Principle 1: Senior Executives as Role Models (Item 8)
The senior executives' constant role modeling of these Business
Excellence Principles and creation of a supportive environment are necessary
to achieve the organization's potential.
The reward structure for your CEO/president and senior executives must
reward behavior that is in accordance with these 10 Business Excellence
Principles. The reverse would be that the reward
system for your CEO and executive rewards behaviors that are not
in line with the 10 Principles. Which, unfortunately, is extremely common.
The commonest examples are rewarding owners, CEOs and managers
- for overly compensating owners and shareholder in the form of excessive
dividend streams that should have been re-invested in the long term
success of the company
- when customer perception of value is declining
- for selling, discontinuing or failing to maintain the company's
core competencies
- when they have failed to improve the core processes and systems
of the company
- when they make decisions based on gut feel rather than data, information
and knowledge
- when they fail to measure the results of their strategies
- when they fail to review their strategies and plans to see if they
have been successful
- when they maintain a regime that punishes innovation and squelches
the enthusiasm of employees
- when they fail to make plans or modify systems and processes to
reach targets.
For many managers, the thinking behind the Business Excellence Principles
is so different from the behaviors that led to their current position
that they cannot acknowledge the existence of the Principles that will
result in more success for their companies.
It is almost as though the reward structure that results in the selection
of CEOs is based on thinking that does not lead to success for the company
and its stakeholders. If that is so, and we believe it is, then it is
high time that the stakeholders took much more interest in the selection
and behavior of the CEO – especially stakeholders such as shareholders
and other owners representatives.
The CEO must try to run the organization in line with these Business
Excellence Principles. The board should
- expect the CEO to do so
- reward actions that are in line with the Principles
- select CEOs for their knowledge of and adherence to these Principles
- dismiss CEOs and managers who work in ways that are against these
Principles.
Boards that reward CEOs for behavior and performance which is not in
accordance with the Principles are reducing the potential performance
of the company and hence reducing the value to all the stakeholders
– owners, customers, employees, community and alliance partners.
Of course, doing that is not logical. However, we continue to see boards
appoint CEOs who behave as though these Principles do not exits and
who demand CEOs to do things that are clearly not in the interest of
the company.
Unfortunately, we also see share prices rise when a slash-and-burn
CEO is appointed. By this we mean a CEO who will deliver short term
profit at the expense of investing in the company and its shareholders.
This is clearly illogical. The share price should fall because the long
term viability of the company is being threatened.
Most of us have seen what happens in organizations that have made significant
progress towards Business Excellence when an old-paradigm CEO replaces
a new-paradigm CEO. The result is usually a dismantling of the things
that work and a decline towards mediocrity again. When an old-paradigm
CEO replaces a new-paradigm CEO the share price should drop and it eventually
will. In those cases, the board that replaced the CEO has done no favors
to the shareholders, or to any other stakeholder.
 People also want their
leaders to demonstrate they are not just there to feather their own
nest. Nor do they tolerate leaders who are tearing the organization
apart. They want their leaders to be working for the good of the organization.
This could be one of the problems with the current reward systems used
in organizations, which encourages considerable `looking after number
one'. Such incentive schemes may be preventing good leadership.
No one said this was supposed to be easy. Each individual and group
will interpret your behavior in different ways. It is a difficult situation
for the boss and explains why we identify so much with David Firth's
shadows.
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