Platt Perspective on Business and Technology

What do C level officers do? 20: Chief Executive Officers and Presidents 6

Posted in career development, HR and personnel, job search, job search and career development by Timothy Platt on March 11, 2015

This is my 20th posting to a series on what C level officers of a business or organization do, that specifically emerge as job requirements for the senior leadership of an organization (see Guide to Effective Job Search and Career Development – 3, postings 376 and following for Parts 1-19.)

This is also my sixth series installment to discuss the role that a Chief Executive Officer (CEO) plays in the senior executive team in running a business. And my goal here is to address the fourth of a set of complicating scenarios that CEO’s can face in carrying out their duties, that I originally offered in Part 15, along with a baseline normative scenario that I have offered as a point of comparison for better understanding the alternatives to it that I have been discussing here.

The first three of these alternative, complicating scenarios that I have been exploring here (in Parts 16-19), all involved what could perhaps best be considered a splintering of overall authority, and generally with a break between the level of authority that is held for making decisions and taking actions, and the level of responsibility for the consequences of what is and is not actually done. That is a common thread that runs through all of the first three of these scenarios, and particularly when this splintering of overall final authority means splitting it, perhaps seemingly arbitrarily at times, between people who can all claim to be within-business stakeholders of one sort or other. The fourth and final scenario that I would address here can also be seen as involving a splintering of authority. But any divisions in that authority that this scenario creates do not come from stakeholders who could lay claim to insider status within the business organization. In fact if that claim were possible, that level and type of connectedness to the business would create conflicts of interest with distinct legal implications.

This fourth scenario that I have just written about more cryptically here, represents a situation that can be common enough in some industries and business sectors for it to be standard there, where:

• Operational and strategic policies are limited by outside regulatory authority, as for example by force of legal statutes.

Why does this scenario belong here in this list of complicating CEO-level leadership challenges? That is because it is essentially always one of the core responsibilities of a CEO that they manage and lead overall business strategy, and to at least strive to keep their business organization as fiscally and organizationally sound and competitive as possible while doing so. And the more that a business and its industry are tightly regulated and regimented as to process and practice, the less room there is for blue ocean opportunity, disruptive innovation, or even for significantly value-creating evolutionary innovative change – and particularly where regulatory guidelines and law spell out what has to be done and how, rather than carving out bad practices and processes that are to be avoided.

Look at more regulated industries, and banking and financial institutions come immediately to mind. Many of the points of distinction that individual banks and other financial institutions offer to their customers and potential customers are relatively minor and even primarily cosmetic in nature, and are largely marketing department-driven.

• Basic products and services that consumers expect to find are fairly standard with largely similar services offered in person and in bank branches or at automated teller machines (ATM), or online.
• Many and even most investment instruments are standardized too (e.g. checking accounts, or 401(k)’s in the United States, or real-estate investment trust (REIT) shares.)
• Quality of customer care and follow-through can be a big point in these institution’s marketing, but interest rates charged and offered and special fees charged (e.g. foreign transaction fees on credit cards) are all fairly market-driven and standardized from that, even if different institutions focus on different sets of these revenue generation options (e.g. some banks charge 1%, 2% or occasionally even more as foreign transaction fees, and some do not charge them at all but balance that by incrementally raising fee-based revenue in other, also relatively standardized, regulatory-approved ways.)

This creates pressure to find new ways to offer services and generate revenue that would make one banking, or more generally one financial institution stand out from its same-industry crowd. I simply note here in passing that this plays a significant part in how and why so many financial institutions have moved towards offering and trading in complicated derivatives and other financial instruments, too many of which have in effect exploded from their longer-term fiscal instabilities.

It is easy to argue that this is driven in large part by personal greed on the part of officers in these institutions and especially when their personal compensation is based more on level of cash flow activity generated, than on risk and benefits concerns or on the long-term consequences of this activity for either the financial institution involved or to its customers. And it easy to argue that point when individuals who carry out this transaction activity are rewarded for any even-just short-term success, but insulated from liability for any collateral failures or negative consequences from what they do. But the need to find points of distinction in what is offered by the business to the customer, that would create a competitive distinction for that financial institution has to be considered here too.

I leave discussion of that complex of issues for another series, simply noting here that these CEOs and the members of their senior executive teams have to find their way through difficult waters, in hewing to the standardization of tightly regulated process and product offerings requirements, while still seeking to be innovatively different – and hopefully in ways that will not longer-term prove more problematical than acceptable and even when they are exploring disruptively new financial instruments or processes that regulatory authority has not caught up with yet, and where risk and benefits concerns can face real unknowns.

I explicitly make note here, of a basic underlying assumption that I just made in the above narrative. It is, I add, one that the leadership of many of these institutions have clearly bought into too – that they need to be competitively novel and higher risk-accepting and even in a tightly regulated industry, if their institutions are to be competitively successful, instead of in effect competing to exceed on the stability and reliability side of the risk and benefits equation for their client customers.

Working effectively as a CEO in this type of industry environment means working as a strategic risk and benefits manager, in finding and maintaining the right balance between fiscally aggressive and conservative approaches, and when deciding what balance of these approaches to offer at all and to offer to specific client demographics.

I am going to in effect return to the beginning of this series, and to its Part 1 in my next series installment where I will reconsider the senior executive team as a whole and how it fits together. Meanwhile, you can find this and related postings at my Guide to Effective Job Search and Career Development – 3 and at the first directory page and second, continuation page to this Guide. I also include this posting in Page 2 of my Human Resources and Personnel directory and also see its Page 1 for related material.


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