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Book summary of CEO Excellence by McKinsey & Company Senior Partners

Six Mindsets That Distinguish the Best Leaders From the Rest

carolyn-dewar-ceo-excellence-book


In the past two decades 30% of Fortune 500 CEOs have lasted less than 3 years, with 2 out of 5 new CEOs failing in their first 18 months on the job. - Centre of Creative Leadership research


What stops a CEO being mediocre?

And what are the methods and mindsets of the world’s best CEOs?

Three McKinsey & Company’s senior partners set out to find out for their new book, CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest.

The McKinsey trio Carolyn Dewar, Scott Keller, and Vikram Malhotra conducted detailed interviews with a representative sample of 67 high-performing CEOs and paired it with McKinsey’s data on 7,800 CEOs from 3,500 public companies across 70 countries and 24 industries. In this article, and also in our book club interview with McKinsey senior partner Carolyn Dewar for Leadership Pass members, we summarise chapter by chapter the entire book CEO Excellence:The Six Mindsets That Distinguish the Best Leaders from the Rest.


Introduction


The role is getting harder


The role of CEO is getting harder. As a result, the probability that a CEO will crash and burn is now higher than ever. This is due to:

·       Accelerating pace of digital transformation.

·       Workforce retraining, and cybersecurity that comes with it.

·       Paying more attention to their employees health and wellbeing, racial diversity, and feelings of inclusion.

·       Concerns around sustainability, the public desire for more purpose-driven organisations

·       Calls for CEOs to be spokespeople on broad societal issues.

·       More public scrutiny and activism driven by social media.


It’s also a lonely job. General Motors chief executive Mary Barra told the authors:


“Becoming a CEO is unexpectedly lonely. I’ve always had regular dialogue with whoever my leader was, and all of a sudden, you don’t have a leader to go to.”


The best in the world


"45% of what can drive results falls into the hands of one person: the CEO" - Chris Bradley et al, Strategy Beyond the Hockey Stick, 2018


This book is a 'masterclass' with the best CEOs in the world. The 67 CEOs interviewed for around three hours each by McKinsey partners include Mastercard former CEO Ajay Banga, Shiseido CEO Masahiko Uotani, former Telstra CEO David Thodey, Adidas CEO Kasper Rorsted, Alphabet CEO Sundar Pichai, Microsoft CEO Satya Nadella, Adobe CEO Shantanu Narayen, Publicis CEO Maurice Levy, former Lego CEO Jorgen Vig Knudstorp, former Westpac CEO Gail Kelly, and Netflix co-CEO Reed Hastings, CEO of JPMorgan Chase Jaime Dimon, and General Motors CEO Mary Barra.

 

What separates the best CEOs from the rest?


Six key responsibilities of CEOs emerged:

  • setting the direction,
  • aligning the organisation,
  • mobilising through leaders,
  • engaging the board,
  • connecting with stakeholders
  • and managing personal effectiveness.

The book attempts to teach CEOs what they actually need to do to succeed in the role. CEOs won’t excel in every aspect of the role, rather they are excellent in some areas and do a solid if not exemplary job in the others.


“We concluded there is no clear pattern. The key takeaway was that despite their different approaches, every CEO at every stage of their tenure meaningfully tended to all six responsibilities.”


The contradictions of the role


3 things struck the authors more deeply than they’d imagined:

·       How unique the role really is.

·       The number of contradictions a CEO faces.

·       The sheer amount of work involved in doing the job well.


CEO of Paris-based global automotive supplier Valeo, Jacques Aschenbroich, told the authors, “The CEO role is the intersection of all contradictions.”


For example, CEOs are tasked with:

·       Delivering short-term results versus investing in long-term performance.

·       Taking time to gather facts and do analyses versus moving fast to capture opportunities.

·       Respecting the past and creating continuity versus disrupting the future.

·       Maximising value for shareholders versus delivering impact for other stakeholders.

·       Having confidence to make tough calls versus having humility to ask for and receive feedback.

So, read on to discover the mindsets that help CEOs grapple with these contradictions.


Direction-Setting Mindset

Be Bold.


The best CEOs embrace uncertainty with a view that fortune favours the bold.


“They’re less a ‘taker’ of their fate and more of a ‘shaper’ – constantly looking for and acting on opportunities that bend the curve of history.”


Chapter 1. Vision Practice. Reframe the Game.


With their vision statements, the most successful CEOs didn’t just raise aspiration levels, they changed the definition of success.

  • Ajay Banga of Mastercard changed ‘Win in payments’ to ‘Kill cash’.
  • Herbert Hainer of Adidas changed ‘Outgrow our Competition’ to ‘Help athletes perform better than their competition.’
  • Mary Barra of GM changed ‘Win in the global auto industry’ to ‘Win by transforming transportation.’
  • Masahiko Uotani of Shiseido changed ‘Create a Japanese beauty products icon’ to ‘Create iconic global beauty brands with Japanese heritage.’

Find and amplify intersections

The best CEOs build their vision by looking for where various aspects of their business and the market intersect. Best Buy former CEO Hubert Joly explains that setting the right course is, “at the intersection of four circles: what the world needs, what you are good at, what you are passionate about, and how you can make money.”


Make it about more than money

None of the successful companies focused on achieving financial outcomes – profits were an outcome of achieving their vision.

Oliver Bate, CEO of the world’s largest insurance company, Allianz, explains why:

“Nobody gets galvanised by ‘I need to double net profit’.”

It’s worth noting most successful CEOs use the terms vision, mission, and company purpose as largely interchangeable.


Look back to look forward

The best CEOs often dig back into a company’s history to find out what originally made it successful and then take that central idea and expand it in ways that open up new opportunities.


Intuit former CEO Brad Smith’s advice to new CEOs is to have "a vision that is so clear a leader doesn’t have to do anything but get out of the way. That’s the most inspiring vision of all.” (Quote from Kantola video)


And McKinsey & Company former managing partner Dominic Barton says:

“As the leader, you have the power – and the responsibility to raise the level of ambition in your organisation.”


Involve a broad group of leaders

“People support what they help create,” says Medtronic’s Bill George. In fact, people are five times more supportive than those who are not involved.

Best Buy’s Hubert Joly reinforces that point:


“Of course, you have to create a plan, but you have to co-create it. It doesn’t need to be perfect – the key is to create energy and manage energy.”


What matters is a clear and simply articulated North Star.


Free Download: 10 Leadership Qualities That Will Help Solve Challenges in 2022


Chapter 2. Strategy Practice. Make big moves early and often.


The ‘be bold’ mindset applies not just to vision, but to the strategies employed in pursuit of it. The best CEOs boldly make big strategic moves early and often during their tenure.


McKinsey’s analysis of nearly 4000 companies over 15 years discovered 5 strategic moves matter most (as long as they’re pursued with a ‘man on the moon’ kind of boldness).

1.     Buy and Sell. The best CEOs execute at least one deal per year on average.

2.     Invest. When capital is spent wisely it can enable a company to expand faster than its industry.

3.     Improve Productivity. The most successful companies reduce administrative, sales, and labour costs more deeply than others, and in so doing achieve 25% more productivity improvement than their industry median over a 10-year period.

4.     Differentiate. The best CEOs improve their business models and create pricing advantages in ways that are big enough to change a company’s trajectory.

5.     Allocate. Resource reallocation among business units to where it does the most good.

Research shows making two of these big moves more than doubles the likelihood of rising from the middle of the pack to the top and executing three or more makes such a rise six times more likely!

Being bold and right is far easier said than done, but the best CEOs show courage to act in the face of uncertainty.


“The best CEOs aren’t only willing to venture into unchartered waters – they’re also willing to boldly stay the course on stormy seas.”


Be an exceptional futurist

All of the excellent CEOs the authors spoke to had lucid views on what the future would bring. So much so, they appeared to ‘see around corners’. This means keeping careful track of shifts in technology, changes in customer preferences, new competitors, and threats on the horizon.


DSM’s Feike Sijbesma says:

“I started reading more about all kinds of subjects, including unrelated subjects, to combine the unrelated things into something new – not only in technical innovation but also in business.

“I also started traveling a lot and building a network, connecting with a lot of people in business, science, and society.”


Lego’s Jorgen Vig Knudstorp famously attended a six-day conference with adult Lego fans. He had conversations with 500-600 people.

The best CEOs then hardwire their view of the future into their company’s strategic planning.


Keep an eye on the downside

Excellent CEOs understand the risk/reward trade-offs of potential big moves and study to downside scenario. Having imperfect information when making decisions is common, so a decision tree may need to be employed.


Former CEO of automotive parts maker Rod O’Neal said one cause of their success were the things they didn’t do. He methodically worked through the consequences using a decision tree.


“What would be the second-, third -, fourth-, fifth-, sixth-, and seventh-order consequences?

“If we came across one that, no matter how remote it was, we couldn’t survive if it showed up, we made another decision.” 


Former CEO of Danaher and GM Larry Culp says he applied three hurdles (always in this order) for making an acquisition:

1.     We’ve got to like the space and the company.

2.     We’ve got to be able to add value.

3.     The math of the deal has to work.


Act like an owner

Valeo’s Jacques Aschenbroich says he thinks like an owner to secure the long term fate of the company.


“If I want to improve results tomorrow, it’s very easy. I control R&D; I control capex. It will be fantastic, but we’ll be dead in a few years.

“I don’t think you are a true CEO if you don’t think long-term.”


Regularly apply ‘heart paddles’

McKinsey & Company’s Dominic Barton says no-one likes to change, so you need to create a rhythm of change. The best CEOs think of making big moves as a series of S-curves driving change over time.


“Think of it as applying ‘heart paddles’ to the organisation.”


The authors of CEO Excellence say they are often called on to counsel CEOs who start strong by making a series of bold moves but a few years into their tenure experience waning motivation and increasingly static performance.


“These CEOs got the memo on ‘make big moves early’ but not the one that added, ‘and often.’”


Chapter 3. Resource Allocation Practice. Act like an outsider.


83% of CEOs identify capital allocation as a key lever for growth – citing it as even more important than operational excellence or M&A. (McKinsey)


Top CEOs shift around large amounts of capital and they do it far more often than average performers.


“Resource allocation is one of the most important things.,” - Adidas’s Kasper Rorsted.


Start with a zero base

Most companies start with last year’s budget or some other form of historical baseline (‘the anchor’), but what if the anchor is replaced by zero?


GM CEO Mary Barra takes a zero-based approach to capital allocation. When doing strategic reviews she engages in deep analysis and has tough conversations with her executives along the lines of:

Is there a different business model we can use? Can we source product from somewhere else? Or do we need to exit the market? Would you put your own money into it?


Solve for the whole

Allianz’s Oliver Bate suggest an analogy of the Mercedes-Benz team in Formula 1. You have Lewis Hamilton (i.e.. heads of the business units) and you have Mercedes (i.e.. role of the central functions).

Hamilton (the business head) tells Mercedes (the central functions) what is needed to win the race, and they’ll bring it to him.


Manage by milestones (not annual budgets)

“Never let an annual budget get in the way of making good business decisions.” – Jamie Dimon, CEO of JPMorgan Chase.

The best CEOs use performance milestones. They release additional tranches of investment only when there is strong evidence that previous tranches are yielding results.


Kill as much as you create

Resource allocation comprises seeding, nurturing, pruning, and harvesting. The best CEOs nurture and prune their business nearly three times more often than the rest.

Many leaders set up rituals to ensure the difficult act of pruning becomes a way of life. Alphabet’s Sundar Pichar says his mentor Bill Campbell used to ask him every Monday: “What ties did you break last week?” 


Organisation Alignment Mindset

Treat the Soft Stuff as the Hard Stuff


Change is rarely an intellectual problem, it’s an emotional one.

The ‘soft stuff’ – issues related to people and culture – account for the vast majority (72%) of the barriers to success. (Keller & Schaninger, 2019, Beyond Performance 2.0)

The best CEOs acknowledge the soft stuff is hard, but they treat the soft stuff as the hard stuff.


Chapter 4: Culture Practice. Find the one thing.


Mastercard’s Ajay Banga reinforces the importance of the company’s ‘Decency Quotient’ (DQ). Ana Botin, who oversees 200,000 employees at Banco Santander, drives home her company’s cultural mantra ‘Simple, Personal, Fair.’

The best CEOs home in on “the one thing” culturally that will make the biggest difference to business performance. 

Microsoft’s Satya Nadella decided to adopt a ‘growth mindset’ as the company mantra after broad input from his team. (Helpful further reading: 18 STEPS TO RENOVATE YOUR WORKPLACE CULTURE)


4 primary influencers shape an employee’s work environment:

·       It’s the stories told and the questions that are asked.

·       It’s the formal mechanisms that govern how work gets done (structure, processes, systems, incentives).

·       It’s the role modelling employees observe (from the CEO, senior team, etc).

·       It’s the extent to which people have confidence in their ability to behave in desired ways.


Make it personal

Role modelling by the CEO matters. To embed a cultural focus on design thinking and experimentation at Intuit, Brad Smith said he began to talk about mistakes he’d made very publicly.


“We had to shift our mindsets to treat success and failure the same way.

“I began to publish my performance reviews on the glass window of my office.”


Make it meaningful

Small gestures can have a meaningful impact. One CEO took an old branding poster off the wall and threw it away. Stories of these actions spread quickly, carrying powerful cultural messages with them. 

Similarly, phrases can be highly memorable. With his new mantra of 'growth mindset' for the company, Satya Nadella implored Microsoft employees to shift from being ‘know-it-alls’ to ‘learn-it-alls.’


Measure what matters

Excellent CEOs look for ways to measure cultural change. Caterpillar former CEO Jim Owens uses a survey-based approach to measure culture on a regular basis.


“How do you expect employees to help you deliver on your goals and move you toward your vision if they don’t understand what that vision is?... If they don’t feel their manager lives those values day in and day out?”


Getting the culture right is the first leg of a three-legged stool used to support an organisation’s delivery of a vision and strategy. The next is Organisation Design.


Chapter 5: Organisation Design Practice. Solve for ‘stagility’.


Organisations that have both stable and agile elements are:

·       Three times more likely to be high-performing than those that are agile but lack stable operating disciplines.

·       More than four times more likely to be high-performing that those that are stable, but lack agile elements.

Hence, the need for ‘stagility’ – methodically enabling agility anchored by a strong organisational backbone.


Stop the pendulum swing

When a CEO sees an organisation tilted one way, there’s a temptation to tilt the opposite way. However, the best CEOs rarely make radical swings from one extreme to the other.


Emphasise accountability

The best CEOs are relentless in clarifying where ultimate accountability rests. One highly matrixed organisation discovered 22 people had signed off on a project that went over budget and failed to deliver the needed outcome. The company was restructured so no more than three people would be responsible and accountable for most future decisions.


Think helix not matrix

Top CEOs don’t think in terms of a matrix. The CEO Excellence authors say a more apt representation is a helix (the double-stranded shape of DNA). In a helix organisation it’s not a ‘dual hard line’ or a ‘dotted line’ reporting structure. Rather it’s a ‘split hard line’ where an employee reports to two different leaders for two different purposes.

Westpac’s Gail Kelly made a bold structural change at the bank. She kept her products as a centre of excellence but put the power of the balance sheet into the distribution channels.


Make ‘smart’ choices

Explicitly making choices as to what will be stable and what will be agile is the key to breaking the otherwise predictable cycle of going through large-scale redesigns every couple of years.

Adidas’s Herbert Hainer:


“Before, we’d been a tanker with 10,000 people on it. If you wanted to turn around, it took 500 miles. Now our fleet includes speedboats.”


Agile organisation elements might include:

·       Using ‘team of teams’ approaches that delegate authority to numerous teams.

·       Creating resource pools that ‘flow to work’ based on where they can create the most value.

·       Applying agile methodologies: rapidly iterating products and services by launching a minimum viable product then getting multiple rounds of customer feedback.


Chapter 6: Talent Management Practice. (Don’t) put people first.


All top CEOs approached the topic of talent with a notably high level of rigor and discipline that enabled them to focus their personal time and energy on the highest impact areas of talent management.


Clearly define high value roles

Once the most valuable roles are identified the best CEOs make sure that each is well defined, with a clear description of what work needs to get done and a list of the necessary skills and attributes to succeed.

The best CEOs also have a short list of ‘must have’ characteristics they see as important for all leaders. For Gail Kelly at Westpac it was ‘enthusiasm, smarts, flexibility, and results orientation, coupled with clear alignment with the company values’.


Don’t forget your ‘left tackles’

An American football team, the star left tack is the most valuable player after the quarterback because they protect the quarterback from getting sacked or even injured by those he can’t see.

For example, IDB’s Lilach Asher-Topilsky says it’s very important to have the best CFO that you can get.


“They can take so much of the day-to-day off your shoulders. They become your right-hand person. People sometimes don’t understand the importance of a good CFO.”


Find the unusual suspects

The best CEOs typically see to it that their top roles are filled with best fit, and that multiple diversity lenses are applied.


“Yes, this means that a CEO’s direct reports aren’t necessarily give the freedom to choose their own teams.”


They are also constantly taking in information to uncover who are the potential stars (and to uncover strugglers). 


Build the bench

Excellent CEOs put real time and energy into coaching, retaining talent, managing performance, and planning for succession for the most valuable roles.


 “How do we get them the exposure and growth they need to get from point A to point B?” – Piyush Gupta, DBS


Mobilising Leaders Mindset.

Solve for the team’s psychology.


The best CEOs think less about what the team does together and more about how the team works together.


Chapter 7: Team composition practice. Create an ecosystem.


A group of high performers only becomes truly high performing if its members are complementary and connected to one another, not simply working side-by-side.


Staff for aptitude and attidude

The right conversation about who should be on the team starts with roles, not people. What kind of senior team will move the company forward? What attributes and attitudes aren’t negotiable?

When picking leaders, Alphabet’s Sundar Pichai has grown to value empathy.


“To run an organisation today at the scale of Google – with its internal and external engagement demands – requires high levels of interpersonal sophistication.”


Act fast but fair

Before removing someone, the best CEOs make sure they’ve asked:

·       Does the team member know exactly what’s expected of them?

·       Have they been given the needed tools and resources, and a chance to build the necessary skills and confidence to use them effectively?

·       Are they surrounded by others who are aligned on a common direction and who display the desired mindsets and behaviours?

·       Is it clear what the consequences are if they don’t get on board and deliver?


Stay connected while keeping distance

To ensure team members become and stay A players, the CEO plays a hands-on role with each individual.

Westpac’s Gail Kelly said she rang all her team at least once a week for a chat.


“My job was to make people be the best that they can be. To do that I needed to know them, to understand their vulnerabilities, their weaknesses, and what they were worrying about.”


Adidas’s Kasper Rorsted says he wants to be friendly at work, but he doesn’t want to make friends.


Build a coalition beyond the immediate team

Building a broader leadership coalition not only gives CEOs more leverage in driving the organisation forward, but it also puts pressure on the top team members who much respond to the leaders below them whom the CEO has trained to have the same vision about the direction of the company.

The best CEOs look for leaders who want and have the skills to build an all-star team.

(Helpful further reading: WHAT IS LEADERSHIP DEVELOPMENT & WHY SHOULD YOU CARE?)


Chapter 8: Teamwork Practice. Make the team the star. 


Only 6% of top HR executives agree with the statement ‘Our executive team operates as a well-integrated team.’

It’s very hard to get a team of professionals working well together. People feel pressure to conform to the group yet the power or the group comes from leveraging the individuality of its members. As well, a team leader must ask success-oriented people to risk failure.

So there are methods CEOs use to build high-performing teams.

(Helpful further reading: THE 5 DYSFUNCTIONS OF A TEAM AND HOW THEY KILL YOUR CULTURE)


Do work that only the team can do

The best CEOs make sure that only needle-moving work items are on the agenda.

As Ecolab’s Doug Baker says:

“My role is making sure the top team does the big things really well. Our job is to focus on what can make the company successful and what can kill us. All the rest is email.”


Define the ‘first team’ norms

It’s imperative to establish the mindset that the top team is every member’s ‘first team’. This means that everyone is expected to put the company’s needs ahead of those on the business unit’s or function’s.

Many CEOs have a catchphrase to capture the essence of the first team mindset. Marillyn Hewson describes this ethos as being part of ‘One Lockheed Martin’, Sony’s Kazuo Hirai rallied his troops around ‘One Sony’ and Jim Owens emphasises ‘Team Caterpillar’.


Combine data, dialogue, and speed

Intuit’s Brad Smith describes his method to ensure decisions were data-driven:


“One of the mottos at Intuit is, ‘Because of (blank), I believe we should do (blank)’. If it’s not based in evidence, it’s an opinion, and we discount it.”


On speed, ICICI’s KV Kamath created a 90-day rule.


“If we do anything, we do it in 90 days or less, or we don’t do it at all.”


And, at DBS, Piyush Gupta creates a MOJO at team meetings to ensure productivity. The MO is the Meeting Owner and the JO is the Joyful Observer, whose role is to the critique the meeting.


Invest in team building

The best CEOs combine a series of facilitated off-sites, team and individual coaching, and reflective exercises to improve teamwork.

McKinsey research has unpacked 3 key dimensions of great teamwork:

·       Alignment on direction – a shared belief about what the company is striving towards and the role of the team in getting there.

·       High-quality interaction, characterised by trust, open communication, and a willingness to embrace conflict.

·       Strong sense of renewal, meaning an environment in which team members become energised because they feel they can take risks, innovate, and learn from outside ideas.


Chapter 9: Operating Rhythm Practice. Get into a groove.


When a CEO creates a clear and effective operating rhythm, every member of the top team can synch the rhythm of their specific area with that of the company as a whole.


Set the template and tempo

A regular rhythm of reviews keeps issues from escalating. As one CEO says, by engaging consistently and substantively the leader is seen as being helpful rather than ‘playing gotcha!’. 

Mary Barra of GM says:

“I ask my team, ‘When is the best time to solve a problem?’ I always say ‘The minute you know you have one.’ Problems don’t get smaller on their own.”


Beyond the weekly meeting, most great CEOs conduct a more formal monthly senior team meeting. At Lockheed Martin such meetings were a full day, but many CEOs reserve a full-day and dinner for a quarterly meeting. As well, there is an annual multi-day offsite for the top team.


Connect the dots

If the CEO is not making the gears mesh together, dysfunctions quickly become hardwired.


Conduct the orchestra

U.S. Bancorp’s Richard Davis says a good CEO will sit back and be the conductor and enjoy the music themselves, “and not get so caught up in how they look or whether it’s going well, but just love it.”


Demand disciplined execution

The best CEOs ensure if anything is out of tune, they act on it. For the best CEOs a disciplined approach starts with having the right information beyond the high-level financials. The best CEOs also ensure that granular data is comparable across the organisation’s various units. And, they demand discipline in how meetings are conducted.


Board Engagement Mindset

Help Directors Help the Business.

Directors are at the pinnacle of governance – the CEO’s boss.

“All of a sudden you’ve got 13 versions of a boss.” – Ecolab’s Doug Baker

The best CEOs have a mindset that eschews ‘my role is to help the board fulfill its fiduciary duties’ in favour of ‘my role is to help directors help the business’.


Board relationships practice. Build a foundation of trust. 


The best CEOs build trust early so they have the flexibility to make bold moves that improve performance, which in turn deepens trust.


Choose radical transparency

“When in doubt, share.” – GE’s Larry Culp


Strengthen the CEO/Board Chair Relationship

Westpac’s Gail Kelly says the role of the CEO is to make the board members’ jobs easier, not more difficult. It starts with forming a great relationship with the chairman.


“I always saw it as my job to make sure the relationship’s great, not the chairman’s job.”


David Thodey took over as CEO of Telstra in 2014 and met with the lead director on a weekly basis to keep her informed on a new initiative.

“Trust is not about charisma or friendship. Trust is based on delivery,” he says.


Reach out to individual directors

The best CEOs invest in building relationships with all the other board members, not just the chair or lead director. It builds trust and transparency, says Aon’s Greg Case.


Expose the board to management

The executive team typically plays an active role in board meetings. In preparation, the best CEOs spend real time coaching their people to succeed in front of the board. Another approach is to have management and the board do site visits together.


Chapter 11: Board Capabilities Practice. Tap the wisdom of elders.


The best CEOs proactively work to ensure their boards collectively have the knowledge and judgment to help their corporations flourish.


Delineate the roles

CEOs and their teams are often touchy about what they see as interference by directors. Weighty boards with years of experience are used to getting their way and are frequently frustrated because their advice is ignored. Both scenarios lead to a loss of trust.

The best CEOs work with their boards to defuse tensions at the outset. Methods include clearly defining the board’s role and establishing well-understood boundaries.


Specify the desired profile

One tool to facilitate getting the right directors in place is a board matrix.

Brad Smith says Intuit adopted a capability matrix listing out the skills and domains needed on the board to deliver the strategy – with the directors’ names listed below. Each director self-assessed whether they brought that skill or experience.

CEOs without formal boards are often well advised to put together an outside advisory board.


Educate the group

Research shows only 10% of board members feel they have a solid understanding of the dynamics of the industries in which their companies operate, and only 21% feel they fully understand how their business creates value. (McKinsey)

While boards need to spend time educating themselves, excellent CEOs shape what this education should look like, and help the board add value to the business.


Encourage renewal

Top CEOs encourage the chair to regularly evaluate board performance, often using an outside consultant. Best Buy’s Hubert Joly explains:

“My first reaction was, as a recovering arrogant leader, ‘Who are these people? The company was performing great, we should be saying thank you and congratulations to each other.”


He said it took him a few weeks to realise he wasn’t getting feedback but ‘feedforward’ – things to be even better in the future.


Chapter 12: Board Meetings Practice. Focus on the future.


The best CEOs ensure that time spent in the boardroom doesn’t become consumed with, as DBS’s Piyush Gupta puts it, “The board being a policeman on top of the business.”

Instead they consider the board meetings an opportunity to tap into the wisdom of a smart group of people with similar interests. Some of their methods to do so are below.


Start with a private session  

DuPont’s Ed Breen says he tells all new CEOs he talks with to take the first hour of the board meeting in executive session with just you and the board. No other internal members of the company should be present.

The private session should be radically transparent. Some CEOs share what’s going on regularly to give the board information in advance.


Promote a forward-looking agenda

After the opening private session, the best CEOs ensure the rest of the board agenda includes forward-looking topics in addition to fiduciary ones. The best CEOs work with the board to create a strategic framework that creates consistency across meetings.

And, it’s a clear best practice to state up front what management is looking for from the board.


Walk in board members’ shoes

For a CEO, there’s no better way to understand what it means to be a board member than to become a director at another company. It reveals how another firm is run, and CEOs can see what it looks like from the other side.


Let the board run itself

CEOs are well advised to keep at arm’s length as much as possible.

U.S. Bancorp’s Richard Davis emphatically explains, “Never, ever, ever meddle with your board’s process.” He says it’s never smart for the CEO to get in the middle of anything because later on the board might decide you’d showed bias or favouritism. 


Stakeholder Connection Mindset. Start with ‘Why?’


Excellent CEOs create strong bonds with the outside world that help the business prosper in the long run.

As Microsoft’s Satya Nadella says in the book:

“The job is all about customers; it’s all about partners; it’s all about your employees, your investors, governments. It’s all about all of them, all the time.”


Chapter 13: Social Purpose Practice. Impact the Big Picture


Research shows humans draw from five sources of purpose and motivation to find meaning at work:

·       Themselves – their development, their financial and non-financial rewards, and their freedom to act.

·       Fellow employees – feeling a sense of belonging, caring for one another, and doing the right thing for the group.

·       The company – achieving industry leadership through creating best practices and beating the competition.

·       The customer – making life easier and better for them by providing a superior service or product.

·       Society – making the world a better place.

It’s fairly evenly divided when you tally up which employees will be motivated by each driver. So a fifth will find colleagues their primary source of energy at work, but a different fifth will be motivated by helping the customer, and so on…

.

Clarify the societal ‘Why?’

The best CEOs instil a sense of social purpose in their organisations. Some find a social intent in their company’s origin story that they can elevate.

A litmus test is whether it has emotional impact and whether it makes rational sense.


Embed purpose into the core

The best CEOs embed their social purpose into the core operation of their businesses, thereby minimising the tension between the two. They test their strategy, products and services, supply chain, performance metrics, and incentive to make sure they mesh with their purpose.

And they ask: ‘What would our most critical stakeholders say are areas where we’re being hypocritical?’ and ‘What is not currently being measured or reported that society will hold us accountable for in the future?’


Use strengths to make a difference

The most scrutiny typically relates to the Corporate Social Responsibility risks and business opportunities around environmental, social, and governance factors (ESG). (Helpful further reading: HOW TO START YOUR COMPANY'S ESG AND SUSTAINABILITY JOURNEY)

The best CEOs attend to all these elements and, while doing so, look for areas where they can achieve outsize results by leveraging their company’s strengths.

And, the best CEOs welcome scrutiny because they know that purpose is reflected in their company’s soul.


Make a stand when warranted

The best CEOs are prepared to be thrust into the spotlight on societal issues, and many choose to be proactive. They don’t confuse their personal passions for their company’s principles. Sometimes listening matters more than speaking.


Chapter 14: Stakeholder Interaction Practice. Get to the essence.


There are many instances where something that seemed quite mundane at the outset turned into an issue to manage. Mishandling these relationships can cause irreparable reputation damage, which at best can end a career and at worst kill a business or drive it to change strategy.


Contain the time spent ‘Outside’

The best CEOs place a firm, absolute boundary on how much time they will spend with the Outside. Once they set the amount of time they want to spend with outside stakeholders, the best CEOs prioritise meeting based on which interactions help the company live its purpose, deliver on its strategy, and manage short- and long-term risks.


Understand their ‘Why?’

The best CEOs go out of their way to go beyond the ‘what’ and understand their stakeholders’ ‘why?’.


Harvest new ideas

Top CEOs not only engage their stakeholders to make a decision, reach an agreement, or achieve an understanding. They also harvest new ideas that can make the business better.

Aon’s Greg Case:

“You, of course, interact with clients to try and actually serve them, but you also interact with clients to understand how you want to change.”


Maintain a single narrative

Having a single narrative that cuts across all stakeholder groups creates a virtuous cycle that often enables CEOs to spend less time with stakeholders as they try to build a track record of consistency.


Chapter 15: Moments of Truth Practice. Stay elevated.


A crisis can arise from anywhere. The best way to manage a crisis is, of course, to prevent it in the first place. But no matter how well a company is run, the question for even the best CEOs isn’t ‘if’ they’ll have to lead through a crisis, it’s ‘when’. 

To deal with crises, Warren Buffett has a mantra: “Get it right, get it fast, get it out, and get it over.”


Stress test the company regularly

The best CEOs adhere to the old proverb: ‘An ounce of prevention is worth a pound of cure.’ But sometimes it’s hard to recognise when you have a crisis, as Ken Powell of General Motors explains.


“They’re not always as apparent as the COVID-19 pandemic. Sometimes you really have to bang the drum because it may not be quite so apparent. A crisis can come from a very committed start-up that is about to beat you. You’ve got to b on the lookout for those companies who have a thousand rabid users.” 


Even if a crisis doesn’t arise, regular stress-testing can reveal opportunities to make a business more resilient. CEOs who build resilience ahead of a crisis will find it far easier to deal with what comes.


Create a command centre

A key role of the command centre is to coordinate and enable good communications internally and externally. Having the right team dedicated to the crisis has many benefits, including a deeper understanding of the crisis, taking action, and calming stakeholders.


Maintain a long-term perspective

Many crises directly affect one or two parts of the organisation and it’s up to the CEO to keep everyone else focused on driving the business forward.


Ahold Delhazie’s Dick Boer has 3 lessons for CEOs:

·       Do not chair or lead your crisis team. Let them report to you. This gives you space and time to oversee all the elements of the business, not only the crisis.

·       Show confidence in your organisation. Show that you’re in control, that you know what you’re doing, and that you’ll take care of your people and your customers.

·       Think of what’s next even when the storm is still around you, because there will be opportunities and other situations you have to manage as a consequence of the crisis that you might not have thought about. 

Show personal resilience

In the book Leadership on the Line, authors Ron Heifetz and Marty Linsky advise leaders to periodically get off the dance floor and up onto the balcony.


This way they can see patterns and see hope on the horizon, just as Adidas’s Herbert Hainer did in a crisis.


“It doesn’t matter how difficult times are, there is always a world after a crisis. Even if the situation looks bleak, believe in yourself and your people and maintain a positive attitude.” – Adidas’s Herbert Hainer



team-in-office


Personal Effectiveness Mindset

Do What Only You Can Do


Caterpillar’s Jim Owens says the key to personal effectiveness is ‘Prioritising the most critical issues that only the CEO can solve and delegating any remaining tasks.”

As a result, the best CEOs think “My job is to do what only I can do.” 


Time and Energy Practice. Manage a series of sprints.


Adidas’s Kasper Rorsted says “I think your return becomes dilutive the more time you spend. As a CEO, it’s easy to start diving into matters that are none of your business. However, if you create time constraints for yourself, you figure out what’s more important.”


Keep a ‘tight but loose’ schedule

The best CEOs are extremely structured about how they use their time. They’re also disciplined about building in flexibility.

“The job of a CEO is different every day. Stuff just drops in. If you don’t have a framework, you’re going to constantly be dealing with the crisis of the moment or with things that aren’t necessary.”


Care enough to compartmentalise

U.S. Bancorp’s Richard Davis suggests “You just have to take everything as it is and isolate, manage it, isolate, manage it.”

Being fully in the moment applies as well to home life, and the best CEOs communicate with their families about the pluses and minuses, and proactively protect vacation time. This offers an opportunity for others to step up and lead.


Infuse energy into your routine

The best CEOs are aware of what generates and what depletes their energy, and they work hard to avoid energy troughs – long periods of activity after which they’re worn down and frustrated.

(See information about our Mental Health week of events: GROWTH FACULTY SUPPORTS WORKPLACE MENTAL HEALTH WITH A WEEK OF FREE EVENTS) also AVOIDING MELTDOWN: 17 HABITS TO THRIVE IN LEADERSHIP AND LIFE)

Satya Nadella of Microsoft has reframed ‘work-life balance’ as ‘harmony’ because “once you start saying ‘balance’ then I start feeling bad because it’s not balanced.”


Tailor your support to you

It’s crucial for the CEO to have a strong office staff. The best CEOs personal team always includes a talented, dedicated administrative assistant, if not two, and increasingly a Chief of Staff (COS) to help manage the complexity of the job.

Some have people who help manage their whole life, including family management and household duties.


Chapter 17: Leadership Model Practice. Live Your ‘To Be’ List


The best CEOs are keenly aware of the difference between doing and being, and the tremendous potential of getting both right.

Cincinnati Children’s CEO Michael Fisher has not just a to-do list, but a ‘to-be’ list as well.


“Today I might want to be ‘generous and genuine’. I hope I’m that way every day. But today I want to make sure it stays top of mind.”


Show consistency of character

All eyes are on the person in the most senior role. Staying true to one’s values can in the short term feel like a losing proposition, but in the long term the best CEOs find it always pays off.


Telstra’s David Thodey had a campaign to be more customer-centric and asked his employees to do whatever it took to please the customer, no matter the cost – within certain limits. When heavy rain caused copper lines to experience faults, which impacted customers, he approved a $40 million fix. It was staying consistent to what he believed.


Adapt to what the company needs

One of the 10 types of leadership style is situational leadership. It’s about adapting their style to the situation while staying authentic. Being who the company needs you to be while staying true to your convictions requires input and feedback.


Seek to continuously grow

CEOs generally receive very little direct coaching and are increasingly isolated from constructive criticism. So, they must ask for feedback. Continuous learning takes courage.

As Best Buy’s Hubert Joly says, “The notion of vulnerability in a leader is a recent notion.”


Always give hope

Andrew Wilson at Electronic Arts believes that organisations today look to their CEOs not just for professional guidance but also for personal, spiritual, and philosophical support.


“Sometimes it just takes showing a bit of humanity to inspire the troops.”


Andrew’s employees thanked him for pausing a Zoom meeting during the pandemic to make a paper airplane for his five-year-old.

“Thank you. You gave us permission to be parents,” they said.


Chapter 18: Perspective Practice. Stay humble.

The CEOs spoken to for CEO Excellence came across to the authors as down-to-earth and genuinely wanting to be of service to their colleagues and the institutions they represent.


Don’t make it about you

Mastercard’s Ajay Banga says CEOs are just stewards of the system in a ship sailing through the sea.


“You have to make sure the boat doesn’t sink while you’re there and that it picks up a couple of extra sails and some new engine technology. You make the boat work better. But you don’t brand the boat with your name and it the Ajay Banga boat.”


Embrace servant leadership

A leader serves because they are the leader, meanwhile they are the leader because they serve.


“I don’t think enough CEOs understand that practicing humility is not only good behaviour, but it will win you more followers than any strategy or tactic or mandate you’ll ever, ever have.” – U.S. Bancorp’s Richard Davis


Humility (along with an indomitable will) is a key factor in Jim Collins's Level 5 leadership. Frank Blake of Home Depot says in CEO Excellence to engage in servant leadership is to think of the organisation as an inverted pyramid with the customers and frontline workers on the top of the chart and the leader on the bottom.


“How do I mesh what I care about with what they care about, and how do I move that up through the organisation?” 


Create a diverse ‘kitchen cabinet’

It’s important to have people close to you who aren’t afraid of you, says Itau Unibanco’s Roberto Setubal.

Mastercard’s Ajay Banga puts a premium on having diverse perspectives.

“I wanted the views of people who didn’t look like me, walk like me, go to the same schools, have the same experiences, or the same backgrounds.”


Feel gratitude

CEOs who feel gratitude tend to perform better and, in having a positive impact, their gratitude only increases.

(Helpful further reading: ENGAGING EMPLOYEES: LEADING WITH GRATITUDE BY ADRIAN GOSTICK & CHESTER ELTON)


Conclusion


The authors believe that the role has more in common with being a decathlete than mastering any one skills. They’re not the world number one at direction setting, aligning the organisation, mobilising leaders, engaging the board, connecting with stakeholders, or managing personal effectiveness, but they’re world class at integrating all of these responsibilities simultaneously.


Patterns and archetypes

No matter the situation, our CEOs made vastly different choices as to where to focus and when.


Starting and finishing strong

All emphasised the benefits of investing time in a listening tour, especially in the honeymoon period.

“People will tell you things because you’re a newbie that they’re not going to tell you in two or three years from now,” says Lockheed Martin’s Marillyn Hewson.

As well, new CEOs do their own diagnostic of the situation. They then convey the new direction with elegant simplicity.


“Virtually every CEO we spoke to could describe their strategy in an elevator ride.”CEO Excellence


When it comes to stepping down, CEOs should ask themselves if they still find joy and fulfillment in the role, and if the company could benefit from a new perspective.


Prioritising across responsibilities

Most CEOs believe that the only way to learn the role is to be in the role.

Medtronic’s Bill George explains:

“No one is prepared to become CEO no matter how much they are. You have to grow into the job.”


The future of the role

At its core the business of business is unchanging, say the authors of CEO Excellence.

“We’ve purposely focused on what’s true versus what’s new.”

“Great CEOs…have a good filter for what in their environment is signal and what is noise. This aptitude will be even more crucial in the future amid what will undoubtedly be an ever more raging torrent of trends, ideas, and information.”

The authors believe the best CEOs of the future will be even more:

·       Ethically accountable

·       Diverse

·       Resilient

·       Impactful


Invest in Your Teams with Our Leadership Pass  

High performing teams need professional development and upskilling to ensure they have the traits needed for this new world of work. Our Leadership Pass gives you access to the best minds and brilliant ideas with weekly live, interactive, virtual masterclasses. Our speakers and authors include Jim Collins, Liz Wiseman, Stephen M.R. Covey, Whitney Johnson and more.  

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