Guidebook

Four lessons on what makes a world-class CEO

Several qualities unite world-class leaders. They're committed, innovative, globally-minded, and they deliver results. Aspiring leaders are advised to take note:

1) The best CEOs think like company owners

Barron's (an American business magazine) searched for leaders who display an ownership mentality at their organisation.

As a result, it's not surprising that a lot of the CEOs on the list are the founders of their companies. Fred Smith has been FedEx's CEO since the company began in 1971. Amazon's Jeff Bezos founded the online retailing behemoth in 1994. Warren Buffet didn't start Berkshire Hathaway, but it's been his baby since 1965.

In Kloppers' case, it's noteworthy that he acts like an owner without owning a lot of BHP stock. He was number 57 on BRW's recent executive rich list, with his personal holdings well behind those of many less-powerful Australian executives.

2) The best CEOs deliver for all stakeholders

Most of the CEOs who made last year's list, but missed out this time, were dropped due to lacklustre earnings results. But merely achieving high earnings year after year isn't enough to be considered a truly world-class CEO.

Barron's singled out Starbucks under Howard Schultz (a founder who returned as CEO in 2008). The café company, known in Australia for an over-expansion and subsequent downsizing in 2009, achieved a 50% rise in share price over the past year while providing health insurance and retirement benefits to even its part-time workers.

Investment banking CEOs are more often derided than applauded, but Barron's heaps praise on JPMorgan Chase's CEO since 2006, Jamie Dimon. The magazine describes how when the company absorbed the sinking Washington Mutual in 2008, Dimon engaged with some 5000 employees of the bank on how to make their jobs better. He then set his management team to making fixes, from simplifying workplace bureaucracy to establishing Mandarin-language call centres. JPMorgan Chase was among the first banks to repay Washington for its bailouts following the global financial crisis, and unlike many of its rivals, offered a dividend increase to shareholders this year, as well as a share-buyback.

3) The best CEOs have a global strategy

The best leaders have a global focus, and are keenly aware of the opportunities this can bring. The three food giants on the list all have significant operations outside their country of origin. Yum! Brands, whose CEO David Novak made the list, gets half its profit from China. Under Jim Skinner, McDonald's now gets half of its earnings outside the United States. Starbucks gets a quarter of its profits outside of America.

Kloppers is no exception to this. BHP has tied its future to China, and supplies 20% of all iron ore used by the rising superpower. Barron's said the South-African born CEO "knows as much about doing business with China as anyone... Though he sees some weaknesses ahead for China, he's in for the long haul and looks likely to be a huge winner."

4) The best CEOs are innovators

Many of the CEOs on the list are masters of positioning themselves ahead of their competitors, adapting new technologies and addressing emerging needs before everyone else catches on.

For example, Marc Benioff of salesforce.com built his company around cloud computing long before most people knew what it was. His company, which he founded in 1999 after leaving a sales post at Oracle, provides cloud computing services to corporations. Revenue was $2.27 billion in 2010-11.

Hyflux CEO Olivia Lum – the only women on the list – tapped into a growing concern over the world's supply of drinking water to found a water-treatment and recycling company in 1989. With a starting investment of only $15,000, the company is now one of Asia's leading water-treatment companies. Lum grew up in a Malaysian shack without running water.

Unsurprisingly, seven of the 30 CEOs on the list are in the internet or computing business. The dominance of quality CEOs in these new, competitive, fast-moving industries points to the importance of innovation to successful CEOs.

*This piece was originally published at Leading Company.


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