Increase Your Chances of Survival as CEO
December 6 2011 by David Brookmire
Over the past five years, there have been a growing number of high-level, hugely public CEO casualties. A few of the recent high profile CEOs that were terminated from their jobs were Leo Apotheker — HP, Jeff Kindler — Pfizer, Carol Bartz — Yahoo, and Robert Kelly — BNY Mellon. Challenger Grey’s research has shown that year to date, 1,031 CEOs were replaced, with 40 due to terminations, but who really knows how many of the 693 CEOs that resigned, retired or “stepped down” were actually pushed out due to poor fits in the role. The average tenure of Fortune 500 CEOs is only 4.6 years, which shows that CEOs have a limited shelf-life. The top job is marked with a bulls-eye, which is especially apparent when things go wrong and shareholders suffer financially.
Why do seemingly accomplished and talented leaders in the CEO role end up losing their jobs due to poor performance or lack of other required capabilities? It’s pretty easy to see how this can happen due to two factors. First is the rate of change in the CEO role’s requirements based on a variety of scenarios, including:
- Economic conditions. Over the past five years, the economy has caused many companies to go from a period of high growth to declining sales and profits. CEOs’ job requirements are different when they’re leading a high growth organization vs. a declining business, and some leaders just can’t evolve with the changing economic climate.
- Rate of technology changes. We’ve recently shifted from Web 1.0 to 2.0, and we went from consumers to creators of web content. Social marketing, in particular, has had a profound impact on all businesses. Today’s CEOs, who are primarily Baby Boomers and grew up without the latest and greatest tech tools, may struggle to keep up with changing technologies – and their impact on today’s business models.
- More accountable Boards of Directors. Over the past several years, the Board of Director roles have had much more control and influence on CEO tenure. CEOs that don’t effectively manage and align the Directors to their strategic direction and operating styles can find themselves out of work. Still, many ineffective CEOs are still in place for a variety of reasons, including their personal relationships, the high costs of replacing them, and other challenges in addressing poor leadership. It is only a matter of time.
- 24/7 jobs. The top job has become on demand 24/7 and CEOs who can’t manage around-the-clock responsibilities and multi-tasking will become overwhelmed and potentially fail.
- Globalization. Globalization has impacted all businesses over the past 20 years, with the Internet speeding up the effects. This has made the CEO role much more complex and skillful, with cross-cultural idiosyncrasies and requirements in just about every facet of the business.
- Generation transition. Most mid-sized and larger company CEOs are Baby Boomers and with that comes the beliefs, attitudes, values, behaviors, rituals, etc., created in that generation. The same old behaviors and tactics just don’t work effectively in today’s innovative, digital world.
The second factor is that on-going development of new skills has become crucial for CEOs as the job evolves and the standards for performance rise over time. In light of the changes that impact the job requirements, as noted above, CEO terminations are on the rise, as many executives are unable to survive and thrive. Often, as the demands increase and pressures to deliver mount, some leaders revert to what had made them successful in the past. In fact, they may rely too much on their over-used strengths (e.g., control, boldness, intellect, etc.). After all, that’s all they may know how to do, even though these traits may become liabilities.
CEOs that fail may not realize that they’re having adverse or negative impact with their bold, controlling leadership styles. This requires a high level of self-awareness, which CEOs may not have — or they just may not realize that they’re negatively impacting their team and the organization overall. Some common barriers include:
- It’s lonely at the top and very rare for subordinates to give CEOs direct and candid feedback about their leadership effectiveness (or lack thereof);
- It’s also rare for CEOs to ask for feedback from their teams for fear of showing vulnerability;
- CEOs may lack self-awareness about the negative implications of their leadership styles;
- Boards of Directors are often not present to observe the CEO’s day-to-day leadership and their impact on others until it’s too late;
- There’s a perceived stigma associated with development at the executive level. Many companies simply stop development at the Director level and above. The assumption is that once you’re in those leadership roles, you should already know how to lead effectively; and
- Time is precious and results trump personal development. In other words, the CEO may be too busy to take time out for much-needed growth and learning opportunities.
There are many successful CEOs that have prospered over time, including Sam Palmisano — IBM, Jeffrey Immelt — GE, Indra Nooyi — Pepsico, and Kenneth Chenault — American Express. Their companies utilize executive coaching to develop leaders and this can be especially helpful to improve CEOs’ effectiveness and long-term success.
There is considerable research on the common derailers for CEOs, and a common theme is the lack of emotional intelligence or the inability to effectively interact with others to inspire and motivate (Goldsmith, Hogan, CCL). The accounts of some public terminations demonstrate that certain leadership styles are not neutral in impact — they actually produce negative impact on others, including board members, senior leaders, customers, etc. This leads to defections, dysfunctional teams, undermining, resistance, turnover, conflict and poor performance.
Most of these CEOs may have blindspots — they rate their leadership higher than their stakeholders do and, therefore, they’re not performing as well as they perceive themselves. This gap in leadership effectiveness can be identified and dealt with by effective executive coaching. Most CEOs don’t realize the impact their leadership (and negative characteristics) has on others. Executive coaching increases the CEO’s self-awareness by helping him/her confront reality about their leadership skill deficiencies. If the CEO is open to this approach and is committed to change, there’s hope that they can survive and thrive for a longer tenure in their roles.
How a Mid-Size Company CEO Raised His Personal Effectiveness
Bill Gaines, CEO of Regis Consumer Products, ran a $750mm global company. Gaines was promoted from within the company and had been in a variety of roles leading up to this promotion, most recently as head of R&D. Gaines had many of the hard and soft skills required for the role at the time of his promotion. He was described by his stakeholders as brilliant, results-driven, process-oriented, organized, credible and reliable. But he lacked inspirational leadership skills, and relied in large part on his position and expertise to motivate others to follow him. While that leadership style worked effectively in R&D, it would hold him back as the CEO of the business. Gaines had a much broader constituency that he had to lead in his new role, and now had to influence everyone from hourly employees to executives. And he needed to make some tough choices, driven by the economy and lack of innovation in products. As a result, he had to address the gap in his leadership and decided to engage an executive coach to assist him in developing and changing within this role. The executive coach interviewed his key stakeholders — his boss, peers, direct reports — and identified critical areas of focus for Gaines to be much more effective as a leader. The executive coach shared these results with Gaines, identifying two areas that needed to be improved for him to be more effective: “Inspiring and Motivating Others” and “Building Effective Relationships.” Over the next nine months, the coach worked with Gaines to improve these behaviors and Gaines continually practiced in multiple situations (e.g., one-on-one and group meetings, corporate officers, etc.). The CEO measured his improvement in these areas, and his targeted competencies had increased by 36 – effectively from below standard to above standard for the CEO role. Arguably, these improvements would not have been made if he’d been left on his own. In the worst case scenario, Gaines would have been terminated due to his blindspots. After coaching, however, he became a much more effective — and respected — leader.