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CEOs Have Little Control Over Bottom Line

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by Peter Block

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CEOs Have Little Control Over Bottom Line
An Indirect Route to Financial Success

Sometimes stepping off the beaten path is the most effective way to reach your destination. In the business world, that destination is a sound bottom line, and for years top management has traveled along the same road to control it. But what if they realized that they couldn't control it? That the road they were on would only lead to a dead end. Jack Hinzman, a consultant at Towers Perrin in Atlanta, Ga., has been helping senior teams get back on the right road for the past 10 years.

You may be asking, "What exactly is a senior team?" Images of a group of 80-year-olds in jerseys and cleats might come to mind, but that's not what we're talking about here. "Senior team" refers to the CEO and/or president of the organization and those reporting directly to them, working together toward the success of the company.

It's these people, at the top of their organizations, who are responsible for keeping the company above water, for tracking that notorious bottom-line figure and seeing to it that it stays out of the red. Ask most CEOs and presidents, and they'll agree that their main responsibility is that bottom line. What they don't realize, though, is that they have no real, hands-on way of controlling it. The key when coaching these groups is to help them discern between what they have direct, as opposed to indirect control over. Once that line has been drawn, the coach and the team can begin to work together to help the team effectively oversee the financial success of the organization.

"When I begin to coach a senior team I like to begin with an up-front assessment of where the team's organization stands," Hinzman says. "Assess their strengths, weaknesses, capabilities, areas that need improvement. You've got to find out what's keeping the senior team up at night." This will help the team see where the holes are. This is also when the team should begin to look critically at that line between direct versus indirect control.

As a coach you have to get the team thinking about what they do and who they interact with on a day-to-day basis. This will help them see that the team has no direct control over the bottom line. Instead, according to Hinzman, their direct responsibilities lie with the "soft stuff." CEOs and presidents aren't developing, manufacturing or selling the widgets, but they do set the stage for all of it to happen through communication, development of the mission, vision, values and workplace culture, coaching and reinforcement of employees and resource allocation. Taken individually, none of these things will move profits in one direction or another. However, if the senior team is doing a poor job of providing these services, then the bottom line will certainly reflect it.

In theory, this indirect control seems to make sense, and as a coach you may understand it. But getting buy-in of the idea from the senior team doesn't always come easy. And, only when you have complete buy-in will the team surrender their immediate claim to the financial aspect of their organization. Just ask Hinzman.

"You've got to get the senior-most person on the team to buy into the concept, or you might as well pack up and go home," he says. As a coach of senior teams, Hinzman understands that this first step involves "a huge mind-set change, and that's the hardest thing about coaching a senior team."

Even Nancy Bair, training specialist for CareerPoint, Holyoke, Md., agrees. "This group of people feels very passionate about that bottom line. It might make them a little nervous if you suggest that they don't have complete and direct control over it."

That's why this step requires a great deal of time and energy to ensure that the team is 100 percent supportive in handing over that control they thought they had. Once you achieve that buy-in from the team, the next step is to agree upon the "soft stuff" they'll use to indirectly regulate the bottom line. But first, says Hinzman, there are some key points to remember as the team begins along this new path. For one, they must understand that this is not a one-time event. Only through continued use of these qualitative measures will the organization's culture evolve to the point where the finances will reflect the change.

A second thing to remember is that what works for one organization might not work for another. Each organization has its own, unique policies and values, and the team must work within the existing organizational goals and objectives. Otherwise, all of the coach's and team's efforts will be wasted by trying to move in the wrong direction.

Staying on Track
Just as the senior team's actions must fit within the current organizational culture, so too must the evaluation process. In addition, it should not only follow with the organization's structure, but it must also remain consistent with the qualitative nature of the actions taken by the senior team. Improving upon that qualitative "soft stuff" means no more judging performance by the bottom line. Instead, Hinzman suggests using employee surveys for measuring success. After all, it's the employees who have to feel the effects of the senior team's efforts in order to drive up profits.

Ask employees to rate their CEO on a survey, though, and their responses may be less than truthful. "The higher up the members on the senior team are, the less honest feedback they will receive," says Hinzman. That's why he recommends conducting these surveys more than once, and no less than every six months. Bair agrees.

"Many line people are not used to being asked to rate their CEO," she says. "That's why you need to train and educate everyone in the organization about this change, so that they will trust the senior team."

"The first time around, people will be a little skeptical about completing these evaluations," says Hinzman. "But eventually, they'll be more comfortable, and you'll get a large enough sample to extract an average." These results can be used by the team to ensure they're staying on track, and by the coach to determine how successful the training has been.
According to Steve Perry, general manager of administration and operations for Seymour Tubing, Inc., Seymour, Ind., the job of a senior team is to provide leadership and direction, eliminate barriers to success and hold all members of the organization accountable for their actions." The team carries the responsibility of creating an organizational work culture where the employees feel willing and able to do the best job they can. And it's the coach's job to show them the most effective way to do it. It's a difficult and lengthy path to take, but the rewards are tremendous. The true reward for the organization and the coach comes when the senior team understands and trusts that managing the workplace culture will improve the bottom line. In the words of Hinzman: "When a CEO or president really gets it, makes the personal and public commitment, and then walks the talk. That's when you know you did your job."