The paradox that you refer to is serious and difficult but not impossible to resolve.  In the situations you refer to the CEOs have competing priorities of immediate term increase in shareholder value and long term corporate growth.  This is made important since the bottom line results are constantly reviewed by the BOD and stockholders and their focus on short term success plays a large part in the CEO’s continued employment.  In a 2011 article in Chief Executive, David Brookmire states, “The average tenure of Fortune 500 CEOs is only 4.6 years."[i]  This situation is well understood by anyone accepting a new CEO position and it is reflected in the priorities they set.   

My own unscientific analysis of CEO action priorities goes something like this:

Year 1 – The newly hired CEO knows that the previous person was released because the BOD was unhappy with his/her overall performance.  This shows the road not to take.  In addition, there is the need to quickly demonstrate his/her ability to increase shareholder value so that everyone knows he/she can be successful and they were “correct” in their hiring decision.  The CEO evaluates the organization, lays out a course of action and begins the change process.  The issue of poor field quality must be dealt with using a short term focus on “firefighting” as this provides the lowest current cost and it is necessary to prevent wholesale customer flight.  This activity is independent of longer term quality improvement and is easier to implement and justify.  In addition, the external failure costs can be blamed on the previous CEO so the new person gets a bit of a honeymoon.

Year 2 – The changes begin to take shape, but the improvements are early in their deployment and there are few large scale successes.  The paradox raises its ugly head as the CEO knows that the clock is ticking.  With the average tenure for a CEO at 4.6 years, there must be significant stockholder value increase within the next year or so.  If not, the BOD will experience shareholder dissatisfaction and confidence in the CEO will be eroded.  What this means is that the improvements cannot require sweeping changes and/or long term cultural change.  Success must be financially measurable at the bottom line and large enough to maintain confidence in the progress.  The effective use of quality improvement tools like CAPA, FMEA and Audit can bring timely improvements because they are straight forward and simple enough to deploy widely in the organization.  They do, however take a couple of years to develop from nothing to meaningful improvement.

Year 3 – This is where the progress needs to appear.  If the CEO does not deliver the goods this year, he/she should be sharpening up their resume because the BOD will make sure that the “failures” do not go on too much longer.  If the priorities have remained with seeking short term gain and little focus on the longer term health, the organization looks like Hindustani Motors (or any US auto company in the 1960’s) that is unable to compete in the new reality.  If the CEO has brought in a few tools and changed the internal focus to be one of improvement, these activities should be starting to show reductions of external and internal failures.  This results in improved productivity and reduced costs – thereby improving the bottom line.  Trying to sustain bottom line improvement through cost reduction and firefighting is difficult to do and it often results in quality decrease rather than increase. 

Year 4 – By the end of the third year, the BOD will begin to weigh the CEO’s performance and decide if there is a “beyond Year 4” or if they are spending this year searching for the “next” CEO.

 The paradox of “Prevent the fire or fight it” is answered by one word – both.  You must first fight the external fires to prevent customer defections.  At the same time, you must move the failures in-house so the customers are protected and the extent of the fires is visible to all inside the organization.  This is where the CEO needs to realize that there is a successful path to the future and that it does not require huge investment or wholesale cultural change.  The first year or two will be difficult because there are many fires to fight and smoldering stuff to remove.  With the current shareholder and BOD expectations for continually increasing share value, there is no room for grandiose programs or fundamental cultural change – they simply take too long and cost too much.  In order for a CEO to have tenure longer than the average, the changes will need to be simple to deploy, straightforward to use and provide effective results.  As quality professionals, we need to assist with the effort by bringing reasonable and effective solutions to the organization.  This is a way to leverage the entire organization and turn everyone from firefighters to fire-preventers and solvers of the paradox.

[i] (Brookmire, 2011)