The bite of the watchdog


A report in Business Week alleges that a certain type of chief executive is dwindling unto death - the type that one non-executive director calls 'the Imperial CEO'.

The Imperial CEO is the simplest possible answer to the fundamental question: 'Who's in charge here?' - or WICH? for short. But can one person truly exercise ultimate power over all aspects of any organisation without adversely affecting its performance and behaviours?

According to the BW report, you can no longer give that old single answer of a single person in charge. Power has transferred to the 'watchdogs', non-executive directors, auditors and lawyers who 'are playing a bigger role in fundamental management decisions about strategy, acquisitions, succession planning, crisis response and what can be booked as earnings'.

So just who is in charge? These watchdogs are more referees and linesmen than players. The task of management can only be done by managers and in the West that means a pyramid narrowing to the apex.

But the answer to WICH? can be in plural form. A group of people can make up the top management, sharing decisions and responsibilities, combining their workloads. This is how most businesses begin life. A generally plural management is a better fit for all those watchdogs.

But pluralism doesn't fit with the long-prevailing universal template - the military model. Army commands have single leaders, and their reach is every bit as imperial as that of any power-hungry corporate czar.

The commitment of mighty forces has always depended for its outcome on the leadership strengths, strategy intelligence and tactical expertise of a clearly appointed supreme leader who you hoped was as strong as his army. Where that hope proved to be mistaken, the result was disposal of the failed leader.

The disposal of failed leaders remains a standard piece of management control theory. Non-executives too easily get taken in by the dynamism and charisma of the Imperial boss. But the issues of strategic or operational failure, though they should predominate, are not generally the cases which lead watchdogs to bark - and bite.

The terminal vices concern matters such as 'loan sales improperly booked over a technical issue', 'accounting problems', 'investigation of company financial controls', etc. The matters definitely reflect impropriety but they don't necessarily condemn the executive effectiveness of a company, or impugn the behaviour of most of its members.

Improper financial direction is unquestionably a threat, but by far the greatest danger to the health and wealth of the business is simple, non-financial mismanagement. In this area the watchdogs have very restricted powers. Not only is it difficult to find out what's going on, but it's harder still to change it.

There is an experimental aspect to management, by its very nature. If it works, that's likely to be good management. If not, it certainly isn't. You balance the scales in your favour partly by taking pains. And like any good scientist, you observe the experiment carefully to judge the action and the results.

If people ignore or dismiss powerful management principles, you need the watchdogs to ask why - loud and clear - before bad figures show bad consequences. Well thought-out and executed policy should make managers immune from watchdog interference. Once dishonest, unethical conduct comes in, failure will follow.

Managers not only need all the moral reinforcement available from outside. They also need to be their own toughest watchdog.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".