• Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
×
  • I'm here to...
  • Services
  • About Us
  • Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
  • Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
×
  • I'm here to...
  • Services
  • About Us
  • Generic selectors
    Exact matches only
    Search in title
    Search in content
    Search in posts
    Search in pages
    FMI Quarterly
    Special Reports
    Industry Outlooks
    News
FMI Quarterly/June 2015/June 1, 2015

The CEO’s Role: Part 2 —Forming a Culture for Success

Image3The CEO’s role is to shape a company’s culture and empower the employees.

Whether they are large public businesses or small, family-owned startups, successful construction companies have strong, positive cultures. These cultural roots typically start with a founder who has a vision of the type of company he or she wants to build.

Jack Mascaro, chairman and founder, Mascaro Construction Company, L.P., Pittsburgh, Pennsylvania, talks about how his own growth path was limited while working for another company. Mascaro left that company to start his own firm:

I knew the kind of company I wanted to build and took out a second mortgage on the house to start the business in the basement. I wanted to create a company with a reputation for great customer satisfaction. One that does what it says it is going to do the first time, then delivers. Construction is a big industry in the U.S., but it is widely reported that there is 30% waste in nonresidential construction. The industry spends less on R&D than does any other industry in the country. There’s lots of room for improvement.

Mascaro also knew his own strengths and weaknesses. One of the first people he hired was a CFO to manage the money it expected to bring in. As company chairman, Mascaro still works to transfer the company’s core values to the next generation. His sons, who now own all the stock, were reared in the business — a sure way to ensure that the company culture was transferred to the next generation. But the senior Mascaro goes a few steps further to see that everyone feels like an owner in a family company:

We have our core values, and they have made us successful into what is now our 25th year. In order to pass on that culture, one must live it every day. I teach an ethics class every year. We have even won a national award for being an ethical company. I tell stories, for instance, of how I have been tempted over the years to bend my ethics and how I overcame those temptations.

Mascaro also acts as a mentor to a few chosen leaders each year, helping to prepare them for new roles as they grow within the company. In exchange for that effort, the Mascaro Construction Company maintains a very high retention rate of 98.5%. Mascaro explains that this is also due to a sophisticated hiring process to, as Collins wrote in “Good to Great:” “Get the right people on the bus and the wrong people off the bus.”

The importance of culture runs deep in well-run companies, and sometimes the CEO must act as a cheerleader — or change leader — especially in difficult times. Guy Gast, president, Iowa Division, Waldinger Corporation and current chairman of the New Horizons Foundation in Des Moines, Iowa, explains how, in the depths of the Great Recession, he told his team that he would “own woe is me” so they could stop worrying about the vicissitudes of the markets and focus on their own important tasks.

Gast explains: It is a role, or a competency, of the CEO to be able to get the group “pumped up.” That can take a lot of energy, but it should be on every CEO’s actionable agenda.

One CEO competency is influencing the culture of the organization to grow in a positive direction. Often the culture in a construction company can become a losing one, especially in tough times. By inspiring higher levels of execution and celebrating individual and team successes, a CEO can raise the aspirations of the organization’s human resources. CEOs who understand, practice, shape and lead with their company’s culture can raise the firm above mediocrity and assemble many different people and talents. Taking the lead to shape the corporate culture can be quite a challenge anytime, but it’s even more important when the company grows to a multibillion dollar organization, like Norwalk, Connecticut-based EMCOR. Tony Guzzi, president and chief executive officer, described how he manages all the companies that make up EMCOR:

The companies are first focused locally. Then we work together at corporate to see where we can help each other. We look for areas where we can work together. We are all united in wanting to do things the right way. We are big on entrepreneurial leaders. We are a company of leaders.

According to Ron Magnus, managing director of FMI’s Center for Strategic Leadership, the CEO is the main caretaker and leader of the culture of the company. He presents the cultural model and “shines bright lights on it.” A culture that involves everyone in the company is at the core of the business. “Success=[P(urpose)*(T(alent)]C(ulture).” What this means is that success is determined by three critical factors within an organization. Purpose sets the path for the long haul. In order to strengthen and carry out this purpose, leading to success, the organization must have the right talent in place. Knowing how to recruit and retain this talent and adequately build the pipeline of “Peak Leaders” contributes and acts as a multiplier of success. These two pieces are raised exponentially by organizational culture, which reflects the organization’s vision. The CEO’s role is to assure the company is organized around its core vision. The CEO makes it clear why the organization exists. “The ‘tweaks’ the CEO makes need to be such that they enhance the culture and empower the people in the company to do great things. That’s magical!”

Is There Any One Characteristic That Makes a Successful CEO?

When we asked interviewees which characteristics make a successful CEO, picking just one was difficult in light of the CEO’s long list of responsibilities. However, we did get a short list that most CEOs would agree with. For starters, the CEO should be able to recognize his strengths and weaknesses, and that awareness comes up again on the short list. It also tends to have some relationship to several other characteristics on the list. The following list is not in any specific order of importance; all are important characteristics of the successful CEO:

  • Having integrity, trustworthiness and transparency
  • Exhibiting competency in all of the CEO’s responsibilities (or assembling a team that completes all those competencies)
  • Being strategically agile and adaptable
  • Being the head salesperson for the company (as in selling the brand of the company and sometimes the services as well)
  • Acting as a servant leader
  • Taking responsibility for “making the numbers”
  • Knowing to ask the right questions in order to get the needed information for decisions and to stay informed on all aspects of the business

To shorten the list even further, we might stop at the third bullet point, incorporating most of the others under competency; but that would lessen the importance of characteristics like being a “servant leader.” To anyone not familiar with the phrase, “servant leader” appears to be an oxymoron. If one is a leader, how can he or she also be a servant? Actually, it is a powerful concept whereby a leader in that privileged position understands his or her role as helping others to realize their full potential. Ultimately, this idea can be a cornerstone of building a strong and enduring company culture.

Integrity, trustworthiness and transparency, especially as these terms relate to ethical concerns, were all mentioned several times during the interviews. Integrity and transparency were at the top of Gast’s list, as he emphasized the need to build trust within the organization:

The CEO or president and other high-ranking executives must have integrity and be able to build trust with the people in the organization. Without mutual trust, things or plans just won’t work out very well. That would be my No. 1 characteristic of a CEO. People in the organization must trust the leadership. Along with that, one must add ethical behavior and good communication skills. The leader sets the tone for the organization on these issues.

Terms that describe the successful CEO include trustworthy, strategic agility, adaptability, speed/reaction time — needs to get all the information in a timely fashion and understand problems so they can be solved quickly.

For Guzzi of EMCOR, being ethical is considered a highly important CEO responsibility:

This is very important to us and to the culture of our company. I know the industry hasn’t always had a stellar track record here, but it is improving. At EMCOR, we do training on these issues, talk about ethical principles and invest in ethics training. We want to be known as an ethical company. It is not only a good thing to do; we see it as a business advantage.

We hold training sessions in leadership at West Point, and ethics is a part of this training. I always attend these sessions.

Guzzi also noted the importance of being a servant leader and working for the good of those he leads. That item was No. 1 on the short list of Hank Harris, president and CEO of FMI:

  1. Be a real servant leader
  2. Be the head salesperson. While most CEOs are extroverts with the personality to be the head salesperson for the company, those who are introverts need to delegate that role to others..

Lee Smither, managing director for FMI, puts “head salesman” at the top of his short list:

Probably the most important role for the successful CEO is to be the head salesperson. The CEO must spend time with customers to keep in touch with the market. Sales is one of the toughest jobs in the construction industry.

If I were to make a short list, head salesperson would be No. 1. If the CEO isn’t very good at that, it will be difficult to be successful. The CEO must be able to sell the company’s services. He must also sell the company to other stakeholders like the banks. The No. 2 characteristic would be the ability to ask the right questions. That goes for most every role from sales to getting the right information internally.

Although we try to make it easier to study the role of the CEO by breaking down different characteristics and responsibilities, it is apparent that all of the characteristics are interactive and present simultaneously, or nearly so. There are no compartments for these characteristics. For instance, being a servant leader also embodies being ethical and trustworthy. Those are characteristics of a head salesperson for the company. Understanding how and when to delegate is not only a sign of a servant leader but also of trust and fostering integrity. Together, all the characteristics serve to strengthen the bottom line of the successful company.

A Culture of Success

A deeper awareness of the importance of a strong corporate culture focuses the goals, values and behaviors of the organization. The CEO is the leader, keeper and shaper of corporate culture — whether handed down from generation to generation or forged anew to reflect the markets and times. Social culture must also be addressed by the CEO. FMI has called this “cultural intelligence” or CQ:

Cultural intelligence (CQ) is the capacity to adapt to unfamiliar, ambiguous, culture-based beliefs and attitudes of the people with whom you interact. In other words, people with high CQs are able to adjust their own thoughts, behaviors and communication style to match those of culturally diverse employees. In reality, people are engaging in cross-cultural interactions every day, due to globalization and increasing diversity within the industry. Leaders with high CQs understand their own cultural assumptions and suspend judgments when interacting with others. Effectively communicating with culturally different employees requires the adjustment of verbal and nonverbal behaviors to match the diversity of others. High-CQ leaders are better able to manage diverse expectations than their low-CQ counterparts are. Recent research links high CQ to several performance outcomes, including better judgment and decision-making, negotiation success and global leadership effectiveness. Cultural intelligence has also been linked to higher leadership potential, interaction adjustment and overall mental well-being.1

Being intelligent and aware of both corporate and social culture is a key CEO component that cannot be completely delegated, although it can be taught and passed on through example and influence. As always, the role of the CEO includes managing the bottom line, but managing and shaping a great culture is the key to keeping up the bottom line.


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 “Preparing to Lead Tomorrow’s Workforce Today,” Kim Morton and Jake Appelman, FMI Quarterly, 2013 Issue 3

 

Did you enjoy this article? Subscribe here for more FMI content.

Want to know more?