The Performance Of A CEO, Growing Level 5 Leaders & ChatGPT Prompts To Be A More Effective CEO

10 September 2023 Newsletter

“The most important thing [is] trying to find a business with a wide and long-lasting moat around it … protecting a terrific economic castle with an honest lord in charge of the castle” -Warren Buffet

Hope you’re Thriving!

I’m in the middle of 9 strategic planning workshop days over 11 business days, including travel across the country. And loving it.

I also received the first copy of my new book Onboarded For Managers. I’m excited share with you more information on its release in the coming weeks.

The Performance Of A CEO

I write this newsletter on a Qantas flight, eating a Qantas salad with sand in it, reading about this week’s resignation of the CEO Alan Joyce after 15 years.
Before departure, I’d arrived at the airport early for a quick business meeting in the lounge, only to be told that my non-flying guest wasn’t allowed into the lounge. Non-flying guests were a long-standing benefit that had apparently been removed a couple of months ago in the fine print somewhere. All we wanted was two seats and two coffees.

I think the general public is sympathetic that airlines must recover financially after Covid.
But with a $2.45b pre-tax profit recently announced and what looks like underinvestment across everything, that sympathy is running out.

In my recent experience, phoning the airline results in hours of pain. The website works around 50% of the time for anything but the most straightforward transaction. Everyone knows people who’ve lost luggage or had flight problems. Remember, this is Australia’s premier full-price airline – it’s not in the discount price-driven market segment, and customers knowingly pay accordingly.

A look at the NPS from the recent report shows that customer satisfaction is just above the score when the CEO grounded all aircraft in a dispute with the unions.

A dotted line doesn’t represent what will happen. It represents what they would like to happen.

Let’s look at some key metrics over the past 15 years:

• Lost $1.862b net profit from 2008 till 2022
• Reported $1.74b net profit in 2023
• Market share went from 68% to 61.1% (against a goal of 70%)
• Share price from $2.36 to $2.54 (at time of writing)
• Average turnover (exc Covid 2008-2019) $15,631b
• Average net profit (exc Covid 2008-2019) $156m
• Average profit % (exc Covid 2008-2019) 0.009%
• Total CEO compensation over 15 years $125m

Pending costs:

• ACCC fine for allegedly selling tickets to cancelled flights >$250m
• Class Action for Covid refunds $unknown
• Replace ageing fleet due to under investment up to $15b
• Repay COVID stimulus to Government – unknown, unlikely but possible

This performance scorecard represents everything that is wrong with corporate Australia.

In my book Made to Thrive, I discussed the five results that great CEOs produce.
These are:

• Higher percentage of top performers
• Higher retention
• Higher productivity
• Consistent growth
• Consistent results

I will let you make your own judgement against these criteria.

Growing Level 5 Leaders

One of the key questions we ask ourselves when considering whether we want to take on a new client is:

“Do we see the potential in this firm or leader for level 5 leadership?”

Or put another way;

“Are they humble enough, and do they have the burning desire to do the difficult things required to build a business that is bigger than themselves?”

When they leave, will there be a lasting, enduring, positive legacy? (Or a list of pending legal action and costs as above).

A year ago, I wrote about Trek cycles and how they are focused on building level 5 leaders. In that article, John Burke, the President of Trek Bicycles from Waterloo, Wisconsin, explained how they “have 450 leaders, and 42 are level 5. There’s a lot of work to do”. Trek is focused on growing leaders and has built an internal university dedicated to it.

I re-read an HBR article about level 5 leaders from Jim Collins this week.
Here’s a quote from that article:

“When you combine that irony with the fact that boards of directors frequently operate under the false belief that a larger-than-life, egocentric leader is required to make a company great, you can quickly see why Level 5 leaders rarely appear at the top of our institutions. We keep putting people in positions of power who lack the seed to become a Level 5 leader, and that is one major reason why there are so few companies that make a sustained and verifiable shift from good to great.”

Here is the Level 5 Hierarchy:

• Level 1 – Highly Capable Individual
• Level 2 – Contributing Team Member
• Level 3 – Competent Manager
• Level 4 – Effective Leader
• Level 5 – Level 5 Executive

The critical difference between level 4 and level 5, according to HBR, is not expected. Level 4 leaders are committed to vigorously pursuing a clear and compelling vision, stimulating the group to high-performance standards. In contrast, level 5 Executives build enduring greatness through a paradoxical combination of personal humility plus professional will.

The surprising truth is that Level 5 executives are naturally introverted and more focused on the team’s success rather than their own prestige. They have also been called Servant Based Leaders. Yet, this term can be confusing because they are incredibly strong in their will for their company or team to succeed despite what the outside world says about them.

The article continues:

“My best advice, based on the research, is to practice the other good-to-great disciplines that we discovered. Since we found a tight symbiotic relationship between each of the other findings and Level 5, we suspect that conscientiously trying to lead using the other disciplines can help you move in the right direction. There is no guarantee that doing so will turn executives into full-fledged Level 5 leaders, but it gives them a tangible place to begin, especially if they have the seed within.”

Read the article here: Level 5 Leadership: The Triumph of Humility and Fierce Resolve

 

5 ChatGPT Prompts To Be A More Effective CEO

Sometimes, you just want a few ideas. AI can be great at helping you to get ideas you hadn’t previously considered or articulating something you weren’t sure about.

But could AI help a CEO become more humble?
Could AI help a leader become more strong-willed in helping their team to succeed? – The signature of level 5 leaders.
I’m not so sure.

This week, I came across an interesting article (written by a company leader who wants to clone you with an AI) that offers five prompts to be a better CEO.

The offered prompts are around the following:

• Create an inspiring vision
• Improve communication
• Keep perspective
• Get more from your team
• Improve self-awareness

I’m pretty skeptical because I feel that it’s designed to write an article for clicks. But, the prompts are well written and could give you some interesting ideas.

Read the article here: 5 ChatGPT Prompts To Be A More Effective CEO

 

Blockbuster [A Friendly Reminder About Being Humble]