The disparity between what a CEO believes he or she ought to be doing and what is actually expected-the basis on which his or her performance is being judged-contributes to a disconnect. It is a troubling and even disabling disconnect, but as these authors suggest, there are things a CEO can do to reconnect.
“It is not the mountain we conquer, but ourselves.”
— Sir Edmund Hillary
When Ken Bradshaw (not his real name) was appointed CEO of a large Canadian public company 18 months ago, he had a reputation for being a results-focused executive and a straight shooter. As an 11-year veteran of the organization, including its vice-president of sales and marketing, he was respected for his openness and ability to tackle difficult problems.
Today, however, the 53-year-old Bradshaw is feeling distinctly uncomfortable in the top spot, and he talks about putting on a corporate “mask” when he goes to work. Bradshaw feels and exhibits a certain disconnect — he behaves differently at home than he does at the office. Moreover, Bradshaw is not alone. In our survey, we discovered that one-third of the CEOs admitted that “feeling disconnected” is one of the three most difficult issues they face.
One reason for the disconnect, say the CEOs, is their ongoing responsibility to protect their business and position it in the best possible light. They also described feelings of isolation from family and friends, and even a sense of alienation from aspects of their own personality. Some described being disconnected, and frustrated, about the degree of control and influence they exercise at the office compared to the home. As a number of them said, the things that are a priority for the boss at work usually get done in a timely way, but on the home front, it’s another story.
Given CEOs’ huge workloads, long hours and preoccupation with business, it is not too surprising they might feel disconnected from family and friends. It did seem more surprising, however, that some CEOs felt out of sync with their own personality. In this article, we describe the phenomenon of the CEO disconnect and offer suggestions for how it can be managed.
The disconnection phenomenon
Ken Bradshaw says that “wearing a mask” helps him hide his concerns about business matters. Being overly candid, for example, could harm the business, be a threat to job security, or contravene securities regulations. Bradshaw admits that taking off the mask-even at home-can be difficult. Other CEOs confirmed that wearing a mask seems necessary when responding to the expectations of board members, the investment community and shareholders for strong, short-term earnings and a buoyant share price and credit rating. As one CEO admitted, “The pressure to continuously produce exceptional profit results and drive up the company’s stock price in the near term runs contrary to what I believe is in the best interests of the business and the sustainability of earnings over the long term.”
“Regardless of the board’s posturing about the long term, the reality of my life as CEO is that I’m judged on the basis of short-term results,” said one senior executive. This sense of urgency is corroborated by studies that show CEO tenure has shrunk from about 10 years in the 1980s to under three years today. One recent study found that only 28 percent of CEOs had held the top job for five or more years, compared with 37 percent two years ago. With all the pressure to survive, a CEO could be driven to make decisions that are not in the best interests of the organization, such as allowing aggressive accounting practices or postponing investment necessary for the longer-term prosperity of the business. The disparity between what the CEO believes he or she ought to be doing and what is actually expected – the basis on which his or her performance is being judged – contributes to a disconnect.
One obvious solution for CEOs and other company spokespeople is to adopt a strict policy of confining their remarks to information that is already in the public domain, such as annual and quarterly reports, media releases, earnings guidances, plant closings, downsizings, and the like. For most CEOs, the temptation to do otherwise is great, particularly when being questioned by the investment community. As one CEO put it: “I can only talk so much about the strength of our management team. There is a clear expectation that I will give them information on company performance which to date hasn’t been released. It’s an extremely awkward and uncomfortable position to be in, and the pressure to disclose more details is very real.”
The fact is that corporate leaders depend on securities analysts for favourable reports. Share prices and corporate financing can hinge on what the analysts say, and they do expect information that goes well beyond the latest press releases-even though this is a clear violation of securities rules. In another CEO’s words: “I’m forced to play the same game other CEOs are, whether they’ll admit it or not. It’s not a pretty picture but it’s the way business is done. My job is contingent on how well I play the game.”
Something else that contributes to CEO disconnect is a downturn in the company’s financial performance. A drop in revenues or profitability may cause the investment community and the board to put a lot of pressure on the CEO to turn things around. This usually leads to cost-cutting measures such as employee layoffs, freezing capital expenditures, cutting back on R&D, divesting non-core businesses (often ones that are typically more profitable than the core business itself) or, conversely, diversifying into activities that reduce exposure in the core business
The problem with these reactive measures is that the CEO may genuinely believe that the best thing for the company is simply to stick with the game plan, particularly when the decline is expected to be short-lived, such as when the overall economy is in a cyclical downturn or a troubled competitor slashes prices. Here is how one CEO describes it: “Staying the course may be the best strategy during troubled times but try selling that to the board and the investment community. It just doesn’t have the right optics. I find myself cajoled into creating an action scenario to prevent serious erosion of our share price. But this is often counterproductive in that the action being taken, such as a major staff reduction, only serves to undermine one of the strengths underpinning our business plan and direction.” This CEO went on to say that if she had stayed the course and dug in her heels, “the action the board might well have taken in order to create the right optics for the investment community would be to terminate me.”
The role of stock options
The potential conflict between taking short-term measures to increase the share price and acting in the best long-term interests of the company is often exacerbated by executive stock options that are exercisable in the short term. Given the pressures on CEOs, it is understandable that they might be tempted to choose the path that is perceived to be necessary for the survival of the organization as well as being beneficial personally.
In one CEO’s words, “If I do everything I can to produce immediate results and drive our share price up, I can benefit big-time by cashing in my options. The financial independence this provides will then allow me to leave the company and escape the stress I’m feeling in this situation. On the other hand, it would also give me the option of staying on and doing what I really believe needs to be done, regardless of pressure from the board, analysts, institutional investors and our bankers.” Another CEO said, “Stock option incentives should not be exercisable in the short term but only after a period of three to five years, so the incentive is there for the senior management team to produce strong results over the intermediate and long term.”
These views reflect what we have heard time and time again from senior executives: The business climate today is too often driven by the impatience and unrealistic expectations of the investment community. Immediate results are being demanded of the CEO, regardless of the posturing that goes on about long-term business success built on the creation of sustainable shareholder value.
Telling It Like It Is
Stress wears many faces. The most frequently mentioned challenge raised by the senior executives in our survey is that they feel “overextended.” This was ranked as one of the top three challenges by more than half of the participants, followed closely by “work-life balance.” Both of these concerns no doubt contribute to the feelings of disconnect experienced by many CEOs. As one executive revealed, “There’s the person you are and the person you’re becoming as a result of the incessant 70-hours-a-week demands of the CEO role. If this is success, how come I feel like a boiled chicken? A lot of my friends envy me…the title, status, power, money. But the truth is that the seemingly endless treadmill I’m on is soul-destroying and provides me with little real personal satisfaction. If only they knew!”
Another CEO said: “Money has no soul. It gravitates to wherever the best return is perceived to be, irrespective of what I regard as the risks inherent in investing in my company. For the most part, I’ve learned to play down my feelings about the downside risk in my discussions with others. Despite the high personal value I place on being open and forthright, I have to put the most positive spin on real risk factors. Candour is not rewarded in the markets.
“I’ve become increasingly distanced from the ‘real me.’ The investment community deserves to hear from the real me, but I know that I’m not going to keep my job if I tell it like it really is. That’s what the board expects of me. To be fully candid would be paramount to committing executive suicide.
“Our share price is critical to our growth prospects. It affects not only our ability to finance growth through the capital markets, but also to expand the business through acquisitions-the higher our share price, the cheaper the cost of the acquisition to our shareholders. Whether I like it or not, being a stock promoter is an unspoken but essential part of the CEO’s role in a public company. My only solace is the knowledge that other CEOs are in exactly the same position I am.”
At what cost?
In our experience, CEOs are talented, hard-working, ambitious, competitive and results-driven individuals. They often find themselves in a “survival mode,” working feverishly with no end in sight. These same attributes-the ones that got them to the top of their organizations-may affect their judgment as CEOs. Typically, a senior executive’s approach to a problem is to work harder, rather than step back, put the issue in perspective, discriminate between what is really important and what isn’t, and ask themselves whether the problem should be handled by someone else. Plagued with a single-minded job focus, they report an underlying fear that if they don’t go full throttle at all times, they will lose their competitive edge. While this intense drive to succeed at the expense of other aspects of their life and personality seems to work for some CEOs, it can trigger a gradual disconnect in others.
The executive who is out of touch with his or her own self inevitably becomes distanced from family, friends, business associates, personal values, spiritual meaning and life in general. This underlying dissonance creates a degree of existential distress that can result in such symptoms as heightened anxiety, impatience, emotional withdrawal and abusive outbursts. Some CEOs elect to address their concerns by talking with a trusted friend, executive coach or their family doctor, to develop a game plan for becoming reconnected with what is important in their lives. Those who ignore their distress may find themselves “acting out” the tensions associated with disconnection in such ways as excessive drinking, extramarital relationships, uncontrolled spending, frustration intolerance, excessive outbursts of temper and reliance on prescription medications to control anxiety, depression and insomnia.
All of us, not just CEOs, maintain certain behaviours and lifestyles because of what we perceive to be the personal payoffs. If something has worked well for us in the past, then we continue to do it in the future. We consider changing the way we do things only when we are experiencing emotional pain. Usually it takes a personal crisis of some sort to get our attention. Examples of such wake-up calls include job termination, spousal separation, death of a close family member or friend, alienation from one’s children, or a major health problem. In the end, people make changes only when they acknowledge something isn’t working for them, can identify a viable alternative and are prepared to make a genuine commitment to action.
What, then, can CEOs who are feeling a growing sense of disconnection and distress do to re-engage and be the kind of leader and person they want to be? How can they translate this renewed courage and conviction into improved relationships with the board of directors and investment community, not to mention in their personal lives?
In moving forward, it is important for the CEO to be both introspective and highly pragmatic. He or she must focus on what is really authentic, and on what is doable in a reasonable time frame. Where the plan directly impacts the business and key stakeholders, the CEO must involve the board of directors, eventually selling them and the investment community on its merits. CEOs must be careful not to overpromise or oversell, because this journey is not just about reconnecting to oneself; it is also about reconnecting key stakeholders to reality.
It is not easy for human beings to change, but senior executives who have made the journey successfully offer some helpful “starting points.” The suggestions that follow are intended to trigger ideas and help readers formulate an action plan.
- Reflect on this question: “What is the primary cause of my discontent, and what steps can I take to become re-engaged in this important area of my life?” If there is more than one cause-and there usually is-place them in order and tackle them one at a time. Don’t take on too much. As an example, if there is a serious disconnection with your spouse, then ask yourself what you are prepared to do about it. You might decide that putting aside one evening a week for the two of you to have dinner is a good way to bring your lives into sync, and a basis for re-establishing your relationship with each other.
- Don’t try to do this alone. Talk through the areas of distress in your job and life with someone whose judgment and discretion you hold in high regard. Do not “act out” these frustrations. It is amazing how helpful it can be to articulate a problem to a “friendly ear,” someone who listens without judging. This produces a clearer definition of the problems at hand, helps you to prioritize concerns, and gets you started in formulating a game plan.
- Be true to yourself and your core values. It’s normal to feel distressed when your actions are inconsistent with your values. Having the courage of your convictions makes you stronger.
- Pay attention to your need for energy renewal. Executives expend enormous amounts of physical and psychic energy due to their demanding workloads; however, they often neglect their need for replenishment and renewal. To continue to perform well in your job, you must follow a regimen of healthy nutrition, exercise and sleep.
- Make a conscious commitment to bring the best of yourself home to your family. It’s not unusual for loved ones to become targets of our fatigue, frustration and stress at the end of a long day. Aim to be a model of success to your family. You can start by asking yourself, “How do I want to be seen by my family?” And, “If I died tomorrow, how would I want them to remember me?” It’s never too soon to begin working on your personal legacy.
- Finally, what can you do about the part of your role related to making public representations about your company’s financial performance? Develop a plan to take to the board that addresses your concerns about having to mask your real thoughts on the business. Some questions to be considered:
– How have you been playing your role in the business? If you knew you could get the board’s support, how would you change your role and the way you have been playing it? How would that contribute to improving the company’s performance?
– Can you fundamentally alter the nature of the dialogue you have with the board and other key constituencies about the company? Can you reset expectations based on straightforward discussions of the fundamentals of the business? Instead of spending so much time on whether this quarter’s results will satisfy the Street’s expectations, shift the conversation to establish a better understanding of the company, its positioning in the industry, its strategy and the risks and opportunities associated with that strategy, and its programs and progress?
– How can you get the board’s approval to change the policy related to guidances on the company’s future financial performance? If this change is not forthcoming, what can you do to ease the burden of having to do this yourself?
The good news about the corporate scandals and the loss of confidence is that investors are searching for public-company leadership that is competent, credible and transparent, and that is rewarded based on longer-term financial performance. Institutional investors, and a rapidly growing segment of the individual investor population, are looking to put their money into companies they can rely on for reporting integrity and consistent, sustainable financial returns.
A further development is the increasing number of public companies that have adopted a policy of not commenting on future performance. This refusal to project future sales and profits originated with legendary investor Warren Buffett and Berkshire Hathaway Inc. It has recently spread to other public companies, including some of the Fortune 500 and some of Canada’s largest corporations.
Corporations that follow this approach believe a short-term obsession with projecting quarterly results prevents a more meaningful focus on longer-term strategic initiatives and performance. They believe that senior management’s job is to run the company as efficiently, ethically and productively as possible, not to forecast the future or comment on fluctuations in the share price. Finally, these companies believe that the proliferation of interim earnings estimates in recent years contributed to questionable accounting techniques and corporate fraud as executives struggled to live up to unrealistic profit expectations.
Being a CEO has never been an easy job, even for the best and brightest, and it seems to be getting tougher. CEOs have even been called “an endangered species.” Today’s top executives wrestle with strong financial pressures, corporate governance issues, competing stakeholder demands, talent attraction and retention concerns, relentless workloads, information overload, and managing in an increasingly uncertain world.
CEOs who are in constant touch with their own personality and values, and whose actions are congruent, tend to be healthier and more effective in their role than those who are disconnected from their true selves and are experiencing the distress of feeling one way and having to act in another.
CEOs who genuinely want to change the way they act can take heart that the excesses in the stock market, myopic focus on performance and widespread manipulation of financial results have created a demand among stakeholders for longer-term perspectives and sustainable financial returns.
For this change to really take hold, CEOs who are experiencing a disconnect need to respond affirmatively and unequivocally to the question, “Do I have the courage of my convictions?” When this sea change in the corporate world does occur, those at the helm of the ships of commerce will find themselves navigating much less treacherous waters.