Why CEO’s shouldn’t do strategy

While most CEO’s view strategy development as a key part of their role, their detailed involvement can do more harm than good. Like a medieval monarch, CEO’s can fall into the trap of staying in their castle to create detailed policy themselves, surrounded only by a small group of hand-picked courtiers.

For example, according to consultants Booz Allen, Bob Nardelli’s dismissal earlier this year as CEO of Home Depot in the US, “was driven by his failure to hear and respond to investor’s concerns – very much the actions of an imperial CEO.” Similarly, The Economist reports that Ebay’s problematic purchase of Skype and subsequent write-off of $1.4 billion (ouch!) was driven directly by CEO Meg Whitman’s personal strategic philosophy and approach.

There are four good reasons why CEO’s should not lead detailed strategy development or try to develop all the answers themselves.

1. It inhibits others. When the boss sets out how the company is going to win in its chosen markets, it is difficult for others to argue effectively. Harvard Business School professor, David Garvin, uses the example of President Kennedy’s 1961 Bay of Pigs invasion. Influenced by the Armed Forces and CIA, Kennedy quickly asserted that invasion was necessary. Garvin notes that “some members of Kennedy’s staff opposed the plan but held their tongues for fear of appearing weak.” To Kennedy’s credit, the lessons learned by the failed invasion led to a change in approach to major decisions. Inquiry, rather than advocacy, became the agreed way to develop foreign policy, an approach which had its biggest success in the US response to the Cuban missile crisis a year later.

2. It prevents ownership. Jeff Bezos, CEO of Amazon, is a strategy-driven person, rather than a lifelong bookseller, who devised the initial Amazon business model whilst working as a quantitative analyst at an investment bank. Wisely, however, he understands the need for wide involvement in the development and delivery of a successful business strategy. When asked by the Harvard Business Review whether he was still developing all the strategy for Amazon he answered, “Oh, heavens, no. We have a group called the 'S Team' that stays abreast of what the company is working on and delves into strategy issues. They key is to ensure that this happens not just at the top. The guy who leads ‘Fulfillment by Amazon’, is making sure the strategic thinking happens for that business in a similar way. At different scales it’s happening everywhere in the company.”

3. CEO’s don’t know everything. Former Asda boss Allan Leighton once said, “I’m lucky if I’m right even half the time.” Seeking to have all the answers creates a dependent and, most likely, slow and unresponsive organisation. Management writer Tom Peters, believes that “the leader as ‘all-knowing commander and order-giver extraordinaire’ is fatally and fundamentally flawed. Leaders resort to the command and control model when they are scared. That is: scared as hell that followers will figure out that they (the leaders) don’t have a clue as to what-the-hell-is-going-on.”

4. The CEO tenure period is becoming shorter than the strategy cycle. Strategy cycle times are shortening, but so too are CEO tenure periods. In Europe, according to Booz Allen, average CEO tenures are now little more than 5 years, and CEO turnover grew from 5% in 1995 to 15% in 2006. Consequently, there is significant pressure on CEO’s to deliver big results quickly, even if that goes against the best longer-term strategy for the business.

So what should the effective CEO be doing? In short, the answer is providing leadership. The CEO’s job is to develop talent, nurture hope and ambition, embed values, make sure that the strategy will work and is working, push for action, encourage learning, listen and communicate relentlessly, build alignment and commitment, and, if necessary, they need to make the final call on big decisions. Given this job description, there is likely to be little time for the effective CEO to develop the detailed strategy even if they wanted to.

The bottom line

As the head of your business, department or team, are you spending too much time trying to have all the answers for your detailed strategy development, and not enough time on being a leader?