Take The Lead

31 March 2009 Dr Ram Charan

For over 35 years, business advisor Dr Ram Charan has worked behind the scenes of some of the world’s most successful companies. Michael Jones met him to discuss the changing role of the CEO in a downturn and why leadership needs to be encouraged throughout an organisation.

Michael Jones: Your work is focused on how leaders must take charge. What must they do in this uncertain time?

Dr Ram Charan: When confronted with change, such as we are seeing now, there is fear over how a company will survive. The usual measure of performance – cash first, margins second and revenue growth third – has been flipped upside down. There is a chance that your company could become smaller during all this. With this in mind, are you courageous enough to make the tough calls?

Your new book, Leaders at All Levels, is extremely timely considering the economic crisis. What was your intent in writing it?

I wanted to help leaders come to terms with the current situation and help them inspire their people.

What do CEOs need to know about creating leaders at all levels in a company?

A company cannot be run by just one leader. Companies exist because there is a customer need and because people collectively meet that need on a profitable basis. You therefore need multiple leaders. In the past, many companies would have a figurehead as a leader, backed by experts. But they were not leaders, they were just a group of number crunchers.

What has happened to the era of the 'command and control' style of leadership?

It has passed. You do need some control, but not command.

What is the best way to attract and develop talent in the current economic climate?

The best place for an employee is in an environment in which they can develop and grow and where their contribution is encouraged and appreciated.

How can you maintain flexible and effective training for leaders and teams in times of change?

The best training is given by the boss. The second-best training is by individuals taking the initiative to train themselves through peers, subordinates and friends. Continuously searching for ideas is the next best way. Google offers the most economic method to uncover ideas. The last method is spending dollars on classroom learning. That is my order of preference.

"The best place for an employee is in an environment in which they can develop and grow and where their contribution is encouraged and appreciated."

In a downturn it is common for a CEO to put a halt on executive training and development programmes. What is your take on that?

My view is to encourage people to learn together outside of the classroom, with senior figures taking an active role. It’s very simple. You ask every boss as a part of their objectives how they are going to train their subordinates for the next 12 months and make it a part of their performance evaluation. Everyone will love it.

Can you give examples of companies that have distinguished themselves from the competition by using leadership learning methods?

General Electric is the gold standard in this area. Jack Welch implemented it and his successor Jeff Immelt is carrying it on. It is part of the company's strategy.

Does a downturn mean that leaders have to be more cautious or is it a time to seek out opportunities?

Every crisis creates opportunities so you have to be bold. You also have to be confident in downsizing to generate your sources. This is not the time to be cautious. It means being bold in a thoughtful way. There is no room for carelessness.

You have said that you would never appoint someone as a CEO if they were afraid to exercise judgment. Can you explain why?

No person should be a CEO if they are hoping for certainty. That’s my point. They are technicians.

You have a CEO coordinating the orchestra, but sometimes the musicians want to play their own tunes. How do you manage this?

Let’s frame the question another way. Because there is a level of skill needed to do the job, not everyone can become a CEO. Some people are a good fit and some are not. It’s the same in every profession.

You recommend constant communication between CEOs and employees. How can a CEO maintain good employee engagement in a downturn?

DuPont chairman Chad Holliday is a very good example. He uses technology to help maintain communications throughout the company.

Do you subscribe to the view of Nokia chairman Jorma Ollila that being a CEO is ‘the loneliest position in the firm’?

I think it depends on the individual. If CEOs build a network of people they can rely on, they will feel less lonely.

What is your opinion of the CEO ‘super coach’ phenomenon of advisors who help CEOs deal with communication and emotional issues?

The key here is that every leader has to be self-aware and should let that self-awareness guide them. However, they should seek help when they need it.

In terms of succession planning, is it enough to appoint a single successor for the role of CEO or do you need to form a cadre and work with them?

I think in every company you should have a leadership pipeline, not just a successor for the CEO. If you have planned for four or five years ahead of time and you have more than one person in mind, the conditions may change and you need to have a different set of criteria.

Getting the outgoing CEO fully onside can be a struggle in a succession planning programme. How do you manage that?

I think that the boards need to take control, not the CEO, which we see happening in America.

Having worked with a long list of hugely inspiring and gifted CEOs across the years, have you pretty much seen and heard it all before?

No two companies have the same problem or opportunity. This is the challenge. I can’t teach what I don’t know.

As the recipient of so many accolades and so much acclaim, what drives you on?

My mission in life is about helping people to perform better. If I can't help, I don't waste anybody's time.