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BA 190: Business Policy Nature of the CEO position

NATURE OF THE CEO POSITION Midterm Paper

In Partial Fulfillment of the Requirements in BA 190: Business Policy

Submitted by Joanne B. Hatulan 2002-00633

Submitted to Sir Art Ilano College of Business Administration August 7, 2006

Introduction
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

The Chief Executive Officer (CEO) of a company is the one who develops policies and plans and carries-out these plans into corporate policies to make sure his/her organizations goals and objectives are met. Most executives are competing against each other to rise up to the ladder, reach the pinnacle of their career and become a CEO by continuously aiming to get the right amount of intellectual and practical skills needed for the job which is erroneously equated solely to prestige. However, one superhero coins it: With great mind, comes great responsibility. Being a CEO is not just about getting the biggest slice of cake with cherry on top during Christmas parties, having a sure seat at presidential tables during weddings nor pinning the Sir/Maam prefix as part of his/her name. The job obviously implies more than just these special treatments and entails wide coverage, yet, varied limitations. All of these make the job tough and hard-to-handle, yet, rewarding and fulfilling. Super CEO: Four Men in One Four General Classifications of CEOs roles Peter Drucker, the man behind the creation of concept of management, believes that the Chief Executive Officer has to have four major personas (thought man, action man, people man and front man) in his one body in order to accomplish his roles. One: CEO as a thought man Planner. As the key planner of the company, the CEO sets its mission, vision, objectives and goals. He has a far-sighted vision which in turn gives him the capacity to devise ways on how to act on the foreseeable future based on the expected and target outcomes. He is also responsible in developing and reviewing company policies that will preserve the companys corporate culture and values aspect if he deems necessary. Strategist. The function of the CEO as a strategist revolves around thinking of the companys purpose and the manner of shaping this purpose towards the future direction of the company he originally sets. He crafts an effective strategy that will enable the company reach its purpose in team-centered strategic planning sessions off-site with his management team and looks beyond years out in the future answering important strategic questions. These strategies are made sure to be aligned with the companys purpose and teams common goal. Indeed, as a great strategist, the CEO must not stop knowing his vision by himself, he must be able to let his team see the big picture of the vision and work all together to build a coalition that will act on it. Inventor. The CEO always seeks for opportunities in the external environment by finding the needs of their customers and later on, develops new product and services to
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

relieve these needs of their customers. He is an advocate for innovation and originality that would help in healing and alleviating the pains of his own bossesthe customers (King). Investor. The CEO treats his company as his precious investment. He knows its market value and devises ways to increase this and strives to grow it (King). Decision-maker. The CEO has the burden of deciding for the companys overall welfare. If there is a decision that cannot be resolved by the people under him, he has the final say, which in turn makes him the person directly accountable to the performance of the company. He makes effective decisions not by himself alone, but with the teams participation. He asks them for input, considers alternatives, takes calculated risks, uses decision-making style that is appropriate for the situation, makes even the toughest decisions and carries the responsibility to gain all members commitment. Two: CEO as an action man Team Captain. As the team captain, the CEO holds the steering wheel. Just the same as a ship in which the ship moves the moment the captain starts to sail, the company moves the moment the CEO acts on driving it. He sets the direction for the future as a leader and not just merely a manager. He leads the way and lets others know where he is heading even if it is not so clearly obvious how to get there. He knows that he is on the right path the whole time so as to keep the ship afloat (Catlin and Cookman). Resource-allocator. The CEO recognizes the need to balance resources against tight demands so that the company can meet customer needs efficiently and achieve its goals. During strategic planning processes, the CEO weighs the short, medium and longer term requirements and thoughtfully allocates those to projects and programs that have specific objectives patterned to the overarching companys mission and vision. Being mindful of the need to promote effective use of these resources, he develops and implements systems that will monitor the use of these resources and views the budget process as a critical stage of resource management (Catlin and Cookman). Architect. As an architect, the CEO builds the organization by giving shape to processes and practices. This involves designing the organization and its systems for measure and information, for planning, for budgeting and control and for reward and punishment which are complemented by choosing ventures and projects that build the strength of the organization (Bower et. al 5). This responsibility entails driving the organization to greater heights by assuming varied difficult tasks and assessing the repercussions of failure so that even if unavoidable and unforeseeable pitfalls occur, the company will not be entirely destroyed. Aside from building the companys processes and practices, CEO builds also a team behind these processes. The executive team is the primary team he builds, assuring that all members set mutual expectations, share common goals, have strong, trusting

Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

relationships, can work together effectively and learn from each other; establish clear roles, responsibilities, team processes and communications among all team members.2 Recruiter. The CEO sees to it that he gets the right people with the appropriate knowledge, skills and cultural fit to fill in the positions of cooperative executive management team seats while standing to be accountable to team members empowering them to achieve common goals and shared vision. Scorekeeper. As a scorekeeper, he is an overseer of the VPs jobs and makes sure that the VPs achieve the company, departmental and cross-functional team objectives while still adhering to the companys culture and customer focus in all his prevailing judgments (Catlin and Cookman). Team Coach. As a team coach, the CEO teaches and guides his direct subordinates through mentoring and instilling a culture of learning in the entire organization. Some of the CEOs direct subordinates might not be able to see the big picture perspective; hence the CEO must allot time and effort to teach it to them. One common example, according to Lawrence King, is the financial model that the CEO uses. Some subordinates think that the company is doing better than it actually is. By teaching them the basic financial model, they will know how the company is performing from a financial standpoint. Three: CEO as a people man Negotiator. The CEO coordinates all members efforts and handles his people accordingly. He is a generalist with a good understanding and strategic thinking who knows how to integrate the diversified backgrounds of his team members. Once conflicts arise due to these differences, he must decisively stand in the middle and negotiate conflicts with careful analysis of all considerations for all concerned (Catlin and Cookman). Motivator. According to Ms. Carol Dominguez, CEO of John Clements Consultants, Inc., the CEO motivates and drives his people and the organization to deliver results. Inspiring them to work beyond their means is a sub-conscious effort that should be evident to an effective CEO. By merely serving as an example and showing his people that success can be reached through teamwork, he can motivate them to do their individual tasks for the companys welfare. Communicator. The CEO, at times, takes for granted his role of communicating the vision to all levels of the organization. This function of the CEO entails him to be able to articulate the companys vision at the level of the listener, let them understand why and how this should be done in terms of behaviors. It is one way to assure that everyone knows what the company is trying to achieve for. Since everyone is part of the company, it is just right that everyone knows what is happening at the top and what the person from
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

the top thinks. This communicator function of the CEO must be applied in a two-way communication basis. The CEO must also know what is happening below so that he knows how to act on it (Baldoni). Four: CEO as a front man Ambassador. The CEO engages most of his time at external affairs acting like an ambassador. The CEO meets with important people in business scene; represents his company in important gatherings; views his company as an investment for him and for his colleagues while selling it unconsciously in conferences as he builds his credibility; and most importantly, reaches out to his customers and clients once or twice a year through continuous two-way communication to know if customer satisfaction is met or not so that the company can immediately act on it accordingly (King). Spokesperson. The CEO is the chief external spokesperson of the company. He speaks and acts in the companys behalf, promotes it effectively and defends its stand every time there is a need for it. . Cheerleader. The CEO serves as cheerleader for the organization, its people and its products. The passion, loyalty and energy in the business he exudes should be sensed by his employees to boost their morale and spirit in day-to-day operations. If the boss cares, the enthusiasm streak of the ones under him follows. Super CEO: The Super Powers Skills of the CEO Much has been said about the pivotal roles of the CEO as a leader of the organization. However, in an imperfect world, not all of these roles are accomplished in a manner that directs the organization towards greater heights. CEOs task is a super-heroic task. His hype must recur through thick and thin, boom and bust and at some point, should exceed the limits of human capacity. Since it is one of the last stops in anyones business career, the high earnings that the CEO gets and the mission of serving mankind, his company at that, must be deserved by the one holding it by brushing up the following skills (Bower et. al 6-7) anyone in the top must rightfully possess: Analytic. The CEO must have the capability to detect trends economically and administratively immediately and connect these patterns into more understandable and useful concepts that will be applied to the company. He must resort to every important detail foreseen and link each detail to the bigger perspective. Sufficient analytic skills require intellectual skills that make a CEO the primary thought man Good judgment. Being the person on top who oversees work-in-progress, he must immediately see problems that may arise along the way, the ones opposed to the strategic plan, and resolve these problems as early as possible by applying his experience in the
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

company and conducting thorough analysis. This value judgment is the final decision his people are banking on, hence, it must be done and said carefully. This skill can also be applied to his roles as recruiter and negotiator. He must be good in understanding conflict soon as it arises while not being pre-empted by bias and prejudice. He is the most credible person for the people under him, so he better gives reason to this claim. Sensitivity. There are other CEO skills that are innate to a person or acquired while growing up, and cannot be taught through books or even in most prestigious business schools in the world. One of these is the ability to apply special kinds of intuition. This skill requires understanding both the natural and displayed behaviors of individuals as well as their motives and anticipates on that basis how they are likely to behave in the future. Sensitivity skill also applies to situation wherein the CEO can immediately know if he is already stepping at ones foot by extending his job over others. This skill enables him to step back at the earliest time even before the morale of his co-worker depletes. In addition, sensitivity of reaction to how policy issues can adversely impact the company and change its over-all performance can save the company from greater danger in succeeding months and years. Creativity. The CEO as an inventor must act effectively to be an advocate for innovation and originality. His skill of capitalizing the opportunities available in the market and turning a problem into an opportunity can give the company a sharper edge to make a cut. Ability to take risks. It is important that the CEO knows how to take a riska calculated risk, rather. He must give up a little to earn some; shell out more to gain more. The attitude of taking calculated risk worth the potential cost attributed therein requires not facing the possible failure with surrender, but facing it boldly while trying to develop a creative solution that converts failure to success. Ability to communicate ones vision and logic. It is essential to have a two-way communication (talking and listening) to all levels of the organization. As a communicator, the CEO must effectively relay to his subordinates what the top level is doing, ask them if its hard and impossible to be done or does not challenge them at all, how can the work be done more efficiently, or just being there to ask them about their own stories. Skills with people. The effective CEO must recognize that an important part of his work is to 'develop others'. If he possesses the skill of blending well with people who have different kinds of personality, style and experience, he can easily develop each of them towards the companys goals with mutual trust and respect; and make himself seen as good source of ideas and information. The Jobs Perks
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

It is a given that roles of CEO can be demanding and exhausting at times. However, it is also a given that being a CEO is an ambition for most executives who have dedicated their lives in the business world, and in the same company at that. The peak of their career might have been sitting on top of the organizational chart while enjoying various tangible and intangible benefits the position can give such as the following (BLS): Self-Actualization Using the context of Abraham Maslows Hierarchy of Needs, a CEO has already reached the peak of the pyramid which is self-actualization. His companys success mirrors his own success as an individual because he greatly influences everything in it and works full-time in representing and standing for it in every way he can. Spacious Offices The CEO typically has spacious office for some obvious reason. This correspondingly utters the power vested on him as the boss of the company. Numerous Support Staff Usually, the CEO has his support staff that will guide him with his schedules for the coming days. This staff must see to it that his tasks are relevant for his roles and not others. After all, hes there not to go about the nitty-gritty aspects of the business anymore. High Earnings Perhaps, the most common and obvious perk given to the CEO is his high salary level. In the US, CEOs are among the highest paid workers. These earnings vary depending on the managerial responsibility, type, length of service and other factors to be considered in giving compensation and benefits. According to the Business Labor Statistics (BLS) of US, the average typical annual earnings of chief executives in 2002 were $126, 260. The industries employing the largest numbers of chief executives annual earnings were:
Management of companies and enterprises Architectural, services engineering, and $145,600

related $133,880 $123,220 $103,120 $73,990

Depository credit intermediation Colleges, universities, and professional schools Local government

The Jobs Flip Side Though CEOs job is both financially rewarding and self-fulfilling, the position has its own flip side that will continuously pull down the company if not properly
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

handled. The CEO has a broad set of roles. However, it has also its own limitations which CEOs must skillfully know. The following are implications of the limitations of CEOs jobs (Porter, Lorsch, Nohria 62-72). Whose job is it, by the way? Sometimes, the CEO wants the company to move at a pace that is somehow impossible for others to perform. Having this sight, the CEO might be in-a-hurry that he wants work done in his own hands at his own fast pace, unknowingly stepping at ones foot by owning that ones job, no matter how grounded his act is with good intentions. This can easily demoralize people, as if, CEO telling them: I can do this job better than you do or worse, I dont trust you doing the job. Do you get what I say? If the CEO is not always visible at the halls of the company, the very rare times hes seen by his people would mean so much causing them to gossip and feast on the instances the CEO smiled or frowned at them, had lunch with a bunch of kids, ran along the hallways with unbuttoned suit and all other littlest of things. What he projects on the surface is what kind of person he is for his subordinates. Due to his busy schedule traveling from city to city, continent to continent, the CEO has less time knowing his company and appearing visible in the eyes of his employees. This makes him the mysterious it man of the companywhich may be good or bad. Bobs signals are chopped! The CEO cant really know what is happening exactly under him both because of his absence on day-to-day operations and authority gaps. He is not able to witness firsthand the conflicts arising, the relationships of people and even the quality of product and services due to his busy schedule doing external affairs. People under him at times cannot communicate the exact message and tend to lie and manipulate results just to please him. Yeah right, Mr. Know-it-all! Some CEOs believe that they already know everything that is why they are in their position in the first place, well, in fact, they will only know a portion of the company. They start believing that they can do better than anybody that gives them the tendency to treat their people as dispensable and just ignore them. I want it perfectly doneNOW! CEOs lose focus that they are doing things right rather than doing the right things. They even get too demanding that sometimes they ask impossible things from his subordinate that even a superhuman cant do. I am the king! New CEOs think that being in the position is equated to being king. Though power is at his hand, it is not safe to assume that he can directly give orders to senior managers and reject proposals if he wants to. These are some things that can be done by him, yet, have own repercussions in doing so, thats why it is better not to do them. These
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

can again demoralize senior managers who spent time and effort in pulling out a project that they never thought to be rejected. Other managers would in turn go about the rigorous and costly process of considering and asking for his opinion and consulting him to avoid proposal-rejections. If the shareholders say so CEOs are accountable to the board of directors and shareholders. This sometimes gives the CEOs a false notion that they need to please the shareholders, subconsciously, making it his overall goal. The problem with this, however, is that actions and strategies deemed useful by the shareholders may not be applicable for companys growth and may not benefit the competitive position of the company. Like, I care? Some CEOs lose contact with his people and get detached with them that they no longer know how to interact with them in case he has to handle tough situations with them. Sigh. Its lonely up here.. As mentioned by Ms. Carol Dominguez, its lonely at the top. The CEO cannot be anyones friend anymore because of the positions power implications. Super CEO: The Evolution Though the general roles of CEOs are mentioned above, Katherine Catlin and Jana Matthews wrote a book telling that CEOs should know how to categorize these roles based on the companys status. As the company changes, the roles and responsibilities of CEOs must change too to successfully lead the company through the stages of its growth. This evolution of roles is mapped in the book, Leading at the Speed of Growth and is illustrated at the figure below with summary of explanation which follows:

Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

Stage 1 Start-up, the time when the CEO is trying to figure out what product or service to offer that fits market needs and what his company's real value will provide for its customers. His role is Doer and Decision Maker. Stage 2 is Initial Growth. In this stage the company is very sales driven, trying to launch a new or different product, trying to capture market share, and growing revenues. Company operations are fast-paced, highly flexible even chaotic. People do whatever is necessary to be successful. His leadership role needs to change to Direction Setter and Delegator. Stage 3 is Rapid Growth. Here, the company is trying to achieve widespread use of its products or services, gain a significant share of its chosen markets, ward off advances from competitors, and move into a market leadership position. Lots of new people need to be hired rounds and rounds of them. Integrating them and aligning their efforts can be a daunting, never-ending task. In this stage, his role as leader changes to Team Builder, Coach, Planner and Chief Communicator. Stage 4 is Continuous Growth which is comprised of successive rounds of turbulence and periodic re-inventions of the company. Rapid growth led to many more customers and market opportunities, a much larger employee base, a more complex organization, and the potential to dominate the industry. But more of everything also includes more potential to go out of control. In Continuous Growth, the company tries to dominate the industry by finding new markets and growing new niches in the current market, expanding the product lines, providing more total solutions to help customers, and branding itself and its people as thought leaders. Growth strategies include new product development, strategic alliances, acquisitions and mergers, spinning off subsidiaries, corporate partnerships to provide funding, or even an Initial Public Offering. The critical leadership roles the CEO must change to are Strategic Innovator, Change Catalyst, Organization Builder and Chief of Culture.

Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

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References: Baldoni, John. Communicating from the Top. Link&Learn. Linkage, Inc., April 2005. Bower et. al. Business Policy: Managing Strategic Processes Bureau of Labor Statistics (BLS), US Department of Labor. 2 Aug. 2005 http://www.bls.gov/oco/ocos012.htm Catlin and Cookman Group. CEOs Speak Out: Secrets of Winning CEOs 2 Aug. 2005 <http://www.ceoexchange.com/secrets1.htm> Catlin and Cookman Group. CEOs Dialogue: A Traffic Report 2 Aug. 2005 <http://www.ceoexchange.com/secrets1.htm> Catlin and Cookman Group. The CEO Performance Evaluator 2 Aug. 2005 <http://www.mgmtarticles.com/2006/02/26/the-ceo-performance-evaluator/> Catlin, K., Matthews, J., Leading at the Speed of Growth: Journey from Entrepreneur to CEO New York: Hungry Minds, 2001. Drucker, Peter F. Management Challenges for the 21st Century. New York: HarperCollins, 1999 Elion, Samuel. Aspects of Management. United Kingdom: Pergamon Press, 1997. King, Lawrence. The Six Essential Roles of a CEO. 2 Aug. 2005 <http://www.tec.net.au/index.php?itemID=208&branch=112>
Hatulan, Joanne B. 2002-00633

BA 190: Business Policy Nature of the CEO position

Porter, M. Lorsch, J. Nohria, N. Seven Surprises for New CEOs. Harvard Business Review
*Insights from Ms. Carol V. Dominguez, CEO of John Clements Consultants, Inc. 11 July 2005

Hatulan, Joanne B. 2002-00633