- CEO’s
need to have integrity, vision and
act as a positive role model.
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- CEO’s
must understand that returns need
to exceed their cost of capital.
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- Successful
CEO’s identify trends in demand
well ahead of their competitors.
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- Successful
CEO’s spend a lot of time hiring
good people.
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- Successful
CEO’s are good at asking for,
and listening to advice from others.
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The role of the CEO changes as the company and its businesses
evolve.
Due to recent negative publicity about CEO behaviour, more
and more emphasis is being placed on integrity, vision,
and being a positive role model.
These were the findings reported in a global survey, titled
“Role of the CEO”, by Accenture in October 2002.
This survey involved feedback from 250 executives.
These executives also stated that CEO’s need to focus
on governance and innovation.
The increased focus on governance is no surprise, with both
shareholders and regulators calling for change and far more
transparency.
The focus on innovation reflects the competitive environment
and the need to generate new ideas and new products to maintain
market position.
Apart from integrity, vision and acting as a positive role
model, there are five other attributes associated with successful
CEO’s.
These attributes may be more or less important depending
on the stage of the company’s development.
The five key attributes are:
- Leading and encouraging people
- Understanding the numbers
- Staying ahead of the trends
- Selecting and retaining good people, and
- Listening to others.
Leading and Encouraging
Others
General Colin Powell once said “the ripple effect
of a leader’s enthusiasm and optimism is awesome”.
He also talked about the importance of a positive attitude
saying “we can change things here, we can achieve
awesome goals, and we can be the best”.
For early stage companies with limited resources, this type
of proactive attitude may mean the difference between success
and failure. The CEO needs to clearly articulate and communicate
the vision and values of the company.
Powell also said “great leaders are almost always
great simplifiers”. The easier it is for everyone
to understand the vision, the greater chance of acceptance
and gaining commitment to it.
Understanding the
Numbers
The first goal of the CEO is to make sure the company makes
money, so that the financial rewards can be shared with
investors and staff.
The quote by a prominent CEO of a growing company “I
want my business to be the best investment for my investors”
shows very strong alignment between the CEO and the investors.
In order to deliver strong financial performance, great
CEO’s understand that their after tax returns must
always exceed their cost of capital.
Successful CEO’s have a very strong focus on cash
flows.
This means monitoring the cash conversion cycle.
One CEO, appointed to turnaround a failing company, focused
on all cash movements and signed every cheque. This may
seem extreme, but for a cash starved company where every
dollar is critical, it may be the difference between survival
and the liquidator. For larger companies, different systems
are required.
Staying ahead of
the Trends
Successful CEO’s identify trends in demand well ahead
of their competitors. This can result in either an opportunity
to build a prosperous business venture, or a costly experience
if the trend disappears or fail to materialise.
Trend opportunists need to anticipate when to change their
business model or simply move on to the next opportunity.
This is where CEO’s with strong industry experience
are likely to be more successful. Due to their expertise
and familiarity with the industry, these CEO’s had
the ability to recognise trends or patterns as they develop.
They also have the ability to fill in the missing elements,
and this early recognition allows them to exploit the opportunity
ahead of their competitors.
Colin Powell said “you don’t know what you can
get away with until you try”.
It is worthwhile pursuing a trend providing the market is
of sufficient size (greater than $100 million), and there
is strong customer acceptance (customer orders in hand).
Acceptable financial returns (returns greater than the cost
of capital) also need to be present.
To remove some of the uncertainty, the opportunity may need
to be developed on a staged basis with specific “go
or no go” milestones.
Selecting and Retaining
Good People
Successful CEO’s spend a lot of their time hiring
good people. Jack Welch of GE fame admitted to spending
60% to 70% of his time on people related matters.
How do you pick the right people?
If ten different CEO’s were asked that question, there
would probably be ten different answers. The majority of
CEO’s would probably say the qualities they look for
include personality, intelligence, motivation and experience.
Powell’s rules for picking people are “look
for intelligence and judgement, and most critically, a capacity
to anticipate, to see around corners”. He also suggested
that you need “high energy drive, a balanced ego,
and a drive to get things done”. That’s a fairly
comprehensive set of requirements.
Retaining talented staff is a major challenge for CEO’s,
especially in those industries where skill shortages exist.
CEO’s must continually assess their talent resources.
People who are good in the early stages of a company’s
development may not be the right people for a larger company
with disciplined processes and procedures.
One recurring comment from CEO’s in growth companies
is that they have not brought in new people quickly enough.
For smaller companies, this is a dilemma.
Sales need to be generated before adding to the back office
positions.
Unfortunately, the additional back office positions may
be critical for the order fulfilment process and the ongoing
support of the customer.
Listening to Others
Successful CEO’s are good at asking for, and listening
to advice from others. One prominent CEO suggested that
if you are building a business you can’t know everything,
so don’t be afraid to ask.
It is interesting to note from the Accenture “Role
of the CEO” survey, a lot of executives rely on a
mentor for advice. In fact, 46% of the most senior executives,
and 47% of the other executives/managers reported having
a mentor or role model in the company.
Mentors not only act as important sounding boards, they
are important for developing careers and capabilities.
Successful CEO’s create a climate where power and
responsibilities are entrusted to intelligent and enthusiastic
people.
They encourage and empower people, but still keep a close
eye on the financial detail. Without the financial returns
they know they won’t be able to attract talented people
or secure funding from investors.
CEO’s need to establish direction, build commitment,
ensure execution and create change. This may sound a tall
order but many successful CEO’s accomplish it.
Peter T Gow is the Managing Director of Creative
Capital Pty Limited. He founded Creative Capital to accelerate
the learning skills of entrepreneurial CEO's and develop
their expertise in capital management, business and strategic
planning, cash flow management and market research and analysis.
Peter has over 12 years of experience in working with growth
companies and has been involved in the completion of over
30 financings in the software, manufacturing and medical
areas. His expertise covers company evaluation, strategy
and market analysis, capital raising, transaction structuring,
documentation and completion. Peter has also set up several
venture capital funds for a major financial institution
and appraised a range of venture capital managers.
Creative Capital Pty Limited
Peter T Gow
61 412 235 455
petergow@creativecapital.com.au
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