What Determines CEO Effectiveness?

Here is an interesting question posed over this holiday weekend.

How does a CEO gauge effectiveness in the role of CEO?  Not conducting a 360 review for other’s perception, but how does the CEO track and consider those elements of CEO effectiveness?

Jack Daly describes the three most important pieces of the CEO role.

  1. Set the vision.
  2. Put key people in key roles.
  3. Build the appropriate culture to support the organization.

In some ways, gauging effectiveness may be in the selection of what the CEO should NOT be doing.  Your thoughts?

8 thoughts on “What Determines CEO Effectiveness?

  1. Joel Swanson

    Great discussion starter, especially given the shrinking terms of CEOs and the increasing expectations to perform quickly. The currency that drives each of those roles is communications. Leadership is primarily a verbal skill: To quote my partner, Jim Lukaszewski “Your job is to go out to the horizon, look over the edge, then come back and tell us all where we’re going and show us how to get there in 150 words or less.” As a result, we’ve found that a significant portion of our practice is evolving — coaching and knowledge transfer to executives and boards on how to communicate through new leadership, changes in vision, crises, opportunities, etc.

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  2. Bernard McGillivray

    The CEO has the same fundamental responsibilities and authorities as any other manager at any other level, so he should be exercising these with regard to his executive team. He also has manager once removed responsibilities with regard to his executive team’s subordinates, so can be measured against these. He does not have to gauge his own effectiveness as the board should be doing that in order to provide the proper oversight to the CEO.

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  3. John Perry

    It is important that the CEO evaluate the effectiveness of his efforts to understand how to improve and also to adapt to change. It is not necessary nor advisable that he is doing the “gauging” but that he has adequate systems to provide feedback from his efforts. On Jack Daly’s 3 points, multiple systems are needed. Has the vision been communicated? A good test for this is to look at the management team’s goals and metrics and evaluate if they align with the vision the CEO has communicated and thus eliminate conflicting incentives that serve to undermine the vision. Continuous dialogue and report up of division performance and alignment to vision and core values will allow the CEO to know if “the right people are in the right seat”. Lastly, the measure of culture must identify if the vision and core values have been communicated and are part of everyday decision making as it impacts employees, performance metrics and customers. Understanding organizational hierarchy and how it relates to delegation of responsibility to accomplish work and various levels in a way that is consistent with the required culture is key. While employee surveys can help to understand this better, looking at how managers approach problems, treat employees and customers, and strive for improvement will be the most telling measure.
    While the best solutions will uniquely suit each company, the use of strategic meetings, operational reviews, employee round table meetings, and of course the beloved dashboard are all important tools in the CEO toolbox.

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  4. Charley Coury

    I don’t think Elliott Jaques would have agreed with Jack on #2 and #3>
    2) Put key people in key roles. Wouldn’t EJ have said, get the structure right–then staff to fill the roles you need?
    3) Build the appropriate culture to support the organization. I’m not sure EJ would have seen the CEO’s role as “culture building”. I think he would something more along the lines of ensuring a requisite organizational structure and accountability practices.

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  5. Tim Fulton

    I will add two roles:

    1) Making “big” deals. Might be a customer (“whale”), a vendor, investors, or even a key hire.

    2) Providing necessary capital to the enterprise. Must mke sure the company doesn’t run out of cash.

    Three roles the CEO must avoid:

    1) Doing the work itself. Must work “on the business”.

    2) The job of an admin including email management, travel arrangments, and answering phone calls.

    3) Managing employee compliance. The focus must be on results.

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  6. Gordon

    First time reader of the site and post caught my eye!

    Two points:

    The vision is key – I see way to many people in leadership and management roles (beyond just the CEO) who can not forecast where the business needs to go, and how it’s going to get there. If you can’t describe that future state, the organization will struggle to get there.

    On the people – I’m a firm believer in finding people’s strength and placing people in positions where those strengths will shine. Afterall, the business will benefit when people are at their best. We actually had a post similar to this on our blog, which talked about a baseball style approach. Everyone – pitcher, catcher, fielder, etc – has a specific job to do that they’re great at. In baseball, you don’t put a pitcher at the top of your batting order, it’s not their strength. This type of philosophy starts with the CEO. Many businesses focus heavily on addressing people’s weaknesses, but rarely talk about maximizing strength.

    My two cents!

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  7. Joel

    Hi, Jack you are right, but some more setup are needed imho, CEO is a Leadership post, where Leadership is about influencing others using an amalgam of individual and positional powers when motivating people to prosperity, choosing, and decision-making on business dilemmas and temptations. Therefore as a Leader, one has to setup a vision, hire, and motivate subordinates toward it, while on the way deciphering dilemmas and temptations. On decision making the Leader must decide on aspirations, processes, and functional setup on an anticipated product or service. These demands huge responsibilities in people’s skills, business masterly capabilities, choosing and setting functional synergies such that competition is achieved.

    Joel NN

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