What the CEO Wants You to Know: How Your Company Really Works

by Ram Charan

The one thing I’ve noticed in all that time is that the best CEOs are like the best teachers. They are able to take the complexity and mystery out of business by focusing on the moneymaking fundamentals. And they make sure that everyone in the company, not just their executive colleagues, understands those building blocks of business.

Every organization must serve its customers, manage its cash effectively, use its assets wisely, and constantly improve and grow.

when discussions are constructive and energizing. You’ll get more excited about your job because you’ll see that your suggestions and decisions are helping the business grow and prosper.

Moneymaking in business has four parts: satisfying customer needs better than the competition, generating cash, producing a sufficient return on the money invested in the business (your capital), and growing profitably.

True businesspeople understand all four parts individually as well as the relationships between them.

don’t rely on clinical data alone. Seeing is indeed believing.

to the business. For example, if your gross margin goes from 52 percent to 48 percent, you have to ask why. Is it costing more to produce your product, or is competition forcing you to lower prices while costs are staying the same?

Focusing on profit margins is good—but insufficient. The best businesspeople, the ones who will be promoted, focus on velocity as well.

A true businessperson masters the relationships among customers, cash generation, return on invested capital, and growth to get an intuitive grasp of the total business.

Your company’s price/earnings ratio is the key for turning money into wealth.

One way to do that is to reframe the way you see the world. Stop looking in the rearview mirror and imagine what will happen in the future.

Generally Accepted Accounting Principles (GAAP)—

people. A leader of the business knows what to do. A leader of people knows how to get it done.

His aptitude, attitude, and drive matched the job and the needs of the company. Without people who fit, Intel could not have become the giant it

Effectively and quickly dealing with mismatches gives you an edge in execution.

Avoiding conflict hurts the business—and hurts the mismatched employee.

It will be important for you to enhance your performance in the two following areas: 1. You should delve more deeply into operational details of your businesses. Whether it is service levels or capital expenditures, you must be completely versed in the inner workings of each business and hold managers strictly accountable for high achievement. While you came from outside the industry, you are a quick study. Having a stronger knowledge base will serve you better. 2. Sometimes you are too sympathetic to people and accept plans or performance from them that are, in fact, substandard. Raise your standards. Always keep your standards at or above what we must achieve to propel us forward as a global company of excellence.

Then he started issuing weekly reports on the three items that were the biggest money guzzlers: the number of employees, the amount of rework, and the percentage of damaged goods.

business focus, building the best team possible, and synchronization.