What the CEO wants you to know is a book written in 2001 (an updated version was published in 2017, but this is a review of the older one), but it’s by no means dated. Written by Ram Charan, an adviser to senior executives and former teacher at Harvard and Northeastern universities in the USA, this book may have old illustrations, but the principles are timeless.
The main focus of the book is explaining what great CEOs do which have been summarised by the author as:
- Understand the basic building blocks of a business and use them to figure out how your company makes money and operates as a total business.
- Decide what to do, despite the flutter of day-to-day business and the complexity of the real world.
This is not a big book, it has just 137 pages of reading content written in simple-to-understand and engaging language. What I particular like about this book are the short stories Ram drops in to illustrate some of the principles he’s teaching. The book has nine chapters split across four parts. I have written very brief descriptions of what’s in each chapter below.
Part 1 – The universal language of business
Chapter one – What Jack Welch and street vendors share: The essence of business thinking – The title of this chapter says it all. What do CEOs and street vendors have in common? Apart from the scale of the venture, Ram asserts that the basics of business are similar. They need finance to build or buy their products, they need to sell, make profit and market their products.
Chapter two – every business is the same inside: Cutting through to cash, margin, velocity, growth and customers – A core aspect of business is discussed here, and it’s the act of money making. Three aspects of money making covered are:
- Cash generation: This is about answering questions such as, does the business generate enough cash? What are the sources of cash generation? How is the cash being used? According to Ram, a business person who can’t answer these questions will fail in their business.
- Return on assets: Assets are what is invested in a business and these can range from money to more physical assets like land. A successful business must be able to generate a reasonable return from the assets. For instance, a person who gets a loan to start their business has to not only generate enough returns to cover the loan repayments, but also make a profit
- Growth: This is about the growth of a business. A business that isn’t growing will be overtaken by competitors and may eventually fold up.
Chapter three – Understanding your company’s total business – How the pieces come together – Here Ram emphasizes how important it is for all individual components of a business to come together to facilitate business success. The business components that need to come together are, cash generation, margin, velocity, return on assets, growth and customers.
Part 2 – Business acumen in the real world
Chapter four – The world has complexity, leaders provide clarity – figuring out business priorities: The premise of this chapter is that CEOs use the same business sense as street vendors to cut through business complexity to deliver outcomes. According to Ram:
They use their business acumen to determine clear, specific priorities, or action items, that make money in the real world and create wealth for stockholders and owners.
He uses a number of examples from Ford, Apple, GM and Kmart to illustrate this principle.
Chapter five – wealth is more than making money – Seeing the business like an investor: This chapter focuses mainly on the importance of the price-earning or PE ratio. Ram writes about what it is, where it came from, how to manage it and how to boost it. He uses some real examples to illustrate this.
Part three – Getting things done
Chapter six – Growing people takes courage – Making matches, fixing mismatches: This is my favourite part of the book as it’s about developing people. The emphasis is on getting things done through others which is a crucial aspect of good leadership. Here’s a quote from the book on the subject:
Personality alone is not what makes a company deliver. It takes insight into how the organization really works and how to link people’s actions and decisions to the right priorities.
According to Ram, this requires the right people to be in the right jobs and when people are placed into jobs they are not fit for, dealing with the mismatch promptly. The latter part of the chapter focuses on business and behavioural coaching.
Chapter seven – Making groups decisive – designing social operating mechanisms : The term “social operating mechanisms” used by Ram in this chapter sounds very technical, but it refers to a system of coordinating the efforts of all individual staff so they work for the good of the organisation as a whole. That is what this chapter is about and an example from Walmart and the late Sam Walton is used to illustrate how it may work in practice. Some more information on how to design social operating mechanisms is also provided.
Chapter eight – What to do and how to do it – A CEO with an edge in execution: Having an edge in execution or successfully executing business priorities requires a number of factors coming together and according to Ram:
An edge in business execution comes from having the right people in jobs, synchronising their efforts and releasing and channelling their energy toward the right set of business priorities
Ram also expresses that while business acumen into the organisation helps a leader to select the right priorities, insight into the organisation and people is necessary to get energy aligned for the purpose of successfully executing the priorities. Ram again uses an example from a former CEO of a company called EDS to explain this concept.
Part four – Your personal agenda
Chapter nine – Your part in the big picture – Rekindling the spirit of the lemonade stand:
This is the last chapter in the book and it’s really a review of what was covered in the previous eight chapters. It also contains some key questions to answer around assessing the total business and cutting through complexity.
The one lesson for me
A habit I am developing is to curate one lesson from each book I go through. My lesson from this book is from chapter six, growing people takes courage. It’s around the difference between business coaching and behavioural coaching. To be honest I wasn’t aware there was a difference between the two. In my next post I will write a brief summary about my learning on that topic.