From CEO-run to a CEO-led company . . .
Have you ever done any of these as a senior leader?
- Choosing the coffee in the office
- Watching your security cameras every hour
- Counting the hours of your employees
- Determining where people need to sit
- Giving lunch break rotational directions
- Selecting the water delivery company
- Approving everyone’s travel expenses
- Booking your employee’s hotel
We all have had managers like this. It kills morale! Don’t do it!
This article is most applicable to those entrepreneurial CEOs who find themselves suddenly in charge of a “real company” with tiered levels of employees, but they are still trying to do it all. This detailed-oriented strategy may have worked in the beginning, but now it is just micro-managing. In order to continue to grow the company, CEOs need to shift from managing to leading its people.
There are so many studies on why being a micro-manager as a CEO is not an effective way to scale a company’s success. This is because, in such a work environment, people neither act or think independently, nor engage meaningfully. Employees stop suggesting how to do things better. They no longer take initiative. They feel under-valued. Not only does this style of management discourage innovation, but it also kills engagement. In the end, employees no longer promote the company….your company! The worst part, once employees disengage; clients feel it, may leave you and you won’t even know why.
While most entrepreneurial CEOs would agree on all these points, it is my experience that many don’t know or won’t admit they are themselves micro-managers. This article is not about important topics like leadership quality, behavior or style. It does not cover points like “be a servant leader” or be aware of “situational management” or “lead with purpose” – all critical (read more ). This article is more pragmatic in nature; it aims to answer a simple question: “When should I get involved?” For those who want to improve, here is a set of simple guidelines to follow when deciding to “jump in” or not.
Let’s start with some assumptions. Your company has a logical organizational structure with at least somewhat capable leaders in appropriate functions and at the right levels. (If you feel you need some direction on this, let us help you.) Next, let’s review the role of CEOs. All effective leaders, should set clear direction as to where the company is heading and identify, collaboratively with the executive team, the strategies to get there. Strategies are high-level decisions around a company’s market standing, competitive differentiation, culture, profitability, investments, social responsibility, innovation, etc. and rest squarely on the CEO. By definition, an effective strategy defines what the organization prioritizes as key focal areas AND equally important and often more difficult, what NOT to do as well. When communicating strategy, the CEO should think about the most effective way of doing so to build buy-in and clear understanding with team members. It is the CEOs job to set the course, get key stake-holders on-board and aligned.
It is then the team’s job to execute the vision by following the company’s values and its defined processes. Values serve as “guard-rails” for behavior. Once well-defined and truly lived by all, including the CEO, everyone will internalize how to, for example, treat clients and each other. The right balance of values driven behavior and world-class processes will provide the guiding principles of how a company operates. It is critical for the CEO to create an environment that allows the workers to suggest exceptions to those processes when a procedure conflicts with the values of the company in a particular situation.
Let’s use an example to better outline the different scenarios around decision making. Example: Process of a customer refund request.
1. A customer requests a refund within the normal 30-days policy is received and executed by a Worker. No additional action or involvement from anyone is needed beyond the well-defined and understood process for this action.
2. Worker decides to pursue an exception to process since a customer had a serious issue and needs a refund on the 45th day (outside 30-day policy) and escalates to Manager for approval.
3. Manager allows the exception after reviewing the case. Manager communicates with accounts payable (or other departments) to ensure the exception is processed (no need to go up the company ladder further). There is an SLA (service level agreement) between departments outlining how they help each other.
4. Manager continues to analyze reports to identify trends. A trend is identified that continued refunds are requested outside the 30-day period during holidays, manager meets with superior/executive team to request a change to the process. She creates a business case that during the holiday season, an additional 15-days must be added.
5. Executive team analyzes the business case, meets with the Manager and agrees to the process change. Front-line Workers and Manager are now empowered. Going forward exceptions are minimized and people are more productive.
6. Executive team continues to monitor reports and realize that the trend is now surpassing the Holiday season and they are losing business to competitors. The team investigates and realizes that their competitor is allowing 45-day money-back-guarantee. Team works on new proposal and THEN meets with the CEO, because the company’s bottom line may be impacted and the success of the CEO’s competitive strategy is in question.
7. The executive team provides a business case to the CEO to adopt a 60-day money return policy to drive more sales and stay profit neutral. The CEO makes some adjustments to the new policy and approves the new direction as it helps him gain more market share, which is a key strategic company goal.
In an ideal world the CEO, who still makes sure he/she stays in touch with clients, the market and the team, may have already felt something had to change and was ready to have this conversation with his team. Anticipation is key.
So, in summary, after the CEO establishes direction and clear values, the executive team defines the execution plan and the key processes. A good work environment allows the workers to follow those processes, request exceptions to their managers, who in turn can collaborate with peers to make decisions around those requests. This is a scalable way of running a company. If exceptions begin trending, then managers work with the executive team change the processes. Once a process change is material and at the strategic level, the CEO must get involved. The CEO should also initiate change to strategy to secure sustainable growth and ongoing value creation for all stakeholders in collaboration with the executive team.
In the end, empower your people. Build a strong set of managers to lead them.
When you do, employees will usually do the right thing. A company with a good value system and quality processes is the company where people do the right thing even when you are not watching. This is what will grow your company with everyone pulling their weight.
If you are micro-managers or feel your team can’t scale, contact us.
Written by Michel Koopman and Robert Greer