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The chief executive vs. the football team manager

Meeting the shareholders' expectations is the CEO's top goal. Fail, and you are out

Gulf News

Chief executives are not over-paid as much as football players are, particularly the English ones," says British business adviser Roger Harrop.

He says that company executives are well paid to carry out their jobs. If they fail, they might as well be in the shoes of a football manager; they have to leave.

"Once he's thrown out or leaves," Harrop says of football managers, "it doesn't mean he's a lousy football manager. It just means it didn't work in that circumstance. He's usually hired by somebody else very quickly, and he does a good job," he told Gulf News in an interview during his recent visit to Dubai.

"In a way, a CEO is very similar. There have been some circumstances that mean actually you have to leave, and you know them as a CEO. You know that it's not working," Harrop, a veteran business consultant, explains.

Then, he says, the chief executive would normally go to the shareholders and tell them it's time to hire a new person. However, this rarely happens in reality, because, he says, it's ‘not human nature'.

First element

Meeting the expectations and goals of shareholders is the first element in measuring the performance of a CEO.

"It's very important for the executives to realise exactly what the purpose of their companies' business is and its objectives, because that's why he or she is there," says Harrop, who speaks on issues relating to chief executives. Apart from having a clear vision of the future, a CEO should also be able to plan targets for his or her company, he says.

While in public trading companies the target of increasing share values seems to be the top priority of shareholders, naming goals expected by the CEOs is probably the priority in private corporations. But some executives in the private sector seem unsure just what is expected from them, Harrop says.

In such circumstances, it's difficult for the top leaders of hierarchic systems to do a good job. At the same time, identifying the purpose and priority of any family business seems to be high on the list in the family business category.

"There are lots of secondary things, but let's be honest: usually the business exists to gain some financial returns. That's the first thing for a CEO to do," says Harrop.

However, the first factor in judging a CEO, he says, lies in the hands of the shareholders and depends on their requirements. "They're the people employing the CEO, whether it's a public or a private company, and their judgment [depends on] whether the CEO is moving them closer to the objectives they have set."

Later come other issues, such as how the chief executive is running the business, and whether "he or she is recruiting people for the long term, motivating staff, and looking after the ethics of the company; examining all these things and is looking at the long term future of the business, also whether they have set in place safety standards," Harrop said, using the British Petroleum spill in the Gulf of Mexico coasts as an example.

The leakage from the underwater oil well has led to losses estimated at billions of dollars.

Harrop, a past president and member of the board of the UK-based Professional Speakers Association, believes there are several features that help any CEO to fulfill expectations that have been put on him. Ideally, a CEO should come from within a corporation or company.

"As a general rule, I would say yes," Harrop adds. The CEO should also be in a position to bring new people to the organisation; recruiting those with the best qualifications to different job roles. However, "sadly this is not happening", he says.

New people

"Actually, in some cases, they don't recruit the best, because they want to be surrounded by people who are ‘yes' men. That's where it's becoming dangerous. They [shareholders] should be looking for someone who will become their successor and they should be helping to bring in new people," Harrop says. "I would argue that you should look at people as very precious, and as fixed assets and, therefore, you should put a lot of effort into recruitment."

Ideally, a good chief executive should also be a national citizen. Knowing the culture and understanding the differences, habits and manners of a people are very important in running a businesses in any country.

As an example, while communication with chief executives is indirect in Japan, Americans like presentations and Swiss executives like to fly under the media radar and don't promote individuals, Harrop explains.