They are the rock stars of the boardroom and sometimes the darlings of the market. In their hands lie the prospects of millions of workers and investments valued at billions of dollars. Lauded for success or harangued for failure, the buck always stops with the chief executive. Some are exceptional; others are not. Most are somewhere in between.
So what sets great chief executives apart from the rest?
"The best chief executives are those who have a mixture of the ability to see the big picture but at the same time not lose sight of the detail," the chairman of the Australian Securities Exchange, David Gonski, says. "If they can do both, it's a fabulous attribute.
"Good chief executives do not glorify themselves. They are modest and realise they have to prove themselves each day, and improve the company each day."
The chairman of Leighton Holdings and Australia Post, David Mortimer, says great leaders inspire. "The most effective people are those who can grasp the imagination of their team. They have the personal magnetism and intelligence to build around them."
The same words are used to describe great leaders -"visionary", "communicators", "story tellers" - because they remain pertinent, the director of the leadership research unit at Monash University, Professor James Sarros, says.
"They are platitudes that we have all heard time and time again but they are real. Ultimately, we find that successful leaders are those that foster talent among people, drive growth and initiative, know how to manage change and deliver by actually executing strategy."
As the economy endures the downturn, those companies with the best chief executives will inevitably emerge in the best shape. The right chief executive can mean the difference between failure and survival.
There is no formulaic route to the chief executive's office. The chief executives of Australia's 100 largest listed companies come from every academic discipline. Thirteen per cent studied engineering, 26 per cent did commerce, 19 per cent undertook a bachelor of science and 8 per cent did economics. Three per cent studied medicine and another 3 per cent, law. Twenty-two of the S&P/ASX 100 leaders have an MBA and 18 achieved honours in their chosen educational endeavours. Only eight hold no tertiary qualifications.
In corporate Australia, there are a handful of chief executives who are considered great leaders by the sharemarket community. Frank Lowy at Westfield Group, Wal King at Leighton Holdings and Frank O'Halloran at QBE Insurance Group have run their organisations for many years, through good times and bad, and delivered strong returns to shareholders.
Others, such as Michael Luscombe at Woolworths, Grant King at Origin Energy, Matthew Quinn at Stockland Corporation and John Grill at WorleyParsons, are also mentioned regularly among the upper-tier chief executives. There is also a group of chief executives in the medical field who are proven leaders: Brian McNamee at CSL, Ed Bateman at Primary Health Care and Chris Roberts at Cochlear.
Some chief executives stand out because of the turnarounds they have led, Perpetual Investments portfolio manager Matt Williams says. "In the retail space, Sally Macdonald at Oroton Group and Mark McInnes at David Jones both took over from what I would describe as previously poor management. Both of those companies were on their knees before Sally and Mark turned up and it shows what a smart, savvy, shareholder-focused chief executive can do."
Sarros says that two decades of researching executives has taught him the importance of implementing a plan. "It's one thing to develop strategy but to implement it is a fundamentally different proposition.
It is the ones who can deliver on strategy that make that difference.
They're the successful leaders."
Psychological capital - or emotional intelligence - is something great leaders have in abundance, Sarros says. The principle, when distilled, relates to an individual's capacity to understand themselves.
"The best leaders have strong psychological capital so they know and understand themselves," he says. "They acknowledge their strengths and acknowledge their weaknesses. It is something that comes with maturity ... research shows conclusively that older, more mature leaders are generally higher in emotional intelligence and psychological capital."
The managing director of consultancy CEO Essentials, Harvey Martin, agrees. "Emotional intelligence is a hackneyed term but it is becoming more and more important. It starts with a CEO being aware of their particular characteristics and how they might impact others. They can't always change, but as long as they're aware and minimise any negative effect they move forward."
In Martin's view, vision is the mark of a great business leader. "The chief executive needs to have a full vision for the organisation. It's a cliché term and I don't mean one of those smart little one-sentence things - I'm talking about being able to describe the future as they see it, in a way which inspires their people."
The senior managing director of global management consultancy Palladium Asia Pacific, Matthew Tice, says in his experience it is rare to find a chief executive that ticks every box. "There are very few chief executives that exhibit all of the ingredients or attributes that separate the good from the average."
However, Tice concedes there is one attribute nearly all successful chief executives share. "A great leader first and foremost is a great communicator. They are able to speak confidently and keep the message simple, which is often quite difficult. They're not afraid to surround themselves with people who are smarter than they are and give them what they need to succeed, and then get out of the road and let them get it done.
"One thing I notice that differentiates good and great chief executives is knowing when to balance consensus with their executive team or other stakeholders, with the speed and execution required to get things done."
Disaster stories illustrate the shortcomings of chief executives but Williams says they also highlight the pitfalls more adept leaders avoid. "When I look at management teams that haven't performed well, my mind is taken back to what Warren Buffet says about 'the institutional imperative' taking over the chief executive's office.
You end up with acquisitions being made not on any savvy financial basis or to benefit shareholders."
Williams says an example of the "institutional imperative" impeding sensible decision-making is the Foster's Group acquisition of Southcorp. "[Foster's then chief executive] Trevor Hoy later gave great insight into the decision-making process. He said he knew it was a bad idea, the board knew it was bad, but somehow this strategic imperative - that they were going to be a big global player in wine - took over. It became the be all and end all of the organisation and we've seen the result."
In his 15 years as a fund manager, Williams has learned there is no right or wrong way to lead a company. But instincts play an important role in assessing individual leaders, he says. "You get a feel for the people to back. Most generally they are down to earth, have a lot of common sense, they're savvy and they get their hands dirty in their business. There's no magic or secret science behind it."
This mirrors the conclusion Matthew Kidman reached after researching
13 Australian chief executives for his book, Master CEOs (John Wiley and Sons Australia, 2008). Each chief executive was deemed a master by virtue of their tenure and performance at the helm of a publicly listed company for at least 10 years, outperforming the All Ordinaries Accumulation Index (which includes dividends) in returns to shareholders over the duration of their time as chief executive.
"They're very stable, well-adjusted people who are not aloof or arrogant," Kidman says. "They're very smart, committed and down to earth without any airs and graces."
As individuals, they are all quite different, but as business people they are very alike, he says. "Each of them had a very clear objective about what they could do in the business and they stuck to the plan and had an unbelievable self-belief that they would get there. They weren't boastful about it, but they just had a quiet belief that that's what they would do. Dovetailing with that, they have the people skills to convince people to come along with them on the ride."
THE RETIRED CEO
Former managing director, board member,
Ramsay Health Care
It is a long time since chief executives have been put under such scrutiny and pressure to perform. In periods of uncertainty, the attributes of a good chief executive are of greater importance. Yet a good chief executive should be able to adjust to all circumstances.
There are four crucial ingredients in a successful organisation and one of the main roles of a chief executive is to develop and mould these ingredients to suit the changing environment - and to ensure the survival, sustainability and long-term growth of the organisation.
The first ingredient is the product itself. A product has to be of genuine value to the consumer. In tough times, consumers will be much more discerning and the product must be aligned with their needs.
Products need to be constantly re-invented to ensure that they are not only meeting the needs of the consumer but also providing value. It is the responsibility of the chief executive to guide this process to ensure the long-term viability of the organisation.
The second ingredient is vision and strategy. The chief executive must be able to set and enunciate a clear direction for both the short and long-term prosperity of the organisation.
A good vision and strategy is developed through a co-ordinated effort with the leadership team, but a good chief executive will incorporate much of his or her beliefs and some pure gut-feel regarding what is right for the organisation's direction.
It is most important that the chief executive then takes responsibility and sells this vision and strategy and direction.
Developing a feeling of trust and creating an environment where staff want to give their all for success is the most important quality of a chief executive and an area where many chief executives are found wanting.
The third ingredient is management of the organisation. In tough times, there is a greater need for micro-management and close monitoring of progress against strategy. Positive cash flow is king.
Identifying wasteful processes and ensuring fast decision time frames are essential. Most importantly, chief executives need to ensure that systems and processes work in sync - not silos - to ensure the best outcomes possible.
A good chief executive understands that too much cost-cutting can destroy a business. When cost-cutting is required, a good chief executive knows that it's not what you do - it's how you do it that counts.
The final ingredient of a successful organisation is its culture - the values that glue the organisation together. A strong culture is the impetus for the organisation and it ensures an environment that gets the best out of its people in both good and bad times.
Culture comes from the leaders of an organisation, so it is vital that the chief executive has the personal values required to ensure the organisation's success.
I am concerned that the tough times will encourage the macho, dominate leader to come to the forefront - the enforcer rather than the inspirer. Nothing could be worse. This is short-term thinking. It is the inspirer who will take the organisation through the tough times and create a better future.
With the financial crisis, there is an opportunity to develop a new paradigm of business leadership where organisations and chief executives are encouraged to have a greater social conscience, and are rewarded by consumers and stakeholders for taking a bigger role in improving society.
THE PROFESSIONAL SERVICES CEO
Chief executive partner, Mallesons Stephen Jaques
After stepping into the chief executive role five years ago, I began to understand more fully the Peter Drucker observation that "management is doing things right, leadership is doing the right things". While his insight applies to managers at all levels, it is a particularly compelling point for those who occupy the chief executive's chair.
Typically, the early years of a professional services career are devoted to building technical, client and, to a lesser extent, management skills. The emphasis is on "doing things right" at a localised level. A chief executive has a different brief: to guide the whole-of-business vision that will underpin appropriate actions by others. In other words, a focus on ensuring the organisation is "doing the right things".
In my experience, the role entails a complex balancing act between strategies that respond to changing environments and ensuring consistent outcomes across all lines.
Additionally, given a large professional services firm is a broad organisation with many different personalities and styles, creating a meaningful alignment between vision, strategies, capabilities and culture is a significant determinant of success.
This is not to claim it is easy.
One of the challenges of the role is that while chief executives are ultimately responsible for leading a business to achieve an agreed vision, we cannot directly control every aspect of execution. We must rely on the capabilities of people in the organisation and build on their leadership skills. Being prepared to step back from day-to-day execution and concentrate on getting the best out of others is the key to success but it often means saying goodbye to previous ways of working.
Business today is undoubtedly tough. People are understandably looking to leaders to help them interpret what the changing landscape means for clients and for themselves, which makes good communication essential.
My experience is that engaging people is first and foremost about using language that reflects the culture and values of the business - using dialogue in a way they can relate to. People are also more likely to engage if they believe a leader is genuinely committed to two-way interchanges. In this respect, listening is as important as communicating.
I would also note that it can be tempting in these challenging times for an organisation to throw all its energies into the development of new strategies. However, in my view, the continual evolution of culture and leadership capabilities in a business is as critical as strategic innovation. "Doing the right things" means addressing these elements together.
THE GOOD ...
If you can mentor, develop and allow that entrepreneurial flare to flower, particularly if they're good people-people, I see that as being an ingredient leading to an impressive chief executive.
David Mortimer, chairman of Leighton Holdings and Australia Post, director of Macquarie Infrastructure Group and Petsec Energy A great chief executive builds a company to well and truly survive them. There are companies that just get better and better as one after another chief executive comes along.
David Gonski, chairman of Australian Securities Exchange and Coca-Cola Amatil, director of Westfield Holdings and Singapore Airlines Leadership encompasses having a vision and being able to communicate it effectively to a team to get buy-in, which is essential for effective implementation of the relevant strategy. leadership needs to identify talent, attract them to the organisation and motivate them to perform. Competence and integrity establish leadership's authority and authenticity.
Charles Macek, director of Wesfarmers and Telstra The very best leaders are certainly passionate about their job - there is no question about it. They are dedicated and they want the very best for the business. They don't just want their business to survive but to do better every year.
Professor James Sarros, Monash University
In my time, I have seen chief executives who have valued themselves more than their people. That often leads to tears.
Too often you see chief executives try and be the hero and have all the answers. Their success [should] come through empowering their people to rise to the occasion to show their best and making sure they get the credit for it.
Harvey Martin, director CEO Essentials
We look at management who seem overly reliant on consultants or investment banks, and outsource the decision-making process. That is usually a strong signal that it is a weak chief executive - and a company and chief executive, therefore, to be cautious of.
Matt Williams, portfolio manager, Perpetual Investments
I've seen people discourage other people from getting too close to the top. Sometimes you get a highly intelligent person who for some reason wants to exhibit that intelligence and wear it on their sleeve and become almost an intellectual bully. Fairfax Business Media
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