The CEO Tightrope: How to Master the Balancing Act of a Successful CEO

By Joel Trammell

Austin, TX

• Language: English
• Publisher: Greenleaf Book Group
• Release date: Sep 9, 2014
• ISBN: 9781626341074

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BALANCING THE FIVE RESPONSIBILITIES

I woke up in a cold sweat. My wife had given me a good shove to stop me from grinding my teeth and keeping her awake. I couldn’t help it. The $13,000 check I had received for computers purchased by a guy in Maine had bounced like a rubber ball. When I had tried to contact the customer to see if there had been an honest mistake, I found that he had already skipped town. At this point in the life of my small business, $13,000 represented a third of the profits for the year. It was as if someone had kicked me in the gut and then laughed as they walked away. Welcome to my first real test as a CEO.

Why had I shipped such a relatively large order without verifying payment? Wasn’t it obviously a risky bet? Well, the customer had placed a number of orders in the past, paying with a cashier’s check, which was our policy at the time (this was long before PayPal or other instant payment options). When he requested that we accept a business check, I didn’t think it was much of a risk. It seemed clear to me that he was building a solid business and being able to write checks would allow him to place more orders, allowing me to make more money. I was balancing the risk of a bad check with the reward of increased revenue.

That sleepless night happened more than twenty years ago. Since then, I have led several more companies, made deals worth hundreds of millions of dollars, and made more bad calls. But no decision has left me with a sicker feeling in my stomach than accepting that $13,000 check. Analyzing options and assessing risks and rewards are just two of the many things I have learned over the last two decades about the precarious tightrope balancing act required of a CEO.

Every CEO faces this challenge in his or her career: balancing the need for revenue, growth, and sustainability with the risks inherent in certain decisions. Some deals are tempting but could be too risky. Some customers offer growth but could damage your business. Some leaders seem sharp and driven but could diminish your culture. Some projects need funding and focus but may not deliver the same return as other projects competing for attention.

These are the decisions that make the CEO job so different from any other job in a business. They require us to take full responsibility for outcomes and events over which we have little control. We are responsible for the whole enterprise and must balance a massive array of needs, demands, interests, and perspectives if we want to be successful. We are asked to meet the needs of employees, customers, and shareholders. We are the arbiters of internal disputes between departments and divisions. We have to be on the lookout for leaders who can add the right ingredient to balance the executive team. Every day we have to fight to escape the draw of tactical activities that cause us to neglect strategic issues.

To take the tightrope analogy even further, not only are we weighed down by competing interests, needs, and demands for our time, we are also chased by the expectations of ever-increasing results. You can’t find a point of balance and then stand still—on a tightrope, that’s barely even possible. Whether you are a public CEO trying to make the quarterly number or a small business owner trying to provide for his family, the expectation is that the business must always grow and prosper.

And while all of these fires are burning, we are the only employees in the organization who have no day-to-day boss to provide guidance or to act as a sounding board when we are making tough decisions. As CEOs we are expected to self-diagnose our weaknesses, because rarely will subordinates directly point out our shortcomings. If we need guidance, we are expected to hire a coach or a consultant. But often the resources are not available, we worry that the outcomes won’t justify the investment, and we aren’t sure what kind of help we need anyway.

All of these challenges and many more point to the huge difference between the job of the CEO and any other executive in a company. And as the title of this book implies, the failure to keep the organization in a state of semi-balance and constantly moving forward often leads to serious consequences—you could fall to your death, and take the company with you.

Balance is the theme of this book, but on a tightrope balance is never actually achieved. Tightrope walkers avoid falling off by constantly making small adjustments as they move forward. The better the tightrope walker, the more natural the corrections appear. In contrast, we have all seen CEOs who make dramatic moves in one direction and then the other in a constant fight to solve the problem of the day. Eventually, they fall.

Like tightrope walkers, the best CEOs appear to be doing the least while moving the business forward—the better the CEO, the more subtle the adjustments, and the smoother the progress. And progress is critical. One of the enduring truths about running a business is that the situation is never static. Staying on the correct path requires constant movement toward one side and the other. How do we, as CEOs or aspiring CEOs, achieve this? By developing a better understanding of the critical roles the CEO plays; by learning how to balance competing needs, interests, and priorities in order to succeed in those roles; and by learning to ask reflective questions that will push us to learn and improve.

The goal of this book is to help make your CEO journey look as smooth as a Sunday stroll. Because the better you are as CEO, the less you will have to do each day and the more you will be able to accomplish.

WE AREN’T WELL PREPARED

Success is a lousy teacher. It seduces smart people into thinking they can’t lose.

—BILL GATES

The fact that special challenges exist for anyone who sits in the CEO chair is not news. Most people accept that it is a difficult job that requires a wide range of skills. What is surprising is how little new CEOs understand about the job before they take it on, how little time they spend studying and preparing. Where are the courses that teach a person how to be a CEO? There’s little content among the vast quantity of business books and research published every year—even by the leadership and management gurus—to address the unique challenges of the CEO job. If you want to learn more about marketing, sales, accounting, or any other major area of business specialization, opportunities are plentiful. The problem is a business cannot be viewed only as a combination of individual parts. Running a good business requires interweaving unique specialties in just the right way to maximize productivity and profit. It’s big-picture balancing.

Many people think that the CEO job is just the next progression after being a senior executive in a business. Only occasionally are people groomed for the CEO position, though, and moved around the company to gain a breadth of knowledge and experience. How many times have those people seen all the pieces that came together for a CEO to make a decision? Instead, people find themselves in the CEO chair either because they started a business and became CEO or were selected for the position after demonstrating significant expertise in a particular functional area of a business.

Entrepreneurs are often better at—or at least more interested in—starting companies than running them long term. And when they first start out, they typically have little experience to draw on. I started my first company when I was twenty-five. What did I know about being a CEO? Only what I learned day by day.

And as for the second path, I would argue that the CEO job is actually not all that similar to other executive roles. Let’s look at the typical career progression of a sales executive. She starts out in a bag-carrying role, selling a product. With success in that role she is promoted to be the manager of a group of salespeople. After many years of climbing the corporate ladder, this former salesperson might reach the pinnacle of her sales career by being named vice president of worldwide sales. At each step along the way she has developed more and more expertise in the area of sales and sales management. As VP, the problems that reach her desk almost always involve an issue that she has experienced at some point during her career. Her significant experience means that she is often the expert in the room and while she may face tough decisions, she doesn’t necessarily have to depend on someone else to explain the issue. Her success will often depend on her ability to pass along her experience to her team and to train them to do the same things that made her successful.

Now imagine what happens when that person is one day made CEO. Most of the issues that come to her desk now will be issues with which she does not have the relevant expertise and experience. She will be asked to make decisions in areas as diverse as human resources, information technology, real estate, legal, technology, and many others. Her success will depend not on passing her experience along but in leveraging the expertise of others both inside and outside the organization. It will require her to think about the implications of her decisions beyond just a single group in the company to all shareholders, employees, and customers.

Before Carly Fiorina became CEO of Hewlett Packard, in July 1999, she had cut her teeth in marketing. It was no surprise, given her background, that she focused externally in the CEO role. She introduced numerous new strategies, including the contentious acquisition of Compaq. She spent much of her time in the public eye building her personal brand as well as the HP name. All of this might have been great if HP’s biggest challenge had been a lack of awareness in the market. Unfortunately for Ms. Fiorina, the problems at HP were internal and operational in nature, as the actions of the next CEO, Mark Hurd, clearly demonstrated. By focusing on reducing costs and increasing efficiencies, Hurd was able to deliver exceptional performance. The company’s profits increased for twenty-two straight quarters under Hurd and its stock price doubled.

When you consider the tremendously successful careers of most people who get a shot at the CEO position, it’s amazing how many fail, by being fired or pushed out. In today’s high-speed business environment, shareholders have little patience for long-term plans if performance in the short term isn’t strong. The average life span of an elite CEO—the leader of one of the world’s largest companies—is about five years, but a high percentage of CEOs are out in less than two years.¹ The numbers vary from study to study, but none of them allow for much learning on the job.

Lack of training for the role is one of the key factors in the rise of the executive coaching industry. Several studies have shown that it takes about 10,000 hours of practice at an activity to perform at a world-class level. Even Michael Jordan was cut from his high school basketball team before he mastered the skills necessary to be a star player. Unfortunately for the newly minted CEO, his practice occurs in a very public forum and his success can dramatically affect the lives of all the employees as well as shareholders and customers.

Obviously the CEO role varies depending on the size and characteristics of the organization. In the smallest of organizations the CEO wears many hats—from individual contributor, to manager, to one-man board. At somewhere between twenty and fifty employees, a company begins to require a systematic approach to management and a full-time CEO role emerges. Growth is also a key factor in the approach to the CEO role. A one-hundred-person company doubling in revenue every year will present very different demands from a one-thousand-person company that is stagnant. With every new CEO position, even experienced CEOs have to shift their perspective.

Yet the challenge all CEOs face is that to build and grow a world-class company, we must be strong in every area of the business—not experts, but well informed—and fulfill the responsibilities that only we can perform. The CEO is responsible for making sure that every group is delivering at the highest possible level. Each company is only as strong as its weakest link. Understanding how to balance performance across all departments requires a CEO with broad experience, big-picture vision, and an understanding of what the job requires.

THE JOB VS. THE JOB VS. THE JOB…

Many new CEOs struggle because they do not have a clear picture of what they should do in the job, the key responsibilities they should prioritize. Before taking the position for the first time, they have observed only a small fraction of the things a CEO does and can be overwhelmed by all the demands on their time once they are in the fray. It’s dangerously easy to fall into a tactical routine, confronting each problem as it comes your way. But being reactive rather than proactive is not the path to building a great company. Instead, successful CEOs spend the majority of their time proactively fulfilling five key responsibilities related to the company vision, resources, culture, decision making, and performance—responsibilities that are owned primarily by the CEO.

Own the Vision

The CEO must be able to communicate the strategy, mission, and vision of the company—where it’s going and why—to all constituents. She must be able to communicate it at the appropriate level for employees, customers, and shareholders, and ensure that everyone within the organization is clear on how the direction impacts his or her job and daily responsibilities. Other people may help create the strategic vision, but the CEO must tell the story of that vision in a way that is clear, engaging, and exciting. And everything the CEO does must support the vision.

Provide the Proper Resources

The CEO is responsible for determining resource needs and allocating those resources within the company. The two most important resources for the typical business are capital and people. The CEO must make both available in the proper quantities and at the right time for the company to be successful.

All executives have experience dealing with budgets and allocating resources. However, the CEO job requires balancing resources between groups and initiatives that are not necessarily comparable in terms of how they influence the company’s progress toward goals. Being good at making these decisions requires a deep understanding of all aspects of the business, combined with a clear vision.

While balancing capital is hard, building the best team is even harder. Each person in your organization is a unique individual with different strengths, weaknesses, and expectations. Success as CEO will depend more on your ability to acquire and maximize human talent than any other skill.

Balancing resources is hard work and will often leave you comparing apples and oranges, but it is a key role that only the CEO can perform.

Build the Culture

Culture is the set of shared attitudes, goals, behaviors, and values that characterize a group. It is how things get done in the company, and it influences the entirety of the employee experience—and therefore the customer experience. Every organized group of individuals develops a culture—whether explicitly recognized or not—and the CEO must constantly observe and manage for the culture he wants. Just like the parents in a family, the CEO sets the tone, and what he rewards and allows will drive the culture. Culture is a popular topic in the business press, but articles often focus on perks such as free food or generous vacation policies. A company can have lots of neat perks and still have a lousy culture that increases turnover rates and delivers poor performance. In my opinion the most critical word in the definition of culture is values. It is the CEO’s job to ensure that a company’s values are applied consistently from top to bottom, across all departments. No person or group can be exempt.

Make Decisions

The new CEO is often surprised by the breadth of the issues she is forced to deal with—one minute discussing a new product, the next a building lease, and the next a legal issue. It is impossible for anyone to be an expert in all aspects of a business. However, the one thing the CEO is responsible for is making a decision. The buck stops at the CEO’s desk. That is the job. If you don’t like making decisions when you aren’t sure of the correct answer, don’t take a CEO job, because this might just be the biggest part of it. Many problems require a solution that impacts multiple departments and only the CEO can make decisions across the organization. Everyone else in the organization can pass the buck from time to time, but the CEO must make the final decision when no one else will or can.

Deliver Performance

Everyone agrees that the CEO is ultimately responsible for the performance of the company, and so the CEO must take an active role in driving that performance. He has to be in touch enough with the core business functions to ensure proper execution. He is the interface between internal operations and external stakeholders, which means that he has to ascertain the expectations for performance from different stakeholders (shareholders may be concerned about stock price while the community is concerned about job creation), interpret those expectations for internal teams, and then drive and refine metrics that reflect the true performance of the business—because you get what you measure. Combined with those demands is the need to maintain awareness of the industry and market. Performance in a competitive business environment is relative. If your company is growing at 10 percent while the market is growing at 25 percent, you are clearly underperforming; the same 10 percent growth in a declining market might be exceptional. Regardless of the circumstances, the stakeholders, or the size or type of business, the CEO sets the bar for the level of performance the business achieves.

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The CEO’s job sounds almost easy with just five things to worry about. Of course, I haven’t mentioned emails, meetings, public appearances, or the many other ways that CEOs are asked to spend their time. It can be easy to sit back and let the job come to you; there will always be tactical things that can be done. Successful CEOs plan how they will spend their time in order to focus on the important responsibilities, not just the urgent to-dos. To successfully grow a company, the CEO must have a clear picture of how to fulfill the responsibilities that only he can fulfill, how to prioritize them, and how to find balance when dealing with the onslaught of issues that arise in each of these areas.

SUCCESSFULLY BALANCING THE RESPONSIBILITIES OF THE CEO

In a recent survey, seventy-five members of the Stanford Graduate School of Business’s Advisory Council rated self-awareness as the most important capability for leaders to develop.² Self-awareness gives you the ability to observe the secondary effects of your actions, to understand and mitigate your areas of weakness, and to leverage your strengths appropriately. This capability is more important for CEOs than for any other leader. We have the only job in a company without a direct feedback mechanism, without someone assigned to provide guidance on how well we are doing the job. And we cannot expect that kind of feedback to come from other leaders or employees in the organization. There’s a great scene in my favorite business movie, Barbarians at the Gate (from the book of the same name), in which the CEO asks if people have heard a joke and his right-hand man begins to laugh at the joke before the CEO even tells it. As CEO, your jokes will be funnier, your ideas will be better, you will be smarter—at least according to the people you work with every day. Even people who aren’t consciously currying favor will measure their comments in your presence. They may not praise you constantly, but they won’t likely tell you where you’re falling down, either.

This book is written from my experience in the CEO chair at one company or another for most of the last twenty-plus years. I wanted to do well, and so I studied business literature and research and I worked hard to be that self-aware leader. In recent years, I have begun teaching a course for CEOs and writing about the challenges, pairing theory with real-world observations. My goal is to help you become more self-aware as you navigate the challenges of the five primary responsibilities, section by section.

For each section, I lay a foundation for fulfilling each of the responsibilities, from communicating to engage different stakeholders, to assessing your human resources, to using what we know about neuropsychology to build a high-performance culture, to identifying the four villains of decision making, to setting goals to build alignment. Then, in each chapter I explore issues that can pull you off balance when you’re trying to meet your responsibilities, and offer an approach for making the minor adjustments that will keep you moving forward. In the rest of this section, I’ll tackle the universal struggles between responsibility versus control and expertise versus need. Influence and using our time to fill the right roles are the keys to finding balance in these areas and to successfully meeting the demands of all of our responsibilities.

Throughout the book, I use failure modes I have observed—when we lean too far in one direction or another and fall off the wire—to help you envision what it looks like to be pulled off balance. While these failure modes are exaggerated, I also include stories of CEOs who have exhibited some of these traits, including myself, and questions listed under the Finding Your Balance heading to help you consider whether you are in danger. Try to get your direct reports to anonymously answer the same questions and examine whether your answers are consistent with theirs. Be honest when answering the questions and you may find areas you need to work on, or a missing element at the top of your organization that you can look for in a new leader. While we are ultimately responsible in these five areas, and focusing on our own growth will improve our chances of success, we can also surround ourselves with smart, engaged people who balance our strengths and weaknesses.

Over the years I have developed some definite opinions on how to think about the job of CEO. I have had both home runs and strikeouts along the way. Yet I still often feel like I don’t know the right answer in a given situation; I do think I have learned to ask the right questions, though. And I believe that asking the right questions is the key to improving.

I hope this book can make a small contribution to your education and success by helping you ask the right questions.

RESPONSIBILITY VS. CONTROL

Few things help an individual more than to place responsibility upon them and to let them know that you trust them.

—BOOKER T. WASHINGTON

I spent my first four years after college in the U.S. Navy teaching at Naval Nuclear Power School. The military has an advantage from a leadership perspective in that what members of the armed forces do is a matter of life and death. Because of that, everybody understands the importance of performance, especially from commanding officers. The commanding officer of a naval vessel at sea is in many ways similar to a CEO—held to a high standard of responsibility for the performance of the ship, with nowhere to turn if things go wrong.

One of the senior officers I met was given command of a submarine group, responsible for not just one submarine but eight. Two weeks after this officer was put in charge, a submarine from his group ran aground in the Pacific. The whole purpose of a submarine depends on its operating quietly and out of sight. When a submarine runs aground, it becomes a sitting duck for an enemy attack. Grounding a submarine is one of the worst mistakes a commander can make and is a huge black mark on his record.

It was no surprise, then, when the commander of the submarine was relieved of command and forced to retire. What might surprise you, though, was the black mark on the group commander’s record. He was not on the submarine, he had taken command only two weeks before the incident, and he had never even