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Posted: July 18, 2012

Saddle sores in the C-suite

Longevity builds accountability

Todd Ordal

A client of mine had one of those “blinding flashes of the obvious” that he shared with me the other day.

He made an ill-advised acquisition several years ago based on advice from an overconfident vice president. After several years of poorly executed integration (by the same vice president), synergies that didn’t materialize, and sexy new products that failed, he was forced to write off a good portion of the purchase price. Acquisitions are tricky, and the majority of them (at least in the public sector where they are measurable) turn out poorly.

This extremely talented and successful CEO has had a great 10-year run, so he’s not in trouble with his board members, though they aren’t overjoyed at the write-off. After a recent frustrating event at this acquired division, he called me and pointed out something that we laughed about. He said, “If I had the tenure of the average CEO, I would’ve been gone long ago, and the next guy would’ve looked like a fool, not me. I guess longevity brings more accountability!” Meanwhile, he continues to bang out great results for his company year after year.

A recent Wall Street Journal article highlighted a very successful investment portolio (ING Corporate Leader Trust) that has outperformed its peers for the past 15 years! The funny thing is, there are 22 stocks in this portfolio, and they were chosen in 1935 and have not been traded since! (There were a handful of exceptions.) In other words, no “management” trying to goose the return by churning the holdings. I think Warren Buffet would agree that finding a good company, buying a piece of it and holding on through the inevitable speed bumps is the best way to get a great return. The same holds true for good leaders.

Hyperactive management doesn’t work well for stocks, nor does it work well for executives. My client’s reasonable and seasoned board of directors is extremely appreciative of the returns he has generated. He is not, however, perfect. Thank goodness they understand that a good CEO in the saddle for a long ride is still accountable (perhaps even more so!) and has a much better chance of producing good long-term gains than constantly switching leadership for short-term glory.

My client was happy to take a ding for the poor acquisition, and his board is pleased to have a seasoned leader at the helm.
 

Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

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