As an avid stock and bond investor, one of the key things that I consider when purchasing a new business is the aptitude of the CEO. In my humble opinion, a successful CEO is a manager that balances three important aspects of a business: Customers, Employees, and Owners.
At the heart of any successful business is a customer demand that's unmatched by any competitors. Although a CEO has a lot to contend with in his day-to-day operations, creating a product or service that absolutely serves his customer should be an authentic priority. It may sound obvious, but many businesses lose sight of this primary objective after numerous years of successful earnings. Of the three aspects highlighted in this article, lack of customer focus is probably mostly commoned by CEOs of large and cumbersome organizations. The practice of losing customer focus is understandable (big bulky staffs that require intense amounts of time), but falling victim to this deprivation is not understandable. Any great CEO will always possess customer focus for any product and service their company produces. Without this vital requirement, a business will always fail.
A great CEO knows how to motivate his employees. As a member of the military, I've seen great leaders and poor leaders. Here's the difference between the two:
-Always place the interest of their subordinates before their own interest
-Motivate their subordinates to complete tasks instead of demanding execution
-Always work as a team
-Always listen before talking
-Always accomplish their missions (and not at the expense of their subordinates)
-Promote efficiency and productivity
-Only care about their own self-interest
-Lack fortitude to disagree or highlight problems
-Talk and rarely listen
-Acomplish missions on the backs of their subordinates and claim the accomplishments as their own
A great CEO always leads by example and knows how to motivate his employees. This type of leadership extremely produces a better product and service.
Everyone must realize that the CEO is nothing more than a manager that's been hired by the shareholders to run their business. If the CEO does not listen or account for the goals of the owners, he has already failed. Where many CEO's get in trouble is that they actually listened to the board of directors (the representatives for the shareholders) too much. You see, it's the job of the CEO to accurately depict the position of the business they lead. Often times, the board of directors put so much stress on a CEO that it causes inflated earnings reports, or dividends that should not be paid, all in an effort to appease the shareholders. This may be one of the most difficult aspects of being a CEO, but their fortitude to accurately report information and provide guidance for future growth is dependent on their credibility and ethics.
The Balancing Act
A CEO's job is very complex. At the root of his responsibilities are these three aspects: Customers, Employees, and Owners. Each of these aspects tug at a CEO like a three-way tug-a-war. When a CEO only manages one or two of these aspects well, his business will eventually become off-centered, and may eventually fail. For the CEO that ethically manages the balance of all three, he'll find his efforts are rewarded and the business will extremely experience long term growth. When purchasing stock, I always look for managers that possess talents in all three areas. The intangible value is something you'll never find on a balance sheet or income statement.