1. In today’s turbulent world, how should the success of CEOs be evaluated?
2. What are the challenges of focusing on just financial metrics to the long term success of organisations?
3. What are the challenges leaders face in balancing financial and ESG performance metrics? Drawing on current leadership research (in the last 5 years) discuss how leaders should address these challenges
Use examples of three current CEOs (leaders), to support your answers to questions 1, 2 and 3. Critically evaluate how each leader’s practice of leadership impacts the success of their organisation.
Use relevant theories and concepts from across the subject but especially from weeks 6 to 9 in addressing this task.
A minimum of 10 academic/professional references must be used
An organization, in order to run successfully needs a good leader to manage all the organizational activities and guide the fellow employees. The leaders or more specifically the CEOs of a company cannot be judged based on the financial performance only. Leaders of the organizations are ranked based not only based on financial performances but also depending upon social, governance and environmental metrics. Effective leaders are responsible to manage their organization in the best possible way so that the organization and its employees both are benefitted. The leaders are responsible to motivate the employees so that they work with more potential and achieve the organizational goals. This leadership essay below will evaluate the success of CEO’s in today’s world that is based on the success of various popular organizations. It will also provide suitable relevant examples to support the facts. This leadership essay will also shed light on the challenges that are faced if the focus is only given on financial metrics. Lastly, this leadership essay will also highlight the challenges faced by the leaders to balance all the metrics (financial and ESG).
In today’s turbulent world, how should the success of CEOs be evaluated?
Traditionally the success of organizations was based mainly on financial metrics, which describes the financial status of the organization. However, this cannot be the only basis of judging a CEO as the success of a firm is not solely dependent on the financial metrics. The CEO is responsible to look after the environmental, social and governance metrics (ESG) (Kotsantonis et al, 2016). The criterion of success of CEO in the 21st century can be measured in terms of strengthening the competitive position of the company, to deliver sustained superior returns to the shareholders and to leave a positive impact on the company. According to Jim Collins, if the success of an organization is measured only in terms of financial metrics, then the CEO of Amazon, Jeff Bezos, will top the list of world’s best CEOs. However, he has position number 71 in the list.
Volkswagen is a famous car manufacturing company that has faced major challenges due to a scandal that hampered the reputation of the company. Volkswagen installed a special device or a software in more than 10.5 million diesel cars all over the world that was able to sense the when the car was tested for parameters of emission that was conducted by the Environmental Protection Agency (Moravcsik, 2017). The software was smart enough; they were able to detect the phase during which the car was tested for its levels of emission. When the car goes on road the software gets turned off and the car emitted harmful chemicals such as Nitrogen oxide, which is a pollutant that produces smog. This harmful chemical could cause serious diseases such as lung cancer. The scandal was revealed and the company was charged a criminal penalty. This incident significantly hampered the reputation of the company, which lost the trust of the customers. The company took many measures to sort the issue and gain back the trust of the customers. The company pulled up many cars that were detected with the software installed. The firmer CEO of the company named Martin Winterkorn, resigned after this severe incident took place. The new CEO, Matthias Muller, proved to be a great leader. He claimed that the company did not lie to its customers, it was just a major technical glitch that the organization faced. He has also ordered complete recognition of the problem so that the customers no more face the same and this will allow the company to gain back the trust of the customers. He also motivated the employees, who feared that they would lose their jobs due to the major downfall that the company faced.
Success can be defined as the achievement of a goal or an action within a specified parameter or stipulated period. It is measured in terms of completion of an objective or reaching to a particular goal. Success of an organization is defined as the ability of the organization to achieve its goals and at the same time look to the needs of its stakeholders (employees, customers, shareholders, suppliers and others). The success of an organization on broader terms is dependent on the needs of the multiple stakeholders. As stated above, the success of an organization cannot only be measured in terms of financial metrics, other factors such as the social, environmental and governance metric also needs to be considered (Isaac, 2017).
The Environmental, social and corporate governance (ESG) criteria are the three main factors that are considered in case of the ethical impact of a firm (Dahlberg and Wiklund, 2018). The ESG factors are responsible for determining the impacts of the company on change of climate or pollution, carbon emission, waste production, conservation of water, broad diversity, community development, human rights efforts and policies on corruption. After from the financial progress, the companies need to focus on these factors, which collaboratively determine the success of the firm.
What are the challenges of focusing on just financial metrics to the long-term success of organizations?
In this very case, it can be mentioned that the financial metrics plays an effective role for determining the development of the organization within the competitive market. With the passage of time it can be stated that the organizations have developed technologically to maintain a pace with the fast moving market (Wu and Chiu, 2018). In this research, Toyota has been considered to determine the fact how the company has been focusing on the financial metrics for the success of the organization in the market and the leader is Matt Callachor. Being financially strong in this market enables the organization to overcome the barriers for their growth. Here, it can be stated that the challenges that Toyota Australia has been focusing on for their growth are discussed in this research. When the economy of any country is complex, the regulatory system also speeds up their changes in order to cope up with the changes in the economic environment. Moreover, it can also be stated in this case, that only just focusing on the financial metrics, the companies ignores the wealth maximization. Thereby the growth of the company remain stagnant at a point and for this very reason, they can face severe challenges in the market. It can be examined here, that maximization of the profit is considered to be very essential and is also considered as an objective of the company. However, the main question lies here is that “Is this more important to maximize the wealth held by the stockholders that maximizing the profit of the organization?”. The answer is NO, as it is quite clear a fact that the organization needs to maximize the profit margin than to calculate the wealth earned by the stockholders for the future growth of the organization. Each stakeholders of the company is liable for the growth or the downfall of the organization (North and Kumta, 2018).
It has also been considered in this case, that the total profit earned by the organization as a whole is not the same as the wealth earned by the individual stockholders. In case of Toyota Australia the case is also similar. The stockholders mainly focus on earning individual wealth and focusing less on the growth of the organization in the highly competitive market. This is the main challenge that is faced by the leaders while considering the financial metrics of Toyota. The maximization of the wealth is essential that is mainly based on the cash flow and focus on maximizing the accounting profit should be reduced. Therefore, this issue will be into its role if the leaders of the organization focuses on the wealth maximization. Therefore, it can also be mentioned that this makes the stakeholders individual players and does not work in a team. In order to enhance the growth level of the organization it is highly essential for the players to focus on the development of the profit maximization of the organization which is one of the objectives (Reid et al., 2018). Therefore, it can also be stated that with the passage of time this issue can be resolved only by developing suitable strategies that must be developed by the organization in an effective manner. However, there are certain other issues as well that the strategy manager must develop the financial strategy in such a way that would help them to overcome issues of enhancing the financial metric. The financial manager is highly responsible to link the budget with that of the reality regarding the different expenses that are undertaken by the organization within the year. This would help the manager to develop the budget in a more specific manner for the next year. If the assumed budget is less that the expenses made then it would be considered that the organization can face huge loss in the upcoming years as the production cost will be higher as compared to that of the revenue generated. The stakeholders are also responsible to develop effective strategies for the growth of the organization and to generate revenue that would maximize the profit level of each of the stakeholders. However, there are also certain issues in this case regarding how they would be able to develop the strategies for the enhancement of their operations in the market in an effective manner (Cini and Ricci, 2018).
Thus, it can be stated that if maximization of the profit must be focused in an effective manner so that this can leverage the growth of the organization for a longer period of time.
What are the challenges leaders face in balancing financial and ESG performance metrics? Drawing on current leadership research (in the last 5 years) discusses how leaders should address these challenges.
As per the studies it has been observed that the leaders face several issues regarding balancing both the ESG performance metrics and the financial accountability of an organization. Therefore, it is highly essential for the organization to develop certain strategies that would help them to develop the performance of the organization in an effective manner. In this case, it can also be mentioned that the leaders play an effective role in the development of the organization so that the company can grow within the market in an effective manner. In case of Coles, one of the most renowned retail organizations in Australia the leader, Rob Scott, Managing Director of the company plays a very essential role for the development of the organization in an effective manner. According to Leyva-de la Hiz et al., (2018), it has been observed that there are certain challenges that the leaders face while maintaining a balance between the financial and ESG performance metrics. The first is defining sustainability which mainly involves the sustainability of the organization. In this case, it can be stated that the organization must practice sustainability so that they can be effective enough to earn the competitive advantage in the market. Operating in a sustainable manner would help in exploiting the resources available to them. Secondly, the calculation of the ESG is not a straight forward concept and for this very reason the application is also considered to be a complex one. As per the analysts, it has been observed that the implementation needs roper training so that it can be understood and uncertainties can be avoided. The study also includes the collection of proper collection of data. On the other hand, it can also be stated that the selection of the proper investor horizon is also considered to be an important aspect. Moreover, it can also be mentioned that the financial issues must also be determined and figured out by the leader, Rob Scott so that the issues encountered by the organization can be pre-defined in an effective manner (Sekerka et al., 2018).
From the last 5 years, it has been depicted that the leaders of Coles have designed several strategies that would help them to develop the operations with the passage of years. Moreover, it can also be mentioned that the leaders must design the strategies in such a manner so that it helps in the future growth of the organization in the near future. It has been observed that Coles have decided to play sustainably within the market thereby has prohibited the use of plastic bags and at the same time has incorporated paper bags which are highly eco-friendly. Moreover the CSR is also effective for the company and this helps the organization to operate effectively within the market. In addition to this, it can also be mentioned that the strategies must be developed by the managers in an effective manner so that it boosts the growth of the organization in an effective manner (Zhao et al., 2018). Therefore, it is highly effective to work by balancing the financial and the ESG performance metrics as it will help the organization to operate within the market in a more competitive manner.
Conclusion The leadership essay written above makes it easy to understand the concept of success that leaders bring to the organization. This leadership essay evaluates the success of the CEOs that is not only focused on the financial metric but also on financial, environmental and governance metrics as well. This leadership essay provides examples of instances of Volkswagen, who had lost its reputation in a diesel scandal. It also sheds light on the challenges that are faced by organizations, when only the financial metrics are considered as the only factor to measure the success of the organization. It also focuses on the issues that are faced by the leaders to balance between ESG performance and financial matrices. This leadership essay also draws relevant references from recent incidents that have taken place in the last few years to explain how the leaders have overcome the challenges they have faced to make their organizations run successfully. Leadership essay are being prepared by our management assignment help experts from top universities which let us to provide you a reliable assignment help online service.
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