Alan Lafley
Former P&G CEO Alan Lafley says running a big company is like managing a Premier League football team.
Boeing, Nike and Starbucks have all changed CEOs in recent months. But how important is the person in the top position for the successful management of such important businesses?
“There's only one cat in the hot seat,” says Alan Lafley, CEO of global consumer goods giant Procter & Gamble from 2000 to 2010 and again from 2013 to 2015.
P&G, selling everything from Pampers diapers to Head & Shoulders shampoo to Fairy dishwashing liquid, has more than five billion customers worldwide. And its workforce now exceeds 107,000 people.
For Mr Lafley, running a business of this size is like being the manager of one of the English Premier League football teams. Specifically, he says the position carries the same risk of being fired if results aren't as good as expected.
“With footballers, if they have a bad season, they don’t leave,” he says. “Instead, it’s the coach or manager who will leave.”
Coffee giant Starbucks announced a CEO change in August, following a decline in sales caused by factors including a complicated menu, fierce competition in China and war-related boycotts in the Middle East. The hope is that new boss Brian Niccol can turn around the company's fortunes.
To distance him from the success he enjoyed at the head of the American restaurant chain Chipotle, Starbucks paid him more than $100 million (£79 million) in his first year, plus the use of a private jet to allow him to travel 1,000 miles from home. in California at the company's headquarters in Seattle, Washington.
“It's pretty obvious that there's a lot of hope for him and his ability to turn this company around,” says executive coach Alisa Cohn, who explains that top salaries are set by a company's board of directors. company and reflect its expectations of the CEO. you name it.
Investors welcomed Mr. Niccol's appointment with a 24.5% rise in Starbucks' stock price on the day of his announcement. On the same day, Chipotle fell 7.5%.
Mr. Niccol is now continuing his efforts to simplify Starbucks' menu.
“It's the CEOs who define the company's strategy,” adds Ms. Cohn. “They are the ones who set the culture of the company and, in truth, they are the ones who have the responsibility in terms of accountability.”
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Starbucks has high hopes for new CEO Brian Niccol to revive the company's fortunes
Marcia Kilgore is a Canadian entrepreneur behind skincare brands Soap & Glory and Beauty Pie, as well as shoe company Fitflop. She says the role of CEO is complicated, demanding and essential to a company's success.
“You need to have someone who can really look at the different workflows that need to be done and organize and prioritize them,” she adds.
“And someone who can ensure that different teams in the company work together harmoniously and ensure that time is not wasted, money is not wasted and energy is not wasted. is not wasted on things that will not move the business. .”
The inability to make the right choices and lead teams in the right direction is why Mr. Lafley became boss of P&G in 2000.
His predecessor Durk Jager resigned following the failure of the vast global restructuring he had led. The loss of 15,000 jobs and 10 factories was supposed to increase profits, but instead led to repeated profit warnings and a sharp collapse in stock prices.
Lafley says that as a CEO, it's not about doing everything yourself, but “enabling everyone in the organization” to do what needs to be done.
“We had 100,000 people looking to the new CEO and saying two things: 'What happened?' and “what are we going to do next?” “.
He explains that he has decided to refocus the company on serving customers and innovating new products, telling staff: “I have no doubt that we will all get out of where we are and get back on track.” way “.
Mr. Lafley adds that clearly communicating his plans to employees was so “extremely important” that in the days before Zoom, he flew across the world to meet with staff in person.
Inspiration and communication also appear to be at the heart of new Nike CEO Elliott Hill's approach. When he got the job in September, he wrote to staff telling them he had “great confidence in his team and our future together” despite years of declining sales.
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New Starbucks boss simplifies menu while trying to inspire a turnaround
Ms. Cohn, who has worked with companies including Google, Etsy and Johnson & Johnson, says that whatever a new CEO's plans, trust is essential to any success.
“The most important quality you need to be a CEO is to know that you will be capable of being a CEO,” she says. “There’s a sense of confidence and a healthy ego that you have to bring to the table.
“The second thing you need to bring is adaptability. You have to be able to assess the situation, make important decisions, then adapt them as you go.”
She says it's not something that can always be taught, which is why she says so many people get “stuck” at the lower levels of a company. Ms. Cohn adds, “You have to develop your own internal state to know that you can handle the pressure, the difficulty, the spotlight.”
Phillip Van Nostrand / Alisa Cohn
Executive coach Alisa Cohn says confidence is key to succeeding as a CEO
This pressure is one of the reasons why top CEOs are often compensated with huge salaries. Looking at the S&P 500 group of America's largest companies last year, the top gainer was Hock Tan at Broadcom with $162 million, followed by Nikesh Arora with $151 million at cybersecurity firm Palo Alto Networks and Stephen Schwarzman with $120 million at investment giant Blackstone.
The average for an S&P500 CEO last year was a record $16.3 million, according to executive consultants Equilar. That means they earn 196 times more than the average worker at their company, and critics say CEOs aren't worth much more than their staff.
“It relies on the stupid idea that the person in the corner office is, somehow, almost solely responsible for the value of the company,” says Sarah Anderson of the progressive think tank based in Washington, Institute for Policy Studies.
She believes it is a growing problem that is spreading across the world. “I think skyrocketing CEO pay is bad for our economy, bad for democracy and bad for business,” she adds.
Mr Lafley agrees that the ratio of staff to CEO pay is “too high”, which is why companies have to compete for the best talent.
He thinks the answer lies in paying CEOs “a pretty modest base salary, and then everything else is just motivation.”
“In the end, he’s a bit like a coach. If you're not motivating people and enabling them to do what you're asking them to do, then you're not doing your job.
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