Monday, April 10, 2006

The CEO: One Key to Success

What are the boundaries of a global CEO's job ... or for that matter any CEO's job? Focus only on shareholders or serve as the company's ambassador-at-large to all of its constituencies?

In today's internet-oriented universe — where a single person can bring down a company — profit-making is inextricably linked with a broader mission: forging good relationships with every stakeholder. Nevertheless, there are critics who see this approach as distracting a CEO from his main job, building shareholder wealth.

To the contrary, says A.G. Lafley, CEO of Proctor & Gamble. In a recent interview with Alan Murray of The Wall Street Journal, Lafley didn't talk much about shareholders. Instead, he talked about stakeholders.

In addition to P&G's 2-½ billion customers and its shareholders, investors and analysts, who are the company’s stakeholders? Employees, retailers, distributors, wholesalers, suppliers, members of the communities in which it does business, regulators, retirees and a wide range of special interest groups concerned with everything from animal testing to the company's policies on global warming.

"We will never agree that a rat is as important as a human being," says Lafley, but talking with various groups helps define legitimate issues. The CEO routinely reaches out even to leaders of groups with diametrically opposed points of view (e.g., gay activists and Christian conservatives) to find a middle ground that works for all parties.

Lafley calls this approach "constructive engagement"; and he has employed it to solve boycotts and deal with a range of other challenging issues. He says that fostering a dialogue among stakeholders "is not an exercise of choice; it's a requirement of the job."

So what are the lessons every CEO can draw from this?
  • Outreach is critical. Parse your "corporate community" — break it into its constituent groups, analyze them and proactively dialogue with each.

  • Forecast potential issues. Examine the current and potential issues facing the company and the constituencies linked to them. Establish a discipline of checking such issues monthly, or even biweekly, to assess the relative degree of risk and urgency. Are they red light, green light or yellow light issues?

  • View your role as broadly as possible. Because your company's future rests with all its stakeholders, not just the shareholders, you must recognize that your job is global, political and demanding. It takes the skill of an ambassador to ensure your company’s ongoing success and profitability.

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