The corporatization of business in the last century has created the need for getting properly qualified and experienced professionals to run the affairs of a business.
The corporatization of business in the last century has created the need for getting properly qualified and experienced professionals to run the affairs of a business.
In years gone by, the entrepreneur was the owner and manager of the business, having put in equity consisting of his own funds and/or having pooled funds from friends and associates. It was expected, or rather a foregone conclusion, that the owner would run the business with greater care, focus and better profitability at the lowest assumption of risk. This remained true for many family-owned businesses. These were well managed and profitable.
With growth in business, coupled with the rapidly changing dynamics of the marketplace, the abilities of the owner to manage and steer the company became a daunting challenge. The impelling need for an emotional detachment by the owners in situations where the market goes against their business was felt more than ever before.
The major ailment any family-owned business suffers from most arises from a claustrophobic mindset. Their thought patterns become fettered, which leads to inertia in decision-making -- and inertia is the major reason for company failures around the world. The mismatch between the owners’ passions and the state of business conditions hinders them from arriving at judgments and solutions.
Their lenses get clouded by the mist of past successes, which may have been the result of placid market conditions. The challenge to the status quo is something that an owner is either unprepared for or refuses to accept. ‘We have done it this way in the past too’ is a familiar statement often heard from owners and even managers when they stand near the end of their business organizations.
In order to bring maturity to the conduct of business with no personal passions dominating policymaking, regulators the world over have introduced different codes of corporate governance that ultimately provoked and/or required organizations to embark upon detaching management from ownership. If the owner wishes to be the CEO of the enterprise, he/she has to recognize and continually remain cognizant of the responsibility they assume.
The CEO of any organization, as the highest-ranking executive, is by definition the one who shoulders complete responsibility for the entity’s decisions and consequent results.
He/she is also the conduit between the board of directors (normally owners themselves or their nominees) and the senior management of the company.
In order to circumvent strict regulatory frameworks that hand over all power to the CEO, many family-owned businesses remain in search of puppets that will never exercise any real power. The regulatory requirements in most jurisdictions recognize only the CEO as the ‘man on the spot’.
This leads us to question whether the CEO should be both the visionary and the executor. A vehement ‘No’ would be my answer. If the list of things to do for the CEO is long, the list of things a CEO should not do is even longer. Most boards in our cultural setup rely entirely upon the owner-board member, sometimes in partnership with the CEO, to chart a vision for the institution.
It is a rarity for both to have the same methodology for achieving the shared vision. Frictions are thus the norm but these are invariably handled maturely. The CEO is not a ‘know-it-all’ nor should he or she be allowed to become one. The quality and availability of tasks in an organization range between the ordinary, boring daily grind and tasks that usher the profoundest delights. A CEO must not become a slave to the daily chores.
Enough time should be set aside for thinking. Leaders must be more thinkers than doers. Visionaries as doers make the worst combination. The necessary distance between the objective and the path towards achieving the desired objective tends to get smudged by passion and misplaced self- belief, leading to failure in accomplishment.
Personally speaking, I find that the lives and work of two great Chinese leaders: Mao Zedong and Chou Enlai are a great case study for management. Mao was a visionary and Chou the loyalist executive. Mao was prone to suffering from serious illusions and it was always Chou who would subtly subvert destructive policies. Chou was the real CEO of China and knew what he could do and what he should not or could not do.
The CEO must plan to transcend the institution from one level of orbit to another. In this quest he/she can draw help from subject matter experts to design, land and implement. It is important that the participation of the CEO does not go beyond the planning and visionary stage. One of the things to learn from Chou Enlai on how to be a good CEO is the remarkable ability to reimagine calm amid turmoil.
The recent trend of putting the prefix of ‘CEO’ to the head of all functional jobs does not serve any purpose other than possibly tickling one’s ego. ‘Manager’ itself is a comprehensive term that defines the functional job. All organizations must have only one CEO at the apex with whom the buck ultimately stops. A person who envisions the most and does the least in terms of nuts-and-bolts. Leaders lead from the front and not by doing the job of the foot soldier but by being more directional.
A leader must have a clear grasp of issues that need to be addressed and must also possess the skills needed to understand the diverse interests of the company and organize them into a powerhouse of proficiency and productivity. CEOs must not fall prey to finding ways and means to subvert the practices of effective corporate governance at the behest of owners or shareholders. Instead, they should stand tall to protect international best practices of governance.
A leader must know the path to the destination and leave the nitty-gritties to the domain experts. It is cheap to be an expensive CEO, manager or supervisor who does the work of others instead of helping them do their work. Developing others by sending opportunities their way is the safest bet for progress.
The writer is a senior banker and a freelance columnist.
