EMC Chairman and CEO Joe Tucci is stepping down. Tucci said his goodbyes at this year’s EMC World [Disclosure: EMC is a client of the author]. He leaves his job as a success, assuring the firm will survive his departure (a best practice). However, we are surrounded by so many CEOs who are in trouble that I thought it would be good to explain what I think makes for a successful CEO in the hope we get more like Joe.
There is very little good CEO training out there. The best have learned by running a successful startup, while many of the failures seem to come from other senior jobs where they weren’t adequately mentored to understand what makes the CEO job really different.
I think there are 15 elements to a successful CEO:
1. CEOs aren’t kings or queens. This is one of the most common misperceptions of the CEO job. The perception that they are somehow all powerful and able to wave their scepters and magically solve problems. This is widely held by rank-and-file employees, and the fact it is untrue is often a huge surprise to new CEOs. Yes, they do have an unusual amount of power, but, and this is particularly true of public firms, they are surrounded by regulations that define what they do and they are offset by the CFO and board who collectively have more power. They run someone else’s company not their own and if they forget this they’ll likely find both investors and customer to be unforgiving.
2. Loyalty is their most powerful tool. CEOs aren’t independent contributors. They depend on their folks to do what they ask of them and to have their backs. Loyalty isn’t unilateral, if they aren’t loyal to their people their people won’t be loyal to them. The best CEOs are often defined by the fact that their people would do anything for them voluntarily. The worst CEOs are defined by employees who throw celebrations when they leave. Good CEOs must realize that part of being loyal to your employees means taking care of them when you leave, that means both assuring the firm is in good hands, not being worried your successor will outshine you, and if the departure puts one of your folks at risk making sure that risk is mitigated.
3. Salary and possessions don’t define success. A lot of CEOs seem to think the important parts of success in the job are big expensive cars, big expensive houses, private jets and near royal treatment. This focus on stuff often sets a foundation for failure because each of these things has to be managed, creates distractions, and creates an “I’m better than you” atmosphere that alienates employees, investors and customers. The best CEOs live relatively modestly and they are defined by what they do not the houses, yachts, cars or even islands they own.
4. Understanding the products deeply. One of the things that made Steve Jobs stand out was he basically husbanded the products himself. He had veto rights over everything and while that is likely a level of involvement most CEOs can’t reach he was considered the best CEO of the last decade. Understanding the products means understanding how they work and how they are created and maintained.
5. Understanding the market that the firm operates in. This is almost more important than understanding the products because this defines the competitive dynamics, who is winning and why, and what works and what doesn’t.
6. Understanding the regulations. Every industry has regulations that surround it. This can tell you a lot about the risks the CEO is taking and whether they are reasonable. Increasingly, this means understanding not only local regulations but the regulations in the markets the company is considering.
7. Know all the business fundamentals well enough to know what questions to ask. The fundamentals are finance/accounting, manufacturing, operations (including IT and HR), marketing and sales. A lack of basic understanding in any of these has led to some of the most damaging decisions I’ve ever seen, such as eliminating commissions, or cutting demand generation spending.
8. Be data-driven and make sure that data isn’t compromised. One of the most common mistakes CEOs make is to surround themselves with people who tell them what they want to hear rather than assuring unbiased information streams that tell them what they need to know. Uncompromised data is critical to making good decisions and this needs to be an absolute rule aggressively enforced.
9. Understand opportunity cost. This is the cost of not doing something. You have choices which have far reaching implications and often the choice of not doing something is higher than doing it. For instance, the cost of not licensing out the MacOS was Windows and the loss of PC market leadership for Apple.