Seven Surprises for New CEOs

Seven Surprises for New CEOs

An article in Harvard Business Review (May 2004) by Michael Porter, Jay W. Lorsch, Nitin Nohria . Already a classic, I think.

Main points:

As a newly minted CEO, one may think to finally have the power to set strategy, the authority to make things happen, and full access to the finer points of your business. But if one expects the job to be as simple as that, you’re in for an awakening. Even though you bear full responsibility for your company’s well-being, you are a few steps removed from many of the factors that drive results. You have more power than anybody else in the corporation, but you need to use it with extreme caution.

Porter ea have discovered that nothing—not even running a large business within the company—fully prepares a person to be the chief executive. The following seven surprises are most common for new CEOs:

1. You can’t run the company (The sheer volume and intensity of external demands take many by surprise. Almost every new CEO struggles to manage the time drain of attending to shareholders, analysts, board members, industry groups, politicians, and other constituencies)
2. Giving orders is very costly (No proposal should reach the CEO for final approval unless he can ratify it with enthusiasm. Before then, everyone involved with the matter should have raised and resolved any potential deal breakers, bringing the CEO into the discussion only at strategically significant moments to obtain feedback and support)
3. It is hard to know what is really going on (Certainly, CEOs are flooded with information, but reliable information is surprisingly scarce. All information coming to the top is filtered, sometimes with good intentions, sometimes with not such good intentions)
4. You are always sending a message (A CEOs words and deeds, however small or off-the-cuff, are instantly spread and amplified, scrutinized, interpreted and sometimes drastically misinterpreted)
5. You are not the boss (Although the CEO may sit at the top of the management hierarchy, he still reports to the board of directors. At the end of the day, the board—not the CEO—is in charge)
6. Pleasing shareholders is not the goal (CEOs must recognize that, ultimately, it is only long-term value creation that matters, not today’s growth expectations or even the stock price)
7. You are still only human (CEO Should recognize he needs connections to the world outside his organization, at home and in the community, to avoid being consumed by his corporate live)

These seven surprises for new CEOs carry some important lessons:

• First, as a new CEO you must learn to manage organizational context rather than focus on daily operations.
• Second, you must recognize that your position does not confer the right to lead, nor does it guarantee the loyalty of the organization.
• Finally, you must remember that you are subject to a host of limitations, even though others might treat you as omnipotent.