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.
Customers 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 ultimately serves his customer should be an enormous priority. It might 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 most commonly abused by CEOs of large and cumbersome organizations. The practice of losing customer focus is understandable (big bulky staffs that require enormous 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.
Employees 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:
Great Leaders -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
Poor Leaders -Only care about their own self-interest -Lack fortitude to disagree or highlight problems -Talk and rarely listen -Accomplish 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 ultimately produces a better product and service.
Owners 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 doesn't listen or account for the goals of the owners, he has already failed. Where many CEO's get in trouble is that they actually listen 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 shouldn't 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 ultimately 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.
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