How to find the right CEO?

Finding the right CEO is an eternal problem. First of all, whoever goes to find, “find” this person will be right, not everyone has the ability to find the CEO. Second, what is the stage of development of the company? It is necessary to define the core competence and key criteria of the CEO required for this stage of development. Whether a company wants to turn losses into profits or develop rapidly is different for people. It is also a rapid development. In the case of successful existing business, large-scale replication, or the existing business has developed saturated, the ability to use new models, or even to open new business, is not the same. Ram Charan (1939-present), one of the most respected management consulting masters of Jack Welch’s global management consulting guru. After earning an MBA at Harvard Business School, he stayed in school for several years and in 1969 received a Ph.D. in Business Administration (DBA) from Harvard Business School.

Representative works include “Executive”, “Leading Echelon”, “Guidance Transformation”, “Eight Core Competencies of Successful Leaders” and so on. His “Execution” with Larry Posti emphasizes the importance of corporate leaders’ deep involvement in business operations. It sold more than 300,000 copies in the US and was included in The New York Times and The Wall Street Journal. , Business Weekly’s bestseller list. On the occasion of his latest work, “Taking People: Managing People Like Managing Money,” Tsinghua Management Review was fortunate to have an in-depth interview with Ram Charan. Also interviewed by Ram Charan, head of China operations, and the world’s only partner, Ms. Yang Yumei. The following is a record of the conversation. Manage people like management funds TBR: Your new book title: “Taking people to use people: managing people like managing funds”, how to understand the subtitle “Manage people like management funds”, the decision of enterprises in terms of talents is really as scientific and rigorous as financial decisions? Ram Charan: The two most important resources of a company are money and people. This is why we say we want to manage people like managing money. It is people who decide how to use funds and how to create performance. There are only people who will find ways to raise funds. Many companies, almost all companies are looking at financial performance.

Because performance represents the company’s financial situation, people use performance to understand whether the company has signs of stagnation. The three-person core group (G3) is the CEO, CHO, CFO, and the three of them sit together to diagnose these financial results. Good performance, bad performance, what is the reason behind it, and then predict how the future performance will go. How to create good performance and how to create better performance is always the meaning of G3. Performance is only the result of the past, and people are the cause of performance. When we go deep into these performances, 99% of the reasons are people. It is a person who makes good performance, is a person, and makes the performance figures perform better. This is the connection between money and people. Therefore, managing funds and managers is equally important. TBR: When managing funds, there are various indicators, such as net cash inflows, profits, turnover rates, etc., to indicate whether the company is operating normally. When we are managing talents, are there any indicators that the company is doing a good job in managing talents? Ram Charan: What you said is very reasonable, starting with performance indicators.

Choose some key performance indicators, such as sales, and sales are rising? Still falling? How is it compared to competitors? Are we doing well, or are we not good? what is the reason? The company’s performance indicators are good, probably because the products are good and the price is good. So we do better than our competitors. Then we want to link performance to people. Who helped us achieve our performance? Who made a huge contribution? Who may not be good enough? This connection is very important and what the successful CEO needs to do. TBR: What do companies do well in organization and talent, or what are their indicators? For example, turnover rate, happiness, and so on. Is there an indicator to test whether the company is doing well or not? Ram Charan: We look at the company’s financial performance and who created it.

This is a two-dimensional matrix of financial performance and people. Yang Yongmei: Can you give an example? Ram Charan: If the company’s financial performance is not good enough, then it is likely that a small number of people have made mistakes in their work, such as CEOs, CFOs, etc. They are responsible for it. So, using such a two-dimensional matrix to detect it is right. For most companies, people have not done so. Are everyone in the right position? If the person is not in the right position, then the organization is not a healthy organization. In most companies, about 20%-25% of people are not in the right position. People-to-person match, people-centered TBR: When it comes to “personal match”, where is the key point? Is it people-centered or is it centered on the post? Ram Charan: People-centered. The position can be adjusted. You can bundle or split different jobs in the same position.

TBR: Is this true for all people and positions? Ram Charan: This is true for all people. Either a promotion or a demotion. Personnel matching, people-centered, applicable to all people and positions. If people are not in the right position, then it will be very unhappy to work. TBR: But I have observed that some companies are doing the opposite when they are doing the reform of the human resources system – centered on the position. Ram Charan: Many organizations do this. Focus on the post. In a modern company, we can see that if people are not happy in the wrong position, then he will leave because there is a lot of demand outside to beckon to them. Of course, you can also start from the post. Think about what is suitable for this position. The premise is to find the right person. After a while, they are not a good match. After the time test, you can see if the person and the post match. TBR: I personally feel that when I implemented this performance system, I didn’t love my job so much, but with a performance system, I might love my job again. Therefore, it is also related to the incentive system. Ram Charan: First of all, the degree of matching between people and positions, and then the incentive system. Look at the basketball team. The first is that there are suitable people in each position.

Baseball is also, orchestra is, music, movies. Wait, these, they are all highly coordinated organizations. TBR: This kind of person match, you see whether they match or do not match, do you have a indicator or method? In other words, how do you measure, does the person’s post match? Ram Charan: Everyone has a leader. The leadership will guide our work and will be responsible for the performance of each subordinate and responsible for performance. If the matching of people and posts is good, people will like his work and can’t wait to come to work and bring new ideas to the work. Otherwise, he will be dragged down, late and leave early, and the energy is not so abundant. This is what the leader can see with the naked eye. It is as if the coach is watching in sports, which athlete is energetic and which athlete is slowly losing his energy. Yang Yongmei: I would like to add a point about the issue of matching people and posts. Many times, the problem of matching people and posts is that we have not put in a position, we must do a good job in this position, and we need to sort out the key skills. When I and Chalan helped entrepreneurs to do key job interviews and evaluations, many times the company did not think about it in particular. In this key position, in the specific historical stage of the enterprise, the most needed ability in the enterprise development is what. This issue is not clearly defined and is the key to many problems.

Especially when a company is going to do business upgrades and make strategic transformations, one’s past success does not necessarily mean that he will be able to do well in the new model in the future. CHO crosses the chasm TBR: As you mentioned in the book, in terms of overall quality, the highest similarity to the CEO, except for the chief operating officer, is CHO. However, “CHO is usually not considered when choosing a CEO successor”. Why? How does CHO make up for the shortcoming between him and the CEO and achieve a leap? Ram Charan: I am very glad that you can mention this question. This is an old-fashioned question and a question that cannot be overemphasized. For any CHO who wants to become a CEO, first imagine what the CEO is doing, and what makes a CEO a great CEO? In China, as well as abroad, there is a lot of information about successful and unsuccessful CEOs, which can be used for learning.

In sports, when a high school student is eager for a sporting event, he will begin to learn everything about the sport. He will watch the video and dream about the sport even dreaming at night. He even dreams of breaking the world record in the Olympics one day. They read the story about the Olympic champion of the event. The same is true for any CHO who is interested in becoming a CEO. This is the first point. Second, they should meet some CEOs. Learning from them is what makes these CEOs successful? What makes them less successful or even failed? Third, no CEOs will succeed without any reason, so it is necessary to learn how companies make money. Most CHOs still don’t understand how business makes money, why do customers choose them, not competitors? You must find out where your strengths are compared to your competitors, and you need to know how to compete and combine these advantages. The organic combination of business and business is like the composition of the various components of a computer. CHOs who want to be experienced, they should actively try other functional departments, such as marketing, production, technology, etc., in the early years of their careers, such as the first five years of their work, if they are government affairs, if they Being able to succeed in these areas, they will likely become CEO candidates. But they can’t wait in the CHO position all the time. If you have never had a career in other positions, you want to be a CEO, which is almost impossible. TBR: You mean, I went to do some other work in the early days to do human resources work.

I may know more about the business, or better match, and the distance from the CEO is smaller. However, for those who work in human resources, I may be working on human resources after my MBA or undergraduate degree. Isn’t this path not so good? These are two different paths. One is that I start to do business or work in other functional departments. The other is to start doing human resources and doing other things. Is there any difference between the two? Ram Charan: Both paths are fine.

No matter what job you do, working in the same department for two or three years, you will understand how this department works. The work of HR has taught people a lot of knowledge about people. It eases the emotions, attitudes and temperament of people’s work. Yang Yongmei: I may have different opinions. Very practically speaking, in the enterprise, a manpower, to jump to do business, completely white, I think it is very difficult. Especially after you have done a certain job. From scratch, if it is a short-term rotation, it will not achieve the goal. Therefore, I think more of it is that in the future, he is not a professional line of talents, but actually an all-round talent.

Imagine, as a business leader, or as a CEO, you actually want to be a CEO who understands organizational talent. You can also think about it from another angle. No matter which business area you are in, you spend a little time on manpower and spend 1-2 years doing some manpower work, which is good for your long-term development. Because when you become the top leader of the company, you will find that most of the things you worry about are not business matters, they are things of those people. Yesterday, Chalan and I were still talking to a big company chairman. The person in charge of their business line, that is, the person who will be promoted to the vice president of the group, is a big man, everyone. These are business leaders who are doing billions of dollars and billions of yuan in business. What kind of people will go longer? What kind of people can only stop here, the gap is not on “doing things”, the gap is on “employing people.” Therefore, even if you don’t want to be a manpower, should you put more energy on “manpower”? I think it is ok. In particular, when it comes to two-way rotation, many companies know that HR has to go out of rotation and have a sense of business. More is not to train HR to be the person in charge of business, but to say that HR needs to understand business, or else, human resources. How can work be done well? In fact, many people who do business are not willing to do HR. It is better to think about it from another angle. There is a little manpower experience. The ability to improve people and people can actually improve the level of one person and his future. This is my idea. TBR: Is the distance between CHO and CEO just saying that he lacks in business, so he has no way to be a CEO? The biggest shortcoming of CHO lies in the business aspect? Ram Charan: The business is one of them, and there are other aspects.

For example, the company’s ability to formulate strategies in the future. TBR: This ability to develop a future strategy can only be recognized in the process of doing business. Ram Charan: No, there are other ways. For example, go to school to study, participate in training, face different scenarios, and learn how to plan. Of course, most people can also read history, learn from history, talk to different people, ask them, especially those who think about the future. TBR: This kind of conversation with different people, CHO has a good friend who is a CEO, but because it is not in that position, you may not really feel the same. Ram Charan: Method, first, you have to find the right person to talk, especially those who have ideas in their heads and can create new knowledge. Second, go to the exercise at work. They are called “strategic planning.”

When you go to strategic planning, you are actually creating the future and opening the future. More importantly, every CHO who is interested in becoming a CEO must have the courage to be determined. There will be various difficulties. No one will tell you the correct answer. Only you can face it yourself. Go to conquer. Yang Yongmei: I don’t think people who are only struggling for a lifetime in the human line can be CEOs. I don’t feel like talking to others, I can learn a lot. Including business strategy, I don’t think everyone is suitable as a CEO. One of them is the ability to face uncertainty and the ability to make decisions in the face of risk. This is not for everyone. On the one hand, not everyone has done the CEO. On the other hand, this decision-making ability is to be experienced through actual combat. Some people, he will think a lot, will give advice to the CEO, but he does it in that position, he did not Decision making. Such people are not really suitable for this position.

To a large extent, such decision-making and judgment capabilities require practical experience. TBR: This is not to say that the CEO is born? Yang Yongmei: Whether it is born or not, it is still going to be experienced. What is born? You put a royal child there, is this born? This is not the case, or it is necessary to go through the experience. For example, Ali, let the people who do business come to be political commissars. This is a two-way flow and strengthen each other. But if a person who is just a manpower, I hope to become a CEO through the points mentioned by Chalan. I don’t think it will be very good, but if it is from the perspective of talent cultivation, can you put such a potential good seed in a small business position and let him go through the experience. This is possible. Few companies will promote a person who has no business experience at all, who has never done a business leader, to be a CEO. This is rare. Identify and retain key talent (2%) TBR: The key talents you mentioned (2%) are not seniors, and the positions may not be so high.

How do we identify these key talents and what kind of people are the key talents? In what ways can you identify key talents? Where is the clue? Ram Charan: First of all, we can’t literally look at it. 2% is a concept, an imaginary number, not an absolute value. In fact, if it is a large company, such as 10,000, 50,000, 100,000 companies, the key talent we are talking about may be 100, 200, 300 people. These key talents have high ambitions. They look for new ideas, new opportunities, and they always attract people’s attention. They want to build something. They know the risks, and of course they may fail, but they are always driven by some great things and missions, and they are determined to achieve them. Within the company, we can do some internal identification, selection, and track records of them, of course, will make some mistakes, regular updates, adjustments, such as refreshing once a quarter. TBR: Is this key talent you talked about the same concept as the high-potential talent we often hear? Ram Charan: High-potential talent is a subset of the key talents we speak. TBR: In real business, there may be some key talents (2%), where he is robbed.

As a leading company, master the core technology and key talents, how to retain these talents? Ram Charan: When it comes to retaining talent, it is suitable for anyone, not just 2% of key talents. First and foremost, the boss is right? Have you equipped him with the right superior? People leave their jobs because many of them are dissatisfied with their superiors. Second, are they not right? Have you put them in the right positions? This position can make them ambitious, make them successful, and they can’t fail if they come up. Third, is the money given enough? Is it enough to give them money before competitors hunt them? These three points are very important. How to find the right CEO? TBR: I just mentioned that CHO may not be a CEO. As the saying goes, “A thousand troops are easy to get, and one will be hard to find.” How can we find the right CEO? Ram Charan: This is an eternal problem. We may make mistakes and of course we should correct them immediately. Find the right CEO. First of all, who is going to find? Who will go to the interview, who will recommend them? The person who “looks” is right. Not everyone has the ability to find a CEO. Also, how to find? The first step is to understand the company’s background and understand the company’s development stage. Some companies need to transform, and some need to grow. Some companies want to change new technologies, while others need to deal with government relations.

Some may have to do all of the above at the same time. Last week, we came into contact with a Chinese case about how to take the next step after recruiting a new CEO, because the company may need to make a major transformation. So, first of all, what is the stage of the company? Second, what is the most important key criterion at the company’s current stage. What are the key criteria that the most sought-after CEOs need? Third, you must recruit some people to interview and compare, and then go and see, who may be more suitable among them. Fourth, after finding the right person, what we should do to help the new CEO succeed. So, this is not an easy task, very hard. TBR: What capabilities, qualities, and key criteria does the CEO need? Ram Charan: Is it a qualification for becoming a CEO? The CEO is a position that does not require a formal degree. You can not receive formal education, and even a high school diploma does not have to be. Every country in the world has a very successful CEO with no formal degree. There are Chinese, and India. Why is this? Because to become a good CEO, you need to understand the needs of customers and customers, and better meet the needs of customers than other competitors. You have to know how the company can make money.

If you are a big company, you must also know how to build an organization and make the process scalable. These can be learned, can be learned through books, meetings, and other people, but not necessarily officially go to school to report, take the degree. TBR: When answering the questions and qualities that the CEO needs to have, Chalan’s answer is more general. Does Teacher Yang add this question? Yang Yongmei: I feel that I need to look at the specific historical stage of this enterprise development and what is needed. For example, I originally invested in private equity. I have invested in this big enterprise.

The problem facing this enterprise is to turn losses into profits, or to develop rapidly. This is different for people. For example, the same rapid development is in the case of the success of existing business, large-scale replication, and existing business has developed to saturation, to use new models, even to open up new business, or to expand In new areas, the required capabilities are different. At this time, the first step in matching people and posts is to define the core competencies required for the post at this stage. This is critical.

Rather than saying that this person is good, the character is good, and there is prestige in the organization, naturally it will be fine. Nor is it because he graduated from a prestigious school and worked in a big company. If the position is very high, it is naturally appropriate. This is not the case. TBR: You are a consultant and have had contact with many CEOs, such as Jack Welch. In your career, have you seen a particularly successful case of CEO selection and succession? Share it with us? Ram Charan: A lot of successful cases. For example, China’s Alibaba and Ma Yun are doing very well.

The current CEO selected by Microsoft four years ago, Satya Nadella, is also very good. Spin-off of Human Resources TBR: The work of human resources can be divided into two parts, one is administrative work, and the other is strategic human resources work. “Human resources must be transferred to strategic human resources work.” This slogan has been called for many years. However, in the actual work process, the human resources department, the human resources manager is also good, a lot of time is still doing the work in the previous part, the latter part has no time to do, or has no ability to do. What is the reason for this situation, how to change such a status quo? Ram Charan: First of all, many (80%-90%) of the administrative HR work has been automated or will be automated.

Second, create a separate department within HR. The job is to handle administrative tasks, automate these tasks, and use machine algorithms to increase productivity. Many companies are doing this. That is, a digital solution. TBR: You once had an article in the Harvard Business Review, “Breaking the Human Resources Department” or “Dismantling the Human Resources Department.” Mr. Zhang Ruimin also has an argument that is to eliminate the middle layer, which sounds more alarmist. So, where is the direction of human resources reform? Ram Charan: I have to clarify that whether it is “splitting” or “exploding”, it is added by the editors later, not my original intention. However, human resources organizations must be divided into two parts, one is strategic human resources work such as leadership and organization, and the other is administrative affairs.

Administrative affairs must be automated, and some companies are doing such spin-offs, and some companies are about to do so. This is what I want to emphasize. TBR: After the split is finished, what’s next? Ram Charan: The staff also made corresponding adjustments. Every part, find the right person to do, to manage. Set goals for each unit. Administrative affairs HR work, setting automation goals for it. What is the proportion of automation? The employee experience is also a goal. How to attract external talent TBR: Now let’s talk about external talent. How can we effectively attract external talent? In some companies, there are a lot of senior managers introduced, but they usually don’t survive well.

How can these external talents survive better? Ram Charan: First of all, ask yourself, people are doing well outside, why should we join our company? The first thing to answer is this question. If you don’t know the answer, you can’t attract outside talent. Then when we go to track these external talents, we need to find out where they are dissatisfied with the existing work. Can these dissatisfaction come to us to solve it? This is the most important. Second, why can’t the outside executives survive after coming in? There are three reasons for this: First, the boss did not spend enough time to help them establish themselves in the company; Second, external executives bring new perspectives that often contrast with existing ones, so conflicts arise.

The boss does not come to solve the problem; Third, some new ideas brought by external executives. If their thoughts are not accepted, they may feel that they have no hope and will leave automatically. Or, we may have invited a wrong person, this person’s performance ability is not good, this is also likely to be asked to leave. TBR: You just talked about some failed cases and the reasons for the failure.

In order to let these external talents come in, he can stay, or our original workforce, and do not have so-called resistance to external talents. What kind of work do our business leaders need to do? Rather than generalizing, is it good to provide support? Ram Charan: The boss needs to spend time and energy to pay attention to the new ideas of these external executives, and then choose the most likely to succeed, to help the external executives to achieve.

TBR: If there is someone inside who doesn’t cooperate, just want to do it with the person who comes in outside, what should I do? Ram Charan: The boss solved it. TBR: How is this so-called solution solved? Is it a dismissal? Ram Charan: Dismissal is one of the methods. But not all. When a newcomer comes in, there is usually another person who is threatened. This person is incapable of being out of date, out of date, so he is not retained, or he needs to complete his work in different ways. This is why we recruit people from outside. Therefore, the malicious block is usually one or two people. He feels insecure and has no sense of security. So, it will solve this problem. Dismissal is a method, but it is not to say that it can only be resigned.

TBR: As you mentioned in the book, in order to attract outside talents, or even to dig out the CEO of the other party, the company will be acquired, and the whole team will be one-stop. Ram Charan: Yes, this happens from time to time. They buy a company, sometimes just to get the CEO of the other party. Yang Yongmei: Is this a trend, or is it just happening? Ram Charan: It just happened. It depends on the specific conditions. TBR: How do you evaluate the phenomenon of this team? Ram Charan: I don’t comment on it. According to the actual situation.

Let me give you an example. JP Morgan bought a bank in Ohio in the United States in the past, in order to find their CEO to serve as CEO of JPMorgan Chase. His name is Jamie Diamond. This case will be mentioned in my new book, Execution 2, in the next quarter. John Chris Morgan (the eldest son of the Morgan family) served as chairman of JP Morgan Chase, but was not responsible for anything. Jamie Dimon is the CEO and executive CEO responsible for the comprehensive strategy of JP Morgan Chase. Their transition was very successful.