This is from the Mastering The CEO Learning Curve email series, which you can sign up for here.

[MCLC] 2 - Systemic CEO interventions

In Episode 1 of this short series on “Mastering the CEO Learning Curve”, we talked about the 'inner game':

  • leading from contribution/service instead of self-preservation/fear, and
  • how the Commission/Contribution framework can help you articulate a vision for your leadership legacy that’s both achievable and compelling.

If you've not read that article, I suggest you do that now.

Now let’s sharpen things up and talk about your focus and your use of time.

As an incoming CEO, how will you balance the need to deliver on short-term milestones and solve immediate operational concerns with the bigger goal of achieving your longer-range vision?

The problem many chief execs find is they see a whole bunch of operational issues they can help solve, and they jump right in. 

The short-term is going to be an obvious pull, because you want to make an immediate impact, and achieving quick operational wins will be familiar ground to you.

As a result, many CEOs quickly become over-scheduled and swamped in operational demands.

They rapidly hit the ‘ceiling of complexity’, which is when they max out: there simply aren’t enough hours in the day. Strategic perspective and progress on transformational projects suffers.

This is incredibly common. When I start working with new clients many of them will start by saying something like:

“I’ve got so much on my plate I’m losing sight of the big picture and am in danger of becoming a ‘busy fool’.”

However, there’s another way, and it relies on two key principles.

Think future-back

One business I worked with provided IT infrastructure to large corporates. But the shift to cloud computing meant that future growth would come from a new set of services outside the scope of the core business. 

The challenge for the incoming CEO: set the company on a path of transformation to be less dependent on hardware and capture the new growth in cloud services instead, It felt like a real clash between short-term and long-term. Almost everyone was focused on closing immediate deals. Long term investments were not prioritised.

However, even if long-term health would come from developing new offerings, the short-term cash would be provided by the legacy business.  So the first principle is obvious: you cannot achieve long-term milestones without achieving short-term milestones. These two aren’t in tension; they’re complimentary. 

The short-term only conflicts with the long-term if you’ve not aligned your stakeholders around:

  1. the long term vision; and
  2. the short term deliverables required to get there.

Putting it another way, if the short-term is in conflict with the long-term, you’ve not got an agreed roadmap to move, quarter by quarter, from where you are to where you want to be.

Work the system

The second principle is: relentlessly use your indirect levers. Let me explain.

Businesses are systems … or more accurately, sets of systems that together comprise the firm and its stakeholder environment.

Something like this - but more complex 🙂

The different elements of the system work together to create a certain result. Every system is perfectly designed to get the results it’s currently getting!

As CEO, instead of making individual operational decisions, focus your attention on the overall system:

  • What’s the vision? Is it clear and compelling?
  • Is there a clear roadmap to get from ‘here to there’?
  • Is the board supportive?
  • Are people bought in?
  • Are incentives aligned?
  • How are tensions between stakeholders playing out?
  • Are roles and responsibilities clear?
  • How effective and cohesive is the leadership team?
  • Are the key business processes sound?

I’ll say it again: As CEO, you’ll hit the ceiling of complexity incredibly quickly if you start getting involved in individual operational decisions.

But when you make interventions at the system level: building new capabilities and assets, changing measurement, incentive and reward structures, shifting perceptions and aligning stakeholders, and improving leadership health, then you apply a huge leverage factor and your personal time and energy is no longer a limitation. 

Any particular system naturally produces a particular outcome. Change the system, change the outcome.

But if you don’t make those changes at the systemic level, who will?

In the case I mentioned, the whole business - the brand, the culture, the incentives, the processes, the entire system - was set up to close hardware deals and maximise EBITDA quarter by quarter. For example:

  • the sales teams were very comfortable selling hardware, and well rewarded. Cloud services were a less-familiar sell and required more effort for less immediate benefit.
  • the senior management team was measured primarily on quarterly EBITDA targets
  • investors had not yet been fully convinced that there was a credible business plan to justify major investments in the short term.

With all these factors working against his vision for change, no wonder that the CEO was frustrated that his executive team were making all the right noises about the new strategy, but this wasn’t showing up in activity and real progress!

His short-term goals therefore became systemic interventions to align the short term with the long term: (i) fully delegate short-term EBITDA oversight to his COO; (ii) bring the investors on board with the business plan, and (iii) rebalance executive compensation away from purely short-term metrics.

Avoid the law of unintended consequences

Seen on Twitter: “My girlfriend works at Airbnb where they have ‘No meeting Wednesdays.’ This Wednesday she had 11 meetings because ‘that’s the only day everyone was free.’”

The law of unintended consequences kicks in when the longer-term ramifications of a decision haven’t been fully considered.

For example, when India was under British rule, the British government attempted to reduce the number of venomous cobras in Delhi, by offering a reward for every dead cobra. In the short term, large numbers of snakes were indeed killed for the reward. But people began to breed cobras for the extra income! When the government realised this, they scrapped the reward program. This led all the cobra breeders to set their (now-worthless) snakes free, increasing the wild cobra population even more!

As CEO, you have the ultimate formal authority to make operational decisions and get your own way. But the unintended consequence of using that power is this:

  • The more you intervene directly in operational issues, the less empowered and motivated the wider team will feel, and the lower their sense of ownership will be.
  • And the more you insert yourself into operations, the more the system will reconfigure itself around you as the ‘genius figure’. This might be a good ego-trip but is a recipe for overwhelm and getting lost in the weeds. 

Summary & Next Time

Your time as CEO is incredibly precious and needs to be used strategically; guard against the tempting pull towards the comfort zone of direct operational intervention and making decisions that properly belong elsewhere in the organisation. 

Instead, spend your time building a roadmap that joins the dots between the short-term and the long-term, and championing the systemic shifts needed to do something beyond 'business as usual'.

Next time, we’re going to cover the most challenging and important activity of any CEO. I dare you to hit REPLY and guess what it is 🙂