Why we should all feel sorry for corporate leaders

Lately, I have been experiencing an uncommon emotion. I have started feeling sorry for chief executives of established publicly listed companies.

Sympathy is not the first reaction most outsiders have for leaders who are highly paid; whose decisions can adversely affect the lives of thousands of others but rarely their own; and who, short of criminal conviction, will retire in comfort.

Yet these days, chief executives are pestered and pursued as never before. They have to carry out a far broader and more complex set of tasks than their antecedents did, at a time of chaotic change, under constant pressure from short-term activists, and all while in competition with lavishly funded, privately held start-ups.

Entrepreneur and educator Steve Blank says he used to call these corporate newcomers “ankle-biters” — a nuisance at worst. As he told last week’s Drucker Forum on management in Vienna, now some of these innovative companies are far better endowed than the incumbents.

Consider the tale of two Jeffs: Bezos and Immelt.

Amazon is a public company, but it behaves like a vast start-up. Founder and chief executive Jeff Bezos succeeded at the outset in convincing his investors that they would let him reinvest any profit in building his “everything store”. Now he reportedly stands at the very gate of the large pharmaceutical companies, ready to disrupt the drugs market.

As chief executive of GE, Jeff Immelt, by contrast, took on the full burden of more than a century of others’ investment.

He is now earning opprobrium for not having shaken up the industrial group faster. As pointed out by my colleague John Gapper, John Flannery, Mr Immelt’s successor, wants to apply private equity-style techniques to reset the company: “analytics, discipline and central discussion of capital allocation”.

At the Drucker Forum, Mr Immelt stood accused, like the heads of Kodak and Nokia before him, of not having spotted that some of GE’s businesses were approaching a dreaded “strategic inflection point”. Rita Gunther McGrath of Columbia Business School said she was disappointed that, on Mr Immelt’s watch, GE authorised the repurchase of billions of dollars of its own shares, rather than investing, Amazon-style, in new opportunities. It was, she said, “a sign that management had run out of ideas”.

If we must talk about inflection points, though, then recall that Mr Immelt took the helm of GE at the greatest geopolitical inflection point the western world has seen in the past 25 years: the terror attacks of September 11 2001. Recasting the group rapidly in the wake of 9/11 would have been a reckless move.

Yves Doz of Insead pointed out that many companies fail “because they keep doing what they do well for too long”. Kodak, in analogue roll-film, and Nokia, in featureless mobile phones, are two good examples. Correct.

But at the other extreme from complacency, CEO hyperactivity is also a dangerous syndrome. Take the other General Electric — the UK’s General Electric Company, which under Arnold Weinstock built a reputation for managerial skill almost as great as that of GE under Jack Welch.

Once GEC had demerged its defence arm in a deal with British Aerospace (now BAE Systems) in 1999, Weinstock’s successor, George Simpson, took off on a cash-and-debt-fuelled acquisition spree to create a telecoms group at the height of the first internet boom.

Corporate leaders are swamped by overlapping and conflicting advice about how to deal with a fast-changing environment

Arguably, he was anticipating the coming digital challenge. But his rash actions made the group’s eventual break-up after the bubble burst as inevitable as it would have been unthinkable 10 years earlier. Weinstock is mainly remembered as a great manager because no great manager followed him.

Corporate leaders are swamped by overlapping and conflicting advice about how to deal with a fast-changing environment. You could stock a library with books built round the allegedly simple, bullet-pointed to-do lists for leaders offered at the Drucker Forum.

I kept a tally of some of the contradictory counsel. See off disrupters, disrupt rivals, and disrupt yourself. Get out to meet staff and customers, but take time to reflect alone. Emphasise the future, but do not throw away the legacy on which your staff depend. Do not be too certain, but certain enough to meet shareholder and board expectations. Foster a “culture of play” but run innovation with the rigour you use to manage your supply chain. And so on.

It is a fact of corporate life that leaders have to encourage innovation and execute existing strategy to survive. The danger of the current assault on chief executives is it will force many down the simplest path open to them, the short-term pursuit of shareholder value — belatedly dubbed the “dumbest idea in the world” by none other than Jack Welch.

andrew.hill@ft.com

Twitter: @andrewtghill