How to Think and Perform like a CEO: Link the External World with the Internal Organization

A.G. Lafley on the Unique Work of CEOs

In this article (PDF of full article) in the May 2009 issue of the Harvard Business Review, Proctor & Gamble’s Chairman and outgoing CEO, A.G. Lafley reflects on the unique responsibilities of CEOs. What makes this article engaging is that A.G. Lafley uses the context of his commendable achievements at the helm of Proctor & Gamble to elaborate on the teachings of management guru Peter Drucker.

“The CEO is the link between the inside and outside. He alone experiences the meaningful outside at an enterprise level and is responsible for understanding it, interpreting it, advocating for it, and presenting it so that the company can respond in a way that enables sustainable sales, profit and total shareholder return (TSR) growth.”

Drawing from Peter Drucker’s teachings, A.G. Lafley identifies the four fundamental tasks of a CEO. Here is a summary:

1. Defining and interpreting the meaningful ‘outside.’ Identifying which external stakeholders matter the most. Recognizing where results are most meaningful. Clarifying and communicating the priority of external stakeholders.
2. Identifying and focusing on the competitive spaces where the organization can win. Inquiring, “What is our business? What should it be? What is not our business? And what should it not be?”
3. Balancing the present and the future. Determining the optimum balance between yield from present activities and investment in a highly uncertain future. This involves, (1) defining realistic growth goals, (2) creating a flexible budgeting process, and (3) allocating human resources in a way that identifies and develops good people for today and tomorrow.
4. Shaping the values and standards of the organization. Winning with those who matter most and against the very best.

Think like a CEO, Focus on Organizational Performance

I believe that everybody is a CEO. Whatever your span of responsibilities—supervisory, managerial or leadership—you are accountable to the external stakeholders. These stakeholders measure you purely by your ability to identify opportunities and get things done through the resources you have. Here are five essential initiatives to help you think and act like a CEO.

1. Understand the context of your organization or project. Change your perception away from the minutiae of your organization and seek to understand what your organization means in the broader context and how it fits into the external world. Draw from this external perspective to establish the right directions and align the work of your entire organization with these organizational goals. Differentiate between short-term and long-term opportunities.
2. Identify the primary external customers—these could be higher-level managers, other groups within your company or a consumer who uses your products. Use this customer standpoint to make every strategic decision and choose the right actions. Connect each initiative to its beneficial results to your customers.
3. Communicate your direction and priorities to your organization. Help your employees determine where to focus their own efforts and how they eventually fit in the broader context of the external world.
4. Focus on execution and achieving results. Introduce a culture of accountability. Ensure that each employee actually does live up to the values and goals of the organization.
5. Coach your employees and develop them. Understand and align their personal values and aspirations to those of the organization, to the extent possible. Per Peter Drucker, “make sure that the performing people are allocated to opportunities rather than only to ‘problems.’ … Make sure that people are placed where their strengths can become effective.” Plan for succession.