EXPECT the UNEXPECTED the Experiences of First-Time Ceos
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EXPECT THE UNEXPECTED The experiences of first-time CEOs The River Group EXCHANGES IN CONVERSATION WITH THE WORLD’S CEOS EXCHANGES is the annual CEO study by The River Group. It is based on conversations with CEOs from around the world. This report is entitled Expect The Unexpected and is about the experience of becoming CEO for the first time. Copyright © The River Group, LLC 2016. All rights reserved. CONTENTS Page Introduction 4 Executive Summary 6 Demographics 10 Findings 13 Finding 1: The challenge of the Board 17 Finding 2: The master and apprentice paradox 23 Finding 3: The weight of conscience 29 Finding 4: Alone in a crowd 35 Finding 5: The power of creative expression 41 Finding 6: The myth of control 47 Summary and Conclusions 53 About The River Group 58 EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS 3 INTRODUCTION by Sandy Lyons, CEO of The River Group LLC EXCHANGES is the annual CEO study by The River Group. Our research focuses on the role of the CEO, the pinnacle role of leadership in an organization. We recognize the unique characteristics of this role because we draw on years of experience as both CEO and consultants to CEOs. Our intention is to inform, enlighten and inspire those who aspire to lead. This year, EXCHANGES is about the experience of becoming CEO for the first time. Our hypothesis was that there would be many common experiences among leaders making that first transition to the role of the CEO. Rooted in my own experiences as CEO, and my colleagues’ observations of client CEOs over the years, this study was designed to explore this crucible moment in transitioning to CEO for the first time. This report summarizes our study, which was based on in-depth conversations with 75 CEOs. We asked the CEOs: “How prepared were you?” “What were the biggest surprises?” “What are the best and worst parts of the job?” “In what way is the job different from other leadership roles?” The report is organized under six core themes or ‘experiences’ of the first-time CEO, as described to us. The findings confirmed our hypothesis, capturing what the CEOs wished they’d known before stepping into the role, while also compiling their advice for those who are preparing for, or aspiring to take on, the role. 4 EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS As a two-time CEO in our study said: “You are an order of magnitude more prepared the second time you become the CEO.” I also found that to be true and was much more prepared each time I took on the role; there’s no substitute for direct experience. As noted, there are six sections in this report. Each section describes one experience of first-time CEOs, and each has three parts: first, quotes from the CEO to illustrate and provide color commentary on that experience; second, a summary of that experience; and third, direct advice about how to handle the experience if you are a first-time CEO. If you are a CEO, we’d love to hear from you about your own experiences when you first became the CEO. Sandy is a former four-time CEO of multi-national, multi-billion dollar businesses in the US and Europe. EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS 5 EXECUTIVE SUMMARY Six months into the job, first time CEOs find they are much less prepared to be the CEO than they thought they were. The spotlight is sharper, the stress is higher, and the isolation—“being alone in a crowd”—unsettling. BUT, most days are the most enjoyable of their professional careers. Overall, the majority find it both fulfilling and rewarding—the best job of their lives. Many surprises lie ahead for the new CEO. The Board will take much more time and attention than expected. The voice of the CEO will take on disproportionate volume and impact. Even the closest of colleagues and friends will behave differently towards them, becoming more guarded and distant. When reflecting about the role, “lonely” is one of the words most often used by CEOs. Unvarnished performance feedback will be rare. And they will learn quickly that the assumed control that comes with the most powerful role in the company is a myth. From the start others see the new CEO as “complete.” The finished product. Anointed to lead with all the skills and experiences in place. The reality is much different. For the first time CEO, this is on-the-job training without a text or a teacher. Finding an experienced CEO to be a sounding board, joining a small group of CEOs for joint learning and support, and engaging a trusted advisor/coach are steps experienced CEOs advocate. 6 EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS Because the CEOs’ decisions affect the lives of so many, these decisions will weigh on their conscience. At the same time they have to be the public face of confidence. They will need to lean on family and friends for safe- harbor and emotional support. Time to think, time to reflect is rare. They are always on 24/7; there is no downtime, the spotlight does not go off, they are the audience in every meeting and the focal point of every conversation—directly or obliquely. Along with all of this comes the opportunity to lead, to have a vision and to set a course; to express themselves almost like an artist with the organization as their canvas. That, CEOs tell us, is the biggest pleasure, not the power, and it comes from connecting with people and creating a shared purpose. To achieve it they need to engage, engage, engage; to be visible and approachable. They need to communicate at least three times more often than they think necessary—and to never underestimate the impact of a five-minute conversation. On the following two pages we summarize the findings of the study and the advice of the CEOs who we interviewed. EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS 7 The challenge of the Board The unexpected demands and challenges of the Board, collectively and individually, are a big surprise for first-time CEOs. Engage members Set expectations by Avoid ugly surprises. individually as well as “contracting” with the collectively. Board early on. The master and apprentice paradox The role of the first-time CEO requires simultaneous learning and leading. Recognize that others Work with peer CEOs Seek constant feedback, see a “complete” CEO, who have “been there” and act on it. while learning on the and can help see what’s job will be the reality. around the corner. The weight on conscience Decisions made by the CEO affect all stakeholders. But, it is the impact of those decisions on the lives of employees and their families that weigh on them most. Find ways to Do not become Be prepared to Understand manage the detached. quickly remove the need for stress that Communicate individuals who emotional comes with clearly and often. are ineffective resilience and making really Be confident. or corrosive. personal well- tough decisions. being. 8 EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS Alone in a crowd CEOs find themselves isolated and at the center of attention simultaneously. Be prepared for Recognize Think carefully Your “title” will relationships the magnified about what impact the to change and impact of every you say and to behavior of to be treated action and whom. Know others—do not differently, statement. that spontaneity let it do the even by close can be the same to you— colleagues. enemy. stay true to who you are. The power of creative expression The freedom to create, to have a vision, to set a course—and then to see it through by working with others—is the best part of the CEO’s job. Use the power of Before moving quickly, A clear sense storytelling to build take the time to engage of purpose, well commitment to your others, to listen, to articulated, is a great vision. learn. way to motivate others. The myth of control The politics and organizational dynamics that strive to influence the CEO are relentless. The CEO’s finite time is in infinite demand. Be prepared to Manage the “time Learn to achieve manage the realities vampires” that suck success through of organizational time away from influence, rather than politics through open important tasks. Take control. engagement and control of the calendar. healthy debate. EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS 9 DEMOGRAPHICS 75 8,000 5.3 CEOs Average number Average tenure of employees in years Average Revenue $3bn Smallest $3 million/Largest $48 billion Percentage of respondents 5% 11% 21% 21% 24% 10% 6% < $10m $10m $50m 50m–$250m $250–$1bn $1bn–$5bn $5bn–$10bn > $10bn Annual revenue in $millions/$billions Gender Education Hire Female 19% Bachelors External 47% PhD 41% 6% Male 81% Masters 53% Internal 53% 10 EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS Career path Number of career CEO roles Sales and Three or more Marketing Others Twice 19% times 14% 20% 23% Finance 21% Operations 36% Once 67% Average age when appointed 45 Youngest 24/Oldest 61 Percentage of respondents 4% 10% 17% 20% 21% 20% 6% 2% Under 30 30 to 35 35 to 40 40 to 45 45 to 50 50 to 55 55 to 60 Over 60 Age EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS 11 45% 45% 10% Public companies Private companies Non-profits Region 49% 40% 11% North America European Union Other Company headquarters of CEOs interviewed Australia • Brazil • Canada • Germany • India • Ireland • Italy • Japan • Oman • Saudi Arabia • Switzerland • The Netherlands • United Arab Emirates • United Kingdom • United States 12 EXCHANGES: IN CONVERSATION WITH THE WORLD’S CEOS FINDINGS The challenge of the Board page17 The master and the apprentice paradox page23 The weight of conscience page29 Alone in a crowd page35 The power