The 12 Responsibilities of CEO
How top-performing CEOs prioritize them is one of their greatest secrets.
by Douglas Swallow on May 1, 2022
“It ain’t what you don’t know that gets you in trouble.
It’s what you know for sure that ain’t so.”
– Mark Twain
Since 1980, the percentage of CEOs that produce net margin percentages 30% or more over their size of company and industry average has remained relatively unchanged. For over 40 years, less than 12% of Fortune 500 company CEOs have consistently achieved this percentage. So, what is it that inhibits 88% of Fortune 500 company CEOs from achieving this percentage?
The profile of a CEO
Keep in mind that just to get into the club, let alone to be the CEO of a Fortune 500 company, the top tier of CEOs, requires an extraordinary pedigree. If you have ever read the typical profile of a CEO, you would know they are brilliant. Typically, CEO’s have I.Q.’s north of 130. Less than 2.0% of the U.S. population has this level of I.Q. Their level of comprehension is extraordinary. The speed and quantity of information they have the ability to process exceeds three times that of a skilled employee. Their personal energy level is visibly twice that of an average employee. They have the innate ability to energize and inspire others just by walking into the room. The keenness with which they execute their responsibilities, edge with which they perform them, discipline to which they adhere, and fun they bring to the huddle, regardless of the pressure, all suggest they are “naturals.” They have the gift. They have whatever “it” is.
So why are 88% of these extraordinary individuals unable to achieve a net margin percentage just 30% above their industry average?
Maybe the more interesting question is, why have over half of the companies listed on Forbes Fortune 500 in 1980, just 30 years ago, died, vanished from the economic landscape. The CEOs of these companies not only had extraordinary professional pedigrees, but they also had every resource imaginable. Their companies had deep pockets and access to the best and brightest college graduates, executives, and consultants in their industry. Virtually every product they had was in the top 3 in market share, and the list goes on.
So why can’t the best CEOs in the world deliver the goods? Was it an oversight in their hiring profile, and they really just aren’t able to do the job? Unlikely. Did they just wake up one day and go, today’s a good day to kill the company? No. Was it arrogance or greed? Maybe. Did their board of directors handcuff them? Maybe. Were they forced to pursue an ill-fated strategy? Maybe. Did something in their personal life distract them? Maybe. Had they just been in the saddle too long? Maybe.
Do you know how long it takes to become a CEO?
Do you know how long it takes to become a lawyer after graduating from college – three years. Do you know long it takes to become a fully licensed doctor after graduating from college – seven to eleven years. Do you know how long it takes to become a CFO, CHRO, CTO, or Business Unit President for a Fortune 500 company – 18 to 24 years. And lastly, do you know how long it takes to become a CEO of a major company after graduating from college – 24 to 28 eight years, the same amount of time it takes to become a one-star General in the U.S. Army. And that’s just to get the job for the first time (unless you are the founder). It takes another six to nine years to get really good at it. The ones that have been in the chair for more than a decade in one company, wow, unfortunately, most of their boards and shareholders have no idea how valuable they are to the enterprise. So why can’t the best college graduates deliver the goods after 24 to 28 years of training for the job?
Did you know that according to a Harvard Review-Journal article, 40% of new CEOs with twenty-eight years of training fail and lose their jobs in the first 18 months on the job? Pretty amazing, right? So what is it that enables the 12% to deliver the goods?
The prevailing reason
The prevailing theory is they can’t execute. Really? After twenty-four to twenty-eight years of executing to the highest levels at each rung on the ladder, all of a sudden, they can’t execute. I don’t buy it.
I’ve been identifying and removing the obstacles to optimal CEO performance as an enterprise performance development consultant for nearly three decades. I’ve found there are eight reasons CEOs are unable to deliver the goods, and their personal ability to execute is not one of them.
Keep in mind that the reasons for a CEO getting fired or forced to resign are different from the reasons they cannot achieve a net margin percentage 30% or more above their industry and size of company average.
The eight reasons CEOs fail to achieve target net margin percentages
The eight reasons, in no particular order, are:
| 1 | How they prioritize their twelve core responsibilities |
| 2 | Inability to achieve and sustain internal and external unaligned strategic platform alignment with the degree of market competitiveness |
| 3 | Lack of innovation |
| 4 | Unable to hire and retain the talent to get the job done |
| 5 | Unbalanced strategical, tactical, and operational time distribution |
| 6 | The use of a non-highly competitive market-oriented CEO dashboard and suite of business navigational system |
| 7 | A non-competitive industry-oriented board of directors and leadership structure |
| 8 | Absence of the innate ability profile to be top-performing CEO |
Today, let’s take a look at the first one – how they prioritize their 12 core responsibilities. And yes, for the record, all major company CEOs, including those in the top 500, have the same twelve job responsibilities.
But, before we get into this, let’s set the record straight. CEOs don’t establish the vision for the company. That is unless they are the founder or an owner/CEO. The board of directors does. Their job is to achieve it.
The twelve responsibilities
The twelve responsibilities of a CEO are:
| 1 | Achieve the annual business plan |
| 2 | Deliver a net margin percentage 30% or more above the industry and size of company average |
| 3 | Increase shareholder value and equity |
| 4 | Achieve and sustain optimal strategic platform alignment |
| 5 | Add points of distribution, enter new markets, exit underperforming ones, acquire companies and dispose of underperforming assets |
| 6 | Have a top-mind awareness of all four types of innovation in the industry and the emerging threats |
| 7 | Ensure the company delivers a customer and employee experience in the top 25% of the industry |
| 8 | Achieve and maintain the top-performing CEO strategic, tactical, and operational time distribution percentage |
| 9 | Be fiscally responsible |
| 10 | Decrease the risk of underperformance |
| 11 | Consistently demonstrate exceptional leadership skills, abilities, and attributes |
| 12 | Increase enterprise, leadership, management, and workforce performance capability |
Let’s stack rank them in order of importance
Just for fun, stack rank these in order of importance. Simply number them from 1 to 12. Put your numbers in the margin. Now how do you think Wall Street stack ranks these twelve responsibilities? How do you think CEOs’ stack rank them? How about owners? How do you think investors and lenders prioritize them? And how about boards of directors?
How each ranks them varies. But what was most interesting about this exercise is where each ranked the 12th responsibility. And what’s most interesting about it is the position it falls on each group’s list. For on all lists, increasing enterprise, leadership, management, and workforce performance capability was in the 12th position, dead last, except on one list, top-performing CEOs. CEOs of top-performing companies consistently placed it in the top four. Why?
Ironically, if a CEO increases their performance capability and that of the enterprise, management team, staff, and salesforce, their ability to achieve all of the other core responsibilities increases exponentially. It is the only core responsibility that has this ability.
The late Jack Welch was the most notable CEO and arguably the first major CEO to place this responsibility in the top four. Jack Welch was the former CEO of the G.E. and was considered by many to be the #1 CEO in the world while he was at the helm. Today, the torch is being carried by Tim Cook at Apple, Warren Buffet at Berkshire Hathaway, and Larry Ellison at Oracle.
Upon asking one of the armed men, “why does he only carry a spear?” He responded, “If we are attacked by a lion (which apparently was a genuine possibility), he will drop the lion with his spear before any of us would get a shot off.” It wasn’t that these men were incompetent, just the opposite; they were all highly trained and skilled hunters. It was just that he was that much faster.
Let’s take a quick look at those 12 core responsibilities
Achieve the annual business plan. In real estate, they say it’s all about location, location, location. For CEOs, it’s – execution, execution, execution, but not personal execution, rather enterprise execution. The first responsibility of a CEO, achieving the annual business plan, is entirely contingent upon the performance capability of their enterprise. Enterprise performance capability indexes comprise the company’s performance capability in eight areas: product, market, financial profile, leadership, management, workforce, and strategic platform (this includes all the other stuff you’re thinking about). Do you want to know the odds of you and your team achieving the current business plan? Simply, put a number between 1 and 10 next to each factor. Add them up and multiply by 10. The resulting number is the probability percentage you will make it.
Deliver a net margin percentage 30% or more above the industry average. There are a lot of levers involved in this one. But the simplest way is to know all the ways to achieve it and have the best value proposition in your value discipline and the workforce to match. And know that the surest way not to achieve it is to throw everything off the plan that is not absolutely essential, tighten down all the screws, in the hope the plane fly’s faster than it ever flew before.
Increase shareholder value and equity. This is the big one, and it’s almost always done by making great acquisitions, staying at the forefront of innovation, having spotless financials, and keeping enough powder dry to take advantage of opportunities when they arise.
Achieve and sustain optimal strategic platform alignment. This may be the toughest one. Despite all the advancements in enterprise and organizational architecture and the over 340 books written on the topic over the last forty years, none have been able to equip a CEO with the ability to achieve and sustain optimal strategic platform alignment. There are 175± primary strategies on which an enterprise operates. Until recently, no technology existed that could equip a CEO who didn’t have the innate ability to do this, with the ability to do it.
Add distribution points, enter new markets, exit underperforming ones, acquire companies and dispose of underperforming assets. Don’t kid yourself; this takes a team of specialists, the ability to execute faster than the competition, and disciplined vigilance on the DNA of the market and how it’s evolving.
Have a top-mind awareness of all four types of innovation in the industry and the emerging threats. The four types of innovation are sustaining, efficiency, breakthrough, and disruptive. Top-performing CEOs foster cultures of sustaining and efficiency innovation within their companies and are on constant alert for breakthrough and disruptive innovations. Emerging threats – these are the big ones. If you are a CEO, they better be on your radar, you better have well-developed contingency plans, and when a member of the board of directors asks you better have the right response.
Ensure the company delivers a customer and employee experience in the top twenty-five percent of the industry. Customer experience includes everything from the website to social media to getting answers to questions on the phone to its distribution points to customer product acquisition and performance to warranty and customer satisfaction, and everything in-between. Employee experience includes,
| 1 | Culture |
| 2 | Direct compensation |
| 3 | Indirect compensation (benefits) |
| 4 | Physical environment |
| 5 | Headcounts and programmed workloads |
| 6 | Co-worker performance capability |
| 7 | Leadership level of direct supervisor |
| 8 | Onboarding program |
Achieve and maintain the top-performing CEO strategic, tactical, and operational time distribution percentages. The optimal distribution varies by industry and degree of market competitiveness. But one thing a CEO can never do is spend too much time in any one category to the detriment of the other two. A former CEO at Apple did precisely this, and it cost him his job. Unfortunately, CEOs tend to allocate their time to the discipline in which they are most proficient to the determinant of the other two. The standard highly competitive industry CEO time distribution percentage is 33% in each category.
Be fiscally responsible. Ensure the company’s financials are spotless. Nothing is out of line. Most top-performing CEOs start every day with a look at the company’s financials, and some even use one of the secrets from the legendary CEO, Lee Iacocca. Back then, he had all the critical numbers colored-coded red, yellow, green, or blue with highlighter pens. Today, it’s done with software. Are the numbers in your reports color-coded? If not, try it. You will find the results very interesting.
Consistently demonstrate an exemplary leadership profile. Leadership profiles are determined by the board of directors. They vary, but all of them go well beyond the prevailing list of the top thirty leadership skills, abilities, and attributes. There are typically comprised of three categories of sub-profiles: fit, think, and lead. Fit typically encompasses displaying the company’s values, ethos, etiquette, dress code, and a complete set of emotional competencies. Think profiles tend to include displaying the professional decision-thinking process, the degree to which their strategies and decisions are aligned with the company’s value orientation, and a top-mind awareness of their performance capability profile. Lead profiles include the level to which one displays the top 30 leadership skills, desired level of leader development, presence and intellect, and the absence of a coercive leadership style. Demonstrating an exemplary leadership profile requires the same four things professional athletes need to reach and stay at the top of their game: clarity, focus, passion, obsession, discipline, performance data, and a coach.
Increase enterprise, leadership, management, and workforce performance capability. When a new CEO takes over the reins of a company, it has a specific enterprise and workforce performance capability index. This index is affected by several factors but none more significant than the enterprise’s production capacity, level of technology, staffing platform, and facility performance capability and locations. It is the responsibility of the CEO to increase this index over their tenure.
So, what’s the bottom line?
CEOs who consistently achieve net margins 30% or more above their industry-average stack rank their 12 responsibilities differently than those who don’t. And pay more attention to the performance capability of their company and its workforce than those who do not. If you’re not achieving the numbers you would like, maybe the answer lies in increasing the performance capability of the human elements of your company.
If you would like to get an edge on the competition and improve the human elements of your company, let’s talk.
Douglas Swallow is an enterprise performance development consultant. What he can do for you is equip you with the knowledge and tools to significantly increase the performance capability of the human elements of your company, business unit, or department. His forty years of research on what enables top-performing CEOs, managers, employees, and salespeople to perform at extraordinary levels led him to identify the solutions to the top eight millennium business problems. The solutions to these problems can enable you to increase your workforces results to 30% or more above the industry average. Reduce your level of employee disengagement by over 70%. Increase its percentage of “impact players” and “top-performers” to over 45%, shattering today’s 15% ceiling. And maybe, most importantly, enable you to become one of the best in your industry at what you do.