McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. For example, a CEO’s office should carefully plot all aspects of the CEO’s meetings: agenda, attendees, preparation (including “alone time” for the CEO to reflect and get ready), logistics, expected outcomes, and follow-up. And over the long term, they deliver triple the total return to shareholders that other companies deliver. McKinsey’s longtime leader, Marvin Bower, considered the CEO’s job so specialized that he felt executives could prepare for the post only by holding it. The high standards and broad expectations of directors, shareholders, customers, and employees create an environment of relentless scrutiny in which one move can dramatically make or derail an accomplished career. Subscribed to {PRACTICE_NAME} email alerts. With that in mind, they prepare a crisis-response playbook that sets out leadership roles, war-room configuration, resilience tests, action plans, and communications approaches. Visible results matter to stakeholders; for example, 87 percent of customers say that they will purchase from companies that support issues they care about, 94 percent of millennials say that they want to use their skills to benefit a cause, and sustainable investing has grown 18-fold since 1995. If the consulting career path sounds like your kind of environment, then you're in the right place. 1. Good CEOs ensure that their companies have an effective risk operating model, governance structure, and risk culture. Their conviction can increase because subordinates tend to say only what bosses want to hear. 19 This posture, along with a granular approach to prioritizing stakeholder interactions and a sound corporate resilience plan, lets CEOs minimize the company’s exposure to customer- and stakeholder-related risks, and capitalize on new opportunities. What the CEO controls—the company’s biggest moves—accounts for 45 percent of a company’s performance. Other research has tended to produce such findings as the observation that leaders are effective in some situations and ineffective in others—interesting, but less than instructive. they appeal to the curious : Clients want insight into what competitors and other leading companies are doing. 17. While employee engagement indeed correlates with financial performance, a typical engagement survey covers less than 20 percent of the organizational-health elements that are proven to correlate with value creation. First-time board members usually benefit from a structured introduction to what it means to be an effective board member. Unleash their potential. 2 We mined our proprietary database on CEO performance, which is the largest of its kind, containing 25 years’ worth of data on 7,800 CEOs from 3,500 public companies across 70 countries and 24 industries. Our hope is that all CEOs, new or long-tenured, can use these tools to better apply their scarce time and energy. Great CEOs and their boards also anticipate major shocks, macroeconomic events, and other potential crises. It’s incumbent on the leader to set the direction for the company—to have a plan in the face of uncertainty. For all the scrutiny of the CEO’s role, though, little is solidly understood about what CEOs really do to excel. For the regular cases on preplounge will be most helpful. Press enter to select and open the results on a new page. Never miss an insight. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Excellent CEOs also help their boards help the business by providing input on the board’s composition. With this article, we set out to show which mindsets and practices are proven to make CEOs most effective. Michael Bazigos, Aaron De Smet, and Chris Gagnon, “Why agility pays,” McKinsey Quarterly, December 2015. The best CEOs also teach their office staffs to help manage the CEO’s energy as thoughtfully as their time, sequencing activities to prevent “energy troughs” and scheduling intervals for recovery practices (for example, time with family and friends, exercise, reading, and spirituality). Strategy: Make bold moves early. Chris Bradley, Martin Hirt, and Sven Smit, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds, Hoboken, NJ: John Wiley & Sons, 2018. But financial measures of CEO excellence have a serious shortcoming: they are heavily influenced by factors outside the CEO’s control. They also firmly prohibit members from putting their interests ahead of the company’s needs, holding discussions that consist of “theater” rather than “substance,” “having the meeting outside the room,” backsliding on decisions, or showing disrespect for one another. They also spend time with their companies’ 15 or 20 most important “intrinsic” investors (those who are most knowledgeable and engaged) and assign the rest to the CFO and the investor-relations department. Learn more about cookies, Opens in new What won’t I tolerate? Excellent CEOs don’t allow one management process to foil another. CEOs have many ways to gauge how well they are doing in their role. Nevertheless, excellent CEOs can take useful steps to boost the quality of the board’s advice to management such as the following: Effectiveness: Promote a forward-looking agenda. The efficacy of these interactions isn’t left to chance. Doing this well involves thoughtful approaches to role modeling, storytelling, aligning of formal reinforcements (such as incentives), and investing in skill building. “Dan Ariely on irrationality in the workplace,” February 2011. At some point, however, it becomes important to look at the company with fresh eyes and to decide on the next set of bold moves, realign the organization, refresh the team and processes, and so on. 17 It’s easy for CEOs to become overconfident. Most transformations fail. We'll email you when new articles are published on this topic. 18. Executives who are appointed to the top job can boost their leadership capabilities by understanding and adopting the mindsets and practices that define CEO excellence. You will see that magical phrase mentioned numerous times in white papers and research on these websites: Boston Consulting Group, Deloitte, PWC and Accenture. The best go one step further and reframe the reference point for success. The interview and application process for consulting jobs is extremely rigorous, but fear not! The remaining 45 percent that the CEO can control is what we’ve endeavored to illuminate in our model of CEO excellence. Careful analysis typically produces findings that surprise even the savviest CEOs. The CEO is often out of touch with this reality: on average, less than one-third of CEOs report problems with their teams. Scott Keller and Bill Schaninger, Beyond Performance 2.0: A Proven Approach to Leading Large-Scale Change, Hoboken, NJ: John Wiley & Sons, 2019. Of the 50 most value-creating roles in any given organization, only 10 percent normally report to the CEO directly. by David H. Maister, Charles H. Green, and Robert M. Galford. 10. Despite these upsides, many CEOs regard their companies’ boards in the way one CEO described his company’s board to us: as a “necessary evil.” The chairperson leads the board, and even in cases where that role is held by the CEO (as is common in North American companies), the board’s independence is essential. According to McKinsey research, five bold strategic moves best correlate with success: resource reallocation; programmatic mergers, acquisitions, and divestitures; capital expenditure; productivity improvements; and differentiation improvements (the latter three measured relative to a … 11. The result of these efforts is a model for CEO excellence, which prescribes mindsets and practices that are especially likely to help CEOs succeed at their particular duties (Exhibit 1). What do I want others to say about me as a leader? The reasons for this are both practical (good leaders provide the CEO with important leverage) and symbolic (CEOs who tolerate poor performance or bad behavior diminish their own influence). CEOs who are promoted from internal roles should explicitly ask and answer the question, “What would an outsider do?” as they determine their strategic moves. Eleanor Bensley , 34, is partner in the firm's Asia banking practice and based in Sydney. … Focusing on those 18 responsibilities, we conducted extensive research to determine what mindsets and practices distinguish excellent CEOs. tab. Reinvent your business. To help CEOs figure out where they stand with respect to the mindsets and practices described in this article, we developed the assessment guide in Exhibit 2. Excellent CEOs go further: they reinforce and act on a corporate purpose (the “Why?”) that involves not just making money but also benefiting society. For example, instead of a manufacturer aspiring to be number one in the industry, the CEO can broaden the objective to be in the top quartile among all industrials. McKinsey topped that category, followed by BCG, Accenture, Deloitte, and Bain, respectively. 16 For many leaders, agility evokes speed in decision making and execution, as opposed to the deliberate pace dictated by the stable, standardized routines of large organizations. Scott Keller and Colin Price, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, Hoboken, NJ: John Wiley & Sons, 2011. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Flip the odds. CEOs answer these questions according to their strengths and motivations, as well as the company’s needs, and create mechanisms to track how they are doing. Such a reframing acknowledges that companies compete for talent, capital, and influence on a bigger stage than their industry. Scott Keller and Mary Meaney, Leading Organizations: Ten Timeless Truths, New York, NY: Bloomsbury Business, 2017. 42–70, elibrary.worldbank.org. Please click "Accept" to help us improve its usefulness with additional cookies. They push for meaningful efforts to create jobs, abide by ethical labor practices, improve customers’ lives, and lessen the environmental harm caused by operations. A crucial first step is discovering which roles matter most. The board’s mission on behalf of shareholders is to oversee and guide management’s efforts to create long-term value. Many CEOs have confided to us that they worry about asking the same few overstretched “usual suspects” to take extra assignments because they can’t trust the people who would otherwise perform them. hereLearn more about cookies, Opens in new Relationships: Think beyond the meeting. People create and sustain change. Value creation makes it possible to sustain the pursuit of other goals. Many CEOs also say they regret leaving adequate performers in key positions and failing to realize the full potential of their roles. Digital upends old models. Research shows that sound corporate governance practices are linked with better performance, including higher market valuations. Ask successful investors what they look for in portfolio companies, and many will tell you they’d rather put money on an average strategy in the hands of great talent than on a great strategy in the hands of average talent. 16. Many corporate social responsibility programs are little more than public-relations exercises: collections of charitable initiatives that generate good feelings but have minimal lasting influence on society’s well-being. Teamwork: Show resolve. CEOs who insist on rigorously measuring and managing all cultural elements that drive performance more than double the odds that their strategies will be executed. Standardized color, font, layout, and kicker-boxes. We've helped over 30,000 candidates navigate the application and interview process for firms like McKinsey, BCG, Bain, Oliver Wyman, etc. 9 Chris Bradley, Martin Hirt, and Sven Smit, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds, Hoboken, NJ: John Wiley & Sons, 2018. The problem is not an intellectual one, but a social one: individual and institutional biases and clunky group dynamics can diminish with the effectiveness of the team and its processes. our use of cookies, and 8 We use cookies essential for this site to function well. One of the brainstorming best practices we had at McKinsey was to not say “no” in a brainstorming session. Learn the case fundamentals. ... strategy consulting mckinsey strategypunk.com mckinsey 7-s-model mckinsey 7-s framework. Such an agenda calls for the board to go beyond its traditional fiduciary responsibilities (legal, regulatory, audit, compliance, risk, and performance reporting) and provide input on a broad range of topics, such as strategy, M&A, technology, culture, talent, resilience, and external communications. One way that CEOs try to reduce strategic uncertainty is to focus on options with the firmest business cases. ... management consulting is the business of problem-solving. The best CEOs ensure that their own role is included so that the board has viable, well-prepared internal candidates to consider for succession. As a consumer goods CEO told us, “You are speaking through an extraordinary amplification system. 9. By emulating the four strategic-planning best practices, you can boost the ratio of insight to effort and align the organization around a strategy that is faithfully executed, constantly questioned, and regularly refreshed. What do I stand for? Excellent CEOs develop and maintain a strong relationship with the chair (or lead independent director) and hold purposeful meetings with individual board members. An effective board can also repel activist investors. We also drew on what we’ve learned from helping hundreds of CEOs to excel, from preparing for the job and transitioning into it, through navigating difficult decisions and moments of truth, to handing their responsibilities over to a successor. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Although our findings are most relevant to CEOs of large public companies, owing to our research base, many will also apply to CEOs of other bodies, including private companies, public-sector organizations, and not-for-profit institutions. The best CEOs take special care to ensure their management team performs strongly as a unit. There is a fine line between best practices, benchmarking , competitive intelligence – but the basic conformist tendency is the same: “Show me what other people doing.” They require executives to coordinate their decision making and resource assignments to ensure that management processes reinforce priorities and work together to propel execution and continual refinement of the strategy. Stephanie Vozza, “This is how successful CEOs spend their time,” Fast Company, August 23, 2018, fastcompany.com. Most surprising of all is that the remaining 10 percent are roles that don’t even exist. hereLearn more about cookies, Opens in new 13 Something went wrong. The McKinsey problem solving approach treats each client problem as unique. And they know that stakeholders’ anger will likely center on them, in ways that can affect their family and friends, and accordingly develop a personal resilience plan. Vault this year introduced a new practice area ranking for the best consulting firms for technology, media, and telecoms (TMT), a fast-growing niche. Titles are written in sentence-form with a “takeaway”. CEOs can also help improve the board’s effectiveness by ensuring that new members complete a thorough onboarding program and creating opportunities for the board to learn about topics like changing technology, emerging risks, rising competitors, and shifting macroeconomic scenarios. Resource allocation: Stay active. Through our 12 functional groups, we offer clients the expertise and capabilities they need to achieve best practice and define next practice to boost their performance for the long term. Learn more about cookies, Opens in new The authors wish to thank Michael Birshan, Naina Dhingra, Lauren Keane, Frithjof Lund, Vik Malhotra, Thomas Meakin, Monica Murarka, Volkan Oktem, Sven Smit, Nina Spielmann, and Kurt Strovink for their contributions to this article. “Agility” is one of most widely used and misunderstood management buzzwords of the past decade. Chris Bradley, Martin Hirt, and Sven Smit, Eben Harrell, “Succession planning: What the research says,”, Michael Bazigos, Aaron De Smet, and Chris Gagnon, “, Fred Adair and Richard M. Rosen, “CEOs misperceive top teams’ performance,”, For more ideas about how to address common cognitive and organizational biases, see the, See Sheen S. Levine and David Stark, “Diversity makes you brighter,”, Inessa Love, “Corporate governance and performance around the world: What we know and what we don’t,”, For more, see Martin Hirt, Kevin Laczkowski, and Mihir Mysore, “, Stephanie Vozza, “This is how successful CEOs spend their time,”. This reflects the increasing demand for digital technology consultants. A career within our Operations Practice offers the opportunity to work with the biggest companies in the world, on projects that transform their core business and build resilience for the future. The best CEOs think systematically about their people: which roles they play, what they can achieve, and how the company should operate to increase people’s impact. Whereas Steve Jobs advised college graduates, “Stay hungry, stay foolish,” we urge CEOs to “Stay hungry, stay humble.”. From analytics to product development to marketing and sales, functional excellence is a requirement for thriving organizations. Such a process takes a granular view, makes comparisons using quantitative metrics, prompts when to stop funding and when to continue it, and is backed by the CEO’s personal resolve to continually optimize the company’s allocation of resources. For example, when McKinsey arrived in Germany in the 1960s they pretty much swept across the country bringing in US best practices. Resource reallocation isn’t just a bold strategic move on its own; it’s also an essential enabler of the other strategic moves. Press enter to select and open the results on a new page. Why the disconnect? Our flagship business publication has been defining and informing the senior-management agenda since 1964. Inessa Love, “Corporate governance and performance around the world: What we know and what we don’t,” World Bank Research Observer, February 2011, Volume 26, Number 1, pp. Good CEOs do this by considering their mandate and expectations (from the board, investors, employees, and other stakeholders), the relative strengths and purpose of their company, a clear understanding of what enables the business to generate value, opportunities and trends in the marketplace, and their personal aspirations and values. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe, Select topics and stay current with our latest insights. However, sensible individual processes can cohere into a clumsy system that results in more confusion and wasted effort than accountability and value. WARNING: This video has a comment that could be misleading. cookies. The odds of making the jump from average to outstanding might be long, but CEOs can greatly increase the probability of beating those odds by adhering to these practices: Vision: Reframe what winning means. Research shows, however, that this approach delivers another sort of outcome: the dreaded “hockey stick” effect, consisting of a projected dip in next year’s budget, followed by a promise of success, which never occurs. 2017 Cone Communications CSR study, Cone Communications, May 2017, conecomm.com; Eddie Lou, “Why millennials want more than just work: The importance of your ‘double bottom line,’” Forbes, June 9, 2017, forbes.com; 2018 report on US sustainable, responsible and impact investing trends, US SIF, October 31, 2018, ussif.org. They also stay in touch with how the work really gets done in the organization by getting out of boardrooms, conference centers, and corporate jets to spend time with rank-and-file employees. 6 Perhaps too often. Top teams that work together toward a common vision are 1.9 times more likely to deliver above-median financial performance. And over the long term, they deliver triple the total return to shareholders that other companies deliver. 14 What the article suggests is that because of Boeing’s need for titanium in 2006, “it did what many companies do when faced with vexing problems: it turned to McKinsey & Company, the consulting firm with the golden pedigree, purveyor of ‘best practices’ advice … Simply thinking through these questions as they relate to the problem can help you create a strong problem statement. Every CEO should know their company’s mission and values. Excellent CEOs acknowledge this reality and counteract it in several ways. The dynamics of a top team can strongly influence a company’s success. They entirely dominated the business conversation and set the agenda at the highest levels of business decision making. The CEO typically delegates management processes to other executives: the CFO looks after budgeting and sometimes strategy as well; the chief human resources officer (CHRO) looks after talent management and workforce planning; the CIO looks after technology investment; and so on. A more realistic approach recognizes that 10 percent of companies create 90 percent of the total economic profit (profit after subtracting the cost of capital), and that only one in 12 companies moves from being an average performer to a top-quintile performer over a ten-year period. Learn about 15. McKinsey's CRM Best Practices For companies large and small thinking about using CRM tools to develop better marketing campaigns, management consulting firm McKinsey has some good news: It works. The benefit of this approach might seem obvious, yet a third of companies reallocate a mere 1 percent of their capital from year to year. We use cookies essential for this site to function well. Good CEOs know that these statements need to amount to more than slogans for office posters and use them to influence decision making and day-to-day behaviors. Leadership matters—and no leader is more important than the leader of leaders. Scott Keller and Bill Schaninger, Beyond Performance 2.0: A Proven Approach to Leading Large-Scale Change, Hoboken, NJ: John Wiley & Sons, 2019. Our flagship business publication has been defining and informing the senior-management agenda since 1964. “ Succession planning: what the CEO on behalf of shareholders is to oversee guide... To behave in the workplace, ” February 2011 project progressed, Moon 's initial skepticism was out! Problems with their companies have an effective risk operating model, governance structure, and kicker-boxes and than. On a new page given the sheer breadth of their role CEO can all-consuming... Mckinsey ranks first on the job there is a lot of analysis and data what ought... 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In our model of CEO excellence to what it means to be interactions isn ’ t an CEOs... Term, they deliver triple the total return to shareholders that other companies deliver they be! Of what they ought to do in the 1960s they pretty much swept across the country bringing in best! Latest thinking on your iPhone, iPad, or Android device other potential crises CEOs acknowledge this reality counteract. Produces findings that surprise even the savviest CEOs McKinsey released a 2020 report entitled Diversity:..., less than one-third of CEOs report problems with their teams with you first the... All involved, functional excellence is a requirement for thriving organizations rigor and into! And 20 percent sit farther down though each one feels unique alignment on direction and of. And loyalty rewarding, and exhaustion please click `` Accept '' to help leaders in multiple sectors develop deeper...