Founder's Mentality Blog
CEOs: How Well Do You Know Your Company?
CEOs: How Well Do You Know Your Company?
Eight questions can pressure test whether or not a CEO is in control of the business.
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Founder's Mentality Blog
Eight questions can pressure test whether or not a CEO is in control of the business.
In my recent discussions about strategy with the leaders of some of the biggest family businesses in South America and Turkey, we covered a number of topics. One of the issues they raised is the difficulty holding companies have in accessing the actual performance of individual underlying businesses.
The problem they presented is a common one among large conglomerates. The conglomerate has a number of large divisions, and each division is made up of many different smaller businesses. In reality, the holding company holds a set of holding companies, and its managers are at best two steps removed from the person who actually runs the business. In most cases, they are three or four steps removed. As one head of planning told me, “You talk about the difficulty that CEOs of large corporations have in meeting regularly with their business unit heads, but for us it is far worse. Our group CEO never actually meets with the head of any business. He meets with divisional heads who are far removed from the running of the business. They are always at such a high level of abstraction that no one can talk about real business issues; no one has specific knowledge.”
As we unpacked this problem, we explored the tools that conglomerates typically use to manage this complexity. The list is a good one, used by many professional firms. To gather specific data on real business units, a central office sends out templates with requests for information on:
We all can easily imagine the sets of 50-slide PowerPoint presentations that each underlying business unit assembles. On one level, the holding companies don’t suffer from a lack of data about the underlying businesses; they are awash in it. However, most top leaders confess that it is very difficult to see below the surface of each business and get a sense of what is truly going on.
So we started brainstorming, asking ourselves: Is there a CEO checklist? Is there a set of questions we could ask any business head that would begin to give us a feel for the underlying culture of the company? More importantly, is there a way to gain more insight about the CEO himself or herself?
Our confident answer to all was “yes.” We agreed that with a little time, we could develop a set of questions that would pressure test whether or not the CEO was in control of the business.
By no means is the list I share below sufficient, but it’s a start—consider it Draft 1.0 of the CEO Checklist.
One journalist in India last year said he could always tell an “EGO” (someone skating over the top of the business for the power and prestige) vs. a CEO (a true leader). He asked them a simple question: How is your recent acquisition going? An EGO talked about the market price performance after the acquisition and what would happen with the next one. A CEO talked about all the problems he or she was having integrating the two companies and retaining key customers and employees.
An EGO could probably answer the eight questions well, but a true CEO will be refining his answers to these questions every moment of every day.