Michael Porter, the Bishop William Lawrence University Professor at Harvard Business School, co-authored the article titled “The Seven Surprises for New CEOs” published in the Harvard Business Review of October 2004. This article, as with all of his articles, is worthwhile reading. The premise is that CEOs assume ultimate responsibility for the success and failure of the business because they can exercise ultimate authority for changing the business system under their Command & Control. In that regard, the position of CEO has many commonalities with that of a solo-entrepreneur. However, the difference is that a CEO is separated from the operational side of the business by many layers of hierarchical decision-making and intermediary technology. This disadvantage needs to be offset by a different mind- and skill set.
The solo-entrepreneur exercises a leadership style that is very much hands-on whereas a CEO must lead by remote control; working the intermediary technology that connects the many hierarchical layers that s/he wants to influence. As a result, feed back information gets translated and thus filtered according to what lower ranking officers believe is the nature and format in which the CEO wants to receive it. On the other hand, the Control & Command information has to be sent down the hierarchy where lower ranking officers translate the CEO’s intentions into what they believe are the appropriate goals and activities. Needless to say that critical information is lost in translation and stripped of its sensitivity.
CEO-Effectiveness™
The current dominant paradigm for solving problems is doing more and better of the same, which translates for the above challenge into more and better communication- and leadership skills. However, I believe that the root cause of poor CEO-Effectiveness™ originates neither from a CEOs proficiency at Communicating nor Leadership. Just, think about the old adage from Information Technology: “Rubbish in, Rubbish out”. This implies that the business system at your Command & Control functions only as a means to an end. Therefore, no investment in tools that are used for relaying your messages and directing the business on your chosen strategic path will enhance CEO-Effectiveness.
Communication and leadership skills are merely tools for the realization of a compelling vision of service to others, and their purpose is to improve its EFFICIENCY, not its EFFECTIVENESS. In other words, CRAFTSMANSHIP, how you use the tools at your disposal, with a clear vision of what you want to accomplish with the resources at hand, is more important than the number or the quality of the tools in your toolbox! In other words, collecting the best carpentry tools on the market does not make one a carpenter; learning carpentry will! Besides, the sharpest tool is inherently dangerous to those who do not know its purpose nor the specific goal for the realization of which they want to deploy it.
I believe that the root cause of poor CEO-Effectiveness™ at the “carpentry of a business” is a lack of insight, understanding and appreciation of the multitude of interdependent functions that people perform on a daily basis, in order to make the business run as a singular, unique, integrated and open system. As a result, many CEOs are oblivious to the fact that nearly all of their decisions for solving one specific problem cut straight across the value chain, with consequences for multiple silos of specialized knowledge. As a result, there are too many examples of well intended decisions with unintended consequences that have been undermining a business’ profitability and sustainability. As a matter of fact, most businesses are destroyed from within.
Ultimate Responsibility
President Harry Truman had a sign on his desk that read “The Buck Stops Here”. That’s exactly what ultimate responsibility means. For a solo entrepreneur, growing a business implies that more tasks must be delegated to others. The object of delegation is the authority for making decisions related to those tasks, but the responsibility for the consequences of delegating tasks remains ultimately with the person doing the delegating.
A CEO is thus responsible for the entire value chain, which raises the question of what qualifies or prepares a person for accepting such a hefty charge. Characteristic of a CEO position is the need to formulate an agenda and show results within six years; the current average CEO-tenure. However, up to 50% of a CEO’s time is taken up with external affairs or community relations, which emphasizes the need for CEO-effectiveness; you only get one shot at demonstrating the soundness of your Command & Control over the entire value chain.
Management Education
Management education focuses on transferring specialized knowledge in routine activities that fall within a chosen area of expertise, such as leadership, marketing or finance. There are specific curricula for various under-graduate-, graduate-, and post-graduate degrees that differentiate themselves according to scope and level of detail. Characteristic of a more advanced curriculum is that students must choose a narrower scope, a.k.a. a major, which deals with the same topic but at a higher level of detail. Scope can also narrow down on the position within a business, in particular that of an executive. These programs tend to favor expertise in leadership, finance, marketing, corporate governance or human resources, but none of them specialize on assuming ultimate responsibility for the entire value chain.
Now, the real test of CEO effectiveness happens during turbulent economic times and when changing strategic direction. The operative word here is CHANGE as opposed to ROUTINE. You know that it’s time for change when routine activities are not delivering the intended results. Since 94% of all results are systemic in nature, any successful CEO must demonstrate his or her effectiveness at Command & Control over the entire value chain; i.e. the entire system, which includes all silos of specialized knowledge. Ultimate responsibility over the entire value chain is what sets the CEO position apart from any other executive role.
We learned from Henry Ford that no executive should be required to possess specialized knowledge in every area of expertise; that’s why he created a master mind of many material experts that he could ask for advice. Instead, s/he must know how to organize specialized knowledge and how to direct that knowledge throughout the value chain toward the realization of a compelling vision of service to others.
This ability of organizing and directing knowledge is The Missing Link in the Value Chain™ and CEOs are forced to acquire this critical mind- and skill set by osmosis. They are left to their own devices because no system of management education offers a curriculum that specializes in organizing and directing the specialized knowledge that a CEO has already acquired, that which is possessed by employees throughout the organization, or that can be obtained form third-party experts. CEOs must learn it all on the job without a genuine mentor to show him/her the ropes, because no-one else in the C-suite shares a similar level of ultimate responsibility and ultimate authority. The pressure to perform is on!
In Conclusion
I have chosen as my mission in life to eliminate a CEO’s need for having to learn by osmosis and to make the curriculum of The Missing Link in the Value Chain™ available to current and future CEOs worldwide.
The benefit of The Missing Link in the Value Chain™ is that it inspires Creativity and Innovation for the urgently needed Self-Renewal and Re-Invention of current business systems worldwide, which is the inevitable result from organizing and directing knowledge after it has been acquired.
Participants in the program will learn from the people that:
- Have helped the US Air Force reduce Human Error,
- Make the US Marine Corp highly maneuverable,
- Turn quality into a strategic weapon,
- and many others showing how to inspire a work force and engage their human intellect.
These sources of specialized knowledge have been around for decades and have made many organizations very successful. However, it takes Stewardship, the moral will to do the right thing, and Craftsmanship, the moral skill to figure out what the right thing is, these are the key components of CEO-Effectiveness, to recognize the possibilities and opportunities that these tools can generate for making a business profitable, sustainable and respectful of humanity. That’s why CEO-Effectiveness is crucial to your success.
Ask me about how I can enhance your CEO-Effectiveness at making tough strategic decisions in less time, with less resistance to change while giving you the satisfaction of Peace of Mind.