Once upon a time, every business manager and leader in a mid-sized to large company read Charan’s and Bossidy’s classic, Execution: The Discipline of Getting Things Done. However, you may have missed a gem that Charan published about a decade later.
What the CEO Wants You to Know
This shorter book with less than 200 pages was written more than a decade after Execution. Yet, there are useful nuggets for any financial leader wanting to think like a CEO.
On the one hand, many of Charan’s suggestions follow business common sense. The counterpoint is that as financial leaders, we can get so caught up in our planning and analytical world, we occasionally forget the bigger picture.
Charan’s View of a Great CEO
According to the author, the best CEOs reduce complexity down to the core fundamentals that every colleague needs to understand.
The best CEOs possess business acumen meaning they know how the business makes money. Such acumen also includes a strong grasp of concepts like margin, velocity, ROI, growth, and what customers want.
Charan’s 3 Basic Parts of Making Money
- Cash Generation – the difference between all the cash flowing into the business and all that is flowing out of it in a given time period. It sounds so simple, yet large companies even run out of cash.
- Return on Assets (a combination of margin and velocity) – the key is not focusing on one or the other, but both. Remember this truism, “ROA has to be greater than the cost of capital.”
- Growth – obviously, this cannot be reckless growth, but profitable and sustainable.
Acumen and Clarity
All business has complexity. But Charan appreciates the following about a great CEO:
They use their business acumen to determine clear, specific priorities, or action items, that make money in the real world and create wealth for stockholders or owners.Charan, Ram. What the CEO Wants You to Know: Using Your Business Acumen to Understand How Your Company Really Works (Kindle Location 663). The Crown Publishing Group. Kindle Edition.
Charan goes on to say that these strong leaders are able to identify significant patterns and trends which impacts their ability to make money.
The best CEOs use their business acumen to reduce complexity, whether internal or external to the company, to the basics of money making.Understand How Your Company Really Works (Kindle Locations 680-681). The Crown Publishing Group. Kindle Edition.
Getting Back to Basics
I’m not calling this a great book. It’s a refresher on thinking like a CEO. Near the end of the book, Charan guides his readers on where our focus should be. Simple? Yes. Fundamental? Yes. Necessary? Absolutely.
- Is there excess capacity in the industry?
- Is the industry consolidating?
- Is there stiff price competition?
- Is the business impacted by interest rates?
- Are there new competitors?
- How is competitive selling in multiple channels impacting the business?
The CFO Bookshelf Rating
Amazon reviewers give this book 4.5 stars. That’s generous. I’m giving it 3.5. It’s not bad, but it’s not Execution-great.
If you liked Execution, then consider this a good rebound book if you missed this title when it came out.
If you are a CEO, it’s a good book to give your leadership team members.
For financial leaders, my favorite part of the book was revisiting the concept of return where:
Return = Margin * Velocity
It’s so simple, yet so foundational.