Entrepreneurial Leadership and Management . . . and Other Stuff

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CEOs Get More Credit Than They Deserve . . . and More Blame

They say it’s lonely at the top.  CEOs are uniquely responsible for the results of the company and how those results are achieved.  No one shares this total responsibility.  There are no peers in the organization and there is, generally, little understanding of the pressures that such responsibility carries.  As such, CEOs are often held up as superheros when things go well and as almost satanic when they don’t.  Fair?  Not exactly.  Reasonable?  Well . . .

In my career, I’ve had the opportunity to run several private companies and a few public ones.  There have been some successes and there have been more than a fair share of failures.  Some of the successes were big ones that were highly visible and some were small and less visible, although at times, even more important.  The same can be said for the failures – while they came in both big and small forms, the big, hairy, nasty ones were not always the most important ones.  Although, they were always the ones that everybody got to see and, likely, remember. 

Sometimes I basked in the glory of the company’s success, getting treated like I carried 750 people on my back across the finish line.  Other times, I got the crap kicked out of me by employees, investors and/or shareholders who thought I was solely responsible for a hiccup in performance.  Both of these points of view are right and both are wrong.

I’m a strong believer in the buck stops here view of the CEO’s role and responsibilities.  The CEO’s role is unique for the fact that he/she is responsible for everything that goes on inside the company – whether or not they are actually in control of it.  In good companies, the CEO is held accountable for what the company does and how it does it.  In this way, getting the lion’s share of credit for a success and being taken to task for a failure are both right.

On the other hand, the job of running a company is complex and multi-faceted.  There are loads of factors related to whether or not the company has short or medium-term successes or failures.  In recognizing the performance of the CEO, some of these factors are often ignored, biasing the external view of the CEO’s performance.  Because of this, both reward and blame may be out of context.  Take, for example, when the overall economy is good, raising all boats with the tide.  Or, when changes in regulatory laws make it difficult to continue to address a market, regardless of the company’s efforts.  Yeah, as I write this I know it sounds like I’m equivocating about the responsibilities of the job.  I’m not, really.  I’m just stating that no judgement about CEO performance is simple, although they are often made that way.

Most CEOs do a good job and are appropriately managed by company boards in a fair and reasonable way, of course.  Glaring and notable cases where CEOs receive insane awards for mediocre performance or no punishment for failure (sometimes even rewards for failure) are the ones we hear about, though.  This is primarily the result of that fact that in the past, many (most?) companies, meaning the directors and shareholders of those companies, have not held their CEOs accountable to a reasonable degree.  They have mostly sat by and watched as the CEO has taken the company to new levels, augered it into the planet or really didn’t do much either way.

So what’s a poor CEO to do?  Well, until there is some universally applied standard for accountability and a commonly understood measure of performance, it is unlikely that there will be a rational and balanced view of how a CEO is actually doing over the long haul.  Perhaps, because it’s the sometimes irrational money of shareholders involved, there can never be a common standard and CEOs will continue to bask in glory one day only to be hung from the gallows the next.

From the CEO’s point of view, the odds of being evaluated correctly increase tremendously when decisions are made in thoughtful, considered ways.  That usually means that truly major decisions, with respect to the company’s size, are made with some level of involvement of the rest of the management team, company advisors and the company’s Board of Directors.  From the Board’s point of view, corporate directors need to always hold the CEO accountable for major decisions and company performance.  That doesn’t mean simply recognizing what happened, but teaching, rewarding, or punishing based on both the results and the process of what the CEO does. 

Yeah, even in a perfect world, it’ll still be an emotional roller coaster ride for the CEO, but that’s part of what makes the job interesting.  Being judged in virtually unpredictable ways in a sometimes irrational manner keeps things exciting <g>.

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 June 30th, 2007  
 Will  
 Leadership  
   
 2 Comments

2 Responses to CEOs Get More Credit Than They Deserve . . . and More Blame

  1. “I’m a strong believer in the buck stops here view of the CEO’s role and responsibilities.” Amen to that! If the CEO isn’t going to stand firm, who will?

    I was trying to think of a good metaphor for the situation — it’s a combination of “sh*t flows downstream” and the small rock that starts an avalanche. Small actions at the CEO-level can make a huge impact on the rest of the company, for better or for worse.

    One of my former employers brought in a turnaround CEO who took some very simple (with the benefit of hindsight) steps and transformed the company in a few short weeks. Before that experience, I was unconvinced that a CEO could really drive a whole company, or fix it when broken. After that experience, I gained a CEO role model…

  2. “I’m a strong believer in the buck stops here view of the CEO’s role and responsibilities.” Amen to that! If the CEO isn’t going to stand firm, who will?

    I was trying to think of a good metaphor for the situation — it’s a combination of “sh*t flows downstream” and the small rock that starts an avalanche. Small actions at the CEO-level can make a huge impact on the rest of the company, for better or for worse.

    One of my former employers brought in a turnaround CEO who took some very simple (with the benefit of hindsight) steps and transformed the company in a few short weeks. Before that experience, I was unconvinced that a CEO could really drive a whole company, or fix it when broken. After that experience, I gained a CEO role model…

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