The changing role of CEO

By on May 29, 2014

Various studies conducted on CEO attrition confirm that the shelf life of a CEO is on a decline (ET Bureau, 2011). The cut-throat competition has reduced the patience level of firms and even a small mistake on part of the CEO may lead to the departure of the CEO.The growing incidences of CEOs’ resignations and termination all across the globe (Stoddard, 2009) offer enough reason to think where do the CEOs’ go wrong and what is expected from contemporary CEOs’? Also, whether the changing business environments require a change not only in the firm’s strategies but also in the role of their CEOs’? While finding the answers to these questions, it was found that contemporary CEOs’ do need a shift in their roles. Contemporary CEOs’ are required to develop new skills. Some of which are:

Strategic thinking by the CEO

Modern CEOs’ cannot afford to make any strategic mistakes. There are a number of leading companies as well as where the CEOs’ proved wrong in their decisions relating to corporate restructuring, product portfolio, customer relationship management etc.  Let’s take the example of HP computers, which signed two wrong merger and acquisition deals with Compaq and Palm ending up with no gains as well as the CEO exits (Nuttall, 2012; Gerard, 2010). So, the CEOs’ are required to be very accurate while making any strategic decisions.

CEOs’ should develop vision

Changing the CEO is often considered as the most feasible option for the companies facing crisis. The CEOs’ today are expected to deliver results as soon as they are appointed. As a result, modern CEOs’ are often observed making decisions with short-term profit orientation. Securing heavy sales and earning huge profits are usually the only things most of the contemporary CEOs’ expect from their team (Miller and Jentz, 2012). For achieving results in the short-run, CEOs’ generally do not mind to carry out massive layoffs or making significant changes in the company’s culture. Paul Polman, the CEO of Hindustan Unilever Limited recently made significant strategic changes in the organizational culture including centralization of decision-making globally and promoting outside talent in the company.  But all these decisions were not welcomed by the people inside the company and it resulted into massive resignations at top level (Vijayraghavan and Chakravarty, 2012). Thus, contemporary CEOs’ are required to develop visions in favor of their companies.

Ethical behavior

Gone are the days when CEOs’ were only confined to setting standards for others; both work-related as well as ethical. The stakeholders today are very much aware of their rights; be it the employees, shareholder, customers or the society in general. The CEOs’ therefore need to behave ethically for all these stakeholders of the business or they will no more remain in power. Mark Hurd, the ex-CEO of HP and Mark McInnes, the ex-CEO of David Jones both had to resign on account of the charges of sexual harassment (Robertson and Metz, 2010). The CEOs’ need to understand that they are accountable to the company’s stakeholders and they cannot afford to deviate from ethics.

Building relationships with stakeholders

The stakeholders of a company involve various groups who are influenced by the performance of the firm including the board of directors, management, shareholders, employees, and customers as well as the society in general. One of the most severe challenges that modern CEOs’ face is to manage a perfect balance among conflicting interests of these stakeholders (Palazzi and Starcher, 2006). In the race of making profits, the CEOs’ often forget the interests of these stakeholders. Thus, modern CEOs’ should take out time and focus upon building amicable relationships with the stakeholders of the company. It is only through building relations, the CEOs’ can successfully manage change in the organizations.

Management by walking around

Today, the organizations are not restricted to a single physical location; most of the organizations are operating through multiple locations with more or less decentralized authority structure which confronts modern CEOs’ with the challenges of interacting with people down at the hierarchy (Becher, 2006). But this creates a communication gap and often leads to severe problems in the long-run. Modern CEOs’ can take this issue as a priority and be readily available to listen to employee’s feedback, suggestions as well as grievances. Management by walking around is what they may adopt. This is probably the only strategy today that helps the CEOs’ to know what is going behind the scenes.