Good CEOs Focus on Active Listening

When an interim CEO or CFO parachutes into a company they have first-hand experience of what measurements and benchmarks (analytics) are useful and how to use and prioritize them. There is also solid recognition that data and numbers can eliminate a great deal of negativity and get people focused on solutions. Taking action is key, and that often begins with active listening to quickly figure out the exact condition of the company.

An interim must get the facts by asking people what they see and where their main areas of concern are. It is rare during this initial listening process that someone does not say something like “if we had better lighting in this area quality control would improve!”

Acting to put better lighting in place is a small, low cost action that quickly demonstrates that the interim listens to people and takes action. These small, positive actions set the stage for future bigger and more meaningful changes developed through active listening to those who are doing their jobs.

Active listening, defined by Wikipedia as fully concentrating, understanding, responding and then remembering what is being said – is critical for success.

I once went into a company and simply put Pareto’s rule to work. In the customer area I found that 20% of the customers provided 80% of the revenues and gross margin. In the product area I found that 20% of the products provided 80% of the revenues and gross margin. One product actually lost $.05 per sale; however, the sales rep told me that it was a critical part for the customer and assured me that since we sold a number of other products to the same customer at a profit that we more than covered the $.05 loss!

In this particular case I visited the customer with the sales rep and the product engineer and asked how this product (an electronic component) was used. It turned out that it was a key component on a motherboard (basically the central control component for a major product line). I said that we were actually losing money on the sale and asked if there would be any issues with a reasonable increase. The actual component was a very small part of the cost of the motherboard, and since it was a critical component that was designed into the product for the future, a reasonable increase would be fine. We ended up with a 60% positive margin and a long relationship with the customer.

In the active listening process, step two, after establishing a baseline factual picture of “where we are today”, begins with asking the question (while actively listening) “what should we do?”

Similar to the product that was losing $.05 I remember asking the top product-marketing manager where our biggest opportunity was in an area where we clearly had too many products. I remember saying, “if you were President of this product line what would you do?” I asked him to get together with an accounting manager (accounting numbers are the only ones that count) and to compile his thoughts along with a plan for moving forward that he could present to the elder counsel (a group of Vice Presidents and senior managers whose knowledge is crucial to the business) and colleagues.

I did the same thing with various individuals in engineering, production, logistics, supply chain, and even administration. We met with the elder counsel and colleagues two weeks later for a full day. The marketing case stands out because when the presentation was made, the elder counsel agreed and we identified the resources and support to make the program successful. I simply said to the marketing manager, “OK, you are now in charge of that product line, working with the accounting manager. Please execute this plan with a top level priority and keep us up-to-date with your progress.”

Ultimately, the company instituted many changes from within by individuals with domain experience who took ownership of the change and received recognition and rewards for success. Consistent, positive activity came from several small teams tackling various problems/opportunities that quickly amounted to a major impact on the company’s results!

About the Author

Richard Lindenmuth

Richard Lindenmuth serves as Chairman of the Advisory Board of the Association of Interim Executive and is a member of the Association’s RED Team. He is a founder and Managing Partner of Verto Partners, and the architect and driver behind the gross margin improvement and return to growth and profitability for many companies. He is also responsible for the successful integration of mergers and acquisitions inside and outside of the United States. He has served on public and private company Boards of Directors in the USA as well as in several other countries. Richard is a hands-on CEO with a strong background in domestic and international operations.