As executive coaches and board advisors, we often help CEOs who are struggling with some aspect of their role. Signs of this struggle can be either commercial or psychological. This month we’ll highlight the commercial indicators that all may not be well. Next month we’ll consider some of the more psychological manifestations.
A CEO’s consistent failure to meet targets – and any attempt to hide or distort the facts – is the most obvious indication there’s a problem. But by the time this becomes apparent it’s generally too late to fix, so our real concern is with those earlier ‘predictive’ warning signs.
The first signal is often a CEO’s inability to focus consistently on the management sweet spot between high-level strategic development and low-level operational detail. An habitual bias toward either extreme is a sign of trouble to come. So too is any tendency to use trial-and-error reorganisations to address under-performance. But a CEO should have capable direct reports to manage and drive operational performance. Limited strategic thinking is therefore the bigger worry.
CEOs who aren’t strong strategically often struggle, even if they are supported by a strategy function and capable senior executives. Signs to look for are failure to identify key trends – particularly those originating beyond the conventional boundaries of their industry – a lack of emphasis on insight or innovation, or an over-reliance on consultants for ‘big ideas’. They also too often pursue major transactions – acquisitions or divestments – as a way to avoid real strategic innovation.
An external commercial warning sign is a loss in market share because share tends to be a lead indicator for subsequent financial results. As macro factors rarely favour one competitor on a consistent basis, sustained changes in market share are unlikely to occur by chance. Struggling CEOs tend to excuse loss of share based on factors rarely mentioned when share has been growing.
Finally, the CEO’s interactions with their Board, Executive Committee and external stakeholders can all raise red flags if he or she is struggling. Board meetings that are seen as a burden or that always go as planned (rehearsed rather than prepared for) suggest a CEO who does not know how to get the best from their Board or who is ‘managing’ the Board to limit challenge. An ineffective ExCo is likely the fault of the CEO. And a tendency to be disdainful of most analysts or regulators is another sign of trouble.
But a key to a CEO’s long-term success is their ability to diagnose their own limitations from these and other commercial symptoms. Those who are forced to accept help by the Board often show little inclination to change. The best CEOs seek feedback from trusted sources and use it to develop. That’s why the psychological signs of a struggling CEO are important; they help distinguish those who have the capacity for self-reflection from those who don’t – a topic we’ll return to in our next Mindset.