KNOW WHEN YOUR TIME IS UP
INSEAD
DEAN SAYS THE DEEPENING ECONOMIC CRISIS HAS SHOWN THAT CEOs NEED TO PASS THE
BATON EARLIER
Five
years is the ideal length of time any chief executive should serve in the not
seat, according to the dean of the INSEAD business school in Singapore.
Mr.
Frank Brown thinks company chiefs should not cling to their position for any
longer than seven years – and that five years is really all they need. “Five
years will do for a CEO. It is enough to do what he has to do and get out,”
said the 53-year-old, an accountant by training.
“When
you look at the credit crisis and some of the colossal failures such as Lehman
Brothers and Bear Stearns, you’ll find that in each case the CEO was in place
for many years, in some cases more than 20 years. That creates a situation
where the CEO surrounds himself with people who will listen, as opposed to
challenge, with people who will probably be about his age or older and
therefore not capable of succeeding him.”
This
June, Mr. Brown will have served three years. So by his own reckoning, he
should have only two more years left at INSEAD. “It keeps you fresh, keeps you
engaged and energized and it also gives others a chance. The last thing you
want is a high-powered person to join an organization and then realize that
there’s no place for them to go, because everybody else is just holding on to
their jobs.”
“If
you’re lucky enough to make it to the top, your sole objective shouldn’t be to
stay there. Your objective should be to bring somebody along behind you who can
succeed you, who can take that organization even further than you did.”
He
also thinks CEO bonuses should include a back-end payment, given only after the
successful transition to a new leader. The CEO should be motivated not for the
level of earnings in their last year, but by the continuing success of the
organization. Right now there’s an incentive for the CEO to load up the P&L
with all kinds of good stuff in their last year so they can leave with
multimillion dollar payouts.
Mr.
Brown notes that Asian leaders tend not to follow this line of thought. Many
remain in their positions too long, especially if they have been successful in
growing a company. “Times change and you need the injection of new ideas. The
same formula is not going to work over and over again.”
To
reduce the number of long-in-the-tooth CEOs and encourage succession
management, he is a keen advocate of bringing back into vogue “servant
leadership”, an approach developed by
the late Robert Greenleaf, an executive with AT&T. Mr. Greenleaf’s 1970
paper on the topic became a seminal piece of research and was taken up by
management gurus such as Steven Covey, Peter Block, Peter Senge and Margaret
Wheatley.
Mr.
Greenleaf wrote in his essay that servant leaders have a desire to serve first.
“That person is sharply different from one who is leader first, perhaps because
of the need to assuage an unusual power drive or to acquire material
possessions,” he said in his essay.
The
concept should not be alien to Asian leaders, points out Mr. Brown. After all,
the Chinese sage Lao Tzu, founder of Taoism, is credited with the same concept
when he remarked that “the greatest leader forgets himself and attends to the
development of others”.
Mr.
Brown breaks the concept down further. Servant leaders, he says, are those who
consider the needs of employees, the needs of the communities in which they
operate and the long-term needs of shareholders. “You can develop strategies
for the long-term good and prosperity of the organization and also play some
role in the long-term good and prosperity of society at large.”
This
takes INSEAD’s dean to a favourite topic of his - TRANSCULTURAL LEADERSHIP - a
subject on which he wrote a book two years ago. In The Global Business Leader:
Practical Advice For Success In A Transcultural Marketplace, he highlights the
importance of building bridges and leading across cultures, geographies and
other traditional boundaries.
So-called
“Transcultural leadership” is a style of running a company that crosses
national borders. It is seen in leaders who combine the best practices of
traditional business leadership with an understanding and sensitivity of the
world’s many cultures.
Mr.
Brown has plenty of anecdotes to illustrate why this ability is becoming
essential. He recalls an incident when he was leading a team of 20 people of at
least 15 nationalities to launch a new multinational venture. Among the key
issues discussed at a meeting was the venture’s name.
Just
as he was about to wrap up an otherwise smooth meeting, he asked each
participant how they saw the venture working in their specific market. That was
when a quiet participant from Japan piped up that the chosen name meant “your
ugly sister” in his part of the world. “He spoke up rather late, but he did and
we managed to avert a major public relations disaster,” Mr. Brown recalls.
Another
example concerns a Japanese company looking to buy a division of an American
firm. It was reluctant to make an offer because the its valuation of the
business was way below the seller’s expected price. The Japanese thought the
Americans would be offended by the lower bid, but the Americans assume the
Japanese would make a bid and then negotiate. The deal might have benefited
both businesses, but ignorance of cultural differences meant that it never
happened.
So
how do business leaders nurture a transcultural ability? Mr. Brown suggests
that they get out of their cultural comfort zones as much as possible. “When
abroad, go to the local market instead of the supermarket, go to the local
barber for a haircut. I have been to barbers in France - it’s a riot,” he says.
“When
you take a taxi, talk to the taxi driver. I took a taxi the other day in
Singapore and he asked me how much I made as boss of a business school. Each
transaction will teach you something about the culture you are dealing with.”
Aside
from promoting transcultural awareness, another important piece of advice he
has for current and future CEOs is: Surround yourself with bright people
willing to challenge and ask hard questions. “I tell my kids if it looks too
good to be true, it is. So ask questions until you understand it,” he says.
Unfortunately,
Asian executives can be reluctant to ask their bosses tough questions. Mr.
Brown accepts that part of this is cultural, but maintains that one can still
put forward a different view politely. “If there’s one thing the current crisis
has shown us, it is that you must be open to challenges. That’s the only way
you can improve service, product or communicate it better,” he says. “You need
workers who will ask why or how. Workers who will say, ‘how can you guarantee a
return of 12% infinitely? It’s just not possible’,” he adds.
Challenging
a long-serving CEO is often more difficult than challenging a relative newcomer,
which brings him back to his pet topic - a time limit for CEOs. He makes clear
that he is not suggesting that CEOs should be consigned to the rubbish heap
once their five or seven years are up. Their experience is a valuable asset for
any company. If they have been successful at growing a company, they can always
repeat that success elsewhere. Citing the well-known leaders of General
Electric and Microsoft, he says: “Imagine if someone like Jack Welch had left
GE earlier, instead of staying there for 20 years. He could have gone and built
another GE.
“Better
still, someone like Bill Gates who has been so innovative in building
Microsoft. Now he is putting his energies to solving problems in education and
health through his foundation. I am sure he will effect some powerful changes
that will be transformative - now that’s servant leadership for you.”
(Excerpted
from “The ST Interview”, The Straits Times, February 25th 2009,
Singapore)