Beware CEOs who draw their own post-performance bullseyes
By Alec Hogg
Here's an interesting thought to start the week, courtesy of the Oracle of Omaha.
If a secretary is hired for a job that requires typing at 80 words a minute and she only manages 50, she won't last long. Similarly if a new salesman doesn't manage to close the deals, he'll be let go fairly briskly. For most jobs there are logical standards, performance is easily measured and if you don't make the grade – goodbye.
But for the guy at the top of the totem pole it's rather different. As Warren Buffett argued in his 1988 letter to shareholders: "A CEO who doesn't perform is frequently carried indefinitely. One reason is performance standards for his job seldom exist. When they do, they are often fuzzy or they may be waived or explained away, even when the performance shortfalls are major and repeated."
Because, says Buffett, "at too many companies the boss shoots the arrow of managerial performance and then hastily paints the bullseye around the spot where it lands." Not much has changed since 1988. Consider that when you next compare managerial promises to the actual outcome. I will.
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