Today’s CEO faces unique challenges. Government regulations and internal policies emerging from the ethics scandals of the 1990s make many executives uncomfortable with risk. With the world economy evolving into an information-based system, challenges are fundamentally different from those of the past. And often a CEO is placed after a predecessor has failed, tasking the new talent with a potent brew of past problems.

But perhaps the greatest challenge today’s CEO faces is embracing the need to change. Some situations beg for change—like today’s difficult economic landscape. In other situations change is difficult but for the best—like changes within senior management or radical shifts in an organization’s culture.
Successful CEOs challenge themselves, and their organizations, to thrive on change.

This month’s newsletter offers some insights from the perspective of CEOs on how to excel in an environment of change—good advice regardless of the economic landscape or where in your organization’s hierarchy you operate. In today’s global marketplace, where enormous changes occur overnight, the ability to adapt is increasingly a source of competitive advantage. As Robert Kennedy noted, “Progress is a nice word. But change is its motivator.”

The two articles below speak specifically to both the strategic and survival based need of CEOs to lead change or ultimately be changed. The first article is written by CarterBaldwin partner Terry Addington. As a successful former CEO of First Cellular, Terry knows first hand what C-level executives face today. The second article from Harvard Business Review takes a look at the same issue but from a different perspective.

At CarterBaldwin we salute today’s CEO who responds to the challenges of our new economy, reinvents corporate culture when necessary, and creates a learning organization.We look forward to helping you reach your business goals and to helping you manage change

David M. Sobocinski
Managing Partner
dave.sobocinski@carterbaldwin.com

Adapt or Die

On Wednesday April 2 of this year an article ran in the Atlanta Business Chronicle with the headline “CEO, CFO turnover jumps in first quarter”. This article made the comparison 1st Q to Q, ‘07 to ’08 and was derived from a report by Liberum, a management change research firm. The data showed a 19 percent jump in CEO turnover and a 21 percent jump in CFO turnover. Overall, the article said other “C-level” jobs turned over at only 5 percent. Moreover, the report said in March ’08 alone, CFO’s turned over at an alarming rate of 41 percent as compared to March ‘07.

This may not come as a great surprise to many considering that there were several factors present in the business environment that made 1Q 2008 challenging. Consider these:

• A downturn in corporate performance overall
• Increased business complexity due to a difficult economy and the intricacies of Globalization
• Intensifying competition both domestically and probably more importantly, internationally
• Shareholder dissatisfaction with diminishing returns
• General market instability
• The sub-prime credit crises

OK, I agree. This is very logical and makes sense due to the fact that in most companies the CEO and/or CFO are accountable for broad company shortfalls, especially associated with things more strategic in nature.

The CEO's
Second Act

When a CEO leaves because of performance problems, the company typically recruits someone thought to be better equipped to fix what the departing executive couldn't — or wouldn't. The board places its confidence in the new person because of the present dilemma's similarity to some previous challenge that he or she dealt with successfully. But familiar problems are inevitably succeeded by less familiar ones, for which the specially selected CEO is not quite so qualified. More often than not, the experiences, skills, and temperament that yielded triumph in Act I turn out to be unequal to Act II's difficulties. In fact, the approaches that worked so brilliantly in Act I may be the very opposite of what is needed in Act II. The CEO has four choices: refuse to change, in which case he or she will be replaced; realize that the next act requires new skills and learn them; downsize or circumscribe his or her role to compensate for deficiencies; or line up a successor who is qualified to fill a role to which the incumbent's skills and interests are no longer suited. Hewlett-Packard's Carly Fiorina exemplifies the first alternative; Merrill Lynch's Stanley O'Neal the second; Google's Sergey Brin and Larry Page the third; and Quest Diagnostics' Ken Freeman the fourth. All but the first option are reasonable responses to the challenges presented in the second acts of most CEOs' tenures. And all but the first require a power of observation, a propensity for introspection, and a strain of humility that are rare in the ranks of the very people who need those qualities most. There are four essential steps executives can take to discern that they have entered new territory and to respond accordingly: recognition that their leadership style and approach are no longer working; acceptance of others' advice on why performance is faltering; analysis and understanding of the nature of the Act II shift; and, finally, decision and action.