The Way the CEO is Going to Make Strategy Decisions in the Real World
As I wrap up this Monday Morning 8 a.m., I’m going to talk about a very interesting conversation I had with a client over the last few months. This client is part of the strategy advisory team for the CEO’s office at a very large American manufacturing giant. This client hasn’t had a great run at the company. When I speak to her every month or two months, she always says, “The company doesn’t listen to me. The CEO doesn’t listen to me. They’re not doing things right. They’re making big mistakes. I don’t know how to help them.” I’ve heard this for a long time, and every time I give her advice, I’m working on the assumption that her interpretation of what is happening is true. There’s only so much I can probe. Certain things are sensitive, and I don’t want her to disclose it to me. But I’m basing my entire career advice on making sure she has a level head when she’s interpreting things.
One day I said, “You mentioned the CEO didn’t make thoughtful decisions, and he’s not being as careful with shareholder money. He’s not applying principles of analytic problem solving. Give me an example of why you feel people are ignoring you when they should be listening. Just talk me through it—not your interpretation of things. Lay it out for me.”
And she said that during COVID when there was a steep lockdown, her CEO got together with a group of other CEOs in this sector, and they approached the US Treasury Department and asked for a bailout. The government came back and said, “How much do you need?” and her CEO replied, “X billion dollars.” Her view on this was, “How can he do that? He doesn’t know how much we need. None of the other CEOs know how much we need. Shouldn’t they have said, ‘Give us two to four weeks, and we’ll do the analysis and come back to you with an exact number?’”
In her view, first, her CEO was not thinking about this very carefully because maybe he asked for far less than they need. Second, he doesn’t know how much they need, so how do they know they’re better off after getting the money? Third, numerous decisions are being made on the fly without the appropriate care, analysis and thought that goes into it. She proposed that they set up twice weekly reviews on key questions, so those questions would be given to a team to do the analysis over one or two weeks. Then they would feed it back to the CEO and board, who make the decisions.
She feels that none of her suggestions are being listened to, and she doesn’t understand why. She feels that it’s a personal vendetta against her because of what she’s asking for. In listening to her, I have no doubt she’s wrong in this situation, but it took me some time to explain to her why she’s wrong.
She’s young: around 30 years old. In the world of strategy, that’s young. She comes from a major consulting firm, and she was a very good consultant. But the way you do strategy on a strategy engagement—when you have the luxury of time—is very different from the way the CEO is going to make strategy decisions when he does not have the luxury of time.
In the example I used with her, I said, “Have you ever been to a smokehouse where they make brisket over a period of six or seven hours? Or have you ever had those French soups that have been prepared over four or five days?” She said yes. “And have you ever eaten a hotdog from a stand in New York or a taco from a taco truck?” She said yes. I pointed out to her that all of these are food items. “Do you agree they’re all food?” She said yes. “But do you agree that the time to prepare them and the technique to prepare each of them are very different? They’re still food, they still serve the purpose of making you happy and providing you nourishment and sustenance.” She agreed.
The point I was trying to make with her is you get different types of food, but they’re still solving the same problem. They take different amounts of time to prepare, and they look different, and they taste different. Strategy also comes in different formats. The way strategy engagement teams from McKinsey, BCG, etc., do strategy—who have the luxury of time and are doing strategy in the way that best draws on their particular assets and capabilities—is different from how a CEO who must make a very quick series of decisions but doesn’t have the same luxury of time will do strategy. It’s still a strategy but it’s done differently.
I can imagine the conversation with the government. You have all these CEOs and I’m guessing the secretary of the treasury, who is a hard person to get on the line, and he’s asking how much you need. You’re not going to say, “Give me two weeks, and I’ll come back to you.” You’re going to give him a big number because he’s probably going to give you the money at that moment.
In the real world, strategy is about numbers—but it’s more about getting things done and surviving. If the CEO knows the personalities of the other CEOs, and he knows the personalities of the treasury officials on the call, he may realize that if he doesn’t give a number, nobody will because everyone’s a bit afraid to speak up. But he also knows that if he doesn’t put a number on the table, the treasury officials will feel like these CEOs don’t have a handle on their business, and they’re not going to back them if that’s the case. So, he may make the judgment call to give any number to get something rather than taking two weeks to get nothing. That’s the way strategy is made in the real world.
When you have the luxury of time, take the time. When you have the luxury of calling up a partner from the Boston Consulting Group and saying, “We’ve got six weeks to make this decision. Bring in a team, let’s make the decision,” by all means do that, and that is a great way to do it. But I’ve worked with many CEOs, and they often don’t have that time. A lot of times when I made decisions with CEOs, we did it over lunch or coffee, and we’ll make a decision in that moment.
You can apply logical thinking and critical problem solving skills without having all the numbers at hand because as the CEO, you have a rough understanding of the numbers. As a strategy partner, you have a rough understanding of the numbers. I know how to make the decisions without going through all the analysis.
For SLIDES members, we’ll be updating a Competition Strategy Study, which is a very detailed response, and you can see how we make decisions if we have the luxury of time to do detailed calculations. For FC Insiders, if you look at the Corporate Strategy and Transformation Study, the entire planning and entire strategy was put together in two days as a set of hypotheses without looking at any of the numbers.
In this particular situation, this client has abandoned her team because, in a manner of speaking, she’s like a soldier who has spent their whole life learning to use a certain weapon. She goes on the battlefield with a team, and they need a different weapon and to fight in a different way, and she’s saying, “Hold on, guys. I’m going to go sit in the corner and drink my water rations while you guys fight it out, and even though the enemy doesn’t want to fight with the weapon I’m using, I want you to change and use the weapon I have. Until you realize that, I’m just not going to help you.”
She has to modify her approach and the approach of her team to figure out how to help the executive team—and particularly the CEO’s office—make decisions the way they’re being forced to make decisions. But she can’t expect the world, the CEO and the company to stop and slow down just to allow her to work at the pace she wants to work. Thankfully, as a big shout-out to this executive coaching client, she did change her approach.
If you look at the FIRMSconsulting website, you’ll notice that we’ve changed it quite significantly. If you go to the “Start Here” section, we talk about what it means to be a leader. This is not an unusual conversation I have with clients who are what I call “young leaders.” These clients have usually spent a lot of time in consulting firms but are breaking into management at the executive level. They have to realize that the way you do strategy in the real world has to change. On the website under “Start Here” and “Leader vs. Analyst,” we make that distinction very clear because it’s a common challenge that many of our clients are facing.
This is an excerpt from Monday Morning 8 a.m. newsletter, issue #17. Many of you have found Monday Morning 8 a.m. so useful that you’ve asked us to release a book version of these newsletters. We’ve obliged and released a Kindle version, which you can find on Amazon under “Strategy Insights.” It contains the insights from previous Monday Morning 8 a.m. issues, edited into a bite-sized format that’s very easy to use. And you can learn about other FIRMSconsulting books here.
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