This important book, written by three senior partners at McKinsey & Company, is about the mindsets that seem to differentiate what are deemed to be 200 truly high performing senior leaders from “the rest”. It is a great book in most ways. For each of its six sections, segmented into 18 chapters, the authors provide useful introductions and summaries which help the reader to put the various interviews with senior leaders in focus, also including the many anecdotes that are provided. Thus, we the readers do not get lost in the details and examples!
A major secret of the book is that it is built with a clear structure. The six sections each address different CEO mindsets: direction setting; organizational alignment; mobilizing and teams; dealing with boards; how to truly support (help) businesses; dealing with shareholders and finally, the CEO’s personal effectiveness. For each of these, there are three chapters that seem to cover the essence at hand, i.e., a total of 18 chapters, and in turn for each of these, there are four major themes with plenty of relevant examples from the “fresh” interviews of the various senior leaders in the sample, 72 in total.
There are no statistics, but the book still offers a very obvious framework when it comes to analyzing the empirical materials, i.e., the interviews and the anecdotes. This is an effective way to provide a sense out of an elseways overly complex set of materials. The tight construction of the book helps here! Much early exploratory research, so-called pre-paradigmatic research, can benefit from this approach.
The materials provided throughout the tome are truly interesting, none the least because of the authors’ seemingly total openness when it comes to CEO’s and other senior executives’ names, the companies they work for, what exactly was done, including reporting not only on the positive side of things, but also on the difficulties and perceptional barriers. Finally, the results were given, mostly successful, but at times also occasional failures.
The days of so-called strategic analysis based on various more or less deterministic models do now seem to be complemented by what we might label strategic culture. Strategy no longer exclusively consists of applying well-documented approaches such as the five forces from Porter, BCG matrix, in various versions, market share/growth analysis and/or SWAT analysis. Strategic culture is indeed a necessity; without corporate strength when it comes to this, there are generally little to no benefits from strategic positioning and modeling. So strategic culture does matter, and this book underscores this! It represents the best exposé of strategic culture that I have ever encountered!
Some additional unanswered questions
Are there perhaps some critical questions that might be raised when it comes to this book? In this reviewer’s opinion there are possibly three: first, why these six factors? Why not others, such as for instance, a CEO’s attitude to speed? The authors do not give a good explanation of how they ended up with this set of six critical factors, except by saying that their own long and direct experiences interacting with senior executives have provided them with the guiding light to focus on these six. This being said, there might be other key factors also, which could determine strategic culture.
Second, when conducting the interviews with the various senior executives, did they bring up issues that perhaps did not fit in so neatly within the author’s framework as has been presented? The book does provide a relatively clear view of what might constitute an effective strategic culture, but is this all? Is this simply too neat?
My third potential question has to do with the fact that the authors in their capacities as senior partners of McKinsey might perhaps have shied away from being critical when it comes to discussing specific firms. These are perhaps clients of McKinsey, or perhaps former clients. If not, they are undoubtedly on the firm’s list of prospective clients. Is it possible to be brutally honest, especially challenging in a very direct way, vis-à-vis such a group of firms?
However, these objections are perhaps ignorable, particularly so, given the undoubtedly positive contributions that this book gives.
About the authors
Carolyn Dewar, Canadian, went to St. Andrews University in Scotland and is the co-leader of McKinsey’s CEO Excellence Service practice, together with Scott Keller. Mr. Keller, born and raised on the US West Coast, also has an eclectic set of non-business interests such as social enterprising and music. Viktram Malhotra is Indian born and educated at Wharton. He was earlier on the board of McKinsey and also formerly head of the firm’s US business practice. Currently he is chairing McKInsey’s Professional Standards Committee.
The Six Core Responsibilities of a CEO
Direction setting
Vision Practice: Reframe the game. The most successful CEOs do not just raise aspirational levels. They change the definition of success! They reframe their approach to the running of their firms. To find so-called intersections is typically important: needs/competences/passion/making money! But it is normally about more than money. Profit comes after achieving one’s vision. Financial outcomes follow. A way to make this happen is to look back in order to look forward. Established levels of ambitions can be manifested through looking back. But good CEOs always try to boost the level of ambition, now looking forward. Many people must be involved, they support what they help create. To find ways to include the employees is thus essential. A simple vision, i.e., a straightforward articulation of one’s North Star is thus critical, to redefine success, to influence decisions and to provide incentives, so that they all act in desired ways.
Good strategic practice must entail making big moves early, and often. Five strategic movements seem to characterize such boldness:
· Buy and sell
· Invest
· Improve productivity
· Differentiate
· Allocate
To be an exceptional futurist is relevant for addressing each of these factors, including keeping track of major technological shifts, changes in customer preferences, new competitors and threats over the horizon. To also keep an eye on the downside is part of this. This should not imply endorsing recklessness, but it involves thinking and acting like the owner. To regularly apply one’s so-called “heart paddles” is a fundamental going forward. This implies changing enough all the time. To create a series of performance enhancing curves may be it! In short, to make big moves early, and backing them up with sufficient investments, seem to be indispensable for setting the firm onto a progressive path.
Resource allocation is thus critical. Capital allocation is a main lever for growth. To free up resources in order to have sufficient discretionary resources to go after exceptional other opportunities is vital. This implies starting with a “zero base” so as to come up with a portfolio of businesses that has a substantial fraction of new entries every year. The next would be to “solve the whole”, i.e., to move resources around so that the overall benefits from the entire firm might be maximized. Progress is then monitored by meeting milestones, which is different from meeting annual budgets. Finally, get rid of what no longer yields adequately, allowing for a balance with new initiatives to be added - “kill as much as you create”.
Organizational alignment
The second section of the book deals with achieving organizational alignment. It seems particularly important to treat so called “soft” issues as if they were “hard” ones. Emotions and culture are key! To reshape the work environment is central here, even though it may perhaps sound overly ambitious. The most successful CEOs seem to try to do this! Their role models are perhaps particularly meaningful here.
This brings focus on trying to make it personal for the CEO, for example when it comes to demonstrating one’s own interest in learning, perhaps as a juxtaposition to blaming others when things do not work out exactly as hoped. To make it personal is therefore also relevant, such as asking for improvement suggestions from the staff, even way down, on a regular basis. But, to measure progress is indeed significant, also when it comes to so-called culture change issues, which may otherwise easily be perceived as too vague. To have primarily one or a few measurable things, and to get this/ these right is perhaps particularly important.
The concept of “stagility” (a hybrid framework). Discussed during the next section, stagility entails organizational design practices. Flexibility is of course central, but also a sense of stability - both stable and agile - hence the above word. It seems to be a matter of achieving both i.e., not a tradeoff. How?
The first victim might be to “stop the pendulum quote”, to avoid tilting too much one way, with a typical reaction tilting too much the other way. ABB under Percy Barnevik might be an example of “over-tilting”, by first dividing ABB into five thousand profit centers, for then later to centralize its focus into merely five major groups.
But accountability remains important, of course. To have clear decision-making authority goes with this. Thus, organizational redesign might be called for. A so-called Helix organization could be advocated, in contrast to the more typical matrix organizations. This implies no dotted lines, with clear capabilities and responsibilities for each manager, so that the value creation from each can result. Clarity rather than ambiguity.
Mobilizing and teams
In the end, nothing can substitute the making of smart choices. To focus on the best talents in one's organization is principal. Being smart is not the only expectation one might have to one's best talents. To have a resolute mind, i.e., never to give up, is another major feature of smartness. To define core roles where talents might be able to contribute the most value seems key. Successful CEOs are likely to be particularly good at this: To define clear roles, with precise tasks and to assign one’s best people to these jobs.
To have a purported “left tackle” individual at senior level, who might relieve the CEO from having to face-off stakeholder groups everywhere might be important. An effective CFO, for instance, might be able to do wonders relative to the financial analyst as well as the investor communities.
To find the best candidate but perhaps the more unusual to take over the top job when it comes to a CEO’s success is also pivotal. It is never automatic that a next-in-line executive be the best choice. What is perhaps more important for a CEO is to bring in good new talents whenever possible. To sum up the alignment of organizational challenge, it is a matter of focusing on one, or very few, cultural practices, where the CEO can make a personal difference, to organize in such a way that “stagility” is achieved, and to always concentrate on attracting the best talents and putting them to work where they might make the most good.
The top team is particularly central, of course. The team must work together! However, cooperation among group members is seldom and automatic. It may therefore be necessary for the CEO to make staffing changes so as to end up with more key people with a cooperative aptitude as well as attitude. For each member of a top team to have both aptitude and attitude seems particularly vital. A good CEO might have to make intervene, but will have to be quick but fair, of course. For team members to know what may be expected of them, as well as to understand the consequences of not falling into the expected mold, are decisive.
To stay connected while keeping distance is a reality many good CEOs might find it hard to live up to. And a strong CEO has not entered into a popularity contest. They may never wish to become too close to the rest of the organization, although do not want to be seen as aloof, of course. To build a network of particularly trusted advisors, a so-called “kitchen cabinet” might be useful. In the end, the team should be the star, not the individual. It is a matter of “we, we, we”, not “me, me, me”. What are core “we, we, we” norms for such teams? What are the main role dimensions for each member of such a team? How can decision making speed be achieved and maintained when teams are working at their best, in contrast to solo decision making?
For all to have a relatively good understanding of how major decisions should be made seems crucial. Good CEOs set their expectations clearly. Discipline is an important part of it. While meetings are typically needed, they must be focused ones, not allowed to drag out. To evaluate how well such meeting practices are followed may be especially useful for a CEO. In the end, it may be a matter of finding a good rhythm in the top management team, i.e., setting the tempo for how an organization is run and for the CEO to act in a way analogous to a conductor of a symphony orchestra. This also implies that the CEO cum conductor shall have the right to ask for discipline. The various members of a high performing symphony orchestra are all connected in an evident, disciplined way, each with definite roles. This is quite similar to what one might expect to find in a well performing organization. So it is a matter for the CEO to mobilize the senior leaders of his/her organization by ensuring that the composition of the leading members in this orchestra are the right ones, to make this orchestra then the star, and to maintain the proper rhythm in his/her role as the conductor.
Dealing with boards and helping directors to help the business
As a pre-ample, it should be clearly stated that the job of a board chair (or lead independent director) is to run the board. The job of the CEO, in contrast, is to run the organization. Thus, the key is to “help” the board chair run the board so that the directors can help the CEO run the business – but not to create “disruption”, unnecessarily “meddling” or “friction”. Essential is to “invite” the board members in, in a constructive way. For this there should be strong relationships between board members and the CEO, reflecting the unique capabilities of various board members and also attempting to enhance board meeting effectiveness.
A first condition is to build a foundation of trust, with wide transparency and direct links to management. To tap the individual wisdoms of board members is crucial. Roles of board members as well as management should be carefully delineated, for this to be positive. And for the board to attempt to continuously to renew itself is also important, including through educational retreats.
To instill a clear focus on the future may be the most critical of all. A forward-looking agenda should be promoted. For individual board members to also be members of other companies’ boards can only be good in this respect, as long as there is no conflict of interest of course. To tap the wisdom of elders, particularly regarding how they see future challenges and opportunities, is what it all comes down to.
In summary:
• “When in doubt, share”!
• A close relationship between the Chairperson and the CEO is advisable, again one built on trust.
• But since each individual director of a board counts, the trust needs to be bridged with each!
• To always focus, to be consistently prepared is perhaps the best advice to give a CEO to establish such trust.
• Another trust-building action is for the CEO to always let board members have access to members of the organization. To allow them to “track down” signals that the CEO has trust in his/her board members. Broad access to management seems therefore essential! This fosters transparency regarding what is “good” as well as “bad”, even “ugly”, and what is working and not.
• To be able to more explicitly delineate the main roles of the board might be required. What does the CEO expect? How might new board members be identified who might have desired profits, in line with this? In the end it may primarily be a question of what it could take to drive the business forward in a successful manner. And there may perhaps be educational remedies here.
• To exchange experiences with the members of other boards could be valuable.
• To attend courses to get a better perception of cutting-edge or outside trends might also be recommendable.
• And to be exposed to the norms for the functioning of good boards may be equally valuable.
• In the end, some degree of renewal of a board is almost always good. Board members’ performances might be evaluated, but how can such evaluations be objective? It is typically always sensitive, often hard, to remove individuals from a board who may have become dysfunctional. The problem is often that such individuals seldom “see” this themselves. Once more, a competent CEO might do wonders!
• A strong CEO might find support in well-defined board meeting practices. How can all board members contribute to a focus on the future, i.e., a forward-looking agenda? Fiduciary grilling is of course not enough. Strategy, organizational health and honing in on talents are perhaps even more crucial!
Dealing with shareholders
All stakeholders are of course essential for a CEO. He/she needs to build trust with them all, not only with main customers, but also with employees, investors, the government, and so on. Credibility, based on trust, is it! Perhaps a good starting point might be to try to find a clear sense of purpose for one’s organization. Why are we here? And then is the core of one’s business aligned with such a purpose? There are certainly risks here, based on adverse developments from environmental, social, and governmental factors, so-called ESG risks. A CEO might do well in closely monitoring such ESG risks. But he should speak up, take a stand, in those (hopefully) few instances when he/she might feel that things might be getting out of control, becoming totally unreasonable. Good CEOs can be expected to take clear stances when merited.
There are valuable heuristics that might guide a CEO when it comes to dealing with outside stakeholders, such as allowing him/herself to only spend a certain fraction of his/her time on such matters, and always in focused, efficient ways. And, to try to better understand why stakeholders may think in particular ways may be helpful. New ideas might even come from such outside stakeholders. In the end, it seems fundamental to aim to always be open, honest and consistent.
There will always be a “moment of truth”. While the authors provide quite a number of insights regarding how effective CEOs might cope with this, my own sense is that for a good CEO to be able to bring in revenue is particularly important. A close relationship with one’s customers is an absolute, i.e., to truly understand the customer base! To be able to react quickly when it comes to potential “derailing” factors here is, of course, also key, such as to create command centers, doing stress-testing, and so on.
Personal effectiveness
This brings us to the sixth and final section of the book, namely, to consider what might be the personal effectiveness mindset of a strong CEO. It is perhaps a matter of:
• Being both physically and psychologically fit!
• Discipline is key!
• Priority setting is central!
• To think about this issue as striving to reach a good work-life balance is perhaps not a good way to approach the challenge. To imply that there is a trade-off may not be it – both work and private life must be successfully coped with.
To keep a “tight” and “loose” calendar is recommended, i.e., to control the calendar but always be open to address new key challenges that might unexpectedly emerge, perhaps unforeseen opportunities above all. This is not a compartmentalized process, nor classical time management. Some compartmentalization might be good, however, particularly to avoid being sucked into or simply distracted by peripheral issues.
For a good CEO to infuse energy is paramount. The second law of thermo-dynamics applies here, i.e., to build so-called entropy. For this reviewer, to collect art and lean on his collection has provided such energy, but there are of course other ways: piano playing, mountain biking, walking long tours, etc. It is a matter of creating harmony.
To have a strong office staff is of course key. Personal assistants are essential, for supporting busy, successful CEOs in many ways. To rotate up and coming talents into such personal assistant roles might be a good solution. The CEO may not only gain more insights regarding a given person’s potential but could actually be able to offer valuable input.
It is important that the CEO always tries to act in a consistent way. If not, he/she might easily create confusion. His/her leadership style should however, be adapted to evolutionary forces regarding what the firm’s needs, and also reflect the CEO’s own intellectual growth. Perhaps particularly important, the CEO should always try to act in ways that inspire his/her organization to remain optimistic, with hope for the future. Even negative feedback should be cast in ways that might offer some “light” in the end of the tunnel; in other words, constructive criticism for improvement, the aim for making good even better.
The final chapter discusses what perhaps is the most critical side of a successful CEO of all, namely, to always stay humble, with no pride or arrogance getting in the way. Any self-centered focus should clearly be tempered. To have a servant’s attitude seems key, as is to stay grounded and to always listen. To display a sense of gratitude, hopefully genuinely felt, should be explicitly acknowledged. All of these “musts” would probably contribute towards creating energy in others.
There is a short conclusion to the book. Not surprisingly there do not seem to be many overriding generalizations that might be made when it comes to what constitutes truly effective CEOs. Three conclusions are stated: starting and finishing strong, prioritizing well, and being an insightful futurist. To this reviewer, these generalizations almost sound like platitudes. But perhaps we should accept that there may be few generic answers. The “final” advice that the authors provide for what might characterize exceptionally effective CEOs are, however, plausible indeed:
· Ethically accountable
· Diverse (in gender, race, ethnicity, class)
· Resistant
· Impactful
In the end, after having read this inspiring book with great interest, I must confess that the conclusions and final recommendations came across to me as somewhat of a letdown perhaps. But this is perhaps a reality we shall have to accept: There is probably no way to “crack” the secret of what makes a truly effective CEO in a matter of a few simple principles. We are indeed dealing with a truly complex issue – and this in itself, may be perhaps the most fundamental conclusion.
There are two final “bonuses” in this book. First there are 67 brief biographies of successful senior executives at the end of the book, with all having been referred to in the text itself. In addition to providing details of the firm that each of these are (or have been) working for, there are short sections on each person’s career highlights, his/her impact as a CEO, and some other key facts about the person’s merits, awards, etc. The second extra benefit are three separate worksheets for leaders to make use of in our own contexts, regarding “my mandate” as CEO, how I might be leading today and finally how I might prioritize improvement areas and related actions.
Summary
This book is a must read for any smart CEO, not just for how to cope with day-to-day events, but for the thriving to do well. To be an effective CEO in any of the world’s largest companies is perhaps among the most challenging roles in business. As one of the book’s endorsers say, “pearls of wisdom … a must read for everyone in the works of ideas and enterprises” (Makesh Ambani, Chairman of India’s Reliance Industries). This reviewer agrees, adding that it is a must read for any CEO, board member or anyone aspiring to such positions.
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