The era of CEO tenures of ten years or more service at the one company are all but gone – even five years is beginning to look out of the norm. The figures on average CEO tenure vary between studies, depending on regions and industries measured, but almost all come to the conclusion life at the top of the corporate tree is getting shorter.
According to one finding, “the average tenure of Fortune 500 CEOs is only 4.6 years, which shows that CEOs have a limited shelf-life.”
Interestingly, some studies have also indicated the average tenure for Australian CEOs is even lower, and the turnover rate is higher than by global standards, making Australia one of the toughest places to work for executives.
Those CEOs who have stood the test of time have been able to continuously change and reinvent themselves. They have shown the capacity to move with the times in their thinking and attitudes on innovation and disruption. In short, they have been able to continuously reinvent themselves.
This is no easy task because CEOs face the challenge of satisfying both demanding short-term goals as well as longer term strategic aims, which is characterised by American CEO and author Gary Burnison as a “schizophrenic” situation:
“This balancing act between relentless quarterly earnings pressure from Wall Street, coupled with the need for a long-term strategy is why being a CEO can seem schizophrenic: have a long-term strategy, but meet this quarter’s expectations.”
The pressure to perform is immense, which is why it’s so important for executives to constantly be looking at ways they can improve.
The question is, can you challenge the norm?
The answer is yes. It's by reinventing yourself. Being courageous, staying ahead of the curve, looking beyond the horizon, challenging your people, embracing technology, being a disruptor.
This is especially relevant to those CEOs who have successfully traversed the ‘honeymoon’ phase of their time with a company. Usually the motivation to rethink and disrupt is strongest when we first take on a role. We approach entrenched problems and stagnant cultures with fresh eyes and the enthusiasm required to inspire our colleagues to embrace change.
But after this period we are faced with the danger of complacency. Rather than continuing to grow and challenge the status quo we too often sit back and set the controls to comfort zone.
This common phenomenon is known as the “seasons of a CEO’s tenure”. Columbia University business academics Donald Hambrick and Gregory Fukutomi identified five distinct phases in the lifecycle of most CEOs:
Hambrick and Fukutomi’s theory saw the convergence stage as being the peak period of CEO power, but this effectiveness was easily undermined when the executive was no longer engaged in active innovation and disruption, but was in the mode of maintenance and preservation, which then brings about a decay in forward-thinking strategy.
Disrupting the culture, the people, the thinking of a company is vital at all stages of CEO tenure, not only early on.
Recruiting people that are different to you and constantly challenging the way you think and see your company is crucial to staying relevant as a leader. Staying abreast of competitive and technological changes in your industry is another. Looking beyond your industry to find new ways of doing things is also a key factor.
In order to ensure you are consistently creating interest, engaging your people and setting up your business for sustainable and enduring success, you need to continuously reinvent yourself. This holds even more true for those who have been in an organisation for five plus years. Don’t let complacency hold your potential as an effective CEO to hostage.
As business leaders, we are living in a time of tremendous opportunity – sometimes we just have to open our eyes to see it. A greater number of people who in previous generations would have been shut out of many opportunities in business, as well as other fields, are now making their voices heard.
The calls for diversity and equality, which have grown louder over the past couple of decades, have meant CEOs and recruiters have had to reassess their thinking about who the “ideal candidate” may be for a role. We’ve also had to rethink who our customers are, and how we serve them best.
Business people are sometimes tempted to view concepts like diversity and equality as soft and fuzzies; nice-to-haves, but not core considerations. Not only is this an outdated mode of thinking, it also ignores the fact that you should be out there competing for the very best talent, throwing the net far and wide to attract and retain prized recruits. And the gender, ethnicity, sexual orientation, or anything else, of those recruits shouldn’t matter – what should matter is what they can bring to your company.
One of the things that stops us from finding the very best talent is something called unconscious bias. This is when our judgement about an issue or person is subject to a bias we don’t consciously realise we hold. It means we make decisions that we see as objective and rational, but which are actually filtered through a subjective lens we don’t know is there.
Google has done a lot of work as a company to educate its employees about unconscious bias. From both a product development and a company culture perspective, Google views unconscious bias as being an obstacle to better results:
“These biases are shaped by our experiences and by cultural norms, and allow us to filter information and make quick decisions. We’ve evolved to trust our guts. But sometimes these mental shortcuts can lead us astray, especially when they cause us to misjudge people.”
Unconscious bias is understandable because as people we have a tendency to trust who and what we know; we construct our mental framework around our experiences and knowledge. However, we can do things to become aware of our biases and lessen their negative impacts.
In terms of recruitment, the corporate world in Australia has traditionally been the domain of older, white men. This is gradually changing as we experience the benefits that come with increased workplace diversity as a broader range of people move into management and executive roles. Women and people from non-English speaking backgrounds are bringing fresh insights to the table. We need to be able to recognise our blind spots when it comes to sexism, racism, ageism or any other form of discrimination.
It’s your responsibility as a CEO to become aware of your unconscious biases, and to start hearing the voices of the people you might not have previously heard. Because if you’re not hearing these people, your business is probably not listening to all of its customers, and you’re almost definitely not hiring the very best people you possibly could to work in your company.
Many businesses are created and function to solve a problem. It goes without saying then that the master problem solver is often the person at the head of the business: the CEO. But what kinds of problems should they be solving?
Most CEOs have risen to their rank because they know how to solve problems and make things happen. This admirable quality brings with it other hidden problems. We all know the saying ‘the buck stops here’, and it is essentially true: leaders hold ultimate responsibility for what happens in an organisation.
However, while CEOs are held to account for everything in their company, no one CEO can do it all alone – especially not in complex, modern organisations. This means there will be blind spots in corporate oversight; areas of activity where the leader has to trust in the efficacy of employees. This is why it is so important to get hiring right.
When a leader is surrounded by people they can trust to do a job, it frees both the leader to concentrate on high level functions as well as the employee to take ownership of their role. The CEO then fulfils a role as a mentor and coach, carefully measuring and assessing their charges, stepping in when required to lead by example and offer experience and insight.
Because of their authority and status, CEOs often have to carry a monkey or two on their back – problems offloaded to them by inexperienced staff, underperforming department heads or overworked C-suite colleagues. These monkeys unfortunately can grow into gorillas, and before long, the CEO is cleaning up a lot of gorilla mess and taking their eye off the ball.
Another issue is that people who are good at something usually like to do that thing, which means problem-solving CEOs find it hard to knock back a challenge. This is a great trait, of course, but it can lead to overload and even burnout, with the CEO putting out spot fires rather than overseeing operations and strategy. This is an unwise use of time and resources.
The smart CEO needs to learn how to delegate. They have to be aware of their leadership style and how that style interacts with colleagues and key employees.
One simple method of thinking about delegation is to apply this five-step process, whereby you assess:
Once the assessment process is conducted, the CEO will need to monitor and provide feedback to the employee until the problem is resolved. So rather than accepting the monkey, so to speak, it becomes a matter of the CEO helping the employee become a better monkey trainer. This creates greater capability and confidence in the employee, and allows leaders to use their experience and knowledge in the best possible way.
Very few leaders have the luxury of being completely removed from their employees’ problems. Learning how to guide and mentor your employees will help to bring out the best in both them and you.
How we organise our workspace can have a big impact on creativity, innovation and collaboration. When an office space works for employees it can increase productivity, efficiency and harmony, but when it doesn’t, there can be a marked drop off in those metrics.
The positive results of transforming workspaces into open plan design, incorporating concepts such as hot desking, have been championed by many design experts, who say it opens employees up to new interactions and ways of working.
If you’re not familiar with the term, hot desking is when multiple workers use the same desk or workspace at differing times depending on need. This is often facilitated by the use of enterprise software that can assign resources according to calendar bookings. One of the most advanced versions of this type of arrangement is Deloitte’s the Edge building in Amsterdam, which has been called “the smartest building in the world”:
A day at the Edge in Amsterdam starts with a smartphone app developed with the building’s main tenant, consulting firm Deloitte. From the minute you wake up, you’re connected. The app checks your schedule, and the building recognizes your car when you arrive and directs you to a parking spot.
But some say this scenario, when badly done, creates the new corporate version of the Hunger Games – people not feeling like they belong or that they have their own space in which to work and concentrate on tasks. The antithesis of the hot desking utopia is portrayed as employees madly scrambling for stark, impersonal desks tables which have been stripped of character and utility.
We’ve been thinking about the best way to organise work space for a long time now. This is from a British government report published in 1865: “...for the intellectual work, separate rooms are necessary so that a person who works with his head may not be interrupted; but for the more mechanical work, the working in concert of a number of clerks in the same room under proper superintendence, is the proper mode of meeting it.”
In fact, if you really wanted to go back in time, you could even argue the famed Greek agora – the large, open meeting places in cities like Athens – is the model for the forward-thinking innovation spaces favoured by companies such as Google and Facebook.
As this Live Science article points out, “Some of the world's most important ideas were born and perfected within the confines of the Athenian agora including, famously, the concept of democracy.” Just as some of the finest minds of Ancient Greece went about their knowledge work, so too the finest minds of the tech age do the same in places like the Googleplex and at Facebook’s MPK20 (Menlo Park Campus Building 20).
Facebook’s staff moved into MPK20 last year. The Frank Gehry designed space comes complete with 36,400 sqm landscaped roof, an 800 metre walking loop, 400 full-grown trees, WiFi, and plenty of spaces for employees to either work outdoors in the Californian sun or in specially appointed hangout spaces.
The company’s chief people officer, Lori Goler, says it’s a space designed for “bumping into people”.
"It really creates an environment where people can collaborate; they can innovate together. There's a lot of spontaneity in the way people bump into each other, just a really fun collaborative creative space."
Not all businesses are Facebook and the workspace requirements of each company depend on variables such as number of employees, building style and capacity, company culture, and of course the resources available to the company.
It can be tempting to jump on trends like hot desking as a way to jumpstart an innovation culture in your company. But you do have to think carefully about whether the creativity dividend (as well as potential cost savings) that may come from such a measure will be outweighed by the disruption of people wandering about looking for a free and usable workspace.
Failure is not an easy subject for successful people. By definition, successful people do all they can to avoid failing. So you could be forgiven for thinking the idea of embracing failure is a foreign concept.
But there are many different ways to fail and many different things we can learn when we fail. Richard Branson did not suddenly become a failure when his venture into the world of soft drinks, Virgin Cola, lost its fizz. He learnt that concentrating on Virgin’s key areas of competitive strength was a better option than taking on Coca-Cola.
One of the biggest companies in the world, Google, has a whole division basically set up to fail: Google X – which has recently changed its name to just plain X. Google’s founders Larry Page and Sergey Brin might have been disappointed that Google Glass, one of the products that came out of the Google X laboratory, never took off, but they are still among the most successful entrepreneurs of our time.
The secret to making friends with failure is all about setting the framework of the relationship.
As a CEO, you are charged with the task of making sure your company does not fail. There is no dancing around this basic proposition with clever semantics; your key stakeholders, your board, shareholders, the ATO and ASIC are only interested in your bottom line success.
This is the tightrope the modern CEO must walk. Making friends with failure is about being open to new possibilities; it’s about trusting and allowing your colleagues to extend themselves in directions that will test their limits and maybe even those of the company. Empower your people, give them the ultimate permission to be adventurous, creative and innovative. Give them permission to make mistakes.
Just as you might follow the ‘hire slow, fire fast’ dictum in regard to recruiting your staff, you need to be able to trust those around you (and yourself) to ‘fail fast, fail often’. This is a mode of thinking big companies have had to learn and adopt from the nimble competitors that have come along in this age of disruption.
However, to fail fast does not mean to fail stupidly. The CEO needs to be able to stack the odds in their favour when negotiating the framework of this relationship with failure.
Your people are not your most important resource, the right people in your organisation are! Hire capable people, foster the right culture, and put in place systems that encourage bold action and you’ll put your company in a position to learn from its mistakes and to grow and excel.
Here is what I would like all CEO’s to do in the near future.
Gather your direct reports, senior management, and any other enterprising young talent in your organisation, book a day away from the office and sit down with one objective in mind – how to kill your business.
That’s right, brainstorm all day on what it would take to destroy all the value in your business. On how many different ways your business could be struggling sooner rather than later – new competitors, older but smarter competitors, new products/services, remodified products/services, clever marketing/digital/social media campaigns to bring new awareness to a client/product/service, price differential strategy, new market strategy and the list goes on.
Spend all day extending your brain cells to think of ways that you could be out of business within a month.
What is the point of this you ask? Quite simply, it will give you the impetuous to ensure that your business survives not only tomorrow but also into the foreseeable future.
It was a strategy that legendary ex-CEO and Chairman Jack Welch regularly undertook with his senior management. Welch, as we all know from his time as CEO and Chairman of GE, took the company through a 4000% growth phase between 1981 and 2001. Welch has now founded the Jack Welch Management Institute at Chancellor University in the US that offers an online MBA. Welch was known for creating an innovative culture, which symbolises GE today, and that is imperative for all small, medium and big businesses if they want to survive.
It is very easy for a business to get complacent, especially if you are doing well. In fact, one of the biggest killers of business is success because people become complacent. They stop looking over their shoulder and start looking in the mirror. While it is good to have a healthy ego, it also needs to be curtailed.
By gathering all the talent in the company into one room it focuses their one mind on the one key principle of the day – looking at ways your business could be infiltrated.
It also creates a sense of unity and a common goal. By focusing all your attention on the one task everyone feels a sense of purpose and can put aside their daily roles for one day. The outcome of the day should result in you identifying what within your business needs to change or at the very least, improved.
There is no need to be daunted by the challenges out there, in fact you should embrace new and existing competition and continue to align your staff with the common goals of the business.
For starters, you can look at your internal structure to see if you have the right people in the right positions or if you even need to create and/or expand a division. This will give you the chance to see employees in a different light and understand their strengths and weaknesses. There may be some senior staff who are capable of more there may be some for whom it is time to walk out the door.
Welch created a Vitality Model consisting of a ‘20-70-10’ system, where you categorize the top 20 per cent of employees, who are the most productive, the 70 per cent that work adequately, and are considered vital to the organization, and the remaining 10 per cent as, well, the non-producers. They should be fired immediately. This may seem harsh but it actually might be what your business needs to stay ahead of the competition.
Even if you don’t have the marketing spend to match a new competitor, you can always review your business processes, internal communications and even your business model. There may be markets you are not fully servicing or even some that you are ignoring completely. There may even be social media channels that could be creating awareness of your product or service that you aren’t capitalizing on yet.
Looking forward and thinking about the future is important. Anticipating what’s coming around the corner in integral. If you prepare for the worst-case scenario of a competitor starting to rise to the top, you will be ahead of them immediately. By looking inward at your management set-up, your operating systems, your reporting divisions and lines, along with your business processes, you are actually reviewing your business as a management consultant would – without the fees.
Killing your business is actually saving your business and creating a more profitable business model for the future.
The competitor of tomorrow is already here, it is just that they are not in the office next to you, or in the building down the road, but rather in a mobile location planning their strategy to take you on and ultimately surpass you.
Are you ready for that challenge?
It is those businesses that are resilient that stand the test of time.
In fact, when I think of resilience one business and one CEO always comes to mind – Ron Santiago, managing director Europcar Australia and New Zealand. Ron Santiago has been in charge of Europcar Australia since 2008. That’s right, when the GFC hit and the business was losing $1 million a month. Rather than walk away from such a significant challenge, Ron set about with one task in mind – to make the business profitable as soon as humanly possible.
By the end of 2009, when most businesses were still struggling with the after effects of the GFC, Santiago had turned the business around to be in the black. How did he achieve this? By simply achieving excellence in every aspect of the business. Ron believes that by listening to your customers and putting them at the heart of your business, especially in the service industry, means that you will not go far wrong with what you are trying to achieve.
His philosophy of managing people, leading by example and creating a culture where people are valued, instils confidence and belief in his employees to be the best they can be.
Perhaps it is humble origins that enabled him to manage people at all levels and understand the service industry so well. Perhaps it is just his intimate understanding of business that have enabled him to have Europcar Australia and New Zealand a leader in the domestic car rental market. Perhaps it is a combination of everything.
Back in 2008 Ron reorganised Europcar Australia, which resulted in the alignment of business divisions leading to sustainable growth and profitability. These solid foundations have allowed the Europcar team to establish further businesses processes creating a defined culture to focus on continual improvement of the customer experience, which ultimately contributes to growth. So, what have been the results for Europcar Australia since Santiago took over? Europcar has won Australasia’s Leading Car Rental Company from 2010 to 2014. The company has won the award eight times in the last 10 years and Europcar are again nominated in 2015.
Other notable achievements include winning the Australian Government’s joint rental car provider back in 2012. In 2014 Europcar secured the number three market share position in the Australian domestic market. More importantly, they are recognized as the best car rental company with respect to customer experience, product quality and innovation.
Resilience is an important trait of any individual and any organisation. For CEOs it is important that you have a guard of invisible armour around you at all times, as you seem to be fighting never-ending battles.
The macro and micro economic environments are one that will challenge any CEO on any given day. Speed to market, agility and adaptability to new market conditions is essential for any CEO to make his or her mark in the world.
We live in a constantly changing environment. Yes there is a level of change fatigue, but the reality is change is here to stay, accept it, embrace it, and get on with it. So adapt your business to it, otherwise you won’t survive.
CEOs of today need to understand that the speed of change is upon us. It is important that all leaders build models for their business that are flexible and can deal with different types of situations that may possible arise over night. Same too with the staff we employ today. They have different expectations of what an employer should provide for them and unless we get to know our staff, not only will we not get the best out of them, but the business won’t reach the heights it is capable of either.
Any CEO just needs to look at the example of Ron Santiago to feel inspired.
With 23 years of rental industry experience spanning the UK, Europe and USA and having started his career from the ground up as a rental agent at Miami International Airport in 1987, Santiago’s journey to now being the managing Director of Europcar Australia and New Zealand, is an inspirational one – and a true example of resilience.
As Australians we all know that we live in a lucky country. In the 1960s Donald Horne wrote this very phrase and it has been an iconic Australian saying. Australia is seen as a country that never really experiences hardship, whether that is economic recession, civil revolution or horrific weather conditions and a place where the people don’t feel the brunt of international events. It’s almost as though we have managed to avoid these very real issues. Where does this leave Australians – are we taking everything for granted?
If we dig into our history, we will find that the backbone of the Australian economy is its natural resources. The minerals that Australia enjoys has allowed for unprecedented growth throughout the 21st century during the mining boom. Our standard of living is amongst the highest in the world, our health services and education are enviable, and our stability in government (dependent on one’s opinion) has helped Australia grow to become the economic powerhouse it is today. It’s easy to see why Australia is just lucky, due to its resources, geographic isolation and relatively cohesive society.
But do we whinge too much about what we don’t have?
We tend to forget how good we have it when this standard of living becomes normal. Due to our disposable incomes rising and the population consuming more and more, this lead to further capital being pumped back in the economy causing growth. Simple market mechanisms showed that consumer confidence rose prior to the GFC – it was a millennial party for the majority of the population. But when the impacts from Wall Street hit our fair shores, the music seemed to stop and the revolving hordes of people adding to economic growth declined. The government realized that if nothing was done, Australia would have ended up like other countries that still suffer from GFC. It doesn’t take a lot of research to realize the Eurozone isn’t in the best shaped, over half a decade on.
Australians are indeed lucky, but that luck is not the will of fate – it comes from concise planning and innovation. Not purely our mineral resources. The stability we experience now is not akin to the surplus of the earlier part of the 21st Century, but we have managed to evade a deep trauma. But are we still whingers?
The answer to that question is indefinite. Allowing a whole country to have a hang-up on complaining is absurd. The waves at Bondi Beach still lap against the sand, the rains still hammer down in Darwin and awaken the arid centre of Australia with a flourish of flora and fauna. We have university graduates entering into industries and businesses that are changing the world. Our cities are consistently dubbed the most liveable in the world and at the end of the day the stability we have is thanked for, consciously or subconsciously.
The nation of Australia is not a place of whingers, rather it is a place of betterment and innovation with individuals that have hard-work bred into their DNA.
