Magazine article Ivey Business Journal Online

Leader-Sheep: Lessons Learned from the Crisis

Magazine article Ivey Business Journal Online

Leader-Sheep: Lessons Learned from the Crisis

Article excerpt

While the economic crisis has exposed poorly performing companies, it has most of all exposed poorly performing CEOs. Readers of this article will learn an important lesson: What qualities make a leader the most and what enables those leaders to endure and emerge from the harshest crisis.

Leader or sheep? Across Canada and around the world, that's the question that many boards of directors and shareholders are asking about their CEO

Before the recent economic crisis, good CEOs - the true "leaders" of business - were glorified in the media, and their management styles and leadership traits became required reading. But recently, the majority of the press has been focused on what the bad ones - the "sheep" - have done wrong.

The line between leader and sheep is a fine one. One of the biggest lessons from the credit crisis is that there are a lot of bad CEOs out there. Leaders of some of the largest, most powerful companies in the world - leaders like Jeff Immelt of General Electric and Fred Goodwin of the Royal Bank of Scotland - were awarded "CEO of the Year" before the crisis, only to be put on lists of the worst CEOs of all-time after the crisis.

Sheep also abound beyond the world of business. Raymond Domenech, the coach of France's World Cup soccer team, faced mutiny from his players and was excoriated in the French press for failing to lead his superstar players and coach his team to more victories. LeBron James, a two-time Most Valuable Player in the National Basketball Association, was portrayed as lacking leadership by abandoning his hometown team of Cleveland to play with a team made up of superstar players in Miami. And in May of this year, British Prime Minister Gordon Brown was voted out of office for being a weak leader during the global economic crisis.

Perhaps it took a crisis to separate the leaders from the sheep. Chuck Knight, a long-time, former CEO of Emerson Electric, looked forward to recessions because they caused competitive shake outs in his industry and put competitors out of business.

Both leaders and sheep have readily discernable traits. Leaders anticipate change and prepare for it proactively; sheep are reactive and panic in the face of a crisis. Leaders surround themselves with great people; sheep surround themselves with weaker members of their flock.

This paper builds on a series of interviews, case studies and profiles of leading Canadian and international CEOs, as well as research conducted by the SECOR Group's leadership consulting practice, to identify the traits of CEOs who have been leaders and sheep throughout the recent economic crisis. While the paper focuses on large, publicly traded companies, the lessons can also be applied to family-owned and small to medium-sized businesses, entrepreneurial start-ups and government organizations.

The paper compares and contrasts the leadership styles of leaders and sheep, and offers three recommendations for all business leaders, as well as board directors, to improve performance:

* Leaders take control of their company's business strategy, prepare for uncertainties, focus on execution and don't get caught up in their own legacy

* Leaders re-double their efforts in building their management teams throughout the major transitions in their tenure

* Leaders trust their boards to be active, thorough and impartial in executing the succession process, and intimately involved in the transition to new leadership

* Leader or Sheep? Critical transitions in a CEO's tenure

To contrast the leadership traits of leaders and sheep, we have simplified and distilled a CEO's tenure into three key phases: making an impact on business strategy and execution; building an enduring legacy; and planning and executing the succession process. As shown in Figure 1, the contrast in behavior between leaders and sheep across the three phases is quite dramatic.

Impact Phase

The main reason that CEOs are hired in the first place is to make an impact. …

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