6 Steps to become a successful CEO:

Six issues demand major-league performance at the outset to successfully adapt to the highest corporate office.

What follows is a view of the CEO's world from what is probably a somewhat atypical perspective. I was a relatively young chief executive--I got the job one month after turning 42. My company, K Steels Ltd , was hardly a giant among Heavy engineering companies in India. What's more, the ownership of the company was not at all typical of a publicly held corporation: About 80 percent was in the hands of the founding family, and, importantly, it was not my family. So while the demands and pressures of my job might be quite different and my total experience must surely pale in comparison to the years of service and experience of many CEOs, I have labored to distill some lessons from my early years as a chief executive that provide another bit of insight into the life of the CEOs about which so much has been written recently. A word of caution, though. No Universal Truths here, or, at least, none intended. If the truth be known, I have come to believe less and less in Universal Truths in any case and more and more in the situational relativity of things. So if I may borrow the remarkably apt term of one of my more memorable business-school professors, here are what I prefer to call some Currently Useful Generalizations. 1. Distance : The newly minted chief executive has the problem of creating some distance between himself and those who were formerly his organizational peers. The reasons for this are many and, to a large extent, obvious. The CEO will be called upon to make decisions that will affect the lives of others. He will sometimes be the final arbiter of disputes. He is the judge in the competition for corporate resources. He must occasionally make unpopular choices. These and others are difficult functions, and they cannot always be done "among friends." This is not to say that the CEO cannot have friendships with associates, but simply that there are limits to which one must be sensitive. The route one takes to the CEO job is important. Distance may be built in: The new CEO is recruited from outside the company or previously occupied a position in the company's management hierarchy with few or no peers. In such cases "distance" is not a problem. The corporate management structure from which I became CEO was relatively flat, and my relationship with many of those who would now report to me had been of the "we're all in this together" variety. Somehow the message had to be conveyed that as a management team "we're still all in this together," but now our relationship had to be different. The need early on for a clear symbol of change, without alienating all those one still must rely on, seemed to be there. The symbol chosen was compensation--not necessarily the amount of compensation, but the form. A new stock-related compensation program was installed, and the new CEO was designated as the only current participant. It got the attention needed to serve a communication purpose because it was a proxy statement item. It did not need to be communicated by me in what would appear to be a self-serving way. Also, standing procedures for additional compensation items such as stock options were changed. This wasn't done in a capricious way; I thought it needed to be done. But it also served to communicate the reality and necessity of distance because it involved redistribution of awards. The element of distance does not mean the end of friendly and cordial relations or becoming unapproachable. It simply means communicating that things have changed. As time goes on, the kind of relationships built with subordinates will serve to define the limits of the appropriate distance, which must surely vary with personalities, the size and complexity of the business, and the kind of working relationships with which the CEO feels comfortable. 2. Legitimacy: It strikes me that in today's corporate world there are few corporate hierarchies--even small ones--that respond lock-step simply because an individual is anointed the CEO by a board of directors. There is a need to establish one's legitimacy in the CEO role in order to be able to spend time getting the job done, rather than defending or proving one's "right" to be CEO. Surely, over time, the best proof of legitimacy is performance; but in the early days, it is a mistake simply to wait for time to establish one's legitimacy. One must face the realities of the organization's perception of the CEO's legitimacy. As with distance, the perceived legitimacy one begins with as CEO is closely related to the route he takes to the job. The new CEO may have been with the company longer than anyone else, may have more general experience--or more of a certain clearly needed kind of experience--than anyone else, may have run the largest or most important division in a clearly superior way, or may be from outside the company but an acknowledged industry leader. In these cases, the need to establish legitimacy early on is less pressing because there's a presumption of legitimacy or credibility which will either be reinforced or undone over time. On the matter of legitimacy, it's important to understand that the reasons for the board of directors choosing a certain individual to be the new CEO may not be well understood or even known by the organization. And even if they are known, they may be perceived as irrelevant. This is because a board has in mind certain implicit needs in naming a new CEO, and these rarely get translated into an explicit view of the future around which the organization can develop a consensus that the new CEO is clearly the best choice to address these needs. It is clear to all that a new CEO represents change--or at least is change--but as Bertrand Russell observed, "Change is one thing; progress is another ... Change is indubitable, whereas progress is a matter of controversy." So whereas the organization may see only change, the board is reaching for progress. The new CEO must recognize the dynamics of these interactions and come to grips with the realities of his own situation in terms of how his position is viewed by the rest of the organization. In my case, when I was named CEO I had been with the company just over five years, which was less than half the tenure of the officer with the next-shortest service (except for one who was a recent arrival). In terms of age, there was about a 12-year spread between me and the next-youngest officer. During my five years, I had spent some time with certain corporate-wide duties and was responsible for making the company's largest acquisition, but I had spent most of my time with the company running one of its smallest (although fastest-growing) operations. Further, this job was essentially international marketing without significant manufacturing responsibility, which was not in the mainstream of the company's activities. My legitimacy problems were real. I dealt with them by focusing the company's efforts on articulating a long-term strategy, which inevitably highlighted the importance of new businesses and acquisitions for our future growth--an area in which I had immediate credibility. Another point regarding legitimacy. I assumed the CEO role from the CEO of the past 25 years. He had been successful in building the company and had the additional advantage of essentially controlling, with his family, more than 50 percent of the common stock (which was reduced to about 40 percent). He remained our chairman of the board. This situation placed a premium on my legitimacy and credibility because the other corporate officers were fully aware of his past level of control of the business and were constantly on the lookout for any signs that the new CEO was not "his own man." The former CEO and I did some symbolic things to help address this reality. The quarterly and annual reports were signed only by me. I presided over our annual shareholders meeting. The management meetings that were held twice a year away from headquarters were always his meetings; they became my meetings, and he didn't attend them at all. And although it's hard for others to get a sense of this, he no longer provides input on strategic or operating matters, budgeting, or goals unless asked. Naturally, the relationship between the past CEO and me was an important one for the company, and continued to evolve. Recognizing and dealing with the implications of this situation was important early on. I had to be recognized as "in charge," but also had to keep in mind the interests and expectations of our new chairman. 3. Perfectibility: I used to believe in the perfectibility of solutions: Given a problem, a basic solution could be formulated that would naturally be imperfect in terms of dealing with all facets of the problem, but with just a bit of tinkering, shaping, and honing, the solution could be "perfected"--could be made to conform to all dimensions of the problem. It always seemed to work for me, or at least nearly enough that a "perfect" solution was approximated. In the CEO job, I have concluded that far more important than the perfectibility of a solution is its simplicity. If there's a choice, simple is almost always better than "perfect"--even if perfection were truly attainable. I suppose this is just a belated recognition on my part of a principle articulated a long time ago by de Tocqueville, which probably comes as close to being a Universal Truth as anything I've ever read: "A false notion which is clear and precise will always have more power in the world than a true principle which is obscure and involved." It isn't so much that the problems one grapples with as CEO are more difficult than those confronted before and hence defy the perfectibility of a solution. That's part of the problem, since as CEO one typically faces larger and more complex problems affecting more people with more diverse interests. But more important, it's that even if a solution were perfected, it would likely be so complex that it would be impossible to communicate effectively and would lose whatever power you hoped it would have. And therein lies another lesson--the importance of communication. 4. Communication : Nothing has been more of a revelation to me in the CEO job than the importance of and the amount of energy that must be devoted to communicating well. I am struck by the triteness of my observation, by how often one reads or hears some version of the importance of communication, by the need I feel to make that observation at all. But the reality is that despite the intellectual understanding we may all have of the importance of communicating with others, being faced with the need to achieve a wide range of communication goals--from informing to advocating to inspiring--with a range of audiences places great demands on a CEO's time and can be the difference between success and failure. And it is one of the areas in which we are often least prepared. Good communication is ignored only at one's peril. I feel it's a mistake to think that the only communications that count by the CEO to employees are those that influence a lot of people at one effort. When I go to the plants, I do call people together for group sessions; and once a quarter I get all middle management together at headquarters and talk about results and other operational matters. But that's not enough. I often hand-write letters to people at all levels of the organization: the salesman named best of the month; a manager in one of our plants who comes up with something useful in a production process; someone mentioned in the employee newsletter doing something of particular note or personal importance. In terms of "productivity," that time may not seem very well spent. But it's the one letter here and there, the 10 minutes spent one-on-one when the opportunity arises, the accumulation of which sends a message to the organization. One-on-one communication may tend to get overlooked because it doesn't seem as powerful, but that's a real mistake. I do not mean here that communications glitter is more important than substance or competence. I do mean, however, that competence and substance are not enough. All levels of management must effectively communicate, and the example must be set by the CEO. An occasional meeting is not enough. There must be a program; there must be an ethic of informing and listening to people. 5. Ambiguity : It is, I suppose, an old saw that the higher one goes in management, the more one must be prepared to deal with ambiguity. In the CEO job, while one may have more power over corporate resources than ever before, there are also more factors over which one has no control and which affect one's destiny. In an anomalous way, at the same time you gain power you lose control. Even those factors that can be controlled are often no longer in your personal control, but are in the control of others in your organization on whom you must rely. More on this aspect of ambiguity in my comments below on leadership. The problem of imperfect information is a facet of ambiguity well known to all managers. It is compounded at the CEO level simply by the fact that the CEO has more areas in which he needs information to make decisions. Imperfect is a problem not only on the front end--that is in terms of input needed to make decisions--but perhaps more important, it is a problem in terms of the likely outcomes of various courses of action. Most managers have become accustomed to dealing with imperfect information on the input side and accept it as something one must live with. There is a great deal of reluctance, however, to accept uncertainty on the outcome side. It's much more comforting to be able to say, "If I do this, such and such will happen." We force alternatives into this formulation without recognizing that there is not one outcome if an action is taken, but a range of possible outcomes. Often, then, ambiguity is dealt with by denying its existence. The CEO cannot seek only convenient answers, but must insist that all reasonable outcomes are recognized in order to understand the possible implications for his company. Not to do so invites real surprise. Ambiguity is insidious because it may lead to inaction. This is particularly real at the CEO level because many decisions will affect people in some way, perhaps even their livelihood. There is always the feeling that some unpleasant result can be avoided simply by delay. This is rarely the case, and the organization is only the worse off for waiting, with its attendant uncertainty. Once one's homework is done, ambiguity or uncertainty cannot be allowed to be the only reason for inaction. 6. Leadership : Much of the life we spend as managers getting ready to be general managers is focused on "managing" better, getting better at bringing together and combining the various technical disciplines and resources--manufacturing, marketing, selling, financing, etc.--to achieve a certain result. Along the way, to be sure, we pay some attention to communication, but the goal usually is only to assure that everyone understands the game plan and is headed in the same direction. Certainly that's important, and it only gets more important as CEO. But this kind of communication, which most of us focused on in earlier management jobs, doesn't serve us as well as CEO, where the premium is less on managing--combining resources--and more on leadership: supplying vision, providing inspiration, and influencing action. In all of this, communication is critical. Not just communicating about what the strategy is, but making everyone feel a personal role in making it happen and a personal stake in the outcome. In moving from managing to leading, one essentially learns the difference between achieving goals and setting goals. There's an old line about the boss that observes that "Nothing is impossible for the one who doesn't have to do it." To be sure, all worthy goals ought to be difficult to achieve, but for poorly set goals, achievement may well be impossible, and that is counterproductive. The real difficulty, the challenge of leadership, is to set good goals--goals that are challenging enough to draw out the best one's organization has to offer, but achievable enough not to dispirit those who have to achieve them. It's a difficult balance to find without selling one side short. Leadership at the CEO level also requires high levels of trust. Whereas in many other management jobs, where factors that are controllable can often be controlled personally, as CEO you have to rely on others extensively. Your span of control may be broadened, but your capability to control myriad factors is greatly reduced. Delegation is no longer just advisable, as it may be in lower-level positions; it is critical. That brings us to another critical dimension of leadership--choosing the right person for the right job. The more trust and confidence the CEO has in his subordinates, the more comfortable he will feel about delegating. And the more comfortable the CEO is about delegating, the more his organization will achieve. Hopes, fears, and aspirations A common denominator that implicitly runs through all of these Currently Useful Generalizations is that virtually everything an organization achieves is accomplished through people. I have in mind here people on the production line as well as those to whom one says good morning every day in the executive suite. The CEO must genuinely care about the hopes and fears and aspirations of the people in his organization and must be equally willing to act on this concern, or in the long run little is likely to be achieved. The view from the CEO's seat is likely to be foggy indeed, because the only constant in much of what the CEO does is uncertainty. But nothing is clearer to me from my short time as CEO than that people make the difference. The CEO must care, and the organization must know through his actions that he cares. The CEO's attitude becomes the company's attitude, and everyone in an organization feels it and responds to it. No one summed it up better than eminent philosopher Yogi Berra. He was talking about baseball, but it applies here, too: "Ninety percent of this game is half mental."