Is your CEO top of your risk register?

Doctor Holliday, I presume

One would expect board level directors to recognise that the CEO can represent a single point of failure for the organisation. Think of the lone, bold gun slinger brought in to clean up the town. Great if she gets the job done, but disastrous if things go south at the OK Corral.

But most CEOs operate within that liminal state that sits between the day of their appointment and being able to justify their remuneration package. But no problem. The appointing body notes how she is settling in nicely, has established a strong leadership team and is revered by the employees. At best this is a loose indicator of potential. But it is not in itself a strong indicator that results are forthcoming.

Pop the bonnet

To really understand whether the CEO is made of the right stuff, we need to understand their capability from a neurological perspective. At the risk of irritating modern neuroscientists, we will explore this from the brain’s three main layers, namely:

• The Reptilian brain (Amygdala)

• The Mammalian brain (Limbic)

• The Human brain (Neocortex).

It was believed that as we evolved from reptiles (more accurately vertebrates) to humans we acquired new layering to our control centre. So the key question for the board is where from an evolutionary perspective does the CEO sit.

Exploring each layer in turn:

The Reptilian brain

Reptiles are focused on survival, particularly their own. Anything that makes them look good in the eyes of those that matter will be pursued. Thus they tend to focus on very specific pain points, particularly those that are perceived by the media / business press as urgent or fashionable. If the pain is both urgent and existential, they will likely take a knee jerk approach. Tariff challenges – cut costs, market softening – cut costs, pandemic – cut costs.

Masquerading profitability is their goal.

Product and service vendors often play to the Reptilian brain.

The Mammalian brain

Mammals are social creatures, but are very desire driven. They look beyond the pain and work towards a better future, eg. a transformed / agile organisation, AI-everywhere etc. They haven’t given it much thought but have been seduced by the narratives of the day and take it as read that these are remarkable goals.

Being social, and thus competitive, they are looking to be CEO of the year, have the ‘biggest’ data or turn a successful traditional engineering business into a quantum computing boutique. This will probably excite the board directors as they have even less of a clue as to what big data and quantum computing are.

In many respects this is like Usain Bolt declaring that he is going head-to-head with the starter and the timekeepers. They are indeed significant figures when it comes to sprinting, but it implies a misunderstanding of what really matters.

Advisory firms often play to the Mammalian brain.

The Human brain

Humans, in theory at least, are capable of restraint, reflection and analysis. They do not simply react instinctively when threatened, nor do they pursue fanciful and questionable goals. Humans learn from mistakes and see failure as part of the process.

Humans are also willing to make sacrifices today to create a better future that in some cases they are unlikely to experience; think stonemasons who contribute to the development of cathedrals they will never see completed.

To make matters worse, we live in a world where such multi-decade projects are far too risky. What seems like a good idea today might not seem so wise in twenty years. The market may have moved on and the associated underlying technologies will appear antiquated.

So human CEOs are less about putting fires out and grand visions and more about adapting to reality. This requires the ability to sense what is happening in their environment, making an intelligent decision and executing quickly.

Don’t blame the CEOs

This is only possible if we are less reliant on one person. So a more distributed leadership approach is needed.

The challenge we have is that the vendor market, from product to strategic consulting, has not yet woken up to this. Neither have the headhunters nor the business schools.

Until boardroom directors wake up to this, organisations will continue down a path that increasingly deviates from reality. But that in turn requires investors and analysts to understand what makes a business successful in these increasingly chaotic times.

There is work to be done.

This article also appeared in the Intelligent Organisation newsletter on LinkedIn.