Call me crazy -- you wouldn’t be the first -- but the annual salaries of CEOs rank near the top of “the ridiculous list.” In fact, one study cites the average pay of a CEO as 300-times higher than that of the typical worker. This is not to say that CEOs don’t have plenty on their plates and don’t deserve compensation -- heaven knows they work their tails off -- but when results don’t match their roles and responsibilities, then that’s when questions arise.
The word “Yahoo!” comes to mind here. Marissa Mayer has been under the gun ever since she took over the ill-fated search engine company in 2012. Rated number 18 on Fortune’s Most Powerful Women’s List, Mayer was expected to turn the company around before it crashed and burned.
But herein lies the problem -- expectation. The difference between a hope and an expectation is this: With hope, there’s no responsibility -- it’s akin to a wish. Hopefully it (whatever it is) happens, but if it doesn’t, oh well. An expectation, however, infers responsibility to the task that is expected to be carried out -- assumedly successfully.
Mayer hasn’t turned the company around based on the expectation that she would. After all, that’s why she was appointed, and that’s the other problem -- incentive. Mayer is still collecting enough money to buy happy hour for everyone for the rest of her life. That’s a pretty safe place to be financially and emotionally.
Now, when you flip this around and consider employee incentives, they know that Yahoo! is in a death spiral, so how incentived are they to make the company great again? It’s a reciprocating recipe for disaster that stems from the top, transcends “the ranks” and keeps rippling throughout the company in a not-so-encouraging light.
So how do you know when the CEO of your company needs a reality check? Here are three ways to tell.
1. They lack confidence.
When asked in an interview with CNN if Mayer thinks she’ll be running the company a year from now, she responded, “I would love to be running Yahoo.” Now, if you were a Yahoo! employee, would hearing this statement convey job security? How about confidence? Didn’t think so.
Moreover, what I hear at the end of this statement is an unannounced “but,” as in “I would love to be running Yahoo [but it may interfere with life].” What Mayer needs to do is make a decision and communicate her intent. The problem with staying in the gray for so long is that without information, people will interpret reality however they see fit. They will spin the rumor mill in any and every direction they want just to find certainty.
2. They act on knee-jerk reactions.
The first thing CEOs want to do to save money is cut costs. It’s a natural go-to, and it works in the short-term until the root of the problem surfaces again. At this point, it’s no longer a cost problem, it’s a people problem that draws upon three of the 5Cs of chaos: competence, character and complacency.
An employee can be competent but lack the confidence to effectively “move the needle.” He can be confident in what he does but lack the situational awareness to competently make decisions, and he can be both competent and confident but utterly complacent in his work. The problem many CEOs face is that they make decisions in a vacuum because the message received is filtered by the time it arrives. Or, they’re not thinking systemically.
What is need-to-know at one level, for example, is don’t-need-to-know at another, which opens the door for assumptions to be made and then... voila! -- context is lost. Every decision has first, second and third-order effects that impact the company, employees, customers, stakeholders and public perception. If a CEO hasn’t learned this, then that company is doomed.
3. They don’t own their mistakes.
When you openly and confidently admit to mistakes, you not only quell the onslaught of media backlash but immediately rescind any publicly perceived loss of character. When CEOs -- or anybody for that matter -- don’t own up to errors, then their judgment (i.e. competence) comes into question. If a million people are saying one thing and the CEO is saying another, then that CEO’s rationale better be rock solid. Otherwise, his judgment will never be trusted again.
When Whole Foods co-CEOs Walter Robb and John Mackey discovered the excessive overcharging of packaged foods, they not only apologized profusely but immediately followed up with a three-point action plan to remedy the situation: retrain employees, implement an audit system and report its progress to customers within 45 days. What their plan demonstrated to the public was that they 1) care and 2) are aware of the problem.
There needs to be a leadership standard where compensation is based on results and not title. What worked “here” (wherever “here” is) doesn’t necessarily work “there.” Exercising humility about what is unknown rather than what’s assumed will take the sarcasm out of that “hot shot” title.