In ordinary life, people are accustomed to observing their bodily and mental activity and looking for signs that may indicate malfunction. The observations maybe anything from a stomach pain to those forgetful ‘senior moments’ that actually also occur to some very junior people. But everybody is accustomed to noting symptoms, getting a diagnosis, moving on to prognosis and receiving some kind of therapy - even if it’s only a painkiller. Managers lack a similar personal process - but it could be very useful. For example, do you suffer from any of these seven managerial symptoms?
• Are you attending too many meetings, and ones which are discussing the wrong things?
• Do subordinates consult you too often before taking action?
• Do you learn about things only after they’ve already happened?
• Are your subordinates apparently trying to anticipate your likes and dislikes - and forming ‘their’ opinions accordingly?
• Are you unclear about where you stand with your boss or bosses?
• Are your incentives disproportionately dependent on the share price?
• Do you have few if any activities which are not connected to the company?
If you’re free of all seven symptoms, you’re very fortunate, and so is the organisation. For all these personal behaviours are symptoms of a corporate disease - and that illness is as common as the cold. The disease is chronic mismanagement. All seven of the symptoms show that you and others in the corporation are being hampered in managing effectively by faults which are manifest, recognised as wrong by the sufferers, but seldom, if ever, rectified.
THE MAIN VICTIM
Who is the main victim, though? The answer, which may surprise readers, is the CEO. The list of symptoms has been adapted from an article in the Harvard Business Review which has no less than three distinguished authors: Michael E. Porter, the leading strategic guru; Jay W. Lorsch, the expert on corporate boards; and Nitin Nohria, also a Harvard Business School professor. The trio warn new CEOs that they are in a deeply unhappy position:
‘Bearing full responsibility for a company’s success or failure, but being unable to control most of what will determine it. Having more authority than anyone else in the organisation, but being unable to wield it without unhappy consequences’.
The surprise to which I referred arises from the fact that the Cult of the Chief Executive is still riding high. Each new CEO in turn is hailed as the superman or superwoman who will wield supreme authority to create dynamic change and win wonderful success. The hoped-for hero is paid enormous sums (sometimes for just starting work), and is entrusted with an overwhelming say in establishing the business strategy. The Cult holds these seven beliefs:
• The CEO runs the company
• He or she does so on the basis of order-and obey
• The CEO controls all events and is the source
of all important information
• His or her authority is enhanced by the exercise of personality - even charisma
• The CEO has no trouble in turning the other directors into acquiescent poodles
• CEOs place pleasing shareholders above all else, primarily by boosting ‘shareholder value’ (i.e., the share price)
• They are expected to deploy superhuman qualities in order to live up to the previous six postulates.
FALLACIOUS AND DANGEROUS
The Cult has been criticised here before because it is fallacious and dangerous. Each of those seven items puts the company and its stakeholders at risk. Thus, boards of directors have gone along with appalling decisions and results because, according to Warren Buffett, ‘At board meetings, criticism of the CEO’s performance is often viewed as the social equivalent of belching’. This polite refusal to face hard facts, moreover, can go on for years.
The three professors, however, don’t so much criticise the Cult as dismiss it entirely. Their ‘seven surprises for the new CEO ‘stress the limitations to chief executive power; indeed, the constraints are so severe that they seem to disempower the new arrival almost entirely.
The new person is told that…
• You can’t run the company (indeed you can’t even run your own time)
• You can give all the orders, but that will be self-defeating - you become the bottleneck
• You will find it extremely hard in your top-floor eyrie to know what’s really going on down below, or in the outside world
• You will discover that the signals you emit have a very powerful influence, which may well not be as you want
• But you’re not the boss - not any more; the board has taken over (and never mind what Warren Buffett says about belching)
• If you try to put shareholders first, you can find yourself in big trouble
• You are still only human, so surrounding yourself with kingly trappings and imperial rewards has no justification
REALISTS AND CULTISTS
The realistic professors are certainly far nearer to the truth than the Cultists, who greatly overplay the ability of one person to hold all the reins in two powerful hands. But public perceptions are much nearer to the Cultist view. Thus the HBR article lists as a warning sign, a symptom of self-aggrandisement, the following: ‘You give interviews about you rather than about the company’. Well, that’s what happens when you live in an age of celebrity. The shareholders - and many of the employees - want a hero. Guess who.
Take the case of J. Sainsbury and Sir Peter Davis, appointed as the wonder man CEO who would rejuvenate what had become a visibly tired supermarket chain. Davis had previously been CEO of the Prudential insurance giant, but he had once worked at Sainsbury’s, too. He was a dominating figure who made large and important promises. Unkindly but fairly, The Times in October compared the promises, made in May 2000, with the miserable actuality which Davis bequeathed to his successor Justin King.
• Davis was going ‘to re-establish our lead in quality and giving value for money’. (King in 2004; ‘we have not delivered this offer effectively’)
• ‘We are committed to bringing the stores up to date’ (King: ‘131 stores have not received any investment for years’)
• Investment to update obsolete systems and distribution would be raised from £803 million to £900 million (King: ‘£200 million is required to complete the IT and supply chain improvements we want’)
The Times reported acidly that the Davis business reputation ‘lay in tatters’ after the company wrote off £550 million of the investments he initiated because ‘some would never work properly’. The Business Editor, Patience Wheatcroft, called this failure, leaving Sainsbury ‘in an even worse state than when the investment began’, a ‘remarkable achievement’. Davis was punished with a large pay-off and a £2.6 million bonus: ‘remarkably’, she writes, Davis ‘had hit the profit targets that had been set for him’.
With respect, that wasn’t remarkable at all. High and mighty CEOs aren’t going to tie their rewards to numbers that will be difficult to meet. In the year to March, with Davis still in situ, the company made £675million; this year, King will be lucky to make £250million - before the £550 million Davis write-offs. The absurdity of rewarding people so heavily for failure is that you massively reduce their incentive to succeed, while doing nothing to offset their management myth.
PSYCHOLOGICAL BARRIER
For nobody benefits more from the Cult of the Chief Executive than the latter. The debunking by the three Harvard professors has a very high psychological barrier to overcome. Who wants to admit to themselves, let alone other people, that they can’t run the company, mustn’t give orders, don’t know what’s going on, create a false image, and aren’t the real boss but rather the lackey of the board? As for the wealth in money and perks that’s showered on the supposed bosses, which of them will exercise the self-denial needed to refuse such lavish booty?
These behaviours, while desirable for the ego, undermine good business management skills. They require suppression of egotism in the interests of collective, collaborative processes that make excellent decisions and effective execution far more likely. For example, you should...
• Limit the number of meetings you attend to those whose purpose is clearly defined and demands your presence
• Delegate ample authority and autonomy to subordinates so that they can take decisions and actions on their own initiative
• Establish communications bottom-up, top-down and lateral so that everybody, including you, has the fullest possible picture of what’s going on everywhere
• Listen to full and frank discussion with subordinates
before guiding people to the best consensus
• Operate on a mutual, advise-and-consent basis (avoiding order-and-obey) in relations with superiors and subordinates
• Work out the vital metrics of the business, and concentrate on them, not the share price
• Stop the business taking over the whole of your life
By no coincidence, the recommendations made above are the reverse of the warning signs, the symptoms of CEO disease recited at the start of this article. The three professors, Porter, Lorsch and Nohria, list several others. For instance, are there too many days when you feel that you’ve lost control of your time? Do you hear concerns and dissenting views on the grapevine rather than direct? Do stories circulate about you that magnify or distort reality?
GREAT OMNIPOTENT MAN
As noted, these are symptoms, not the disease itself. Normally, in management as in medicine, the advice is to treat the underlying disease rather than just its outward signs. But in this case, correcting the wrong behaviours and occurrences takes you a long way towards curing the basic condition. You can’t easily pose as the Great Omnipotent Man, for example, if you encourage your colleagues to tell you where you’re going wrong, and act accordingly when those honest criticisms are justified.
In fact, the best antidote to management sickness is deliberate search for the realities of the business, as seen through the eyes of its constituents: directors, other managers, staff at all levels, customers, suppliers, shareholders, opinion-formers. You don’t poll these knowledgeable people, but have small, representative samples interviewed in depth by experienced outsiders. This is the basis of my own consultancy work. The consultant acts as a conduit for the views of the true experts in the business - those who live with its faults and virtues day-by-day.
At one client - Sainsbury, in fact - our research showed that a policy of tight control of staff numbers had a dire effect when combined with a well-advertised promise to keep down the length of check-out queues. So staff were being taken off the shelves to man the tills. So the customers found too many gaps on the shelves – and went elsewhere. Needless to say, inadequately stocked shelves are now being blamed for the group’s crisis, several years later. That’s the most ominous sign of all: when management hears about sad realities, but fails to correct them. As the Davis disaster shows, reality always catches up with you in the end. Better by far to manage by reality from the very beginning.
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