KEYSTONE, Colo. — How well a CEO does his or her job is a better predictor of profitability than the underlying economic environment, according to one management consulting firm.
Bruce Stuart, president of Vancouver-based ChannelCorp Management
Consultants Inc. shared this message with a solution provider audience during his keynote Tuesday at GE Access’ New Frontiers Conference.
Stuart’s presentation was based on a recent research report entitled “”Storage-Focused CEOs with Growth Plans Drive Growth,”” released by ChannelCorp on behalf of StorageTek and GE Access. The study, which focused on growth-induced corporate change and the process of growth, found that the reseller CEO is also the chief growth officer. “”With no functioning CEO, there wil be no sustained value creating growth in a reseller,”” the report stated.
In a separate interview with CDN, Stuart expanded on how a good CEO can make a difference in a solution provider business. “”For all those people that are looking at the market and saying, ‘I’m in the tank because the economy is in the tank,’ that’s not what the data shows,”” he said. “”The top 25 per cent of financial performers in the industry have CEOs that do a demonstrably different job. When 75 per cent of the businesses in an industry don’t have someone at the top who’s doing the job, they consequently don’t do very well.””
The study measured reseller success in terms of bank account balances. Only 10 per cent of solution providers are in excellent financial condition, meaning they have 10 per cent of last year’s revenue in cash or lines of credit, Stuart said. But too many North American solution providers are performing a juggling act; they are technically insolvent, he said, which means they don’t have enough cash on hand to meet the liabilties when they are due. “”The data’s pretty clear there’s an awful lot of broken businesses in the IT sector,”” Stuart said.
Researchers at ChannelCorp were curious to find out what caused the success of a select few solution providers. “”Their financial performance is a byproduct of superior CEO performance,”” Stuart said. “”It doesn’t just happen randomly; it occurs in clusters where there are CEOs that have different sets of capabilities and do different things.””
CEOs have to realize that they are responsible for every aspect of their company’s performance, Stuart said. “”The CEO’s job is to create structure that works because the job is to make sure that all of the resources that the business is investing in are going in the same direction. It is an integration function.””
According to Stuart, this requires a CEO to have certain personality traits, including intelligence and the ability to be a multispecialist. He or she must be able to cope with stress and know how to balance the personal side with the business side. “”A lot of the characters who are control freaks right at the edge don’t do very well. Usually the best CEOs have some sort of balance in their lives.”” Good CEOs tend to have a realistic yet positive attitude as well as the ability to sacrifice and show genuine dedication — something their employees, partners and competition can detect, he said.
Successful CEOs take time to ask themselves questions about where their business is going and where they want to take it, he added. They constantly evaluate whether their current business model works, whether they are going after the right markets, whether they’ve implemented an appropriate technology strategy.
Less-than-ideal CEOs, on the other hand, are more concerned with appearance than with substance and with process over results, said Stuart. They exhibit arrogance, dysfunctional ambition and laziness. They also forget who is boss: the shareholders and board of directors. Of all the CEO types, the study suggested that a firm’s founder who becomes the CEO offers the best leadership. Their businesses tend to recover faster after recessions and the CEO gains respect by proving he or she is in for the long haul.
“”It does need very special people with very special skills. But from an aspirational perspective, that’s the destination you want to achieve. That particular mountain is worth risking to climb at a personal level.””
If the founder can’t or doesn’t want to assume the role of CEO, said Stuart, the next best option is to bring someone in from the outside — however, he cautioned, the reins must be handed over entirely to the new person, in order for the business to succeed.