Today’s post on the National Debt will be short and to the point. While I could easily digress and reduce this discussion to a partisan political diatribe, I promise to resist the temptation. This post is written for every American citizen regardless of political affiliation, or socioeconomic status. Every American, as well as future generations of Americans, now share the burden of our rapidly mounting financial obligations. While I could throw figure after figure at you about the ridiculous hole we have dug for our children and grandchildren, nothing is as powerful as taking a few minutes to study the national debt clock. So the only thing I ask of anyone reading today’s post is this: to study the clock and make known whatever your feelings are in a very loud and public fashion. Unless America unites its collective voice about our current levels of deficit federal spending, and forces the government to stop the madness, we all will face a much tougher road than is necessary.
While in flight today I had the opportunity to read an interview in “Fortune” with Home Depot’s CFO, Carol Tome. As a prelude to the interview, Home Depot’s CEO, Frank Blake proudly stated that he had placed Tome in charge of the company’s growth initiatives, at which time I sighed and said a silent prayer for Home Depot as it must surely be on its death bed to place a CFO in charge of growth. While there are certainly exceptions to every rule, placing a CFO in charge of corporate growth is like placing the drug addict in charge of inventory control in the pharmacy…it’s just not good business, and it won’t work.
As I delved into the meat of the interview my initial skepticism was confirmed. Tome’s “growth” moves seemed to be focused on cost-cutting, head-count reduction, slowing store expansion, etc. To be fair to Ms. Tome, I don’t know her, it was an interview, and she did throw out a few catch-phrases like increasing sales per square foot, and improving the customer experience, but disclaimers aside, the interview read like just another CFO in way over her head to me…When will CFOs learn that cost-cutting and workforce reduction are not sustainable business strategies? Anyone can take out the chain-saw, hack away for a few quarters, and look like a hero, but what happens after that?
The story usually unfolds like this: After all the slash and burn has taken place, which by the way causes a sense of uncertainty across the enterprise, and a corresponding rapid downturn in morale, what the finance savvy CFO has just done in his/her first few acts is disrupt the entire culture, increase cost centers and decrease profit centers, but boy is this operation lean and mean…
All sarcasm aside, the reality is these decisions won’t adversely impact the business in the short-run as the near term funnel will not likely be harmed. However when revenue starts to evaporate in forthcoming quarters because customers are not being serviced, new deals are not being added to the pipeline due to sales people leaving the company, and the corporate brand is losing visibility due to reduction in marketing expenditures, things start to get a little tense. You see there is no substitute for operating experience. The most brilliant CFO if void of operating experience will make similar mistakes to those mentioned above when making non-financial, operating or strategy decisions.
At this point in time you may be saying to yourself “this author really doesn’t like CFOs.” Quite to the contrary…at one point in my career I served as a CFO, and I understand better than most that CFOs play a critical role in the success of any business. In fact, one of my first recommendations to any client is hire the best CFO they can afford. One of my next recommendations is to start mentoring the CFO in the non-financial aspects of business. If your CFO has only operated in a finance silo how can he or she be expected to gain experience across competencies and business units. Consider embedding the CFO in operational roles in marketing, strategy, business development, innovation, branding etc., so that they have the opportunity to understand the essential long-term value created by initiatives that may not have an immediate impact on the balance sheet or P&L.
It is necessary to understand that most CFOs come out of a public accounting background and rarely have training or experience in sales, marketing, advertising, public relations, non-financial strategy and tactics, and usually have little experience in terms market knowledge from a competitive, production or operating perspective. Accountants are typically trained in tax or audit functions, and while fluent in GAAP, they don’t typically bring traditional business savvy to the table. They are masters of retroactive analysis as their job is to document and report on historical events.
Let it be noted that I am a strong advocate of sound financial governance and the implementation of reasonable cost containment measures. However not when applied in a vacuum irrespective of the ripple effect across the enterprise. A company can have all the cost containment in the world, but without revenue what does it matter? In C-level operating and strategy positions the executive has a broader sphere of influence, and will have many more points of critical contact both internally and externally than will the typical CFO. Therefore having experience across a broad range of skill sets and competencies is mission critical for a company’s executive operating and strategy talent.
Ponder this…if the Chairman or CEO places the CFO in charge of corporate growth without the experience necessary to pull if off, the resulting chaos isn’t really the fault of the CFO, but rather it belongs to the Chairman/CEO that set him or her up for failure. The moral of this story is simply to hire/promote the most experienced and discerning people possible into executive operating positions. This can and and sometimes does include a current or former CFO that has been properly trained and mentored, but it should never include the unprepared CFO.
What drives your internet strategy? I’m always amazed that in today’s digital world where web based technologies reign supreme, at the number of companies that still don’t get it…It is not at all uncommon for me to find corporate internet strategies that are at best cobbled together if they exist at all. It is as if digital marketing and branding initiatives are the corporate version of the “hot potato,” such that everyone wants to have their say, but no one wants to take responsibility. Rarely do I come across corporate internet strategies that are aligned with the core business strategy. In an earlier post entitled “Who’s In Charge of Your Internet Strategy” (dated but relevant), I address many of the typical mistakes made with regard to the management of corporate internet initiatives, but in today’s post I’ll focus on the benefits derived by engineering a well conceived internet strategy.
Is your internet strategy engineered by design, or has it just evolved over time by default? There are few assets that can be leveraged across the enterprise as effectively as a company’s web assets. Furthermore, your company’s brand credibility is often judged by the quality and consistency of a user’s online interaction and experience, so why would you want to put anything other than your best foot forward? Rather than complain about your online initiatives I would suggest you correct performance gaps by taking a step back and revisiting your overall internet strategy to insure that it is properly aligned with your core business strategy.
Rule number one when developing your internet strategy is that it must be inclusive and not exclusive. Your corporate web presence should not be driven by IT, marketing or sales to the exclusion of one another, but rather it should be developed collaboratively in order to unite all departments to deliver real business value across the enterprise. A company’s digital strategy should balance ROI and contribution to the bottom line with growth-oriented business and IT initiatives.
As part of the cohesive and collaborative approach mentioned above, it is important to once and for all understand that your corporate website is where things begin, and not where they end. Believing that a corporate website can function as a single, stand-alone asset shows a complete lack of understanding of how to leverage the internet. Your corporate website needs to rest at the center of a spoke and hub architecture that includes, blogs, wikis, profiles and groups on social networking communities (Linkedin, Facebook, Twitter, etc.), a network of related product/service/group microsites, article and video marketing, internet radio, TV, and PR, and the list goes on…The internet is a constantly evolving space and has changed radically from the early dot-com days.
A solid internet strategy is born out of both analytical and practical considerations with the internet strategy simply being a tactical extension of core business strategy. A well conceived digital strategy will be deeply based on customer, competitor, industry and constituent research used to identify and prioritize key business opportunities for internet channels. It will guide you towards the identification of new opportunities for increased revenue or cost savings by applying rigorous analysis of customer behavior, needs and financial value. The strategy should define associated costs and expected return as well as put forth metrics-driven implementation roadmaps.
It is also important that your internet strategy create multi-channel integration which serves to combine business and technology assessment, requirements development, and implementation. It is essential to evaluate and clarify channel strategies for effectiveness and profitability, as well as assessing areas of vulnerability and opportunity. A well designed internet strategy will also accelerate go to market time-frames and add to customer lifecycle value. With constantly evolving technology, and a better understanding of consumer behavior, barriers to adoption are falling at rapid rates. The proper strategy will leverage these trends to build strong sales funnels and increase conversion ratios. By building in strong up-sell/cross-sell mechanisms, and effective customer self-service options, margins should increase due to an increase in average order size with a lower cost of fulfillment.
Internally, the implementation of a well defined internet strategy will increase operating efficiencies by automating business process, stimulating innovation and collaboration, increasing the effectiveness of communication, and shortening production cycles. Virtually any application that was once administered through desktop solutions can now be addressed through web based solutions at lower costs with greater efficiency and scalability. Externally, the internet must align and propagate your brand promise and message in a way that works cross platform and medium to increase revenue and brand equity by reaching all constituencies in the manner in which the prefer to be communicated with.
Bottom line…the internet is only as powerful as your ability to understand and harness its strength to your advantage.
Today’s Myatt on Monday’s question comes from a CEO who asked: “Our employee turnover is higher than I would like it to be. If you had to point out one factor that drives employee churn, what would that be?” Few things in business are as costly and disruptive as having the proverbial revolving door for employees to exit from. Even worse is not knowing how to stop the door from turning. While an “employers job market” can certainly help slow the churn, it will not stop it. The harsh truth is that there are many secondary and tertiary items that can influence an employee’s decision to leave, in today’s post I’ll address the primary item; the one single factor that constitutes the overarching reason which drives a person’s decision to leave their employer.
Let me begin by stating that no company in the world has a 100% retention factor if measured over any meaningful length of time. However the question I want you to ponder is this: why do some companies have the ability to create excellent work environments leading to superior employee satisfaction and retention while others seem to fail miserably in their efforts in this regard. The answer is simpler than you may think…Organizations that display the healthy, dynamic, and positive culture that fosters a motivated and engaged workforce all have one thing in common…great leadership.
There is an old saying that goes; “Employees don’t quit working for companies, they quit working for their bosses.” Regardless of tenure, position, title, etc., employees who voluntarily leave generally do so out of some type of perceived disconnect with leadership. Furthermore, while the accuracy of exit interviews are somewhat debatable, they nonetheless support the conclusion drawn in the previous sentence. The following list contains just five representative samples of the differences between solid company leadership and poor leadership…
- Hiring Methodology: Great leadership teams use a values based hiring methodology. They hire slowly, carefully, and only to fill a defined need with a specific skill set. Companies with challenged leadership hire quickly, often based on how affordably they can fill a position, and many times in absence of a defined need.
- Leadership Continuity: Great companies have a clear vision, mission, and strategy, which are evangelized by a cohesive leadership team. A crisply articulated vision, and continuity of leadership creates an engaged workforce that understands the business model and key objectives of the enterprise. Companies that have a fractured leadership team lose the confidence of line and staff. Employees that don’t understand what they’re playing for are very difficult to motivate and as a result are often disengaged and non-productive.
- A Planned Transition: Outstanding leadership teams set employees up for success and not for failure. They have an established onboarding process which puts forth an initial roadmap for a successful transition by clearly defining key performance indicators, business objectives, and other key metrics. Well honed leadership teams immediately assign an in house mentor to new hires to help insure a successful acclimation. Unsophisticated leadership teams usually have a sink or swim mentality with regard to new hires and have substantial voids in training and management processes in the early days of a new hire. Poor leadership teams have a lack of continuity in their training and development which breeds discontentment and dissatisfaction.
- Compensation: Great leadership teams understand the value of tier-one talent, and are not afraid to pay-up in order to attract it and retain it. They create a multi-tiered compensation plan that rewards employees at the top of industry scale when performance objectives are met or exceeded. Moreover they understand the value of non-compensatory recognition and apply it generously and judiciously. Companies with poor leadership often trip over dollars to pick-up pennies when it comes to compensation. Their compensation plans lack sophistication, creativity, and are engineered by default and not be design. People will often cite non-competitive compensation as an issue for leaving a company, but what they are really stating is that the company has an unsophisticated leadership team which is out of touch with both the market, and the needs of its employees.
- Professional Development: Solid leadership teams challenge their employees by offering them a clear path toward personal and professional growth. Great companies create a career path that offers the successful employee the option of matriculating throughout the company based upon achievements, needs, and qualifications. Great leadership teams understand that in order to create a thriving and sustainable enterprise that a key priority is to develop talent to their greatest potential, and ultimately to create other leaders. Poor leadership teams don’t see the value in training, mentoring, coaching, and other forms of professional development. Their workforces are stagnant and not competitive, which places them a not only a competitive disadvantage, but also at risk for long-term sustainability.
While today’s post was an extemporaneous highlight of just a few critical acknowledgements, I hope it clearly portrayed the value of leadership in employee retention and development.
Accountability and transparency are hot topics today, and rightly so…Given this new found popularity, I felt that a piece delving into the topic of accountability would be both prudent and timely. Frankly, considering what the lack of accountability has done to our nation’s economy and political structure we should all be spending more time on the topic. However the truth is that few people really like to hear the “A” word applied to their individual circumstances, choices, decisions, and performance. Regrettably, this is precisely why we are embroiled with many of the daunting challenges facing our country today. Nothing keeps personal and corporate train wrecks from occurring more than a solid framework of accountability. In today’s post I’ll examine the many reasons for why accountability should matter to all of us…
Regardless of where you are in the corporate hierarchy, accountability is a fundamental principle associated with success. Administrative and support staff needs to be accountable for the quality and timeliness of their work. Sales people need to be accountable for not only production volume, but also the manner in which they represent the company brand while attaining said volume. Management needs to be accountable to their subordinates, as well as to executive leadership. Executives need to be accountable for their quality of leadership and decision making, and as we discussed yesterday, board members need to be accountable to shareholders. I would be remiss at this point if I didn’t also take a moment to remind politicians that they are accountable to their constituents.
Accountability is the lowest cost, most practical, and most productive form of risk management and quality assurance that can be implemented across an enterprise. It is really nothing more than a common sense understanding that decisions made within a framework are going to have a greater chance of success than those made in a vacuum. Decisioning options vetted in the full light of public view will by default go a long way toward the prevention of self-dealing.
It is those individuals or organizations who don’t believe they are accountable to anyone, for anything, or at anytime that are nothing more than a disaster waiting to happen. All human beings, regardless of who they are, can be capable of making huge mistakes when operating in a vacuum or under a veil of secrecy. While there are certainly those individuals who are just predatory, bad to the bone people, clearly not everyone who makes a mistake is evil with the intent to do harm to others. Rather many people when faced with a tough situation simply were not operating in an accountable manner, and therefore made a decision that they would not have likely made if they were openly operating under the scrutiny and review of others.
All one has to do is to just pay attention to the recent headlines to understand the critical importance of, and need for accountability. I truly believe that if most of the public figures falling prey to bad decisions of late had been operating in the open light of day, and had they sought counsel in their decision making, that the outcomes of their recent debacles may have been quite different. If you think back to any of the bad and/or regrettable decisions you’ve made in your life, it is highly probable that you didn’t seek the counsel of others (or ignored said counsel) prior to making the wrong decision. Setting up an enterprise wide framework for accountability is as simple as implementing the following five items:
1. Have a clearly articulated statement of corporate values: Not only state the values that you want the entity to use as a foundation for operation, but also use the values to frame your vision, mission, strategy, tactics, and processes. Hire and manage based upon the corporate values. If you hire someone who doesn’t share the corporate values, or don’t hold existing employees accountable for maintaining the corporate values, then you will get what you deserve.
2. Have a written delegation of authority: A written guideline for corporate decisioning will help individuals make good decisions. Describe in great detail which employees are authorized to make what decisions. Establish budgetary and approval guidelines for all decisions, making sure that good checks and balances are in place to help keep employees accountable.
3. Implement a good leadership development program: Utilizing training, coaching, mentoring, peer review, talent management, and other development best practices will help insure that your leaders will continue to grow, and that corporate accountability guidelines are being consistently reinforced.
4. Active Oversight: Engaged management oversight is key to preventing poor decisioning. It is fairly easy to course correct if you’re only a few degrees off course for a short period of time. However, if allowed to wander far astray for great lengths of time, it may be virtually impossible to prevent a disaster. All small problems can be dealt with. However the bigger the problem, and the longer it has been allowed to fester, the more difficult and costly the solution (if there is a solution) will be.
5. Compensatory Penalties: Those individuals who believe they are substantially at risk for poor decisioning will simply make fewer bad choices. Fines, liquidated or punitive damages, compensation forfeiture, restitution, and/or termination will keep most people on the right side of the line.
The bottom line is that individuals, teams, business units, divisions and corporations will be better off when a culture of accountability is adopted. Don’t run from accountability; rather embrace it as a way to manage personal and professional risk.
Related Post: “Rogue CEOs & Board Accountability“
What do I mean by “culturally savvy“? I am not addressing the topic of being politically correct, rather I want you to focus on the importance of simply being cognizant that there is a larger cultural impact on how business is conducted today than ever before. Cultural differences often exist within the same companies…they certainly exist between different companies. Without question there are different cultural business practices in different cities or regions within an individual country. These differences are almost exponentially complicated when you start doing business on a global basis. For purposes of this post we will address how to best blend and manage your internal cultural characteristics with those of your vendors, partners, suppliers, customers and investors who may be located in foreign countries.
The impacts of globalization are being felt by all of us at some level whether we realize it or not. Moreover, it is likely that businesses that once would never have had to deal with global concerns most certainly will as time marches forward. Every culture has their own unique way of functioning, and if you want to remain competitive in today’s market you will need to develop a cultural sensitivity and maturity to your business approach that may not presently exist.
I have been doing business internationally since the mid 80’s. I have traveled to 26 different countries and have done business in Canada, Central and South America, the Mid-East, Europe, India, and Asia. What I have learned in my travels and experiences is being culturally savvy can not only shorten your initial time to market, but also help insure that entry into a foreign market is profitable and sustainable. Learning the language (or at least some common pleasantries), customs, values, and usual and customary business practices are a must for not embarrassing yourself or your company. False starts in a new country can be very costly and often times there a no second chances…
While the basics of cultural awareness mentioned above will get you in the door, it is becoming culturally savvy that will keep you there. I liken international business to acquiring a new company. It is rarely the acquisition that is a problem, rather it is the post acquisition integration issues, many of which are cultural, that often determine the long-term viability of an acquisition. Similarly, it has been estimated that the mortality rate of international joint ventures exceeds 50% within a three year period of time. It is rarely technical competency that is responsible for the high failure rate noted above, rather the reason most often noted for the dissolution of ventures are the problems surrounding the inability to manage and deal with cultural constraints, barriers, and conflicts.
What works in one culture often times simply does not work in other cultures. In fact, many times what works within one country can deeply offend someone from another country. Let me give you an example of how even innocent things can spiral out of control when you’re on foreign soil. Regardless of what you think about Richard Gere’s acting ability, political beliefs, or religious views there is much that can be learned by peeling back the layers on the unwitting and very public faux pas he made a while back in India. Mr. Gere who has long been a strong supporter of the Indian, Tibetan, and Chinese cultures essesntially unwound years work during a public appearance in India in what I’m sure he believed was nothing more than an innocent gesture of public affection. However his cultural perception of an innocence actually insulted much of the Indian public, and in such sever fashion that he had to be rushed out of the country for his own safety and to avoid potential legal consequences. The bottom line is that it pays to do your homework well in advance of doing business abroad. While the incident was later resolved, it should have never occured to begin with.
The most effective way in which to insure your success abroad requires a blending of two key components. The first is selecting the right “in country” partners and advisors. These should be locals who know the ropes from a political, regulatory, legal, tax, and cultural perspective. The local partners should already have a solid network in place that will help you hit the ground running. A common mistake is to just open an office, staff it up, and expect to get the same results that you would by opening a branch office domestically. This rarely works, and in fact can be very costly on a number of different levels.
The second component needed to be successful abroad is to hire a consultant to advise and train your domestic staff on the finer points of cross-cultural integration and interaction. You may select the perfect set of foreign partners and advisors, but if your domestic staff doesn’t understand how to communicate and do business with them on a culturally acceptable basis the venture will be very short lived.
To conduct business successfully in today’s international marketplace requires a commitment to global team building in a multicultural environment. This in turn requires that both you and your organization become culturally savvy.
Because risk management as it applies to executive decisioning is a subject that is not adequately addressed in the educational world, it is often left to lessons of experience. As such, learning how to recognize, understand, quantify and manage risk is one of those lessons that often comes at a very high price. While each individual has a different tolerance for risk, it is how a person chooses to manage risk that will have a direct correlation on their ability to succeed in the world of business. In today’s post I’ll examine the relationships between fear, risk, failure and success.
So, what is the greatest fear possessed by executives and entrepreneurs? It has been my experience that the greatest fear most professionals struggle with is the fear of failure. It is often times this fear of failure that governs how much risk a business person will take, and in turn how successful (or not) they are likely to become.
Fear in and of itself is not a bad thing, rather it is how a person chooses to cope with fear that will determine its effect on their life. Ask anyone who has ever been in combat and they’ll tell you that it is their innate and often heightened sense of fear that helped to keep them alive. A good soldier doesn’t give into fear, but they learn to respect and manage their fear so that it acutally becomes their ally and not their adversary.
Most professionals don’t naturally associate the words “success” and “failure” as having anything to do with one another. However under the right circumstances, failure is absolutely the best experiential learning tool available. Furthermore, I would go so far as to say failure is an essential element of becoming successful. In fact, if you show me a professional who has never experienced failure, I’ll say that professional either hasn’t tried hard enough or is very new to the world of business.
One of my favorite lessons in the world of overcoming failures, and understanding the value of persistence, is what can be learned from looking at the life of Abraham Lincoln. Born into poverty, Mr. Lincoln was faced with defeat throughout most of his life. He twice failed in business, lost eight different elections and suffered a nervous breakdown. The following bullet points represent Lincoln’s chronological path to the White House:
- 1816: Lincoln’s family lost their home and he had to quit school to support them.
- 1818: His mother passed away.
- 1831: He failed in business.
- 1832: He ran for state legislature and lost, also lost his job, and while he wanted to go to law school he couldn’t get in.
- 1833: He borrowed money to start a new business and was bankrupt by the end of the year. He spent the next 17 years paying off the debt.
- 1834: He ran for state legislature again and this time he won.
- 1835: He was engaged to be married and his fiance died.
- 1836: Mr. Lincoln suffered a total nervous breakdown and spent six months in bed.
- 1838: He sought to become speaker of the state legislature and was again defeated.
- 1840: He sought to become elector and was defeated.
- 1843: Lincoln ran for Congress and lost.
- 1846: He ran for Congress again and this time he won.
- 1848: Lincoln lost his re-election race for Congress.
- 1849: He sought the position of land officer in his home state and was turned down.
- 1854: Lincoln ran for the US Senate and lost.
- 1856: He sought the Vice-Presidential nomination and lost receiving less than 100 votes.
- 1858: He ran yet again for the US Senate and lost.
- 1860: Abraham Lincoln was elected President of the United States.
It was in fact Abraham Lincoln who later said: “My great concern is not whether you have failed, but whether you are content with your failure.” Lincoln was obviously someone who was more focused on pursuing his goals than being guided by a fear of failure. Thomas Edison failed more than 1000 times before he successfully invented the light bulb, and he was later quoted as saying: “Many of life’s failures are men who did not realize how close they were to success when they gave up.”
I have a strong belief that fear of failure is far more damaging than failure itself. While successful people overcome their fear of failure, fear absolutely incapacitates unsuccessful people. Over the years I have witnessed business people, who but for being guided by fear of failure, would have likely been very successful. It was Mark Twain who said: “Courage is resistance to and mastery of fear–not the absence of fear.”
Failure is really a matter of reason and perspective. I have met individuals ranging in perspective from those who believe anything short of perfection is failure, to those who don’t consider anything to be a failure. It is not where you fall on the risk spectrum that matters, rather it is how you learn to overcome your fears and manage risk that will determine how successful you will become. My nature is to be somewhat conservative, but I learned long ago that if I were to allow myself to be guided by my fears I would have very few successes. I am a classic example of someone who has learned to manage risk in order to assuage my fears, which in turn allows me to pursue activities that lead to success.
All people have the ability to gain control over their fear of failure by simply defining their tolerance for risk, and then using their new risk tolerance definition to manage their “fight or flight” tendencies. For years I have subscribed to using the following acronym to help overcome fear and manage risk:
Focus: Focus on your values, vision, mission, strategy, goals, tactics and processes. Clarity of thought and attention to detail will take you where you want to go. Don’t focus on failure; focus on success.
Explore: Search out your fears and confront them. Be willing to learn from your fears. I have learned far more from my fears and failures than I ever have from my victories. Introspective thinking is one of the most productive things you can do to advance your learning.
Assess: This is your time to innovate…Take stock of what you learn during times of self-assessment, failure analysis, introspective thinking and research. There is nothing wrong with failure assuming that you learn from it, leverage it, and not fall prey to the same mistakes in the future.
Respond: Develop a bias toward action…Use focus, exploration, and assessment to develop actionable steps to managing risk and achieving your goals. You can accomplish great things through action and few things through inaction.
Bottom line…Don’t be limited by your fears or your failures. The truth is that most fears possessed by individuals are likely self-imposed, and in fact rarely have a factual basis. There is an old axiom that states fear is an acronym for False Expectations Assumed Real. The reality is that most failures are simply stepping stones to future success. Get focused, harness your fears, leverage your fears, and take action. To your continued success…
CEOs are in a state of crisis. As an adviser to CEOs, I can tell you that chief executives are under siege on all fronts…This is clearly a defining time for CEOs as an occupational class. To be clear, I’m not using the term “crisis” as it relates to dealing with the difficulties and challenges associated with navigating a recession, rather I’m talking about CEOs being able to successfully manage the intensity of negative public opinion. In today’s post I’ll share why I believe most CEOs are unfairly being vilified.
Will the actions of a few bad CEOs take down the reputations of all, or is the American public smart enough to see through the blame game currently being played by the media and the politicians? Look, I understand that Americans are upset about the economic debacle we find ourselves presently entangled in. I’m upset and outraged as well. Nobody could listen to the stories of CEO abuse that have circulated in the media of late and not have the hair stand-up on the back of their neck. That being said, not all CEOs are bad guys…in fact I’ll go so far as to say rogue CEOs are the exception and not the rule.
So, are CEOs getting a bad rap? In a word, yes. We’ve entered the blame zone of rash allegations and finger pointing in order to deflect responsibility. While I understand that no sane person could have watched the events of the last few month’s and not want to pin the blame on someone, simply assigning “villain” status to chief executives as a class because their compensation plans seem egregious to some is not the answer.
So, is CEO compensation out of control? In some cases I absolutely believe it is, but not in every case as many politicians and pundits would have you believe. I take great exception to those chief executives that take advantage of the position they hold, the shareholders they represent, and the relationships they’re entrusted with. That being said, the CEOs described in the preceding sentence don’t constitute the majority of chief executives.
I have called for transparency in previously addressing the issue of Rogue CEOs and Board Accountability. I can tell you from first hand experience that most chief executives are hard working professionals who take their fiduciary obligations very seriously. Moreover they hold the position of chief executive while incurring great personal risk and sacrifice. All one has to do is watch a CEO testify on Capitol Hill to know that the buck does eventually come to rest with the chief executive. I would be remiss if I didn’t take this opportunity to chasten the shameless politicians who use national tragedy and congressional testimony as a publicity platform to air venomous soundbites in order to transfer blame and placate their constituencies, but I digress…
At face value, I don’t care how much money a CEO does or doesn’t make. The issue is not the amount of remuneration paid out to CEOs, but rather on what basis, and when it is paid out. Simply put, CEOs that perform deserve all the compensatory benefits that accompany said performance, and to compensate them for the risk they undertake in the execution of their duties. Conversely, those CEOs who fail to perform have no business maximizing compensation to the detriment of the stakeholders they were supposed to be serving. I have no troube with a CEO using a corporate jet to conduct business that is in the best interests of shareholders. It is the CEO who abuses shareholder trust by using the corporate jet for personal gain or frivolous activities that has crossed the line. Again, keep in mind that most CEOs have never even seen the inside of a private jet…
Sure some CEOs are idiots, but so are a certain percentage of people in any occupational class. No doubt CEOs will need to work overtime in order to rebuild trust and credibility with the public…Their actions must match their words, and they need to demonstrate an understanding that holding the title of chief executive is a priviledge, not a right. All of this said, what is perhaps most important for the American public to realize is the true peril that lies ahead if we over-react and neuter CEOs such that they become nothing more than powerless figureheads. Oversight is a good thing, but where were these concerned politicians leading up to this current mess.
Bottom line…it is not wrong to assign some blame to the rogue CEOs who deserve it, but it is terribly wrong to assign blame to those good chief executives just because CEO is printed on their business card.