John Ainley: The loneliness of the CEO, and the dangers for their businesses
Midweek View: Many CEOs 'don't know what they don't know' and are struggling without the guidance of experienced leaders
Wednesday 21 August 2013
We all need people around us who understand, support and challenge us, but increasingly chief executives are becoming isolated, with potentially serious consequences for our major businesses.
The CEOs and chairmen of our largest companies report that they feel isolated and unsupported, according to a study we've done at The Leaders' Coach. This is worrying. All human beings, with the exception of psychopaths, thrive on relationships with other human beings, for learning and support. And it has a knock-on effect: people want to "mirror" their leaders; organisations become shadows of those at the top.
The danger is that businesses become inward-looking; they stop listening to the outside world and simply focus on their own needs and ambitions. Some may say: "CEOs earn enough to be able to endure this pressure," but that is not the point. These emotions are damaging and we must not have isolated and lonely people running our wealth-generating industries.
Our research reveals four major causes of this increased isolation. First, the financial crisis: the chairmen of old were sounding boards, coaches and mentors to the chief executive. Now the chairmen and non-executive directors are very aware of the risks to their reputations and future wealth caused by a malfunctioning business. They have seen the reputations of their peers trashed by the Government, the press or the regulator. Consequently, their focus is on governance, on being a policeman for shareholders and the regulator.
The changed expectations of chairmen has caused some to become pseudo-CEOs, checking the work of the real CEO. This new abrasive, challenging style has dispensed with the supportive arm-round-the-shoulder role that they used to play. These days they can't afford to be seen to be siding with the chief executive.
Second, the pressure to deliver results quickly has grown. The average tenure of CEOs continues to fall, now standing at just four and a half years, and most strategic plans have a five-year focus. This causes pressure for short-term results and generates insecurity. Quarterly reporting means that businesses are run for the short term, for the next quarter rather than long-term results. As one CEO put it: "There is no such thing as a constantly growing business; they all go through cycles of slower growth, but there is no sympathy for this from those who judge us."
The combination of these trends attracts the independent, JFDI-style of leadership; yet the Government and regulatory rhetoric is for the creation of cultures where customer need, and ethics, drive all behaviours. This division is causing a conflicting set of dynamics to occur.
The third reason is social media. Gone are the days when a CEO was protected from what was really going on for the customers of the business. With today's instant communication, they expect immediate access to the CEO to resolve problems. One retail CEO reported that he receives 15 emails a day, each expecting an instant response and threatening public complaints that could damage the brand if they don't receive satisfaction. This direct interaction causes our CEOs to be on call 365 days a year, ready to deal with customer needs.
And finally, the majority of CEOs these days are former chief financial officers; most are male and financially and process-driven, not "people focused". There are just a handful of CEOs who were formerly HR directors. As one chairman put it: "The 'people ability' is absolutely vital for a CEO, not just with their staff, but also with the press and other key stakeholders, this has to be developed. Most CEOs don't have this."
Many former finance directors "don't know what they don't know" and are struggling, without the wise guidance of more experienced leaders, to create a style that meets the needs of staff and shareholders.
Of course, not all was well under the old model. The chairman and chief executive could become too close, non-executive directors were "managed" by the executive and too many non-executives turned up for board meetings not having read their papers. However, this new isolation of executives leaves significant concerns for the support, development, health and welfare of our CEOs and consequently the companies that they lead.
John Ainley is founder of The Leaders' Coach: theleaderscoach.co.uk
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