A model for CEO excellence

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-mindsets-and-practices-of-excellent-ceos

by kungfudoi • 7 years ago

85 49 7 years ago

mckinsey.com

buyingarmor• 7 years ago

I'm pretty impressed from the content quality level at Mckinsey

Most enterprise don't know how to write content people like to read for some reason

jacques_chester• 7 years ago

What I am not seeing in this discussion is any calculations showing how much of these outcomes are down to dumb luck, sample bias and correlation.

For example:

Furthermore, research using our CEO database found that the top decile of high performing CEOs are 35 percent more likely to dynamically reallocate capital than average performers.

Maybe they stumbled into an opportunity that the rest didn't. That's luck.

To move “boldly” is to shift at least 30 percent more than the industry median. Making one or two bold moves more than doubles the likelihood of rising from the middle quintiles of economic profit to the top quintile, and making three or more bold moves makes such a rise six times more likely.

So if your random walk takes you upwards, you wind up having walked upwards. Brilliant.

In the largest research effort of its kind, McKinsey found that CEOs who insist on rigorously measuring and managing all cultural elements that drive performance more than double the odds that their strategies will be executed.

Measured number rises, unmeasured number remains unmeasured. Scientists baffled.

Remember: these are the best and the brightest. They are taken extremely seriously.

Edit: they do give a source for their 45%-explained-by-CEO claim ... and it's a pop-business book written by the same authors. Oh well.

jacobolus• 7 years ago

Considering McKinsey’s business model (“hey CEOs, if you hire us we’ll make you excellent”), there’s nothing surprising in the content of this article (“coincidentally, the vague list of things that we consider to make CEOs excellent is the same as the list of things that we have experience promoting”).

shantly• 7 years ago

I've seen nothing to convince me that most C-level management "experts" care about confounders, selection bias or, generally, the quality of any data they come up with. Nor have I seen evidence that others in a position to call them on it care to. They either do not care, or do not know, how to reasonably use data to support a point or to make a decision. To include folks from the big-3 management consultants.

Though to be fair, it's not like people down the org chart are usually much better at it.

bjornsing2• 7 years ago

I can second this. Everybody wants to be “data driven”, but hardly anybody wants to adhere to the rigorous standards necessary for sound data analysis.

I think it’s a bit unfair to point the finger at “C-level management” in particular though. The same kind of thinking can be observed in government agencies, in the legal system, even in academia. Statistics is just hard, and a lot of people are simply not interested and cognitively capable enough to get it right, sadly.

mlthoughts2018• 7 years ago

A good article on this,

https://www.cato-unbound.org/2011/07/13/robin-hanson/who-car...

closed• 7 years ago

It seems worth noting that Anders Ericcson's handbook on expertise has chapters studying business expertise (though I get the feeling C level management gurus aren't reading it; there's an interesting chapter on entrepreneurs though!).

https://www.amazon.com/Cambridge-Expertise-Performance-Handb...

nelsonic• 7 years ago

Great content/analysis. Shame the PDF is not optimised to read on mobile.

tomp2• 7 years ago

Of the 50 most value-creating roles in any given organization, only 10 percent normally report to the CEO directly. Sixty percent are two levels below, and 10 percent sit farther down. Most surprising of all is that the remaining 10 percent are roles that don’t even exist.

This is very insightful analysis, using the method called "I made up all the numbers".

And somehow we're supposed to trust the rest of the article?!

Spooky23• 7 years ago

In other words, the parts of a company that do work create value. A vapid conclusion even by management consultant standards.

A smart CEO or board understands where value can be destroyed. That’s always the existential threat facing an organization who gives a shit about McKinsey.

tempsy• 7 years ago

Also that adds up to 90%...

bostonpete• 7 years ago

The source they're referencing was talking about asking companies to prioritize roles by value creation. Ten percent ended up being roles that didn't exist in the organization, but should. Also, the source said 20% were three levels below the CEO (as opposed to the quote above, which says 10% "sit farther down").

I agree this is pretty sloppy writing.

hn_throwaway_99• 7 years ago

It's still what I like to call "lie with statistics". Take a topic that is pretty much inherently unmeasurable ("roles by value creation"), and then assign numbers to it in a pseudoscientific attempt to sound like you've done your research.

tomp2• 7 years ago

Well, yeah, I didn't check the original source, which might as well be right (or at least less wrong), but this article is definitely plain wrong. Typo? Maybe, but this is really simple math. I'd be ashamed to publish an article like this...

gatherhunterer2• 7 years ago

What the CEO controls—the company’s biggest moves—accounts for 45 percent of a company’s performance.

What do executives think numbers are for? Why does the author find this metric meaningful? How does this number have any meaning at all? The fact that a CEO is important was not one that I questioned until I read this.

kiba• 7 years ago

I heard that changing the CEO doesn't really change the performance of a company, which made me skeptical right away.

I am not sure if the statistics I heard had any basis whatsoever though.

avip• 7 years ago

Coming next on HN: A model for ladders strength (stanleytools.com)

Vaslo• 7 years ago

Had a lot of experience with McKinsey doing projects at my company at different levels I’ve been in throughout it the years. When it’s highly technical things like implementing a new technology or creat8!( a new manufacturing footprint, they do really good work. Anything “Strategic” or fluffy like this I find a waste of time. They are excellent salespeople and do a lot to calm the C-suite but I rarely see these fluffy items like this article driving employee happiness or the bottom line after spending millions.

hos234• 7 years ago

Agree but many of the issues at the top of the food chain are like solving Family Dysfunction. Dad is the problem. Dad doesn't listen to anyone. Dad pays the bills.

cosmodisk2• 7 years ago

I'm sympathetic to the CEO position.Not because of the overly glamorised picture of what it entails but because of how lonely it can feel sometimes. Most people can make decisions knowing that there's someone above them who can advise/change or cancel it all together.For CEOs that's often not the case and whatever you decide,you have to live with it.

Zhenya• 7 years ago

I think the board plays that role of checking the CEO.

cosmodisk2• 7 years ago

Only if the company is big enough,which is not,in most cases.

throwawayuuuu52• 7 years ago

Current McKinsey, not associated with this report but kind of close. Yes, this one is very fluffy. There’s a few high level things that are important though around Org. Lots of companies just don’t have a good strategy for org, and there’s a lot of low hanging fruit for things like talent, culture, etc.

osipov• 7 years ago

So do you admit that McK occasionally acts as a fluffer?

throwawayuuuu52• 7 years ago

I would say every business and the vast majority of individual people occasionally act as fluffers (as I believe I am to interpret that term) so sure.

My point is not to reveal a gotcha that McKinsey is not the word of God. You will find nobody at the firm thinks this way.

Many people have strongly negative perceptions of consulting firms, and I’m sure some people have strong anecdotes to justify their beliefs. Yet I’m brought in to address certain problems and it’s very clear that help is needed. Sometimes the solution is something that could have come from someone inside, or is perhaps something that someone on the inside is already saying beforehand, but the consultant gets communicated better to leadership because they have more political capital and credibility on the issue. If this happens, then you’re already experiencing some of the problems highlighted in this article. Political and organizational friction is real. If that is the “only” thing preventing an organization from solving a problem, then they are still incapable of solving the problem on their own. I think a lot of people would benefit from seeing how things are from the consultants point of view.

zebnyc• 7 years ago

My wife's company (large pharma in SSF starting with G) consulted with Mckinsey for "strategy and innovation". Mckinsey recommended

a) the company G move to Agile except that they didn't say how. So now every meeting/townhall/1:1 is filled with buzzwords. It is clear from the way she describes it, no one in the company understands what Agile means. Everybody talks about collaboration but they don't do any of the Agile rituals.

b) All of G's employees should move to an open office plan with non dedicated seats. You come in the morning and have to hunt around for a desk. If you have to go for a meeting in a conference room, you have to pack up all your stuff in your bag and go. When your meeting is over, it is time to start hunting again.

Morale amongst the rank-and-file is quite low.

arbitrary_name2• 7 years ago

Did the Mck guys handle any of the implementation? Because that sounds like the client took potentially valid recommendations and half-assed the implementation. Plus if the name ends with g, well, morale was already kinda low from what I heard from ex employees.

barry-cotter2• 7 years ago

McKinsey don’t do implementation. Not doing implementation is what strategy consulting means.

samsonradu• 7 years ago

All of G's employees should move to an open office plan with non dedicated seats.

I've heard about this being discussed at one other large org. It sounds very concerning to me, is there any proven benefit to having non-dedicated seats?

mdorazio2• 7 years ago

The proven benefit is cost reduction. You can reduce total desks and therefore office space required by estimating how many people are actually in the office on average and then having that many desks + communal working spaces and conference rooms. When I’ve seen the calculations done it’s normally at least a 10% desk count reduction.

x0x0• 7 years ago

Please don't take this as defending Mckinsey, but I think there was a good chance this is a decision that G wanted to take, and they just used Mckinsey as a blame sink.

mdorazio2• 7 years ago

Similar story. McKinsey was brought in to a company I was working with. Their purpose was to improve management efficiency and morale, which were both quite poor because the CEO had no actual industry experience and had brought his friends on as senior executives, who similarly had no idea what they were doing. McKinsey interviewed everyone for three months, literally reading questions from a playbook, had their junior staff write up some recommendations, and then promptly disappeared while effecting zero actual change. The company went bankrupt shortly thereafter.

This is why management consulting has such a bad reputation in the tech community. On the other hand, McKinsey does do a pretty decent job of research and case studies since they’re able to work with so many prominent companies.

Aeolun2• 7 years ago

I feel like the only things recommended are usually the ones that are already popular anyway. Management just needs an excusez

donw• 7 years ago

A thousand times, this.

In my experience, this stems from the shocking number of "Agile Coaches" lacking practical experience in any of the three main disciplines within a functioning product team (software engineering, product management, or design).

So while they can introduce the high-level rituals -- standups, retrospectives, and the like -- they are unable to teach battle magic: building code that can cope with changing user requirements, writing specifications that make sense to both stakeholders and engineers, and figuring out what problems we acutally need to solve to get people to buy and use the product.

Moreover, they undersell just how much an organization needs to adapt to actually leverage any of this.

The end result is exactly as you describe.

In my experience, companies that succeed with Agile practices are the ones that (a) constantly invest in their people; (b) delegate problems, not solutions; and (c) are ruthlessly rational, requiring that each new practice or idea pays its own rent.

hogFeast• 7 years ago

I truly despair for the world. The "advice" offered is just so devoid of content.

What if some things can't be learned, packaged into a Powerpoint, and then taught and instantly absorbed?

It is like the economist who spends his whole life ensconced in his little office telling investors how to invest, or policy makers how to manage an economy...despite having no actual experience of those things himself.

I don't know how we got to this point.

rcurry• 7 years ago

After a number of years in the space I’ve come to the sad conclusion that many (not all) companies succeed despite their leadership rather than because of it. There are often a large number of true believers involved in keeping the ship sailing straight and they often get little credit for it.

ncmncm• 7 years ago

What I like in a CEO: takes no salary, and keeps the hell out of the way.

And never, never hires McKinsey.

dwoozle• 7 years ago

McKinsey’s advice on what makes a great CEO is like my advice for making it through menopause. They know absolutely nothing about it and their expertise is mainly in creating CYA documents for executives and assisting corrupt governments and regimes.

jl2718• 7 years ago

Very impressive. Language-generation models have really come a long way.

A model for CEO excellence

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