What New CEOs Get Wrong About the Job

(upbeat music) - I'm Allison Beard. - And I'm Adi Ignatius, and this is the HBR IDA cast. (upbeat music) - Adi, today we're having a conversation about expectations versus reality in senior roles. - Yeah, look, I think people sometimes say yes to our opportunities without realizing what exactly they're getting involved in other than maybe a shiny new title. - Yes, and this happens at every level of your career. But today's guest, Nathanoria, former Dean of Harvard Business School, has looked specifically at what happens when people move into the chief executive role. He spent more than three decades studying CEOs, including bringing new ones together each year to discuss the challenges they're facing. And he has a new book out that offers lessons and best practices on how to successfully prepare for the top job. And that includes lots of good advice for people who aspire to the C-suite too. So we'll talk about how executives can stay connected to what's really happening inside their organizations, why humility is a huge asset, and how to decide what not to do when you're being hit with a barrage of new developments each day. Here's my conversation with Nathanoria, author of the CEO, the role, the reality, the responsibility. (upbeat music) So you have created a really thorough roadmap to help CEOs navigate all the issues that come up in the role. But I'd love to start with all the different ways that you've seen executives' expectations about the job collide with the realities of actually being in it. Even when these are people that have maybe already led very complex businesses within their organizations. The first one that seemed really counterintuitive to me is the realization that a CEO you can't run the company. So what exactly do you mean by that and how have you seen it play out? - So when people become CEOs, they usually become CEOs because they've run something really well. You end up running a business or you end up running a function. But as soon as you become CEO, you realize that now your job is to have other people like yourself, like you used to be, actually run the company. And you have to create the conditions where they can run the company in a way that you can applaud and feel great about rather than running the company yourself. Because if you start running the company, then you're actually doing the job with the people who are supposed to be on your senior management team. If a CEO intervenes, people feel disempowered, they feel like now I have to check everything with the CEO. I think any executive who does that has some risk of doing that, but when the CEO does that, it's such a loud megaphone and everybody wants to be so sure that they're doing everything that the CEO wants them to do that. Once the CEO starts to run the company, then the risk is that everybody feels that now the CEO is running the company, and I need to run everything by them, which just slows everything down to a grind. - You also point out the fact that CEOs are always in the spotlight and that might seem obvious, but you've found that a lot of leaders aren't quite prepared for the internal and external scrutiny that they're gonna face. Why is that? - It's really remarkable that comes from the very small things about someone who said that my wife was walking through a grocery aisle, and all of a sudden, her friends would look at her differently. So it's not just the CEO, it's even the CEO's family that ends up now being seen differently by people who were just friends, and CEOs find out all the time that they say, "I'm just surprised by feeling like I'm constantly "being watched, I'm being watched inside my company, "I'm being watched by outsiders. "Every time I go any place, I represent the company. "People are hanging on to every word that I say "for clues if you're an investor. "You may find this surprising, but there are investors "who hire CIA agents to listen to it. "Ceos quarterly calls to see if there are tell signs." In fact, one of our colleagues at Harvard Business School has written a case about that about someone who tried to get an edge by tracking how CEO speak and the inflection and their voices to tell when they're telling the truth or not. So CEOs come under a remarkable level of scrutiny in every aspect of their lives. - And how do the best ones that you've observed cope with that extra level of being in the spotlight? - One of the things that CEOs learn is to speak quite intentionally. Seeers very quickly learn that they need to have their talking points, so whatever their agenda is, whatever the strategy is, they develop clarity about that. They try and repeat the same message consistently. Of course, you have to be careful that you don't sound like a wooden person who's saying the same thing mechanically all the time. So you have to find a way of staying on message and yet being on TETIC, which is being true to the audience, finding a way of giving an example that is recent, that is on point. That's the demand that a CEO's job produces in terms of communication and the best CEOs learn how to do that. - And you also argue that it's hard for CEOs to really know everything that's going on. Why does that come as such a shock to people? - So CEOs think that now that I'm CEO, I can find out everything that is going on in the company. And in fact, the initial expectation is that the access I have to information will increase, which is a face value true, right? The CEO can ask anybody a question of any kind and chances are they'll get a report or they'll get an immediate response if they ask for a immediate response. So it's not like the organization isn't responsive. But if you just think from the other person's perspective, everybody who reports to CEO has some agenda that they have of their own. And so they're trying to present information to the CEO that puts them in the best light in addition to giving the CEO the information that they need. At times, it may not even be that self-serving. They may even say, I don't want to bother the CEO. So if there's bad news to report, maybe I'll say that it's all going to be okay. I'll work it out. And then two days later, I'll be able to say to them, I've worked it out. There's a wonderful metaphor that one of my colleagues shared with me, he was from a serial company, which is information arrives to the CEO as conflicts, ends up on their desk as frosted conflicts. So everything that shook it up, everything looks a little bit sweeter for the CEO, sugarcoded for the CEO. So I just thought that was a kind of wonderful metaphor for how information arrives at the CEO's desk. - Yeah, and what advice do you give to CEOs about how to be better collectors of information across the organization and make sure they're getting the corn flakes, not the frosted flakes? - The simple thing is that the farther you go from who reports to the CEO, the lower down in the organization you go, the more likely you are to see the truth. So the easiest way to continue to get the truth is to go to the front lines, to talk to people who are far removed from the CEO, to talk to customers. And the irony is that when you do time studies of CEOs, the people who seem to get the least time in the CEO's calendar are the frontline people and customers. So the very places where you're most likely to get the truth are places that CEOs seem to over time have less contact. But it's really important to maintain that discipline, which is to get out of the bubble of people who surround you on a daily basis and to cut through those filters and experience reality. The other lesson that I've learned is that some CEOs do have very trusted people, people whom they've known for many years. And these are the truth tellers, they still don't have an agenda. They're not looking to get the next promotion. And people like that can be very good truth tellers around a CEO as well. On the opposite end of the hierarchy from the front lines are the board, who you argue in this book, that's your real boss when you're a new CEO. So explain how that impacts leaders and what they should do about it. The board is a very complicated boss. Just like CEOs are great operators and when they become CEO, they have to learn that that's not their job anymore. CEOs are very good at managing bosses. They usually haven't risen up the organization if they aren't good at managing a boss. But they're good at managing one boss at a time or if they had a dotted line relationship maybe too. Here you now have this very complex entity of 10 to 12 people who are collectively a boss. And it's a complex social group. Technically, all members of a board are equal. They each have a vote, they each have a point of view. They don't always express their point of view bluntly. The norm in a board is to be polite for the most part to show your support for the CEO, to express your concerns gently if you can. It turns out to be a very complicated boss to manage and most CEOs discover that they don't really know what the board thinks of them. Also, unlike your boss who's in the business every day, board members are only engaged with the business once every two or three months. So they don't know as much about the business as your previous bosses and yet they have one responsibility which is to make sure that they hire and fire a CEO. Great CEOs also realize that it's important to know each board member individually because if you just interact with them in board meetings, you don't really always know what's on their mind. Drawing out the more quiet members of the board is really important because sometimes the loudest members are not the most influential, though you might think they're the most influential. So it's a complex social group and I think good CEOs learn over time that managing a board is really important. In our CEO workshops every now and then we have CEOs who get fired. And to a person, every CEO that I've met who's got fired was surprised that they were fired. And so what could they have done to avoid that surprise? I think that that's what they needed to do, right? Which is they lost touch with the board, they mistook the politeness of the board for actually support. And if they had taken the time to actually speak to people privately, to really be in touch, to speak to the members who feel like they're not saying everything that is on their mind, they would have learnt that there were issues rumbling in a board that they would have been better prepared for. But it's really striking to me, I have yet to meet a CEO who got fired, who didn't feel surprised, that they felt blindsided a little bit by what happened. As people are working their way up through the ranks, are there ways for them to better prepare? So they're more fully equipped for all these surprises that we're talking about? Or does it really have to be sort of a learning by doing experience? I think it is much more learning by doing experience. And the good news is that most people who become CEOs tend to be very good learners. They were good learners throughout their life. Now they're just given a very different job in which they have to learn a new with the nature of this job is. And at least my experience is that the learning curve that CEOs have, most of them is very steep while they're surprised at the outset. By year two or three, most of them have begun to feel at least some sense of, if not mastery, at least an understanding of how the job gets done and then over time their capacity to be masters at the job increases. What are some of the red flags that you've seen to indicate a leader won't be a successful CEO or at the very least is on the wrong track? So I think the first thing that CEOs have to do is to develop a real clarity about their agenda and where they plan to drive the company. And if you meet a CEO in year two who still doesn't have clarity or can't tell you crisply, what it is that they're trying to get the company to do. And more importantly, if you interview five people on their management team, I've done this exercise in some companies where I've just randomly spoken to five out of the top one hundred people in the company. And if they can't play back to you with very high fidelity, what's on the CEO's mind? Chances are that that CEO is unlikely to be successful. One other place where you do find that CEOs get surprised is if you read the analyst reports and the analyst reports are saying all manner of things about the troubles of the company and the CEO keeps saying the analysts don't understand my company. That's usually a bad side that usually means that the CEO is trying to ignore the people who are investors in the company. And one thing I've learned is that boards will cut you some slack, but if you fail four or five quarters in a row, you're really operating on ten eyes at that time and at some point boards are not running the company every day. They expect you to run the company and they don't want to be disappointed. It is one of their responsibilities to make sure that the company is doing right by shareholders. So if you keep failing that constituency, that's when you get into real trouble over time. And observing a new CEO in a role are there particular things that you look for in the first weeks or months that you think to yourself, okay, this person is adjusting well, is adapting to all of these surprises and differences in the role. It's a curious thing to say, but the thing that I look for most is humility. It's a job in which you can easily start to say, you know, now I have the top job. And you do have to project confidence. So it's important to the rest of the organization that you project confidence. But when I talk to CEOs, if I get the sense that they remain open minded, they continue to learn, they continue to think that this is a job that I have to keep growing into. Chances are that those are the CEOs who do better over time. What about aspiring CEOs, you know, people who want to be candidates for that top job based on all of your experience and what you know about what makes a successful CEO can use us out who's going to be good and who's not before they get there. You have to be able to deliver results on a consistent basis in order to have even a chance of being a CEO. And usually most CEOs have shown the ability at some point to deal with something that was hairy. They gain even more visibility if they've gone out and turned around a reason that was failing or a business that was failing, or they take something that was new that had growth potential and allowed it to achieve its fullest potential quicker than anybody could have imagined. So they build a new business and the new business sparkles. They tend to in one or two jobs before they become CEO have done something which catches the eye of people and says that was a very special performance opportunities. So it's been striking to me how many CEOs before they became CEOs had at least one job before they became CEO, something that felt like they took a risk and the risk was something that they made good on and that's what caused people to say maybe this person is the kind of person whose entrepreneurial can get things done, can be thrown into both bad situations and good situations and can make the most out of that for the company. So given all the different facets of this top job, what is your top line advice for CEOs on strategies to sort of help them balance their time and priorities? I know you've done lots of research into how CEOs spend their time. So if you had to say the top two things you would want them to focus on, what is it? One of them is to again have ongoing clarity about the agenda. You have to have both the company's agenda which is what you think the company as a whole needs to pursue. But within that a CEO needs to have a sense of their own agenda and that is not exactly the same as the company's agenda because sometimes if you have an agenda of five topics that you want to drive on behalf of the company which is company wide, there are two that might require your particular attention in this quarter or in this year. So CEO is very good about knowing what is it that I need to focus my attention on right now and when they go back and they look at their calendar and by the way, this is a discipline that I recommend every CEO do which is to do a quarterly review of that calendar. If about half of your time is not being spent on the things that you wrote down were going to be a part of your agenda when you at the beginning of the quarter. So I would say write down on the beginning of the quarter what your agenda is. Look at your time at the end of the quarter and if half of your time wasn't being spent on your agenda then you're really on using your time well and this is your most precious asset. You can always hire people, hire people, you can always, it's not like money is perfectly fungible but CEO's actually have a lot of resources at their command. The one thing that they have an absolute constraint on is their own time. So if you're going to be effective make sure that you are spending time on your agenda. And the second thing is assemble the most extraordinary team around you and make sure that they are equally aligned with your agenda. If you have even one week link you're going to get distracted into managing that person. You'll be watching over their shoulder. By the way anybody who's shoulder that you're watching over feels washed too so they end up feeling insecure as well. I have very rarely seen CEOs who have doubts about a member of their senior team come to the other side and say by the way my doubts were overcome and this person did great. So the biggest form of leverage you have as a CEO is the quality of your senior team and how aligned they are with you. So early shakeups might be inevitable or necessary. Most CEOs who start with the leadership team start with the leadership team that they inherited from their predecessor. Sometimes they were a part of that leadership team so in a very stable company that has been doing well for a long period of time it's tempting to stay with the same team but it's important for CEOs to remember that the team that got the company to this stage may or may not be the team that gets the company to where it needs to go. And the sooner you can assemble a team that is ready for where the company needs to go the better off you'll be. So even in a stable company in which things are going well where you have become the new CEO we ask every CEO to almost start with zero based budgeting and to say if I was to assemble a team from scratch today for the agenda that I have is just the team that I would assemble. Sometimes the answer may be eight out of ten out of them are who I want and I will make changes over time. Sometimes you discover that eight out of ten need to change and in that case you should get on with the change. The most dangerous thing we found CEO is doing is to postpone changes that they know in their heart they'll need to make. And that's all agenda driven, not personality driven. Yes. You also talk about the shift between motivating the people who work for you and motivating a whole organization at scale. So talk about the advice that you give to leaders who need to figure out how to do that. They've been great team leaders, functional leaders, but now they're speaking to a massive workforce or even a small workforce. you know. workforce, they don't have direct contact with every day. A colleague of mine, Francis Frye, puts it very nicely is how do people feel when you're not in the room? Because you're in very few rooms all the time. So the key sign of a CEO is what is the level of energy or what is the level of motivation that people carry when you're not in the room? And in order to do that, to keep an organization motivated, first things, the organization needs to trust you and the more you develop trust over time and trust is developed in multiple ways is develop because people believe that you're going to make good decisions, which comes back to the agenda. People believe that what you say is authentic. People believe that the values that you espoused are values that you live by. There is evidence to them that people who violate the values do not get promoted, do not seem to get ahead, but in fact, consequences exist for people who violate the values. People watch the signs of how CEOs act, so if you want to keep an organization motivated, the first thing to do is to make sure that there is everyday evidence that your actions are consistent with your strategy and is consistent with your values. When people experience that, they find that deeply motivating. I then know what it is that I need to do and I know how I need to behave. But path to gaining trust and establishing shared values and a strong culture, that seems like it would be a lot easier for someone who's grown up in an organization than an outsider coming in. Have you seen differences in how insiders versus outsiders adjust? And outsider is watched even more than an insider when they become CEO. So even an insider when they become a CEO is surprised by, oh, you know, all these people I thought already know me, but yet as soon as they become CEO, people are observing them much more closely. But certainly an outsider, people don't even know them, so they're coming in and everybody is curious, everybody wants to know them. For outsiders, early symbolic actions are often a way to gain trust. So people want to see ways in which you respect aspects of the culture that they value and they prize. And if you show respect for those things, it matters a lot. But they also recognize that usually when an outsider is brought in, some things need to change. And they're keen to watch what it is that you change and are you doing it in a way that people start to say, yes, this is a future that we can feel more excited about. So new CEOs are a little bit more in the spotlight, but I've been surprised by how quickly they can gain trust. Sometimes I don't think it's a matter of taking years, usually new CEOs who gain trust within six months are trusted by the organization. Interesting, the new CEO of Starbucks, who just came in from Chipotle, I overheard a guy I knew who runs a business and has noticed all these changes in Starbucks. And so we asked one of the baristas, hey, what's going on? And they're like, well, our new CEO really wants us to start talking to customers. And it was just that sort of clarity that you're talking about and that immediate trust in someone who is an outsider that's come in, but to create positive change. Yeah. That's a great example. So you've run this workshop for new CEOs at HBS for nearly three decades. What have you seen change most recently if anything about what it takes to be successful in the job? So I think 80% of the job is the same, developing an agenda, communicating the agenda, assembling a top management team, developing a strategy, making sure you have a strong culture. But even over three decades, that has not changed that much. The things that change are the external environment always presents a different set of challenges and CEOs of any given generation have to respond to that. So half a dozen years ago, Black Lives Matter, social issues, the demand to speak out on social issues, to take a public stance, if you didn't take a public stance, people didn't think you were a great CEO. Those were the issues that were very much on CEO's minds. Why do I respond to this evolving environment? All of a sudden now geopolitics, which was very quiet for a long period of time, has become the issue. What are the tariffs going to be tomorrow? What's going to happen in the war? Where do we go with inflation? Suddenly macro issues are salient today. AI was not on the radar five years ago. There's no new CEO who isn't now having to confront the question, what will AI look like? 15 years ago, there was cloud 20 years before that it was entering the internet. So technology is always changing. So I always say there's about 20% of a CEO's job that is being responsive to what's going on in the world at that time, but 80% of the job has been remarkably constant. How do the leaders that you work with and those that aspire to that level, how do they do a better job of predicting what will be that 20% of new stuff they need to focus on in the future? I've rarely seen CEOs be truly blindsided by what's going on in the world. The world comes at you fast and furious, so I don't think the issue is missing what's coming. I think the issue is knowing how to seize that reality and figure out what to do about it in your company. I think that's where more people stumble than actually missing what's going on. So I've not often found CEOs who are not aware of the issues that they need to deal with. What they wrestle with is how do I give shape to this issue in a way that makes sense for my company and will allow my company to embrace it and create value from it? And how do the best ones do that? I've learned so much from my colleague Mike, who's been a partner in the CEO workshop for a long time and he used to say the definition of strategy is as much deciding what you're not going to do as deciding what you are going to do. New emerging issues, sometimes it's tempting to do everything because you don't yet have clarity about what it is that you ought to do. So the earlier you can say there's a lot going on in AI, I'm not going to be able to do anything. Here are the two things that I'm going to do because they're most aligned with my company and I'm going to let the noise and everything else quiet and down and in fact, I'm going to have the courage to say we're not going to be great at these other things. So this is not something that my organization needs to focus on. That discrimination, which is learning to be truly focused to allocate the resources in terms of your time, your attention, your company's money, your senior management's time on the things where you have an opportunity to be differentiated and to actually not try to win the battle on every front. That's often the secret to success. Having studied both successful and unsuccessful CEOs for so long, having tracked all the recent change and uncertainty in the business world, what is one piece of advice that you would give to someone who aspires to be CEO one day? The two pieces of advice I would give them are one, don't look too far ahead. The best opportunity to get the CEO job is to crush it at what you're doing today. My experience is that the people who look too far ahead don't do a great job today. It's a highly competitive job you need to have an exceptional track record. So do what you're doing today well. And the second is when other people blanche at an opportunity or feel like it's too risky, raise your hand, because usually that's the way you get to do something that caches people's attention, that gives people the confidence that you're the person who is capable of leading when others hesitate. If there's an international assignment that nobody else wants to take, raise your hand. If there's a failing company that everybody says, "Oh my God, there's nobody who can save this," or if there's a new business that looks like, "Oh, why don't I run the main business? There's new business. Who knows what it'll become?" Unless you are willing to take that risk that like you have your becoming CEO is small. I thought you were going to say understand that it's an incredibly tough, complex job and really ask yourself whether you're up for it. That's a good thing too. I think that if you get to the point where you're asked if you would throw your hand in the ring, which is different than are you even going to be someone who's asked to throw your hand in the ring? If you're ever asked to throw your hand in the ring, look deep inside yourself and ask, "Am I ready for everything this job entails?" Including a fair level of personal sacrifice. It's a very demanding job. It will consume you for ten years. It will have consequences in terms of no CEO can do the job without some cost to their family as well. It's a job that's very demanding on families too. No CEO has traveled a third of the time. As best as you want to make sure that you're there for the important events in your family, you'll miss some. These are all the things that you have to be ready for if you decide in the end that you want the job. Terrific. Well, it's been such a pleasure talking to you and learning about what makes a great CEO. Thanks so much for being with me today. Thank you so much, Amsterdam. Really appreciate it. That was Nathan Noria, a professor and former dean at Harvard Business School, an author of the book The CEO, the role, the reality, the responsibility. Be sure to come back to the feed on Thursday for the second episode in our special AI series. This one is how AI is changing communication. If you found this episode helpful, please share it with a colleague and be sure to subscribe and rate ID a cast in Apple Podcasts, Spotify or wherever you listen. If you want to help leaders move the world forward, consider subscribing to Harvard Business Review. If you have any good access to the HBR mobile app, the weekly exclusive insider newsletter and unlimited access to HBR online, just head to hbr.org/subscribe. Thanks to our team, senior producer Mary Doe, and Senior Production Editor, Christian Murphy Romano. And thanks to you for listening to the HBR IdeaCast. I'm Allison Beard. [MUSIC PLAYING]