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FMI Quarterly/March 2015/March 1, 2015

CEO Insights: Part 1 —Defining the Role of the CEO

Man_suit_outside_imageIt’s not just fulfilling responsibilities that makes a good CEO.

Help wanted ads for CEOs aren’t usually published in newspapers or on online job search sites. When companies go looking for a CEO, they either turn to professional search firms or develop their best candidates within the organization. The company — often the board of directors and major shareholders — is looking for a very special individual who will not only have the capabilities to perform the responsibilities listed in the article sidebar below, but will also fit the specific needs and culture of the organization the next CEO will be hired to run. While the CEO does not — or should not — act in a vacuum, the decisions he or she makes can mean the difference between the success and failure of the organization.

The responsibilities of the CEO apply in almost any industry or type of organization; however, our focus for this paper is on construction organizations. In general, we find that many of the characteristics of the CEO are the same in any organization or industry, but there are some significant differences to consider for the construction industry.1

2015q1_ceo_insights_ex1

The Self-Aware CEO

“Know thyself,” the ancient maxim from the Oracle at Delphi, does not appear on the list of CEO responsibilities. This knowledge falls under the area of job competencies; yet knowing thyself supports many of the decisions and actions taken by top leaders. The idea of self-knowledge came up repeatedly during our conversations for this paper. Most often, it was in the sense noted by Guzzi that, “The CEO must know his/her personal strengths and then have good people around him/her who know what to do.” Jack Mascaro noted, “A future CEO can be trained and rise through the company ranks through any field of endeavor if he is self-aware and knows his strengths and weaknesses. The new CEO must realize how his duties have changed and not get involved in the details of his previous job. He first has to worry about the financial strength of the company.”

Having a high degree of self-knowledge is not about excessive self-contemplation; it is a matter of knowing one’s strengths and weaknesses and then finding the right advisors to create a team with the strengths required to fulfill the responsibilities of the CEO. Self-awareness, or knowing one’s strengths and weaknesses, is the first step in the competency of delegation. Knowing thyself is a starting point to knowing the strengths and weaknesses of other team members, using their strengths where needed, and perhaps getting mentoring or coaching to help build up areas of weakness. As Hank Harris points out:

There are probably many different views of what makes a good CEO. At the CEO level in a large company, it is more of a “social job.” This is different from other levels of the company where the focus is often on specific team performance. The CEO must focus on the whole company. There are many more things to juggle. The CEO needs to have good people skills, socialization and political savvy. The CEO needs to know how to get things done with many different people.

The CEO who feels lonely at the top is likely having difficulty fulfilling the responsibilities of the role and needs help with some social competencies. These skills or characteristics can be seen as prerequisites for the successful CEO. It is good to have them before one takes the position, but they are learnable for the CEO or for the candidate who first understands what he or she needs to learn. However, there is much more to the role of the CEO. For instance, as Mascaro noted, the CEO needs to be self-aware, but also must “worry about the financial strength of the company.” According to Mascaro, the CEO’s job can be broken down into these three key areas:

  • He/She has to make his or her numbers every year.
  • He/She has business development responsibilities.
  • He/She has at least some operational involvement and concerns.

Most of the executives interviewed for this paper would agree with this short list, but there are some differences and elaborations needed to better define the role and how these items are accomplished. As Guy Gast notes, “the CEO and those who hire the CEO need to know the responsibilities, but more importantly, they must know or be able to learn the competencies required to fulfill the responsibilities of the position.”

CEO Responsibilities: A Closer Look

From the individuals interviewed, we found more areas of agreement and no real disagreement on a range of topics concerning the role of the CEO. The differences are more a matter of style, experience and opinion; however, all agreed that the list of responsibilities presented at the beginning of this article is a thorough list of CEO responsibilities. On the other hand, Guy Gast noted that he would rather think of the “responsibilities of the CEO in terms of competencies.” In part, this is because he thinks from the perspective of choosing a CEO and asks:

[W]hat competencies should he/she possess? This is not necessarily the same as just having responsibilities. For instance, in a job description, a CEO candidate must have, and be able to demonstrate, the competencies associated with the responsibilities. The question then becomes how to evaluate a candidate for those competencies. Selection must be based on a more objective analysis of skills. Notably, some of those skills are more ambiguous, but the attempt should be to demonstrate competencies that match responsibilities.

Ron Magnus and the team at FMI’s Center for Strategic Leadership looked at the list and presented a more compact version that will accommodate the list of responsibilities as well as competencies required by top executive leaders:

We combine all of the things on the list presented at the outset of our discussion into four major buckets. We focus on the four roles of a “VUCA”2 leader:

  • Alliance builder

  • Master strategist

  • Talent developer

  • Change leader

According to Magnus, “The CEO role is to assure that the culture of the company doesn’t stop good ideas. The CEO must remove obstacles and encourage ideas that capitalize on and align with the company’s purpose. The CEO must be actively involved in this process. In my experience, 90% of construction company CEOs don’t do this very well.”

While there may be a large percentage of CEOs in the industry that “don’t do this very well,” the short list of top executives interviewed for this article agree the CEO must “align new ideas and company strategy with the company’s purpose.” The CEO must carry the torch for the company’s culture, purpose, strategy and beliefs. All those interviewed concur and say this is as important as making money. Rather, this torch-bearing is an important part in the success of the company that also includes being profitable and achieving an organization that is “Built to Last,” as Jim Collins described in his book by that title. (It is notable that each of the executives we spoke with is a reader familiar with a wide range of business literature. Even though we did not ask about specific reading habits, a number of quotes and references to leading business authors came up frequently in our conversations.)

The list of responsibilities that a CEO must carry out is long, but we discovered in our interviews that although responsibilities are important, having the skills and competencies to carry out those responsibilities is critical to the success of the CEO and the company he or she leads. In practice, it is rare to find all of those competencies in one person. That is why one of the most critical skills for a leader is the ability to understand his or her competencies and find a core group of trusted advisors and supporters to provide those competencies that the CEO doesn’t naturally exhibit. In Parts 2 and 3 of this report, we will touch on the importance of the CEO in forming a culture of success and additional characteristics of a successful CEO. We will also comment upon some characteristics of those who might not become successful CEOs. Q


Help Wanted—CEO:

Must have the skills and characteristics required to carry out the following responsibilities:

  • Director: Set direction for the company
  • Decision-maker: Make high-level, critical policy decisions
  • Leader: Provide vision for the future of the organization
  • Motivator: Motivate employees and shareholders
  • Driver of change within the organization
  • Promoter and head salesperson for the company
  • Manager and facilitator of operations: Presides over the organization’s day-to-day, month-to-month and year-to-year operations
  • Advisor to the board of directors
  • Communicator: Within the company and with the rest of the outside world as needed
  • Visionary: Lead strategic planning efforts and oversee the plan’s execution
  • Listener: Surround himself or herself with the best people for advice
  • Recruiter/mentor: Select and nurture his or her successor
  • Fiduciary: “A CEO’s legal responsibilities to his company’s shareholders are broken down into three distinct fiduciary duties: the duty of care, the duty of loyalty and the duty of disclosure.”
  • Ethical leader for the organization

Phil Warner is a research consultant with FMI Corporation. He can be reached at 919.785.9357 or via email at pwarner@fminet.com.

1 This research paper was developed for the New Horizons Foundation. While we focus more on CEO responsibilities for HVAC/sheet metal firms, we also look at other construction industry firms. Generally, we found few differences in the overall responsibilities or skills of the CEO within the industry, but more differences in companies of different sizes and organizational structures.

2 Note: “Experiences over the last decade suggest that operating environments will become increasingly Volatile, Uncertain, Complex and Ambiguous in the years ahead — the future will be defined by VUCA.”

 

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