Leadership determines success.
I've learned over the years that the extent to which CEOs are prepared to deal with this reality influences in every possible way their ability to succeed as managers and profoundly impacts their companies' ability to make profit. This may explain why businesses with the best equipment (but poor leadership) can go belly up while others with facilities that are "older than dirt" (and strong leadership) may hum along at profit levels twice or three times the industry average. The bottom line is that the presence or absence of effective leadership is the single greatest determinant of a business' success.
But what does leadership mean, and how can a CEO provide it? Here's how I'd answer these all-important questions. First, business leadership means giving direction to people in a company setting. As far as how a CEO leads, many believe that leadership means establishing sound company policies and ensuring that every employee behaves in ways consistent with those policies.
Policies are written directions that set forth the fundamental guiding principles of a business. They are "big picture" in nature, broad in their impact and crystal clear in their intent. Issues such as the nature and importance of employee development, product line scope, the extent of horizontal or vertical integration, target customer definitions, critical manufacturing attributes, the primacy of quality, required levels of financial performance, and so on should be the subjects of universally understood written company policies. By the way, the process of researching, thinking about and articulating policies such as these is often referred to as "strategic planning."
Unfortunately, this is where most attempts at providing leadership stop. But creating policies and strategic plans is not enough; the CEO must lead his or her employees to water and make them drink. In other words, the extent to which a business will succeed (i.e., earn profits) and derive value from strategic planning is directly proportional to the extent to which CEOs are prepared to ensure that every employee behaves in ways consistent with the plan and the policies embedded in it.
Ensuring that every employee behaves in ways consistent with the company's policies is the true substance of leadership - the true substance of the CEO's job - because it involves decisions made and actions taken throughout every hour of every business day. In other words, it is by virtue of the CEO acting in ways consistent with the company's policies that the people around him or her will do so. In turn, as senior managers act in ways consistent with the company's policies, middle managers will begin to do so and, finally, as middle management acts consistently with the company's policies, the entire organization will do so.
But how can a CEO make these illusive concepts real? In five fundamental ways. First, he or she must communicate the contents of the strategic plan in such a way that everyone in the organization understands company policy in the same way and fully appreciates that they are expected to behave in ways consistent with that policy. A regular company newsletter or "president's letter" will help as will repeated sit-down sessions with each department, but it is in the way the CEO behaves - the way he or she answers questions, the decisions he or she makes and the ways in which he or she spends the company's money - that sends the most powerful messages. Thus, "appropriate and consistent behavior" is the second fundamental way CEOs can provide the substance of effective leadership.
Staffing and Training
Hiring and staffing is the third key to effective leadership. When the CEO selects "true believers" for the company's most important positions, they will (through their actions and consistent dedication to the company's policies) send those priorities and that behavior cascading throughout the organization. And that effect multiplies a business' profit-making potential.
Of course, it is not possible to replace every employee - and their bad habits - with malleable new hires. For this reason, training is the fourth component of effective leadership. CEOs should ensure that the organization has the resources needed to correctly identify and fulfill each employee's training needs.
The fifth and final element of effective leadership is the company's incentive and performance evaluation systems. These form the backbone of the organization's alignment with the company's strategic plan and policies, because they provide appropriate definitions and standards to objectively measure the extent to which each employee is behaving in ways consistent with company policies.
To ensure that a company's money is being put where its mouth is, all job descriptions must be linked directly to the company's written policies. This is how employees know they are expected to act in ways consistent with those policies. Next, performance evaluations must be linked directly to job descriptions so that managers can objectively assess to what extent employees are performing in appropriately consistent ways. Finally, financial and non-financial incentives should be established to reward excellent performance, encourage performance improvement and discourage behavior that is inconsistent with company policies.
It should be clear by now that the key to all of this is consistency on the CEO's part. CEOs, of course, must have vision to create a credible strategic plan but, just as important, they must have the fortitude and stamina to infuse that vision throughout the company and align every employee's behavior - especially his or her own - with it. These characteristics are what distinguish the best CEOs from the rest and separate the companies that achieve vastly superior financial results from the average ones.
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|Date:||Aug 1, 1999|
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