Thursday, August 14, 2008

What the Best CEO’s Know by Jeffrey Krames

With all the focus in the last several years on corporate scandals, are there any CEO’s who can teach us something? There are, and their stories are included in What the Best CEO’s Know by Jeffrey Kramer. We cannot deny that there have been an unusual number of corporations who find themselves on the wrong side of the legal system, but that is not the case with every CEO.

What traits are needed to be a top CEO? How do you build a business that can weather the inevitable storms that will come? The stories of these men will inspire you, help you analyze your abilities as a CEO along with learning how to improve your effectiveness in business. Some of these men survived personal and business pitfalls, but established durable companies.

You are given the chance to “Assess Your CEO Quotient” by using questions to evaluate your performance and your business. These unique features offer you the opportunity to learn improved ways to handle your business.

Six Traits That Connect 7 CEO’s

1 – “Outside-In” Perspective – This perspective requires the ability to analyze varying aspects of the target market. The organization must focus on and satisfy the market.

2 – “Evangelical Leadership Gene” – A common mistake that people make, is to confuse this trait with charisma. A CEO must arouse enthusiasm and devotion.

3 – Importance of Culture and the Difficulty in Changing Culture – Some CEO’s create a fun, family culture in their businesses and others opt for a culture of a healthy fear of competition and failure.

4 – “Next Generation” Companies – Top CEO’s must anticipate what the market will need and how their business can fill that need. They need to have vision about what will be needed.

5 – “Implement Best Idea” – Some people must take credit for all good ideas. These CEO’s realized that a good idea should be utilized, no matter who originated the idea.

6 – Advance Leadership Body of Knowledge – These men understood the knowledge of a leader should always increase and improve their performance.

Focus Your Business Around the Customer

Michael Dell was a Fortune 500 CEO at 27. He realized any product needed to fill the customer’s need. His system eliminated the need to stockpile items. Each system is custom built to meet a specific customer’s needs, after the order was placed.

He learned an expensive lesson, when a new product was designed without consulting the public. After this setback, Dell returned to the principle of listening to his customers. They realized a profitable use for the internet was placing orders online. This also collected information from customers and freed employees for other duties. These things help Dell to maintain a competitive edge and rock bottom prices. By eliminating the middleman and inventory, he held prices down and ensured a higher profit. Focusing on the customer and satisfying them multiplied potential profits and made Dell a company to watch and learn from through the years.

Create an Authentic Learning Environment

Imagine being promoted to CEO in an established company and the best move is to totally reorganize the organization? This is the situation that confronted Jack Welch as CEO of GE. To make the situation worse, key vice presidents and thousands of managers didn’t see a problem.

Welch needed a better learning environment to reorganize GE, but his first priority was to cut expenses. The company needed to be financially stable before the education could be implemented. The training would be costly, but the cost would be offset through increased productivity and more effective management of the companies which made up GE.

Welch knew a key source for valuable ideas could be competitors. He encouraged his employees to actively search for ideas in any place. Employees were rewarded for bringing ideas to his attention. New ideas were celebrated within the company and the best were shared in a company newsletter. He felt the employees needed to share information and this enabled them to understand how the company operated and their part in the process.

GE spent billions to train their employees, but their revenues proved this was a worthwhile endeavor. When Welch took over as CEO in 1981, the total market capitalization was $13 billion. While this was a very respectable number, the value in 2000 was an impressive $596 billion.

Focus on Solutions

What if you were chosen as the CEO of a company founded by Thomas Edison. If that isn’t intimidating enough, the previous year the company posted the largest annual loss to date - $8.1 billion. How could one person remedy the problems in that company?

At one time, IBM was the largest computer company. As the CEO, Gerstner’s first priority was to stop the financial bleeding. The last CEO wanted to break up the company, but Gerstner planned to keep the company together. The decision was to expand and make IBM a full service computer company. The existing customer base needed more and the new plan would enable IBM to capitalize on long term and loyal customers by satisfying more of their needs.

Each part of the company needed to be involved in this restructuring and expansion to make it a success. Gerstner also went to the customers and asked for their input. In the past, IBM became arrogant about their business position. They developed the mindset that they didn’t need to study their competitors or talk to their customers to maintain their position.

Gerstner turned to Jack Welch for help. He “shocked” the company into understanding the situation by cutting expenses by $1.5 billion in six months. The original idea was to sell products, but under Gerstner, they needed to provide solutions. One of Gerstner’s primary goals was to increase research and development. The researchers put their emphasis on finding and creating ways to solve their customer’s problems.

Prepare the Organization for Drastic Change

Intel developed and manufactured microchips. They discovered that limitless information could be stored without needing more space, the potential was limitless. But, a Japanese company found the same answer and could make the chips cheaper. This shook Intel’s foothold on the market. It took three long years, but Intel bounced back. They shifted from microchips to microprocessors and regained their footing in the industry. This decision by Andy Grove put the company in a profitable position and positioned the company to become a giant in the industry. He viewed the company in a brutally honest way and saw what was needed. It was a drastic answer, but it was what the situation needed. He found this answer by thinking like a person outside the business.

A small defect was found in a chip. He had two possibilities, one was to convince the public it was a small problem or he could replace the part. Grove decided to replace the parts, which cost the company $500,000,000. Andy Grove helped Intel survive several large crises by insisting that there was no place for complacency within the company. Regular meetings with managers help everyone keep an eye on potential problems and deal with many before they become large problems. A healthy fear also needs to be instilled in employees. This will keep them watchful for trends that can harm the company and their future.

Harness the Intellect of Every Employee

Bill Gates became involved in the computer industry at a key time. He was able to get in on the ground floor and build his business while the industry was young. His belief that every employee had something to contribute was a key to forming an idea driven company and that gave an employee the confidence to come to him about the potential of the internet. An employee noticed how Cornell students were using the internet for more than research, and he brought the information back to his employer.

Create a Performance Driven Culture

Airlines were especially hard hit after the September 11 terrorist attacks. Even in these tough times, the CEO for Southwest Airlines showed a profit for three decades. Herb Kelleher’s strategies contributed to that success. Southwest originally flew commuter routes in Texas and grew into a $5.7 billion business.

There is little conventional thinking at Southwest Airlines. These ideas begin with the low pricing structure and include the policy of no assigned seats. The overall attitude creates an incredible loyalty among employees. In 2000, fuel prices that had tripled and that could threaten the company. Each employee found ways to save $5 a day, in 6 weeks they saved $2 million.

The company hiring policies are a little unorthodox, but people’s attitudes play a big part in their hiring decision. The attitudes they want include: “cheerfulness, optimism, decision-making ability, team spirit, communication, self-confidence and self starter skills.” Kelleher told his people to focus on service and pleasing the customer. He believed if you give excellent service and satisfy the customer, profits will follow.

Learn from Competitors, but Remain Faithful to the Vision

Sam Walton started with a small retail store and created a mega store. He had a trial and error process, but he learned from each mistake and continued to make changes throughout the years. He admitted that he “borrowed” ideas from competitors. He kept an eye on their product selection, prices, customers and service. Walton understood to keep an eye on the competition and to learn from them.

Many people have a hard time comprehending Walton’s most prevalent idea – the belief that lower prices bring higher profits. He bought products at very low prices because he bought in such bulk. Then he sold more than others and the profit grew. Look down the aisles of your local Wal-Mart. Most products are represented on the shelves, but there are only a couple of types of each product. Limiting the depth of selection gave Walton a wide breadth of products.


What common threads are seen with these seven CEO’s? Each one knew customers were a key to their success. They needed to supply a product the customer wanted and to do it better than their competitors. To do this, they needed to study their competition, use good ideas and improve on the bad ideas. These men knew a good idea was important, no matter where it originated. Many rewarded their employees for sharing good ideas and didn’t penalize bad ideas. The CEO’s acknowledged some of the best ideas came from employees.

Through the “CEO Quotient” questions in each chapter and practical examples, each CEO or small business owner can find invaluable tips. Even if you have heard the idea before, these men may procide a different slant on it that would benefit you and your business to reach heights you didn’t think was possible.

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