The April 2017 issue of the McKinsey Quarterly includes an article by Michael Birshan, Thomas Meakin, and Kurt Strovink titled “What makes a CEO ‘exceptional’?” Great question, huh? If your job is developing leaders, you want to know the details so you can set them up as a model. Here’s how the consultants set about answering it.
“Our focus was on the top 5 percent of the CEOs in our sample as a whole whose companies’ returns to shareholders had increased by more than 500 percent over their tenure.”
That’s it? Total return to shareholders is the only measure of success? That’s crazy. If that’s the only measure, Ken Lay was one of the top CEOs of all time.
Leadership development: TSR is the wrong measure
Our business culture has a bias for things you can count and measure with numbers. Total Shareholder Return (TSR) is one of them. Alas, TSR doesn’t measure many of things that are important, but that can’t be counted. Even worse, if TSR is the sole measure of success, the emphasis is on the stock price and short term returns, not the long-term health of the company.
Leadership development and the uncountables
We expect leaders to do more than make the stock price go up. We expect leaders to inspire and engage. We want the leaders at the top of the org chart to do many things that are important but that can’t be counted. Sometimes, we expect the CEO to sacrifice short term results for long term gains, even if those gains have nothing to do with Total Shareholder Return.
Leadership development for the long game
Develop leaders for the long term. Develop leaders who can get results you can count and results that you can only assess. Your company and your people will be the better for it.