The CEO as Sun King

FAME, CELEBRITY, EGO, STARDOM - THE POISONED CHALICE FOR CORPORATE LEADERSHIP?

Rakesh Khurana, a professor at Harvard Business School, wrote a book in 2002 entitled Searching for a Corporate Saviour: The Irrational Quest for Charismatic CEOs. (Princeton University Press). In an article in the Harvard Business Review in September 2002, entitled The Curse of the Superstar CEO, he comprehensively challenges the notion that charismatic leaders with high public profiles are anything but bad news for corporate performance - (except in crises, which are usually avoidable anyhow).

In the US, says Khurana, the idea of charismatic leadership has gripped the minds of business academics, investors, journalists and through them, the general public. Much work has gone into trying to deconstruct and bottle charisma - the personalities of Lee Iaccoca, Jack Welsh, Steve Jobs and many others, even the violent Al 'Chainsaw' Dunlap, have been scrutinised to isolate the magic ingredients that will lead to corporate success.

I first heard of Jack Welsh in 1983 from an American business school professor, who could hardly contain his excitement at the wonders of this superhero - he told several stories of the fantastic deeds of the great man to illustrate what he meant. After the session I asked how he had observed the paragon at work and it came to light that he had never met him - he was repeating fifth hand stories that he had heard on the grapevine! But I was in at the beginning of the creation of a mythological management superhero; a whole industry grew up around the Welsh fan club - to the point that people who were said to have worked in his vicinity were hired on the assumption that something must have rubbed off on them.

Eulogies tend to follow a similar pattern, almost in the Style of 'Hello' magazine. Here's a not untypical example:

"He was dressed casually, almost carelessly, like his troops, and he wore his hair combed off his face in the style of Hollywood producers and Wall Street financiers. He was assiduously fit; his eyes were ice blue and his gaze was steady, and he spoke in clipped, flat, supremely confidently tones. Everyone at Enron knew that Jeff was twice as smart as they were - twice as smart as they could ever hope to be - and they hung on his every word".

The subject of this eulogy was of course, Jeff Skilling, CEO of Enron, rated at one time by Fortune magazine as 'America's most innovative corporation'. A friend pointed out a similar romantic attachment by some to highwaymen in the eighteenth century.

Khurana traces the notion of the charismatic leader back to early Christian times. St. Paul listed various 'Charisms', or gifts of the holy spirit that Christians may possess - these extraordinary endowments enabled church leaders to speak in tongues and work miracles. Khurana says: Our fervent and often irrational faith in the power of the charismatic leader seems to be part of our human nature. The charismatic illusion is fostered by tales of white knights, lone rangers, and other heroic figures who rescue us from danger. Major events are easier to understand when we can attribute them to the actions of prominent individuals rather than having to consider the interplay of social, economic and other impersonal forces that shape and constrain even the most heroic individual efforts. Sociologists and social psychologists refer to this common tendency to over-estimate the impact of the individual as the 'fundamental attribution error', and American society, with its mythology of frontier heroes, pioneering inventors and other 'rugged individualists', has always been beleaguered by it.

Note.....

The late 20^th century saw an outbreak of religious metaphors creeping into business - Visions, Missions, Core Values and the like reinforced the notion that quasi-spiritual inspiration was a substitute for good relationships, common sense and hard work.

Conversely.....Studies show that various internal and external constraints inhibit an executive's ability to affect a company's performance. Most estimates, for example, attribute anywhere from 30% to 45% of performance to industry effects and 10% to 20% to year-to- year economic changes. Thus, the best anyone can say about the effect of a CEO on a company's performance is that it depends greatly on the circumstances.

I would add from experience that sustainable change and high performance depends so much on the efforts of many people that a CEO is usually greatly more dependent on the support of others than most would realize.

However, there are two exceptions to this. High profile, expressive, forceful individuals can make a difference in a crisis - and a CEO supported by a small corporate staff and external advisers can plan and consummate huge M&A deals.

Comment:

• Many corporate crises are a result of the damage wrought by superheroes. It seems a little bizarre to be hiring a superstar to repair the damage caused by a previous fallen idol!
• The majority of big mergers and acquisitions, often the preferred stratagem of heroic deal-makers - fail to deliver value and many ruin the acquiring companies - so destruction and mayhem is a more likely outcome of relying on superstars than fantastic performance.

Nevertheless, the idea of the charismatic superstar persists, especially in the minds of journalists, investors, analysts and some business school academics who really ought to know better.

We are not immune to such superstitions in the UK either - remember the adulation and celebrity that washed around Sir Clive Thompson, who earned the accolade of 'Mr. 20 percent' by driving Rentokil to apparently amazing performances. Mr. Clive Thompson duly became Sir Clive, was appointed President of the CBI, was feted for the takeover of Initial plc. He eventually plunged to an ignominious end - with odium heaped on his head by those who had previously lionized him when it became apparent that he had driven his company into the dirt to maintain impossible levels of performance. He was eventually forced out as chairman of Rentokil Initial and new management vividly categorized the damage caused on his watch.

The most recent superstar to fall from grace and to lose the capacity to walk on water in the eyes of the business paparazzi is Lord Browne, CEO of BP. John Browne's career is a distinguished one, marked by many achievements - but it has ended in a rather sour sense of failure as the reputation of BP as a wonder performer, environmental saviour and superior employer have all been challenged by events. Observers seem to feel that Browne lost his grip on the internal realities of BP - and there was circumstantial evidence from subordinates and events much earlier to indicate that his external public profile was beginning to draw his attention away from leading BP.

Why does it happen?

Here are 3 good reasons:

• These days, the financial markets and their outriders, business commentators and journalists, are accurately perceived to be the prime determinants of top managers' careers, reputations and wealth. Thus the draw to attend to satisfying this demanding and frequently petulant audience is immense. Just look what happened to Sir Philip Watts of Shell who affected not to care about them. Only 2 years ago his behaviour was negatively contrasted with that of Browne and BP and he was forced out of Shell. Now looking at the respective contemporary performance and reputations of Shell and BP and one wonders whether the fuss was about style or substance. Two years is an age in executive Tinseltown!
  
  Economist John Kay hit the nail on the head:

  Today, politics are governed by spin and tabloid headlines and business is accountable to investment managers judged on quarterly figures. And when rewards are based on individual performance, the mutual trust necessary for collegiate management breaks down. In accommodating itself to current fashion, Shell looks like parents at their children's disco, courting popularity but only losing dignity.
  
  Yet there does not seem to be much wrong with the underlying business. Shell is profitable, its revenues are growing, the reputation of its products is unimpaired by problems with its corporate image. The dispute over reserves obscures the central point that Shell owns no less oil than it did. It is a company out of sympathy with its times. But maybe the fault lies with the times as well as with Shell.

• It is very easy for top people in large companies to become seduced by the power and trappings of the role. Bad signs are swish offices, protected by batteries of secretaries, corporate jets, coteries of assistants and bag carriers and a very large corporate PR department that appears to be mainly occupied with polishing the CEO's reputation. Big external profiles and honours are other possible contra-indications. Maybe Lord Browne fell victim to some of these factors.
  
  The real downsides of the draws of external scrutiny and the trappings of power and pomp are that executives become detached from their own companies and eventually from reality. When eventually the denouement comes, it must be very painful for the individual concerned, who can only console him/herself with the size of their bank balance/pension pot.
• The vast majority of those who comment and pontificate on corporate performance and leadership have little or no experience of working in leadership positions inside large organizations. Investors, analysts, journalists, headhunters and others are very distant from the inner realities of corporate life, usually have no personal experience of how such complex entities as large organizations work, and have to resort to spreadsheets and gossip to fill the void of their ignorance. Perforce, they go for the easy option of treating that which they can see as the whole picture. It should not need much imagination to see that a superficial personality analysis of a small group of people, plus manipulating historical financial information that has already been massaged by a corporate office is a pretty imperfect way of understanding a large businesses! Being out of touch with reality also creates space for theories like Creative Destruction to take root.

Note to a Superstar

"The trouble with being treated like old fashioned royalty and cut off from the world inside your company is that you are developing a strong sense of entitlement and with it a false impression of your own importance. The really difficult thing is that your points of reference are now others like you and a media circus that behaves as though you actually are the company. This sense of self-importance can only be exacerbated by the trappings of power and position - chauffeured cars, corporate jets, an office suite containing many assistants, publicity advisers and bag-carriers and a lifestyle that cuts you off from the lives of the average mortals that make up your fellow employees and customers. Talk about 'l'etat, c'est moi'!

"Of course the reality is that you are very important, because you can cause great damage in conjunction with compliant external directors, a few corporate staff, and external advisers. You, without any reference to the many thousands of people who do the real business of this firm, can buy and sell assets and people and cut huge deals that will more likely than not damage the real company and with it many peoples' lives. You can also issue edicts and initiate programmes from your office that may change the lives of thousands of people without actually meeting any of them.

"But that is where your uniqueness stops. If you were minded to nurture the company and grow its business steadily and sustainably, then you would have to lead and rely upon many others - and in doing so, would have to mix with them and develop a wide range of internal networks and relationships. Then you would come to realise that you are a member of a community, perhaps not even the most important member, except maybe in times of crisis or great opportunity.

Alas, you are unlikely to realise any of these things. Perforce, you have joined another universe, the centre of which lies outside the company in the world of your peers and competitors, the media and the City. Of this trinity, the City is the most powerful, because they can destroy you - and it is not in their interests that you should value the company, its customers and its people more than them.

This is the nub of the matter - although you may not even realise it, you are trapped in a sort of limbo - a space that is in between the company you are supposed to lead and the investors that you have to satisfy or perish. In reality you cannot be wholeheartedly a part of either. If you manage the balancing act, for a time you will be richly rewarded with both wealth and acclaim - get too close to either and you will most likely be judged to have failed the one or betrayed the other. Like policemen, your range of friends and contacts is very limited.

Some people might envy or hate you, but I feel rather sorry, because deep down you know that you cannot commit yourself to the people you lead and you are rather frightened of the City and the media and of the gnawing worry that it could all end in failure. Personally, I wouldn't want your life for all the tea in China. It is actually quite rational to want as much as you can get out of it, quickly, because it may all come to an end soon. A corrosive combination of great power, great insecurity and great pressure is working its insidious influence on you and we are all the worse for it".

Is there another way?

For those who are interested in evidence, it would seem that the secret of success in large corporations has little to do with charismatic leaders and heroic deeds. Henry Mintzberg and many others who have taken the trouble to actually observe what managers do have seen that leadership is a rather quiet activity, based on many contacts and networks. Good leaders do not spend their days in high powered meetings and presentations - they cultivate extensive networks inside their organisation, collect data and disseminate their messages through a myriad of informal contacts with many people. The best managers are not reported to be charismatic - they can be rather serious and quiet, spending the majority of their time with employees, customers and industry contacts rather than investors or journalists. Terry Leahy of Tesco is reported to be like this.

Mintzberg says: A prominent business magazine hires a journalist to write about the chief executive of a major corporation. The man has been at the helm for several years and is considered highly effective. The journalist submits an excellent piece, capturing the very spirit of the man's managerial style. The magazine rejects it - not exciting enough, no hype. Yet, the company has just broken profit records for its industry. .....consider this proposition: maybe really good management is boring. Maybe the press is the problem, alongside so-called gurus, since they are the ones who personalise success and deify the leaders (before they defile them). After all corporations are large and complicated, it takes a lot of effort to find out what is really going on. It is so much easier to assume that the great one did it all. Makes for better stories too.

He describes the Art of 'Managing Quietly' like this. Quiet managers:

• Strengthen internal cultural bonds, not by treating people as "human resources" (probably the most offensive term ever coined in management, at least until "human capital" came along), but as respected members of a cohesive social system.
• Care for their organisations, they do not slice away problems as surgeons do. They spend more time preventing problems than fixing them, because they know enough to decide when and how to intervene.
• Manage change by infusion, change that seeps in slowly, steadily and profoundly. Rather than having change thrust upon them in dramatic, superficial episodes, everyone takes responsibility for making sure that serious changes take hold.
• Leading from the 'floor', where the knowledge for strategy making lies, rather than the executive suite. Such management blends into the daily life of the corporation, so that all sorts of people with their feet planted firmly on the ground can pursue exciting initiatives.
• Put differently, the manager is not the organisation any more than a coat of paint is what holds up a building. Lou Gerstner is not IBM and Percy Barnevik was not ABB. A healthy organisation does not have to leap from one hero to another; it is a collective social system that naturally survives changes in leadership. If you want to judge a leader, look at the organisation ten years later.

Mintzberg sums up his observations with a piece of great wisdom:

Quiet management is about thoughtfulness rooted in experience. Words like wisdom, trust, dedication, and judgement apply. Leadership works because it is legitimate, meaning that it is an integral part of the organisation and so has the respect of everyone there. Tomorrow is appreciated because yesterday is honoured. That makes today a pleasure.

Indeed the best managing of all may well be silent. That way people can say, "We did it ourselves". Because we did.

One More Thing.

Most informed research opinion (that backed by systematic research) indicates that a focus on exceptional individuals and high ego publicity-seeking behaviour is not that which leads to building strong companies.

In fact, the opposite is the case, good leaders build extensive networks of relationships across their enterprises, and focus on bonding with the organisation and its business. This is a time-consuming activity, leaving little room for building a big public profile. Maybe others, chairmen for example, should shoulder the burdens of communicating with the investment markets and press.

In fact, in most good organisations, leadership itself is a dispersed, networked activity, working through teams and many, many individuals who exercise leadership roles at all levels in the organisation. This is the real 'Quiet Leadership', the sort that can lead to sustainable high performance.

Is 'Managing Quietly' the best way to superior performance?
If so, why don't they get it?

This piece has sought to discuss some important issues that can affect corporate performance, the strength of the economy and above all, the experience of millions in their work.

Is our bias towards Managing Quietly valid? And if so, why has a totally different philosophy of leadership taken root in the minds of those who determine policy?

What is your experience? What do you think?

Addendum
The tragedy of John Browne

John Browne was once a non-executive director of Redland. The author was appointed to that board as an executive during his tenure. Browne impressed his executive colleagues mightily by the quality of his intellect and his capacity to get to the root of things. He also caused some comment and gentle amusement when he brought his mother to board functions. She was tiny and dressed magnificently in flowing gowns and big hats. She also demonstrated a formidable intellect, delivered with a rich Hungarian accent.

Being a bunch of blokes, the Redland colleagues speculated idly about his sexuality - but this was a completely minor issue compared with his formidable skills.

What seemed more significant when Browne resigned from the Redland board to prepare himself for greater things prior to his appointment as CEO of BP, was his progressive transition from competent corporate leader to public superstar. It was noticeable that the group of followers and supporters which accompanied him to such events as public speeches and presentations grew to a full entourage, that corporate jets seemed to be his normal mode of transport, that the portraits in BP annual reports seemed to focus more and more on Browne as an individual and less on the collective of BP. His public profile with the City and in the press grew mightily, he was feted by Tony Blair and other politicians and he led a hugely skilful campaign positioning BP as the world leader in Green strategies - remember 'Beyond Petroleum'?

By the early years of the 21^st century, John Browne had become a full-blown celebrity, living in a world that, it appears, became more and more cut off from the internal realities and ordinary people of BP. Circumstantial indications of this were comments made to the author by a colleague that 'John was becoming more distant' and was being 'rather driven by his PR agenda'.

It was also interesting that when his halo appeared to slip in late 2004 as a result of a performance glitch, and the media immediately started to speculate that he had 'lost it', the company rapidly announced a 'strategy review' leading to the sale of assets and a significant number of redundancies. At the time, this seemed to smack of seeking to please external audiences.

But it was not until a couple of years back that BP's and John Browne's haloes really fell around their shoulders. First came a reported spat with his chairman about stretching his retirement date. This was rapidly followed by a series of environmental and safety disasters that indicated that BP was driven strongly by the need to save cost, that this had resulted in a major loss of life in a refinery disaster in America and considerable environmental damage in Alaska. It also appeared that the top management of BP, including Browne, had become isolated from the 'guts' of the organisation, which seemed to be driven by an assumed cost cutting agenda driven from the top.

John Browne, typically, accepted criticism of BP as being his responsibility, he declared that he should accept responsibility as the problems had occurred 'on his watch'.

Gurnek Bains, CEO of business psychology consultancy YSC, commented some time back that the careers of CEOs of large companies were becoming more and more like those of politicians - hugely exposed to the public gaze and likely to end in failure.

Tragically, this is what seems to have happened to Browne. He has recently been exposed as having lied in court about a homosexual relationship with a Canadian man - the pressures to cover the truth deriving from his huge public profile. Lord John Browne has now resigned as a result, a totally unfitting end to a fine career of success as a major shaper of one of the world's largest companies.

There should have been no connections between John Browne the talented industrial leader and Lord Browne the celebrity. Industrial leadership should not be done by celebrities, because fame and adulation distorts peoples' sense of proportion and priorities - and CEOs' priorities should be with the people who make companies tick - not with the media and the City.

Celebrities have to resign because they are found to have tried to cover up gay relationships - why the hell should CEOs have to - it has nothing whatsoever to do with their competence in the role. Most CEOs' have relationships of some sort, why the distinction between gay and straight relationships? The real tragedies are that Lord Browne seems to have been seduced by his public profile and felt that he should have to cover up relationships that in a better world he might have openly celebrated.