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Your CEO sucks? Here’s why your company will extend his contract.

October 28, 2009

I like Formula One, especially when my heroes are winning, and this season has been full of surprises. Here’s one that I picked up recently from the world of F1. Glad to know even that vaunted sport is not spared.

“‘News of the discontent at Brawn has filtered down the pit lane prompting rival teams, including Red Bull, McLaren and Ferrari, to attempt to lure the top brains behind the championship-winning car with lucrative job offers.’

Brawn chief executive Nick Fry, though, insists he is unaware of any unhappiness in the camp.

No one has said anything to me about this,” Fry told the paper. “I am extremely surprised. We will look into any concerns that people have, though I am not aware of any. As far as we are concerned these are internal matters but if there is an issue with anybody we are quite happy to talk to them about it.”

Source

Sound familiar?

You probably know a company or two where everyone’s fed up with the working conditions. The grapevine’s busy with crude jokes and cartoons about senior management. Its been going on a while. Some are so pissed they argue openly with managers. Then when you ask the CEO about it, he’ll go, “No, I’m not aware of this. No one told me. I am extremely surprised.” πŸ˜€

You also know companies whose customers are so pissed at their services they go to blogosphere for a noisy roasting. A hundred comments pour in from other similarly pissed customers. But ask the CEO and he’ll say, “No, I’ve never received a single complaint. I’m surprised. As far as I know, everything’s fine.”

So what do you do with such a CEO? Or more precisely, what should the board do with him?

Fire him?

Haha, in your dreams. Come year end, 9 out of 10 times they will give him a handsome raise and renew his contract for another 2 years. Yes! Give us more of your magic!! the board says.

If you doubt this, go read the local papers. See what’s happening in companies where morale is at rock bottom. See how the CEO’s contract gets renewed every time, with a nice bonus thrown in.

So all you management gurus, care to tell me what’s up?

I can only guess and here is my guess. It has nothing to do with morale. It has everything to do with numbers.

Okay, here’s what I’d do if I were the evil CEO.

See, sometimes when shareholders are clamoring for numbers and sales figures aren’t good enough, the only way to make profits look good is to revert to that old trick – cut costs.

So I cut corners. I reduce training. I do away with the coffee and tea in the pantry, the subsidized parking, the toilet paper. I axe the company trip and annual dinner. I also cut extra services to customers. No more refillable soda at the counter. Whatever I can restrict I restrict.

The staff will be pissed. So will the customers but I will give just enough not to scare off my most valuable customers. The 20% who gives me 80% of my money. I also look after the staff who keep this 20% happy. The rest of them I wouldn’t give a sh*t.

Meanwhile I will get ready for half the company to leave in disgust but I already have plans to get new blood in so go ahead make my day. Leave if you want.

The immediate effect: sales stay the same but because my costs go down, my profit goes up. The staff curses and swears at me but the board loves my numbers. I get my contract renewed.

I know what you’re thinking. How long can this go on? I agree. But it buys me time to clean house and get something going with the new blood I’m getting from the outside. New brooms sweep the best you see.

If that doesn’t happen, simple. I’ll just cite uncontrollable market changes, propose a buyout or merger and with some accounting magic, I still come up ahead.

Now you know why evil CEOs survive. But you know what? He’s not the only one to blame. Think of your hunger for good P/E ratios if you happen to have a few lots of the company’s shares. πŸ˜€

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2 Comments leave one →
  1. October 29, 2009 8:40 am

    PE ratio can be misleading πŸ˜› i don look at that nowadays.

    Anyway, 1 of the big bosses in my prev company is the typical salesman + consultant fella. The company was doing badly – no new projects, existing customers were pissed, employees were unhappy. But the board of directors loved him! Why? well, you’ve guessed it – numbers.

    And this was what he did – he pretended to fight for the employees and obtained a huge amount of training budget for us. Then he used 10% of them, pumped the 90% into ‘certain areas’ which ended up making the profit shot up. Smart eh?

    Most people were angry and left. But he just carried on, hiring new people to become the scapegoats. And he still get to pay for his BMW and bungalow πŸ˜›

    Perhaps companies with shareholders who care…should send some spies =_=

    I think most employees don’t understand how it works. The CEO’s job is not to look after the staff’s interest. Its to look after the board’s interest, and the board looks after the shareholders’ interest. To shareholders, people are just a resource to make money from, like tyres on a car. They work, wear out, and is replaced. The only time shareholders worry is when their share prices drop. Workers career paths… they normally don’t give a shit.

  2. October 29, 2009 10:40 am

    Thats why ,

    If the Owner of the company is the CEO of the company .
    None of this bullshit problem will come up .

    But Damien , your post make a CEO position sounds really fun πŸ™‚

    True, but only if you are the owner-CEO or the MD. A salaried CEO is just a glorified employee and he will get kicked around by the board.

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