Tough at the top

Being a CEO might bring certain financial rewards, but it can also be fraught with problems. So just what qualities do you need to do the job? Dave Waller gets the view from the Channel Islands.

When Portugal’s António Horta- Osório became CEO of Lloyds Banking Group in March last year, he was seen as the great hope for retail banking. Joining the statebacked company with a package worth a cool £8.3 million, he certainly looked the part – he was charming, politically astute and made a hobby of swimming with sharks. Yet all didn’t go quite as planned. Eight months later, amid rumours of going five days without sleep and holding executive summits on Sundays, almost £1bn was wiped off Lloyds’ market value as he signed off with extreme fatigue and stress.

A rested Horta-Osório returned to the hot seat in January this year, but his story highlights the perils of being a micromanaging CEO these days. “Life certainly becomes more complicated when the economy gets tough,” says Nick Winsor, CEO of HS BC in Jersey. “Those pressures that every company faces – growing revenue, managing costs – are still crucial, only there’s lots more stuff going on in the market place than there would be otherwise.”

In Lloyds’ case, that means taxpayer ownership, increased regulation and being forced to sell off 632 branches to meet Europe’s criteria on state aid. But it’s not just financial heads who are having it tough. Against the backdrop of a creaking Eurozone and widespread austerity, CEO s across the board are being required to increase output while reducing costs, to introduce restructuring and redundancies, and to ask for greater levels of effort from vulnerable employees who are themselves looking to their leaders for reassurance that their futures are secure.

Whether at the head of a FTSE 100 company or leading a relatively small firm in the Channel Islands, it’s a wonder the CEO ever finds time to sleep at all. “Successful CEO s will retain a level of high engagement across all employees, and this is exhausting,” says Nicky Little, Partner at leadership consultant Cirrus. “They’ve got so many concerns, plus they need to show a level of humility. The respected ones are those who admit that ‘yes it is tough, but I’m here for you’.”

It’d be hard to imagine the likes of Steve Jobs saying that. The Apple pioneer may have gone to the grave as one of history’s most successful and iconic leaders [see page 46], but behind the quiet black turtlenecks, his temperament was fiery and he remained absolutely fixed on following his own vision.

Follow my leader

So which type of leader is best? Do troubled times call for a more team-focused approach, or is it time to cede control to a Jobs-style autocrat, someone who’s willing to take the company by the scruff of the neck in the dogged pursuit of their own goals?

Graeme Millar came in to lead JT Group in 2009, and he believes it’s a mistake to make such a distinction between leaders. The best, he says, exhibit a bit of everything. “They just know how to use the right qualities at the right time. There are times when talking is important, and other times when you have to make a decision. Of course you listen to all the arguments and pros and cons – but ultimately the buck stops with you.”

There has been a shift in perception of the CEO role. The 1980s and 1990s were all about Jobs-style individual, almost heroic, leadership at the top. Now we see a more distributed leadership across the business. Horta-Osório seems to have learned that the hard way: having made the mistake of centralising all decision-making around himself, he returned allowing trusted lieutenants to handle the minutiae, while he oversaw overall strategy.

“A successful firm focuses on collective success, not individual achievements,” says Andrew Dann, CI Managing Partner at Ernst & Young. “The CEO is fundamental to getting the tone right, setting consistent values and acting as a role model to inspire and motivate people. That makes them more engaged with clients, which in turn leads to more work. The people should come first, but the CEO has a key role to play in ensuring that happens.”

So the CEO ’s job is to prime people to take responsibility. Sounds easy enough. But first they have to join a company and make the role their own. This is often less than simple, yet how it’s handled will have lasting effects.

Taking the reins

Research from US consultant FTI shows that the initial reaction to a change of CEO can have a longer-term effect on share price. Six months after the new CEO started, companies with a positive stock price reaction on day one saw their stock outperform the market on average by about 19 per cent six months after the new CEO started. Those with unsuccessful CEO transitions underperformed the market by an average of nearly 17 per cent.

Little and Cirrus worked extensively with Marks & Spencer when Stuart Rose stepped down in May 2010. The company had lost its figurehead, and stakeholders were understandably concerned. Incoming CEO Marc Bolland kept the market waiting till that November before revealing his strategy. Yet such confidence and clarity proved reassuring. “There was pressure from the City, and he was criticised, but he was very clear from the start about what people could expect,” says Little. “It worked in the end, but it was a gutsy move as people loved Rose so much.”

Of course, it’s probably no easier inheriting a company that’s in trouble. When former GE man Peter Löscher arrived at Siemens in 2007, he was the first top executive in the 160-year history of the company to be hired from outside. That’s a big ask, especially when the company had just been fined $1.34bn for bribery. Like Bolland, Löscher launched an extensive tour around the business to listen to what employees and clients had to say. He also applied his own principles, including what he defines as having a “true north – a clear definition for myself of right and wrong”.

Graeme Millar’s tenure at JT began in less intense but similarly uncertain times: shortly after the States abandoned an attempt to sell it. He came in and displayed a similar curiosity. “The first few weeks were about meeting customers, employees, the unions, the government and the regulators,” he says. “I asked two questions: what’s good about what we’re doing, and what’s not good? After that the job gets quite easy – do more of the good, and less of the not-so-good.”

The message from the Channel Islands, then, is that a successful CEO spends most of their time listening to others but, like Löscher or Jobs, is never be afraid to be themselves either. “If someone asks you to the pub, you wouldn’t run a risk assessment and write a business case,” agrees Winsor. “Similarly, you shouldn’t hang your own characteristics on the coat hook and just go by the rule book when you turn up at the office.”

Equally, as Lloyds’ Horta-Osório quickly learned, a healthy CEO will leave the work pressures on the peg before heading home.

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