Facebook Twitter LinkedIn Email Share

Why CEO Leadership Gaps in Troubled Companies Matter

CEO, leadership, leadership gaps, troubled companies, underperforming company

One consistent theme can be found playing out in virtually every troubled and underperforming company: a sustained gap in effective leadership by the CEO. 

Throughout the life cycle of a business, normal ebbs and flows of both prosperity and challenges are natural. Businesses are continually impacted by internal and external forces, and many may be out of management’s control. But the difference between successful and not so successful navigation of these waters lies in the hands of the company’s leadership—particularly those of the CEO.

Why is a CEO so important to an organization? Simply put, he or she determines what the organization works on (strategy), who is selected to do the work and how it is rewarded (talent and reward/recognition), the environment in which the work is done (culture), what bets the company makes and at what target return on investment (risk), why the company does the work that it does (core purpose), and the company’s financial returns (stakeholder value). 

The CEO ultimately defines the trajectory of a company. It is very difficult for a company to overcome the long-term impact of an underperforming CEO. Given the stakes attached to this critically defining leadership position, how does one recognize the warning signs of a leadership gap?  

It’s actually easier than it might seem, and the answers are not to be found on the balance sheet or cash flow statement. Rather, it boils down to the simple word “trust.” Does the CEO have effective engagement from and relationships with employees? Do these relationships instill the trust that ultimately enables the CEO and his or her team to influence and inspire? If this sounds parental, that’s because in many ways there is a definite and distinct correlation. Teenagers don’t listen to parents for very long if they have a broken or nonexistent relationship. Employees tune out their leaders for the exact same reasons. 

So, what are the warning signs of an ineffective CEO? Here are a few.

Turnover. Is the company experiencing a revolving door of employees coming and going? While hiring is never an exact science, ongoing turnover can be tied directly to gaps in culture and, ultimately, leadership. The CEO sparks engagement and sets the tone. Employees need to see that they fit into a culture that they value and trust. Compensation is always important, but effective leadership leads to workforce stability even when compensation may not. 

Communication Gaps. Is the message of what is expected of employees and how everyone gets there as a team being communicated repeatedly? Do front-line employees understand and repeat the message clearly? If not, there is likely a gap in either clarity or consistency of the message—and the responsibility for both is a core role of leadership.

Likability (The “No Jerk Rule”). Most have probably heard the old saying, “You don’t have to like me, but you have to respect me!” Unfortunately, that rule simply does not apply today. While a leader does not necessarily need to be Prince Charming, it’s a good bet that a “jerk CEO” will not take an organization to great heights. The laws of human nature don’t cease to exist within the four walls of a company, and people skills are the foundation of building relationships. This, in turn, is essential to building trust.

Focus. A consistent liability of many underperforming companies is the chaos created by ever-changing priorities and tasks. In many cases, this knee-jerk leadership style is a function of “panic leadership” and an ill-conceived strategy on the front end. Constancy of purpose is an identifiable characteristic of successful companies, and the CEO sets this tone. It does not mean working only on one task, but it does mean consistently being laser-focused on the top two or three projects that matter. The CEO filters the distractions for the organization. A company constantly undergoing change is a sign of an ineffective CEO.

The “Me” Factor. CEOs who don’t understand the concept of service above self will not be able to build engagement and trust with those they lead. Any leader is only as good as his or her team’s permission to lead. A CEO who exhibits ongoing ego, pride, selfishness, and arrogance will soon find himself or herself rowing the boat alone. Real leaders take the blame and give the credit—not the other way around. While it may seem counterintuitive, the leader must first be the servant.

Customer Focus. Nothing happens until someone buys something. Great companies have great customer policies; they just get it, and their customers feel it and see it. These companies don’t get lost in transactional pennies, but instead they focus on long-term dollars. The internal company culture set by a CEO ultimately becomes obvious to external stakeholders. Chances are that a CEO who has not made a customer visit in the past six months is a CEO who is not connected to his or her company’s customers.

Pace. Great CEOs understand the notion of pace. A significant sense of urgency is critical to accomplishing the goals of the business—especially in times of crisis—but constant demands for speed can lead to organizational burnout. Connected CEOs know when to put the pedal to the metal and when to hit the brakes. They feel the workforce’s vibe and know when to pull back. Consequently, these CEOs create an ongoing sense of urgency that leads to beating the competition and satisfying customers.

Competency. Although this may seem obvious, a CEO may not necessarily have the competency to function well in the position. This is particularly true in family-owned businesses, where leadership is often handed down from one generation to the next. Strong CEOs have situational business experience in the company’s competitive arena. It is not a matter of simply being intellectually bright, though this is mandatory. The CEO needs to have seen a situation over and over again when the stakes are not as high to make good decisions when the stakes are at their highest. Being a CEO is not a learn-on-the-job type of role, so the individual holding the position needs to be ready for the job well in advance of getting the title.

In the end, an effective CEO must possess the integrity and honesty necessary to instill engagement and trust. With a demonstrated track record, excellent communication and people skills, an emphasis on serving those he or she leads, and laser focus, the CEO will likely lead a company to sustained success. If ongoing gaps exist, there will likely be trouble ahead.

Mike Musso

Michael J. Musso

Conway MacKenzie, Inc.

Michael J. Musso is a managing director with Conway MacKenzie, Inc. and leads the firm’s Consumer Goods Practice. He has more than 30 years of experience as a senior operations, turnaround, and restructuring expert with leadership in both crisis management and long-term value optimization. He has worked extensively in revitalizing underperforming companies as CEO, financial advisor, and CRO in the consumer packaged goods industry. Earlier in his career, Musso served in leadership roles at Procter & Gamble, Pepsi Cola, and Frito-Lay. 

TMA Print Logo