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How to run a company well
Oct 23rd 2003 From The Economist print edition
Ten commandments for successful leaders LEADING a big public company is one of the world's most important jobs. It is already fiendishly difficult, and seems to be getting harder all the time. Those who make it to the top frequently fail: they stay for shorter and shorter periods. And there is more competition than there used to be for the talents of top bosses because private equity now offers another option. To judge by the huge pay packets offered to the few deemed capable of doing such jobs, there is a dire shortage of people thought to have what it takes. Here is a ten-point checklist of the necessary qualities. 1. A sound ethical compass. If the boss's values are undemanding, the company's will also be wobbly. That may not put it out of business, but it means the company will have to pay a premium for talent. Good people do not like working for organisations whose values they mistrust. But ethical values are difficult to acquire on demand, in middle life. “The deeper sources of constraint are hard-wired at an early age,” says NYU's Mr Allen. 2. The ability to take unpleasant decisions. Many judgments must be made on the basis of ambiguous information. Leaders often have to deal swiftly with conflicting demands without being sure of their facts. That calls for a strong stomach. Those who cannot bear to inflict pain or risk making enemies, or who need cast-iron evidence before making up their minds, should not apply. 3. Clarity and focus are essential requirements for making those awkward judgments. Leading a large company, and dealing at speed with a host of complicated and many-sided issues, is an immense intellectual challenge. To extract the crucial point from complexity is essential for devising an effective strategy. In order to survive the clamour for time and attention, a leader must also be able to screen out unnecessary noise and to focus on what really matters. That goes with realism—there is no point in aspiring to the unachievable. 4. Ambition. The best leaders are empire-builders who want to create something that outlasts them. That is different from ego-boosting personal ambition. It supplies the ruthless drive and the obsession with excellence that are essential components of good leadership. 5. Effective communications skills are a relatively new requirement, the result of the increasing intrusion of the outside world: media, analysts, shareholders, environmental groups. All require a corporate leader who can talk convincingly—which is not always the same thing as telling the whole truth. Motivating a large workforce requires a gift to present a clear vision persuasively. A leader who cannot inspire trust and convey authenticity will find the task difficult. 6. The ability to judge people is an essential prerequisite, given the importance of human capital. Lord Stevenson, the chairman of HBOS, a big bank (and also of Pearson, which part-owns The Economist), says that he spends perhaps three-quarters of his time getting to know the top
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The glare of the media. And if all else fails. That is the way to create leaders at many levels in an organisation. A knack for developing talent is needed to build a stock of future leaders. or in public attitudes. Yale University's Mr Sonnenfeld is cataloguing ways to turn misfortune into fortune. 7. they must also be teachers. Mr Welch used to describe himself as the “world's best-paid humanresources director”. The key seems to be an ability to “reframe”: to reshape a problem so that from some angles it can look like a success. Like so many aspects of the top job. will eventually go too far in some countries. A bit of luck helps too. Adaptability will prove invaluable when things go wrong.com 150 people where he works. Emotional self-confidence. Regulation is only one of several growing and conflicting constraints on corporate leaders. All this helps to rebuild trust.cfm?Story_ID=2137450 (2 of 3) [11/4/2003 3:23:02 PM] . People learn far more about the art of leading from a good mentor than from a great book. Many of these qualities are useful for leading any enterprise. 10.. Surviving a reverse calls for resilience and flexibility. even if that means abandoning an idea to which a leader has been passionately committed. the incessant demands of analysts and the increasing politicisation all make the job harder to do well. Leaders who are jealous of their followers do not inspire loyalty. Self-confidence also allows people to admit to weakness and ask for help without feeling defensive or inadequate.Economist. 9. the way companies are led determines the prosperity of nations and the happiness of their workforce and their customers. or in the political climate.. though that may prove hard to arrange. but at least it provides tools to tackle bad management. though. a danger that regulators. That is no bad thing: good governance may not guarantee good performance. “I don't know what to do next. but few get to the top without it. Talk to the chief executive of a public corporation about a job in private equity and “the first http://www. Accumulating a pool of talent requires an ability to work with people who may be better at their job than you are at yours. it requires intuition as well as experience.” without losing the respect of their colleagues. Judging who will work best in which slot is one of the key tasks of leadership. In turn. Successful leaders need to be able to say. And it is right to give boards a sense of responsibility and the means to exercise it. conveying their skills to those around them (and encouraging others to teach their colleagues too). under pressure to be seen to act. The demand for capable people to run businesses held by private-equity ventures is booming. It is quite another quickly to devise a completely different approach. But corporate leaders now have an alternative. Charm is not a quality taught on MBA courses. It is one thing to spot a change in the market.economist. but especially a publicly traded corporation. So effective leaders need not only to spot where the talents of a particular individual might be best deployed. and to guide and motivate them. governments have rushed in to tighten the rules of corporate governance. There is.com/printedition/PrinterFriendly. 8. In response to the scandals and collapses of the past two years.
com question is. The rewards for success are huge. but nobody should take it for granted that there will always be a supply of leaders with talent and integrity willing to take it on.Economist. and some of the best may simply decide the task is not worth the effort. Running a large public company is still a thrilling and rewarding job. All rights reserved. http://www. In addition. Too much mistrust and invective. a headhunter with the London office of Egon Zehnder.” says Ashley Summerfield. The investor is rational and interested. The timeframe is manageable. there is a refreshing lack of ambiguity about what you are expected to achieve.com/printedition/PrinterFriendly. and the media and non-governmental groups are much less intrusive. Copyright © 2003 The Economist Newspaper and The Economist Group. Running a business for a private-equity firm means not only shelter from the limelight: no small shareholders turn up at your annual meeting to moan about your pay. And nobody asks awkward public questions about your pay package. ‘When can I start?' They bite your hand off.economist.cfm?Story_ID=2137450 (3 of 3) [11/4/2003 3:23:02 PM] .
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