Watching gymnasts perform on a balance beam that is less than 4 inches wide can be a heart pounding experience. The total concentration, years of practice, and perfect timing exhibited by these athletes can result in a thrilling performance. However, the slightest misstep can result in a fall that takes only a split second to occur. CEOs, in many ways, face even more challenging balancing acts. Unlike the gymnast’s balancing beam that is stable and predictable, the CEO must perform their balancing act with constant, and generally unpredictable, variations while also having to balance in four different directions. To be fair, CEOs often have far more opportunities to correct missteps and their “falls,” when they do occur. Most issues that a CEO faces do not require the same instantaneous response as those experienced by the gymnast. However, both the gymnast and the CEO are individually held accountable for their performance. For gymnasts, the audience is likely to be forgiving, and the gymnasts can move on to the next competition. CEOs that fall short of expectations rarely are given a second chance.
While the gymnast can concentrate on one thing, the CEO must balance four different, sometimes, opposing issues simultaneously, often in a hostile, unpredictable environment. Using the famous picture of Leonardo Davinci’s Vitruvian Man may be an appropriate pictorial analogy. In that picture, Davinci portrayed a man with his arms and legs extended diagonally, with fingers and toes touching either an all-encompassing square or circle. Although Davinci’s work has a different meaning, it can illustrate the four different forces “pulling” on a CEO that he must balance in order to stay upright. Those four forces are listed in Principle Three of this collection under the title of “Provide an Acceptable Return to All Investors.” That principle lists four investor categories ranked in order of their importance as listed below. The list provides a very brief rationale for each category that is fully explained in Volume II, Chapter 4.
- Employees: They are investing an irretrievable resource, their time.
- Partners: They are working with you instead of someone else, a major opportunity cost.
- Customers: They have embraced your product or service instead of some other alternative.
- Financial: They are expecting a superior return from your efforts versus alternative investments.
At first glance, the order of importance may seem to be reversed with Financial Investors at the top of the list. After all, Financial Investors are often the most vocal and quickest to judge a CEO’s performance and demand action, which may include their removal. Naturally, with that threat, many CEOs respond quickly to investor or Board of Director demands and are most sensitive to their requests over those of the other groups. However, consistent, superior, financial performance cannot be achieved unless the other three investor category’s needs are addressed first. Clearly, balancing the needs of all four groups is difficult. Further complicating the situation are external factors that are both unpredictable and uncontrollable. As one example, think of the almost universal impact the terrorist attacks on the World Trade Center on September 11, 2001 had on the entire business community. Virtually every CEO had to reconsider their balancing act and make adjustments accordingly.
Just like the gymnast needs to carefully and continuously consider a number of factors to stay on the beam and perform their amazing feats, a CEO needs to continuously think of all four investor groups in every action they take. It does not take a rigorous or time-consuming process to stay in balance. It all starts with a simple process consisting of asking the question: “If we do this, how will it impact each of my four investor categories?” Actions or inactions and the required timing will quickly surface, and perhaps with some minor corrective actions, the proper balance can be maintained.