Who's the biggest driver of the success of a company? Employees or CEO?

Great Debates
1

I ask because in a recent conference after the spacex landing on a Sea Barge, Elon Musk made mention that The people working at Space X were the ones that did the work. And normally I’d agree that the vast majority of the effort and success of a company rests on the shoulders of the people working there more than the one who directs the efforts.

But with Elon, there is something about him that seems more… indispensable. Part of it was that he kind of was, he put his own fortune on the line for both spacex and tesla and they turned around. So there seems to be a boost effect of worth for founders of companies compared to some random CEO that parachuted in to act as one among many neverending stewards of a company. But He in particular also seems to have a larger overarching vision beyond pure profit for its own sake that guides the efforts of both spacex and tesla that makes him seem more important than a bean counting CEO. And yet, even with all that, he could not have accomplished a fraction of what he has without the people working at his company.
So maybe the answer is there is no answer and it completely depends on the individual company and dynamics.

2

For pretty much any industry initiative (in a typical top-down hierarchical authority setup, at least), CEO/management makes it happen, and employees make it successful. Neither role will work without the other.

3

Luck
As you go up the hierarchy, workers key decisions get progressively less frequent, more important, and more subject to chance.

4

An army of sheep led by a lion are more to be feared than an army of lions led by a sheep.

An effective CEO should be able to bring about success even if starting with ineffective employees. A group of individually effective employees trying their best in spite of a countereffective CEO are not likely to succeed.

5

Overarching vision is important for brand new,revolutionary, ventures.
But most companies are not new or revolutionary.

You only need a Musk, or a Steven Jobs, or a Henry Ford, to start the first generation of a company.
After that, it’s all caretakers… and luck.
(See: Dilbert cartoons.)

6

Nonsense. Do companies operate in a static environment? No. Companies that fail to constantly be new and revolutionary in adapting to changing market conditions often find themselves out of business.

That’s the reason why competent C-level leadership is so important. Individually, even the best employees at a large company can only contribute so much. It is the vision, strategy, policies, and culture that are defined by leadership that determine whether you even have high quality employees in the first place.

Some companies in slow changing industries like insurance can get by with “custodial” leadership. Layers upon layers of middle managers just collecting status reports making sure underlings are at their desk executing the tasks that keep the wheels on the bus.

I’ve also worked at companies where leadership had no vision or strategy, but had high quality employees. They are places filled with frustration, high turnover, and constant yo-yoing from one short-sighted goal to the next. They can stay in business a long time, but rarely are they “successful” in terms of being industry leaders. My last employer was like that. Top-notch tech people and project managers. But no real strategy beyond “lets sell whatever we can and see what sticks”. The problem with that is as you try to work on projects any larger than a couple of staff-augmentation developers you need to be more strategic and operational in terms of the types of people you hire, how you train them, the type of work you sell and how to coordinate that across the company. Otherwise you get what we had. Dozens of projects fighting for resources, no career paths, 18 month cycles of “look how fast we’re growing!” hyped up hiring binges followed by office closings and massive layoffs.
The problem with the “bean counting CEO” is that growth often takes investment and risk. And if you are managing to quarterly numbers, you will never take those risks.

7

One of the most important responsibilities of a good manager is to see that the company has good employees.

8

Both. They are mutually dependent.

A CEO can not be effective if he does not have the employees to get the work done, and they have specific skill sets he does not have.

The employees by themselves can not get the work to do, or the financing, or the approvals, or the resolution of major league issues without the CEO.

This was explained to me early in life right out of college a year of so in my first job on a construction site. I was talking to a lead foreman and he said this to me. “Antionio”, the company President, “couldn’t build a square box if his life depended on it. I do that for him. On the other hand I been working for him 20 years and as soon as one job ends I go to another and he is the one that sees that happens.”

9

And keeps them, by making sure their contributions are sincerely recognized, appreciated, and utilized.

10

Obviously the CEO, but not without good employees. Sometimes the CEO doesn’t do that much and it’s subordinate management that makes the difference, but every ship needs a captain. Once that ship is built and sets to sea it may be the crew that makes the difference from that point on though.

11

The point of asymmetry is that the CEO has the power to change the employees by firing, hiring or inspiring.

12

CEO is the upper brain, and the employees are the skin and internal organs.

Sure, the CEO ensures the business organism doesn’t do something stupid, and may make great important decisions which lead to the well-being of the business organism. And, without the upper brain, the business organism will probably be torn apart by predators, or starve to death.

However, without the skin and internal organs, the business organism dies immediately.

It’s possible to replace parts of the skin, or get an organ transplant. It’s possible that the employees are more replaceable, but it’s a bad idea to replace good organs, and it’s always risky.

One might argue that this analogy falls apart because a CEO can probably be replaced as well, by someone competent. Yeah, and even a mediocre CEO might not allow the company to die very fast.

But what happens if the employees of a company are unhappy, underpaid, mistreated, and disloyal? How could that ever lead to the success of a brand, even one which is already global and enormously successful?

A company like Wal-Mart loses out big time, just as an example, because almost all of the business that is conducted and almost all of the relations that the company has with the customer happens on an employee level. If the CEO of Wal-Mart were to die, but the employees were amazing, it’s a fair bet that Wal-Mart would rally. If the CEO were amazing, but the employees were horrible, there’s really nothing the CEO can do except try to fix the problem.

I would argue both are indispensable in their own way, but there’s no bigger problem, and no more critical issue, than a business whose employees are ineffective. It’s very damaging, and harder to fix than a bad CEO.

13

You can’t ask a question like that in isolation, and you haven’t even defined “success”. The skills it takes to be “successful” in making money are vastly different than the skills it takes to successfully drive leading-edge innovation, and the two are not only different, they are sometimes mutually exclusive.

I don’t know how useful it is to use Elon Musk – or for that matter, someone like Steve Jobs – as examples because they are exceptionally rare visionaries and motivators. It’s not a useful object lesson in how to structure a successful organization because people like that are incredibly rare. Moreover, both are/were douchebags who’d likely be utter failures at running any ordinary company that wasn’t a pushing-the-envelope high-tech anomaly, if only because no ordinary person in ordinary circumstances could stand to work for them.

The track record of Jobs in that respect is legendary. Musk is no better. When his loyal long-time personal assistant for many years took on greater and greater responsibilities, she asked him to formalize that changed reality with an appropriate salary and title. Musk’s response was to tell her to take a few weeks off and he’d see if he could do both his job and hers at the same time. When she returned to work, Musk told her he’d managed just fine, and fired her. That’s not just bad management, it’s sociopathic. OTOH, he built an electric car that no one else thought possible, and a rocket that delivers stuff to the ISS and then lands itself.

I guess the short answer is that both top leadership and employee quality are important, but the reason there are such an enormous number of overpaid dumbass CEOs (and that the Dilbert cartoon strip is so popular!) is that existing markets and an entrenched institutionalized knowledge base and skill set can keep many typical established companies moving forward by sheer momentum even when the CEO is a complete idiot.

14

When I was in the army, during training we were told that the best thing you can have is a good 2nd in command and section leaders. As the leader, you will make mistakes, you will miss things, but it is these secondary leaders that can make up for your shortcomings. Do not piss off you platoon warrant officer!

I think for a company the parallel is the middle and lower tier management. The rank and file aren’t inspired by the CEO because they are too far removed from them. They are inspired by their immediate supervisor. Similarly, it is the middle management that has to transform the higher vision into an actual plan of action and execute it. Ironically, it is these managements positions which are filled often in the worst possible way. When I worked in IT, low level management was often filled with the best technical person, but these guys often couldn’t lead. Alternatively, if somebody was brought in from the outside it was a business person who could not understand how to make decisions that were appropriate for technological limitations.

This comical video illustrates this last bit perfectly.

15

Corporate leadership is both very important, and also often overrated. I don’t think most people are very good at analyzing the quality of corporate leadership in real time, which is why you often see CEOs that probably had a good long term plan/vision get fired by a short sighted board, and vice versa–CEOs who are given way too long to fail by a board that isn’t willing to accept the CEO isn’t working.

Musk and Jobs are good examples of both sides of this coin. For example Jobs was really a failure as a CEO in the 80s, he did help get Apple to the point it was a significant player in the early home computer market, but he also had positioned Apple to be pretty unsuccessful in that market. To be honest while Apple traditional computers are a little stronger now versus Windows than they were say, 15 years ago (in terms of market share) they’re still small players in the overall laptop/desktop market. If that was all Apple did they’d still be a much smaller, less profitable (possibly not profitable) company.

Further, Jobs arguably didn’t learn a whole lot about strategy and management during his time away from Apple. I think what instead happened is his strategy that was never going to be that competitive with computers was applied to MP3 players, smartphones and tablet computers and that model ends up being probably the best way to handle things on those form factors, thus Apple’s huge success there. It’s also worth pointing out Jobs could not seriously write software code or design computers–even from the earliest days at Apple he did not have involvement with that. He also wasn’t even the guy doing the industrial design. Instead he was the guy giving Apple’s famed industrial design and UI a “look over” from a perspective of someone who seemed to be really good at picking apart what consumers “wouldn’t like.” Jobs was no computer genius even though he’s often portrayed as one. What he did have was a really good instinct for usability and design particularly in the area of improving upon and helping underlings doing the real work and getting it to a better finished product.

Jobs had a very controlling way of viewing the industries he was in, thus why Macs ran with chips that no other computer used for ages (which made it a bear for companies to port PC software to Macs and contributed to how much Mac struggled until it abandoned this approach.) He wanted full control and integration from chip to software, and he never really abandoned that approach–even when it was disastrous in the personal computer sphere.

Elon Musk could be picked apart a good bit as well. Musk was very successful with PayPal and sold it and became a billionaire. He then started companies like Tesla and SpaceX. I don’t believe SpaceX publicly discloses its financials but I think it’s believed to be profitable. Musk’s company really has driven efficiency in launching stuff both suborbitally and orbitally. It’s not that no other company or person could’ve done it (in fact there are other companies doing it), but Musk has done the best job of disrupting the commercial space industry. The old incumbents in that industry have always ran very inefficiently and worked at larger scale, largely profiting because of the fact there’s been a historic close relationship between the U.S. government and a small number of manufacturers so they never really had to work that hard to cut costs. They knew the money was there from NASA and focused more on other aspects.

Tesla on the other hand, I think the jury is still out there. No one can deny that Musk has generated incredible PR for his company, and has gotten people really interested in full electric cars, and has done a smart thing (started as a luxury car maker where you can get by on much lower volumes) and has also invested heavily in battery manufacturing so he can potentially profit from a move toward battery powered electrics even if it isn’t Tesla that is the dominant player, by selling the batteries to traditional automakers. But, all that being said–Tesla has never been profitable. Musk’s charisma and showmanship has essentially continued to give him a blank check in the form of repeated stock issues and a market that seems happy to buy up shares in his company. But, push come to shove a company eventually must be profitable off of its core business, it cannot survive forever at large scale by just having investors pony up more and more money–eventually profits must be realized. We keep hearing that will happen as they scale up production–and it very well might, but at least so far we’ve not actually seen that costs at Tesla don’t scale up right a long with production at a rate that suggests it may be very hard for Tesla to be profitable. I suspect Musk is hoping outside investment keeps the company afloat until core battery technology has advanced to the point where it can be sold profitably at the price points he has established. If that doesn’t happen before investors get tired of not seeing profits then the company will fail. I think right now he’s basically willing to sell cars at a loss to build a market, in hopes the cost of the batteries will eventually allow him to profit off of the car sales.

16

I agree both. Think of the military. A general who sends his troops off on a stupid battle plan (think Light Brigade) will fail no matter how good the troops are. A good general with a chicken army will fail also.

A crappy CEO can ruin a company all by himself, but a good CEO can’t succeed without reasonable staff to execute stuff. If he or she demoralizes the staff by claiming all the credit even good plans will fail. So the danger is that a person who thinks he is a great CEO and employees don’t matter is a bad CEO by definition.

17

Even with Musk’s companies, his personality and his vision probably attracts very high quality human capital. So a big part of what Musk is doing is attracting good employees.

18

To be an effective CEO, you simply need to not suck. It’s a job where doing stupid or counter-productive things are going to doom everything. But it’s hard to do much more than not screwing everything over. Most CEOs are, really, just people who can keep things running and not muck it all up.

There are a few who can really bring something more to it. Bill Gates, for example, was genuinely a good CEO. If you view the corporate world as a big game of chess, Gates was an awesome chess player. He didn’t necessarily predict where things were going to go, but he knew how to make sure that no matter what happened, he would be in position to take advantage of it.

Jobs, after he came back, was good as a product designer (besides being a sufficient CEO) and could use his position to force his design onto the end products, rather than allowing the whole design-by-committee thing that other companies generally end up with. And, of course, he had sufficiently good presentation and sales ability to sell the music industry on the internet business. Rather than guarding against the future, he helped to make it.

Musk, on the other hand, really just lucked into a bottomless pit of money. Google makes so much on advertising that they’re, effectively, spending more time trying to figure out how to blow it all than they are in making any more. And that’s resulting in some cool things; if you don’t care about making a profit or success, you can really go after some pie in the sky things. And, given enough money and time, you might even reach success.

If you gave Bill Gates that money, he probably would either have started buying up companies to put out of business or increase the total holdings of Microsoft. If truly desperate to jettison all that money, maybe he would have just given it to charity or spent it on lobbying the government to increase worker visas for skilled candidates and such. And, outside of giving that money to charity, it all would make more sense as a CEO to do that.

Musk is doing cool things for humanity. He’s doing nothing exceptional as a CEO for Google. For Tesla and SpaceX he’s just cutting a group of intelligent people a blank check to be cool. I’m not sure that really counts as being a “great CEO”.

19

Story told before. In a “let’s help you find a job” simulation, the psychologist had me fill a couple of personality tests and matched them with profiles she’d developed for my intended target position, using as a model an actual ad for a factory’s quality manager. In the “submission vs leadership” axis I rated a 5 out of 10; she said this meant I couldn’t be a manager, she expected a manager to get a 9 or 10. I said “oh hell, you just explained to me why there are so many complaints about how difficult it is to find good middle managers!”
“Uh?”
“It’s a middle manager. A middle manager has to be able to generate orders, take orders, transmit orders correctly both when he agrees with them and when he doesn’t. 10s want to be president of Coca Cola, they’re no good at following and transmitting orders!”
I didn’t want to depress her even further by explaining technical managers such as EHS, who give instructions to everybody and orders to no-one.

The top point things in the right direction (hopefully), but it doesn’t move without everybody else. It’s like that joke about body parts where each of them claims to be the most important… “yeah, we don’t eat if you don’t think about it, if you don’t grab it, if you don’t bite it… but without me we’d just be a bloated bag of shit!”

20

I’ve been fascinated by this aspect of business for a long time, so I read books about what makes companies succeed or fail. (Very much recommend Jim Collin’s books.) One of the best I’ve ever read was “DEC is Dead, Long Live DEC” by Edgar Schein. It sounds like it started as a DEC (Digital Equipment Corporation) fanwank, but it’s a fascinating study of why the company thrived and then why it failed. Some major points are that it thrived because it’s founder and early CEO Ken Olson was an engineer and he ran it as a company full of engineers. He did that “thing” where he let his engineers propose and attempt little hobby projects, some of the winners influenced their larger successful products and some were sold as products by themselves, to succeed or fail in the market. (DEC Rainbow and the atrocious hockey puck mouse.) Except for the notable failure products, this focus on engineering made them a company with a reputation for high quality.

In the middle years as the business grew he hired many non-engineers into the middle-manager ranks; accounting and marketing folks. Over a couple of decades the best of those rose into senior leadership and gradually gained power over the entire company. We’re talking corporate politics at this point. The book describes how at that later stage, those non-engineers would completely ignore Olson’s wishes and do what they wanted - while he was still CEO! He finally quit when he couldn’t stand that anymore, and the company then quickly went downhill (failing miserably to complete in the changing IT market, being sold to Compaq and finally HP). Olson has well-known faults (famously wondering why anyone would want a computer on their desk), but the consensus is that the company moved from a quality focus to a bean-counter focus and that’s what damaged it.

The idea that the bureaucracy can build it’s own momentum and take over a company to the detriment of it’s own highest leadership is something that I didn’t know was possible. Another good book I’ve read illustrates that point with aggregated data. It studied many companies that developed poisoned political cultures that were damaging the companies’ performances and whether or how long it took for a new CEO to turn things around. The study found that in the very few cases where it was successful, it took a new CEO 15 years to bring a failing company back to a success track. Fifteen years!