It Is All About Looking in the Future

Why CEOs and Presidents Lose Their Jobs?

In the August Mastermind Digest we wrote that it was important for leaders to be able to look well in the future. As examples of the consequences of this lack of foresight we used the recent downturn in sales and profit that Ford, GM and Chrysler have suffered due to the inability of their leaders to anticipate the future and maneuver their companies around massive oil price increases. As we predicted it now appears that these American based auto companies will have to merge as they are burning up more cash than they can earn. In addition they require a tremendous amount of capital to develop the cars that can compete against Toyota, Honda and Nissan. Without this capital they will lose even more ground to their more nimble and cash rich competitors.

We are now painfully experiencing along with our friendly stockbroker the Wall Street meltdown. Financial companies with long histories of success such as Lehman Brothers and Merrill Lynch are in bankruptcy protection or being acquired for a few cents on the dollar. The US government was forced to enact a huge bail out of these companies in order to avert a deep recession caused by a sudden deflation. Other examples of ruined companies are the recent US federal government takeover of mortgage giants Fannie Mae and Freddie Mac. Their shareholders and their employees are devastated financially and many employees will lose their pension and/or their jobs. What were their CEOs doing leading up to this financial debacle? How could they take on billions of dollars of high risk mortgage based financial derivatives? Why could they not anticipate that this catastrophe could happen and render their companies bankrupt or to be sold at fire sale prices?

Why didn’t these CEOs see this coming?

The answer to these serious mistakes made by the CEOs of these companies may revolve around being able to see in the future and in ensuring that all of the internal systems and functions within their companies are working adequately. CEO’s and Presidents of organizations should be working way out in the future to ensure that their companies grow and prosper. Another reason for being able to see in the future is to anticipate potential issues that can impact on the ability of the company to survive.

In order to illustrate this let’s look at the role of a President or a CEO. Figure 1 below depicts a company as a “ship” that is led by a President or a CEO.

The role of the President/CEO is twofold. The President/CEO must first ensure that all of the systems and functions in his/her company ship are working well. These consist of the key systems and functions involving areas such product development, marketing, sales, operations, distribution, quality, human resources and finance. If one of these systems or functions do not work well you will have a ship that will not run as fast and a breakdown in certain vital operations can actually stop the ship and send it adrift. An example of this happening is the recent Maple Leaf Foods Inc. food contamination problem that stopped the company sales for many of its products. In this example, the quality systems did not work adequately to foresee bacterial contamination on the cutting machines at one of the large Maple Leaf plants. In a Toronto Star article Michael McCain the CEO of Maple Leaf Foods is quoted as saying: “We have learned from this tragic experience and we can and will do more.” McCain also announced that he will name a Chief Food Officer who will report directly to McCain on the latest innovative processes for ensuring food safety.

The second major responsibility of a President/CEO is to look out in the future and steer the ship towards safe water and away from storms in order to achieve the corporate objectives. This involves formulating and executing a strategic plan that takes into consideration all of the competitive threats that could negatively impact on the company. The only real competitive advantage is to be able to predict the future and have your products and services available to take advantage of major market shifts or dramatic technological advances. It is important that western trained executives change their pre-occupation from monthly and quarterly results to spending a greater part of their time working on how their organization and employees will compete in the future.

Figure 1

Figure 2 below depicts the President/CEO responsibility to be able to recognize storms or threats that can harm the company ship while at the same time ensuring that the various systems that drive the ship are all running efficiently. Many CEOs, Presidents and VP GMs spend too much time looking inwardly at short term issues within their organization and not enough time looking outwardly scanning for opportunities and threats in the longer term. An example of an internal component failure is the accounting fraud that was purported to have occurred at Nortel. This has cost Nortel millions plus the erosion of confidence with clients and shareholders. Nortel is still struggling to recover.

Figure 2

In conclusion there are two ways that a President or CEO can get fired. One way is to have a major component failure within your company that can set it adrift and the other way is to fail to see a threat that can destroy or severely weaken your company. The financial titans of Wall Street failed on identifying external threats and most of these Presidents are losing their jobs as a result of this financial conflagration.

During the next several months it may be advantageous to allocate some days to scan the environment and determine the threats and opportunities that your company and your industry face. Once you have determined these threats and opportunities you can then develop a longer term strategic plan of action that will become the President’s longest task to accomplish. In order to prevent internal component failure it is important that you periodically audit your key functions and processes to identify weaknesses that can be corrected.

If you believe that you might require outside facilitation to achieve a longer term strategic plan or to audit key functions against component failures please consider calling on Mastermind Solutions. Mastermind has developed processes and has the expertise to review your organization’s health and to ensure that your strategic planning retreat or your sales conference is a success.

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