The Absent CEO – Who’s Minding the Store?
Corporate families can carry the traits of a smaller family – what do I mean by this quip? An absent parent inevitably causes harm to a family. Families depend on connection, support and ultimately intimacy. Corporations, by analogy, are not much different.
An absent CEO can have a serious negative impact on company culture and performance. Some leaders do not like to engage. Other leaders like to bask in the popularity and paparazzi surrounding CEOs who are made to feel “special” in society. Whatever the form, CEOs who turn away from running a company inevitably will suffer negative consequences.
This is not to say that a CEO has to be a micromanager. As one moves up in responsibility, albeit a middle manager, or senior manager as well, the trick is to find the right balance between oversight, direction and pulling back and creating room for employees to operate and succeed on their own. It is an art to fine tune an organization’s structure so that a leader can maximize the performance of his/her employees.
The same principle applies to a CEO and his/her senior executive team. A CEO is entitled to embed the team he/she wants. By doing so, the CEO can establish a structure to maximize initiatives and direction. In other words, the CEO has put his/her stamp on the organization.
CEOs have to decide on the number and importance of direct reports. Too many direct reports and he/she will be overwhelmed. Too few, and he/she will lose control to individual senior executives. Again, it is a delicate balance.
If you remove the CEO from this dynamic, or the CEO exercises minimal oversight and leadership, the organization will suffer. When members of the senior leadership become emboldened, a CEO can lose his/her opportunity to influence and direct the organization’s strategies. An absent CEO, like an absent parent, creates a vacuum that will be filled by placing extraordinary influence on another member of the family or senior leadership team (to carry out and finish the analogy).
This analysis is not absolute. I am sure there are situations where a trusted senior executive can “fill the shoes” of the CEO and execute the CEO’s strategy but over the long run such a working relationship will create risks to the organization.
Corporate boards have a close working relationship with the CEO and often defer to the CEO to lead the company. When the board discovers that the CEO is operating with an absent, hands-off approach, board members usually become nervous and start to question the CEO’s execution plan. If financial performance starts to suffer, you can rest assured the board is not going to be too patient with the CEO’s hands-off approach.
The problem with an absent CEO is that it usually takes an organization time to determine that the CEO is absent and that the organization is suffering as a result. The board has to oversee an organization’s activities and it principally interacts with the CEO as the primary source of information. A board in most cases trusts the CEO to define a strategic plan and execute on it. When there is a gap in CEP leadership and commitment, corporate performance will slowly but steadily underperform – that is the difficult issue for a corporate board to identify. Once it does so, boards are often slow to react. A board has ways to communicate its concern and it is imperative that it do so quickly before a situation turns dire.
CEOs who “manage” in abstentia are more common than you think. Sometimes they survive or succeed despite themselves; other times, they fail and do so relatively quickly. The tell-tale signs of an absent CEO are not hard to identify and corporate boards have to be ready to act when the situation arises.