Seven surprises for new CEOs

As a newly minted CEO, you may think you finally have the power to set strategy, the authority to make things happen, and full access to the finer points of your business. But if you expect the job to be as simple as that, you're in for an awakening. Even though you bear full responsibility for your company's well-being, you are a few steps removed from many of the factors that drive results. You have more power than anybody else in the corporation, but you need to use it with extreme caution. In their workshops for new CEOs, held at Harvard Business School in Boston, the authors have discovered that nothing--not even running a large business within the company--fully prepares a person to be the chief executive. The seven most common surprises are: You can't run the company. Giving orders is very costly. It is hard to know what is really going on. You are always sending a message. You are not the boss. Pleasing shareholders is not the goal. You are still only human. These surprises carry some important and subtle lessons. First, you must learn to manage organizational context rather than focus on daily operations. Second, you must recognize that your position does not confer the right to lead, nor does it guarantee the loyalty of the organization. Finally, you must remember that you are subject to a host of limitations, even though others might treat you as omnipotent. How well and how quickly you understand, accept, and confront the seven surprises will have a lot to do with your success or failure as a CEO.     

A time for growth: an interview with Amgen CEO Kevin Sharer. Interview by Paul Hemp

Fast growth is a nice problem to have--but a hard one to manage well. In this interview, Kevin Sharer, the CEO of biotech giant Amgen, talks about the special challenges leaders face when their companies are on a roll. Sharer, who was also head of marketing at pre-WorldCom MCI and a division head and a staff assistant to Jack Welch at GE, offers insights drawn from his own experience--and from his own self-proclaimed blunders: "I learned the hard way that you need to become credible and enlist support inside the company before you start trying to be a change agent. If you think you're going to make change happen simply by force of personality or position or intellect, you'd better think again." And change there was: Under Sharer's leadership, Amgen overhauled its management team, altered its culture, and launched a couple of blockbuster products. How do chief executives survive in that kind of dizzying environment? "A CEO must always be switching between different altitudes--tasks of different levels of abstraction and specificity," Sharer says. "You might need to spend time working on a redesign of your organizational structure and then quickly switch to drafting a memo to all employees aimed at reinforcing one of the company's values." Having a supportive and capable top team is also key: "A top management team is the most revealing window into a CEO's style, values, and aspirations.... If you don't have the right top team, you won't have the right tiers below them. [The] A players won't work for B players. Maybe with a company like GE, the reputation of the company is so strong that it can attract top people to work for weaker managers. In a new company like Amgen, that won't happen."     

Managing Middlescence

They make up more than half your workforce. They work longer hours than anyone else in your company. From their ranks come most of your top managers. They're your midcareer employees, the solid citizens between the ages of 35 and 55 whom you bank on for their loyalty and commitment. And they're not happy. In fact, they're burned out, bored, and bottlenecked, new research reveals. Only 33% of the 7700 workers the authors surveyed feel energized by their work; 36% say they're in dead-end jobs. One in three is not satisfied with his or her job. One in five is looking for another. Welcome to middlescence. Like adolescence, it can be a time of frustration, confusion, and alienation. But it can also be a time of self-discovery, new direction, and fresh beginnings. Today, millions of midcareer men and women are wrestling with middlescence-looking for ways to balance work, family, and leisure while hoping to find new meaning in theirjobs. The question is, Will they find it in your organization or elsewhere? Companies are ill prepared to manage middlescence because it is so pervasive, largely invisible, and culturally uncharted. That neglect is bad for business: Many companies risk losing some of their best people or-even worse-ending up with an army of disaffected people who stay. The best way to engage middlescents is to tap into their hunger for renewal and help them launch into more meaningful roles. Perhaps managers can't grant a promotion to everyone who merits one in today's flat organizations, but you may be able to offer new training, fresh assignments, mentoring opportunities, even sabbaticals or entirely new career paths within your own company. Millions of midcareer men and women would like nothing better than to convert their restlessness into fresh energy. They just need the occasion-and perhaps a little assistance-to unleash and channel all that potential.     

The five messages leaders must manage

If you want to know why so many organizations sink into chaos, look no further than their leaders' mouths. Over and over, leaders present grand, overarching-yet fuzzy-notions of where they think the company is going. They assume everyone shares their definitions of"vision;" "accountability," and "results". The result is often sloppy behavior and misalignment that can cost a company dearly. Effective communication is a leader's most critical tool for doing the essential job of leadership: inspiring the organization to take responsibility for creating a better future. Five topics wield extraordinary influence within a company: organizational structure and hierarchy, financial results, the leader's sense of his or her job, time management, and corporate culture. Properly defined, disseminated, and controlled, these topics give the leader opportunities for increased accountability and substantially better performance. For example, one CEO always keeps communications about hierarchy admirably brief and to the point. When he realized he needed to realign internal resources, he told the staff: "I'm changing the structure of resources so that we can execute more effectively." After unveiling a new organization chart, he said, "It's 10:45. You have until noon to be annoyed, should that be your reaction. At noon, pizza will be served. At one o'clock, we go to work in our new positions." The most effective leaders ask themselves, "What needs to happen today to get where we want to go? What vague belief or notion can I clarify or debunk?" A CEO who communicates precisely to ten direct reports, each of whom communicates with equal precision to 40 other employees, aligns the organization's commitment and energy with a well-understood vision of the firm's real goals and opportunities.     

Confessions of a trusted counselor

Advising CEOs sounds like a dream job, but doing so can be perplexing and perilous. At times, the questions you must ask yourself-about your own motivations and loyalty-can be thornier than the organizational problems that clients face. David Nadler knows, because he has been asking himself such questions for a quarter century while advising the chiefs of more than two dozen corporations. If you're an adviser to CEOs, recognizing the pitfalls of your role may help you sidestep them. And understanding a problem's nuances and implications may help you uncover a solution. The challenges facing consultants include the following: The loyalty dilemma: Is my ultimate responsibility to the CEO, who pays for my services, or to the institution, which pays for his? Today's shorter CEO tenures and greater board oversight have diminished the top leader's power and autonomy; it's now routine for a CEO adviser to have conversations with directors about the CEO's performance. To defuse loyalty issues, the adviser should raise them with the executive at the outset of the relationship. The overidentification dilemma: How do I immerse myself in the CEO's worldview without making it my own? CEOs can be enormously persuasive, but if you don't push back, you're not doing your job. The trick is to ask probing questions without shaking the CEO's confidence that you fully comprehend the forces that shape her views. The friendship dilemma: If the CEO and I like each other, can we-should we-become friends? A successful, long-term advisory relationship with a CEO requires a strong personal connection; in some cases, that becomes a friendship. But the best relationships are characterized by the participants' clear-eyed recognition of each other's frailties-tempered, of course, by genuine affection and easy rapport.     

How right should the customer be?

If your salespeople aren't sure who their boss is--the district manager? the regional manager? the customer?--it could be a sign that your company's sales force controls are working at cross-purposes and that your sales function is in trouble. Sales force controls are the policies and practices that govern the way you train, supervise, motivate, and evaluate your sales staff. They include the types of compensation you offer your people and the criteria your sales managers use to evaluate the reps' performance. These controls let salespeople know which trade-offs the company would prefer them to make when the inevitable conflicts arise between what they want to do (spend lots of time and money to get a sale) and what they actually can do (use limited resources and still get the sale). When sales force controls aren't aligned--when, say, the system simultaneously encourages reps to be entrepreneurial but also to file detailed call reports and check in frequently with their bosses--individuals become discouraged and unproductive, and they eventually leave the company. The authors' research suggests there are significant differences between the control systems of companies that encourage salespeople to put the customer first-outcome control (OC) systems--and those that encourage reps to put their managers first--behavior control (BC) systems. In this article, they list the characteristics of OC and BC systems, describe the potential fallout from conflicts within these systems, and explain how you can tell which control system is appropriate for your firm. In most cases, the right choice will be a consistent system somewhere in the middle of the OC-BC continuum.     

Managing for creativity

A company's most important asset isn't raw materials, transportation systems, or political influence. It's creative capital--simply put, an arsenal of creative thinkers whose ideas can be turned into valuable products and services. Creative employees pioneer new technologies, birth new industries, and power economic growth. If you want your company to succeed, these are the people you entrust it to. But how do you accommodate the complex and chaotic nature of the creative process while increasing efficiency, improving quality, and raising productivity? Most businesses haven't figured this out. A notable exception is SAS Institute, the world's largest privately held software company. SAS makes Fortune's 100 Best Companies to Work For list every year. The company has enjoyed low employee turnover, high customer satisfaction, and 28 straight years of revenue growth. What's the secret to all this success? The authors, an academic and a CEO, approach this question differently, but they've come to the same conclusion: SAS has learned how to harness the creative energies of all its stakeholders, including its customers, software developers, managers, and support staff. Its framework for managing creativity rests on three guiding principles. First, help employees do their best work by keeping them intellectually engaged and by removing distractions. Second, make managers responsible for sparking creativity and eliminate arbitrary distinctions between "suits" and "creatives". And third, engage customers as creative partners so you can deliver superior products. Underlying all three principles is a mandate to foster interaction--not just to collect individuals' ideas. By nurturing relationships among developers, salespeople, and customers, SAS is investing in its future creative capital. Within a management framework like SAS's, creativity and productivity flourish, flexibility and profitability go hand in hand, and work/life balance and hard work aren't mutually exclusive.     

Are you a good boss--or a great one?

Private moments of doubt and fear come even to managers who have spent years on the job. Any number of events can trigger them: an initiative going poorly, a lukewarm performance review, a daunting new assignment. HBS professor Hill and executive Lineback have long studied the question of how manager grow and advance. Their experience brings them to a simple but troubling observation: Most bosses reach a certain level of proficiency and stay there--short of what they could and should be. Why? Because they stop working on themselves. The authors offer what they call the three imperatives for managers who seek to avoid this stagnation. First, manage yourself--who you are as a person, the beliefs and values that drive your actions, and especially how you connect with others all matter to the people you must influence. Second, manage your network. Effective managers know that they cannot avoid conflict and competition among organizational groups; they build and nurture ongoing relationships. Third, manage your team. Team members need to know what's required of them collectively and individually and what the team's values, norms, and standards are. The authors include a useful assessment tool to help readers get started.     

How we went digital without a strategy

Once you say what business you're in, you put your employees into a mental straitjacket and hand them a ready-made excuse for ignoring new opportunities. So rather than dictate his company's identity, Ricardo Semler--the majority owner of Semco in S?o Paulo, Brazil--lets his employees shape it through their individual efforts and interests. "I don't know what Semco is," he writes in this first-person account of his company's expansion from manufacturing to Internet services. "Nor do I want to know." Ten years ago, Semco employees who were selling cooling towers to owners of large commercial buildings heard customers complain about the high cost of maintaining the towers. The salespeople proposed a new business in cooling-tower maintenance, and the venture is now a $30 million property-management business. That initiative led to the creation, with Semco's support, of an on-line exchange to facilitate the management of commercial construction projects. The exchange is revolutionizing the construction process in Brazil and has become a springboard for further Web initiatives such as virtual trade shows. The author shares some of the lessons he has learned along the way: Forget about the top line. Never stop being a start-up. Don't be a nanny (treat your employees like adults). Let talent find its place. Make decisions quickly and openly when it comes to reviewing proposals for new businesses. And partner promiscuously: "Our partners," Semler says, "are as much a part of our company as our employees."     

Welcome aboard (but don't change a thing)

Cheryl Hailstrom, the CEO of Lakeland Wonders, a manufacturer of high-quality wooden toys, is the first person outside the Swensen family to hold the top job. But she's not a stranger to this 94-year-old company: She'd been the COO of one of its largest customers and had worked with Lakeland to develop many best-selling products. Wally Swensen IV, the previous CEO, chose Cheryl because she knew how to generate profits and because he believed her energy and enthusiasm could take the company to the next level. Yet here she is, nearing her six-month anniversary, wondering why her expansive vision for the company isn't taking hold. She's tried to lead by example: traveling a pounding schedule to visit customers, setting aggressive project deadlines, and proposing a bonus schedule. She has a plan to reach the board's growth goals--going beyond Lakeland's core upscale market and launching into the midmarket with an exclusive toy contract with a new customer. The problem is that while Cheryl's senior managers are giving her the nod on the surface, they're all really dragging their feet. Some fear that offshore outsourcing will hurt their brand, not to mention make for tricky union negotiations. Others are balking at trying a new design firm. Is Cheryl pushing too much change too quickly? Should she bring in outsiders to speedily adopt the changes she envisions and overhaul Lakeland's corporate culture? Or should she keep trying to work with the current team? Commentators Kathleen Calcidise of Apple Retail Stores; executive coach Debra Benton; Dan Cohen, coauthor of The Heart of Change; and consultant Nina Aversano offer advice in this fictional case study.     

Is your company ready for one-to-one marketing?

One-to-one marketing, also known as relationship marketing, promises to increase the value of your customer base by establishing a learning relationship with each customer. The customer tells you of some need, and you customize your product or service to meet it. Every interaction and modification improves your ability to fit your product to the particular customer. Eventually, even if a competitor offers the same type of service, your customer won't be able to enjoy the same level of convenience without taking the time to teach your competitor the lessons your company has already learned. Although the theory behind one-to-one marketing is simple, implementation is complex. Too many companies have jumped on the one-to-one band-wagon without proper preparation--mistakenly understanding it as an excuse to badger customers with excessive telemarketing and direct mail campaigns. The authors offer practical advice for implementing a one-to-one marketing program correctly. They describe four key steps: identifying your customers, differentiating among them, interacting with them, and customizing your product or service to meet each customer's needs. And they provide activities and exercises, to be administered to employees and customers, that will help you identify your company's readiness to launch a one-to-one initiative. Although some managers dismiss the possibility of one-to-one marketing as an unattainable goal, even a modest program can produce substantial benefits. This tool kit will help you determine what type of program your company can implement now, what you need to do to position your company for a large-scale initiative, and how to set priorities.     

The CEO's real legacy

The literature on CEO succession planning is nearly unanimous in its advice: Begin early, look first inside your company for exceptional talent, see that candidates gain experience in all aspects of the business, and help them develop the skills they will need in the top job. It all makes sense and sounds pretty straightforward. Nevertheless, the list of CEOs who last no more than a few years on the job continues to grow. Implicit in many, if not all, of these unceremonious departures is the absence of an effective CEO succession plan. The problem is, most boards simply don't want to talk about CEO succession: Why rock the boat when things are going well? Why risk offending the current CEO? Meanwhile, most CEOs can't imagine that anyone could adequately replace them. In this article, Kenneth W. Freeman, the retired CEO of Quest Diagnostics, discusses his own recent handoff experience (Surya N. Mohapatra became chief executive in May 2004) and offers his approach to succession planning. He says it falls squarely on the incumbent CEO to put ego aside and initiate and actively manage the process of selecting and grooming a successor. Aggressive succession planning is one of the best ways for CEOs to ensure the long-term health of the company, he says. Plus, thinking early and often about a successor will likely improve the chief executive's performance during his tenure. Freeman advocates the textbook rules for succession planning but adds to that list a few more that apply specifically to the incumbent CEO: Insist that the board become engaged in succession planning, look for a successor who is different from you, and make the successor's success your own. After all, Freeman argues, the CEO's true legacy is determined by what happens after he leaves the corner office.     

Designing high-performance jobs

Tales of great strategies derailed by poor execution are all too common. That's because some organizations are designed to fail. For a company to achieve its potential, each employee's supply of organizational resources should equal the demand, and the same balance must apply to every business unit and to the company as a whole. To carry out his or her job, each employee has to know the answers to four basic questions: What resources do I control to accomplish my tasks? What measures will be used to evaluate my performance? Who do I need to interact with and influence to achieve my goals? And how much support can I expect when I reach out to others for help? The questions correspond to what the author calls the four basic spans of a job-control, accountability, influence, and support. Each span can be adjusted so that it is narrow or wide or somewhere in between. If you get the settings right, you can design a job in which a talented individual can successfully execute on your company's strategy. If you get the settings wrong, it will be difficult for an employee to be effective. The first step is to set the span of control to reflect the resources allocated to each position and unit that plays an important role in delivering customer value. This setting, like the others, is determined by how the business creates value for customers and differentiates its products and services. Next, you can dial in different levels of entrepreneurial behavior and creative tension by widening or narrowing spans of accountability and influence. Finally, you must adjust the span of support to ensure that the job or unit will get the informal help it needs.     

Are you in with the in crowd?

At the core of your company, there is a group of people who seem to call the shots--or, rather, all the shots seem to be called for their benefit. This core group can't be found on any organization chart. It exists in people's hearts and minds. It comprises the people whose perceived interests and needs are taken into account as decisions are made throughout the organization. In most companies, talking explicitly about this group is taboo; its existence seems to contradict the vital corporate premise that we all have a common stake in the firm's success. In the best organizations, the core group can be a resource: Members represent the unique values and knowledge that distinguish their companies. When core groups display independence, creativity, and power, the rest of the company follows. Such behavior on the part of the company, in turn, creates value for shareholders, especially over the long term. But because of the core group's enormous power, members need to make themselves aware of the signals they send, both intended and unintended. For better and for worse, the core group reinforces whatever it pays attention to. A core group member who casually mentions a product might well discover three weeks later that someone has spent $1 million introducing it. If you do not know who constitutes the core group in your organization, or what the members stand for, you may find that leading will be extremely difficult--even if you are ostensibly the person in charge. If you want to move the organization in a new direction, you may need to explicitly challenge the core group. Otherwise the rest of the organization will not go along.     

Leading clever people

In an economy driven by ideas and intellectual know-how, top executives recognize the importance of employing smart, highly creative people. But if clever people have one defining characteristic, it's that they do not want to be led. So what is a leader to do? The authors conducted more than 100 interviews with leaders and their clever people at major organizations such as PricewaterhouseCoopers, Cisco Systems, Novartis, the BBC, and Roche. What they learned is that the psychological relationships effective leaders have with their clever people are very different from the ones they have with traditional followers. Those relationships can be shaped by seven characteristics that clever people share: They know their worth--and they know you have to employ them if you want their tacit skills. They are organizationally savvy and will seek the company context in which their interests are most generously funded. They ignore corporate hierarchy; although intellectual status is important to them, you can't lure them with promotions. They expect instant access to top management, and if they don't get it, they may think the organization doesn't take their work seriously. They are plugged into highly developed knowledge networks, which both increases their value and makes them more of a flight risk. They have a low boredom threshold, so you have to keep them challenged and committed. They won't thank you--even when you're leading them well. The trick is to act like a benevolent guardian: to grant them the respect and recognition they demand, protect them from organizational rules and politics, and give them room to pursue private efforts and even to fail. The payoff will be a flourishing crop of creative minds that will enrich your whole organization.     

The case of the hidden harassment

The past year has seen a growing public awareness of sexual harassment in the workplace. The question of what constitutes sexual harassment and how to recognize it has been debated in the news, the courts, and Congress. This HBR case study is less concerned with defining it than with examining what a manager should do about it. When Filmore Trust manager Jerry Tarkwell found out one of his employees was being sexually harassed on the job, he thought he knew exactly what to do. Following company policy, he immediately notified the bank's equal employment office. Then he called Jill McNair, the employee being harassed. Her response dumbfounded him. "You had no right to call EEO before talking to me," McNair said angrily. Do you have any idea what could happen to me and to my career if people find out about this?" Tarkwell didn't understand; McNair wasn't to blame. He believed the only person who should be worried was the harasser. Tarkwell tried to spell out the procedure for her. "All you have to do is write a letter and ..." McNair cut him off. "If this gets investigated by EEO, everyone in the building could be questioned. I'll probably get transferred, and then I won't have a chance at promotion. And who'd want to work with me? Every man in the company would be afraid I'd report him if he so much as opened a door for me."(ABSTRACT TRUNCATED AT 250 WORDS)     

Finding your next core business

How do you know when your core needs to change? And how do you determine what should replace it? From an in-depth study of 25 companies, the author, a strategy consultant, has discovered that it's possible to measure the vitality of a business's core. If it needs reinvention, he says, the best course is to mine hidden assets. Some of the 25 companies were in deep crisis when they began the process of redefining themselves. But, says Zook, management teams can learn to recognize early signs of erosion. He offers five diagnostic questions with which to evaluate the customers, key sources of differentiation, profit pools, capabilities, and organizational culture of your core business. The next step is strategic regeneration. In four-fifths of the companies Zook examined, a hidden asset was the centerpiece of the new strategy. He provides a map for identifying the hidden assets in your midst, which tend to fall into three categories: undervalued business platforms, untapped insights into customers, and underexploited capabilities. The Swedish company Dometic, for example, was manufacturing small absorption refrigerators for boats and RVs when it discovered a hidden asset: its understanding of, and access to, customers in the RV market. The company took advantage of a boom in that market to refocus on complete systems for live-in vehicles. The Danish company Novozymes, which produced relatively low-tech commodity enzymes such as those used in detergents, realized that its underutilized biochemical capability in genetic and protein engineering was a hidden asset and successfully refocused on creating bioengineered specialty enzymes. Your next core business is not likely to announce itself with fanfare. Use the author's tools to conduct an internal audit of possibilities and pinpoint your new focus.     

What's your story?

When you're in the midst of a major career change, telling stories about your professional self can inspire others' belief in your character and in your capacity to take a leap and land on your feet. It also can help you believe in yourself. A narrative thread will give meaning to your career history; it will assure you that, in moving on to something new, you are not discarding everything you've worked so hard to accomplish. Unfortunately, the authors explain in this article, most of us fail to use the power of storytelling in pursuit of our professional goals, or we do it badly. Tales of transition are especially challenging. Not knowing how to reconcile the built-in discontinuities in our work lives, we often relay just the facts. We present ourselves as safe--and dull and unremarkable. That's not a necessary compromise. A transition story has inherent dramatic appeal. The protagonist is you, of course, and what's at stake is your career. Perhaps you've come to an event or insight that represents a point of no return. It's this kind of break with the past that will force you to discover and reveal who you really are. Discontinuity and tension are part of the experience. If these elements are missing from your career story, the tale will fall flat. With all these twists and turns, how do you demonstrate stability and earn listeners' trust? By emphasizing continuity and causality--in other words, by showing that your past is related to the present and, from that trajectory, conveying that a solid future is in sight. If you can make your story of transition cohere, you will have gone far in convincing the listener--and reassuring yourself--that the change makes sense for you and is likely to bring success.     

Understanding "people" people

Nearly all areas of business--not just sales and human resources--call for interpersonal savvy. Relational know-how comprises a greater variety of aptitudes than many executives think. Some people can "talk a dog off a meat truck," as the saying goes. Others are great at resolving interpersonal conflicts. Some have a knack for translating high-level concepts for the masses. And others thrive when they're managing a team. Since people do their best work when it most closely matches their interests, the authors contend, managers can increase productivity by taking into account employees' relational interests and skills when making personnel choices and project assignments. After analyzing psychological tests of more than 7,000 business professionals, the authors have identified four dimensions of relational work: influence, interpersonal facilitation, relational creativity, and team leadership. This article explains each one and offers practical advice to managers--how to build a well-balanced team, for instance, and how to gauge the relational skills of potential employees during interviews. To determine whether a job candidate excels in, say, relational creativity, ask her to describe her favorite advertising campaign, slogan, or image and tell you why she finds it to be so effective. Understanding these four dimensions will help you get optimal performance from your employees, appropriately reward their work, and assist them in setting career goals. It will also help you make better choices when it comes to your own career development. To get started, try the authors' free online assessment tool, which will measure both your orientation toward relational work in general and your interest level in each of its four dimensions.