Every day we see or read about superb acts of leadership. The ones that occupy an indelible place in our minds are often characterized by unexpected high-pressure, traumatic conditions and courageous acts taken within a very limited amount of time – a cabbie delivering a baby, a mayor calming a city after one of the worst terrorist attack in the history of mankind, a pilot making the call to land a powerless 65 ton piece of steel on a river in the middle of a major metropolis, a primary school teacher protecting her class from a gun-wielding madman. With the exception of tampered product recalls, oil spills, or factory explosions, these types of trials never face the captains of industry. Am I implying that leading a business enterprise is easy? Not in the least. But in the context of taking charge and leading human beings during major or minor crises, every chief executive is blessed with the luxuries of time, subordinate counsel, years of related experience, and knowhow imparted by pundits in thousands of books, journals and case studies.
So, why do 21st century CEOs continue to struggle in their roles as leaders of a business enterprise? Consider this: Only two years ago the average tenure of a CEO in America was 8.4 years, down from 10.0 years in 2000. According to The Conference Board report, dismissals were on the rise because of increased accountability of directors and a greater scrutiny from shareholders and activists. The Conference Board suggests that the pressure of serving as the CEO of a large company in an increasingly competitive global marketplace has resulted in voluntarily shorter tenures, implying that CEOs are leaving on their own terms after fewer years on the job. This is a case of “jump” before you are “pushed.”
Is the tenure problem leadership itself, impatient shareholders, uncontrollable external factors or a combination of all three? Blaming shareholders is a cop-out. The moment shareholders lose confidence in their chief executive, he or she is toast. A critical role of an organization’s leader is to generate and communicate business progress to all stakeholders. Sometimes that headway doesn’t show up on the profit line of the income statement. Progress may be represented by top-line sales, market share, productivity, innovation, new product launches, or expanding distribution. These factors can be the determinants of the organization’s strategic well-being. Strategic health ultimately results in profit. But profit can also be the worse indicator of a company’s strategic health. Look at any business with increasing profits and declining or stagnating sales; below the shining profit façade is a deep-rooted problem.
In judging CEO performance, there is no place for the uncontrollable factor. Chief Executives are paid handsomely to deal with sick economies and currency fluctuations. CEO’s aren’t expected to change the world, but they sure as hell can affect how their companies deal with negatives that ostensibly are beyond their control. Over my 17-year career in the North American coffee business, I must have dealt with three or four Brazilian frosts that pushed the price of coffee futures through the roof. Most of the lessons learned were from the errors the executive team made in the first frost that almost put us out of business. After that calamity, we altered our course to make the best of a difficult situation and always came out of the frost in much better shape than our competition. You do not throw your hands in the air and tell the shareholders to wait for prices to stabilize.
Back to my question – who to blame for lackluster CEO performance? Though I have no statistical evidence to support my theory, I place most of the blame on leadership itself. Great leadership within an organization begins in the interview process. Those keen to secure the job and the big paycheck tend to over-sell and over-promise. Astute leaders establish the right expectations and continue to manage those expectations in unpredictable battlefields. These CEOs deal with uncontrollable issues as the norm, and they have a better shot at a longer tenure – if they want it. In the late 19th century, someone said, “When the going gets tough, the tough get going.” Today’s successful CEOs have little choice but to walk that talk.