The Whitehead Mann Leadership Debate

THE WHITEHEAD MANN LEADERSHIP DEBATE

What makes a great Chief Executive? What makes a great Chief Executive? Material consists of 80% recycled certification. recycled post-consumer certification. NAPM FSC fibre; 10% TCF (totally chlorine ); m ill Paper 10% accredited ECF (elemental with ISOchlorine 9001 andfree). ISO All 14001 responsibilities status. to the local environment and manufacturing processes are strictly monitored. Contact Carol Leonard All rights reserved. No part of this publication Whitehead Mann is one of the world’s best-known leadership consultancies may be reproduced, stored in a retrieval system, working with clients to create value through people. As an independent, Whitehead Mann or transmitted in any form or by any means, international partnership, we work as a single team to deliver deep sector Ryder Court electronic, mechanical, photocopying, recording and functional expertise. We are authorities in the areas of leadership; CEO 14 Ryder Street or otherwise, without the express permission concerns; CEO characteristics and career issues at Board and CEO level. SW1Y 6QB of the copyright owner. Our long track record is built on our contacts, judgement, the quality of our t +44 (0) 207 024 9000 © The Whitehead Mann Partnership LLP board placements and our ability to identify the CEOs of tomorrow. Over 90 f +44 (0) 207 024 9001 of Europe’s top 200 companies and most of the FTSE 100 companies and e [email protected] Fortune 500 organisations have retained Whitehead Mann.

www.whmllp.com www.whmllp.com Contents Acknowledgements 4

Interviewees 5

Foreword 7

Introduction 9

Summary 10

Characteristics of great CEOs as identified by their peers 14

Other aspects of success 20

A great CEO: the ten X Factors 22

Best of the boardroom 26

The definition of success 29

Situational leadership 31

Issues 32

Conclusion 37

Methodology 38 4 The Whitehead Mann Leadership Debate

Acknowledgements Our thanks are due to all the interviewees who volunteered time during their busy schedules to take part in this project. The interviewees all hold senior positions within one or more organisations, with inevitable pressures on their availability. But they all recognised and appreciated the significance of the questions being raised by this research, and felt it important to take part and express their views. Some asked to remain anonymous but many of them are listed on the opposite page. Thanks are also due to the many partners within Whitehead Mann who carried out the interviews and produced such rich and thought-provoking feedback.

The views expressed are those of our participants and not necessarily of Whitehead Mann or its partners and are, by definition, highly subjective. What makes a great Chief Executive? 5

Interviewees Name Company Name Company Marcus Agius Barclays Mike Humphrey Croda International Mark Andrews NG Bailey Bob Ivell David Lloyd Leisure Sly Bailey Trinity Mirror John Kelly Gala Coral Group John Barton Next Christian Koefoed-Nielsen Sir Winfried Bischoff Guy Leech Treasury Holdings Properties Sir Victor Blank Lloyds TSB Group Rob Leith Standard Bank Tom Bloxham, MBE Urban Splash Group Alan Lovell Infinis John Botts Botts & Company Derek Mapp Informa Tim Breedon Legal & General Group Michael Marx Development Securities Dr David Brooks Oxitec Bronek Masojada Hiscox Nick Bubb Pali International Brian May Bunzl Brian Buchan Burton’s Foods and R&R Icecream Dr John McAdam Simon Burke Superquinn Sir Callum McCarthy Mark Clare David McCarthy Toby Courtauld Simon Melliss Bob Cowell Makinson Cowell William Mills Citi Jonson Cox AWG Iain Napier Imperial Tobacco Group Eric Daniels Lloyds TSB Group John Napier RSA Insurance Group Sir Reed Elsevier Group Bill Oliver St Modwen Properties Dane Douetil, CBE Brit Insurance Holdings Simon Oliver Dairy Crest Group Jan du Plessis Sir John Parker National Grid Richard Entwistle Jarvis Harry Platt David Fischel Liberty International Quintin Price BlackRock Martin Flower Croda International Tony Pryor Halcrow Group Katherine Garrett-Cox Fernando Ribeiro F&C Asset Management Sir Christopher Gent GlaxoSmithKline Anne Richards Aberdeen Asset Management Sir Peter Gershon, CBE Premier Farnell Sir John Rose Rolls-Royce Martin Gilbert Aberdeen Asset Management Francis Salway Land Securities Group Charles Goode ANZ Hector Sants Financial Services Authority Richard Gregory, OBE Yorkshire Bank Nicholas Scarles Anthony Habgood Bunzl and Whitbread Mark Selway Drummond Hall Mitchells & Butlers Tony Shiret Credit Suisse Sir Philip Hampton Sainsbury’s Timothy Stevenson Dr Alan Hearne RPS Group Peter Sutherland, KCMG BP Keith Henry Regal Petroleum Nimble Thompson NG Bailey Stephen Hester The Company David Turner WSP Group Terry Hill Arup Group John Varley Barclays Sir Christopher Hogg John Von Spreckelsen Merchant Equity Baroness Sarah Hogg Sir Robert Wilson BG Group Christopher Honeyborne Dyson Group Roger Yates Henderson Group Nigel Hugill Lend Lease Europe 6 The Whitehead Mann Leadership Debate What makes a great Chief Executive? 7

Foreword We can all spot the successful chief executive, but what are the qualities that a great chief executive needs for success? That is the interesting question which Whitehead Mann’s latest research has set out to explore.

The greatest business leaders are those who set a clear vision, prepare coherent plans to achieve their aspirations and lead their team to successful delivery. They need to do this against a backcloth of sometimes competing expectations from several constituencies – their board, their shareholders, senior executives, staff throughout the business and the wider community.

Recognising that any chief executive operates their business in an environment which is partly out of their control, the key qualities must include an ability to lead, inspire and motivate people, the ability to communicate well to all shareholder groups, and the ability to be fleet of foot. As we have seen recently, the external environment can change through economic or political circumstances, unexpectedly and quickly.

As a chairman, you know how blessed you are if your chief executive exhibits these skills. It makes our role much more satisfying and perhaps a little less demanding.

This report from Whitehead Mann is timely and relevant because it demonstrates how to recognise what makes a great leader.

Sir Victor Blank

Chairman Lloyds TSB Group 8 The Whitehead Mann Leadership Debate

What makes a great Chief Executive? Great chief executives are those who have a clear vision and integrity of purpose What makes a great Chief Executive? 9

“The idea that there is one model for the ideal CEO is quite wrong.” Sir Callum McCarthy

Introduction Having a vision and clarity of purpose is without with soaring commodity prices, have created an doubt the hallmark of leadership, whether in entirely new and challenging scenario in which the world of business, politics, the arts, sport or businesses have to operate. science. There are also different pressures on back at some of the great business leaders contemporary leaders; the glare of publicity, of the twentieth century and you will see that the scrutiny of a stock market listing and the they all stood for something. All have one pressure for instant returns make it harder than defining feature – vision. Henry Ford, Andrew ever to lead a business, to invest for the future Carnegie, Giovanni Agnelli, Michael Marks and and to implement a long-term strategy. The Tom Spencer, John Sainsbury, Charles Rolls and pressure of a 24/7 society and the accompanying Henry Royce all built superb businesses and left a communications technology means there is remarkable legacy. And is it too soon to mention never any escape. Does this mean that leaders the legacy of Steve Jobs, or Larry Page and today need different skills? Do they have to be Sergey Brin? better equipped than ever before? Have some business leaders turned away from the world Are there leaders today who will leave similar of the plc? legacies? Does short-termism coupled with accelerated pace and tougher economic In a series of in-depth interviews with some of conditions mean it has become more difficult for the top business leaders in the UK, and several individual business leaders to make an impact? A senior members of the investment community, fragile financial system and potential recession in Whitehead Mann’s study sets out to explore some the western world, increasing demand from more of these issues. affluent populations in and India, coupled 10 The Whitehead Mann Leadership Debate

Summary Whitehead Mann undertook this study of a number of different skills including creativity leadership to explore in greater detail what and the ability to analyse data. makes a great CEO. We interviewed more than 80 people including FTSE 100 chief executives As one interviewee said: “People often think and chairmen, City fund managers and financial that you can only be either creative or numerate. analysts, to find out what they believe those The reality is that many of the very best leaders qualities are and how to recognise them. are those who combine a range of skills from both sides of that divide. They can communicate We also asked them which CEOs they admire well and they can adapt to different stages of and respect the most, and why. Of the 100 the business cycle. The most crucial quality of business leaders cited by our interviewees, all, however, is to be able to inspire the people eight individuals were awarded three or more around you – that’s the way to create a truly commendations. These eight have all either run good, competitive and sustainable business. The or are still running long-established businesses, best leaders are actually really rather nice, decent, operating mainly in mature sectors. Seven of well-rounded individuals. Driven and competitive, these eight businesses are UK based, five are but full of integrity.” retailers. Five have tenures of ten years or more, and all of the top eight leaders are men. This all This view was reinforced by many of the other suggests not only that leaders need time to prove interviewees who agreed that when a new CEO themselves but that it may be easier to judge joins a company it is up to them to create or those who are more in the public eye. drive the culture. Really good leaders are those who do this subconsciously, setting a style which All the interviewees agreed that the two most inspires others, that infiltrates and changes the important attributes of a great CEO are being culture. Another interviewee said: “People will visionary and a person of great integrity. They still follow an ordinary leader because they are agreed that it is possible to be an effective used to the command-and-control situation. But if leader with one but not the other, but the most you have a leader who is inspiring, then you can powerful combination was when CEOs displayed get fantastic results.” both. While having a vision is considered the most important characteristic, it was also felt Many of our interviewees said that the CEOs they that the very best leaders are those who combine admired the most were those who demonstrated What makes a great Chief Executive? 11

concern for their employees and cared about tenure of a CEO had fallen. Several of the their progress. Participants highlighted that the interviewees said they felt that being a CEO had smart CEOs were often those who helped develop become significantly tougher over the last few the next generation of managers, helped develop years. One said the physical as well as the mental their board and worked on developing their own demands had made the job almost “unbearable” successor. This was not seen as altruism but as a while another said being a CEO has become a vital part of building a strong team culture and three-year job. Most of the interviewees agreed that long-term support within the business. short-termism on the part of investors is the reason behind the reduction in tenure. In general, Our study also looked at some of the emerging between five and eight years was seen as being the challenges facing CEOs today. We asked our right time for a CEO to stay in their position and to interviewees if they thought the role had become achieve their goals. more difficult and why they thought the average 12 The Whitehead Mann Leadership Debate What makes a great Chief Executive? 13

“… if you have a leader who is inspiring, then you can get fantastic results.”

Only a few years ago, being the CEO of a FTSE This is the new mantra. Indeed, one of the company was seen as the pinnacle of a business surprising findings from this study was the leader’s career. This is no longer always the relative lack of importance now given to the case as the explosive growth of the private outside world by the interviewees, even in equity industry has shown in recent years. The the publicly-quoted sector. Most interviewees remuneration is greater, and the public scrutiny suggested that CEOs should be mindful of is less, than for a listed company. Private equity- spending too much time with either City advisers, backed businesses have become an attractive shareholders or the media, concentrating instead alternative place to work for some CEOs. on looking after their main business.

As one interviewee said: “If you want to make serious money and you don’t have an ego, go into private equity.” 14 The Whitehead Mann Leadership Debate

Characteristics of great CEOs as identified by their peers

What are the defining features of a great CEO? By David McCarthy, Retail Analyst, expressed the definition, the role is about “leadership”, but is it same sentiment: “Sometimes [it’s] about stopping possible to break down business leadership into it from sinking, sometimes about re-setting sail.” different elements? And, more ambitiously, is it Another CEO said: “It depends on whether a possible to identify the relative importance of company is publicly listed or privately owned those different elements? – there is less immediate pressure for performance in a private business.” How important is having a vision of where the company should be heading? Is the style A similar comment was made by Dr Alan Hearne, of leadership half as important? A quarter? Chief Executive of RPS Group: “I think a private Is delivering financial performance more or equity firm would take the view that if we don’t less important than developing strategies for meet the numbers that’s OK, provided that we sustainable success? are setting the groundwork to sell the business in three or four years’ time… They have a different Participants were given ten factors to score in time frame.” terms of their relative importance in being a successful CEO. This provided some interesting Hearne added that the role has changed insights into what CEOs themselves see as more dramatically: “I think the job has moved over the or less important characteristics. last ten to fifteen years, from being more rounded to being much more narrowly focused on meeting Sir Callum McCarthy said: “It depends hugely on the numbers – if you don’t consistently meet the the circumstances. In some industries, change is numbers, you’re a dead duck.” incessant; in some industries, it’s about getting operational efficiency. The requirement therefore Dr John McAdam, agreed: “You should assume reflects the circumstances.” that you won’t be given a long time if you cannot provide [consistent financial performance].” What makes a great Chief Executive? 15

Table 1 Top 10 CEOs’ characteristics and behaviours as perceived by interviewees

Relative ranking % score*

1 Bring real vision of where the company should be heading 15 2 Deliver consistent financial performance in line with or above the market But being able to deliver consistent financial 13 performance was not seen by participants as the most important characteristic. “Vision of where 3 Produce competitive strategies the company should be heading” – a much more for sustainable success long-term concern – was seen as the most vital 12 quality. 4 Develop the next generation of managers, the board and their own successors Table 1 illustrates the relative importance of the different characteristics of a great CEO. As David 10 Turner, Chairman of WSP Group, said: “Vision… 5 Manage the internal stakeholders has to come first”. (employees and management team) 10 Without exception, all the interviewees highlighted the CEO’s responsibility for the 6 Step up to the mark in a crisis and assume responsibility long-term strategy. One commented: “The CEO is responsible for everything that happens 9 – and everything that doesn’t happen.” 7 Manage the external stakeholders (the City, shareholders, regulators, media, public) While Tony Pryor, Chairman of Halcrow 9 Group, said: “The CEO chairs strategy.” 8 Work well with the chairman and board and be seen as a team player One of the UK’s most highly rated industrialists, who preferred to remain anonymous, added that 8 the most important thing was: “Understanding 9 Have a proven track record of success what are the appropriate opportunities for the (not necessarily at CEO level) company – but also its limitations.” 8

10 Tailor his/her leadership style to fit the culture 6

* Total number of interviewees responding to this topic = 80 16 The Whitehead Mann Leadership Debate

“Manage and lead the firm and the rest will fall into place.” William Mills

Francis Salway, Group Chief Executive of Land There was widespread agreement among those Securities Group said: “[The] ability to work out interviewed that developing the next generation the business’s competitive advantage is critical.” of managers, the board itself and in some cases their own successor was more important than Indeed, Jan du Plessis, Chairman, British managing or influencing external stakeholders, American Tobacco, said that vision and looking as seen in Table 1. to the future are crucial and far more important than short-term financial goals. For him: Quintin Price, Chief Investment Officer, Europe, “A good chief executive… [must always be]… Middle East, Africa and Pacific of BlackRock thinking about the real, long-term issues facing highlighted the importance for a CEO to: his industry… [otherwise]… that is how you get “…be able to reach out and connect, really touch, businesses that do very well for a number of years the employee population. It is not about purely and then suddenly fall over a cliff… because the managing stakeholders, it is about inspiring chief executive and the board didn’t spend enough them.” time thinking about the future.” The fact that managing internal stakeholders was He went on to comment: “I think that a chief seen as more important than managing external executive who spends so much time worrying stakeholders might come as a surprise. about the external world and, frankly, image and communications, has got his priorities But, as one CEO said: “External stakeholders screwed up.” should take care of themselves.”

This echoes “Resource Based Theory”, an approach to business strategy, which sees a firm as a collection of capabilities and emphasises the role of top management in creating a match between those capabilities and its external environment. As William Mills, Chief Executive Officer, Western Europe, Middle East and Africa of Citi stated: “Manage and lead the firm and the rest will fall into place.” What makes a great Chief Executive? 17

“Vision… has to come first.” David Turner 18 The Whitehead Mann Leadership Debate

“Be able to reach out and connect, really touch, the employee population. It is not about purely managing stakeholders, it is about inspiring them.” Quintin Price

Many interviewees claimed commentators Many interviewees commented that CEOs exaggerated the importance of the City, the and their peers should be wary of being analysts and the investment community. They over-influenced by the City – and some had provided frank advice that wouldn’t come become frustrated by what they perceive as from a Business School: “The City is not good its short-termism. Many of our findings reflect at absorbing a trend that isn’t upward-driven interviewees’ beliefs that the CEO should focus and therefore often overreacts to any sign of bad on the long-term strategic vision rather than next news,” said Dr Alan Hearne. quarter’s financials. This is in spite of the fact that CEO tenure is decreasing. Sir Victor Blank, Chairman of Lloyds TSB Group: “I am worried when a chief executive officer has to Tailoring leadership style to fit the organisation spend 25 or 30 percent of his time on the external was seen as being relatively less important, with market and analysts, it may not be unusual, but some participants advising against doing this. I think it is too much… but the fact is that major shareholders want to see the chief executive.” As Sir Philip Hampton, Chairman of Sainsbury’s, commented: “The notion that a CEO coming into Influencing external stakeholders and managing a business must adapt to that business [is one] I their perceptions and expectations is clearly struggle with, as I think that most of the pressure part of the role of a plc CEO. Nevertheless, should be in the other direction” many of the CEOs we interviewed felt it was easy to over-emphasise its importance. Several He added that this was particularly the case in of them cautioned against being seduced by the a turnaround situation, “where the new CEO or temptation to spend too much time on it. This team should always make a major impact. In the is an interesting and relevant point for anyone best run businesses, however, the new team may aspiring to the role of CEO – particularly for rightly push for more continuity.” those hoping to be promoted from CFO and for those involved in the appointment of a CEO. What makes a great Chief Executive? 19

Sir Christopher Gent, Chairman of GlaxoSmithKline said: “Culture comes from the top – and it may be that you need a fundamental change.”

On the issue of personality and style, another CEO added: “I am the way I am, and I am not going to change. So it would be very hard for me to change my style because… of a move from one company to another.”

Whitehead Mann’s experience of board searches would confirm that clients are more attracted to a track record of strong leadership, and less concerned about leadership ‘fit’.

Although tailoring leadership style to the company was not seen as a pertinent characteristic of great CEOs, leadership style itself was seen as important by some (but not all) participants.

Derek Mapp, Chairman of Informa said: “A good CEO commands respect by their charisma, the quality of engagement, how they deal with people. [You] need energy and a sense of humour, [and you] need to be honest… you need proprietary honesty.” 20 The Whitehead Mann Leadership Debate

Other aspects As well as rating the importance of ten given Several interviewees mentioned “intellect” as of success characteristics, participants were asked to a vital characteristic of a CEO. Stephen Hester, propose others. Chief Executive of The British Land Company, commented: “Intelligence is important – a CEO Nick Bubb, Retailing Analyst at Pali needs to get quickly to the best answer.” International, said: “There are two core things that are important: a feel for and understanding Some might see this as surprising, particularly of the market (and what gives the business a in light of the perceived anti-intellectualism competitive edge) and a feel for the numbers/the within parts of British management. Others ability to talk about numbers in detail.” might see intelligence as ‘a given’. What is more interesting, though, is that none of the other He added: “There are some [CEOs] who have a participants mentioned technical skill sets, such good grasp of one of these core factors – but not as financial literacy or brand management, or the other.” academic qualifications such as MBAs.

A combination of two characteristics was For Jan du Plessis: “Intellect is not what it is ranked as most important: vision of where the about. You are primarily looking for other skills.” company should be heading and the ability to deliver consistent financial performance. Bubb’s He added: “It is widely agreed that Reagan was notion of market and financial understanding, no rocket scientist – but he knew where he wanted two technical skill sets, was not mentioned so to go and he knew how to inspire the American explicitly by other participants. nation to go there. That’s why he was a great leader and that’s a quality you need in a CEO as well.” What makes a great Chief Executive? 21

“If you cannot work eighteen hours straight on three consecutive days, you have no chance.” Roger Yates

A different perspective was provided by Marcus As well as integrity, CEOs need energy. Roger Agius, chairman of Barclays, who said: “I think Yates, Chief Executive, Henderson Group said: you need to have unquestionable personal “The most important ingredient for a successful integrity.” CEO is energy. If you cannot work eighteen hours straight on three consecutive days, you have no John Von Spreckelsen, Operating Partner of chance and you would still need to be sharp at Merchant Equity also highlighted integrity as one the end of that process. Every company has its of the top three characteristics of a CEO. During crises whether it is deals, deadlines, getting issues the course of the research, many comments were away etc and you need to have real energy and made with regard to the importance of integrity. capacity.”

While we agree with Sir Callum McCarthy’s statement that: “The idea that there is one model for the ideal CEO is quite wrong”, there are some core qualities – vision, integrity, energy and enthusiasm – which consistently emerged from our interviews. 22 The Whitehead Mann Leadership Debate

A great CEO: The ten X Factors

Our analysis shows that there is no single 2 …delivers financial performance, “X Factor”. Rather it is a combination of appreciating this is always necessary – but competencies that is needed to go from ‘good’ alone is not sufficient to ‘great’. A ‘great’ CEO: A great CEO will have a feel for the numbers 1 …has a vision of where the company is going, and be able to explain them in detail and with not just of the next year’s financials confidence. A great CEO will have a disciplined approach to management that is focused on A great CEO will chair strategy (if not originate financial performance – but will combine it), and will examine the issues that affect the this with a feel for the market and sources of business including, but not restricted to, market competitive advantage. It is this combination trends. A great CEO will drive the brand and that leads to greatness. the proposition, understand what opportunities there are – but also understand the limitations. 3 …recruits, retains and motivates other Clarity of thought is key to strategic thinking. talented people

The CEO has ultimate responsibility for A great CEO appreciates management is a team everything that happens and everything that game and that internal stakeholders are at least does not (whether they are great or not). Vision as important as external ones. A great CEO does does not and cannot negate the need to take not devote too much time to the latter. responsibility. Great CEOs surround themselves with skilful and knowledgeable managers, then listen to and develop them (which includes allowing them freedom). Their skills should be complementary and be exploited to the full: CEOs should learn from their peers – but also from their subordinates. And they must be prepared to listen to bad as well as good news. What makes a great Chief Executive? 23

4 …is smart 5 …has an eye for detail without losing sight of the bigger picture Great CEOs are intelligent, articulate and persuasive; knowing where they want to go Great CEOs will, from time to time, immerse and how to inspire people to take the company themselves in detail, but not allow themselves there. The first characteristic may well be less to become buried in it; they are able to distil important than the second or third: the CEO issues quickly. Being focused – but also doesn’t have to have the strongest intellect appreciating where it is appropriate to focus around the boardroom table. – is fundamental to being an effective CEO. 24 The Whitehead Mann Leadership Debate

6 …has a realistic view concerning time-frames 9 …has energy and resilience

A great CEO will change a company, leaving it in A great CEO will not allow a state of constant a better state than they found it. This cannot be crisis management – but they will appreciate done overnight - but neither can it be done over that companies should be constantly adapting decades. It is important to get out at the right in order to grow and in some cases simply to time and identify this in advance. survive.

7 …has integrity Change is exhausting and a great CEO will have the capacity to deal with this and all the other Great CEOs inspire trust and are honest with pressures associated with the role. themselves and others (both internally and externally). They must be able to cope with successive 18 hour days. 8 …is not afraid to stamp their own style on an organisation 10 …understands that there is no single model

They must be strong enough to drive the culture Sometimes the requirement is for huge change rather than be driven by it. – a complete turnaround – sometimes the need is to increase operational efficiency; there is no A great CEO appreciates that culture comes single process, no single set of objectives, no from the top. single solution.

Perceptions are important, both internally and Business guidelines can sometimes be externally, and management of perceptions is a contradictory. But a great CEO has the skill, key element of the CEO’s role. flexibility and judgment (and carefully selected advisers) to apply the relevant principles to the situation. What makes a great Chief Executive? 25 26 The Whitehead Mann Leadership Debate

Best of the boardroom Interviewees were asked whom they most admired among their peer group, and why.

Of the 100 business leaders identified, eight Sir Terry Leahy, Tesco were commended by three or more participants. “Phenomenal success”; “Incredible organic These leaders run, or have run, long-established growth”; “Very clear objectives, not scared to businesses, operating mainly in mature sectors. make big decisions and knows how to make Seven of their eight businesses are UK based, five them”; “Incisive and focused”; “Developed a of the eight are pure retail businesses and all the business model and concentrated on it”; leaders are men. Just one woman made it into “Rational, relentless execution, an incredible eye the top 20. That was Kate Swann of WH Smith. for detail, impressive understanding of the The quotations below speak for themselves. environment in which he operates”; “Recruited a good group of people and, throughout his long Lord (John) Browne, BP tenure, has consistently taken the business to “Strategic vision”; “Gave the business another level”; “Doesn’t blame difficulties on the leadership”; “Managed massive change at BP… market or constraints and redefines the Tesco very successfully”; “Changed the perception of proposition to deal with changes in the market”; BP”; “Created a world class company”; “A mindset that says ‘come rain or shine’ the “Great achievements over a good period of time”; business needs to grow”; “Incredibly focused guy, “Was a genius”. driving a massive organisation – no matter how successful it is, just driving it on. Somebody like Terry Duddy, Home Retail Group that is clearly the sort of person you would “Great marketeer”; “Staying ahead of his market aspire to be, and with a tremendous reputation”. in a mature sector”; “Understated quality of consistency”. Lord MacLaurin, Tesco “Leadership”; “Vision”; “Being a change agent – Justin King, Sainsbury’s he transformed the company”; “A fantastic “A great feel for retail”; “Great in stores”; retailer”; “When MacLaurin took over, Tesco was “Brilliant communication”; “Has focused on an awful company, but he outfoxed JS, built up a delivery and delivered… and has taken others strong property bank and drove the business with him”. forward”; “Performed exceptionally well, especially in relation to direct competitors”. What makes a great Chief Executive? 27

Table 2

Business leaders as nominated by their peers*

Name Company** Name Company** Name Company**

Lord John Browne BP Sir Richard Giordano BOC Group Jeremy Newsum Grosvenor Estate Terry Duddy Home Retail Group Sir Royal Bank of Scotland Archie Norman Asda Justin King Sainsbury’s Sir Owen Green BTR Jorma Ollila Nokia Sir Terry Leahy Te sco Sir Philip Green Arcadia Alan Parker Brunswick Group Lord Ian MacLaurin Tesco Hank Greenberg American International Group Sir Brian Pitman Lloyds TSB Group Sir John Rose Rolls-Royce Anthony Habgood Bunzl Sir David Plastow Vickers Sir Stuart Rose Marks & Spencer Dr Jürgen Hambrecht BASF Sir David Prosser Legal & General Group Jack Welch General Electric Company Sir Ronald Hampel Imperial Chemical Industries Sir Bass Paul Adams British American Tobacco Sir Philip Hampton British Gas Sir William Purvis HSBC Povl Ahm Arup Group Andrew Harrison easyJet Peter Rigby Informa Sir Michael Angus Unilever Sir John Harvey-Jones Imperial Chemical Industries Sir John Ritblat The British Land Company Sir Laurie Barratt Barratt Andy Haste RSA Insurance Group Mark Robertshaw Morgan Crucible Company Bart Becht Reckitt Benckiser Group Dr Tony Hayward BP Sir Ralph Robins Rolls-Royce Trevor Bish-Jones Woolworths Goup Sir Christopher Hogg Courtaulds Gerald Ronson Heron Sir Richard Branson Virgin Group Sir Julian Horn-Smith Vodafone Ira Rubinoff Smithsonian Institution Warren Buffet Berkshire Hathaway Tim How Majestic Wine David Simons, CBE Kwik Save Sir Bill Castell Amersham Sir Peter Hunt Land Securities John Smale Procter & Gamble Patrick Cescau Unilever Norman Ireland BTR Sir Kevin Smith, KB CBE GKN Frank Chapman BG Group Steve Jobs Apple Sir Martin Sorrell WPP Group Sir CK Chow GKN Alan Jones Westland Group Sir Brian Stewart, CBE Scottish & Newcastle Chris Cole WSP Group Alan Lafley Procter & Gamble Kate Swann WH Smith John Connolly Deloitte Sam Laidlaw Ratan Tata Tata Geoff Cooper Travis Perkins James Lambert Richmond Foods Sidney Ta urel Eli Lilly & Co Gareth Davis Imperial Tobacco Allan Leighton Asda To ny Trahar Anglo American JP Morgan Chase & Co Sir Moir Lockhead FirstGroup Mike Turner, CBE BAE Systems Charles Dunstone Carphone Warehouse Group Sergio Marchionne Fiat John Varley Barclays Sir Richard Evans, CBE British Aerospace Jacko Maree Standard Bank Dr Ben Verwaayen, KBE BT Group Stanley Fink Colin Matthews BAA Donald Voelte Woodside Petroleum Greg Fitzgerald Galliford Try Sir Tom McKillop AstraZeneca Paul Walsh Diageo Paul Forman Low & Bonar John Mellon Reed Elsevier Sam Walton Wal-Mart Jonathan Fry Burmah Castrol Sir Duncan Michael Arup Group Mike Welton Dr Jean-Pierre Garnier GlaxoSmithKline Sir Ken Morrison Wm Morrison Supermarkets Phil White, CBE Group Sir Christopher Gent Vodafone Group Gary Nesbitt Our Price * Those commended by three or more are shaded and in alphabetical order ** Individuals admired for what they achieved at this particular company Arnold Ziff To wn Centre Securities 28 The Whitehead Mann Leadership Debate

“He gave the people working with him both confidence and freedom.”

Sir Stuart Rose, Marks & Spencer “Vision and affinity with values”; “Focused on delivery and delivered, pulled round financial results quickly, brought in good people and has taken them with him”; “Sorted out the brand very quickly, socially responsible – good on CSR”.

Sir John Rose, Rolls-Royce “Doing a sustainable job at Rolls-Royce, developing the culture”; “Broke the box Rolls- Royce were stuck in”; “Bringing in new people”.

Jack Welch, General Electric Company “Consistency of vision, disciplined approach to management”; “Successfully grew a very complex business”; “Delivery, phenomenal execution, able to get things done at enormous speed”; “Sustainability”; “Focused on financial performance”; “Backed his instinct, straight talker – very black or white”; “Cut through bureaucracy, strong succession planning”; “Inspired and motivated 250,000 people”; “Managed the whole of General Electric Company so brilliantly and with such thought”. What makes a great Chief Executive? 29

The definition As might be expected, many participants As well as marketing skills, interviewees stressed of success praised strategic thinking and clarity of thought, the ability to build, lead, inspire and motivate objectives and vision. Generally, vision was a management team. Sir Richard Branson, in mentioned in connection with the corporate addition to being a great marketeer, was admired brand. Many interviewees admire strong because “he surrounds himself with different marketing skills and the ability to develop an people to him”. enduring brand. Lord Browne of BP was praised for “real leadership and having changed the Similarly, one of many compliments made about perception of BP”, while Sir Stuart Rose of Sir Terry Leahy, Chief Executive of Tesco, who Marks & Spencer, was admired “because he came out top overall, was that he “has recruited a sorted out the brand very quickly”. good group of people”.

In a similar vein, Charles Dunstone, one of Archie Norman, formerly Chief Executive of the founders and the CEO of the Carphone Asda, was rated because, “he gave the people Warehouse, was respected for “understanding his working with him both confidence and freedom”. market, constantly staying in front of it”. A third theme that emerged was competence The same interviewee highlighted Terry Duddy and confidence in finance. Kate Swann, of Home Retail Group as “a great marketeer who Chief Executive of WH Smith, was seen as has stayed ahead of his market in a mature sector”. understanding the numbers extremely well and using them effectively. Gary Nesbitt, Chief Another commented that Marc Bolland, Chief Executive of Our Price and MVC was praised for Executive of Wm Morrison Supermarkets, “having a great feel for the market as well as being “understands the consumer brands”. very strong with numbers”.

Despite all these comments, marketing per se Jack Welch, the former CEO of the US was not mentioned independently as a critical conglomerate, General Electric, was described as skill for a great CEO. having a “…disciplined approach to management that was focused on financial performance”. 30 The Whitehead Mann Leadership Debate

Some interviewees challenge the notion of a They have great leadership skills and at the same single definition of success. Simon Melliss, Group time, possess the ability to deliver rational and Finance Director of Hammerson said: “It’s an relentless execution. They focus on financial impossible question, because I struggle to think performance, have unquestionable integrity how best to judge CEOs, other than those that I in every sense and develop people. In short, a have worked for – or directly with.” combination of the best of the best; taking a quality from each of our Top 8 CEOs. This is a fair point, and partly explains why so many different leaders were mentioned. There is no single model of what makes a great CEO. Therefore, to find these qualities In our view the great CEOs have vision, Whitehead Mann looks beyond the obvious pool consistency and brilliant communication skills. of established names. What makes a great Chief Executive? 31

Situational For many interviewees, success was about having used to describe him, his skill set and style were leadership the right personality and skill set for a specific “efficient” and “effective”, as opposed to creative. situation – for example the sector or the firm’s David Plaistow, CEO at Vickers was recognised lifecycle. as a transformer who changed the company in under three years, and Sir Stuart Rose was Retail is perhaps the clearest illustration of acknowledged as having “led the transformation this principle. At Tesco, Lord MacLaurin was of M&S”. described by one interviewee as “the change agent,” but Sir Terry Leahy (whom he also In a different situation again, Mark Thompson admired as a great CEO) was described as having at the BBC was praised by one interviewee “joined a fast moving train”. who commented: “What you have there is a completely different set-up, in that there is no Another admirer of Leahy (and there were profit motive and the whole of what the BBC many) described him as having “developed a does is creativity… an odd world with different business model and really concentrated on it”. dynamics.” The phrase was telling – “developed a business model” – not “invented” or “created” – but A similar point was made about Sir Martin increased its efficiency. That is not a criticism; it Sorrell, WPP Group, who was described as having is a recognition of the situational requirement. achieved long-term success “in tricky markets, Another participant praised Sir CK Chow with difficult people”. from BOC and GKN, describing him as “very good at making changes in big complicated Turning a local player into a global one led to organisations”. praise for Sir Christopher Gent during his time at Vodafone: “Many others would have ended up Companies in a ‘build-out’ phase have being bought rather than buying. This was partly different requirements. Steve Jobs, at Apple, down to vision and partly down to creating a was praised as an innovator. Gary Nesbitt was team.” praised as a great CEO in the early stages of an organisation’s development, where there was a There is clearly the need for different skills in relatively untested business model and a need different situations. Whitehead Mann recently for innovation and intuition about the market. conducted research into the differences between He was described as having a “great feel for the the leadership of successful companies at music market as well as being very strong different stages in the business cycle. The with numbers”. results support the hypothesis that leadership requirements change in a predictable way as Companies in turnaround situations require companies move between different stages of the something different from their CEO. Sir Philip cycle. These are clearly supported by this research Hampton was praised as having had a number examining the thoughts, feelings and behaviours of roles but always having “a clear mission” of occupants of the CEO role. which was “corporate restructuring”. Words 32 The Whitehead Mann Leadership Debate

Table 3 CEOs’ tenure: Issues perception of ideal vs. reality Relative ranking % score As seen by respondents * On CEO tenure Tenure, and knowing when to go, was another Analysis of tenure for FTSE 100 CEOs ** dominant theme. For example, participants More than 10 years talking about one famous CEO commented that: 4 “He probably went on too long” while another interviewee commented he had immense respect 11 for the same man but said: “As so often with chief 8 - 10 years executives and prime ministers they hung on too long and blew it.” 7 7 In contrast, another well-known CEO was praised 6 - 7 years because “…after bringing confidence into a failing business, he managed to leave at the right time”. 53 12 How long one individual could – or should – remain in the position of CEO has been much 4 - 5 years debated. 23 14 At the time of writing, the two longest serving CEOs in the FTSE 100 have both held their roles 1 to 3 years for twenty-two and a half years (Source: Boardex). 0 But only these two have been in role for more than 40 twenty years. A further nine have been in their roles for more than ten years, while two thirds of Less than 1 year all FTSE 100 companies have a CEO who has been 0 in place for five years or less (see Table 3). 16

Not possible to generalise 13

* Total number of interviewees responding to this topic = 70 ** Source: Boardex (July 2008) What makes a great Chief Executive? 33

“Activism for short-term gain is not how you create long-term value.” Anne Richards

Research shows that the average age of a CEO has term view about what is best for the business. been decreasing with tenure. In the mid-1990s, Conversely, the CEO is expected to take a medium in any one year, about 8% of the top companies to long-term view – so in reality investors and in the UK had a change of CEO. At present, the management have two different agendas.” rate is nearer to 15%. (Source: CEO 2.0: The next generation Chief Executive, Egremont Group 2007). Investors were criticised by some participants on the grounds of the short-term expectations Our interviewees were asked why they thought they have of organisations. “Pressure from the average tenure is decreasing, and what the shareholders and activists”, “the City’s hunger” tenure of a CEO should be. One of or “unforgiving capital markets”. As one CEO the most valuable insights was provided by observed: “One set of bad numbers then you’re Jan du Plessis: “I could sum it up in ‘short- out. The institutions are too short-term and they termism’ – but when I say that, I think it takes don’t accept legitimate fluctuations in company two to tango. It’s easy in the first instance results.” to accuse the institutions of becoming quite short-term… but I equally think companies Alongside short-term investor expectations, have themselves to blame for that... Very often another common theme that emerged was the companies spend too much time talking about increasing complexity and associated pressure the short-term and about next quarter, and of the role. As Katherine Garrett-Cox, Chief then, when they can’t deliver, the institutions get Executive of Alliance Trust said: “The role of CEO impatient and go to the board and ask the chief is very, very visible.” executive to be thrown out.” Roger Yates explained: “The most important Anne Richards, Chief Investment Officer, factor behind this trend is that the job is getting Aberdeen Asset Management, commented: harder, it is more complex, more global, there is “Activism for short-term gain is not how you greater regulatory exposure, media exposure and create long-term value.” [there is a] shorter product cycle.”

Another CEO felt: “A CEO’s tenure can often hang on the latest whim of potential or existing investors – many of whom are not taking a long- 34 The Whitehead Mann Leadership Debate

“It takes three years to change a business, then another two (at least) to embed those changes. After seven years, there is a risk of becoming stale.” Stephen Hester

Marcus Agius added: “I think it is easy to As Sir Christopher Gent said: “The alternative underestimate the intensity of the responsibility. attractions of private equity, where you don’t have If you are talking about a large company, to do that public exposure, are great and there is the it well, a chief executive needs to be physically opportunity to do very well.” tough.” A CEO who preferred to remain anonymous, clearly agreed: “Being a CEO is Several other participants mentioned a simply not as much fun as it’s cracked up to be.” migration towards private equity that appears to be maintaining momentum. As another CEO Sir Christopher Gent, added: “In the broad sense, concluded: “There is now life after being a [plc] people are under far more public scrutiny, with a CEO.” relatively unsympathetic press towards business, which makes the public scrutiny much tougher So, is there a right tenure for being a CEO? than it need be. There is more regulatory pressure. Understandably some participants felt there was In that sense it may not be… much fun.” no answer to this question; it depended on the company, the sector and the individual. Amongst Several people commented that being a CEO others there was a degree of consensus. is increasingly a 24/7 job with no respite. Mike Humphrey, Chief Executive, Croda International Stephen Hester said: “It takes three years to went so far as to say: “Being a CEO of a listed change a business, then another two (at least) to company has become a poisoned chalice”. embed those changes. After seven years, there is a risk of becoming stale.” And a chairman felt Are the challenges facing CEOs so great that at the same: “A new chief executive first needs to least some of the really talented will now avoid understand the business he is heading and then, the potential pitfalls of such public positions? through leadership, have an impact on it. After seven years they get ‘CEO-itis.’” To a degree, this is already happening. Over the last few years, some of the UK’s top business Many participants broadly agreed with this. Five leaders have been seduced by private equity to eight years in the top role is seen as being houses or have sought to convert their businesses about right by many of the people currently into private entities. assuming these roles. What makes a great Chief Executive? 35

Sector How important is sector experience for a great experience CEO? At Whitehead Mann we encounter clients who have different perspectives on this issue: The leaders we spoke to in our research thought that, on balance, it is more important than not. Industry knowledge gives a better understanding of the factors that determine performance. This helps new CEOs get up to speed quickly, instils confidence in investors and lends authority both • The experience of the chairman and board: If internally and externally. In a crisis there is an the executive team has deep sector experience, even greater premium on sector experience. looking outside the industry for new skills and ideas might be appropriate; The importance of sector experience depends on a number of factors: • How much the business and management team needs to be changed: Again, bringing • Industry sector: In highly technical or external sector experience can be invaluable in specialist sectors, coming from outside these circumstances; can be difficult. As one of the Chairmen we interviewed said: “The technicalities of • Economic circumstances: Under fast-changing understanding risk in [a different industry] circumstances, such as during a crisis, when would make anybody pause for thought in decisions have to be taken quickly there is no stepping in”; time to learn on the job. Wrong decisions can prove disastrous, and so some sector experience • Complexity and scale of operations: The is vital. larger the scale, the less the necessity for sector experience: “If you have a conglomerate, you However, on its own, sector experience is not don’t need somebody who has specific industry enough, as demonstrated by the FTSE 100 knowledge because the job that is needed is a in 2007, where 42% of externally appointed broader job about financial management and CEOs moved across sector (Source: Boardex). A financial control, human resource selection, track record in leadership is more important, strategy and value creation”; regardless of sector. 36 The Whitehead Mann Leadership Debate

Financial It is not necessarily different skills that are reverse). 12% of FTSE 100 CEOs have moved climate required, but a difference in emphasis/focus, e.g. into a role in private equity between 2002 to the CEO must be able to make radical changes, 2007, but this needs to be qualified against how take tough decisions and deliver bad news. many CEOs went on to another executive role, a Previous experience of downturns is a huge portfolio career or one of the many other options, advantage. Leadership, with the ability to inspire to conclude whether there has in fact been a and instil confidence is still crucial. Energy, brain drain to private equity (Source: Boardex). determination and an ability to communicate The varying opinions of our interviewees are all felt to be more critical factors when times support this. are tough. “We are all struggling with our succession While cost control is more important in a plans, particularly in the US, as we lose talent downturn it has to be balanced with the need to to the unquoted world.” Interestingly, this is invest in the future and manage the expectations not necessarily viewed as a bad thing: “The role (internal and external) about growth. As one and contribution of private businesses in the UK chairman said: “I am sure that the global economy is undervalued” and “I am not unduly economic crisis, in a way, makes a difference. It worried about this trend. Not all that go into will simply mark out the men from the boys. The private equity would be, or have been, great successful from the unsuccessful. I don’t think they leaders of public companies.” need different qualities. It is a calibre thing.” This is an area in which Whitehead Mann is Brain drain to There does not seem to be a conclusive doing further research. private equity? consensus. There is a drain to some degree which is likely to continue (although some think the trend is now slowing and may even go into What makes a great Chief Executive? 37

Conclusion Two clear themes emerge from our study: great ability – to manage the present and create the CEOs are those who have a clear vision and future – and something of a paradox. But if the integrity of purpose. CEO can pull this off, they can build a lasting legacy. Exceptional CEOs are distinguished through their ability to formulate and communicate a vision As well as vision, great CEOs will stay true to of where the company should be heading. This their values and principles. This brings us to vision is more than a depth of understanding the second theme that emerged from our study, of intricate finances. It is an ability to integrate which is that the most respected leaders are the enormous complexity that spans time those with integrity. Integrity means behaving frames of more than ten years – they need to constantly according to a solid set of principles. be constantly looking to the future. This means This stimulates trust. It engenders confidence they have to bring together a deep understanding among followers. Ultimately, it is this which of where the organisation is at that moment of gives leaders legitimacy: it accords the right time, but also an awareness of how its markets to lead. are developing. These qualities explain why great CEOs are a While intellectual ability and education are rare breed. It is the combination of all these important, they are by no means the determining qualities supported by creative skills, financial factors. The most important is vision, which is numeracy, intellect, determination, energy, drive, intuitive rather than something which can be enthusiasm and the ability to communicate formally learnt. It is this which endows leaders which provides the winning formula. with the ability to provide direction to their employees and which enables them to create a company where people want to work. It is a rare 38 The Whitehead Mann Leadership Debate

Methodology Over a three month period we have interviewed Do people answer truthfully? Interviewees directors of FTSE 100, FTSE 250, large private were talking to people with whom they had companies and public sector bodies, as well as some degree of relationship, but they were in a institutional shareholders and senior professional position where there was absolutely no need advisers. Our aim has been to establish an (or opportunity) to “sell” to them or to get across enlightened current view of the attributes that a pre-defined message. The subject matter was characterise an exceptional CEO in today’s clearly of interest to most of the interviewees changing world. – in some cases a quite passionate interest.

Our research method was primarily qualitative, All of this would suggest they were likely to be a ‘discussion guide’ is used rather than a reasonably truthful about their thoughts, feelings questionnaire. This difference is more than and behaviour. However, all the interviewees semantics; the guide is a series of prompts, to were senior players in their organisations, enable a focused business discussion. We did, and therefore, even when relaxed, they would however, include some structured questions be likely to be conscious of “impression which supported the quantitative data in this management.” report. So, should the reader believe every word that Our interviewees gave us their views about the interviewers reported? Some interviewees a diverse range of factors that can make the will have exaggerated or underplayed their difference between a good CEO and a great CEO, beliefs, and of course, all interviewers have using examples of people they have known or their own filters. Although we interviewed worked with, as well as, for many, information over 80 participants, the study does not claim on their own experiences as CEOs. They were to be a statistically representative sample of open and forthright, and answers were given the corporate world. However, subject to these in confidence. Where quotations have been caveats, Whitehead Mann believes the study is a attributed, the interviewees’ permission has genuinely revealing snap-shot into the current been sought. thinking of highly influential business leaders. Contact Carol Leonard All rights reserved. No part of this publication Whitehead Mann is one of the world’s best-known leadership consultancies may be reproduced, stored in a retrieval system, working with clients to create value through people. As an independent, Whitehead Mann or transmitted in any form or by any means, international partnership, we work as a single team to deliver deep sector Ryder Court electronic, mechanical, photocopying, recording and functional expertise. We are authorities in the areas of leadership; CEO 14 Ryder Street or otherwise, without the express permission concerns; CEO characteristics and career issues at Board and CEO level. London SW1Y 6QB of the copyright owner. Our long track record is built on our contacts, judgement, the quality of our t +44 (0) 207 024 9000 © The Whitehead Mann Partnership LLP board placements and our ability to identify the CEOs of tomorrow. Over 90 f +44 (0) 207 024 9001 of Europe’s top 200 companies and most of the FTSE 100 companies and e [email protected] Fortune 500 organisations have retained Whitehead Mann.

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