A CEO may have an impressive resume and tick all the personality trait boxes but if they aren’t the right strategic fit with an organisation the marriage just isn’t going to work.
They may also start their term as chief executive with a range of impressive initiatives, but after a time it can become clear that the person at the top is hindering rather than helping.
We spoke to Chris Jackson, head of the UNSW School of Management, about the signs that a CEO might be holding a company back.
1. Their leadership style doesn’t fit with the company’s strategy
According to the Harvard Business Review there is a direct link between company performance and how aligned top managers are with its strategy.
While this may sound obvious, the problem is CEO’s experience and personality qualities are relatively static while a company is constantly being pushed and pulled by both internal and external factors forcing it to change and evolve over time, as well as react to market conditions, iterate and innovate.
Jackson told Business Insider if a CEO’s leadership style doesn’t fit well with the changes a company is trying to make it can all go belly up.
Put simply: poor fit equals poor performance.
There’s no better example of this than what’s been going on in Australia’s mining sector over the past 12 months. Australian miners are adjusting to deal with the end of the mining boom, where diversified miners are having to shift the way they do business in order to drive production and boost profitability.
The idea here is that a number of the people that holding the top jobs previously weren’t a good fit for the new company strategy.
To make way for miners’ new cost-out strategic direction the likes of Tom Albanese and Marius Kloppers were ousted from their jobs, replaced with new blood, who brought a new vision.
There’s more on miner’s cost outing strategies here.
2. They’re too popular
Just because a CEO is popular doesn’t mean they’re doing the best job.
In fact being too popular especially during times of economic contraction can indicate the executive isn’t making the tough decisions necessary to get the company through a rough spot.
But Jackson warns popularity isn’t always good measure of performance. “Popularity isn’t an index of a CEO doing a good job or a bad job,” he said. “But it’s hard to be popular in down times.
“Some people can do it but it’s hard, people interaction is very complex.
“It comes down to looking after your people, building trust and fairness.”
3. They’ve held the top job for too long
Staying in a job for too long can do more harm than good, Jackson explained.
“Leadership has a life expectancy,” he said.
“Every solution an executive comes up with creates a future problem, these problems need fresh eyes to find the best solution.”
He added if a CEO has held the top job for too long the company can risk missing opportunities.
4. They’re all glory and no action
A CEO that needs glory, needs to be loved and liked or is too charismatic, can risk dreaming too big instead of building the capabilities required for successful performance.
“While there is a role for a charismatic leader when a company needs to undergo change there is such thing as being too charismatic,” Jackson said.
“They need to have a bigger and bigger vision to stay the centre of attention, this can risk either no action or wrong action.”
5. They are driven by profit rather than value creation
When a CEO can’t think beyond next reporting season the company is at risk of falling victim to short termism.
And while the executive may be looking after today’s profit they’re not doing the company’s future any favours.
“You can only be a successful company if you’re doing well today and you need to keep your shareholders happy,” Jackson said.
He said it’s about finding a balance.
“If you don’t do R&D and invest in people, chances are you will be taken over by your competitors,” Jackson said.
“CEOs need to build capabilities to allow allow the company to be successful in both the short term and the long term.”
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