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Posted 07.19.2010

Job of the CEO: build value

But what's the best way to do it?

By Laurence B. Valant

Editor’s note: Here is another valuable excerpt from the new success book by Colorado-based national business consultant Laurence B. Valant and partner Gayle W. Hustad, Lead and Manage! The definitive guide for getting the results you want.

CEOs understand that their primary task in the long-run is to build the value of the enterprise. Beyond that agreement, CEOs find it difficult to agree on exactly how the value of their enterprise is best built, usually digressing onto one of the following paths:

• The measurement of value growth should be based on the value the market assigns to my enterprise.
• The best way to build the value of an enterprise is through great marketing (or instead of great marketing they substitute great customer service, or being a low-cost producer, or being the best product innovator, or being the best strategic planner, etc.)

When asked how to best grow the value of their enterprises, CEOs will rarely respond with the predictors of success which we hold near and dear (and which most certainly explains why most CEOs have difficulty in growing their company's value). In order to build the value of an enterprise a CEO must achieve their planned results as contained in their Business Plan and their budget, or as we like to refer to it, make plan. And, equally important, CEOs must select and grow superior leaders and managers, without whom they cannot of course make plan.

While interesting, it is not surprising that CEOs struggle to answer this most critical question as to how best to grow the value of their enterprise. Why is it not surprising? Simply because the concepts of effective leadership and management are not understood by most who find themselves in positions of leadership and management.

Most companies are ineffectively led and managed, not because the people in key positions are incompetent, but because most people in leadership and management positions have never been taught the fundamentals required to be effective in their leadership and management roles.

Another curious phenomenon in business performance and value growth measurement is the lack of sophistication applied to the measurement of leadership and management performance. Outlandish compensation packages are created and used to measure and reward performance in ways that make it clear the decisions regarding performance measurement were naïve and misinformed. This naïveté has led to compensation packages that reward poor, even destructive performance where compensation and often severance have been based on reputation rather than performance.

Companies that are led and managed in a superior fashion consistently outperform their competition. Good leadership and management are generally poorly understood by those who lead and manage, but more tragically, they are poorly understood by those who hire, i.e., the boards of directors. Poor selection of leaders and managers occurs because the criteria for hiring superior leaders and managers are poorly understood and therefore incorrectly applied.

Leadership and management are not only misunderstood, but are often considered to be interchangeable titles.

Because the work of the enterprise must be accomplished with people who must be led and managed, understanding the concepts of leadership and management should not be a casual endeavor, but rather a formal undertaking by everyone who holds or hopes to hold a leadership or management role.

Some might say, "I've been successful for a long time and now you're telling me I don't know anything about leadership and management?" Based on our work within hundreds of companies, most know very little about how to bring about superior leadership and management within their enterprise. If you have any doubt about your competency as a leader or manager, ask yourself one simple question, "Do I (and those who lead and manage with me) consistently make plan, month after month, quarter after quarter, year after year?"

We realize there are companies that already have superior leadership and management. We are addressing then, of course, the other 95 percent. Where are you?

Laurence B. Valant is President and CEO of Valant & Co., a Denver-based business performance improvement consultancy that has worked with almost 300 firms to increase their value by billions of dollars. He is co-author of the hot-selling new book, “Make Plan! With Effective Execution” and now, “Lead and Manage!” Valant can be reached at lvalant@valantco.com or at 303-589-3840. If you want more information or would like to order a copy of “Stop Breaking These Rules! 100 Hard-Hitting Truths for Business Integrity and Performance,” please visit www.valantco.com.

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