When a CEO’s lackluster performance isn’t meeting expectations or delivering anticipated results, it may not be dire enough to warrant terminating him or her. But with the right leadership development techniques, talent managers can actively turn the situation around.
Many mediocre CEOs stay in their roles too long, resulting in declining performance and morale. Under Leo Apotheker, former HP CEO, HP share prices dropped more than 40 percent. Jeff Kindler, former Pfizer CEO, received countless complaints about his poor leadership style. Carol Bartz, former Yahoo CEO, led the company while its share prices dropped and it fell far behind industry competitors.
So, why do companies permit mediocre CEOs to stay in their jobs, despite the obvious problems?
• When CEOs are dismissed, stock price volatility and shareholder unrest increase.
• Boards sometimes develop emotional ties to CEOs, so it’s difficult to make tough, objective decisions.
• Often, boards are distanced from the CEO’s day-to-day leadership and don’t recognize his or her ongoing performance problems until it’s too late.
• Most companies don’t have suitable replacements for CEOs and don’t want to invest the time, effort and expense of finding appropriate candidates.
• Firing the CEO puts the board members’ jobs at risk, so they stick with an uninspiring leader for self-preservation.
Often, there isn’t any formal training to help CEOs improve. All CEOs make some missteps along the way, but some strive to improve while others avoid or deflect criticism.
Training a CEO can be challenging. Board members rarely see them in action, and colleagues may resist providing real feedback, worrying about the repercussions of their honesty. Therefore, a 360-degree survey doesn’t work well here – even though it’s highly effective for other roles.?
Here’s how companies can boost their CEO’s — and thereby, the company’s — performance:
1. Identify the competencies required for the CEO in his or her current role along with the future requirements based on the strategy and changing external environment.
2. Develop a process to assess and provide regular feedback for the CEO. This can be done through interviews or surveys of direct reports; best practices for other similarly situated CEOs; and individual assessments, such as personality, critical thinking, values, etc.
3. Identify the blind spots — what’s hindering the CEO’s leadership? What are the derailers that the CEO may not be aware of that are getting in the way of his or her performance impact?
4. Ensure the feedback is delivered by a credible internal source or external coach.
5. Create a development plan to address the CEO’s key deficiencies and leverage strengths.
6. To be successful, the CEO must:
a. Accept feedback and agree that “perception is reality.”
b. Commit to change.
c. Be courageous and try new behaviors.
d. Be motivated to continue developing.
e. Solicit ongoing feedback from credible sources inside and outside the company and continually adjust his or her leadership accordingly.
There’s plenty of incentive for CEOs to improve: their personal wealth creation is typically tied to increased performance and shareholder value. Also, they recognize that terminations for ineffective performance are increasing and boards continue to be under close scrutiny to address company performance issues.
David Brookmire is an executive adviser, researcher, author and expert in leadership effectiveness. He has coached executives at companies including The Cheesecake Factory, Darden Restaurants and Frito-Lay.? He can be reached at firstname.lastname@example.org.