A company has only one peerless role: chief executive officer. It’s the most powerful and sought-after title in business, more exciting, rewarding, and influential than any other. What the CEO controls—the company’s biggest moves—accounts for 45 percent of a company’s performance. Despite the luster of the role, serving as a CEO can be all-consuming, lonely, and stressful. Just three in five newly appointed CEOs live up to performance expectations in their first 18 months on the job. The high standards and broad expectations of directors, shareholders, customers, and employees create an environment of relentless scrutiny in which one move can dramatically make or derail an accomplished career.

With this article, we set out to show which mindsets and practices are proven to make CEOs most effective. It is the fruit of a long-running effort to study performance data on thousands of CEOs, revisit our firsthand experience helping CEOs enhance their leadership approaches, and extract a set of empirical, broadly applicable insights on how excellent CEOs think and act. We also offer a self-assessment guide to help CEOs (and CEO watchers, such as boards of directors) determine how closely they adhere to the mindsets and practices that are closely associated with superior CEO performance. Our hope is that all CEOs, new or long-tenured, can use these tools to better apply their scarce time and energy.

Society’s expectations for business are rising. Customers—particularly younger ones—want to know what the companies they engage with are doing for, with, and to the world. Nine in ten Generation Z consumers believe that companies have a responsibility to address environmental and social issues. Younger people think that environmentally and socially focused companies are better prospective employers, and the vast majority say they would be more loyal to companies aligned with those values.

As demands for social accountability rise, so do demands on leaders. This article, based on a range of McKinsey research and case studies of leaders in action, provides a glimpse of the emerging new leadership imperative. Sometimes it’s about boosting transparency—for example, the moves a few fashion- and consumer-oriented companies are making. Empathy also looms large, as shown by new McKinsey research based on surveys and interviews with a group of fellows at Ashoka, one of the world’s leading communities of social entrepreneurs.¹ Also critical: a sense of meaning, say two CEOs who recently described their work during a panel discussion marking the 50th anniversary of Pepperdine University’s Graziadio Business School. Transparency, empathy, and meaning—timeless and increasingly timely—are all starting to define a new leadership benchmark.

Modularization excels in high-volume industries such as automotive, but does it offer tangible benefits for companies that tackle just a few, extremely complicated projects each year? The builders of steel plants, chemical plants, paper mills, wind parks, packaging lines, or power plants fall into this category, completing a handful of highly specialized solutions every year that feature very specialized components. New research—laid out in our report Smart platforms: Cracking the complexity challenge of project industries—affirms that, if done right, a modular platform strategy can deliver significant value quickly in these situations to fix the complexity challenge.

In industries focused on large projects, companies typically face four key challenges: customization at low prices, delays and cost overruns, long payback times due to low volumes, and flexibility between customers and suppliers. And lacking rigid product management systems, teams often develop new solutions based on prior projects. Consequently, each new project creates new variants, making a well-structured product portfolio unachievable—with products that may include “historical” features that the customer at hand does not value. As such, many project industry players find themselves stuck. Can modular platform strategies address this complexity, and can companies monetize the savings more quickly than the usual three- to five-year time span? 

It can be done. But to succeed, project industry leaders must first overcome their skepticism of smart platforms. Doing so, and embracing a smart platform strategy, can help them achieve substantial impact in as little as three to five months. Players could, for example, significantly reduce direct costs or shorten project lead times by 30 to 50 percent by improving project quality, clarifying technical concepts, and boosting execution stability. Beyond immediate effects like those, a smart platform strategy can also enable further improvement initiatives: moving opportunistically from the partial reuse of existing parts to the integrated planning of product platforms sets the foundation for structured improvements along the product hierarchy.

A merger provides an exceptional moment for executives to reflect on the performance of a company’s operating model—the organization of structures, processes, and people in service of value creation. Substantial changes to an operating model are often necessary to achieve the strategic objectives and deliver the promised value of a merger. Making these important changes is not something that top teams can or should delegate.

Mergers have a bias for speed, leading to the temptation to cut corners during operating model redesign. For example, top teams might focus on structure with the hope that future leaders will attend to processes and people. In our experience, this is generally a mistake and can lead to serious change management challenges during the transition process.

Conducting an operating model redesign during a merger also presents some unique constraints and risks:

• Success depends on building a new executive-leadership team that aligns on a vision, agrees on the path to get there, and commits to modeling the new company’s ways of working.
• Heightened anxiety and jockeying for position in the executive ranks increases the pressure for a CEO to get the top-team selection and alignment right.
• Transitioning from two existing operating models to a new, combined operating model requires thoughtful transition planning and increased attention to change management—underdeveloped skills in most organizations.
• Despite pressure to deliver value quickly, teams often need to use an interim operating model for some time after a deal closes before transitioning to an end-state model—and the interim model needs to be functional enough to start delivering on deal rationale.
• Workforces are typically anxious during a redesign, and a desire for information and clarity may decrease productivity during the process.
• Regulatory and legal considerations restrict what organizations can do, design, communicate, and implement.

This article looks at the approach to designing operating models during mergers, including how to think about an overall operating model for a new company, the process to design and implement it, and key factors for success.

“We have to do something about G&A!”

That’s the commitment the leaders of a global industrials company made recently under earnings pressure. But rather than immediately cutting the G&A budget, the company took a more strategic approach.

Management realized that the company’s support functions, which made up the majority of its G&A costs, were central to several sources of value creation. For example, the procurement function was using strategic vendor partnerships to lead a wave of product innovation, while the finance function piloted the most promising use cases in the company for robotic process automation. Therefore, investing and building capacity made more sense than cutting costs.

It’s time for every company to re-evaluate G&A, just as this firm did. G&A isn’t just an expense line in the profit and loss (P&L) statement. Instead, it is an integrated set of roles that have the potential to create significant value.