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Captaining the ship

I was asked, “Why [should Rod Humble] change from a proper job at EA on an ejection seat at Linden Lab?” – and my response started to run on a bit, so I decided to waffle on about it in its own post.

As for why someone might choose to captain a ship, whether it is a sinking one or not – well, in certain industries and at certain levels of business there ain’t no such thing as a pay-raise. If you want a pay-raise your only option is to go work for someone else.

Now, it is rather notable that many CEOs that are hired are hired from companies that have just gone bankrupt or ran into the ground for some reason. Some CEOs come from a long string of broken and failed corporations – and you cannot help but ask yourself “Why did they hire this guy?”

Let me tell you about one CEO, I worked for.

He’d departed from a mobile phone provider, which struggled and heaved, but ultimately collapsed. The board of another mobile phone provider picked him to replace their own CEO. He held that post for a couple years, and – well, people I knew at the company told me stories. Stories about absurd spends on marketing stunts coupled to vapourware programmes, and how the company was haemorrhaging cashflow directly through his office. The board let him go, and replaced him with the CEO of another failed business, but teetered back from the brink.

Imagine my surprise when our board announced that he was now going to be our CEO. Both as an employee and as a key shareholder, I was more than a little concerned – indeed baffled – by the decision.

After all, if I had made any errors in judgement half so significant I would, as they say, have “never worked in this town again.”

Instead, the board was hot under the collar to nab him, and his compensation package was… significant. At the time, I think I used the word ‘appalling’ to describe it.

To be fair, he made an effort to understand the industry we were in, and the products and services we provided as a company. Which is a whole lot more than any of the other CEOs had done.

On the other hand, I remember cringing with the rest of the shareholders when we watched him on national television, not announcing the new product that the company was six weeks away from launching, but its successor which we hadn’t yet given any thought to, and that he promised to the world in only four weeks.

It was also backed up with a lot of expensive marketing. For a product that hadn’t been designed, and was still almost two years away.

A couple of weeks later, he asked me why nobody on our development teams respected his position.

“Well,” I said, “There’s a difference between your position and theirs. And it isn’t just the fact that you earn ten times what they do, and have an office that would fit thirty of them, if we keep to the same density that they’re packed in over there.”

“And what’s that?”

“These people are experts and specialists, with extensive experience, years of specialist education, and most of them are brilliant. Each of them is very nearly unique, hand-picked, we have a near monopoly in this country on this level of expertise at the moment. Our competitors envy us for having them. Your position is CEO, and just about every company has one of those. If you want their respect, you’ve got to earn it.”

He changed colours a few times then in interesting ways, and later – I understand – tried to figure out how to fire me. Rather unsuccessfully, as I didn’t report to him, or indeed to anybody in the company, having a position with my staff and teams parallel – but not connected – to the company organisational chart. Simply put, the board wouldn’t let him.

Our company hit trouble in the wake of expensively marketing a product we ultimately never developed. Our CEO left, and got a much better paid job somewhere else, earning maybe twice as much. The company recovered, and ultimately, I also parted ways and worked elsewhere for a while, until a competitor bought it up and my shares paid off rather handsomely.

But I’m rambling a bit. Did you notice?

What’s the lesson here?

Being a CEO is not a career. More often than not, it is a series of sharp – sometimes brutal – tenures at various businesses. Well-paid tenures, at that.

As a CEO – and I’ve been one myself – the main goal is to act as both a communications conduit between the business and the board, as well as a buffer to stop the business and the board from getting riled up and making unjustified war on each-other (it’s actually not very common for the board and the business to be very well aligned. Usually they’re at significant odds with each-other, and occasionally openly hostile). Just managing that tension is usually quite hairy enough without actually taking on any important decision-making (that’s what vice-presidents are for). It’s an error-prone sort of process at the best of times.

As I have said, almost every company has a CEO. You need them. But the demand is so great that the quality of the pool must inevitably suffer. You have to take what you can get. Demand, however, means that a CEO is generally very well compensated, and nobody much cares if your last dozen companies are smoking ruins. So, it’s an appealing sort of game to get into – you’re well paid and nobody seems to care if you make a mess of it. Even a comparatively short stint can fund your next startup. With only the rarest of exceptions, all CEO seats are ejection seats.

Bad CEOs come and go. Good ones you must treasure.

You’re certainly paying enough for them, right?

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Categories: Business, Opinion.

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