Who gets to be CEO?

anthonykkingBusiness Development, Strategy

Introduction

The CEO is generally viewed as the overall leader of an organization. Not surprisingly it is also probably the most coveted and challenging role in any organization. Before looking at the role itself let’s take a look at a few interesting statistics on CEO’s:

  • 60% are entrepreneurs who have founded at least one company
  • 28% cite finance as their primary area of expertise.
  • 78% are under 55 with the average age for an incoming CEO in 2014 51-55. The average age for exiting the post was 63.
  • 90% are married and 96% have children
  • 84% have a higher education qualification
  • USA topped the salary list at $12.26M, UK were mid-way at $3.76M and lowest was Poland with $0.56M
  • Best-performing CEO over the past 20 years was Steve Jobs of Apple. From 1997 to 2011, Apple’s market value increased by $359 billion, and its shareholder return experienced average compound annual growth of 35%.
  • 74% were insiders. India has the lowest proportion (63%) and Japan the highest (90%).
  • 14% of women hold the CEO role and earn 80% what their male counterparts receive to do the same job.
  • 30% of CEOs are active on at least one social network. 28% prefer LinkedIn with just 8% on Facebook.

For anyone currently in a CEO position, aspiring to be one, or perhaps tasked with recruiting for a CEO, it can be a bit of a challenge trying to pin down exactly what the role entails, and to determine who would make a good candidate. Looking for good reference examples of CEO’s doesn’t really help to shed much more light as well known CEO’s can exhibit very different personalities and core competencies. Ask yourself, what do Elon Musk, Richard Branson and Alan Sugar actually have in common aside from sharing the same title?

In this post we will dissect the CEO role in an attempt to better understand why it is so difficult to pin down, and to better understand its relationship to organizational needs.

At Korolit we help organizations to review, build and develop senior management teams and we would be delighted to hear from you if you would like to discuss your own challenges. This post has already appeared on the Korolit website ( ) along with other related articles which you are welcome to read.

The CEO role

The Chief Executive Officer (CEO), or Managing Director (MD) in the UK, is the highest ranking executive manager in an organization with responsibilities as a director, decision maker, leader, manager and executor. The CEO typically advises the board of directors, motivates employees, and drives change within the organization.

The specific duties of the CEO can vary enormously from organization to organization. In smaller companies, the CEO will often have a much more hands-on role in the company, making a lot of the business decisions, hiring of staff and possibly answering phones and making the coffee for visitors! In larger companies the CEO will often be more abstracted from these operational elements and will deal only with the higher-level strategy of the company, directing its overall growth. Most other tasks will be delegated to subordinate managers and departments.

The specific responsibilities will vary depending on the type and needs of the organization hence the following list is limited to providing a very broad outline of the overall areas of responsibility common to most CEO’s:

  • Creating, communicating, and implementing the organization’s vision, mission, and overall direction. Leading the development and implementation of the overall organization’s strategy
  • Leading, guiding, directing, and evaluating the work of other executive leaders including presidents, vice presidents, and directors, depending on the organization’s reporting structure
  • Soliciting advice and guidance, when appropriate, from a Board of Directors
  • Formulating and implementing the strategic plan that guides the direction of the business or organization
  • Overseeing the complete operation of an organization in accordance with the direction established in the strategic plans
  • Evaluating the success of the organization
  • Maintaining awareness of both the external and internal competitive landscape, opportunities for expansion, customers, markets, new industry developments and standards, and so forth
  • Able to inspire trust across a diverse range of people, including the shareholders, the board, the staff, industry, and customers.
  • Representing the organization for civic and professional association responsibilities
  • Demonstrating the leadership necessary to make the organization’s mission a success. This includes providing vision, attracting followers, and all other aspects of successful leadership.

Not all CEO’s are ‘cut from the same cloth’

It is important to appreciate that individuals with very different personalities and competencies can and do achieve considerable levels of success as CEO’s in their respective organizations. The differences in CEO requirements across organizations, and the changing needs over time, must be taken into account for any internal succession planning.

The break-out below is just one way of illustrating the varying types of CEO in organizations today:

Start-up: The Start-up CEO has either founded the company they are now leading or has launched another company previously. They’re the people who stay up all night, work weekends and sacrifice holidays and marriages to get their ventures off the ground. They are incredibly hands on and like to know what’s happening across every part of their organization. They can come across as abrasive and with considerable intensity, and may lack interpersonal skills.

Corporate: Also referred to as ‘professional’ CEOs and they often have a long track record of running businesses. They focus on every single detail to ensure operational and strategic objectives are attained. Tim Cook, the CEO of Apple, has the qualities of a Corporate CEO. The CNN Money/Fortune stated “Mr Cook is an industry veteran who spent more than a decade with IBM, before he was lured by Mr Jobs to join Apple in late 1990s. Given the task of turning around the fortunes of the company, which was on the brink of collapse at the time, he made some drastic – and highly effective decisions”.

Financial:  See their task as preparing a company for growth-mode, if not for immediate sale. Like Corporate, they are resolute, and better leaders and listeners. But they are even less likely to be involved in the day-to-day than Corporate CEO’s. They are primarily interested in results, not in how the results are generated. They focus on portfolio management while the second-tier executives run the businesses. A good example of a financial CEO is Indra Nooyi who became president and CFO of PepsiCo in 2001, before stepping into the CEO role five years later.

Disrupters: Have something to prove and they invent breakthroughs and disrupt industries proposing better ways of doing things. Steve Jobs, the founder and former CEO of Apple was an example of this CEO type. When personal computers were booming and Windows Operating Systems were the market leader, Jobs saw the opportunity to innovate. At that time Apple’s product line was far less popular than Microsoft’s, so Jobs started improving the design and features of Apple products to demand more attention.

Technical: Believe that they know how a product works better than anyone else. Microsoft’s CEO, Satya Nadella, is possibly a good example of a Technical CEO in that he brings to bear long-term experience and expertise in Microsoft’s Cloud and Enterprise group where he developed innovative approaches that are vital for maintaining the firm’s relevance in its competition for market share with Apple and Google.

Conclusion

The CEO is a title that is used to describe a very broad set of competencies. The detailed skills required to fulfill the role successfully will also vary depending on the stage and particular characteristics of the organization and its particular needs. There is no ‘one size fits all’ and in defining the CEO role you will need to carefully think through the type of leadership qualities that are most important, along with the respective KPI’s.

Organizational CEO requirements tend to change over time. Few Start-up CEO’s are comfortable or have the skills to run a much larger organization which require a very different set of skills. This is a recognition that most investors look for when they make an assessment to fund a business, and it can make or break both the decision to fund and the eventual success of the investment. Tim Cook was probably absolutely the right man to take on the Apple top spot from Steve Jobs when he did, and with Jonathan Ive as his Chief Design Officer. I’m reasonably sure that Cook would probably agree that Jobs was absolutely the right guy to run it before him, albeit Apple had a few hiccups along the way!

Some organizations, particularly technology focused, can be the exception to this rule with Facebook and Amazon providing great examples of companies that will probably always need a Disruptor in the CEO position to ensure a steady stream of vision, innovation and competitive differentiation (At the 2013 TechCrunch Disrupt conference, held in September, Zuckerberg stated that he was working towards registering the 5 billion humans who were not connected to the Internet!). Twitter is also a good example of a company that got the CEO decision wrong and had to re-appoint Jack Dorsey this year after having pushed him out in 2008. Similarly, Microsoft recognized the need to re-instate a Technical leader when Steve Ballmer stepped down and Satya Nadella was promoted to the CEO position in 2014.