Greg Glockner has mastered something which I have been unable to do - he writes for two blogs at once, his own, Greg's Rants, which features his thoughts on "technology and business" but delves into other matters (such as his dissatisfaction with the non-race, Bay to Breakers), and his corporate blog, Decidedly, which focuses on, well, business and technology. (As you have seen, I maintain only the one blog, so everything goes in here, from soup to nuts.) (Disclaimer: I have known Greg for years, meeting him back when he was a violin-playing math competitor - now he is a marathon-running COO.)
Despite the separation of the two blogs, occasionally Greg will find some synchronicity, as he does this week with his rant, CEO week, and his corporate post, The king is dead - long live the king. Both posts talk about CEOs, a topic I've talked about a time or two. In the first, Greg links to a Business Week item that laments the lack of good CEOs, and infers that the message is that "senior executives are the only ones who matter, while other employees are expendable." In the second, the salient point is: "Seems like the board of directors should be doing a cost-benefit analysis when hiring a CEO."
One thing that's interesting here is that Greg is a business executive, so we would tend to take his opinions more seriously than, say, mine (which also makes The Corporate Cynic so invaluable). But now we're into my opinions, and I would argue that what Greg is noting is an absolute failure in business terms, and threatens the system we're counting on to lead us into the future.
I worked for a few years for a small consulting firm, small enough that I got to know the CEO reasonably well. This fellow had the look of a CEO, he could go on for hours about the industry and how technology could be applied, and he came off very well with customers and other movers and shakers. But he had one flaw: he had no idea how to deal with people and their issues.
When I started, there was a triumvirate of really good middle managers serving to buffer this CEO from actual employees (and there were only about 30 of those in the whole company). Fairly quickly, though, those managers peeled off, and the CEO was left to deal with real people. And he became utterly undone. What he did do was to search for a savior, someone who could re-buffer him. He was terrible at it, finding a succession of people who were ill-equipped to handle what should have been his role, until he found a COO who essentially ran the company into the ground.
My point here is that boards of directors do the same thing. They have no idea how the company should be run (even the outside CEOs who sit on the board don't take the time to understand how this company works, and the non-CEOs can't possibly do so), so they tend to grasp at straws. When someone comes in for an interview who has energy and ideas, the board jumps, giving the candidate anything they want if they'll just make all the problems go away.
Cost-benefit analysis? You've got to be kidding. I know, it seems odd that we have more of an idea of marginal contribution for a baseball shortstop then we do for someone who is going to run a major enterprise, but it's true.
But there is also a pernicious problem built into this. Remember, the CEO is being hired to do everything, to walk on water, and being compensated accordingly (and the compensation structure, purportedly based on bringing value to the company, is hugely flawed). Anyone who has spent any time in business knows that's not possible, that there are real challenges that won't yield to a hearty handshake and an ability to schmooze stock analysts. So investors and the board quickly become disillusioned, the CEO gets the heave-ho, and off we go in search of the next savior ("and if we just offer them even more money, we'll get the right person - this time").
There are some people, including even the usually level-headed Robert Reich, who believe that CEOs are worth the money because of the added value they bring. Lee Raymond as head of ExxonMobil brought $16 billion of extra value to the company, and got only 4% of that, and many would cite that as appropriate. I might be willing to accept that if under-performing CEOs had to give money back, and if other employees were evaluated the same way.
Because, pursuant to Greg's first point, it is frequently the case that the CEO is not even the most valuable person in the company. Do we really believe that the media-seeking Carly Fiorina was the most important person in Hewlett-Packard, or was it an engineer who came up with salable technology? But that engineer is invisible to the board, and the shareholders, and the analysts, and so is "expendable" as soon as an executive convinces him/herself that the new grad in South Korea could do the same thing for less money.
Perhaps one day we will realize that the celebrity culture that has grown up around CEOs is wrong, that more than one person is responsible when a company pulls in $15.6 million per employee. If that ever happens, and it's a big if, CEOs will be compensated more in line with what they actually do, and we'll have reasonable expectations of what they actually can do. At the same time, we'll have a lot more respect for the guy or gal who comes in every day and does their job, and we'll be less likely to treat them as a fungible, costly commodity. I'm not holding my breath.
Despite the separation of the two blogs, occasionally Greg will find some synchronicity, as he does this week with his rant, CEO week, and his corporate post, The king is dead - long live the king. Both posts talk about CEOs, a topic I've talked about a time or two. In the first, Greg links to a Business Week item that laments the lack of good CEOs, and infers that the message is that "senior executives are the only ones who matter, while other employees are expendable." In the second, the salient point is: "Seems like the board of directors should be doing a cost-benefit analysis when hiring a CEO."
One thing that's interesting here is that Greg is a business executive, so we would tend to take his opinions more seriously than, say, mine (which also makes The Corporate Cynic so invaluable). But now we're into my opinions, and I would argue that what Greg is noting is an absolute failure in business terms, and threatens the system we're counting on to lead us into the future.
I worked for a few years for a small consulting firm, small enough that I got to know the CEO reasonably well. This fellow had the look of a CEO, he could go on for hours about the industry and how technology could be applied, and he came off very well with customers and other movers and shakers. But he had one flaw: he had no idea how to deal with people and their issues.
When I started, there was a triumvirate of really good middle managers serving to buffer this CEO from actual employees (and there were only about 30 of those in the whole company). Fairly quickly, though, those managers peeled off, and the CEO was left to deal with real people. And he became utterly undone. What he did do was to search for a savior, someone who could re-buffer him. He was terrible at it, finding a succession of people who were ill-equipped to handle what should have been his role, until he found a COO who essentially ran the company into the ground.
My point here is that boards of directors do the same thing. They have no idea how the company should be run (even the outside CEOs who sit on the board don't take the time to understand how this company works, and the non-CEOs can't possibly do so), so they tend to grasp at straws. When someone comes in for an interview who has energy and ideas, the board jumps, giving the candidate anything they want if they'll just make all the problems go away.
Cost-benefit analysis? You've got to be kidding. I know, it seems odd that we have more of an idea of marginal contribution for a baseball shortstop then we do for someone who is going to run a major enterprise, but it's true.
But there is also a pernicious problem built into this. Remember, the CEO is being hired to do everything, to walk on water, and being compensated accordingly (and the compensation structure, purportedly based on bringing value to the company, is hugely flawed). Anyone who has spent any time in business knows that's not possible, that there are real challenges that won't yield to a hearty handshake and an ability to schmooze stock analysts. So investors and the board quickly become disillusioned, the CEO gets the heave-ho, and off we go in search of the next savior ("and if we just offer them even more money, we'll get the right person - this time").
There are some people, including even the usually level-headed Robert Reich, who believe that CEOs are worth the money because of the added value they bring. Lee Raymond as head of ExxonMobil brought $16 billion of extra value to the company, and got only 4% of that, and many would cite that as appropriate. I might be willing to accept that if under-performing CEOs had to give money back, and if other employees were evaluated the same way.
Because, pursuant to Greg's first point, it is frequently the case that the CEO is not even the most valuable person in the company. Do we really believe that the media-seeking Carly Fiorina was the most important person in Hewlett-Packard, or was it an engineer who came up with salable technology? But that engineer is invisible to the board, and the shareholders, and the analysts, and so is "expendable" as soon as an executive convinces him/herself that the new grad in South Korea could do the same thing for less money.
Perhaps one day we will realize that the celebrity culture that has grown up around CEOs is wrong, that more than one person is responsible when a company pulls in $15.6 million per employee. If that ever happens, and it's a big if, CEOs will be compensated more in line with what they actually do, and we'll have reasonable expectations of what they actually can do. At the same time, we'll have a lot more respect for the guy or gal who comes in every day and does their job, and we'll be less likely to treat them as a fungible, costly commodity. I'm not holding my breath.
1 comment:
under-performing CEO's get sent home. over-performing employees get additional rewards. i have received additional compensation for innovative engineering. i hope companies like mine (well, i'm independent, but experiences like mine) overtake the misery you describe as commercial production, and i have every reason to believe they will.
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