BY MARK L. FAGAN
With Patrick Gallagher
We see instances of it in corporate America all the time: without the right CEO, a business will likely flounder.
The CEO is responsible for developing a keen strategy for growth, centered on key business drivers such as revenues or gross profit.
Another responsibility, and one that is not to be overlooked, is for the CEO to find strong managers and capable employees to carry out that strategy on a daily basis.
The company comes first: Decision-making becomes easier if you keep in mind that there is no one person ”” the CEO included ”” who comes before the success of the company.
In 2009, we had a lot of very difficult discussions with CEOs, with some of them even breaking down, because they knew they had to lay off people who had been with the company for as many as 20 or 30 years. But not doing so might have caused the company to go under six or eight months down the road, which wouldn”™t have boded well for any employees.
That trickles down to the CEO as well: in tough times, everyone”™s position and salary needs to be examined. Every decision, in good times or bad, has to be made with the company”™s best interests in mind.
You get what you pay for: Most great CEOs know how to identify, retain and develop talent. But having the best talent costs money, while settling for mediocre talent can cost you in the long run.
Too many companies are trying to go on the cheap by hiring at below-market rates. That just doesn”™t work. When you pay at or above market rate, you get to set the expectations and it is more likely that high expectations will be met because you have shown you”™re willing to pay for success.
Additionally, if an employee doesn”™t work out, it will be easier to replace them if the outgoing employee was already working at a competitive salary level.
Fostering leadership: There is a fine line between having reliable, productive managers and having carbon copies of yourself. To have a truly successful management team, you”™ve got to let them be leaders.
As CEO, you want to allow and encourage your managers to bring their own style to the job, while reinforcing your broader strategic goals. If employees see your second-in-command merely barking out your orders like robots, their credibility will be compromised.
Also, expect those managers to fail from time to time. Your managers might be able to predict many of your moves and decisions, but not your every move. The mistakes may cost the company in terms of customers and sales, but those mistakes and losses will be more than offset through the development of strong managers.
Learning from the best: The position of CEO is a lonely one. While on the job, CEOs rarely have mentors in-house to draw on for advice. To fill that void, there are a number of networking groups established exclusively for CEOs.
Vistage (vistage.com) is a good international organization with local chapters, and others include the CEO Mentor Group (mentorusa.com) and the CEO Roundtable (theceoroundtable.com).
Additionally, having a board of directors to serve as a sounding board for strategic decisions can be instrumental in a CEO”™s success.
Balancing loyalties: Family businesses pose their own set of potential issues, most of which revolve around employment, compensation and ownership stakes.
It”™s vital to look at a family business like any other entity and not just as a family operation. The business should be run by the CEO, for the benefit of the owners, and in the direction set forth by a board of directors, which in turn should have some non-family representation to act as an objective voice.
Just as in other businesses, compensation, commissions and bonuses should be based on market value and an employee”™s productivity in relation to the company and determined by the board of directors.
Beyond compensation, owners in any family business may determine that they need to expand profit-sharing to other members of the family who are involved with the business, and may ultimately decide to pass down some of their stake to the next generation.
A family business can be like the golden goose: it has to stay healthy so it can continue to lay those eggs and everyone can continue to feed off of it. But if members of the family are all grabbing for their piece of the business, the goose will stop laying those eggs.
