Effective CEO development in today’s competitive construction environment.
In Part 1 of this three-part series, we looked at the many characteristics and competencies shared by successful CEOs. Part 2 looked at the critical role of a CEO in shaping the company’s culture. In this final article, we look briefly at some of the things a CEO should not be doing, who should not be a CEO, the typical career paths to becoming a CEO in the construction industry, and a “typical day” in the life of a CEO.
What Should CEOs Not Be Doing?
Now that we know the best characteristics of a CEO, we thought it would be a good idea to shine a bit of light on some things a CEO should not do. Of course, sometimes the light shines very brightly in the news headlines when a CEO does something he or she really should not be doing. Everyone can probably name a few recent major ethical and legal meltdowns, both inside the construction industry and in other industries. The CEOs we spoke with all mentioned the importance of ethical behavior, so ethics is high on the list of what a CEO should do. However, all of the things a CEO should not do are not just taken to be the opposite of what they should do. Those actions contrary to the role of a CEO mostly fall outside of the list of CEO responsibilities.
Jack Mascaro, chairman and founder, Mascaro Construction Company, L.P., Pittsburgh, Pennsylvania, offers some sound management advice to CEOs:
Don’t step on the toes of the people around you. Let people make mistakes themselves, so they can learn from them. If you always followed them around and made sure they never made mistakes, they would never learn. The CEO must be a good delegator and learn to live with his decisions.
Guy Gast, president, Iowa Division, Waldinger Corporation and current chairman of the New Horizons Foundation, Des Moines, Iowa, agrees and adds a few other items to the list:
- Don’t engage in unethical behavior
- Don’t undermine the work of others
- Don’t micromanage
- Don’t be a “derailer”
Gast noted that CEOs shouldn’t get caught up in the day-to-day work, but must remain invested in the daily, weekly and monthly processes that support the work or define the company’s method for executing it. 
Complacency about process may happen when things are going well. In the book, “Good to Great,” Jim Collins noted, “Good is the enemy of great.” So, it is the CEO’s job to drive out complacency, lead a culture of successful execution, and promote change and forward movement, even when others might feel we’re doing well enough. Sustaining a competitive advantage or looking for the next one is not everyone’s work; but it is a core responsibility of the CEO to encourage others to seek it and to lead that agenda.
FMI’s Hank Harris and Lee Smither both agree that the CEO shouldn’t get too involved in everyday issues. This can be a particular problem for newly promoted CEOs who are making the transition from positions where they were tasked with taking care of the details of everyday problems. It may also affect the CEO in a growing company that must now avoid micromanaging and spend more time on the larger issues. Smither notes, “It is hard to get out of the weeds. The CEO needs to foster new abilities that are different from what got him there. The CEO needs to focus on the longer view and trust others to do what he or she used to do.”
Harris adds:
The CEO must get things done through others. He must have his finger on the pulse of what’s going on. That means he must go out and listen to other people, but not circumvent the authority of his reports. Many CEOs have the tendency to want to fix the problems themselves.
CEOs will make mistakes but need to learn from them. They need to have the characteristics of honesty and transparency when dealing with problems. They always have the company’s interest at heart, even if sometimes they are wrong. When it comes to ethics, the CEO sets the organization’s position.
Who Should Not Be a CEO?
As we noted at the beginning of this paper, not everyone need apply to a help wanted ad for a CEO. Tony Guzzi, president and chief executive officer of EMCOR in Norwalk, Connecticut, sums up most of the comments we heard from others on this topic:
- First, I would say the kind of person who should not be a CEO is someone who is just focused on making a lot of money. That means he is not likely to focus on all of the responsibilities we have been talking about.
- Second, a CEO candidate should not be an insular person. As I said earlier, the CEO needs to be a people person who gets out and talks to people.
- Anyone who is tone-deaf or unaware of the environment around him in the company and in the market will not make a good CEO.
- Anyone who is afraid of making tough decisions won’t make a good CEO. That’s what the CEO gets paid for; being decisive is a big part of the job. Some decisions just aren’t popular, but they have to be made.
- The CEO must be optimistic, but also be a steely-eyed realist without being too negative.
- It is tougher to be a CEO in today’s world than it used to be. The CEO must be great at fulfilling his fiduciary duties to the company. It changes as a company’s sales grow from $20 million to $100 million. The focus becomes broader. The CEO of the larger company needs to have an external board of directors to advise him and oversee what he does. Everybody needs a boss.
- In their quests to become CEOs of larger firms, most people don’t make the cut. They can’t make the transition to take on new and different responsibilities.
Although there are a number of executive positions that don’t regularly become CEOs, there are too many exceptions to say that CEOs can’t rise from most any position in the company given the right circumstances. One area that surprises some and disappoints many current CEOs is that some family members may not be good candidates — no matter their current position or degree of ownership — if they are not prepared for the job of CEO. Mostly, it is typical that people in those positions are either too risk-averse — something their current jobs require — or too detail-oriented and not strategically oriented. However, all of these comments were qualified, since there are many good examples of CEOs in the industry who have come up through various positions. They realized their shortcomings and overcame them or found others on their team to help fill in where needed.
How Does One Become a CEO in the Construction Industry?
For family-owned businesses, there is some danger that the next generation takes over the position even if that person is not ready or doesn’t even want the job but takes it because it is expected or other circumstances such as the current owner/CEO is unable to continue his duties. As Ron Magnus, director of FMI’s Center for Strategic Leadership, notes:
Sometimes there are problems in family companies. However, we think there are fewer now than there used to be. The family member who finds himself in the role of CEO by virtue of being family eventually realizes that he may be in over his head. The new CEO isn’t enjoying the position he is in. When this happens, he or she will seek out someone else to be CEO and step aside.
With the large number of family- owned and closely held private businesses in the construction industry, “having the right last name” is often the key to becoming the next CEO. That doesn’t always work out, as noted above, and sometimes drives away otherwise good people with the right competencies and skills to do the job. Some of those people leave the company to start new companies and become competitors. Of course, that is not a rule. There are many multigenerational family businesses in the construction industry. Like the Mascaro Company, the next generation has often been brought up in the company and shares the values of its parents. Even though the next generation has preference when being promoted, the next CEO should go through the same process of learning the skills of various positions, plus the added leadership skills needed to be promoted. The next generation must earn the trust and respect of its peers. Mascaro’s three sons were raised in the business, as he comments:
We are now entering the second generation with my sons in control for the last six years. But one thing will never change; they will always be my sons. We’re family. You can’t change that, but you must be able to get past that in the business. It is important that we all trust each other, even though we might have some tougher battles with each other than other companies would; we work through it and still respect each other.
The transition has been going very well. That is in large part because of the trust my sons have for each other. Still, it takes time to prepare for the transition, and ultimately there must only be one boss who makes the final decisions. You must realize that there is a family side and a business side of life.
Whether family or not, Mascaro notes, “A future CEO can be trained and rise through the company ranks through any field of endeavor if he is self-aware and knows his strengths and weaknesses.” Guzzi agrees that there are several paths that can lead to the CEO position:
The most typical is the person who comes up through the trades and knows labor really well. Others are great project managers and really good at what they do. Then there are some who come up through the financial ranks. These individuals are good at understanding the risks involved in running the company; however, it is important that person have someone on the team who knows the operations side of the business.
When project managers are promoted, they need to make the transition from building the project to running the company. We provide these people with support in making this transition like coaching and training.
Guy Gast is one of those who came up through the ranks of project manager:
Things went well in my career as a project manager, but I soon realized that I was more interested in broader aspects of the business. I wanted to do more than just be attached to the details of the job. I wanted to work with customers to find solutions to problems. This is a typical path to upper management in construction. The top executives usually come up through operations. In smaller companies, it is especially important that the CEO/president have a thorough understanding of how things are built and who the competitors are. In larger businesses, the CEO may originate on the financial side of the business too. The CFO or controller knows a lot of the details about the business and how it is run, although it is unusual for CFOs to possess many of the people/business development competencies that those who came up through operations might have. This can be overcome by realizing these shortcomings and by finding someone else to trust with those duties.
Conclusion: So You Want to Be a CEO?
Unless you are the self-proclaimed CEO of a one- or two-person startup, becoming a CEO and performing the duties of the role of the chief executive officer entail many responsibilities and competencies. Most successful CEOs gain competencies as they move up through the company. However, the most important lesson to learn when one becomes the CEO is not to think of the role as being at the peak of the pyramid — i.e., the top boss with no one above you. Our research and conversations with successful CEOs and seasoned FMI consultants to CEOs find that, in reality, the CEO has more bosses than anyone else in the company. This is in part due to the concept of the servant leader that was mentioned several times in our discussions. The CEO serves the interests of all the constituents of the company. In some companies — but not all family businesses — the CEO must answer to a functioning board of directors; mostly, the CEO answers to the success of the company and the satisfaction of its customers and its employees. So you want to be a CEO? Learn these things first. Q
Phil Warner is a research consultant with FMI Corporation. He can be reached at 919.785.9357 or via email at pwarner@fminet.com.
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