Care and Feeding of CEOs Part One: Experience or Energy?

Care and Feeding of CEOs Part One: Experience or Energy?

I have written about CEOs quite a bit recently, because of their criticality to the success of the business. Today I want to target my comments at those people whose job it is to appoint or support the selection of a CEO or General Manager for Japan.

I have dealt with many technology firms over the years, and have found that most are conservative organizations that want to do things in a way that they are familiar with. When it comes to recruiting the CEO, typically this means going to a global top tier recruiting firm for advice. The problem here is that common wisdom says that if you want to be successful in Japan, you'd better shoot for a very senior, older Japanese national with extensive contacts in industry.

While there is nothing wrong with this approach, I feel that this type of person is ONLY an automatic choice for companies with an M&A strategy or which have a very strong product offering, where the capabilities of the product pretty much guarantee sales.

For M&A, older leaders can convince target companies to sell - obviously a desirable outcome. In addition, if your new CEO is sufficiently well known, he or she can give the employees of the acquired business a leader that they can look up to, thus reducing employee turmoil during the hand-over.

For strong product offerings, the task is one of building a distribution and marketing organization, and thus someone with plenty of experience and strong contacts with potential distributors and other supporters is indeed a boon.

However, if the company is in a space which is not well differentiated, such as services, then the CEO not only has to get on the phone to call his or her mates, they probably have to work out an entire business strategy and then get out there to make it work as well. In such cases, just as with any start-up that doesn't have a clear advantage in the form of patents or original know-how, then the quality of the results will be directly proportional to the amount of energy and effort put in. Clearly in this situation, an older person is not appropriate - in fact you could wind up killing them. So you need the right tool for the right job.

A conservative foreign consulting services company I know brought in a CEO from a famous Japanese company, offering him an excellent package and control of a workforce of a few hundred staff here in Japan. For some months he dug into the company trying to decide how to position the business, which had not been performing well. I remember clearly his senior managers wondering when he was going to issue a strategy paper, and privately being concerned that he was taking so much time when things were going so poorly. However, he was a smart guy and realized that he'd only have one chance to get it right.

He found that as a services business, they competed directly with some of the Japanese majors. Thus, when approaching Japanese customers, they were always the Number Two choice. What he did find is that his new employer did have an excellent international network, and so for any Japanese customer requiring foreign support, they were able to get a contract. But given the surprisingly small number of Japanese companies that actually do export or conduct significant business overseas, this aspect was always a consolation prize. It was not something you could form a solid business on - and he knew that.

The CEO was highly experienced and to his credit he soon realized that the company couldn't be differentiated, and decided that the only way he could use his talents and give the company a boost was to do an M&A, targeting companies with customers and more engineers. He correctly surmised that to do anything else would have needed a much younger and more energetic man.

The rationale was well received by headquarters, and the Japanese CEO proceeded to start approaches and negotiations. Everything went well, and he had a massive deal on the table that would have ensured headlines and great strategic positioning for the company.

Unfortunately for all concerned, fate then decided to play a hand and the parent company had a very poor financial result that particular year. The sponsor for the Japan-based CEO ran into political difficulties and of course all major strategic initiatives, including the deal, were called off. Needless to say, the CEO could do little else, and soon found a job somewhere else.

The point of this story was that the older CEO's strategy was right on, and he clearly demonstrated his experience and value. But once it was clear that the business would have to grow organically, he correctly surmised that a younger man with a more hands on approach was required.

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