Business

CEO Guru: Taking decisions can be tough at the top

  • 9 August 2013
  • From the section Business
Media captionHow do chief executives make big decisions?

Nothing can prepare you for becoming a company chief executive, says the boss of US multi-national General Electric, Jeff Immelt.

You might think that for those who have risen steadily through a company's ranks, eventually reaching the top spot and becoming the boss might feel part of a natural progression.

But Mr Immelt, who joined GE in 1982, says his 19 years' experience counted for very little once he himself became chief executive in 2001.

"I was brought up in the GE system and I went through a very public succession process - and really three days after I became CEO none of that mattered one bit," he says.

Once a new CEO is in post, he or she may be surrounded by board members and subordinates, but the role itself can still be quite lonely, especially if a decision turns out to be the wrong one.

"If it was a good one then a lot of people take credit, and if it was a bad one then I appreciate the fact that it was my responsibility," says Joe Plumeri of the global insurance giant Willis.

Chief executives are of course well-rewarded for their decision-making.

Indeed bosses' financial packages have often proved controversial because they have risen so dramatically when compared to workers' salaries.

In the United States for instance, chief executives are now paid more than 400 times the pay packet of the average worker.

Consultation crucial

But while bosses may be paid enough to take the tough decisions, often it is better for there to be as much consultation about the decision-making process as possible, says Martin Gilbert of Aberdeen Asset Management.

"When we bought Deutsche Asset Management in 2005, it comes down to me in a room with the guy from Deutsche, so there is that loneliness at these crucial points," he explains.

"But up until then, we do discuss things hugely. We are largely consensus-driven, for me to go out and try and do something without taking my people with me would be suicidal."

So what makes a good leader? In essence, a chief executive will need to know what their mission is and why their company exists, they will need to have a vision for where their firm should go, and know how progress towards that goal will be measured.

Yet for Hong Kong-based entrepreneur Allan Zeman, of the Lan Kwai Fong Group, the most important quality which marks out future decision-makers is the ability "to think out of the box".

"You've got to face problems and you've got to be able to react - and react very quickly," he says.

'Invisible ruthlessness'

Many bosses say that most important part of their job is in dealing with a handful of really important issues, and taking tough decisions which may upset others. But it is also clear that merely being tough is not in itself a recipe for success.

Image caption Being ruthless is fine - up to a point, says Standard Life's Gerry Grimstone

"Ruthlessness is an important part of business," says Gerry Grimstone, chairman of Standard Life.

"But my very strong advice is this should always be done with some consultation, I'm a great believer in invisible ruthlessness.

"Ruthlessness where you literally have your blood on the carpet afterwards just leaves an unpleasant mess that you have to clean up."

Some CEOs enjoy making big decisions, but the trick is not to get carried away by the power at your disposal.

Being hard-headed about everything is not always the best answer.

"You have to develop the tough decision tools as well as the emollient tools if you're going to exist in the centre," warns Harriet Green, chief executive of travel group Thomas Cook.

Managing your team

Being tough and inflexible may win you a battle or two, but you may still end up losing the war, because success in business is also about bringing people round to your way of thinking.

Image caption A company hierarchy is not just there for the CEO, says Thomas Cook's Harriet Green

"I think CEOs who are autocratic will get hounded out of a business eventually because everyone reacts so badly to them," says Aberdeen Asset Management's Martin Gilbert.

"You've got to keep people onside. You've got to make them think it's a good idea before you proceed or else they'll make sure it doesn't work."

While no decision is easy, if a CEO does not make the right choices then ultimately they may find things being taken out of their hands - as shareholders pressure the company management board to replace them.