Good Riddance to the Imperial CEO

When those in the C-suite assume a royal distance from those they lead, understanding, communication, and effectiveness all suffer

Members of the C-suite—the CEOs, CFOs, and other chiefs—traditionally focus on managing their companies' financial assets. But a solely financial focus can make senior staff members appear unapproachable and more consumed with dividends and returns on investment than with the development and performance of their employees.

Along with this, there has been a growing tendency for CEOs to adopt a model of leadership I'll call "imperial." They make decisions and develop strategies with little input and discussion. Their decisions are above criticism and challenge. They adopt lifestyles that make them celebrities, and their companies become vehicles that make them "rock stars." They are supported by technology that is designed to keep them in touch 24/7. But in reality, most imperial CEOs are dangerously out of touch with the people they lead, particularly when it comes to the issue of strategy implementation and development. Often they don't hear bad news until it is too late (witness today's problems in financial firms).

Strategies and business plans in human capital-centric organizations are likely to be successfully developed and implemented only if the individuals who have to implement them have had a say in crafting them. Even if a brilliant CEO or senior executive can craft a successful strategy without input, the issue of how it is going to be implemented remains. Without individuals throughout the organization having a say in what comprises the strategy and agreeing that it is the right one, it's highly unlikely they will want to or be able to implement it.

Lead Closely

In an HC-centric organization, the gap between leader and led should never be large. It is simply too important for leaders to gather information from others and to be seen as role models. Leaders need to be approachable. They need to be told when they do something wrong or have made a mistake, and they need to acknowledge it and change. Only if they are understood and respected by the critical capital in the organization, which is the talent that works there, will the leaders be able to create a high-performance organization.

In addition, managers need to demonstrate visibly that they value employees. When cost-cutting is a priority, they should explore alternatives before cutting staff. When it is necessary, they should be sure cuts are executed in a way that fits their employer brand. When there is leadership training, they should take part. When it is time for talent reviews, they should lead the process.

Jeff Immelt, GE's (GE) chief executive, stated what CEOs need to do in GE's 2005 annual report: "Developing and motivating people is the most important part of my job. I spend one-third of my time on people. We invest $1 billion annually in training to make them better…. I spend most of my time on the top 600 leaders in the company; this is how you create a culture. These people all get selected and paid by me."

I could go on, but I don't think I need to. There are thousands of things managers can do to minimize the distance between the management levels in an organization.

Off With Their Heads

Some firings of high-profile CEOs suggest that corporate boards are recognizing that imperial CEOs may not be the best CEOs. In 2005, CEO Carly Fiorina was fired by the board of Hewlett-Packard (HPQ). Hank Greenberg, was forced out at American International Group (AIG) after three decades. Perhaps the most visible case was the firing of Bob Nardelli by Home Depot (HD) following his dreadful decision to have his board of directors not attend the company's annual meeting.

When Frank Blake became the new CEO of Home Depot he recognized the importance of moving away from the imperial leadership style of his predecessor. In addition to taking a much lower salary, Blake discontinued the catered executive luncheon that the company's top management team had enjoyed under Bob Nardelli and "suggested" that the members of senior management eat in the cafeteria with the other employees. This sent a clear message to the employees that Blake intended to be a different kind of leader.

Perhaps the most common mistake top executives make in all types of organizations is not recognizing the importance of communicating directly and effectively with employees. One CEO who does recognize the importance of this is Jim McNerney, CEO of Boeing (BA). Boeing has a global workforce of 160,000, so communicating with everyone is not a simple task. When asked recently if he was going to spend more time with customers and stock analysts, he replied that it is more important for him to spend time with Boeing's employees than to spend it on raising his profile and visibility in the press. According to him, employees "have got to know that working with them is more important to me than public forums where I'm making big speeches."

Yes, strategies to increase a business' success are certainly essential and can be time-consuming to develop and implement. But even the smallest act—like eating lunch with an employee—goes a long way toward establishing positive relationships with staff as well as helping the "chiefs" more effectively solicit constructive feedback and input from employees.

Simply put, the days of rigid business hierarchies cannot continue, and senior management need to acknowledge that a company's human capital is its most valuable and sustainable competitive asset. As businesses make the decision to adopt an HC-centric approach, an imperialistic attitude toward leadership is not an option if they expect to thrive while attracting and retaining top talent.

Adapted from: Talent: Making People Your Competitive Advantage (Jossey-Bass, April 2008)