Why CEOs Shouldn't Set Strategy

Last Updated Jun 5, 2008 9:30 AM EDT

Are you spending too much time trying to come up with detailed strategy development? Take a step back, let your team take the lead, and then hold them accountable for the results.

Three reasons why CEOs should stay out of strategy-setting:

  1. You don't know everything. Former Asda boss Allan Leighton once said, "I'm lucky if I'm right even half the time." Seeking to have all the answers creates a dependent, slow and unresponsive organisation. Bob Nardelli's dismissal in 2007 as CEO of Home Depot in the US "was driven by his failure to hear and respond to investors' concerns -- very much the actions of an imperial CEO," according to Booz Allen's strategy+business.
  2. It inhibits others and prevents ownership. To the rest of your team, it can feel like an order. You may get compliance but will you get genuine enthusiasm and support?
  3. CEO tenure periods, at around five years, are less than the strategy cycle. There is significant pressure on you to deliver big results quickly, even if that goes against the best longer-term strategy for the business.
What should the effective CEO be doing? In short, providing leadership.
Five things the CEO should be doing to help strategy-setters:
  • Set goals. As CEO of Diageo, John McGrath set his top team a three-year profit target, demanded the shape of profit growth be acceptable and insisted the strategy be in line with the company's vision. What he didn't do was prescribe specific solutions -- he wanted his team to create the answers and then deliver against them.
  • Engage the top team. At one client of mine, the CEO used the top team to develop a refreshed strategy in a series of full-day sessions. The time spent allowed them to agree on the business's key strategic issues and explore alternative routes forward. The result? An agenda with strong buy-in from the top team.
  • Align with the company's values. When Herb Kelleher believed that a strategy or initiative was not in line with Southwest Airline's raison d'etre, he would simply reply: "And how will this help us be the low-fare airline?"
  • Communicate, communicate, communicate. As CEO of Alliance Boots in the UK, Richard Baker would communicate -- in major presentations and one-to-one encounters -- the company's six strategic priorities. Over time people from across the business began to understand what was important and why, and changed their approach and behaviour accordingly.
  • Have the final say on big decisions. You must sign-off on strategy and you should also have the final say on big investment decisions.
  • Stuart Cross

    Stuart Cross is a founder of Morgan Cross Consulting, which helps companies find new ways to drive substantial, profitable growth. His clients include Alliance Boots, Avon and PricewaterhouseCoopers.