In my latest Letter to Thinking Managers I recount a fascinating list from Fortune of 10 CEOs who ‘face Herculean challenges’. Forget the challenges for the time being. The Highest Common Factor (or Lowest Common Denominator) is that the 10 companies headed by the challenged were once dominant super-giants: Citigroup in banking; Coca-Cola; Gap in clothing; Merck, once easily the best drug company; Microsoft; Morgan Stanley in investment banking; Nike; Sony; Verizon in communications; and even the mighty Wal-Mart.
I’ll be exploring these cases in more detail in the April Letter; but just why do these ex-wonders’ CEOs, to quote Fortune’s trap line, have the ‘the toughest jobs in business’? It isn’t because their markets are inherently weak. In fact, some of the 10 (see Microsoft and Nike) are doing fine. The problem is that the expectations all centre on this one lonely figure at the top. Yet you could argue – and I do – that the trouble springs from a failure of likewise lone predecessors to meet unrealistic expectations. In a business world of increasing complexity, you need to spread power much more widely – what you don’t need is to create another overburdened Chief Executive who can’t possibly cover all the bases on his own.
Take one area which Fortune author Geoffrey Colvin singles out as yesterday’s and today’s headaches - marketing. The older pain was trying to ‘amass market power in commodity businesses’. That’s changed to ‘confronting increased customer power and investor power in all businesses’. ‘ In fact, ‘yesterday’ these giants didn’t have to try to amass market power – they had it, and their business model was based on screwing non-commodity prices and profits against hamstrung competition. It isn’t customer power that has won; it’s market concentration that has been lost.
For years, I’ve been repeating that fragmented markets call for fragmented management, with dedicated teams suited to the needs of the fragment. But the Cult of the Chief Executive cuts right across this necessity. Yesterday’s real headache was that the management model (built around the Cult) was increasingly out of step with the changing business model. In the same issue of Fortune, there’s a most penetrating study of General Motors and its appalling decline. The cause and effect of this is a halving of a once-magnificent market share.
Time after time, the recovery has been entrusted to a single person who has promptly failed to create a new management machine – one capable of what should have been the most massive turnaround of business history. Instead, the same car has been driven still further and faster towards the brink by much the same corpocratic management methods. I remember my horror at discovering long ago that all GM car prices were fixed centrally, thus neatly emasculating the brand managers further down the hierarchy. I wouldn’t be a bit surprised to find the same system still operating 20 years on. How come?
Colvin asks in his title ‘Who wants to be the boss?’ Silly question. Two of the Challenged Ten earn over $11 million dollars a year. True, lowest paid got only one million – but he is Steve Ballmer, the third founder of Microsoft, and proud possessor of a billion dollar fortune. In general the financial pleasure more than compensates for the management pain. And if the challenge is not met, today’s CEO will be handsomely rewarded for his failure: success is an optional extra for the ‘challenged’ boss.
Yet Colvin claims that the best things about the hot-seat CEOs ‘is that they’re responding to the biggest problems of a revolutionised economy, showing the way for the next generation of business leaders’. If only that were true. For a revolutionary economic you must have management revolutionaries. And of that there is no real sign.
Read more with a trial copy of the April issue Letter to Thinking Managers
read all 70 gurus with one feed read all Read all media
