Hidden Truths E-Book

David Fubini

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 343

Veröffentlichungsjahr: 2020

Beschreibung

Complete your leadership toolkit with this inside look at high-level, executive positions Hidden Truths: What Leaders Need to Hear But Are Rarely Told delivers profound and rarely discussed insights about C-suite jobs that provide aspiring leaders with practical, new skills that will equip them for the immense challenges of their desired jobs. Through 14 illuminating chapters, accomplished Harvard Business School faculty member and former Senior Partner of McKinsey & Company sets out the essential habits that help leaders create success, time and time again. You'll learn: * How to recognize the limits of monetary incentives for employees and colleagues * To manage your relationships with members of the Board of Directors * How to value and realize true diversity * How to manage mergers and acquisitions properly, one of the most difficult parts of business leadership Perfect for managers, executives, and other business leaders with an eye on the C-suite, Hidden Truths also belongs on the bookshelves of people who already find themselves in a C-level position and wish to learn how to better manage the stresses and challenges of the job.

Leseprobe

Table of Contents

Cover

Title Page

Copyright

Dedication

Foreword

Preface

Acknowledgments

1 Arrive Prepared

A NEW AND DEMANDING ERA

ROGER KRONE: DOING YOUR HOMEWORK

HOW DID KRONE DEVELOP ALL THESE PERSPECTIVES? HE HAD HELP

HOW DO YOU PREPARE? GO DEEP AND BROAD

2 Avoid Half‐Truths and Misperceptions

WHEN GOOD NEWS IS BAD ADVICE

IT TAKES TWO TO TANGO: CEO ARE PART OF THE DANCE AROUND THE TRUTH

EXAMPLES OF DAMAGING HALF‐TRUTHS AND WITHHELD INFORMATION

KNOW YOUR SHAKESPEARE, DON'T BE LIKE LEAR

HOW TO MOVE FROM PARTIAL TO WHOLE TRUTHS

TOLERATE FAILURE, HEAR THE FULL TRUTH

3 Adopt a Constituent Consciousness

CRAZY CALENDARS, MYOPIA, AND INTENSE DEMANDS

WAYS TO ADDRESS THE CONSTITUENCIES CONUNDRUM

IT'S ALL A MATTER OF TIME

4 Start Change Management by Changing the Management

THE ALLURE OF CHANGING SLOWLY—AND THE DANGERS

THE NEED TO MAKE THE MOST OF TWO VERY SCARCE RESOURCES: TIME AND TRUST

SUCCESSFULLY TRANSITIONING AFTER A MERGER OR ACQUISITION: AMERICAN AIRLINES

CHANGE REQUIRES EMPATHY, CLARITY, AND COURAGE

NOTES

5 Avoid Becoming Isolated

HOW ISOLATION HAPPENS

CREATING YOUR OWN SHELL

TRANSITIONING TO A GOOD COMMUNICATIONS REGIME

CONNECTING WITH BOARDS

REACH OUT TO THE RIGHT PEOPLE

FIVE WAYS TO KEEP CONNECTED

6 Manage the Mentorship Conundrum

A GROWING NEED IN ORGANIZATIONS

MENTORSHIP ROLES AND RESPONSIBILITIES

BOARD EXPECTATIONS, CEO RESISTANCE

MENTORSHIP DO'S AND DON'TS

7 Use Role Modeling as a Change Tool

AN ESSENTIAL CHANGE MANAGEMENT ASSET

FOUR WAYS TO MODEL THE RIGHT MESSAGE

MODELING THE RELATIONSHIP BETWEEN CUSTOMERS AND R&D

THE MAGNIFICATION PRINCIPLE

BE CAREFUL ABOUT THE BEHAVIOR YOU MODEL

INSPIRATION AND INSTINCT

8 Use Psychic Rewards, Not Just Monetary Ones

SOLID BUT INFLEXIBLE

INFORMAL AND FORMAL TYPES

WHY CEOS UNDERUTILIZE THIS VALUABLE TOOL

BUT COMPANIES CAN'T LIVE BY FINANCIAL INCENTIVES ALONE

NOTE

9 Get on Board with Your Board

TIMELY FACTORS

PROACTIVE, NOT REACTIVE

A REFLEXIVE RELUCTANCE

THE RESET OPPORTUNITY

CHOOSING BOARD CHALLENGERS

RESTRUCTURING BOARD INTERACTIONS

WILL BOARD MEMBERS RESIST?

10 Do Good While Doing Well

SAYING ONE THING, DOING ANOTHER

NAVIGATING THE PARADOX: 7 FEASIBLE DIRECTIONS

EDUCATE, ENGAGE, AND QUESTION

CREATING A GOOD IMPRESSION

YOUR WORLD IS CHANGING

GOING FORWARD WITH AN AUTHENTIC CAUSE

11 Embrace the Value and Reality of Diversity

BEWARE OF REFLEXIVE ACTIONS

SIX PROACTIVE ACTIONS

12 Know When to Leave

WHAT BOARDS TALK ABOUT WHEN THEY TALK ABOUT CEO

DEPARTURE TIMES AND TYPES

QUICK TO LEAVE, SLOW TO DEPART

HOW TO TIME IT RIGHT

LOGIC AND INSTINCT

13 Plan a Post‐Leadership Life

WHERE DO CEO GO AT THE END OF THE DAY?

WHY EXIT PLANS MAKE SENSE FOR LEADERS AND THEIR BOARDS

HOW TO FIND THE RIGHT POST‐CEO PURSUIT

TWO EXAMPLES: A GOOD AND BAD POST‐DEPARTURE EXISTENCE

14 Strive for Authenticity

THE GENUINE ARTICLE

HOW DO YOU MEASURE YOUR AUTHENTICITY?

PITFALLS: HOW INAUTHENTICITY HAPPENS

HOW TO COMMUNICATE AUTHENTICALLY

HONESTY WORKS

15 Seek Truths in the Future

PREPARE FOR GROWING DEMANDS

RECOGNIZING NEW REALITIES

CEOs CAN HANDLE THE TRUTHS

Index

End User License Agreement

Guide

Cover

Table of Contents

Begin Reading

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HIDDEN TRUTHS

WHAT LEADERS NEED TO HEAR BUT ARE RARELY TOLD

David Fubini

Copyright © 2021 by David Fubini. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging‐in‐Publication Data is available:

ISBN 9781119682332 (Hardcover)

ISBN 9781119682356 (ePDF)

ISBN 9781119682349 (ePub)

Cover Design: Paul McCarthy

Cover Art: © Getty Images | Miragec

For my wife Bertha and our four wonderful children:Michael, William, Anna, and Marco

Foreword

As the leader of two companies—Danaher and General Electric—I've learned the hidden truths about being a CEO the hard way. David Fubini makes it easier for future leaders and CEOs.

In between these two stints as CEO, I taught at the Harvard Business School, which is where I got to know David. We co‐taught the introductory courses on Organizational Behavior and Leadership. We also joined to teach second‐year students about the challenge of executing strategy and we have taught executives together. I also learned my own truth about David: He understands CEOs; he also understands the reality of the job and what happens behind the curtain of the CEO role.

I'll admit, I have a certain wariness when it comes to management consultants. I think it is critical for an organization to build their own capabilities and develop their own insights to be able to address important topics. Yet, the value of a third‐party, impartial view, informed by the best practice of others can be enlightening and helpful. Such is the case with David's three decades experience as a management consultant at McKinsey, providing an invaluable source for insights for new leaders. David has torn the veneer off the role of CEO to let others see the reality of the difficult trade‐offs, the challenges of day‐to‐day management, and the highs and lows of the job in a manner that is illuminating and beneficial to other CEOs and leaders. In this way, it is not a traditional management consultant's perspective. This is a more personal counselor's view of the challenges of being a chosen CEO or leader.

David's belief that few people really grasp what this top leadership job entails is right on the mark. His conviction that knowing the 14 hidden truths can be a huge help to leaders is equally valid.

I know this because I've walked it—and I wish I had these 14 truths in hand from the start.

At Danaher, a global science and technology company, I established a decentralized leadership style, focused much of our efforts on hiring and training, and implemented a series of measures that helped Danaher achieve a great deal of success. Although I was prepared for a lot of what leading this company involved, I discovered that the moment I assumed the CEO role, the clock was ticking—loudly. The board wanted to be sure that they had made the right choice for the job. Wall Street analysts were eagerly watching to see what changes we'd make. Employees, suppliers, and other stakeholders were observing and analyzing my every move.

David emphasizes the need to arrive prepared—this was a truth that hit home during those initial weeks and months on the job.

His observation about being cautious about becoming isolated from the rest of the organization is important. CEOs are faced with many big decisions with huge ramifications, and there are few who share in the consequences of the results of those actions. That can be isolating and somewhat difficult to get your mind around until it actually happens. I sought to counter this challenge by building a team around me to get diverse viewpoints and a range of perspectives. I learned the value of seeking out truth tellers, creating a culture where you encourage putting both the good and the bad on the table. You can't do this from the CEO's desk; you have to travel a lot, meet directly with those closest to your customers, and talk with outsiders, not just insiders. As I'm fond of saying, there's a huge benefit from “not eating off the same menu.” This approach was one of the hallmarks of my time at Danaher and what we are underway building at GE.

CEOs often don't know what they're getting into, even when they know a great deal about the businesses that they're hired to lead. At GE, I was on the board prior to my colleagues turning to me and asking if I would consider taking the job as chairman and CEO. David reminded me that when we were teaching at Harvard, a student asked why I accepted when I could have just rested on my laurels earned at Danaher. I told the student I was too young not to want the challenge of another leadership role and, perhaps more importantly, that I relished both the challenge and the opportunity to save an iconic American company—one that was started by Thomas Edison.

You work hard to be prepared for a new leadership role and yet it's only when you get in the ring that you really know the full scope of the fight. No one really understands the full nuance of the situation—the inevitable constraints on time to act, talent you have inherited, and capital, which never seems enough. I've always believed that organizations must continuously work to improve and drive change, but changing in the midst of a crisis such as the one GE has gone through is something else entirely. There's the expression “Changing the tires on a moving truck” that is applicable. David writes about the importance of “changing the management as a critical step in making change happen,” and I've had to grapple with a lot of these changes in talent in my top team. It's never easy, but it's necessary.

I also found David's discussion of boards enlightening and aligned with my own experiences. Having served on a number of boards in different industries, including GE, T. Rowe Price, and GlaxoSmithKline, I know how challenging it can be for first‐time CEOs to deal with this new type of oversight. Boards can be quick to provide perspectives and critiques despite the fact they meet roughly six to ten times during the course of a year. Plus, new CEOs must navigate the transition from having one boss to now having many. Using baseball as an analogy, as I have been both a player and an owner, I can tell you with certainty a 90‐mile fastball sure seems a lot faster when you're in the batter's box than when you are in the owner's box.

At the same time, I agree with David that if CEOs establish true partnerships with boards, it can be an incredibly valuable relationship. Why? Because of their combined diverse experience and wisdom, their networks of valuable experts, and their willingness to provide honest feedback that may not be available from anyone else.

And yes, humility matters—a lot. Leaders need to remember, it's not about you. One of my first actions at Danaher was to start the discussion about my eventual successor. The board was surprised—“Hey, we just promoted you”—but this is a crucial CEO task for the enterprise's continued success. David correctly notes how important this responsibility is for CEOs, as well as knowing the right time to depart. I left Danaher when the company was doing well and the board had multiple succession candidates. I assessed it was time for the organization to continue to change—for new leadership with a fresh view. I didn't have to leave, but I knew it was time.

When David and I were teaching together at Harvard, we'd inform a class about something that appeared to us to be an obvious managerial truism about leadership. We'd later ask each other, “Wouldn't students have known this?” But they didn't. Similarly, I learned not to assume that because I know something about being a CEO, others would know it as well.

And that's the beauty of this book. It's the ultimate inside baseball look at being a CEO. What David knows about this challenging, fascinating, and at times frustrating job, most people don't. Until you read this terrific book. Then you'll know the truths.

Larry Culp

Preface

As a consultant at McKinsey & Co. for nearly 35 years, I have helped CEOs navigate some of the most difficult transitions and other challenges they face on the job. These decisions centered on critical issues such as: selling part of their own company or merging with another one; drastically reorganizing the whole organization, making a massive strategic shift in the marketplace, and dealing with the demands of consumers, boards, and shareholders; and navigating the non‐market forces shaped by government, demographics, and cultural trends. All of these situations are enormously complicated, and the stakes are always high. Corporate legacy, jobs, revenues, investments, careers, personal reputations, and shareholder value are on the line. While the rewards of running a company are great, the risks of the job are sometimes even greater. After those 35 years, I came away convinced of this truth: Being a CEO is a singularly tough job, and to be successful, these leaders need help to know not only about basic leadership principles but also the “hidden truths” that are part of the role's daily challenges. Too often, these truths are the difference between success and failure.

Since retiring as a senior partner at McKinsey to teach at Harvard Business School, I've become familiar with the advice offered in business books and articles to help leaders. I must admit that many of these works have left me a bit disappointed. While their authors offer interesting insights, they do so from a vantage point that doesn't seem to reflect the reality and practical aspects of CEOs' daily lives—lives that I observed firsthand. I was acutely aware of these aspects—the multiple agendas of senior staff, the unknowns imbedded in many situations, the variety and conflicting desires of various stakeholders, the intense stress of the job—and they were often missing from books, articles, and former CEOs' lofty speeches. Their authors frequently wrote as if leaders (or leadership problems) existed within an ideal business state, where problems were analyzed dispassionately and solutions ensued logically.

Here's another crucial truth that these authors miss about the challenges business leaders continually face: CEOs and their executive teams, no matter how accomplished, have very human reactions to being in high‐stakes situations. When that human nature is put under consistent pressure in a context that demands clear and quick decision‐making, poor processes and bad habits often result. I've witnessed countless situations in which very smart business people made awful decisions because of the emotional, interpersonal, and communications messes they've managed to make.

Hidden Truths: What leaders need to hear but are rarely told offers approaches and frameworks to deal effectively with the real business world of human beings under pressure. It assumes that CEOs have weaknesses and foibles common to all of us while also understanding that the situations CEOs face are uncommon and extraordinary. Indeed, as of this writing, we are in the midst of a worldwide pandemic and a new social dialogue in the US around racial disparity, which has generated a range of uncommon and extraordinary issues that are posing daunting challenges to CEOs. No doubt, more such issues will arise in the coming months and years.

As the title of the book suggests, CEOs are often surprised by the stark reality of their roles—surprised in their initial weeks and months on the job as well as years later. CEOs may enter the job with high expectations, but they often become overwhelmed by new circumstances, finding themselves surprisingly isolated from the rest of the organization and learning that the data and information delivered from senior leadership often lacks clarity or transparency—or both. Many CEOs also struggle to initiate organizational changes. This struggle can occur in a recently inherited organization where their often‐complicated relationship with a new board increases these transition challenges. It can also occur when CEOs have been on the job for a sustained period of time and they grapple with a rapidly evolving competitive landscape, a more engaged board, and an entrenched culture at odds with new strategic direction.

Through the many case studies and stories included in this book, readers will see the wide variety of problems that arise when CEOs don't take care to hear the truth and don't embrace the reality of their new roles. Too often new CEOs think the scholarly articles and frameworks and flow charts that business and academic texts outline are what they need to master. The realty is far more challenging.

In writing this book, I'm forcing myself to relive some of the difficult situations I saw during my career and assess what took place—the mistakes made, the mistakes that might have been avoided—with the benefit of hindsight. Without the restrictions inherent in the consultant‐client relationship, I can assess with complete freedom. But far more importantly, writing a book creates some distance from the heat of the moment (for me and for CEOs and leaders reading this), when emotions run high and reason is sometimes in short supply. Using that distance, I hope to improve the performance of current and future leaders by providing helpful perspectives, processes, and mindsets that can be employed before their leadership is (almost inevitably) pushed to a crisis moment.

Just because I am freed from consultant‐client restrictions doesn't mean I'm able to name every name in the examples mentioned in this book. I will identify CEOs and other leaders when they've given me permission to do so, or their stories are a matter of public record, or when they have appeared as part of Harvard Business School case studies. I have also relied on my own personal interactions with some clients that I do name as they are in the somewhat distant past but whose lessons remain relevant to today's challenges. In some instances, however, I will disguise identities because of the sensitivity of the material.

This book is particularly focused on CEOs because these leaders face situations that are particular to the office. Keep in mind that when people become CEOs, they face two transitions at once: dealing with their own personal adjustments to a very new role, while simultaneously helping the organizations they run adjust to new leadership. This is especially daunting for first‐time CEOs, even if they have enjoyed enormous success in other executive positions. The CEO occupies a role that is like no other in a company, making the stakes, the responsibilities, and even the mechanics of decision‐making truly novel. The highly distinctive nature of the job can be challenging not only during the early part of their tenure, but also for years afterward.

Today, most CEOs need to be aware of the realities of the job. They need resources that address issues that are complex and confusing and for which their previous positions haven't prepared them. They need the insights of CEOs who have gone before them, who speak honestly and sometimes provocatively about the challenges they met—and in some instances, didn't meet. I hope this book can, at least in part, satisfy these needs.

Acknowledgments

Many people helped to make this book a reality, and I am grateful for their assistance.

I want to thank Larry Culp, not only for taking the time to write a Foreword for this book, but also for his colleagueship and friendship, both while he was at Harvard Business School and now in his new role as the CEO of GE. Larry's humility, his brilliance as a leader, and his commitment to excellence in all that he does is a wonderful reminder of what true leadership looks like.

I also want to thank my Harvard Business School faculty colleagues for embracing me and teaching me to be a better thought leader and educator than anyone would have expected when I joined HBS five years ago. I joined the faculty in order to remain close to the leading edge of business thought and to continue to learn and evolve as a business leader. Every day, I am blessed to be learning from and being challenged by this group of extraordinary educators, academics, and professionals all—the while having the wonderful opportunity to help educate the next generation of business leaders. In particular, I want to thank Dean Nitin Nohria for his mentorship, coaching, and friendship, over the more than a decade that I've known him.

None of the hidden truths in this book would've seen the light of day without my McKinsey & Co. colleagues. Over my 35‐year career, I learned from, was guided by, and worked collaboratively with a vast array of professional colleagues who were brilliant counselors to clients. McKinsey is a unique institution with a wonderful professional commitment to client service and a relentless commitment to advancing managerial learning. I have been the direct beneficiary of this professional commitment, and in my time there, I gained insights about CEOs and other leaders that provided the original inspiration for this book.

I'm often asked by my students, What do I miss most about my former career at McKinsey? While I miss my former colleagues, I miss my clients at least as much. I loved being a counselor and advisor. Thank you to the many clients who allowed me to hone my craft. I provided them with advice and counsel that I hope furthered their goals and aspirations, and they provided me with a true understanding of what great leadership entails. Across the hundreds of clients that I served, it is hard to single out any one individual, but I should say that I would not have been able to have the career I had without Claude “Bud” Moore from General Motors. In the five years that Bud and I worked together, I learned from him how to be a “true” client counselor. Bud's humility, commitment to others, and unwavering focus on the institution that he loved inspired me then as it does now.

I also want to acknowledge the incredible efforts of Bill Fallon, Purvi Patel, and the rest of the Wiley team who have been so helpful in guiding the publication of this book. Similarly, I want to thank Bruce Wexler for his support and for his outstanding editing and general insights.

1Arrive Prepared

Every day as new CEO is a rude awakening. Just‐arrived leaders of an organization, in a role that they have aspired to and worked diligently for years to achieve, soon face the stark reality that the highly developed skills that positioned them for this leadership role are of little value to their organizational success. From the first few weeks in the role to five years down the line, the demands of the position are vastly different from the operational leadership skills that produced the record of achievement allowing for advancement to a CEO role. This is surprising and, for many, shocking—given the complexity that comes with being a modern‐day CEO.

This harsh reality is even more pronounced since the most immediate challenge for all new CEOs, be they outsiders or promoted insiders, is to arrive prepared.

The CEO's job has become exceedingly more challenging than even in the recent past. Many CEOs don't realize how they must prepare themselves for the challenge ahead. The intensity of the leadership challenge, the tsunami of issues and constituents to be addressed, and the limited time and high expectations for immediate results are rarely fully anticipated by new leaders. While they may be aware of the strategic challenge, few anticipate the talent deficits, the competitive market demands, legal nightmares, regulatory gauntlets, and financial conundrums that are integral to the position.

In today's market environment, the CEO's job isn't as simple as leading an organization to deliver a return to shareholders exceeding the cost of capital. Now CEOs must address a vast array of confounding issues, balancing many managerial trade‐offs: time (to act), talent (to execute), and capital (to finance). New CEOs are expected to be able to respond immediately to a vast number of wide‐ranging questions that include:

How do you plan to deliver short‐term results without sacrificing long‐term sustainability?

Does your existing organization have the right structure, systems, and talent to deliver these results?

Is your balance sheet and capital structure sufficient to fund the programs you anticipate needing to launch?

What do you want to say to the vast array of customers who want to know what you plan to change and how quickly you're going to change the products and services that affect their businesses and interests?

How well positioned are you within your community and with the political leaders that all believe they have a stake in the decisions that you are about to make?

How do you plan to position your diverse company to analysts who want to categorize your company into neat segments that align with their predetermined positions of value, growth, and so forth?

How do you respond to viral social media posts and Twitter traffic that have an uninformed, yet publicly influential impact on internal and external company audiences?

How do you generate cash flow to fund operations but not attract activists whose models track cash as an early indication of a value play?

How do you ensure compliance with the vast array of regulatory agencies all dictating ever‐increasing numbers of demands?

How can you remain socially conscious, given that it seems like little time, money, or energy remains for necessary causes?

How do you keep your board of directors happy and meet the expectations they had in hiring you?

Consider a recently appointed CEO—let's call him Jack. He arrives at his large organization with big plans for his upcoming tenure. Jack has waited his whole career actively planning and positioning himself for this leadership opportunity to arrive. For years, he's thought about what he would do when he was in charge. Jack is eager to put his extensive global management experience to use; he knows the technological innovations and operational moves that he believes will create a quantum leap in performance. Given his extensive experience, Jack is determined to lead others differently and more effectively than the way he has been managed. He is thrilled the board has elected him, and he is anxious to meet their lofty expectations.

What Jack doesn't know, however, is that his new company is heading into a hurricane of issues: within a month of his appointment, a combination of a competitor's breakthrough products, the weakness of his inherited management team, the demands of the multiple constituents seeking his time and attention, and a failed acquisition has attracted an activist investor who is questioning the quality of the company's strategy and the return from its operations. Jack is forced into firefighting mode, scrambling to respond reactively and quickly realizing that he never was able to deliver on his carefully planned series of technical and operation plans.

Jack's story isn't unusual. An unrelenting demand for fast turnarounds, improved performance, and financial results is commonplace. CEOs must grapple with shareholder requirements, a changing, diversifying workforce, employees striving for professional and personal life balance, and the need for community acceptance/service. Rating agencies, buy‐ and sell‐side analysts, the ever‐threatening presence of activists, and preying private equity (PE) firms all ratchet up the intensity.

On top of that, CEOs are on the clock. They no longer have the luxury of time, the ability to wait for things to sort themselves out. In a fast‐changing environment, seconds count. CEOs need a sharp and clear direction shaped by a vision of the future of the company—and the path to that vision must be taken quickly.

To meet these challenges, CEOs don't just need to arrive; they need to arrive prepared.

A NEW AND DEMANDING ERA

In the past, CEOs had a much different economic climate with more leisurely timeframes to enact change. Boards of directors often hired them mainly because of their demonstrated past talent, not necessarily their detailed future vision. Many new leaders were expected to have a reasonable amount of time—often months—to figure out how the company really worked and to develop a prescription for change and begin enacting major new initiatives. Referred to as a “honeymoon period,” this initial timeframe might involve meeting individually with executives, going on road shows to visit facilities, hosting “listening tours” with major channel participants and customers, and generally enjoying a period of reflective thinking. After the honeymoon ended, CEOs could present thoughtful plans and approaches informed by the homework they had done. This is hardly ever the case anymore. Now, traditional timeframes for new CEOs to form a team, diagnose needed changes, and define action plans have been dramatically compressed. In the past, turnarounds necessitated by the previous CEO's failure sometimes required this accelerated approach. Now, even a normal transition of leadership requires decisive and speedy actions.

CEOs are often shocked by this demand for immediate action. If they haven't done their homework or lack a theory in the case that helps them implement change in confusing, complex situations, they may well find themselves unable to act—and in today's environment, inaction is almost always counterproductive and costly to all stakeholders.

In mid‐2017, General Electric changed CEOs. After Jeff Immelt's long‐planned departure was executed, the board chose John Flannery to be CEO. In an early interview, Flannery let it be known that it would be approximately four months before new strategy shifts and updates to earnings targets would be announced. During an analysts' conference he said his review would take time but said it had not altered GE's 2017 outlook. The market reacted negatively to the news, driving the stock price down 3% in a single day. The Wall Street Journal quoted Jeff Windau, an analyst at Edward Jones, as saying, “People want to get the answers sooner.” Deane Dray, an analyst at RBC Capital, seemed to concur as he was quoted observing that GE would be “in a state of limbo” until the review was finished. The market abhors any vacuum and so fills it with concern and a sense of downside risk, and a negative cycle can be launched.

More concerning, when the turnaround plan was announced incrementally over time, it called for a radical redefinition of the entire company. The shock to many constituents was profound as few were prepared for the step function nature of the suggested changes. The delay also reinforced the resistance to major change that historically always exists. The new CEO's radical change in tone and expectations shook investors, analysts, and shareholders. Ultimately, Flannery lasted less than a year in the role before being replaced by Larry Culp. Partially as a result, GE dropped from the Dow Jones Index and the company prepared to be broken apart, as whole units divested, major layoffs were enacted, and new management was bought in. A rethinking of the entire corporation structure also took place, including a radical resizing of the corporate headquarters. We'll never know, but if Flannery had arrived better prepared—if he had hit the ground running with these plans finalized and ready to be enacted—the reaction within and outside of GE might have been different.

As difficult as it is for long‐tenured CEOs to make fast decisions, it's even harder for those new to the role—and more new CEOs exist than ever before. A recent Wall Street Journal article noted that in the first five months of 2017, 13 companies with market values in excess of $40 billion had installed new CEOs—some often quite suddenly. This included such household names as Ford, Caterpillar, Fiat/Chrysler, and AIG. In June of 2017 alone, new CEOs were appointed at GE, Uber, Whirlpool, Buffalo Wild Wings, Perrigo, and Pandora. Of these, only Whirlpool was not facing activist pressure at the time of these management moves.

Why are CEOs under such intense pressure to take quick action? Here are three factors that every CEO should be aware of and prepare themselves for:

The Impatience of Markets and Investors.

Analysts and the broader market were conditioned to allow for a honeymoon period, but the market now demands shorter investment cycles accompanied by actions that are the result of strategic clarity. They want to see forceful personalities prescribing forceful actions. New CEOs have to work in an environment of increased market sophistication, digital transformation, and cutting‐edge modeling and simulations; they also have to deal with increased transparency as a result of social media and the multiplicity of global communication forums/exchanges. Boards that used to have a balanced view of the short and long term, are increasingly forced by today's market context to focus less on long‐term strategic renewal in favor of more immediate actions.

Emergence of the Private Equity Secondary Market and the Rise of Activism.

PE firms now provide an attractive secondary market for unwanted assets, and all manner of activists stand ready to act as a check on slow‐acting management. Historically, a new CEO might have had to live with a slow wind down or sale to a strategic buyer of underperforming businesses. Now, private equity provides the means for strategic acceleration. The market has come to expect that CEOs will address underperforming businesses and unwanted assets quickly, in part by using PE firms to market and monetize unwanted assets. This secondary market also enables activists and other market influencers to force divestitures and reshape corporate portfolios faster than in the past. Activism has had a profound effect on boards, and boards in turn have pressured CEOs to respond. A new and growing investor class of activism has emerged with a wide continuum of investors ranging from the “radical and confrontational” to those who are “accommodating but insistent.” Finally, corporate social responsibility groups bring their own form of activism, motivating boards to meet the needs of these stakeholders and avoid the negative press that might accompany their failure to act forcefully.

Change in Board Attitudes toward CEO Tenure and Selection.

Boards and shareholders have never welcomed failure, but they are far less tolerant of it today than in the past. As a result, boards are much more willing to fire CEOs. Getting rid of a CEO used to be anathema for a board because it was a sign of failure of their governance. Now it may be considered a governance strength, and at the very least, it's a more acceptable board behavior. Similarly, boards are looking to hire stars who have “been there, done that.” They want to be able to say, “We hired Julie because she turned around Company X; we knew she had this capability.” At the same time, they are increasingly under pressure to question the perceived value of “qualified” internal candidates who have never been CEO.

All this means that CEOs need a different start‐up game plan than their predecessors. It's not just that they are pressured to produce excellent results immediately. It's that they need to prepare themselves by obtaining key insights and perspectives before they even accept the position and through the preparatory phase as they come on board to the new job. CEOs must use the interview phase as due diligence on the issues and needed operational changes. Listening carefully and thoughtfully even while interviewing for the role is a critical skill, and one too often ignored in the rush to impress.

Consider how Roger Krone, formerly of Boeing and now CEO of Leidos, made the transition.

ROGER KRONE: DOING YOUR HOMEWORK

In late 2013, Leidos (a large defense/health care company providing software and services to many government and defense agencies) was searching for a new CEO. One of the candidates was Roger Krone, who had risen close to the top at Boeing and who was looking for an opportunity to be a CEO. During this period, the Leidos board was particularly worried about the company's strategy, its recent performance, and the no‐longer‐remote possibility that the company might be the target for an activist investor. While earnings were acceptable, prospects for future growth were constrained, and yet the business was generating large amounts of cash flow—an enticement to an activist.

To effect a needed turnaround and fend off any unfriendly initiatives from the outside, the board members were eager to find a CEO who could change things quickly. There were three main sets of questions the board asked to make their assessment.

The first set concerned Krone's plans for changing the company in the early days of his tenure. How would he assess the Leidos portfolio? What parts of the company would he retain and what parts of the company would he sell? The board pressed him on his first quarter plans, especially how he would assess the need for financial change and how much cultural change might be needed to attain his financial goals.