The highest-ranking person in the organization is responsible for strategic decisions that define the course of the company's operations. What input does the CEO need to be effective at this job?
Making bold moves when necessary. Thinking like an outsider, whether he or she is actually one.
These are key traits that allow a CEO to boost their success in implementing strategic decisions in their establishment, according to consulting powerhouse McKinsey. An article titled, “How New CEOs Can Boost Their Odds of Success,” published recently on McKinsey Quarterly, looked at the major strategic actions that almost 600 CEOs made during their first two years in office.
These included decisions to overhaul positions in management, reduce operation costs, launch new products and services or draw up expansion plans – mergers and acquisitions, replacement of the management team, and adoption of cloud ERP technology.
The article used the yearly Total Returns to Shareholders (TRS) in rating the growth of the company during the period when the CEO took charge of its operation. The decisions of the CEOs were scrutinized and these are connected to the status and well-being of the companies from the time they joined until the next 24 months. The article observed that the choices and pronouncements that the CEOs produced more profound effects in struggling companies than in fairly performing organizations. It also noted that CEOs hired from outside were more likely to act faster, accomplish more tasks and attend to issues in rapid succession. This is because outsiders are generally less restricted by inside politics and are not burdened by indecisions due to multiple considerations.
The findings of the article are backed by almost 250 case studies.
The study is useful for new CEOs and boards that employ them.
It sends a message for CEOs to promptly make fearless moves during the initial stage of their tenure and put a premium on the fact that they still have the fresh mindsets of outsiders – whether or not they actually are new hires.
They focused on important actions that the CEOs usually make as soon as they come on board.
McKinsey first assumed that CEOs who joined poorly performing companies would be more inclined to execute bold moves as soon as they are settled in than the CEOs who joined well-performing firms. After all, CEOs in the first group were under pressure to deliver results right away, being seen as game changers and industry shakers. But the study found out that new CEOs, however the company was performing at the time they started, moved in very similar ways.
They made decisions at the same pace, whether they were in companies that performed well or not so well. CEOs in contrasting situations made courageous moves at relatively the same rate.
Still, the study indicated that companies mired in conflict gained more from key overhauls, than companies that were relatively stable.