How To Be An Effective CEO In The Current Economy

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The recovery is far from rapid, but even still there’s evidence of a CEO shuffle.In January, 96 CEO changes were announced by U.S.-based companies, according to the latest CEO turnover report released by outplacement firm Challenge, grey & Christmas.

While down 9 per cent from 107 in December, it is eight per cent higher than the same month a year ago, when 89 CEO departures were announced.

“We could see more changes like this as the economy continues to pull out of recession. Despite evidence that stability at the top is a key element to long-term success, many companies feel that certain CEOs are better suited for holding the ship steady through rough waters, while others are better for expansion,” said John Challenger, CEO of Challenger, grey & Christmas in a prepared statement.

In fact, Stephen Miles, vice chairman of executive recruiting firm Heidrick & Struggles,and head of the firm’s Leadership Advisory Services says, “As companies moves from a survival mentality to focus on growth and longer-term investment, many are finding that they need to revaluate their CEO. The new reality of post-crisis leadership driven by a greater understanding of risk and the interconnectedness of the global economy – requires an evolving set of schools.

“Boards of directors are demanding that their CEO possess particular qualities to help lead their companies into the new era. Companies are willing to make a bold change at the top, even if it means having to go to the external market and search for a new chief executive. We anticipate this change will continue through 2011 and 2012, unless there is another catastrophic event to send companies back into survival mode,” said Miles.

What is it that boards most want to see in today’s CEO? Here are just a few of Miles’ thoughts.

Ability to stand up to a “stress test”. Just as financial institutions were stress tested to show the strength of their balance sheets, leaders also need to be stress tested. How has the CEO candidate held up under sudden pressure? What serious challenges –bankruptcy, regulatory action, etc. has the potential CEO had to work through in his career? These types of events typically reveal character and capabilities. “Many CEOs who thrive during long bull markets are not up to meet real challenges, while others rise to the occasion,” said Miles. Boards are looking to bet on leaders who have been tested and have demonstrated that they can thrive and even flourish when the chips are down.

Possessing a keen “risk radar.” “The leader must be able to get the whiff of smoke before it is a forest fire. CEOs today need to use Socratic leadership to ask questions and test people and the organisation,” said Miles. They must have the acumen and sense to know when something seemingly innocuous actually can carry catastrophic risk for the company.

Being immersed in the global geopolitical system. “It is no longer satisfactory to ‘grow up’ in a single company and single industry, and nor can CEOs delegate the delicate task of managing their company’s governmental relations. Boards are looking for leaders who are connected to a much broader ecosystem that includes government leaders, regulators from around the world, special interest groups, activist shareholders, and peers across industries. CEOs must work across company lines, across industries, and across cultures in order to represent their company in a meaningful way.”

Having a purpose. “The simple yet powerful notion of ‘the profit motive’ is not good enough anymore. People are sick of the corporation-as-parasite extracting value from whatever it touches. CEOs need to think about symbiotic relationships that still allow them to run profitable and sustainable corporations that also have a broader purpose for all of their shareholders.”

Lastly, said Miles, “The CEO that is needed today is much bigger than an operations or finance master. A re-thinking of globalism, technology, and customers – as well as an acute consciousness of how stress and risk can affect corporate viability – is driving real changes in what it take to thrive as a corporate chief.”

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