Seven Surprises for new ceos


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Michael E. Porter, Jay W. Lorsch, and Nitin Nohria (Dean of the Harvard Business School) offer some surprising thoughts for new and about to be new CEOs.

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  • On Competition p. 508
  • On Competition p. 511
  • On Competition p. 514
  • On Competition p. 516
  • On Competition p. 518
  • On Competition p. 20
  • On Competition p. 521
  • On Competition p. 522, 523
  • Seven Surprises for new ceos

    1. 1. Seven Surprises for New CEOs Michael E. Porter Jay W. Lorsch Nitin Nohria Excerpted and abridged from the book by Michael E. Porter. On Competition (Boston, MA: HBS Publishing, 2008)
    2. 2. Surprise 1: You Can’t Run the Company • Almost every new CEO struggles to manage the time drain of attending to shareholders, analysts, board members, and other constituencies. • CEO’s have to let go of a lot of responsibility – not just for operating the company but even for knowing what’s going on. • Many decisions must be left with people closer to operations. • The CEO’s greatest influence shifts from direct to indirect means: • Articulating and communicating a clear, easily understood strategy • Institutionalizing rigorous structures and processes to guide, inform, and reward • Setting values and tone • Selecting and managing the right senior management team to share the burden 10/4/2013
    3. 3. Surprise 2: Giving Orders is Very Costly • No proposal should reach the CEO for final approval unless he or she can ratify it with enthusiasm. • Before then, everyone involved should have raised and resolved any potential deal breakers. • Ironically, by exercising his power to give orders, the CEO actually: • Reduces his real power, saps his energy and his organization’s, and slows down progress. • If the CEO shoots down a big proposal, he sends a signal that everybody should check with him even on mundane matters. • His managers lose confidence that they understand his wants, his calendar gets bottlenecked, decision making grinds to a halt. • It is rarely a good idea to unilaterally overrule a thoughtful decision that has cleared several other organizational hurdles. • The need to do so is a sure sign of a broader organizational failure. 10/4/2013
    4. 4. Surprise 3: What is Really Going On? • All information coming to the top is filtered, sometimes with good intentions, sometimes not. • Your informal channels go on their guard, now that you’re the CEO. • Each individual’s agenda colors the information the CEO receives. • Sometimes you have to go outside your organization to find out what is going on: • Through contact with customers and suppliers • Through conversations with other CEO’s • Through affiliations with industry associations. • Sometimes you have to go deep in your own organization, but you have to be careful. • Independent advisors with the approval to criticize the CEO’s thinking and tell the unabashed truth is another avenue to pursue. 10/4/2013
    5. 5. Surprise 4: You Are Always Sending a Message • The new CEO knows that his actions will be noticed. • What he may not realize is that his every move – both inside and outside the company – will be scrutinized and interpreted. • His microphone is always on, and his message can become distorted. • Even an innocent question may be interpreted as a loss of confidence. • CEOs need to learn quickly what signals they are sending. • To minimize inadvertent messages • To maximize the impact of the messages they want to send • To leverage the multiplier effect of their words and actions. • Different constituencies respond to the same news in different ways. • The task of managing outside and inside constituencies, while keeping the message truthful and consistent to both, is never easy. 10/4/2013
    6. 6. Surprise 5: You Are Not the Boss • Just when the new CEOs think they can finally stop managing upward, the need to do so grows in complexity. • Instead of a single boss, the new CEO has ten or 12 bosses, including a “lead director,” who is meant to balance the CEO’s authority. • “I no longer have a clear picture of how to work with the board,” is nowadays a common complaint. • The best CEOs turn board meetings into participatory discussions rather than presentations: • By actively investing in director knowledge and relationships • Through one-on-one contacts, email updates of corporate progress, and distribution of background material • A new CEO who is open with – and creates the opportunity to collaborate with—his directors will be more likely to garner support from these new bosses. 10/4/2013
    7. 7. Surprise 6: Pleasing Shareholders Is Not the Goal • The average share of stock in the U.S. is held for less than a year. • They care only about what happens to the stock during the period they expect to own it. • Both shareholders and analysts are prone to take a short-term view. • CEOs, however, need to concern themselves with creating sustainable economic value. • The CEO must develop and articulate a clear strategy to distinguish the company from others, and address industry fundamentals. • An involved, informed board can be the CEO’s best ally in staying focused on the long run. • A constant stream of reiterations, explanations and reminders will also be necessary to affect analysts’ perceptions. • And… “There comes a time when you just don’t give a damn what the analysts think.” 10/4/2013
    8. 8. Surprise 7: You Are Still Only Human • The attention and adulation that come with the job of CEO make introspection difficult and vulnerabilities seemingly inadmissible. • CEOs need to resist the illusion of self-importance, omnipotence, and omniscience. • No CEO can do everything well, though it is difficult and ego-bruising to accept gaps in one’s expertise, and to admit that the job is more physically and emotionally taxing than any others they have held. • Many new CEOs are confident they can balance their new challenges with their personal lives, but the CEO role can significantly intensify this tension.“ • In the end,” says one CEO, “There is no such thing as balance. There are only trade-offs.” • Virtually every new CEO reports that relationships with friends and family have changed. 10/4/2013
    9. 9. Michael Porter – Jay Lorsch – Nitin Nohria • It surprised us that many new CEOs – even in the early days – were already thinking about their legacies. • This can lead to a long-term focus, which is good. • It can also lead to bold (and even reckless) attempts to make a mark on the company by changing what should not be changed. • It is easy to be seduced by major deals, and tempting to create an organization that is three times larger – even if it is less profitable. • It is essential for new CEOs to make a disciplined effort: • To stay humble; to revisit their decisions and actions; to listen to others; and to find people who will be honest and forthright. • Otherwise, the rewards and praise bestowed upon a CEO can tempt him (or her) into acts of hubris. • Regular exercise, family vacations and golf seem to help, too. (final thoughts) 10/4/2013
    10. 10. veritas