Seven Surprises for New CEOs
(Michael Porter)

Explanation of Seven Surprises for new CEOs of Michael Porter, Jay Lorsch, Nitin Nohria. ('04)

The Seven Surprises for New CEOs were described for the first time in the HBR of October 2004 in an article regarding CEO Leadership by Michael Porter, Jay Lorsch and Nitin Nohria.

As a newly appointed CEO, one may think to finally have the power to set strategy. The authority to make things happen, and full access to the finer points of your business. But if you expect that this job is so simple, you'd better wake up now. You bear full responsibility for your company's well-being. But you are a few steps away from many important business factors. You have more power than anybody in the corporation, but you need to use it with extreme caution.

Porter, Lorsch and Nohria have discovered that nothing - not even leading a large business within the company - fully prepares a person to be the chief executive.

The seven most common SURPRISES for new CEOs:

You can't run the company. The sheer volume and intensity of external demands take many by surprise. Almost every new chief executive struggles to manage the time drain of attending to shareholders, analysts, board members, industry groups, politicians, and other constituencies.
Giving orders is very costly. No proposal should reach the CEO for final approval, unless he can ratify it with enthusiasm. Before then, everyone working on the matter should have raised and resolved any potential deal breakers. The CEO should be brought into the discussion only at strategically significant moments to give feedback and support.
It is hard to know what is really going on. Certainly, CEOs are flooded with information, but reliable information is surprisingly scarce. All information coming to the top of the enterprise is filtered, sometimes with good intentions, sometimes with not such good intentions.
You are always sending a message. The words and actions of a CEO, however small or said casually, are instantly spread and amplified, scrutinized, interpreted and sometimes drastically misinterpreted. Compare: Charismatic Leadership
You are not the boss. Although the CEO may sit on the top of the management hierarchy, he still reports to the board of directors. Ultimately, the board is in charge. Not the CEO.
Pleasing shareholders is not the goal. CEOs must recognize that, ultimately, it is only long-term value creation that is important. Today's growth expectations or even the stock price are not so relevant. Compare: Moral Purpose
You are still only human. CEO should recognize that he needs connections to the world outside his organization, at home and in the community. In order to avoid that he is completely consumed by his corporate life.

These Seven Surprises for new CEOs carry some important lessons:

First, as a new CEO you must learn to manage organizational context rather than focus on daily operations.
Second, you must recognize that your position does not confer the right to lead, nor your position guarantees the loyalty of the organization.
Finally, you must remember that you are subject to a range of limitations, even though others might treat you as if you were omnipotent.

Seven Surprises for New CEOs Forum

Recent User Comments

    			 
  			   Ellen Callaway - UK
  	       
  		     Undercutting CEO Power
  	  		 "In Fortune (Europe, March 12, 2007, no. 4) Geoff Colvin mentions some new rules that decrease the authority of existing (US) CEOs in favor of the shareholders: 1. From 1993, institutional shareholders may discuss companies in which they hold shares with eachother 2. New NYSE and Nasdaq listing requirements after Enron/WorldCom 3. A 2003 SEC rule requires mutual funds to report how they vote their shares 4. Shareholders propose to elect directors by majority vote. 5. Delaware law now holds that if shareholders approve a majority-vote rule, the resolution is binding."
  			   
  	  		 -1