What Only the CEO Can Do

The CEO wears many hats: communicator, coach, problem solver. While others in your organization can also fill those roles, there’s one critical job only a CEO can do: link the outside world (society, economy, technology, customers) with the inside world (your organization).

Here is an interesting article by by A.G. Lafley CEO Proctor & Gamble
Please also view the video

Shyam

I became Procter & Gamble’s CEO in June 2000, in the midst of a crisis. On March 7 of that year the company had announced that it would not meet its projected third-quarter earnings, and the stock price plummeted from $86 to $60 in one day, leading the Dow Jones Industrial Average to a 374-point decline.
The price dropped another 11% during the week my appointment was announced. A number of factors had contributed to the mess we were in, chief among them an overly ambitious organizational transformation in which we tried to change too much too fast and which distracted us from running the everyday business with excellence. But our biggest problem in the summer of 2000 was not the loss of $85 billion in market capitalization. It was a crisis of confidence. Many of P&G’s leaders had retreated to their bunkers. Business units were blaming headquarters for poor results, and headquarters was blaming the units. Investors and financial analysts were surprised and angry. Employees were calling for heads to roll. Retirees, whose profit-sharing nest eggs had been cut in half, were even angrier.
The news media chronicled the drama with headlines ranging from “P&G Investor Confidence Shot” to “Trouble in Brand City: We love their products. But in a tech-crazed market, we hate their stocks.” The most painful one was in a major industry publication: “Does P&G Still Matter?”
At 6:00 PM on my first day as CEO, I stood in a TV studio, a deer in the headlights, being grilled about what had gone wrong and how we were going to fix it. Everyone was looking to me for answers, but the truth was that I did not yet know what it would take to get P&G back on track. Welcome to the job of CEO—a job I’d never done before.
The Work of the CEO
In October 2004 I looked back on that first day and the even more difficult weeks that followed as I sat with Peter Drucker and several other CEOs and management scholars who had come together to ask, “What is the work of the CEO?” (Most of the quotations in this article come from Drucker’s notes for the remarks he made on that occasion.)
It seemed an odd question, because enormous attention has been paid to CEOs, who are alternately revered as corporate saviors and reviled as corporate scoundrels. Yet the question remained: Do we really understand the role and the unique work of the chief executive? Drucker believed the answer was no. He argued that people wrongly view CEOs as coaches and utility infielders who jump in to solve problems as needed, and that CEOs indeed have work that is their own. On his death, in November 2005, Drucker left behind an outline of his emerging thoughts on the role. (The Wall Street Journal had published a portion of it as “The American CEO” in January 2005.) In 2004 Drucker said, “The CEO is the link between the Inside that is ‘the organization,’ and the Outside of society, economy, technology, markets, and customers. Inside there are only costs. Results are only on the outside.”
My experience validates Drucker’s observations, and my actions since those early days and weeks have been consistent with them. I’ve gone back to his unfinished draft time and again, reflecting on his central question: What is the unique work of CEOs—work that only they can do and that they must do? Over time I’ve come to see the power in Drucker’s words about linking the outside to the inside. The CEO alone experiences the meaningful outside at an enterprise level and is responsible for understanding it, interpreting it, advocating for it, and presenting it so that the company can respond in a way that enables sustainable sales, profit, and total shareholder return (TSR) growth.
It’s a job that only CEOs can do because everybody else in the organization is focused much more narrowly and, for the most part, in one direction: Salespeople are externally focused; just about everyone else is inwardly focused. Integrating the outside and the inside is hard; it’s far easier to pick one. The CEO can see opportunities that others don’t see and, as the one person whose boss isn’t another company employee, make the judgments and the tough calls others are unable to make. The CEO is the only one held accountable for the performance and results of the company—according not just to its own goals but also to the measures and standards of diverse and often competing external stakeholders.

The CEO wears many hats: communicator, coach, problem solver. While others in your organization can also fill those roles, there’s one critical job only a CEO can do: link the outside world (society, economy, technology, customers) with the inside world (your organization).
To link outside to inside, says Procter & Gamble CEO Lafley, chief executives must focus on these four tasks:
• Define the meaningful outside: Determine which external constituency matters most. Not surprisingly, at P&G, the consumer is king.
• Decide what business you’re in: For example, what are your core businesses, and which of them will you grow? In 2000, P&G decided to target low-income consumers and developing markets.
• Balance present and future: Ensure that stakeholders’ near-term interests don’t overshadow your company’s long-term future. To fund long-term bets such as compact detergent packaging, P&G lowered its short-term revenue goals.
• Shape values and standards: For instance, P&G defined trust as consumers’ trust in its brands.
The Idea in Practice
A closer look at the four tasks enabling CEOs to link outside to inside:
Define the Meaningful Outside
Your company has many stakeholders, each with important demands. Once you’ve defined your most important external constituency, ensure that everyone acts on that understanding.
Example: P&G is obsessive about understanding its customers. Almost every trip Lafley takes includes in-home or in-store consumer visits. Offices and innovation centers have consumers inside working with P&G employees, who also spend days living with lower-income consumers and working in neighborhood stores. These activities keep P&G’s two external moments of truth—consumers’ choosing a P&G product and then using the product—top of mind for employees.
Decide What Business You’re In
Analyze the attractiveness of the businesses you’re already in, your company’s position in existing industries relative to competitors’, and industries’ strategic fit with your core competencies.
Example: P&G decided to grow from its core businesses—laundry, diapers, feminine care, and hair care—where it was already a global sales and market-share leader. Though mature, these businesses had significant opportunities for growth, evidenced by demographic trends. For instance, people are living longer and experimenting with beauty and personal-care products at earlier ages. So P&G invested more in these businesses as well as in low-income consumers and developing markets, which show the most population and income growth.
Balance Present and Future
Balance short-term investments with investments in resources needed for your company’s longer-term future.
Example: P&G allocates human resources with an eye toward the skills and experiences leaders will need to run businesses that don’t yet exist. Lafley personally grooms people for the future. He knows the top 500 people in the company and involves himself in career planning for the 150 potential presidents or function heads. He reviews their assignment plans, assesses their strengths and weaknesses, and puts them in front of the board at company events.
Shape Values and Standards
Define your company’s values (its identity) and standards (expectations) in ways that encourage the right behaviors.
Example: Over time, P&G’s company values became interpreted in a way that implicitly placed employees’ needs ahead of consumers’. For example, its value of trust had come to mean employees could count on lifetime employment at P&G. Lafley encouraged the company to embrace outwardly focused interpretations of its values. Trust now means consumers’ trust in P&G brands and investors’ trust in P&G as a long-term investment.

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3 Responses to “What Only the CEO Can Do”

  1. What Only the CEO Can Do Says:

    […] Original post by Shyamsunder Panchavati […]

  2. Sandeep Says:

    Interesting article.

  3. Shawn Says:

    This was one of my favorite articles…

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