision in a meaningful way.
A leader must also be a sage: a coach, a teacher-learner, a mentor. All of these elements are related, yet they require different approaches to helping others achieve understanding and reach their goals. As the coach—an overused sports metaphor that nonetheless continues to stand the test of time—you're the head of the team, making decisions, charting strategy, getting the most out of every player. As a teacher-learner, you have a wealth of experience and knowledge to share with others; you also seek to learn from everyone else, as they have different skills, experience, and expertise than you do. Finally, as a mentor, you nurture others at their own pace, helping them be the best they can be. In all these roles, you earn trust by willingly giving of yourself to help others advance.
Early on in my career I was lucky enough to have a great mentor who immediately asked me, "What's going to be your first victory? How I can help you get there?" I learned so much from this person, and indeed achieved my first "victory" with his help. This idea has stuck with me to this day: Make sure that you mentor new employees in a manner that allows them to complete a project of notoriety, an accomplishment that boosts their confidence right away. It sets people off on the right foot. Then, help people build on their victories. In addition to helping others move ahead, you are fulfilling a responsibility to the wider organization to create its future leaders. Without coaching, teaching, and mentoring, you leave the cultivation of the organization's internal leadership to chance.
Of course, there is another aspect to being a sage, embodied in the image of the wise old person on top of the mountain, the one to whom others come for counsel. You won't immediately have all the answers—and that's all right. Trust is earned by your willingness to carefully consider and deliberate on a problem until you come to an answer. It's earned by understanding that, as CEO, your opinion carries disproportionate weight in the organization—indeed, it may be the final word in a dispute. So, earn trust through impartiality and honest deliberation.
The Deal Maker
Former CEO and executive coach Walt Sutton puts it this way: One of the functions of the CEO is "to navigate the rivers of cash." That means evaluating all the deals in front of you and deciding which ones to greenlight and which ones to take a pass on. Remember Iacocca marching off to Washington to put together the deal of the century, the one that would literally save his company? It's possible you may find yourself staring down a deal that will be the making of your company. Most of the time, however, the deals you evaluate will represent a wide range of opportunities: strategic alliances, partnerships, new products.
I absolutely support a culture of innovation at FWI. But truth be told, most of our product ideas come from the customers themselves. And that's not a bad thing—it's a great thing. By my definition, marketing means figuring out what the customer needs and wants, and then satisfying that need or desire better than anyone else. Conducting product development in a vacuum is a big mistake. Having customers influence your product development efforts is crucial to staying in tune with market needs.
And this is why you need to stay in front of customers—that you continue to earn their trust—even if you're the CEO, and even if you're not serving customers day to day. It's been said that when Lou Gerstner started at IBM, the first thing he did was get on an airplane. Where was he going? To see the CEO of each major account. He was on a mission to learn what his customers wanted from IBM, which at the time was apparently not what they were getting. The visits also carried an underlying message: The buck stopped with Lou.
While I don't directly manage accounts anymore, I still visit customers, listening to their ideas and offering myself as a resource to solve problems and identify opportunities. I let our clients know that I'm there, and ultimately they can trust that the buck stops with me.
The Risk Taker
Chapter 9 is dedicated to the topic of risk, so here I will be brief. Nonetheless, it's important to emphasize that, as CEO, your role as chief risk taker is crucial to your company's survival.
However, it can be a difficult role to embrace. Sales are up, profits are up, and your bonus is up—so why rock the boat? Or you may be facing the opposite situation, telling yourself, "I can't afford to take risks with net income down 10 percent!" Maybe you're somewhere in the middle—your profits climb a predictable 3 percent a year no matter what you do. Or maybe it has little to do with how your company is doing—you're at the pinnacle of your career and are content with collecting a paycheck and playing golf four times a week. That's understandable … you worked for it, right? Now, why don't you just quit right now and do your company a favor?
CEOs are paid to take risks. Educated and responsible risks, yes, but risks nonetheless. As you set the vision and make the deals, be conscientious, keeping in mind that your people are counting on you. But don't let the weight of responsibility cow you into risk avoidance.
Similarly, part of the CEO's role as risk taker is played out within the organization—by making changes in order to keep your people fresh, motivated, and productive. How you approach this role greatly influences buy-in and trust. Consider the response inspired by the typical announcement that a company is "embarking on a new era," and that employees should "be prepared for some big changes on the horizon." Look out at the audience and what do you see? The ones who are still there are frozen in their chairs, staring back with terror in their eyes. Why? People fear change; they fear the unknown.
When seeking to create buy-in as you effect change, why not reframe the process as "experimentation"? Next time you want to do something differently, tell your team that you are about to experiment with a new idea. Watch the look of anticipation on their faces. You'll have an audience of curious learners, ready to roll up their sleeves and try something new. It's necessary to "shock the system" every once in a while, to get people to think differently. If you get them on board up front, it will be much easier to take the risk—and make your next breakthrough.
When was the last time you shocked your system?
When I think of manager in the traditional sense, I think technician—they're the ones who are experts in planning, analysis, measurement of outcomes, and control. Meanwhile, the word leader has come to embody an elusive inspirational quality—leaders are the ones who move people. Nonetheless, leaders can learn a great deal from effective managers. As head of an organization, it's vital to understand how to manage people as well as motivate them, because managerial competence is a powerful way to earn trust.
In my own case, when it comes to management I'm as good a generalist as any, having a solid understanding of marketing, finance, and operations. It's also true that everyone at FWI is better at their job than I would be; you wouldn't want me putting together the company's tax return. But I know enough about the functional areas of the business not to be scared to read a financial report, and I know enough to manage by exception. Most of the time I know what to look for, and since the buck indeed does stop with me, I'd better pay attention to the details.
This isn't only true for small companies. At IBM, Lou Gerstner was good on his feet, he was a visionary, and he cared about the people in his company. But he also was a highly competent technician. Bill Gates still reviews lines of code. It's not enough to have charisma. Great CEOs act like managers—they roll up their sleeves and get their hands dirty. They get involved.
Being involved takes keen observation. If you're the CEO, you can't rely solely on information that comes to you through the traditional channels: meetings, e-mail, reports, even casual conversations. Why? Because people hate to deliver disappointing results to supervisors, no matter how graciously those supervisors take the news. On the other hand, people may overstate their victories. Of course, these concerns lessen as trust within an organization increases, but it is just human nature to want to present the best picture to one's boss.
Finally, part of the role of manager entails orchestrating a steady improvement in performance. The quality of most rank-and-file employees, managers, and executives will cycle in an up-and-down fashion. It's rare that the stellar performer can maintain that high level of excellence day in and day out. Nonetheless, when looking at performance growth conceptually—whether it's a person's technical competence or emotional competence—what you're looking for is something akin to the Dow Jones Industrial Average over a long period of time. Sure, there will be some bumps in the road, maybe even a recession from time to time, but the graph continues to trend upward. Your job as a manager is to minimize the peaks and valleys. You're looking for steady, predictable growth.
The reason for managing the troughs is intuitive, but why manage the peaks? To avoid burnout. Your star performers are most susceptible to this, being so achievement oriented that they work around the clock—until they get burned out and crash, that is. As much as you monitor for dips in your team's performance, pay equally close attention to the stars. When a star is burned out, it doesn't give off any heat. Keep your stars healthy and shining.
"I think leaders need to appreciate the context of the broader relationship system," says David Wolfenden, a leadership coach and executive at DMB, a real estate development company.
As a leader, you have less latitude to publicly walk up and start talking to somebody in an irritated voice than someone else might—not because it's inherently wrong, but because the context of leadership requires you to be more compassionate and sensitive to the broader relationship system in which the conversation occurs, which includes the past, present, and future.
In other words, as a leader you can't afford to let your distemper get the best of you, because the people who surround you will take on your disposition like mood rings. You cannot escape from this reality, but you can use it to your organization's advantage. CEOs can motivate employees in ways that no one else can. At FWI, if I'm positive and upbeat, so are those around me. While that may be a known psychological phenomenon about humans in general—enthusiasm is contagious—it's especially true when it comes from the CEO.
What about integrity, you say? If you're in a bad mood and you put on a false front, isn't that less than honest? Well, yes; if you walk around with a silly grin all day, every day, people will wonder if it's time to have you taken away. Or, at the least, they'll become distrustful of your demeanor. I'm not talking about constantly masking your emotions. People like to know that their CEO is human as well. But one of the hallmarks of "emotionally intelligent" leaders is their ability to understand how their emotions affect others and to manage those emotions appropriately. It's fine if you have a bad day. Just don't make it a habit, and be acutely aware of the effect that your moods have on others. Your enthusiasm pays dividends down the line.
Ask yourself: Why did you take the job of CEO in the first place? Maybe you're like me—you founded the place. Maybe you were hired or promoted to the job. It really doesn't matter how you got there, but as the chief motivator, you've got to have passion for what you do and what your company does. If you've lost your passion, figure out a way to get it back, and quickly. Indifference is as contagious as enthusiasm, and the last thing you need is a company full of people who just don't care.
The "vision thing" is so obvious I hesitate to mention it—it's what many CEOs consider to be their only role. But for every visionary CEO I've met, there are two who haven't an idea as to where they're headed. And that's unfortunate, because defining the company's vision is the one role that the leader absolutely cannot delegate.
There have been times during my tenure when the future looked uncertain, such as during FWI's rebranding. Yet that process has helped me to establish a clear vision for the company. I went back and revisited our roots; I talked to customers; I talked to people who had looked at our product but hadn't purchased, and asked why; I held internal focus groups; and I hired a branding agency for guidance. I asked for employees' input. But the final call—the decision about what and who we would aspire to be—was up to me.
Again, some CEOs believe in determining their company's vision by committee, because they want buy-in from their employees. It's their company, too, they say, so everyone should have their stamp on it. It's an admirable sentiment. I, too, believe in getting buy-in from employees and asking for their opinions. However, when you get too large a group of people together expressly to create a statement of vision (or values, or purpose, or mission), you end up with something that's less than inspirational. Having been stretched to accommodate everyone's stamp, the statement eventually becomes meaningless.
I don't mean to dissuade you from soliciting input from your employees. By all means—talk with them, listen to their varied perspectives on what the company means to them. I certainly did and always will. But when it comes to finalizing your company's defining statements, the ultimate decision is yours. Make these statements meaningful, powerful, and easy to remember. Then consistently communicate them to all your company's employees, whether they number fifty or fifty thousand. Of course, this isn't an easy task, even within smaller organizations. However, it is possible to clearly define your organization's values and purpose for employees and consistently reinforce them in creative and memorable ways.
In short, effective CEOs know where they're taking their company. They make their vision memorable, and communicate it with passion.
Ronald Reagan was known as "The Great Communicator." Martin Luther King Jr.'s oratory is legendary. These leaders could electrify their audiences, not only with their words but also their commanding delivery. Leaders who are great public speakers are often referred to as "the voice" of their organization or cause. All great leaders, in fact, seem to have a compelling story to tell. Says Harvard education professor Howard Gardner,
Leaders achieve effects primarily by telling stories and by embodying those stories in their own lives…. The art of the leader is to create and refine a story so that it engages the attention and commitment of followers, thereby changing their views of who they are, what they committed to, and what they want to achieve and why.
But the role of the company's CEO as communicator is not limited to making great speeches or keeping the company's story alive. It also encompasses facilitating effective and empathetic communication among all stakeholders in the company. (Chapter 7 includes a detailed discussion on the guideposts for achieving this kind of communication.) "Leaders are responsible for doing as much as they can to create a context where open, rigorous, fair, and balanced discussions are typical," says Craig Weber, an organizational behavior consultant and president of Weber and Associates. "Of course, as the CEO you can't just write a memo and force people to be open, candid, and direct. But you can strive to create a context that promotes openness."
Communicating effectively and empathetically is vital to fostering understanding and buy-in among stakeholders. By creating an environment in which good communication thrives, a leader makes great strides toward building trust.
Joseph L. Badaracco Jr., Defining Moments: When Managers Must Choose Between Right and Right (Boston: Harvard Business School Press, 1997).
Walt Sutton, Leap of Strength: A Personal Tour Through the Months Before and Years After You Start Your Business (Los Angeles: Silver Lake Publishing, 2000), 97.
David Wolfenden, DMB, interview by author, August 19, 2002.
The term emotional intelligence was popularized in the late 1990s by Daniel Goleman. In his first book on the subject, Emotional Intelligence, Goleman argues that EQ is a better predictor of achievement than IQ. As he defines it, emotional intelligence is "the capacity for recognizing our own feelings and those of others, for motivating ourselves, and for managing emotions well in ourselves and in our relationships" (317). In his model, there are five measurable areas of emotional intelligence: self-awareness, self-regulation, motivation, empathy, and social skills. Later empirical work by Goleman and others suggests that emotional intelligence is highly correlated with effective business leadership—greater than IQ, schooling, income, or other more traditional drivers of success.
Howard Gardner, Intelligence Reframed (New York: Basic Books, 1999), 126–128.
Craig Weber, president of Weber and Associates, interview by author, April 24, 2003.