“What Makes a CEO ‘Exceptional’”, an article published last April in McKinsey Quarterly caught my attention as I constantly want to help the CEOs achieve more. It focuses is on what differentiated the top 5% of CEO performers among a group of 600 CEOs at S&P 500 companies between 2004 and 2014. These leaders had to guide companies through unusual circumstances, including bankruptcy proceedings and returning successful to the public markets.
The study discovered that CEOs hired externally tend to pull more strategic levers than leaders promoted from inside. Within their first years of tenure they are:
- More likely to conduct a strategic review and initiate a cost-reduction program
- Less likely to engage in:
- Organizational redesign
- Business/product launch
- Management reshuffle
Why? These leaders may have been hired to bring fresh perspectives about marketing to the customers. They are less sensitive to “sacred cows” and “internal cultural politics”, which may restrict the vision and efforts of leaders promoted from inside. At the same time, they may not want to overload the company with changes, so they focus first on strategic shifts and then use first-hand experience with staff before making structural changes to support them. In contrast, many of the leaders promoted from within the company may have been chosen to do what they did – continue the trajectory of existing strategy and culture. (It would be interesting to see how internally promoted leader who has radically promoted new ideas compare to these other two groups.)
Thus, the issue for the Board of Directors when choosing CEOs and other senior leaders is whether they have a clear understanding of what changes are needed, now. In a VUCA world (Volatility, Uncertainty, Complexity and Ambiguity), with technological, demographic and global power changes that may require new conceptual frameworks (e.g., a “Blue Ocean Shift), it’s the fresh perspective that apparently wins. Moving around the furniture on the Titanic only makes sense when you understand where you should be headed.
Organizations should hold annual Strategic Leadership Advances (SLAs) to challenge themselves on what’s needed for success in the coming year. (We don’t call them “Management Retreats” because leaders must always move forward.) Using outside facilitators to inspire fresh thinking and observe the current leadership culture makes lots of sense, if you’re seeking an exceptional result!
What are you doing to make sure that your top leaders have the fresh perspective and wind-behind-their sales to support improvements in the coming year? Share with us!