- Aug
- 14
- 2006
- 12:28 PM
CEO survey: people are key, but tech is under-delivering
- By: Ray Pellecchia
- File Under: NYSE
Have just been reading through the NYSE CEO Report 2007, our second annual survey of CEO viewpoints, published in the new nyse magazine. Here's the link to the news release. The survey respondents were more than 200 CEOs from 21 countries and more than 50 industries. Together their companies have 3.8 million employees, 2005 revenues of nearly $1.6 trillion, and … well I guess that’s enough numbers, you get the idea.
I know the HybridTalk audience is trader-ish, tech-ish, regulator-ish, ... market-ish. But don’t tell me you don’t care where the people in your respective corner offices are taking your companies.
Here are 10 findings I thought were interesting:
• Only one in four CEOs say the ROI of their technology investments fully met or exceeded their expectations. A big disconnect, no? Are CEOs being unrealistic, or are technologists under-delivering results, or mismanaging expectations? Is it that every technological advance naturally leads to wanting more? Maybe there’s an inherent flaw in the process of technologists proposing an initiative, getting executive buy-in, and demonstrating results. Or some combination of these, or something else altogether?
• Three of four say their management team will have “more” or “much more” impact on top-line growth in the coming year than in the past three. Remarkable that “management team” out-polled new technology, new product development, strength of brand and all other factors on this one.
• Further on the previous point, more than half say they will spend more next year on employee development and retention. That makes intrinsic sense: in a more competitive environment, with new products and technologies becoming commoditized faster, having better people than your competitor is the best way to ensure a sustainable edge. People make all the other competitive advantages possible.
• To retain employees, CEOS are leaning more toward cash bonuses and stock incentives (53 percent each), employee education (51 percent), and flexible schedules (44 percent); 27 percent say employee discounts are less effective. I would take all of the above, though I acknowledge that discounts on the product on our shelves -- listed stocks -- might be a little problematic.
• Predictably, CEOs say they are spending more time on regulation/compliance and reporting to the board. But where is that time coming from? For one thing, 27 percent say they are spending less time on customer relations. That may be a downside of the demands of the new regulatory/governance regime, or maybe it’s got to do with the fact that 40 percent say it’s easier to attract customers now than three years ago. Either way, I think less time with customers will ultimately result in more time explaining poor performance.
• Eight of 10 CEOs expect operational efficiency to have more impact on profits than in the past. Three quarters say management will (there’s that management team again!).
• When asked to name the single most positive outcome of the Sarbanes-Oxley Act and NYSE governance rules, 30 percent say directors are more engaged, and more than a quarter say investor confidence has improved, but only 6 percent say they believe investor are actually better served, and only 1 percent say boards are more effective. More engaged doesn’t equal more effective? Maybe we need some re-direction of that engagement?
• Forty-eight percent of U.S. CEOs and 23 percent of non-U.S. CEOs say their compliance costs have increased 100 percent or more in the last couple of years. Doubling in three years is what caught my eye there.
• How do CEOs monitor corporate reputation? The most common ways are informal discussions with relevant parties (87 percent), discussions with or surveys of employees (84 percent) and reviews of published rankings (83 percent).
• Sixty-five percent cite the U.S. as the country where they plan to focus more through 2007; China was second at 45 percent. Wonder what those numbers will look like in 10 years, or even 5.
Recommend the report itself or the magazine article based on it. And as always, welcome hearing what you think.
Comments
FYI, here's a link to a Reuters article about the survey, called, "CEOs call governance costs burdensome, but helpful."
by Ray Pellecchia on August 14, 2006 4:35 PM
As author of the nyse magazine article that reported on the NYSE CEO Report 2007, the thing I was most struck by when talking to the CEOs for this year's report was, no matter what the external or internal pressures of leading a major corporation, how enthusiastic they were about their jobs. Make no mistake, they were candid about the significant stresses and time-demands of the current regulatory environment. But for the majority of the chiefs I spoke with, the opportunities they saw for growth far outweighed the stresses of the job.
by Susan Caminiti on August 15, 2006 11:04 AM
Susan -- Thanks for sharing that perspective. Glad to hear there's still some "fire in the belly." I think passion for the work can make a big difference in addressing or at least dealing with today's challenges.
by Ray Pellecchia on August 15, 2006 12:58 PM
Came across another article on the survey, on MarketWatch: "CEOs will focus on NAFTA region; will also look to U.S. and China in coming year."
by Ray Pellecchia on August 15, 2006 1:46 PM
In the just released NYSE CEO Report 2007, one theme that stands out for technologists is the that of the partially unfilled promise of technology. A mere one-fourth of CEOs claim the ROI of their company’s technology investments have fully met or exceeded their expectations while an almost equal proportion say the ROI on their investment in technology has fallen short of their expectations. Since ROI has a benefit and a cost component, here are some observations on how to get ROIs more in line with expectations by increasing benefits and/or reducing costs:
Be involved, really involved.
Senior management shouldn't abdicate their responsibility in critically questioning strategies, projects, benefits, costs, etc. Too many view this subject as "rocket science" and defer to the technology "expert" they've hired. This "expert" - CIO. CTO, consultant, etc. may be excellent but can be too close to the subject matter. Fresh perspectives/questioning from other non-technology management can yield valuable insights. I remember a Fortune 500 CEO I made a presentation to who stopped me at the first PowerPoint slide and said "Whoa, remember I was only a history major" and told me that I could go ahead with the project even though he had not asked one question. I appreciated the vote of confidence and the project was successful but I would also have welcomed some more critical review. I am a big proponent of thinking like a start-up - if I had limited resources and limited time, would I do this project the same way? Is there a more creative approach I could take that would deliver most of the value at a lower cost and in a shorter time? Ben Franklin said "Necessity is the mother of invention". I think too many companies aren't sufficiently "needy" to become inventive.
Software should not be built like Model T Fords
Too many firms have a modern version of the automobile assembly line for software. Business analysts give their requirements to a systems analyst who then gives it to a development manger who gives it to a project manager who gives it to a number of developers and tech writers and operations staff, etc., so that in no time we have yet another example of the "Mythical Man-Month" effect. Each person in the assembly line has their pre-defined box whose limits they are supposed to work within. A better model is to assign multiple roles to a smaller number of people, people who can do several jobs well. Gartner has coined a term for this - the versatilist. This kind of job strategy provides greater value to the firm and higher levels of job satisfaction to the employee. Many firms have a quick fix for the assembly line cost - they move it offshore so they can do the inefficient process at a lower cost. Offshoring should be reserved for either very well understood problems (e.g. accounting systems) or for severe resource shortfalls. Moving inefficient processes to a cheaper venue is merely a band-aid. One other thing to keep in mind is that productivity of development projects is inversely proportional to the distance between all the stakeholders. Have all the business and technology folks in one big room - highly productive. Separate them by floors or buildings - watch the productivity decrease. Increase the distance to thousands of miles - well, you get the idea. This proximal packing configuration may not always be practical, but you should be mindful of it should it be possible. I always got a laugh out of the early Internet retailers and service providers who proclaimed the end of the shopping mall because it would be replaced by
cyberspace locations, totally discounting the social patterns of humans whose needs and habits have been evolving for many millennia and aren't easily replaced by a 19" monitor. The same principles apply to the workplace.
Folk wisdom: "Two heads are better than one" but "too many cooks (engineers) spoil the broth (system)"
I am a big fan of simplicity in systems. Simple designs are cheaper and faster to build and easier to support. Complexity is the enemy of reliability. Projects that have a large staff tend to be overengineered - all the very competent people on the project need to have their contributions incorporated in the project because that's how they're compensated. The result - very busy Visio diagrams highlighting everyone's contribution to complexity. The war in Afghanistan was essentially won by a very small number of highly qualified soldiers. Believe in the power and ability of small teams.
Productivity?
Speaking of productivity, don't fall for the productivity trap as a justification for projects. So many times I have heard that if we do "this" our staff will be significantly more productive. Who can argue against increased productivity? But if the net effect of the technology project is to allow the work that was not enhanced by this project to expand to fill
the newly found time, then there has been little or no productivity increase. If you can't measure this productivity increase in head count (either reduced or not hired) then make sure you have a valid program of measurement to see if there really was a productivity gain.
by Steven Rubinow, EVP & Chief Technology Officer, NYSE Group on August 16, 2006 11:04 AM
Steven -- Enjoyed your observations. Thanks for writing.
If anyone else cares to comment, the polls are still open, so to speak.
by Ray Pellecchia on August 16, 2006 1:20 PM
From my perspective as the lead researcher on the study, there is an underlying theme in this year’s effort – one that isn’t all that apparent on the surface but is worth some additional thought. Call it a potential corporate culture shift.
Let’s put this in a bit of historic corporate perspective. What is the enduring impact of the public’s perception about the decade of corporate greed and poor behavior in the 1990’s? Perhaps it is a new generation of corporate leadership that understands the power that can be harnessed through an energized, talented, and well-treated workforce – power that will drive the revenue and profit growth expected by Wall Street.
From this year’s survey it seems apparent to me that CEOs are valuing their people to a greater degree. They acknowledge they can’t succeed on their own – their management teams are critical. They are also spending money on employee-centric activities such as employee education and retention efforts. Diversity initiatives are also receiving greater funding in 2007 according to the survey.
To me, this adds up to a long overdue focus on people. It doesn’t negate the focus on the bottom line……it recognizes that people are the core of any business and a critical element of meeting financial targets. Your thoughts?
by Jeff Resnick on August 16, 2006 2:48 PM
I found the reputational area of the survey to be of particular interest. BBDO is in the business of building brands. In this role, we spend much of our time helping senior management deal with strategic issues related to their brands.
It comes as no surprise that CEO's are increasingly focused on protecting their company's good name and building awareness of their company among customers. In fact, we work equally hard at BBDO to build our own strong corporate reputation as the place where clients want to come and people want to work.
We've gained success based on our ability to attract and retain a disproportionate share of the limited pool of exceptional talent in the industry. And once we have attracted this talent, we invest a significant amount of time, energy and resources into developing our "human capital."
Internal surveys allow us to benchmark employee satisfaction. Mentoring programs and diversity training are two initiatives we began last year and are expanding.
Other forms of training, annual "town hall" meetings, senior staff meetings and weekly correspondence from the CEO to everyone in the agency help keep people informed and involved. Our people tell us one of the most important criteria for building morale is simply keeping everyone connected with news and information (in "straight talk" terms), ensuring everyone is united behind our mission.
At BBDO, that mission is to create the world's most compelling commercial content. We sometimes express this as our mantra: "The Work. The Work. The Work." In the absence of great work, nothing else matters.
However, it's our belief that great work is not possible if we don't have the best people on our team. The best people in terms of passion, creativity and strategic savvy.
Our people contribute to our reputation as much as every dollar of revenue growth, any piece of new business or any award...three important measures of success.
by John Osborn, President and CEO, BBDO New York on August 16, 2006 3:48 PM
The recent NYSE CEO Report concluded that CEO's monitor corporate reputation in the following manner: 87% utilize informal discussions with relevant parties; 84% utilize discussions with or surveys of employees; 83% utilize reviews of published rankings.
Clearly, such qualitative methods, as listed above, are important to C-Level executives. However, those who take the time to quantitatively measure their brand strength, bring their companies into more fact-based decisions, and are rewarded with stronger brand value, and ultimately increased stock performance. The key for CEO's is to realize the enormous value of their corporate reputation and building it consciously over time toward targeted goals.
Through CoreBrand’s exhaustive 16-year quantitative research study evaluating the corporate reputations of 1200 companies across 54 industries, we have found that intangibles like the corporate reputation can be:
• Accurately and consistently measured
• Managed like other business assets
• Grow significantly in value over time
It is clear that intangible assets are increasing in size at most corporations as well as increasing in proportion of the total assets. The current accounting standards do not account for the true nature of intangibles like corporate reputation or what we call the corporate brand.
by James R. Gregory, CEO, CoreBrand on August 17, 2006 8:25 AM
Very good reading. Peace until next time.
WaltDe
by WaltDe on August 31, 2006 12:39 PM
Comment on this entry
Forward this entry to a friend