Bob MacDonald explains why bringing back an entrepreneurial leader may be the best way to energize a flagging company.
Wide media publicity has been given to the announcement that Howard Schultz has returned as CEO of Starbucks. His first pronouncement set the tone for his plans and the ultimate reason for his return when he essentially said that Starbucks had to get back to being Starbucks.
The return of the Starbucks CEO drew such a bevy of interest that Herb Greenberg of The Wall Street Journal wrote on column on January 12, 2008 titled “Why Investors Should Applaud A CEO’s Encore Performance.” In Mr. Greenberg’s article he chronicled a number of entrepreneurial leaders who had retired, only to be called back to attempt to right a wronging ship of business. While not every return was successful, the article quoted Rudi Fahlenbrach, an assistant finance professor at Ohio State who had conducted a study that showed, “…on average, the stocks of companies run by CEOs on a second tour of duty outperformed the market by 6% annually during their comebacks.”
While numerous examples were offered in the article, some of the better known returns cited were Charles Schwab of Charles Schwab, Apple’s Steve Jobs and Eli Callaway of Callaway Golf. These were all companies that struggled after the entrepreneurial leader departed and then “miraculously” recovered following their return.
It was interesting to note that Jeffery Sonnenfeld a management professor at the Yale School of Management suggested those CEOs who did successfully return did so for the right reasons. As Professor Sonnenfeld pointed out, “… they came back with great reluctance … they were not coming back for some unmet ego need … they were drafted … because of … relationships, knowledge and a cultural aura (that allows them) to do things nobody else can do to fix the problems.”
This interest among members of the media and college professors in the success of returning entrepreneurial CEOs is because the idea that one person can make such a big difference in the performance of a large company is foreign to the established theories of business management.
Like most things that thoroughly confuse the media and academia the answer to their dilemma is simple. So simple they can’t see it.
As we wrote in CHEAT TO WIN a couple of years ago and in the current book offering BEAT THE SYSTEM, the true entrepreneurial leader talks of simple things and simply does them.
During the development stages of a company it is the entrepreneurial leader who infuses the effort with “soul.” The leader paints the vision, defines the culture, communicates, motivates and empowers others to accomplish great things. Most important the entrepreneurial leader is relentless in maintaining focus and commitment to the objective. For those working in a company with a true entrepreneurial leader their actions are not just about business; they are about a way of life, a passion, a desire to be part of something special and rewarding.
When a successful company loses an entrepreneurial leader he/she is usually replaced with a talented, competent, well intended “business manager.” This business manager often views his/her job as one of quantifying, maintaining and preserving what had gone before. It is not that the new management is disrespectful of what the entrepreneurial leader built.
On the contrary, the new management usually wants to preserve the company as it is. The problem is that these new people tend to be good managers but not real leaders. (Even though they often go out of their way to describe themselves as “leaders.”) What they do introduce into the company to “preserve” the past are bureaucratic systems and limitations that result in mummification not preservation of the past. In short, the company begins to lose its soul. With loss of soul comes loss of passion to achieve.
When the old leader returns he brings with him the infusion of simplicity and soul that had been lost. As simple and “soft” as this may seem, it is something that even the very best and well intended bureaucratic managers fail to recognize or understand.
And the moral of the story . . .
With the return of the entrepreneurial CEO comes the mixture of vision, passion, focus and commitment to the essence of the effort that built the company initially. And with it there is usually a return to success.