instructor Hood's Key Ideas from CEO Excellence
by Vikram Malhotra, Scott Keller, Carolyn Dewar

When Herbert Hainer took over at Adidas in 2001, sales were lagging, and the company was struggling with new shoe designs. Some CEOs would have addressed the revenue crisis by cutting expenditures and urging employees to sell more shoes. Instead, Hainer revamped the firm’s marketing strategy to emphasize athletic performance. When Hainer retired in 2016, Adidas’s market value had risen from $3.4 billion to more than $30 billion.

“The goal wasn’t to be the biggest and the richest, it was to start creating products that helped athletes perform better.”

Change is more emotional than intellectual. It involves “people and culture,” and, therefore, always involves emotion. Soft stuff – emotions and company culture – is often the primary cause of strategic misfire. Most CEOs are more comfortable dealing with the hard stuff, and leaving culture and people to other departments. Elite CEOs take a different approach: They regard hard and soft stuff as equally important.

Change is more emotional than intellectual. It involves “people and culture,” and, therefore, always involves emotion. Soft stuff – emotions and company culture – is often the primary cause of strategic misfire. Most CEOs are more comfortable dealing with the hard stuff, and leaving culture and people to other departments. Elite CEOs take a different approach: They regard hard and soft stuff as equally important.

When CEOs honor both aspects, their chances of successfully executing a strategy jump from 30% to 79%. Plus, the effectiveness of execution is nearly twice as great.

In attempting to transform corporate culture, top CEOs start by pinpointing a specific area or concern. For example, at his first shareholder meeting after he took over the struggling aluminum manufacturer Alcoa, Paul O’Neill announced he would focus on workplace safety.

No matter how descriptive or motivational a catchphrase may be, it’s useless unless the workforce embraces change. CEOs set the tone. When former Inuit CEO Brad Smith wanted to emphasize accountability and self-improvement, he began posting his performance reviews on his office window. His leadership team soon followed suit. Before long, employees felt safe admitting mistakes and taking corrective actions.

When investors examine the potential of a new IPO, they consider quality of the top management team. Companies are two times more likely to exceed average performance when top managers work together toward a common goal.

Building an executive team is one of a CEO’s most important tasks. Roughly half of senior executives think their top management team is underachieving, but two-thirds of CEOs say everything is OK, which suggests a crucial, dysfunctional disconnect. Egos, personal agendas and different perspectives, among other factors, impede senior members from pulling in the same direction.

A CEO’s most challenges include interacting with the board of directors. CEOs are accountable to people they didn’t hire, and can't control.

CEOs must establish solid relationships with their board and help them run the organization efficiently. However, because board members only show up for meetings, CEOs may be tempted to keep them out of the loop regarding certain issues or processes. Showing such a lack of trust and transparency always backfires.

When it comes to forging a strong connection with stakeholders, a CEO can’t risk ignoring anyone. Every sector matters: customers, employees, vendors, partners and regulators. Research indicates that stakeholder engagement can affect earnings by up to 30%. Additionally, fallout from a crisis may be less severe if the CEO enjoys a trusting, credible relationship with multiple stakeholder groups.

An executive coach told Brad Smith of Intuit that outworking the job of being a CEO is impossible; the day simply doesn’t have enough hours. Exceptional CEOs don’t allow extraneous commitments to swallow them or their lives. They establish priorities, build flexibility into their schedules, and leave time for themselves, their families and their outside interests. For example, Kasper Rørsted of Adidas usually finishes his workdays by 6 pm in order to exercise. He spends the weekends with his wife and four children.

“If you’re known to be tougher and more irritable at the end of the day than at the beginning of the day, then you don’t know how to compartmentalize. You just have to take everything as it is and isolate, manage it; isolate, manage it.” (Richard Davis, US Bancorp).

Great CEOs compartmentalize. They devote their full attention to one issue or one meeting at a time, and they don’t carry emotional baggage from one situation to the next.