MANAGING THE MIDDLE ACT

A guide for CEOs in mid-tenure BY Jayashantha Jayawardhana

Most leaders know how to behave and act in their first year in office. This is when one must assess and diagnose, craft a vision and strategy, and achieve the early wins that are instrumental in earning trust and legitimacy.

And thanks to the volume of management literature available, no leader is in the dark about how he or she should approach their primary responsibility in the final months on the job – picking a successor, grooming him or her and smoothly handing over power.

However, little counsel is available on managing the middle act (the time between the initial and final stages of their term) and how chief executives can make the most of these intermediate years.

How can they accomplish early success? And how can they continue to have an impact? In what ways should they change their priorities? Should they set aside time for different stakeholders? And should they engage the organisation in different ways? How should their mindsets and ways of working change and evolve?

To find answers to these important questions, researchers Rodney Zemmel, Matt Cuddihy and Dennis Carey surveyed a group of chief executive officers of large-cap companies, each with a tenure of at least six years, which is the median term for an S&P 500 CEO.

They then hand-picked a subset whose companies outperformed industry standards during their time at the helm or who had high overall total shareholder return performance. And they conducted detailed structured interviews with 22 of them, and posed those very questions to them.

Drawing on their research, the authors offer valuable advice to CEOs on managing their middle act effectively in an enlightening article headlined ‘How Successful CEOs Manage Their Middle Act’ in the Harvard Business Review (HBR). The authors accentuate five themes, which they deem essential for success in a leader’s middle years.

They emphasise that leaders should view their term as a series of chapters rather than a single uninterrupted span and advocate against believing that a strong start neces­sarily guarantees a strong middle act.

Here are their five themes.

AMBITION Keep raising the level of ambition: at the start of their term, CEOs tend to solve the most urgent problems and make their mark on the organisation. By midterm, as stability sets in, the company risks relapsing into what former CEO of DuPont Ellen Kullman calls “the old normal.”

Discussing her middle years as CEO, Kullman says: “You’ve got to infuse people with the will to continue focussing on the changing environment and say that if you aren’t moving, somebody is going to run you over.”

Simultaneously, you must guard against organisational exhaustion, which results from resources being stretched too thin.

PROCESSES New CEOs are keen to identify organisational problems early on and formulate solutions but when it comes to addressing ingrained practices, they find that their middle years are best for that task.

This takes more thinking, studied planning and support from multiple stakeholders in senior management, some of whom may dislike and even resist change. While this kind of operational fine-tuning is largely invisible to external constituencies including investors, it is vital to the company’s sustained performance in the long run.

EVALUATE Most new CEOs shake up or recast the senior leadership team. However, successful long-term leaders understand that adjustments must continue in the midterm too.

This is because people go through different phases in their lives; someone who had been hand-picked early on by the new CEO for the senior leadership team could have lost his or her drive, or become burnt out by the midterm and may need to be replaced.

That is why former CEO of Tyco International Edward Breen conducted an annual appraisal of Tyco’s senior leadership. The process was formalised and cascaded down through the company, ensuring that leaders at each level would be subject to evaluation every year.

MECHANISMS “After three or four years, people have an understanding of how you respond in different scenarios,” says former CEO of The Home Depot Frank Blake. He adds: “Everybody knows what you want to hear so that’s what they tell you.”

This is a recipe for failure. A CEO must stay connected with the organisational grassroots and foster a culture of candour at every level.

EXPENDITURE Invest leadership capital in bold long-term moves. For certain ambitious endeavours such as large acquisitions without a quick payback, only a seasoned leader can rally enough support to proceed.

Having established credibility with the board, investors and employees in their early years, successful midterm CEOs are in a strong position to take risks.

This is why managing the middle act is considered an evolution rather than a revolution.