In a recent column, the well-respected Financial Times business journalist Stefan Stern discussed research findings suggesting that "CEOs who carry out a big deal in their first year outperform their peers in the long run." Stern quotes research from the Mergers and Acquisitions Research Centre (Marc) at Cass Business School in London, which studied the relative performance of 276 CEOs in 171 European companies. I thought of this when a business colleague informed me that he was taking on his first Chief Executive Officer role, after years of climbing the corporate ladder. Having already made this leap some years ago, it occurred to me that few of the many business books I own and little of the friendly advice I received from peers were very helpful when I finally sat in the chair. "Now what?" I recall thinking. With that in mind, here are 15 practical lessons I've learned along the way that new CEOs might find helpful.
Bold actions speak loudly to the market. Just as Stern reports, many business leaders become constrained by their environment, burdened by the many internal forces striving to maintain the status quo. Often a new leader can walk in the door and see an obvious course of action over which the previous leader endlessly hemmed and hawed. Just as often, the metrics by which the new leader are measured offer greater flexibility than those constraining the previous leader. In my own experience, my team and I pitched our corporate parent for years to obtain capital investment for our slowly dying business, but as the cash cow we were required to fund every other risky investment. Years later the business received its capital investment, but only after losing tens of millions in revenue (essentially reducing the business by half), and even then it required a bold new CEO to drive through the necessary changes. New CEOs have the ability to make bold moves, so instead of wasting time in analysis paralysis, study the data already available and make a move.
Small actions speak loudly internally. Global strategy is important to analysts and shareholders. Having a clean restroom and a snow-free parking lot mean far more to the staff. A CEO must consider these as priorities too, despite the temptation to delegate all minutiea. You'd be surprised what one can learn when interacting directly with staff on issues that matter to them.
One of the first company-wide edicts I made as a new CEO was to eliminate our "no blue jeans" policy. Our main facility was part production plant, with big whirring machines and forklifts and trucks coming and going at all hours, and part cubicle farm. While clients and potential clients regularly toured our facility, I felt my staff was quite capable of judging when to dress up and when to dress comfortably, so I removed a rule I felt was paternalistic and unnecessary. In another example, a telephone agent cautiously approached me on behalf of a wheelchair-bound colleague who had difficulty accessing a shared fax machine. The worker's teammates had designed a lower shelf configuration using existing interchangeable cubicle materials and identified a new fax machine with controls on the side rather than on top. But since it would cost a few hundred dollars and require several levels of management approval, the proposal languished for months. I approved the plan on the spot. In a final example, I took over a team that spent all day every day marking up documents, yet the manager would allow only two new pens or pencils each week, the distribution of which was tightly controlled. If you needed another pen during the week, you had to bring one from home! When my new team told me this I laughed, thinking they were being facetious. They weren't. So we dispatched some folks to Staples and they returned with a huge box of pencils and pens and notepads and sticky notes and staple removers and other odds and ends. Total cost was maybe $500, but the loyalty it created was priceless.
Care about everything. All CEOs rise through the ranks with expertise in some business functions and blind spots in others. But a CEO has to be fluent in everything, even when there are good lieutenants responsible for the various business functions. In fact, the greatest risk for a new CEO is to trust too much that the lieutenants have everything under control. As a new CEO I cared about all that I could manage until I felt comfortable with how things were progressing and with the person in charge. Until then, despite the hurt feelings and nasty looks I received from my senior managers, I cared about the menu for the holiday party, I cared about the high turnover in the call center, I cared about the aging machinery that frequently led to 3rd shift downtime, I cared about the building sign with the perpetually burned out lights, I cared about the low activity exhibited by our newest salesperson, I cared who was selected to throw out the first pitch on employee night at the local baseball field, I cared to inquire why the vending machine guy had his own key for our supposedly secure facility, and on and on. Care about too much at first, rather than too little.
Finance is your friend. And your enemy. Without question your CFO or head of finance will be one of your most important allies. You don't have to be best friends, but you do have to have mutual trust. Sooner or later your CFO will gloss over a detail or two, explaining that the result is what matters not the underlying calculation. Or maybe she'll present a forecast with several nested assumptions that can't be readily explained. Stop her right there and don't proceed until there is full transparency. Corporate finance is challenging. Even with an MBA and a lifetime in business, few new CEOs are readily conversant in every nuance. But you must be a master of your P&L, especially the numbers reported to the parent company, to the board or to the market. In my own experience, a long-standing President who reported to me took it upon himself to protect me from the messy calculations necessary to produce our monthly financial dashboard, and my repeated attempts to learn more were thwarted. Only during his vacation was I able to scare the finance staff into revealing all of the complicated machinations, only to learn that (a) it wasn't rocket science, and (b) many of the assumptions were flawed. Yet as CEO my signature and my signature alone was on the SEC filings. Don't leave a stone unturned when it comes to understanding the numbers that matter most.
Manage by sitting down. We all recall the management philosophy "management by walking around," which I quite obviously believe in. But walking around isn't enough. Sit down too. Have lunch in the cafeteria occasionally with people you don't know. Arrange for periodic informal breakfast sessions with random employees. Go to the company-sponsored softball game and buy a round of drinks after. If you have the skills (and whether I do is questionable), don a jersey and play in a game or two -- just don't wait until the playoffs. Don't worry, few will be bold enough to criticize your performance! (But if someone does, call on them for honest opinions on other matters too.) I used to regularly don a headset and listen in on calls in my company's call center. And not the escalated calls that required a senior manager. Just everyday calls from everyday customers with everyday issues. A half hour now and again is quite an education, and it sends quite a strong message to your staff. (Incidentally, the TV show "Undercover Boss" effectively demonstrates this philosophy.)
You are not the top salesperson. This might be surprising coming from me, since my background is in sales. I pride myself on being the top salesperson in the room, knowing not only how to understand the client's needs but how to tie these to the benefits of my company's offerings, or knowing when there isn't a tie-in. I'm good at it. But there's nothing more disappointing to me than learning I have to be the best salesperson because no one else gets it done. CEOs should be in the field regularly, far more often than most are. In some cases it's ceremonial -- trot out the big cheese so the customer will see how important they are. In many cases it's for someone else's benefit -- such as a sales manager or salesperson who stages a performance with you as the audience. But as good as you may be, learn how to hire top sales leaders and salespeople and then work to support them from your position as CEO, not as top salesperson-in-chief.
Find a common enemy. One of my former CEOs taught me this lesson. I was his first appointment on his first day, hours before anyone else arrived at the office. My division was in trouble and I had made it abundantly clear to him during the interview process and to the corporate parent's CEO who was doing the hiring that my division needed attention. He listened and within weeks we had a common enemy. Ours had to do with some internal supply chain issues which were causing significant strife with our key customers, issues I had been railing about to deaf ears internally for some time. Within weeks our new CEO created a company-wide slogan and an aggressive timetable to fix the issues, along with a public progress meter. Then he did what I could not do with my peers -- he based a large chunk of the executive team bonus on solving the problems. I won't go into details, but suffice it to say our battleship was spinning pirouettes in very short order, even though the management team had previously said it couldn't be done. Your particular enemy may be a competitor, a technology challenge, a new product launch. Anything that can be made tangible is fair game. Too many CEOs waste this tool on a too-common problem: they want more revenue or they want lower costs, so they try to pull out all the stops to work harder or to do more with less. This isn't inspiring. Of course some companies need a kick in the tail. But if your main contribution as CEO is to suggest everyone work harder, then perhaps you too can work harder to identify something to rally around.
Good ideas may be right in front of you. Years ago our corporate parent hired a consulting firm to drive innovation among the various divisions. They toured the world asking us for ideas we hadn't thought of, using a formulaic approach to "ideation" (consultant speak for brainstorming). The main rule was one could not suggest an idea that in some form or another had been suggested previously. The assumption was that our wise leaders had already discarded these old ideas after careful consideration, and as if to prove the point Exhibit A was the absence of the idea in action. Trouble is, many of our good ideas had never seen the light of day in the normal course of business, whether due to politics or inept management or distractions. So these consultants spent millions of our money to collect new ideas when there were thousands of solid ideas readily available if only the right level of management could see them. As a new CEO, you will be approached by many people with agendas. Learn how to filter out the noise and the self-promotion and you will absolutely find game-changing ideas already well-formed in the minds of your people who live and breathe these issues all day long.
CEOs learn to eat alone. If you believe in management by walking around (or sitting down) then you really shouldn't eat alone very often. But you will find that nearly everyone you meet has an agenda for self-promotion. They nearly always start the same way, praising everyone and everything and then slowly they begin to criticize everyone and everything. Some are blatant, some are more subtle, but nearly everyone hopes that you'll intervene in their particular problem. And this is not directed solely at junior staffers -- I'm referring to the executive management team! If we could harness the energy of the animosity typically found between fellow executives, then we could provide sufficient electricity for the eastern seaboard for several months. If you befriend one, you make an enemy of another. If you befriend one of their staff, they begin to harass their staffer. If you let slip some gossip or a dig at a colleague, it will be shared before the day's out. Sadly, you can be great acquaintances with your staff. But you can't truly be friends. For me, playing pickup basketball after hours with the inside sales and mailroom guys was a way to interact as "just one of the guys," once the guys learned I didn't expect to be passed the ball when I didn't deserve it, and it was okay to call fouls on me when I did deserve it. But for many CEOs, they find companionship in peers at other businesses because as CEO you can never really let down your guard.
You are the CEO of Human Resources. If you haven't read Robert Fulghum's fantastic book "All I Really Need to Know I Learned in Kindergarten" then run, don't walk, to buy a copy. If you've reached CEO status, then you've spent years in executive management where you learned that much of your day is spent addressing petty squabbles among your staff, including even senior (in rank and age) people. As CEO, you may be surprised to learn that the only thing that's changed is the titles of the combatants include "Vice" and "Executive" and there is no higher court than you. Much of your time is spent dealing with H.R. issues that will distract you from the real business at hand, but if left unattended will get out of hand. But H.R. issues are not all bad. One primary role of CEO is to find quality talent. I recall hearing that Jack Welch, the famous (former) head of GE, spent half his time on people management. As a young manager I found this preposterous. But as CEO I realized there was almost no action I could take that would have as lasting an effect as finding the right people and eliminating the wrong people. So as much as you like strategy or operations or sales or finance or IT, get used to H.R.
Value your secretary... from a distance. A good assistant is hard to find. They combine a talent for time management, logistics, politics, scout leader and mother. Some secretaries come with the office, and they have the advantage of knowing the ins and outs of the organization and how to get things done. Some you bring with you, and they have the advantage of knowing how you operate. Most are quite capable of acting on your behalf, though some go too far and act as if they're second-in-command. I grew up watching television secretaries like Betty, at Bewitched's McMann & Tate, and I recall thinking that asking your secretary to handle anything but work-related tasks is demeaning, until I met Arleen, my capable assistant of several years, who went out of her way to handle small errands and other minor personal business for me so I could focus on the job at hand. With time being a CEO's most precious commodity, I learned that it's okay on occasion to ask your secretary to handle some personal business, so long as she (or he) is okay with it. Needless to say, when you spend a lot of time with someone in a work setting it's necessary to maintain certain boundaries. An assistant is a valued employee, not a serf, and not a "companion" in every sense of the word. One of my prior executive secretaries was a paid informant for the parent company's leaders, which was helpful when I needed to "send a message" through back channels but challenging when my every move was recorded and reported. Find what works for you, find someone you can trust and delegate to in verbal and non-verbal ways, and then treat him or her very very well.
Everyone is someone's Assistant Brand Manager. I learned this maxim from a former CEO who rose through the ranks of Proctor & Gamble's well-known executive development program. In consumer products parlance, an assistant brand manager (or ABM) is the grunt who does all the work while the brand manager gets the glory, the worker bee who keeps things moving behind the scenes. However, even when you reach the CEO suite, the one with the kitchen and the private bathroom and shower (I've had this and it's as cool as it sounds!) and you believe you've finally arrived, it's helpful to remember that you are still answerable to someone. There will come a time when you can't delegate some menial task, when the Board or the parent company CFO comes calling, and you have no choice but to roll up your sleeves, edit that acquisition justification memo, tweak the quarterly earnings PowerPoint, add up the proposed savings in the departmental budget submissions, and so on. No matter how important you are, or how important you think you are, someone will always consider you their go-to person, their assistant brand manager. And you had better be ready to answer the call.
Embrace the We. At times a new CEO, particularly one joining from outside the organization, will slowly ease into using terms like "our business" and "our markets" so as not to offend the insiders. I'm sure we can all dig into our past to recall hearing a new leader use a phrase like "our products" and finding it odd, even offensive, that this person claimed ownership of our output on day one. The reality is that it's healthy to take ownership right away -- of the failures and the successes, of the future and the past, of the team and the offerings. Like a star athlete who joins a new team, displacing the existing captain and becoming the new face of the franchise, a new CEO must take charge because he is in charge. There is no time to waste on blaming the last guy or whine about fixing the last guy's mess. There's only time to focus on our problems, the ones we're facing right now.
Act. When you're in the CEO seat, there's no time to gently ease into anything. Whether you're in a position to strike a sizable deal or a substantial acquisition as Stefan Stern reports, or merely take ownership of existing work streams, Stern is absolutely right: CEOs who take immediate action are more likely to succeed than those who take their time getting up to speed. It's easy to select a CEO from the existing executive ranks, one who knows the culture, the markets, the products, one who won't disrupt too much while perhaps incrementally improving the business. But CEOs are expected to drive change, and you can't drive substantive, sustainable change if you don't act quickly and boldly.
Focus beyond the bonus. I grew up in Rochester, New York, the headquarters of Eastman Kodak. My father spent 28 years toiling for the once mighty film manufacturer, which has struggled to adapt in the digital age, and my formative years were spent observing CEO after CEO miss opportunities to drive change. I firmly believe this resulted from misaligned incentives. How can a CEO make decisions and allocate resources to build a company for the long run when bonuses are meted out based on short-term results? Many CEOs have significant compensation triggers at 3-year intervals, so they focus on short-term performance metrics and too often this omits consideration of long-term, more lucrative investments. It seemed as if no Kodak CEO would choose the long-term health of the business over short-term wealth creation and as a result the business floundered, until finally it lost enough market share and profits that there was no choice but to rebuild for the long-term.
I have similar observations about a former legal technology employer of mine. The CEO has had an unusually long 10-year reign, but he has no 10-year vision. Rather, he's had a series of short-term plans where acquisitions grow the top line and reorganizations improve the bottom line, while the business slowly but inexorably declines. You can blame the worker bees for only so long, but I find it unconscionable that he's earned millions while the main export of the business is quality alumni.
I have absolutely lost compensation from decisions that helped my organizations in the long-run because it was the right thing to do, when I could just as easily have made a decision that earned me money and helped the business in the short term, but I shouldn't be lauded for that. As CEO, we're expected to think long-term and it's partially the fault of boards and flawed senior management for creating incentives that emphasize the short-term. As you ponder your strategy and investment options, try to limit the amount of influence your personal compensation will have on your decisions, and instead focus on whether your decisions will leave a healthy company 5 and 10 and 20 years out. Obviously you can't ignore the short-term, but trust me, there are plenty of people on your team whose incentives will drive short-term performance. Try to be the one who thinks differently.
Good luck in your new CEO role, my friend.
Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Fellow, and a member of the Hall of Fame and past president of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. A sought-after speaker and writer, he also authors Corcoran’s Business of Law blog. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.
Companies are in the business of making cars or furniture or software or bed linens or rust-resistant rivets used on ocean liners or x-ray film or lunch meat or ships in bottles or countless other offerings. Most businesses find forays into non-core areas dilutive to earnings, so they hire others to mow the lawn at the company headquarters and manage the company cafeteria or make the coating that they apply to the rivets and so on. Every business eventually encounters a need for legal advice yet few have lawyers on staff. And those companies with enough scale to have in-house lawyers generally hire quarterbacks to manage outside specialists rather than to hire one lawyer for every specialized legal need they might ever encounter. In a word, the legal needs are outsourced -- first to in-house counsel, when available, and then to outside counsel. The primary reason for existence for most, if not all, law firms is to serve as an outsourcing provider to clients who do not have and do not want to maintain this function as a core competency.
