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Seven surprises for new CEOs | Harvard Business Review

I found this article resonated with me a lot.  A keeper.

23 minutes

Bearing full responsibility for a company’s success or failure, but being unable to control most of what will determine it. Having more authority than anyone else in the organization, but being unable to wield it without unhappy consequences. Sound like a tough job? It is—ask a CEO. Surprised by the description? So are CEOs who are new to the role. Just when an executive feels he has reached the pinnacle of his career, capturing the coveted goal for which he has so long been striving, he begins to realize that the CEO’s job is different and more complicated than he imagined.

Some of the surprises for new CEOs arise from time and knowledge limitations—there is so much to do in complex new areas, with imperfect information and never enough time. Others stem from unexpected and unfamiliar new roles and altered professional relationships. Still others crop up because of the paradox that the more power you have, the harder it is to use. While several of the challenges may appear familiar, we have discovered that nothing in a leader’s background, even running a large business within his company, fully prepares him to be CEO.

Through our work with new chief executives of major companies, we have found seven surprises to be the most common. (See the sidebar “Learning the Ropes.”) How well and how quickly new CEOs understand, accept, and confront them will have a lot to do with the executives’ eventual success or failure. The seven surprises highlight realities about the nature of leadership that are important not just for CEOs but for executives at any level and in any size organization.

Read more.

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Discipline and systems allow businesses to scale | Kan & Company

In New Zealand, because of our flexibility and laid back attitudes, it’s easy to conclude that a lack of formality and bureaucratic procedure is part of the reason why New Zealand company’s succeed.

However, that conclusion is false.

Too many of New Zealand’s businesses are stuck in perpetual “start-up” mode, frozen at a small scale, still operating like small start ups with few standard systems and procedures even after decades of operation.

Consequently, new staff are always re-inventing the wheel, developing processes from scratch for routine operational processes.

Without documentation systems, new project teams have to develop their own processes for deployment and these processes can’t be easily handed on to the next set of new staff, leaving new staff to repeat the same grind.

Without systems, mistakes and gotchas can’t be flagged for subsequent staff to avoid.

Without timesheets how can the organisation control its costs?  How can it apportion its overheads to particular projects and activities?  How can the business know whether a particular activity makes money?

Too few business owners and managers are disciplined enough to put systems in place to be able to answer these questions with any rigor.

These questions seem so obvious yet why isn’t answering them prioritized?  Often the lack of a systematic, disciplined approach results in poorly tested, and unreliable products and services.

Deployment under these circumstances results in much re-work and this gets in the way of product and service development, and places greater pressure on meeting contractual deadlines.  In other words, fighting fires.

Not surprisingly, profitability is impaired but often managers comfort themselves with high gross margins.  Such managers fool themselves into thinking they are still making money because all that re-work is still a hidden cost, buried among the overheads.

All that frenetic, frantic activity yet the company isn’t growing as it should.

Success is not just based on talent, expertise, knowledge, acumen or luck but also discipline.  Systems provide discipline.  Not just discipline for operational activity as we have just touched on, but also to strategy setting, business planning, goal and objective setting too.

In fact, if a lack of systems is creating bottlenecks that are constricting your company’s growth then implementing systems has become a strategic imperative.

Systems allow a winning formula to be replicated across a great many people and this is how businesses scale.

Implementing systems that encourage a systematic and disciplined approach to all your business activities (including sales and marketing) will allow your company to focus on the right things, control costs and scale to new heights.

Putting systems in place and gaining staff engagement to sustainably use them, takes leadership and hard work.  In my experience, it’s an investment that is well worth the effort.

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It’s not rocket science | Kan & Company

2 minutes

I dropped in on a CEO the other day. We talked about the lessons we had learnt about turning around non-performing companies.

We chatted about how it was so much about reinforcing values. About upholding standards of cleanliness, everyone pitching in, opening up communications between people, creating safe environments so people have the confidence to speak up, building trust, bringing discipline to operations, customer service, sales and marketing, engineering and technology development.

I noticed he had a number of Summer interns working for him. I asked him if they were paid. Before he could answer, I explained why I asked.

It reminded me of a conversation around a board table many years ago. The discussion was about whether interns should be paid as we had noticed that there was a growing trend not to pay them. Fortunately they decided that they should be paid.

All of our interns are paid, he said.  You can shaft someone, and there will be a short term benefit , but in the end, it comes back and bites you. You just have to treat others the way you want to be treated yourself.  It’s not rocket science.

Indeed, I replied. It isn’t rocket science, but what catches people is a lack of courage. Often when the decision has to be made, money might be tight, and the temptation to get something for free is at its height, to pad out the meager resources available and thereby buy more time.

You’re right, it’s not rocket science, but you do need courage to do the right thing.

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Executive compensation: “at risk” should really be “at risk”

Quick read

I was involved in a discussion about Executive Compensation the other day.

We were discussing how a base salary covered meeting the budget sales and profitability targets.  Then bonus targets were set above the budget targets. 

The bonus would be awarded on a pro rata basis depending on how much progress had been made on meeting the bonus targets.

Get half way to meeting the bonus targets after reaching the budget targets, and the executive gets half the bonus. 

There was some doubt about the structure because the bonus targets couldn’t be reached with 100% certainty.

And that’s how it’s meant to be.

If achieving the bonus targets was 100% certain, then the budget targets have been set too low.

The idea of bonus targets is to create a “stretch” objective, which will require going the extra mile and thinking outside the box to achieve.

Bonus targets that are too easy to reach, mean that the bonus or “at risk” components of the compensation package are in fact components of the base salary package in disguise.

“At risk” components of an executive compensation package should really be “at risk.”

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