Strategy & Corporate Finance Practice

The mindsets
and practices of
excellent CEOs
The CEO’s job is as difficult as it is important. Here is a guide
to how the best CEOs think and act.

by Carolyn Dewar, Martin Hirt, and Scott Keller

© mbbirdy/Getty Images

October 2019
 A company has only one peerless role: chief With this article, we set out to show which mindsets
executive officer. It’s the most powerful and sought- and practices are proven to make CEOs most
after title in business, more exciting, rewarding, effective. It is the fruit of a long-running effort to
and influential than any other. What the CEO study performance data on thousands of CEOs,
controls—the company’s biggest moves—accounts revisit our firsthand experience helping CEOs
for 45 percent of a company’s performance.1 enhance their leadership approaches, and extract a
Despite the luster of the role, serving as a CEO can set of empirical, broadly applicable insights on how
be all-consuming, lonely, and stressful. Just three in excellent CEOs think and act. We also offer a self-
five newly appointed CEOs live up to performance assessment guide to help CEOs (and CEO watchers,
expectations in their first 18 months on the job.2 such as boards of directors) determine how closely
The high standards and broad expectations of they adhere to the mindsets and practices that are
directors, shareholders, customers, and employees closely associated with superior CEO performance.
create an environment of relentless scrutiny in Our hope is that all CEOs, new or long-tenured,
which one move can dramatically make or derail an can use these tools to better apply their scarce
accomplished career. time and energy.

For all the scrutiny of the CEO’s role, though, little

is solidly understood about what CEOs really do to A model for CEO excellence
excel. McKinsey’s longtime leader, Marvin Bower, To answer the question, “What are the mindsets
considered the CEO’s job so specialized that he and practices of excellent CEOs?,” we started with
felt executives could prepare for the post only by the six main elements of the CEO’s job—elements
holding it. Many of the CEOs we’ve worked with have touched on in virtually all literature about the role:
expressed similar views. In their experience, even setting the strategy, aligning the organization,
asking other CEOs how to approach the job doesn’t leading the top team, working with the board, being
help, because suggestions vary greatly once they go the face of the company to external stakeholders,
beyond high-level advice such as “set the strategy,” and managing one’s own time and energy. We then
“shape the culture,” and “get the right team.” Perhaps broke those down into 18 specific responsibilities
that’s not surprising—industry contexts differ, as do that fall exclusively to the CEO. For example, setting
leadership preferences—but it illustrates that fellow a corporate strategy requires that the CEO make the
CEOs don’t necessarily make reliable guides. final call on an overall vision, a set of strategic moves,
and the allocation of capital.
Nor has academic and other research on the CEO’s
role done much to illuminate how CEOs think and Focusing on those 18 responsibilities, we conducted
what they do to excel. For example, recent studies extensive research to determine what mindsets and
that detail how CEOs spend their time don’t show practices distinguish excellent CEOs. We mined our
the difference between a good use of time and a proprietary database on CEO performance, which is
bad one. Academic research also demonstrates that the largest of its kind, containing 25 years’ worth of
traits such as drive, resilience, and risk tolerance data on 7,800 CEOs from 3,500 public companies
make CEOs more successful. This insight is helpful across 70 countries and 24 industries. We also
during a search for a new CEO, but it’s hardly drew on what we’ve learned from helping hundreds
one that sitting CEOs can use to improve their of CEOs to excel, from preparing for the job and
performance. Other research has tended to produce transitioning into it, through navigating difficult
such findings as the observation that leaders are decisions and moments of truth, to handing their
effective in some situations and ineffective in responsibilities over to a successor.
others—interesting, but less than instructive.

1
Chris Bradley, Martin Hirt, and Sven Smit, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds,
Hoboken, NJ: John Wiley & Sons, 2018.
2
Eben Harrell, “Succession planning: What the research says,” Harvard Business Review, December 2016, pp. 70–74, hbr.org.

2 The mindsets and practices of excellent CEOs

 The result of these efforts is a model for CEO the dreaded “hockey stick” effect, consisting of a
excellence, which prescribes mindsets and projected dip in next year’s budget, followed by a
practices that are especially likely to help CEOs promise of success, which never occurs. A more
succeed at their particular duties (Exhibit 1). What realistic approach recognizes that 10 percent of
follows is a detailed look at these mindsets and companies create 90 percent of the total economic
practices. Although our findings are most relevant profit (profit after subtracting the cost of capital),
to CEOs of large public companies, owing to our and that only one in 12 companies moves from being
research base, many will also apply to CEOs of other an average performer to a top-quintile performer
bodies, including private companies, public-sector over a ten-year period. 3 The odds of making the
organizations, and not-for-profit institutions. jump from average to outstanding might be long, but
CEOs can greatly increase the probability of beating
Corporate strategy: Focus on beating the odds those odds by adhering to these practices:
It’s incumbent on the leader to set the direction
for the company—to have a plan in the face of Vision: Reframe what winning means. The CEO
uncertainty. One way that CEOs try to reduce is the ultimate decision maker when it comes to
strategic uncertainty is to focus on options with the setting a company’s vision (where do we want to
firmest business cases. Research shows, however, be in five, ten, or 15 years?). Good CEOs do this
that this approach delivers another sort of outcome: by considering their mandate and expectations

Exhibit 1

Excellent CEOs approach the role’s six elements with certain mindsets and adhere to 18 practices
when fulfilling their unique responsibilities.

Personal working norms Corporate strategy

Office: Manage time and energy Do what Focus on Vision: Reframe what winning means
Leadership model: Choose authenticity only you beating Strategy: Make bold moves early
Perspective: Guard against hubris can do the odds Resource allocation: Stay active

External stakeholders Organizational alignment

Social purpose: Look at Center Talent: Match talent to value
on the CEO Manage
the big picture performance Culture: Go beyond employee
Interactions: Prioritize and shape long-term excellence engagement
“Why?” and health
Moments of truth: Build Organizational design:
resilience ahead of a crisis Combine speed with stability

Help Put
Board engagement directors dynamics Team and processes
Effectiveness: Promote a forward- help the ahead of Teamwork: Show resolve
looking agenda business mechanics Decision making: Defend
Relationships: Think beyond the meeting against biases
Capabilities: Seek balance and Management processes:
development Mindsets Ensure coherence

Practices

3
Chris Bradley, Martin Hirt, and Sven Smit, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds,
Hoboken, NJ: John Wiley & Sons, 2018.

The mindsets and practices of excellent CEOs 3

 (from the board, investors, employees, and Resource allocation: Stay active. Resource
other stakeholders), the relative strengths and reallocation isn’t just a bold strategic move on
purpose of their company, a clear understanding its own; it’s also an essential enabler of the other
of what enables the business to generate value, strategic moves. Companies that reallocate more
opportunities and trends in the marketplace, and than 50 percent of their capital expenditures
their personal aspirations and values. The best go among business units over ten years create
one step further and reframe the reference point 50 percent more value than companies that
for success. For example, instead of a manufacturer reallocate more slowly.7 The benefit of this approach
aspiring to be number one in the industry, the might seem obvious, yet a third of companies
CEO can broaden the objective to be in the top reallocate a mere 1 percent of their capital from
quartile among all industrials. Such a reframing year to year. Furthermore, research using our
acknowledges that companies compete for talent, CEO database found that the top decile of high
capital, and influence on a bigger stage than their performing CEOs are 35 percent more likely
industry. It casts key performance measures such to dynamically reallocate capital than average
as margin, cash flow, and organizational health in a performers. To ensure that resources are swiftly
different light, thereby cutting through the biases reallocated to where they will deliver the most value
and social dynamics that can lead to complacency. rather than spread thinly across businesses and
operations, excellent CEOs institute an ongoing (not
Strategy: Make bold moves early. According to annual) stage-gate process. Such a process takes a
McKinsey research, five bold strategic moves granular view, makes comparisons using quantitative
best correlate with success: resource reallocation; metrics, prompts when to stop funding and when
programmatic mergers, acquisitions, and to continue it, and is backed by the CEO’s personal
divestitures; capital expenditure; productivity resolve to continually optimize the company’s
improvements; and differentiation improvements allocation of resources.
(the latter three measured relative to a company’s
industry). To move “boldly” is to shift at least 30 Organizational alignment: Manage performance
percent more than the industry median. Making one and health with equal rigor
or two bold moves more than doubles the likelihood Ask successful investors what they look for in
of rising from the middle quintiles of economic portfolio companies, and many will tell you they’d
profit to the top quintile, and making three or more rather put money on an average strategy in the
bold moves makes such a rise six times more likely. 4 hands of great talent than on a great strategy in the
Furthermore, CEOs who make these moves earlier hands of average talent. The best CEOs put equal
in their tenure outperform those who move later, and rigor and discipline into achieving greatness on both
those who do so multiple times in their tenure avoid strategy and talent. And when it comes to putting
an otherwise common decline in performance. 5 great talent in place, almost half of senior leaders
Not surprisingly, data also show that externally say that their biggest regret is taking too long to
hired CEOs are more likely to move with boldness move lesser performers out of important roles, or
and speed than those promoted from within an out of the organization altogether. 8 The reasons for
organization.6 CEOs who are promoted from internal this are both practical (good leaders provide the
roles should explicitly ask and answer the question, CEO with important leverage) and symbolic (CEOs
“What would an outsider do?” as they determine their who tolerate poor performance or bad behavior
strategic moves. diminish their own influence). Many CEOs also say

4
Ibid.
5
Michael Birshan, Thomas Meakin, and Kurt Strovink, “What makes a CEO ‘exceptional’?,” McKinsey Quarterly, April 2017, McKinsey.com.
6
Michael Birshan, Thomas Meakin, and Kurt Strovink, “How new CEOs can boost their odds of success,” McKinsey Quarterly, May 2016,
McKinsey.com.
7
Chris Bradley, Martin Hirt, and Sven Smit, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds, Hoboken,
NJ: John Wiley & Sons, 2018.
8
“How to beat the transformation odds,” April 2015, McKinsey.com.

4 The mindsets and practices of excellent CEOs

 they regret leaving adequate performers in key found that CEOs who insist on rigorously measuring
positions and failing to realize the full potential and managing all cultural elements that drive
of their roles. The best CEOs think systematically performance more than double the odds that their
about their people: which roles they play, what they strategies will be executed. And over the long term,
can achieve, and how the company should operate they deliver triple the total return to shareholders
to increase people’s impact. that other companies deliver.11 Doing this well
involves thoughtful approaches to role modeling,
Talent: Match talent to value. Many CEOs have storytelling, aligning of formal reinforcements (such
confided to us that they worry about asking the as incentives), and investing in skill building.
same few overstretched “usual suspects” to take
extra assignments because they can’t trust the Organizational design: Combine speed with
people who would otherwise perform them. The stability. “Agility” is one of most widely used and
best CEOs take a methodical approach to matching misunderstood management buzzwords of the past
talent with roles that create the most value.9 A decade. For many leaders, agility evokes speed in
crucial first step is discovering which roles matter decision making and execution, as opposed to the
most. Careful analysis typically produces findings deliberate pace dictated by the stable, standardized
that surprise even the savviest CEOs. Of the 50 routines of large organizations. The facts show
most value-creating roles in any given organization, that agility requires no such trade-off: on the
only 10 percent normally report to the CEO directly. contrary, companies that are both fast and stable
Sixty percent are two levels below, and 10 percent are nearly three times more likely to rank in the top
sit farther down. Most surprising of all is that the quartile of organizational health than companies
remaining 10 percent are roles that don’t even that are fast but lack stable operating disciplines.12
exist.10 Once these roles are identified, the CEO can Excellent CEOs increase their companies’ agility by
work with other executives to see that these roles determining which features of their organizational
are managed with increased rigor and are occupied design will be stable and unchanging (such features
by the right people. Robust talent pipelines can also might include a primary axis of organization, a few
be developed so that important roles remain well signature processes, and shared values) and by
staffed. The best CEOs ensure that their own role is creating dynamic elements that adapt quickly to
included so that the board has viable, well-prepared new challenges and opportunities (such elements
internal candidates to consider for succession. might include temporary performance cells, flow-to-
work staffing models, and minimum-viable-product
Culture: Go beyond employee engagement. iterations). A services company CEO, for example,
Vendors of workforce surveys like to say that better enabled her “one company” strategy by
employee engagement is the best measure of shifting the profit-and-loss axis from products to
“soft stuff.” It’s not. While employee engagement geographies, reorganizing the back office according
indeed correlates with financial performance, a to an agile flow-to-work model, and creating a new
typical engagement survey covers less than 20 agile product development group.
percent of the organizational-health elements
that are proven to correlate with value creation. A Team and processes: Put dynamics
proper assessment of organizational health takes in ahead of mechanics
everything from alignment on direction and quality The dynamics of a top team can strongly influence
of execution to the ability to learn and adapt. In a company’s success. Yet more than half of
the largest research effort of its kind, McKinsey senior executives report that the top team is

9
Dominic Barton, Dennis Carey, and Ram Charan, “An agenda for the talent-first CEO,” McKinsey Quarterly, March 2018, McKinsey.com.
10
Scott Keller and Bill Schaninger, Beyond Performance 2.0: A Proven Approach to Leading Large-Scale Change, Hoboken, NJ: John Wiley
& Sons, 2019.
11
Ibid.
12
Michael Bazigos, Aaron De Smet, and Chris Gagnon, “Why agility pays,” McKinsey Quarterly, December 2015, McKinsey.com.

The mindsets and practices of excellent CEOs 5

 underperforming. The CEO is often out of touch with performance shortfalls, such as the significant cost
this reality: on average, less than one-third of CEOs overruns that affect 90 percent of capital projects.16
report problems with their teams.13 The efficiency We also know that biases cannot be unlearned. Even
and effectiveness of a company’s core management behavioral economist Dan Ariely, one of the foremost
processes also can change a company’s fortunes, authorities on cognitive biases, admits, “I was just
yet less than a third of employees report that their as bad myself at making decisions as everyone else
company’s management processes support the I write about.”17 Nevertheless, CEOs sometimes
achievement of business objectives.14 Why the feel as though they’re immune to bias (after all, they
disconnect? The problem is not an intellectual one, might ask, hasn’t good judgment gotten them where
but a social one: individual and institutional biases they are?). Excellent CEOs endeavor to minimize the
and clunky group dynamics can diminish with effect of biases by instituting such processes as
the effectiveness of the team and its processes. preemptively solving for failure modes (premortems),
Excellent CEOs acknowledge this reality and formally appointing a contrarian (red team),
counteract it in several ways. disregarding past information (clean sheet), and
taking plan A off the table (vanishing options).18 They
Teamwork: Show resolve. The best CEOs take also ensure they have a diverse team, which has been
special care to ensure their management team shown to improve decision-making quality.19
performs strongly as a unit. The reward for doing
so is real: top teams that work together toward a Management processes: Ensure coherence. The
common vision are 1.9 times more likely to deliver CEO typically delegates management processes
above-median financial performance.15 In practice, to other executives: the CFO looks after budgeting
CEOs swiftly adjust the team’s composition (size, and sometimes strategy as well; the chief human
diversity, and capability), which can involve hard resources officer (CHRO) looks after talent
calls on removing likeable low performers and management and workforce planning; the CIO looks
disagreeable high performers and on elevating after technology investment; and so on. However,
people with high potential. CEOs should also calibrate sensible individual processes can cohere into
individual relationships, maintaining the distance a clumsy system that results in more confusion
to be objective but enough closeness to gain trust and wasted effort than accountability and value.
and loyalty. Further, they commit to making the team Managers pushed to agree to stretch targets find
productive by regularly taking stock of and improving at year’s end that they are being held accountable
its operating rhythm, meeting protocols, interaction for full delivery; sandbagging ensues. Long-term
quality, and dynamics. They also firmly prohibit strategies are set, yet talent promotions are based on
members from putting their interests ahead of the near-term results. Urgent product ideas are approved,
company’s needs, holding discussions that consist only to get bogged down in long technology queues
of “theater” rather than “substance,” “having the and one-size-fits-all risk-management processes.
meeting outside the room,” backsliding on decisions, Excellent CEOs don’t allow one management process
or showing disrespect for one another. to foil another. They require executives to coordinate
their decision making and resource assignments
Decision making: Defend against biases. Cognitive to ensure that management processes reinforce
and organizational biases worsen everyone’s priorities and work together to propel execution and
judgment. Such biases contribute to many common continual refinement of the strategy.

13
Fred Adair and Richard M. Rosen, “CEOs misperceive top teams’ performance,” Harvard Business Review, September 2007, hbr.org.
14
Scott Keller and Mary Meaney, Leading Organizations: Ten Timeless Truths, New York, NY: Bloomsbury Business, 2017.
15
Scott Keller and Colin Price, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, Hoboken, NJ:
John Wiley & Sons, 2011.
16
Ibid.
17
“Dan Ariely on irrationality in the workplace,” February 2011, McKinsey.com.
18
For more ideas about how to address common cognitive and organizational biases, see the McKinsey Quarterly Bias Busters series on
McKinsey.com.
19
See Sheen S. Levine and David Stark, “Diversity makes you brighter,” New York Times, December 9, 2015, nytimes.com; “Better decisions
through diversity,” Kellogg Insight, October 1, 2010, insight.kellogg.northwestern.edu; and Bill Snyder, “Deborah Gruenfeld: Diverse teams
produce better decisions,” Insights by Stanford Business, April 1, 2004, gsb.stanford.edu.

6 The mindsets and practices of excellent CEOs

 Board engagement: Help directors and abilities, and privately discuss topics that may
help the business be difficult for the larger group to address. Excellent
The board’s mission on behalf of shareholders CEOs also promote connections and collaboration
is to oversee and guide management’s efforts between the board and top executives, which
to create long-term value. Research shows that keeps the board informed about the business and
sound corporate governance practices are linked engaged in supporting its priorities.
with better performance, including higher market
valuations.20 An effective board can also repel Capabilities: Seek balance and development.
activist investors. Despite these upsides, many Excellent CEOs also help their boards help
CEOs regard their companies’ boards in the way the business by providing input on the board’s
one CEO described his company’s board to us: as composition. For example, the CEO might suggest
a “necessary evil.” The chairperson leads the board, that certain types of expertise or experience—be
and even in cases where that role is held by the CEO they related to industries, functions, geographies,
(as is common in North American companies), the growth phases, or demographics—would enable
board’s independence is essential. Nevertheless, the board to better assess and support the
excellent CEOs can take useful steps to boost the business. CEOs can also help improve the board’s
quality of the board’s advice to management such as effectiveness by ensuring that new members
the following: complete a thorough onboarding program and
creating opportunities for the board to learn about
Effectiveness: Promote a forward-looking topics like changing technology, emerging risks,
agenda. To get the most from their time with the rising competitors, and shifting macroeconomic
board, excellent CEOs collaborate with board scenarios. First-time board members usually benefit
chairs on developing a forward-looking board from a structured introduction to what it means to
agenda. Such an agenda calls for the board to go be an effective board member.
beyond its traditional fiduciary responsibilities (legal,
regulatory, audit, compliance, risk, and performance External stakeholders: Center on the
reporting) and provide input on a broad range of long-term ‘Why?’
topics, such as strategy, M&A, technology, culture, Every CEO should know their company’s mission
talent, resilience, and external communications. and values. Good CEOs know that these statements
Board members’ outside views on these topics can need to amount to more than slogans for office
help management without compromising executives’ posters and use them to influence decision making
authority. In addition, the CEO should make sure and day-to-day behaviors. Excellent CEOs go
that the board and management take up related further: they reinforce and act on a corporate
activities, such as reviewing talent and refreshing purpose (the “Why?”) that involves not just making
the strategy, at the same times of year. money but also benefiting society. This posture,
along with a granular approach to prioritizing
Relationships: Think beyond the meeting. Excellent stakeholder interactions and a sound corporate
CEOs develop and maintain a strong relationship resilience plan, lets CEOs minimize the company’s
with the chair (or lead independent director) and exposure to customer- and stakeholder-related
hold purposeful meetings with individual board risks, and capitalize on new opportunities.
members. Establishing good relationships and a
tone of transparency early on enables the CEO to Social purpose: Look at the big picture. Many
build trust and to clearly delineate responsibilities corporate social responsibility programs are little
between management and the board. Building more than public-relations exercises: collections
relationships with individual board members of charitable initiatives that generate good feelings
positions the CEO to benefit from their perspectives but have minimal lasting influence on society’s

20
Inessa Love, “Corporate governance and performance around the world: What we know and what we don’t,” World Bank Research Observer,
February 2011, Volume 26, Number 1, pp. 42–70, elibrary.worldbank.org.

The mindsets and practices of excellent CEOs 7

 well-being. Excellent CEOs spend time thinking structure, and risk culture. Great CEOs and
about, articulating, and championing the purpose their boards also anticipate major shocks,
of their company as it relates to the big-picture macroeconomic events, and other potential crises.
impact of day-to-day business practices. They There’s good reason to do this: headlines that
push for meaningful efforts to create jobs, abide carried the word “crisis” alongside the names of 100
by ethical labor practices, improve customers’ lives, top companies appeared 80 percent more often
and lessen the environmental harm caused by from 2010 to 2017 than they did in the previous
operations. Visible results matter to stakeholders; decade.23 Excellent CEOs recognize that most crises
for example, 87 percent of customers say that they follow predictable patterns even though each one
will purchase from companies that support issues feels unique. With that in mind, they prepare a crisis-
they care about, 94 percent of millennials say that response playbook that sets out leadership roles,
they want to use their skills to benefit a cause, and war-room configuration, resilience tests, action
sustainable investing has grown 18-fold since plans, and communications approaches. They seek
1995.21 And not demonstrating such results isn’t opportunities to go on the offensive, to the extent
an option—wise CEOs know they will be held to they can.24 And they know that stakeholders’ anger
account for fulfilling their promises. will likely center on them, in ways that can affect
their family and friends, and accordingly develop a
Interactions: Prioritize and shape. Excellent CEOs personal resilience plan.
systematically prioritize, proactively schedule, and
use interactions with their companies’ important Personal working norms: Do what only
external stakeholders to motivate action. CEOs of you can do
B2B companies typically focus on their highest- CEOs can easily become overwhelmed, which is
value and largest potential customers. CEOs of understandable given the sheer breadth of their
B2C companies often like to make unannounced role. As the dean of Harvard Business School, Nitin
visits to stores and other frontline operations to Nohria, has said, “CEOs are accountable for all the
better understand the customer experience that work of their organizations. Their life is endless
the business provides. They also spend time with meetings and a barrage of email.”25 Plenty of
their companies’ 15 or 20 most important “intrinsic” research also suggests that many CEOs are beset
investors (those who are most knowledgeable and by loneliness, frustration, disappointment, irritation,
engaged) and assign the rest to the CFO and the and exhaustion. While no CEO can escape these
investor-relations department.22 Other stakeholder emotions completely, excellent CEOs know that they
groups (such as regulators, politicians, advocacy will serve the company better by taking command of
groups, and community organizations) also will their well-being in these ways:
require a portion of the CEO’s time. The efficacy
of these interactions isn’t left to chance. Excellent Office: Manage time and energy. The most
CEOs know what they want to accomplish, prepare successful CEOs quickly establish an office (often
well, communicate audience-tailored messages including one or two highly skilled executive
(always centered on their company’s “Why?”), listen assistants and a chief of staff) that makes their
intently, and seek win–win solutions where possible. priorities explicit and helps them spend their
scarce time doing work that only CEOs can do. For
Moments of truth: Build resilience ahead of a example, a CEO’s office should carefully plot all
crisis. Good CEOs ensure that their companies aspects of the CEO’s meetings: agenda, attendees,
have an effective risk operating model, governance preparation (including “alone time” for the CEO

21
2017 Cone Communications CSR study, Cone Communications, May 2017, conecomm.com; Eddie Lou, “Why millennials want more than just
work: The importance of your ‘double bottom line,’” Forbes, June 9, 2017, forbes.com; 2018 report on US sustainable, responsible and impact
investing trends, US SIF, October 31, 2018, ussif.org.
22
Robert N. Palter, Werner Rehm, and Jonathan Shih, “Communicating with the right investors,” McKinsey Quarterly, April 2008, McKinsey.com.
23
Sanjay Kalavar and Mihir Mysore, “Are you prepared for a corporate crisis?,” McKinsey Quarterly, April 2017, McKinsey.com.
24
For more, see Martin Hirt, Kevin Laczkowski, and Mihir Mysore, “Bubbles pop, downturns stop,” McKinsey Quarterly, May 2019, McKinsey.com.
25
Stephanie Vozza, “This is how successful CEOs spend their time,” Fast Company, August 23, 2018, fastcompany.com.

8 The mindsets and practices of excellent CEOs

 to reflect and get ready), logistics, expected stay in touch with how the work really gets done
outcomes, and follow-up. 26 CEOs should limit their in the organization by getting out of boardrooms,
involvement in tasks that can be dealt with by conference centers, and corporate jets to spend
others and reserve time to deal with unexpected time with rank-and-file employees. This is not
developments. The best CEOs also teach their only grounding for the CEO, but also motivating
office staffs to help manage the CEO’s energy as for all involved. Finally, excellent CEOs keep their
thoughtfully as their time, sequencing activities role in perspective by reminding themselves it is
to prevent “energy troughs” and scheduling temporary and does not define or limit their self-
intervals for recovery practices (for example, time worth and importance in the world. Whereas Steve
with family and friends, exercise, reading, and Jobs advised college graduates, “Stay hungry, stay
spirituality). Doing so ensures that CEOs set a foolish,” we urge CEOs to “Stay hungry, stay humble.”
pace they can sustain for a marathon-length effort,
rather than burn out by sprinting over and over.
Gauging CEO excellence
Leadership model: Choose authenticity. Exemplary CEOs have many ways to gauge how well they are
CEOs combine the reality of what they ought to do doing in their role. A criterion used in virtually every
in the role with who they are as human beings. They “best CEO” ranking for public companies is how
deliberately choose how to behave in the role, based much value a CEO’s company creates. Value creation
on such questions as: What legacy do I want to makes it possible to sustain the pursuit of other goals.
leave? What do I want others to say about me as a But financial measures of CEO excellence have a
leader? What do I stand for? What won’t I tolerate? serious shortcoming: they are heavily influenced
CEOs answer these questions according to their by factors outside the CEO’s control. For example,
strengths and motivations, as well as the company’s the “endowment” a CEO inherits (for example, the
needs, and create mechanisms to track how they company’s revenue base, debt levels, and past
are doing. Further, by expressing these intentions investments in R&D) accounts for 30 percent of what
as part of the rationale for their decisions and enables a company to move from average to the top
actions, CEOs can minimize the risk of unintended quintile of economic profit. Industry and geographic
interpretations being amplified in unhelpful ways. trends account for 25 percent.27
The importance of this can’t be underestimated. As
a consumer goods CEO told us, “You are speaking The remaining 45 percent that the CEO can control
through an extraordinary amplification system. is what we’ve endeavored to illuminate in our model
The slightest thing you do or say is picked up on by of CEO excellence. The gap between excellent
everyone in the system and, by and large, acted on.” CEOs and lesser ones is wide, as many directors
know firsthand (analysis of our CEO database
Perspective: Guard against hubris. It’s easy for shows that 30 percent of top-performing CEOs
CEOs to become overconfident. While they must take over from bottom-performing ones and 23
push ahead in spite of naysayers at times, they percent of bottom-performing CEOs take over
can also tune out critics once they learn to trust from top performers). One thing to keep in mind:
their own instincts. Their conviction can increase we are not suggesting that an excellent CEO is
because subordinates tend to say only what bosses one who excels at every one of their 18 unique
want to hear. Before long, CEOs forget how to say “I responsibilities. In fact, we’ve yet to meet one who
don’t know,” cease asking for help or feedback, and does. Rather, we’ve observed that the best CEOs
dismiss all criticism. Excellent CEOs form a small are ordinarily excellent in a few areas, able in all
group of trusted colleagues to provide discreet, others, and challenged in none. The more areas a
unfiltered advice—including the kind that hasn’t CEO excels in, the better their results tend to be.
been asked for but is important to hear. They also

26
Aaron De Smet, Gregor Jost, and Leigh Weiss, “Want a better decision? Plan a better meeting,” McKinsey Quarterly, May 2019, McKinsey.com.
27
Chris Bradley, Martin Hirt, and Sven Smit, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds, Hoboken,
NJ: John Wiley & Sons, 2018.

The mindsets and practices of excellent CEOs 9

Exhibit 2
CEOs can prioritize improvement areas by rating their practices for 18 unique responsibilities.
Practices appear in standard type. Mindsets appear in italics.

CORPORATE STRATEGY Challenged Able Excellent

Let a thousand flowers bloom Minimize uncertainty Focus on beating the odds
Vision Assert a generic statement of Strive for industry leadership Uniquely and ambitiously reframe
intent on defined metrics what it means to win
Strategy Make many small bets with unclear Make 1–2 bold moves and other Make multiple bold moves early
paths to scale moves on a “best efforts” basis and methodically
Resource allocation Largely maintain the status quo Reallocate resources during annual Reallocate frequently to focus
budgeting resources on priorities

ORGANIZATIONAL ALIGNMENT
Diplomatically avoid social issues Tend to the ‘soft stuff’ Manage performance and health
Accept lesser performers and Act on low performers; elevate Rigorously match high-value
Talent mediocre succession plans strong performers roles with best-fit talent
Assume desired values and Manage engagement or Explicitly manage all aspects of
Culture behaviors will be followed satisfaction measures organizational effectiveness
Organizational Put others’ feelings ahead of Define the primary axis of Specify and enable where you
design efficiency and effectiveness organization; clarify roles expect stability and agility

TEAM AND PROCESSES

Give to someone else to manage Coordinate and drive execution Put dynamics ahead of mechanics
Teamwork Allow silos, discord, and “outside Instill effective working-team norms Resolutely strengthen the team
the room” meetings and its teamwork continuously
Avoid debate; don’t declare when a Consider multiple scenarios before Defend explicitly against
Decision making decision is final deciding and acting cognitive and social biases

Management Accept legacy bureaucratic See that individual management Ensure coherence across
processes processes processes are effective processes

BOARD ENGAGEMENT
Stay ‘hands off’ Support fiduciary duties Help directors help the business
Leave the board agenda to the Tap board members’ expertise as Promote a forward-looking
Effectiveness chair; accept what comes helpful on fiduciary matters agenda (beyond fiduciary)
Keep the board at arm’s length; Nurture working relationships with Proactively foster relationships
Relationships minimize interactions board members beyond the meeting
Leave composition to chance; Take opportunities to educate the Develop board capabilities and
Capabilities indulge uninformed views board about the business inform its composition

EXTERNAL STAKEHOLDERS
Minimize time spent externally Tactically triage and target Center on the long-term ‘Why?’
Focus solely on shareholder value Take and communicate actions to Commit to making a positive
Social purpose “do no harm” big-picture impact
Engage in an ad hoc, reactive Prepare well for all Prioritize stakeholders and
Interactions manner stakeholder interactions proactively shape their views
Assume crises won’t occur; Establish protocols to mobilize Build corporate resilience ahead
Moments of truth
improvise if one does quickly when crises emerge of a crisis

PERSONAL WORKING NORMS

Focus on what’s in front of you Stay organized and efficient Do what only you can do
Office Build your schedule around others’ Establish a support structure that Get high-quality support to help
priorities helps prioritize your time manage time and energy
Adopt a “I am who I am, take Model the behaviors that you Authentically connect personal
Leadership model
it or leave it” posture believe the company needs purpose to leadership needed
Cultivate an air of superiority; seek Adopt a balanced, elder Counter hubris with candid
Perspective adulation not advice statesperson perspective advice and personal practices

10 The mindsets and practices of excellent CEOs

What’s more, the emphasis that CEOs should place
on individual responsibilities will change over time.
Time spent setting the corporate strategy early in a Leadership matters—and no leader is more
CEO’s tenure will normally give way to fine-tuning and important than the leader of leaders. Executives
driving execution, and then to highlighting tangible who are appointed to the top job can boost their
results that build credibility with stakeholders. At leadership capabilities by understanding and
some point, however, it becomes important to look adopting the mindsets and practices that define
at the company with fresh eyes and to decide on CEO excellence.
the next set of bold moves, realign the organization,
refresh the team and processes, and so on.

To help CEOs figure out where they stand with

respect to the mindsets and practices described in
this article, we developed the assessment guide in
Exhibit 2.

Carolyn Dewar is a senior partner in McKinsey’s San Francisco office, Martin Hirt is a senior partner in the Greater China
office, and Scott Keller is a senior partner in the Southern California office.

The authors wish to thank Michael Birshan, Naina Dhingra, Lauren Keane, Frithjof Lund, Vik Malhotra, Thomas Meakin, Monica
Murarka, Volkan Oktem, Sven Smit, Nina Spielmann, and Kurt Strovink for their contributions to this article.

Designed by Global Editorial Services

Copyright © 2019 McKinsey & Company. All rights reserved.

The mindsets and practices of excellent CEOs 11

 The Mindsets And Practices Of E
Excellent
xcellent CEOs
1. What are the most important skills for the C C-Suit professionals? It is said that drive, resilience and risk
tolerance are key for choosing a CEO, but it´s hardly helpful for or a sitting one to improve performance.
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
2. The study found that only 3 out of 5 CEOs live up to expectations in their first couple of years in the
job. What are the biggest pitfalls or reas
reasons for their failure?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
3. It iss well known that advices like “set the strategy”, “shape the culture” and “get the right team” are
key for success as a CEO. Can you expand on these advices and how they they apply to your company?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
4. When itt comes to a Model of CEO Excellence, the study divided it in 6 main el element s and 18 specific
responsibilities. What do you think about the elements and the responsibilities it talks about?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
5. Can you discuss each onee of the 6 elements given in the study?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
6. Are there different set of skills that are relevant for CEOs of large corporations and medium size
businesses? If so, what are they?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
7. The very first one in the list is the Corporate Strategy:
Strategy: Focus Beating the Odds. What would be your
Strategy for your business if you are/were the CEO?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________

Anderson Romanhuk
 8. The study shows that 10% of the companies create 9 0% of the total economic profit, and that only 1 in
90%
12 companies move from being average performer to a top-quintile
top erformer over a ten-year
performer ten period.
The study also narrow the success of it down to:: 1) Vision: Reframe what winning means, 2) Strategy:
Make boldold moves early and 3) Resource allocation: Stay active. What do you agree on or disagree on
what makes a business successful? Discuss it.
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
9. Then we have the Organizational Alignment with 1) Talent: Match talent to value, 2) Culture
Culture: Go
beyond employee engagement and 3) Organizational Design: Combine speed with stability. Successful
investors will often say they´d rather
ra put their money on an average strategy in the hands of great
talentt than on a great strategy in the hands of average talent. How do you make amend of these in
your own business?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
10. There are two main things when it comes to the mindset of CEOs excellence, 1) Put dynamics ahead of
mechanics and 2) Help directors/managers help the business. How do you see the implementation of
these 2 mindsets in your business?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________

Anderson Romanhuk
 11. When it comes to external stakeholders, we know that every CEO should know their company´s
mission and values. Good CEOs know now that these statements need to amount to more than slogans for
office posters. Excellent CEOs reinforce and act on a corporatete purpose (the “WHY?”). Who are and
how do you see the stakeholders of your business?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
12. CEOs can easily become overwhelmed, which is understandable given the sheer breadth of their role.
CEOs are accountable for all the work
As the dean of Harvard Business School, Nitin Nohria, has said, ““CEOs
of their organizations. Their life is endless meetings and a barrage of email.” Plenty of research also
suggests that many CEOs are beset by loneliness, frustration, disappointment, irritation, and
exhaustion. While no CEO can escape these emotions completely, excellent CEOs know that they will
well being in these ways.
serve the company better by taking command of their well-being ways How do you balance
the position as a CEO to ease and improve your well-being without compromising the results expect as
the CEO?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
13. What are some ways to measure how well CEOs are doing in their roles? Expand on it.
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________

Anderson Romanhuk