If there is one area of disagreement between shareholders and the Board, it is in the choice of the Chief Executive Officer (CEO) for the company. In most cases, the two parties have unmatched expectations. Shareholders on one hand want a CEO who can drive results and ensure the business declares profits. That is a sure return on capital. They care quite little on the actual personality of the CEO and how the individual engages with the other stakeholders.
One typical example is a Premiership team called Arsenal with its vibrant manager at the time, Arsene Wenger. There was a time he could not deliver results for the other general stakeholders whose primary focus was about winning trophies. The shareholders were little bothered provided Wenger delivered positive financial bottom-lines. The only time they responded to the protests of the club’s fans was when the team started to finish outside the top four teams that took away the millions of dollars associated with playing in the Champions League. In other words, the shareholders only generated a resignation from their cherished manager when the financial numbers were affected.
The boards entrusted with the oversight role for any organization look beyond the profits. They have the bigger picture in mind when identifying the CEO. Some issues the boards focus on is the actual personality of the individual in question. Their questions go beyond the ability of the individual to drive profits. Is the individual flexible in the sense that he/she can redirect company policy when circumstances demand so? This is because there are CEO who are so rigid that even when circumstances change, they will not look beyond policy. There are CEOs who are so scared of venturing into new territory that they would rather lose an opportunity than take a risk. Shareholders love these individuals, but boards usually do not value such rigidity, failure to think outside the box.
Boards also want a CEO who can easily connect with customers and employees. The shareholders are not that concerned about autocratic leaders as CEOs. If anything, these are the individuals they value. They would not like a CEO who easily makes win-win compromises with employees; that eats into their dividends. Boards, on the other hand, want good leadership. A company is more than financial bottom lines but about how those who help drive the profits are treated.
Other issues boards consider in the choice of a CEO are team building skills, the ability to develop quality relationships through cooperation and collaboration, cross cultural skills and generally, ability to lead. But why is finding such a CEO a nightmare? It is because individuals with such skills are not easily found. Let me redirect the discussion to point out the three types of potential CEOs that boards will interview for the top job.
First, most boards and shareholders find it easy to identify a technically competent CEO. These are individuals who know a lot about the product. Usually, they grow from within the business. They have job specific knowledge and will always appeal for consideration for the job. They understand the numbers, the way the business is run and are very well-focused individuals. In most cases, they drive the KPIs, primarily the profits. These become a darling to shareholders.
From experience, while these individuals drive the results, the outcome is that the business slowly goes on a nosedive over a period. One of the reasons is that because they are so much results focused, they lose wider networks of support, first from employees, unions and critical stakeholders such as suppliers. Some of the technically minded CEOs are usually very insecure leaders; they fear to be challenged for their lack of emotional intelligence. To make up for this, they silence contrary views. Management meetings take the path of autocracy.
By the way, in the old paradigm of leadership, that of the 1960s, these are the managers who built organisations. That was when the markets were local, with a non-diverse homogeneous workforce and all that mattered was organizational stability and efficiency. Unfortunately, the nature of business under the global village has drastically changed. Many organisations have graduated from autocratic leadership styles where the technically competent CEOs thrived to learning organisations.
In other words, the CEO is no longer the only source of innovation and ideas. The ideas now come from everyone in the organization, including the shop floor manager who does not sit in management meetings. This has made the technically competent CEO no longer that desirable for long term business sustainability. They can drive the results in the short term but rarely in the long term.
The second potential CEO who attends the job interview is the networker. These are individuals well versed in people skills. They possess the ability to understand others and alter, lead and control the behaviour in organisations. They are mostly loved by many stakeholders, including employees even if they know quite little about the job.
Unfortunately, these individuals whose leverage is in public relations skills are not that appreciated by shareholders because they give away too much in terms of money. Whereas the institution maintains stability, their focus on people affects the overall contribution to the growth of the business. The nightmare for the board is that these individuals have large networks from which they build a strong reputation for the business and the board will not fire them easily until the AGM makes a resolution.
The third and most crucial candidate for the board is the conceptual CEO. The individual has both characteristics of technical competence and people skills. They can analyse and diagnose a situation in order to come up with solutions. They have very strong emotional intelligence skills through which they understand and acknowledge their weaknesses and able to understand others.
This is where the gap lies in most of our local institutions, particularly the state-owned enterprises. Government, which assumes that role of shareholder, sometimes has influence on the selection of these individuals. These are pushed into leadership positions either for their technical competence or for their relationships with some people. The boards, on the other hand, are looking for individuals who understand the job well and at the same able to operate at the very high level. Finding the individual with the right balance and exposure under the Zambian circumstances is always a nightmare. We do not have that many candidates who have the conceptual outlook to business.
I reported to a gentleman called Pearson Gowero, then Managing Director of Zambian Breweries. He fully understood the business of beer. He had worked in the business for many years. I did fully appreciate the level of thinking he applied to the business. Every management meeting was a strategic platform; building business models from every engagement. He was able to lead thinking among management whenever market conditions changed. He did this in a very timely manner, marshalling and redirecting resources like a football coach making substitutions to respond to a goal deficit.
Pearson’s other strength was people management. He built strong networks within the business, understanding employee expectations, engaging them quarterly through townhall meetings. His office was always open to allow for all employees to easily walk in to share ideas. His level of emotional intelligence was excellent.
Boards in Zambia should not only be on a search for these individuals. Boards should be ready to pump money to groom these potential leaders through training and coaching. We have a huge opportunity to transform the parastatals through dynamic CEOs.