Chief executives are more than ever the pinnacles of the management system. They have immense power, subject only to the confidence of the board of directors. That trust in their leadership is still too often misplaced, but it is somewhat less easily retained than in the past.
This is not because boards are any keener on exercising their authority, or any stricter in demanding acceptable results, but because investors have become far more restless about 'under-performance'.
But what performance should be expected from the people at the top? The general approach is to vest them with total responsibility for the success or failure of the organisation. That applies all the way from a global corporation to local government.
But the vesting is vague. Appointees are hardly ever given, or asked to provide, a list of objectives or criteria by which they can expect to be judged. In well-run companies that is, of course, how delegation works.
Why should the delegator-in-chief be exempted from the same accountability? In fact, common objectives and criteria, while generally unspoken, do exist for all CEOs in all businesses. They must be able to answer, with a resounding "Yes", questions such as:
- Is the company providing only profitable goods and services that customers want and at prices that they readily pay?
- Are the goods and services being supplied at highly competitive and constantly reducing costs, with continuous improvements in physical efficiency and productivity?
- Does the business rate more highly, on all the aspects most important to the customer, than its very best competition?
- Is the business tapping the widest possible markets, geographically and by segment, for its existing products and services?
- Are new products and services coming onto the market that will add significantly, as and when needed, to the company's competitive strength?
- Are there powerful reasons, in the customer's mind, for buying the company's products and services rather than anybody else's?
- Are policies, plans and strategies in place, and being continually renewed, that should sustain the company's strengths into the indefinite future and go on giving Yes answers to the above six questions?
Those Seven Critical Questions, note, involve a number of trade-offs and compromises; but you neglect any of them at your peril. The harm done will offset much good done elsewhere. By concentrating on all the critical seven areas, you significantly improve your answers to each.
Another deeply significant aspect of the Seven Critical Questions is that all can be translated into measurable objectives and criteria. The CEO must be said to under-perform if these targets are not met. That is not because the incumbent has personally failed to 'make the numbers', but because those working lower down the organisation have not been adequately motivated, organised, managed and resourced.
Ensuring that this demanding set of needs is met is an intimidating but essential task, and top people who fail to meet the needs cannot be left on top. Leave them, and the under-performance will become systemic, and immensely difficult to eradicate – even under new leadership.
