Archive for the ‘CEO’ Category

CEO: From Genius to Fool?

January 3, 2008

The business landscape of the last decade is littered with CEOs who went from being acclaimed as geniuses to being dismissed as fools because of strategic mistakes.

Were these executives fools?

Did they go from being brilliant to being stupid overnight?

No and no.  They were as smart and skilled at the end as they were at the beginning.  It’s just that they were never skilled enough to consistently predict the future, probably because no one is.

CEOs should come with the same disclaimer as mutual funds: Past success is no guarantee of future success.

— Extracted from The Wisdom of Crowds by James Suroweicki

Are CEOs several hundred times more important than frontline people? Their salary says they are

January 2, 2008

Organizations are social entities, and people are social creatures.  What this means for leaders is that social relations are important.   People compare themselves to others and derive feelings of worth and status from that comparison.  Consequently, pay differences have not only substantive but symbolic meaning.

Take the most notorious example [of pay differences], CEO pay.  CEOs who make several hundred times more than what the average employee in their company makes send the signal that what they do is several hundred times more important.  Is that really the right signal to send?  If frontline people think that what they do doesn’t matter very much for the organization’s success or in the opinion of senior management, why bother worry about how well they are doing their job?  It is not by accident or coincidence that many of the most successful, consistently best-performing companies have CEOs who are not outrageously overpaid –, CostCo, and Southwest Airlines are a few current examples.  By sending a signal that performance is a collective, not just an individual, endeavor, those companies are more likely to induce thought, creativity, and effort on the part of their people.

Hard Facts by Jeffrey Pfeffer and Robert I. Sutton

See this related blog:  Paradox: Embracing Decentralization while Hailing the CEO as Corporate Savior

Paradox: Embracing Decentralization while Hailing the CEO as Corporate Savior

December 31, 2007

Some companies claim to embrace decentralization and bottom-up mechanisms and yet they then turn around and treat their CEO as superheroes and as the “corporate savior.”

CEOs are given massive salaries and are hyped as the one person who will lead the company to prosperity.

The problem is that people actually believe the hype, taking it on faith that putting the right individual at the top is the key to corporate success.

What’s perplexing about this faith is how little evidence there is that a single individual can consistently make superior forecasts or strategic decisions in the face of a genuine uncertainty.

If companies were to truly embrace the virtues of decentralization then the CEO would have a much smaller role (and paid much less) and there would be more emphasis on collective decision-making.

— Extracted from The Wisdom of Crowds by James Suroweicki