Why most CXOs never make it to CEO unless they use 5-STAR business networks, or ideas similar to it?
It is usually the case that for every open position of a CEO, by
default, there are between 5-10 internal candidates, in addition to all the potential external hires. While many of them may not have the most serious intention or calibre, there are still enough contenders to make each race interesting.
Is this scenario familiar to you?
Let us look at an example: Kevin (disguised example) was a brilliant finance executive. After a few years working in an accountancy practice, he joined an in-house finance department and steadily rose in rank over the years to become its Chief Finance Officer. The board trusted his numbers as well as his prudent judgment.
Yet, when for the third time in five years Kevin was overlooked for promotion to the CEO role, he shared his frustration with me. He had worked his way up to the board, and known each and every member, even the new ones, well enough to be regarded as a reliable ‘colleague’.
They knew that he would not mind taking on the challenge and were also aware that two of their last three choices did not turn out to be that brilliant.
Yet they were reluctant to hand over the mantle to him. He had already proven his case by his excellent leadership of the finance function as well as his strategic thought process.
What else did he need to do to prove to the board the most obvious thing – that they were ignoring the best candidate for the job.
We started discussing perceptions and his indispensability as the CFO, but soon we found ourselves drawing figures on paper napkins. It was clear that he had a great coverage of the entire length and breadth of the finance function as we went through the pyramid that later turned into Figure 1 below.
Whether it was funding, budgeting, financial control or treasury management, he had made his mark on the business. He was proud that the auditors, investment bankers as well as commercial bankers all complimented his accomplishments.
Despite knowing all this, the board would not give him the final nod. As the discussion meandered from the finance function to the CEO’s role, another figure on the paper napkin illustrated the conundrum. This figure was later turned into Figure 2 below after a few revisions.
As I discussed my experience from shipboard command that most captains had to rely a lot on the chief engineer and hence seemed to favour chief engineers over chief officers.
After all, most captains were fully capable of being chief officers if they ever had to. Moreover, despite all their engineering knowledge, most captains could never replicate the knowledge base of a chief engineer.
Successful captains were those who seemed to get the best co-operation from the chief engineers and knew how to get it.
A modern organisation is made up of specialists
A modern organisation is far more complex than a shipboard company. Reporting to a CEO is a complement of 5-10 people and each of them is a potential candidate for the role.
It appeared in Kevin’s case that, whether by design or not, the board preferred an executive for the CEO role who could integrate the gaps between the various points of views and get the best performance out of the entire team.
While each contender with a real chance is already good at the functional area they come from – whether it is sales, marketing, finance or operations – the one that can coordinate the entire team and engineer a unique shared vision of the future that the board can buy into generally get the nod.
Inevitably there are gaps between different functional areas, parts of which could be outsourced to third parties. Integrating these external parties into the organisation’s fabric in such a way that they start sharing organisation’s vision as responsible parts of the team is even more difficult.
In my view Chief Executives of the future will distinguish themselves on this capability – to integrate useful outsiders into the organisation’s fabric, to outsource strategically, to build a business network of mutually dependent entities and to get this network working in unison towards the shared vision.
CEOs integrate the specialists into a team of internal and external experts
As the significance of manoeuvering external parties within a business network increases, outsourcing is now among the hottest topics for every Board of Directors, every CEO and CXO. Knowing when to outsource, and how to do it well will distinguish the CEOs of the future. In some shape or form, this requirement has already shown up in the selection criteria of most selection committees, and it will become increasingly explicit and important in the coming years. That is the strategic thrust underpinning this book.
I ask the reader to use the concepts, materials, models and ideas presented as guidelines. As in all other situations, blind adherence to diktats or empty slogans (such as think global, act local) is neither practical nor beneficial. Take what makes sense in your situation, mould it to your circumstance and use it. For this reason, the readers will benefit from coming back to this book again and again - rather unlike most modern business books which present a single idea with a lot of anecdotes, statistics and examples.