Mastering the Art of Leadership: Hard-Won Lessons from a Turnaround CEO
There are many theories about what it takes to be an effective Chief Executive Officer. Academics and consultants all have their own perspectives – and some are right on the money. But, much too often, their views are based on observation and research. They lack the hands-on, in the trenches experience of what it really takes to lead a company – especially one that is experiencing bad times and needs a new leadership model.
The biggest flaw that I have find when entering a company that is severely distressed and losing money is that the CEO whom I am replacing, usually a decent and hard working executive, has failed because he or she simply did not know how to be a CEO – did not understand basic practices and fundamentals.
I have worked for more than twenty years as a turnaround Chief Executive Officer for manufacturing and service companies like Evenflo and Ladish. This follows my fifteen-year career at Emerson Electric Co. where I advanced to the position of Division President. In this article, I describe some of the most important CEO practices that I have embraced. These are practices that worked for me in restructuring companies that were facing huge losses or were on the verge of bankruptcy. Imagine how effective these practices would be if followed by the CEOs of healthy businesses as well as the CEOs of at-risk companies.
“Focusing on the true definition of the Chief Executive Officer is central to illustrating the basis for sound leadership.”
1. Understand the True Meaning of CEO
Naturally born leaders are very rare. It takes hard work to learn how to lead in a productive manner. One must be a serious, passionate, and accessible student, to be able to develop into a truly capable leader. Focusing on the true definition of the Chief Executive Officer is central to illustrating the basis for sound leadership. Common dictionary descriptions may be simplistic, but they accurately define the position: Chief: The person with the most authority in an organization, who ultimately controls or commands all the others.
Executive: A person having administrative or supervisory authority in an organization with the power to put plans into effect.
Officer: One who holds an office of trust, authority, or command.
Numerous interpretations of this combination of terms exist today, and will surely evolve in the future. The “Chief” is commonly attributed to the highest in rank. However, it remains essential to remember that the most important term is “Executive”. The word execute is key for any successful leader. Virtually any business person can write a plan, but very few can implement and execute it. The ability to have a team carry out a focused plan is vital. To guide all to remain disciplined in the execution of an essential strategy can be extremely difficult. Providing clear-cut direction only grows more problematic, while facing competing forces, considerable distractions, and intense challenges.
The true meaning of the word “Officer” also has great significance, for any potential leader to bear in mind. A person appointed to this elevated position is “held in trust” with genuine fiduciary accountability. They are entrusted with the management of the property, with the power to act on behalf of the owners. Fiduciary is the most solemn of the responsibilities – take it seriously.
2. Learn To Whisper A Chief Executive Officer’s primary focus is people.
A CEO gets the job done by working through others. Subordinates will greatly appreciate a CEO who has the ability to command authority without condescension. Moreover, there is no room for hubris in the executive suite.
Some leaders believe a tormenting style can motivate, but the mistreatment of people will eventually lead to loss for all. At no time should a CEO bully employees. The news of having even one officer yelling at an employee will spread throughout any company. This browbeating style will negatively affect a productive culture. This will always reduce the CEO’s effectiveness. Employees, even high ranking officers, will become timid, wary, fearful, and suspicious. Many will wonder if they too, will be next to receive ugly treatment. Trust will be lost over time, which will erode attention, confidence, and efficiency.
An old General Electric Company training precept is one of the finest examples of advice passed on to me when I joined GE in my first job. “When you become a CEO remember that ‘people’ are your most important resource. Successful leaders motivate. Do not intimidate. Whisper to get results. Remain calm regardless of problems. They are viewed as having ‘high integrity and as distinctly competent’. Leadership is learned. Respect is earned.”
“To be successful, CEOs must “submerge” themselves into the lower levels of the organization to learn the status of the company’s vital issues – to get the facts.”
3. Interact With Employees at All Levels
Whether newly appointed or a ten-year veteran with the company, a CEO only knows 10% of what is actually going on in the company – particularly the key issues and problems. To be successful, Chief Executive Officers must “submerge” themselves into the lower levels of the organization to learn the status of the company’s vital issues – to get the facts.
Effective Chief Executive Officers are not office bound, not isolated from employees. It is important to be seen walking in the office hallways, the floors of the manufacturing plants and distribution facilities. People are curious about you – they think CEOs are different. I have experienced employees touching the sleeve of my shirt and remarking in an excited voice “I’ve never touched a CEO” – a humbling experience. Always remember how much influence you can have on people.
When walking around company facilities, be approachable. Today, many company dress codes are business casual. If there is a formal dress code, do not wear a suit coat – be more informal. Interact with the employees. Stop to answer questions. Stop to ask about what the employee is working on. Do not be aloof. You are the ultimate boss and people will be nervous around you. Display a likeable personality, a sense of humor – don’t be judged a stiff. Do not answer requests for improvements in work rules, bonuses or wages by saying “I’ll check and get back to you.” Be decisive and say no – if the ultimate answer is no – but explain why the answer is no.
“Sound leadership with expectations for above average results can motivate a team. Intense encouragement for quality will inspire all to work harder.”
4. Demand Excellence
It is perfectly acceptable for a CEO to demand excellent performance. Sound leadership with expectations for above average results can motivate a team. Intense encouragement for quality will inspire all to work harder.
This winning style can grow the capabilities within a company. Employees will stretch and can reach higher levels of performance than even they expected of themselves. Success foments self-confidence. It builds a gung ho team – roughly defined as “the enthusiastic and dedicated attitude of working together”.
Always use a constructive tone. Never intimidate anyone with bullying. Again, instead of raising your voice, remember to “whisper” in a productive manner.
5. Consider Failure
It is common sense to require that rigorous, in-depth and detailed analyses be completed prior to implementing priorities, initiatives and capital investments. Management wants to know what positive incremental profitability and free cash flow will result from executing the project or making an acquisition. But the analysis should also analyze the impact on the company if the initiative fails. If it is a capital expenditure, what will the affect be on the capital structure and the cash flow? If it is a new product introduction, what will the reaction be in the channel segment, with customers, and the advantage it gives competitors? If an acquisition, are we ready to handle integrating the new operation into existing operations? Does management have the time for an acquisition or will they be overwhelmed, because they have their hands full with other priorities? What are the short and long-term consequences on the existing businesses that may result by an overwhelmed management?
“Always remember the definition of Chief Executive Officer. You are the person with the highest rank in the company. You must implement and execute the strategic plan. And you have the fiduciary responsibility to do it correctly. Take your responsibilities seriously.”
Once a management team decides on its priorities, there is a tendency for a project to “get a life of its own”. In other words, to not objectively consider killing the project once work has started on it. To not sit back and reconsider proceeding. While the probability is low that a priority should not be implemented, it is a practical consideration to periodically judge its viability.
6. Foster Communication
Well-run companies function with candid cross-functional communication. It is essential for the new Chief Executive Officer to maintain fluid, open exchanges of information. Meetings should include everyone involved with the initiative, issue, or problem including knowledgeable employees from the third and fourth tiers of the company as well as second tier officers. For example, do not invite only the vice president of sales and his team, while investigating a problem with sales. Include marketing, manufacturing, supply chain, product and accounting in the meeting, because each of these functions affect sales – even tangentially.
Cross-functional communication gives a balanced examination of issues. Each function has a different perspective and information on the subject. This will qualify and eliminate the tendency to “pass the buck” to another function or department, because all functions related to the issue are in the meeting. More effective and constructive solutions will be generated and a strong team mentality will be created.
I have discovered that cross-functional communication is almost always lacking in distressed companies, because it takes the direction, energy, and patience of management to maintain it. “Silo management with top-down decision making” is considerably easier for a CEO to use. But this weaker method, always results in a failing business. Mistakes are easily hidden and slowly multiply because of the absence of sharing information. When internal functions do not discuss vital issues, a business gradually becomes uncoordinated. It produces negative surprises. Successful companies are never surprised.
I always encourage people to meet face-to-face to develop healthy communication. Avoid being dependent upon telephones or video conferencing. Judging performance and initiatives is best evaluated first hand, in the same room with the people orchestrating the endeavor. Seeing body language, facial expressions, and sensing a person’s passion, provides signals often missed when using various advanced technologies.
7. Empower The Team
Ownership of the strategic plan to fix or run a company must be held by the people on all the organization levels, who contribute to creating the plan and are crucial to its being implemented. It cannot be only the CEO’s action plan. It will never get implemented. Do not legislate the strategies and tactics. Do not dominate the process. Persuade your subordinates and remember to listen to their input.
In the end, although, it is important to have “consensus and ownership” of decisions by the officers and managers, the Chief Executive Officer is the final decision maker. Do not abdicate the role. Do not decide based on “since we all agree”. If, as CEO you do not agree, do not approve a group decision. This may include deciding on an alternative solution and not implementing the consensus’ solution. While I joke with the team that “we’re all equal, but I have the only vote”, this is in fact accurate.
In conclusion, always remember the definition of Chief Executive Officer. You are the person with the highest rank in the company. You must implement and execute the strategic plan. And you have the fiduciary responsibility to do it correctly. Take your responsibilities seriously.
Being a CEO is a position of great power and esteem. But it is not an easy one. I think you will find, though, that if you follow the steps outlined above, you will thrive in your work and the company you lead will thrive as well.
About the Author
Since 1991, Robert F. Amter has served as a Chief Executive Officer and Advisor to distressed manufacturing companies on behalf of such clients as Bank of New York, GE Capital, and Morgan Stanley. His CEO assignments have included Evenflo Company and Ladish Co. Prior to 1991, Amter worked at Emerson Electric Co. for fifteen years, advancing to Division President. Robert Amter, who received his MBA from New York University, is currently completing a book about the role of the CEO. You can learn more at www.robertamter.com.