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Rapid organizational change means CEOs need to step up with a strategic response

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What makes a CEO exceptional: A leader’s guide

Peak performance ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 

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The more outstanding its leader, the better an organization performs. There’s even a name for this outcome: CEO alpha. Coined by McKinsey, the term “refers to when a company outperforms because its CEO is also outperforming,” says McKinsey senior partner Sacha Ghai. While the concept of CEO alpha applies particularly to the financial sector, it can occur in any industry—a CEO who can create alpha needs to have certain distinctive capabilities, including being able to conduct strategic planning in a short time frame, working effectively with boards, allocating resources dynamically, and creating value with new technologies. And “having a CEO who is a fabulous talent developer and recruiter, who can pitch a terrific story and who surrounds him- or herself with outstanding talent, makes all the difference in the world,” says Ghai.

58%

That’s how much more likely exceptional CEOs are than others to conduct a strategic review in the first two years of their tenure, according to research led by McKinsey’s Michael Birshan, Thomas Meakin, and Kurt Strovink. By making such bold moves early on, exceptional CEOs build strategic momentum. They are less likely than average CEOs to undertake organizational redesign or management-team reshuffles in their first two years on the job. “There are only so many initiatives and changes that organizations and people can absorb in a short space of time,” the McKinsey experts say. “Investing in a robust strategic review will provide a surer perspective for setting a strategic direction. A grounding in the organization’s context, meanwhile, will help calibrate the speed and scope of change.”

For Vipul Chawla, group CEO of Singapore’s FairPrice supermarket chain, excelling in his role is about being hands-on—including picking, packing, and fulfilling orders in his first few months on the job. “I said to myself that unless I invested at least 100 hours doing something, I didn’t have the license to even have a conversation with my team, let alone make decisions,” he says in a discussion with McKinsey senior partner Rohit Razdan. His stint as a cashier, for example, enabled Chawla to see that customer transactions at checkout were needlessly complicated and could be simplified: “It created an empathy for what our staff went through and what was possible.” This empathetic approach underlies the three pillars of Chawla’s leadership strategy: culture, purpose, and people. “Those are the three things I’m maniacally focused on,” he says.

Lead exceptionally well.

— Edited by Rama Ramaswami, senior editor, New York

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 01:10 - 10 Jul 2023