Are You Up to the Challenge - Term Paper Example

? CEO Resigns: Tough Decisions about Leadership and Management Texas A&M - Commerce In partial fulfillment of the requirements for MGT 590 Professor Lloyd M. Basham April 5, 2012 Table of Contents 3 Abstract 3 Review of Related Literature 4 Discussion 9 The resignation of the CEO 10 Selection of the NEXT President – the future CEO 10 Rationalization and Justification of the choice 11 Conclusion 14 References 15 Appendices 17 Abstract In the corporate world of business, tough decisions always emerged about leadership and management. The complexity of the environment of corporate business is a challenge especially for those chosen executives sitting on the top level. This paper presents the highlight ingredients of success of the highest leader of the corporate chain – Chief Executive Officer (CEO). The gravity of the responsibility of being CEO will be related to the selection of a President – as one of the major events that can make or break the success of a corporation. The selection of the President is very crucial because you are preparing the right person to be the most probable next CEO of the corporation. The main contents of this paper are structured to answer questions based on a situational dilemma on Business Corporation’s selection of President. The decision made on the selection will be extended towards the analysis of its effects on the individual level and the company as a whole. Keywords: Corporate culture, Leadership, Management, Executive transitions Review of Related Literature This section presents some of the related literatures involving leadership and management for a corporate business environment with focus on what’s at stake to be a Chief Executive Officer. The world of corporate business is complex and may require essential leadership and management skills to climb and maintain your position at the top. Probably the biggest challenge most leaders face today is making a balance on the need of increasing shareholder value while creating an environment that caters passion and commitment of the employees (Hulsmans, n.d.). The evolving corporate world has produced several definitions of leadership. It is sometimes viewed as a relationship that involves three aspects towards a desired goal: mobilization, influence and guidance (Wollinski, 2010). It is true that leadership can occur only in the context of a group of individuals working together to achieve something. The product of leadership must not only end on motivated followers, but individuals who are empowered to participate in decision making and hone their leadership skills (McKay, et. al. 2000). Based on personal perspective, leadership can also be a function of knowing oneself, having a well communicated vision, building trust among colleagues, and taking effective action to realize one’s leadership potential as stated by Bennis (1989 as cited by Willonski, 2010). . Management requires the behavior and actions of employees be channeled and directed towards the achievement of the organization’s objectives. Leadership must encompass management skills to effectively communicate to your employees. The next step should involve capitalizing employee’s strength and capacity to become leverage for the organization and help produce quality value added customer wants (O’ Brien, 2012). For companies undergoing transition to knowledge economies, fair process is a must. It is on fair process that trust is created which directly influences attitudes and behaviors of members of an organization leading them to become more innovative and vocal in their ideas (Kim and Mauborgne 1997). It is important to note that today’s employees demand personal growth and learning that will engage and stimulate them. They want to be challenged, and they need to be trusted and held accountable (Hulsmans n.d.). The leadership with outstanding management skills can be mostly seen in the topmost of the corporate ladder. Individuals who are actively participating in leading certain firms are normally called the Chief Operating Officer or CEO, however for some cases; firms prefer the title “President” (Reagan Consulting, Inc. 2011). Given their leadership positions and compensation, CEOs likely have a significant impact on their companies’ success (Kaplan, 2008). It is the CEO’s first job to select his team which will share and enrich the leadership and vision that he has. Figure 1. Highest educational attainment for Top CEOS (Source: Reagan Consulting Leadership Series – CEO Survey) Figure 2. College major of Top CEOS (Source: Reagan Consulting Leadership Series – CEO Survey) A good starting point in selecting a CEO would be based on their educational and work history. The Reagan Consulting, Inc. (2011) pointed out that the level of education or the specific type of education does not seem to be a critical success factor based on a CEO survey (please refer to Figure 1). The figures 1 and 2 present us some representative facts on educational background of Top CEOs today. It is not surprising to that most of their college majors are in business. Interestingly, there are more CEOs having history major instead of risk management major. The Top CEOs and any candidate being considered for CEO benefits from a quality education and we see that the record achieved in school is a great indicator of intellectual capacity, maturity, self-discipline and overall ability. Figure 3. Jobs of Top CEOs immediately prior to the CEO job. (Source: Reagan Consulting Leadership Series – CEO Survey) Likewise, prior work experience or the specific type of prior work does not seem to be a critical success factor (please refer to Figure 3). To the extent that the prior work was in insurance it can provide the training and experience that would open the door for an opportunity within an insurance agency. Work experience in other fields or disciplines may also mature or develop a candidate for a successful career in insurance. Like school, we see the record of performance in prior employment as a great indicator of the capacity and specific capabilities of a candidate. Furthermore, it is important for CEO candidates to have agency management experience before becoming CEO. The Reagan Consultancy, Inc. (2011) indicated that 72% of all of the Top CEOs had prior management experience and that for those more recently assuming CEO responsibilities, the percentage is even higher. In the same survey made by Reagan Consultancy, Inc. (2011), they found out that the ability of CEOs to “engage and empower” employees has been the defining factor during their selection and that makes them to the top. To achieve this, some foundational characteristics and habits that may come naturally to certain people while others are able to attain it through thorough internalization. These characteristics must show a shift of focus away from themselves to others. It goes with the concept that one’s success can be defined by the success of people around them. This requires a gradual redirection, how demanding it might cost, of time and attention towards the needs and success of others. It includes learning to acknowledge employees success and sensitivity to help them when they fall. Moreover, building trust by fairness, truthfulness and transparency and motivating through example or by being natural mentors are additional characteristics. Finally, they make certain that an environment exists in which employees can succeed. They make sure they have the tools and resources. They make certain that all of the pieces of the organization are working in sync. They give the employees the space and latitude needed but they also recognize when help or accountability is needed (Reagan Consultancy, Inc. (2011). In addition, some distinguishing characteristics and qualities of these Top CEOs are worthy to be noted by aspiring and existing CEO as well as the board to select next CEO. It is believed that the more of these qualities that a person has, the greater the likelihood that they will be successful. These qualities include: passion and dedication, integrity, intelligence and the ability to problem solve, communication skills, setting vision, and positive attitude (Reagan Consultancy, Inc. (2011). Further information is provided about top CEOs on the appendices section of this paper. . Discussion How does organization identify a successful future CEO? In a corporate world, there is really no shortage of candidates eager to take a spot for the top job. However, many will be unsuitable and in reality the perfect fit will be hard to find. With CEO tenure reducing and shareholder expectations increasing, companies must have the right leader in place, but also successors ‘in-waiting’ in order to give themselves the greatest number of possible options (Korn/Ferry International, n.d.). It is vital for a corporation to ensure a succession plan for whatever executive position to ensure a full talent pipeline, gives a meaningful structure to career development programs, and creates a common way of thinking about (and measuring) leadership and leadership potential (Sheehan, 2011). As the Corporate Senior Vice President of an operational identity, I am expected to be directly involved in operational aspects of the corporation. It is my task to carry out strategic plans, mostly created by the CEO/President through overseeing operations, developing functional roles and assigning responsibilities to employees (Mayhew, 2012). To some extent, part of my role can include managing the income and expense structure of the corporation to produce a net operating profit for our business. My hands-on involvement in the operations and activities of the corporation explains my workaholic attitude and alert mind for decisions. However, most of the time, the alertness of thinking can only be stimulated by coffee drinking. The news brought about by Jim about the resignation of the current CEO, Nathan, makes us the first two in the company to know. This privilege can be traced back into the close relationship Jim and me has. There is a mutual respect and trust that exists between us which also became a significant reason of my professional growth inside the corporation. The resignation of the CEO Nathan, the current CEO has announced to the Board of Directors his resignation. During his term as CEO, he has never been the Chairman of the Board. To some extent, the age old element of ego and pride became one of the reasons. This can be significant since this can be a reason why he will be succeeded. In fact, Karlsson, et. al. (2008) stated that a CEO who is also chairman is more secure than one who is not. Globally, of all CEOs departing in 2007 who never held the title of chairman, half were forced to leave, compared with 34 percent of those who held the title of chairman at the end of their tenure, and only 26 percent of those who held the title of chairman at the start of their tenure. The resignation however for Nathan will be a new beginning for him in another company in different industry. The fact that he has been chosen by a prestigious Executive Search firm for another industry, suggests that he possess the characteristics Top CEOs exudes. With these, the only way to pirate a CEO like him is to offer him better compensations and benefits than the previous which consist of offers to be both CEO and Chairman of the Board and good stock options which can ultimately make him permanently retire as a wealthy man. However, for him to drive strategic plans for his new board, a CEO needs to understand the company’s capabilities and the major forces affecting it which can require him to spend significant length of time (Wheeler, 2007). The chance for him to underperform can be possible, which can be a big challenge for Nathan. Selection of the NEXT President – the future CEO The next president must be the most promising candidate for the CEO in the years to come. The process of selection must have a systematic succession plan which can be transformed into leadership profile and competency models. It has been proven that leaders inside a corporation that became CEOs become more successful compared to those outsiders. In this situation, the two candidates come within the organization. In this connection, we must learn first the type of corporate culture that Nathan developed through his leadership and management style. In this way, we can have a basis for the selection. An organization’s culture alone probably does more to influence corporate leadership than anything else does. It determines how individuals and organizations as a whole react and perform on a daily basis. All of the experiences during long years of business create a set of values, explicit and implicit, for the corporation that underpins the corporation’s leadership culture (Hulsmans, n.d.). One that is best accustomed to the culture and leadership style can probably replace the current which can better provide continuity to the operations during the turn-over of position. Aside from his legacy on foreign market expansion, one notable leadership style of Nathan is his people-oriented and participative type of management. In line with these traits, I would recommend Gary to be the next president of the corporation. Rationalization and Justification of the choice Bob doesn’t really possess a likable demeanor especially upon his approach with colleagues and employees. It seems that his management style is very impersonal and only focuses on the end result without taking much attention on the process and participation of employees in reaching the result. Maybe, one of the reasons of this kind of attitude can be accounted to his level of education and training. Despite his demeanor, his impact on the generation of new ideas and contribution to profit growth is indeed very significant for the corporation. Considering Bob for president would eventually create a holding type of corporate management which place high regard to results instead of an operationally involved management which Nathan (the resigned CEO) has left for the corporation. According to Favaro, et. al. (2011), holding corporate management is primarily interested in results, not in how the results are generated; in contrast with operationally involved management wherein focus is on the development of cross-company capabilities and functional expertise that engage the whole company towards prescribed plans. It is worthwhile to note that an organization must understand the difference between relentless drive at the expense of others and someone who can galvanize and lead. As for any selection of top executives, the latter is always much tougher to identify (Korn/Ferry International, n.d.). It seems that Bob established a relational gap between his colleagues (the fact almost everyone sees him as a privilege son and tyranny) in the company. For me, the last thing that an executive would do is to lose the trust and healthy working relationship with your colleagues and employees. Doing this can definitely provide you an express ticket for your downfall. On a lighter side, my relationship with Bob seems to be closer than anybody else in the corporation. Despite of his strong personality, he has exposed his emotional side in certain occasions which can be a sign of trust and accountability in my perspective. This can be a good sign for me if he’s going to be the next president since it can become a ticket for me to work closer to him. However, the relationship we have is still surrounded with uncertainties and the boundaries that are not fully defined. One significant event that marked a negative impression for me was the time that Bob chose the competitor’s product of Gary even they are in the same corporation. For me, harmony is an important ingredient for success. Instead of labeling your colleagues product line as “no quality” and “useless R&D”, you can go the extra mile to help him understand and improve his process to help you both grow and succeed, not the other way around. This event has the likelihood to occur even to me if he’ll be the President. I am not promoting mere complacency, but an environment where one can say, “I’m here to watch your back”. Gary possesses a near personality with Nathan. He has the skills to connect with people as well as within the organization and the whole company alike. He has also developed the strategy for international sales and growth of his products which can be closely linked to the style of Nathan. Despite of his laid back appearance, I can be a proof of his aggressiveness and assertive with strong convictions to his position and the direction and strategy of the organization. My points here, is that, effective leadership culture can promote employee well-being and engagement as one of the major tools for corporate success. Instead of developing a leadership culture which means starting from the bottom up – a very costly and unhealthy process – why not choose a candidate that knows how to walk along the existing culture of organization? The corporate sustainability requires a powerful corporate leadership culture where employee energy, passion, and intellectual capital can flourish in support of an organization’s objectives. Creating this environment should be the number one priority within organizations (Hulsmans, n.d.). Of course, being a “people person” is not enough. Gary must still prove his effectiveness as the new president of the company. Based from historical records, he has not performed quite well as the Executive Vice President of his product line. But this can certainly change upon his selection as president. In fact, we can view this as an experience or lesson learned where he can avoid during his president years. The lesson from his previous product line can be part of the “set of experiences can possibly prepare them for the entire decision making and responsibilities required of that top job,” as directly stated by Sheehan (2011). He further added that, in what senior position, you are generally hired for what you know, but you are fired [or retained] for who you are. My choice can benefit me firsthand. Gary was one of the main reasons of my career growth towards Senior Vice President and being sure that he is on my side will definitely provide me the confidence and the chance to further advance inside the corporation. The relationship I have with him is extended throughout our families and even to spiritual faith which can be a determining factor for our future engagements. On the company’s benefit, Gary can definitely provide continuity to the corporate culture that we have. This culture has brought progress within the corporation, thanks to the invaluable efforts of Nathan and the past CEOs. His leadership style can open several opportunities at an individual level and organizational level alike, compared to Bob’s wherein almost all the decisions revolve around him. The type of growth and success of the company that Gary can bring can be determined not only on international sales and profit but by the quality of environment where anyone can grow and flourish according to the objectives and strategy plan of the corporation. Conclusion In this globally competitive market where all organizations are trying to maintain their spots, leadership and management must have a deep commitment to and knowledge of those who truly invest in the firm, not only from the outside but especially those that are inside the corporation – employees and the whole organization. This requires a fervent understanding on the nature and direction of the whole organization as a challenge for executive entities in the top level. A systematic succession strategy must be implemented to ensure a smooth transition of leaders within the corporation to provide continuity and development not only in profit but to the whole operations. References Chan, K. and R. Mauborgne. (1997) Fair Process: Managing in the Knowledge Economy. Motivating People. Harvard Business Review. Favaro, K., Karlsson, P. and G.L. Neilson. (2011). CEO Succession 2010: The four types of CEOs. Strategy and Leadership: Issue 63. Hulsmans, L. (n.d.). Corporate Leadership: Are you up to the challenge? The Banff Centre. [Internet] Retrieved April 3, 2012 from: Kaplan, S., Klebanov, M.M., and M. Sorensen. (2008). Which CEO characteristics and abilities matter? NBER Working Paper Series. 14195. National Bureau of Economic Research. Cambridge, MA. pp. 1-55. Karlsson, P., Nielson, G.L., and J.C. Webster. 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CEOs: The Reagan consulting leadership series. pp. 1- 43. Sheena, B. (2011). Achieving Sustainable growth through Leadership. Boardroam guide to CEO succession. [Internet]. Retrieved April 3, 2012 from: Wheeler, S. (2007). Why your next CEO should come from inside. A strategy+business exclusive. Booz Allen Hamilton Inc. pp. 1-6. Wollinski, S. (2010). Leadership defined. Free Management Library. Authenticity Consulting, LLC. [Internet] Retrieved April 3, 2012 from: Appendices APPENDIX A Top CEO Tenure with agency before becoming CEO Source: Reagan Consultancy Leadership Series – CEO Survey2011 Age of top CEOs during the acceptance of job Source: Reagan Consultancy Leadership Series – CEO Survey2011 APPENDIX B Distribution of Top CEO priorities Source: Reagan Consultancy Leadership Series – CEO Survey2011 APPENDIX C Time currently spent on corporation activities by top CEOs Source: Reagan Consultancy Leadership Series – CEO Survey2011 Read More