The age of the imperial CEO is
waning. In its place, a crop of new CEOs—humble,
team building, highly communicative—are rising.
Upon joining CDW two years ago, John Edwardson had a
large picture window installed in his office. Where
CEOs have traditionally worked in hushed inner sanctums—far
from prying eyes—Edwardson wanted employees to
be able to look right in and watch him work. He also
outfitted his office with a pair of vintage Bally pinball
machines, the better to entice workers to take the unprecedented
step of actually dropping by the CEO’s office
for a casual visit.
Edwardson, 54, formerly president of United
Airlines, has even made a series of wacky wagers, all
part of an active campaign to diminish the majesty and
mystery of his role as chief executive. CDW is a $4.3
billion Vernon Hills, Ill., company that sells IBM,
Hewlett-Packard and other manufacturers’ computers
and related equipment by phone and over the Internet.
Throughout his tenure, Edwardson has made regular bets
that the company can’t achieve certain metrics.
When it has, he has responded by shaving his head or
growing mutton-chop sideburns. Edwardson doesn’t
act like a traditional CEO, doesn’t look like
one (at least, right after losing a bet) and he certainly
doesn’t talk like one. “Hey, it’s
important for me to be visible and accessible,”
he says. “I’m trying to dream up unique
ways of energizing and motivating my co-workers.”
Edwardson is an original, no question.
But it’s safe to say that he is also representative
of a growing phenomenon. Increasingly, the top spots
in Corporate America are getting handed to a new breed
of CEO. It’s an ever younger leader, one more
often in his or her 40’s or 50’s than 60’s
and 70’s.
But the trend is not merely generational. A host of
factors have contributed to a new corporate environment,
one that has changed the nature of the CEO job, as well
as the leaders themselves. The classic CEO management
mode—distant and hierarchical—is losing
out to a new style that’s more open, communicative
and collaborative. These team-builders, no longer royalty,
are valued as much for their unsullied reputations as
their solid track records. They feel at ease with the
latest technology and eschew extravagant perks, sporting
a humility that would have been considered, well, unseemly
even a decade ago. They use the media to communicate
with their constituents, not to glorify themselves.
“The imperial CEO is dead,” says Peter Crist,
a 26-year veteran of the executive-search field.
Of course, skeptics may ask whether the
change is merely window-dressing, with the same CEOs
simply toeing a new party line to appeal to the more
critical masses. The new-breed CEOs aren’t, for
example, taking more humble salaries. And it’s
possible that as these modern CEOs age and settle into
their jobs, their styles could revert to the more traditional
top-down approach.
But the shift in style appears real, at
least for now. Arguably, the single greatest contributor
to the rise of new-breed CEOs is the fact that the economy
has slumped the past several years. Back in the Roaring
Nineties, everything was going so swimmingly that companies
could virtually run themselves. That freed up many CEOs
to focus all their energy externally—on Wall Street
and the media. For some of these celebrity CEOs, the
closest they came to mingling with employees was when
a new issue of BusinessWeek—featuring their image
on the cover—circulated through the office.
Then came the wake-up call, economic hard times that
have resulted in more than 4 million layoffs over the
past three years. Still, work-force reductions have
their limits. There’s only so much that can be
accomplished through cutting, cutting, endless cutting.
Enter a new challenge: how to inspire stellar performances
from the remaining employees. This is no mean feat given
that these pink-slip survivors tend to be overworked
and demoralized.
When Tenneco Automotive was spun off from
its parent in 1999, Mark Frissora was named CEO. Tough
timing: Frissora stepped into his new role at the very
moment the company plunged off a cliff, balance-sheet-wise.
Almost immediately, Frissora had to start laying people
off. The company quickly shed 25 percent of its work
force, going from more than 24,000 employees to 19,600.
But for Tenneco, the latter number represented a kind
of lower limit. There have been no further layoffs the
past two years. And Frissora turned to an entirely different
set of skills. “What separates me from some of
the traditional CEOs that I observed earlier in my career,”
he says, “is that I have to be a very good communicator.”
Today, Frissora finds himself acting as
a combination coach, cheerleader and motivational speaker.
He has dreamed up a variety of awards for exceptional
employees. There’s the president’s award,
which is a cash bonus, as well as EDs, which stands
for “execution and discipline” and consists
of a little Oscar-like statuette. “In this environment,
you have to be creative and you have to do more with
less,” says Frissora, whose company is based in
Lake Forest, Ill. “I think today’s CEOs
have to have a good dose of enthusiasm. If you can’t
articulate that, you’re going to have demoralized
people.”
It’s worth noting that $3.5 billion
Tenneco Automotive, despite its diminished work force,
has posted six consecutive quarters of improved earnings.
The stock price doubled over the past year.
Squeaky clean, with a knack for
complexity
Persistent corporate scandals at companies such as Enron,
Tyco and WorldCom have also helped usher in a new style
of CEO. Companies are now selecting the big boss with
an eye toward avoiding future crises. According to Thomas
Neff, chairman of Spencer Stuart, search firms such
as his are increasingly being asked to do deep background
checks on prospective CEOs. Often this requires subcontracting
to an investigative firm such as Kroll. “Today,
a CEO has to be squeaky clean,” says Neff.
John Hammergren was named CEO of McKesson
in 1999, following a financial restatement that shook
the investors’ faith in the company. Overnight,
the giant San Francisco-based health-care firm saw half
its market cap vaporize, and CEO Mark Pulido was forced
out. For Hammergren, stepping into the CEO’s job
in the current climate—and under McKesson’s
special circumstances—has been quite a challenge.
“The reputation of Corporate America has been
sullied,” says Hammergren, “and the reputation
of CEOs has been tarnished and it makes the complexity
of our job even greater.”
That theme—the increasing complexity of the job—is
becoming common for most CEOs. Even at companies untarnished
by a recent scandal, a vast web of constituents is demanding
ever more contact and consolation from the CEO. Art
Collins, CEO of Medtronic, a $7.7 billion Minneapolis-based
manufacturer of medical devices such as pacemakers,
has long been an avid practitioner of managing by walking
around. When he was handed the top job in 2001, he figured
he’d try to reach out to as many of the company’s
29,000 workers as possible. He holds weekly luncheons
with 30 or so employees, representing a cross section
of the firm. But he says he finds himself increasingly
beholden to other constituents: customers, regulators,
physicians, hospital administrators, patient advocacy
groups, shareholders, the media—the list goes
on. There’s no sense fighting it, he concedes,
it’s just a fact of the job, circa 2003. “Here
in the post-Enron/Arthur Andersen era, a greater degree
of skepticism exists,” says Collins.
New-style CEOs don’t court the press
with the aim of aggrandizing themselves and becoming
celebrities. But it’s more necessary than ever—as
Medtronic’s Collins and others have learned—to
have good media relations in order to tell the company’s
story, particularly when there’s a concern or
controversy.
Conspicuous symbols of CEO royalty continue
to be on the wane. For example, the term “corner
office”—once a worthy aspiration—has
become a kind of shorthand for one of power’s
more superficial trappings. Mike Eskew, the soft-spoken
CEO of UPS, has no private jet, no limo and shares an
administrative assistant with three other people. Like
Dell founder Michael Dell, Medtronic’s Collins
doesn’t even have an assigned parking space. “If
I want to park closer, I get in early,” Collins
says. General Electric CEO Jeff Immelt’s style
couldn’t be any more different than Jack Welch’s:
Rather than demanding a blizzard of numbers from his
direct reports, Immelt prefers to put his feet up on
a desk and have a quiet chat.
Truly, CEOs are managing differently today,
with less of a sense of entitlement. Harry Kraemer has
worked at Baxter International in Deerfield, Ill., for
21 years. Every day, he makes a point of walking past
the cubicle where he worked in a junior position when
he first arrived at the company. “I try to remember
how I thought when I was sitting in that cube,”
he says. “When I make a decision, I try to put
myself in the mindset of the person I was 21 years ago.
My job is all about taking other perspectives into account.”
Tenneco’s Frissora offers a similar
assessment. “This company has a talented group
of people. The moment I start talking about myself,
they start disconnecting and I lose them,” he
says. “In today’s environment, you have
to check your ego at the door, and make sure it’s
about the team members and not about you.”
That’s yet another factor: teamwork.
Sure, intensified competitive pressures may be the catalyst
behind companies adopting team-based approaches. But
there is no doubt that team-oriented companies also
demand a different kind of CEO.
Christine Jacobs is CEO of Theragenics,
a Buford, Ga., company that manufactures radioactive
seeds used in the treatment of prostate cancer. (Rudy
Giuliani successfully fought the disease using Theragenic’s
product). To brainstorm new ways to use its radioactive
seeds, Jacobs has organized the company into a series
of R&D teams. She loves to throw together people
with diverse backgrounds: an accountant, say, with a
physicist and a guy who runs a cyclotron machine. “It
involves employees in the company’s future, so
that people at all functions and levels are buying in,”
she says. “Everyone is involved in what’s
going to make the company succeed. I want the whole
company to be empowered. I can’t do this alone.”
It may be hard to believe, but one of
the requisite traits of new-breed CEOs is humility.
Book stores offer abundant titles suggesting that managers
emulate Machiavelli, Atilla the Hun and other unsavory
but decisive individuals from history. With management
style fast changing, look for Leadership Secrets of
Jimmy Stewart any day now. Says UPS’s Eskew: “I’m
one of 360,000 people who work here. I’m also
the ninth CEO in 96 years. This company is a whole lot
more than me and it’s going to be here way after
I’m gone. My job is to help keep us on track toward
very long-term goals.”
As nice as that sounds, skeptics aren’t
wrong to question the humble-CEO model. Getting to the
top, after all, requires blazing ambition and fierce
drive, traits that are anathema to modesty. CEOs do
tend to be silver-tongued and no doubt there are those
who are merely doing a canny self-repositioning. It’s
akin to politicians moving left or right to suit the
temper of the times. “I think that for at least
some of these guys it’s merely a stance,”
says Leslie Gaines-Ross, a CEO reputation expert with
Burson-Marsteller and author of CEO Capital: A Guide
to Building CEO Reputation and Company Success. “Given
the recent scandals and the negative way in which corporate
leadership is perceived today, appearing humble can
be the politically correct thing to do.”
Not that CEO humility necessarily extends
to compensation. Don’t hold your breath waiting
for someone to say: “I’m just one of 25,000
associates at General Amalgamated. My pay should be
on par with everyone else’s.” A survey conducted
by Pearl Meyer & Partners of 200 large U.S. companies
found that median CEO pay was $10.8 million in 2002,
an increase of 6 percent.
Even skeptics should be aware, however,
that besides powerful attitudinal reasons, there are
also some structural changes to corporations that truly
are causing CEOs to work in new ways. Foremost among
them are the board governance and composition requirements
spelled out in Sarbanes-Oxley and in the listing criteria
of both the New York Stock Exchange and Nasdaq. Companies
must now appoint independent directors to head their
audit committees, and must have a majority of outside
directors on the board. Gone are the days of CEO worship
when corporate leaders could surround—and arguably
insulate—themselves with friends and insiders.
Today they’re expected to sit on boards that challenge
them and aren’t afraid to knock them off their
perches.
The new CEOs, therefore, have to be exemplars
of good corporate governance. Baxter’s board consists
of CEO Kraemer and 10 truly outside directors, people
who have no other professional affiliation with Baxter.
Likewise, Kraemer avoids any inter-linking, or the no-no
of serving on his board members’ boards. In Kraemer’s
estimation, an independent board keeps him honest and
accountable. From a governance standpoint it keeps everything
properly aligned: he serves the board; the board serves
the shareholders.
While some more traditional CEOs balk
at outside director dominance, questioning how personally
invested these directors are in the company, new breed
CEOs are more likely to align themselves with the corporate
philosophies born of today’s heavily regulated
environment. “You don’t want a wink-wink
board consisting of a bunch of old college buddies,”
says Kraemer. “You need a board that will question
and challenge and push you.”
In search of the flat organization
Another significant corporate structure change: Many
companies are getting rid of the position of chief operating
officer. Just in the past few months, the COO post has
been eliminated at Lucent, Reuters and 3M. This move
can have a profound effect on how a CEO manages. It
eliminates a layer of management between the CEO and
division heads and makes it possible for CEOs to communicate
more directly with their employees. In other words,
it’s a real hierarchy buster.
In 2001, Joe Galli became CEO of Newell Rubbermaid,
the $7.4 billion Atlanta company behind such brands
as Sharpie pens, Goody hairbrushes, and Levolor blinds.
One of his first acts was to get rid of the COO position.
“A layer always creates some sort of bureaucracy,”
says Galli. “We’re trying to build an apolitical
company that’s long on decisions, action and speed;
short on bureaucracy, politics and time-consuming procrastination.”
It can’t be entirely attributed
to the lack of a COO, but Galli says that approval times
for capital expenditures have been cut by 90 percent.
Overall, he’s trying to flatten the organization.
There once were 11 layers between the CEO and a major
customer. Now there are three. “Wal-Mart is a
very demanding customer,” says Galli. “We
owe it to all our key customers to move more quickly.”
In the comfort zone with technology
One final attribute of new-breed CEOs is that they are
far more tech savvy than their predecessors. A recent
study—co-produced by Forbes.com and Gartner.com—found
that 82 percent of C-level executives check email at
the start of each workday, 58 percent do online research
and 80 percent use search engines such as Google. There’s
no comparative study—from, say, five years ago—but
it’s a safe bet that those numbers were much,
much lower.
Today, many CEOs, including General Motors’
Rick Wagoner, use electronic devices to communicate
with key people in their organizations. BlackBerrys
are becoming as ubiquitous among newer CEOs as country
club memberships were among the prior generation.
This communication technology— particularly
email—is proving to be another consummate hierarchy
buster. Getting an audience with the CEO used to require
employees to make an appointment, then wend their way
through the treacherous territory of the executive suite.
Now, it’s as simple as sending an email. Have
a question for Baxter’s Harry Kraemer? Just send
it to askharry.com, an address on the company’s
intranet.
Jacobs of Theragenics is a BlackBerry
fanatic who deeply values email’s power to cut
through hierarchy. She has no choice but to move quickly.
Theragenic’s radioactive seeds are made of Palladium-103,
a member of the silver family that has a 17-day half-life.
Thus, Theragenics has to be a master of just-in-time
manufacturing, creating only enough radioactive seeds
to meet the current needs of patients undergoing treatment
for prostate cancer. Even so, each day on average the
company loses 4 percent of its expensive inventory.
“Everything is so ‘now,’” says
Jacobs. “The economy and my particular company
are moving so fast. I’ve made it clear to everyone
who works here that they’re expected to go at
the speed of light. If anyone needs me they can get
me any time, they only have to realize, it may be by
email. I’m a live-time manager.”
So there it is: a new breed of CEO, working
smarter and faster, communicating openly and relying
on technology. Who knows? As this style gains popularity,
maybe it will be just what’s needed to push U.S.
companies back into high gear.
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