The Executive's Two Responsibilities (MT)

Summary

Podcast Summary: Manager Tools - "The Executive's Two Responsibilities"

Date: November 17, 2025
Hosts: Mark & Mike
Event: Recorded live at the 2025 M Conference, Los Angeles

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Episode Overview

In this special live episode, Mark and Mike lay out the foundational responsibilities of executives: growth of results and leader development. Drawing a clear line between what managers are tasked with versus executives, they argue that while managers are accountable for current, tactical execution ("current successful operation"), executives must ensure the future success of the organization. The discussion is rich with frameworks, practical anecdotes, Drucker references, and even some lighthearted banter.

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Key Topics & Insights

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1. The Distinction: Managers vs. Executives

Timestamps: 02:00–04:35

• Managers focus on the organization's present operational success; their primary charge is current results and retention of staff.

• Executives must ensure the future of the organization—their two core responsibilities are:

  1. Growth of results: not just maintaining, but growing outcomes over time.
  2. Leader development: cultivating future executives within the organization.

• Not knowing this distinction is a major risk: "Woe be it to the manager-executive who doesn't know the difference." (C, 02:11)

• Noteworthy quote (Mark):

  "Managers are only responsible for the current successful operation of the org, while executive leaders are responsible for the future success..." (03:00)

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2. First Executive Responsibility: Results – Growth

Timestamps: 04:35–30:08

a. The Nature of Growth

• Growth is the first executive responsibility, distinguished from the more static focus of managers.
• Growth isn’t just an option—organizations are living systems:

  "There are only two stages of organic life and therefore human life. And they are growth and death." (C, 07:04)

  • If you're not growing, you're moving toward irrelevance and demise.
• The peril of 'steady state' thinking is strongly criticized as "dangerous" and "stagnant."

b. Organizational Purpose & Drucker

• Referencing Peter Drucker:

  "The purpose of every organization is to create a customer." (C, 13:20)

  • Growth means adapting to market needs, innovating, and maintaining relevance.
  • Drucker's "marketing and innovation" functions are foundational, not limited to advertising or product launches.
• Organizations must respond to society's needs and specialize.

c. Outside-In Thinking

• Executives must shift to an external focus:

  "All results of an organization happen outside of the company." (C, 19:11)

  • Internal perfection means nothing if the external market is not served.
• Managers often remain internally focused—executives must resist this.

d. Growth Relative to Market

• Growth isn't just absolute:

  "Does 1% count as growth if your industry grows at 4%? No." (C, 28:25)

  • True success is growth relative to the competition and market at large.
  • Few companies remain dominant over decades — staying in the Dow Jones is used as a metaphor for how rare sustained success truly is.

e. Edge Cases: Charities & Government

• Some missions are finite (e.g., eradicating disease):

  "If that is your mission and it is in fact eradicated, then you should disband and you should celebrate." (C, 22:18)

  • Most organizations, however, "keep moving the finish line" (mission creep) to justify their continued existence.

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3. Second Executive Responsibility: Leader Development

Timestamps: 30:08–40:41

a. Internal Promotion is the Norm

• Contrary to common belief, almost all CEOs and top executives are promoted from within:

  “About 5 or 6% are hired from the outside… the rest promoted internally.” (C, 30:57)

• When outside executives are hired, it's “an indictment of the previous leadership”:

  “If it happens… that's an indictment of the previous leadership for sure.” (B, 32:45)

b. News and Cognitive Bias

• Outsider CEO appointments make headlines because they’re rare, biasing perceptions about how leadership transitions actually occur.

c. Growth Requires Developing Future Leaders

• To sustain growth, organizations must constantly cultivate talent to fill future leadership roles.

  “If you don't have growth in there, the org chart simply becomes full of people who can only do their existing job, and that's a really, really bad thing.” (C, 35:00)

• The "people system" (alongside strategy and operations) is cited as foundational for developing effective leaders.
  • Delegation and challenging assignments are core tools here.

d. Candor & Evaluation

• Candid performance evaluations are essential but rare:

  "I can assure you, no offense guys, candor is in short supply in your organization." (C, 37:56)

• Growing future executives is equated to science-level achievement:

  “If you can run a billion-dollar human organization… you’re in the 1% of the 1% of the 1%…” (C, 38:44)

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4. Memorable Quotes & Moments

• On perpetual growth:

  “If the company grows by 5% and you don’t, you are falling behind, and if you fall behind for two more years, you're going to fall out of the organization.” (C, 08:03)

• Drucker distilled:

  “Organizations must change and grow in order to maintain relevance and therefore existence.” (C, 15:04)

• Candor on leadership development:

  “Organizations must develop future leaders or face extinction.” (C, 37:56)

• Banter on government organizations:

  "There's nothing closer to immortality than a governmental bureaucracy." (C, 24:15)

  • Ronald Reagan’s quote cited for emphasis.

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5. The Takeaway Framework

• Executive’s Two Responsibilities:

  1. Grow the Results of the organization — always align with external needs.
  2. Develop Future Leaders — internal pipeline ensures stability and growth.

• Develop an external focus and ensure your organization adapts to market, customer, and competition signals.

• Use clear language with your teams; communicate the ‘why’ of growth and leader development to foster understanding and alignment.

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Notable Segment Timestamps

• 02:29–04:35: Managers vs. Executives' responsibilities outlined
• 07:03–09:19: Growth vs. Death – "There are only two stages" analogy
• 13:20–15:04: Drucker—Purpose is to “create a customer”
• 19:08–21:50: “All results…happen outside the company”
• 30:55–32:45: Internal vs. external CEO hiring—setting the record straight
• 37:56–40:41: Need for candor in leadership development and organization evaluation

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Final Thoughts

Mark and Mike argue that executives, in contrast to managers, must look outward and forward: they shepherd organizations into the future by growing market results and building successors who can do the same. The live recording’s energy and interplay with the audience provide added insight and moments of humor, making the case that execution and leadership are, above all else, about people and continual growth.

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For more actionable management advice, visit: manager-tools.com

Transcript

[A]

Well, hello there, Manager Tools audience. We have got a special treat in store for you today. Back in October, Mark and Mike recorded live in front of an audience, an Executive Tools podcast. This is only the second podcast ever we've recorded in front of an audience, so we thought we'd share today with you. That recording. It's about the executive's two responsibilities. And if you'd love the opportunity to join us, and maybe if you're lucky, catch a glimpse of Mark and Mic recording live yourself, you're going to want to sign up for the mConference 2026, which will be happening in Los Angeles October 6th and 7th, 2026. It's live for sale on our website right now. That is manager-tools.com mConference. We hope to see you there.

[B]

Welcome to Executive Tools. This episode, we have a rare treat. Mark and I are recording this episode of Executive Tools in front of a live. We are at the 2025 M conference in Los Angeles. There are about 50 folks sitting here watching us and listening to our actual recording. Lucky them. You already said hi, so audience, say hi to everybody.

[C]

Hi.

[B]

Okay, and we're off. Here we go. I already said welcome to Executive Tools, didn't I? See, this is improvise. It's already adapt. It's already different, overcome. Okay? So here again, welcome to Executive Tool, the Executive Tools. Okay, what happens here is Paul cuts that out. Okay? Just be clear, all right? And he'll probably do it.

[C]

We'll see.

[B]

We'll see whether he cuts it out this time. Here we go. Welcome to Executive Tools. The executive's two responsibilities. This cast answers these questions. What is the primary responsibility of all executives? What is the secondary responsibility of all executives? Well, if we want to answer those questions and more. Keep listening. Here we go, Mark. Executives and managers both have two core responsibilities that inform all else that they do. But the two key responsibilities are different between managers and executives. And woe be it to the manager executive who doesn't know the difference. So managers manage executives Exec. No, they lead. They lead.

[C]

Exec being a good verb. Yeah. It probably won't surprise anybody who's paying attention if you've listened to a few Executive Tools cast. We've actually teased this many times on Manager Tools as well. Executives have two primary responsibilities, just like managers do. It's probably not surprising that it's very similar to the results and retention that managers have to achieve. Keep in mind that all executives are also. Almost all executives are also managers, too. But the difference derives from the fact that managers and leaders have different fundamental responsibilities to the organization at even a higher level than these more tactical ones. Managers are only responsible for the current successful operation. I say again, current successful operation of the org, while executive leaders are responsible for the future success of the company or the organization. Now, what does that mean? If you take the manager's current responsibilities and you extend them in the future, what's the logical outcome of that for the executive responsibilities? And you can probably figure that very quickly. It's not just results, but it's results.

[B]

Growth.

[C]

We're going to explain why it is growth as opposed to sustenance or stability, or stability, you know, flatline, if you will, which is a really good. It's actually a really good wrong use. We're going to be stable. Flatline. And then the other one is leader development. It's not enough to retain. You have to develop future leaders, the organization. So we're just going to make this one super simple. Usually our lines have more points than this, but they only have two. I don't think we've ever done a cast. Have we done a cast where we only had one item? I don't think so.

[B]

Have we?

[C]

You know, I don't. I don't recall one. We've only done a few casts, so we should be able to remember that. I thought I could laugh there, but I did not. Okay, so that's fine. So our outline is simple. What's the executive's first responsibility? Results. Growth. What's the executive second responsibility? Leader development.

[B]

So, all right, so let's talk about the executive's first responsibility. Results. Growth.

[C]

Yeah. So just to be clear, in case you've missed it, I think he said it like five times. The first responsibility of every executive and every organization in the world is the growth of the results of the organization. Now, different organizations will measure growth differently. There's an awful lot of organizations in the world that don't measure growth at all. And those are the ones that are terrible at their job. Okay, we'll talk about some examples of that here shortly.

[B]

But it's interesting. For managers, it's results, right?

[C]

Yeah.

[B]

And here we're talking about natural results, but growth acceleration, those kind of. Right.

[C]

Actually, the pure definition is future results. But very quickly, what you realize, and we'll go through the logic and the derivation of that. If you're responsible for future results, by definition you're responsible for one of three things. Better results, same results, or worse results.

[B]

Which one should we pick?

[C]

I don't know.

[B]

Maybe.

[C]

Maybe we'll explain it here. And maybe it's in the show notes, I don't know. Yeah, and, and there are only this, People forget this all the time. I, I tell this, I use this example and people just look at me like I'm weird. And again, it's one of those cases where I console myself with being right that, that you people say, well, why was it done that way? I said, because this is an organization, not a mechanization. And by that I mean it's full of people who are organisms. That's why it's called an organization. It behaves according to organization organistic rules. It is not a mechanization. Even though org charts, we were talking about that before charcoal org charts make it seem like it's a mechanization. And the technologists in the world, you all raise your hands. No, don't the technologists in the world think it's about systems and processes and machines and efficiencies and so on. And that is why Horstman's first law is it's all about people. I hate that first law, but it's true. And so I pay attention as often as I possibly can. By the way, good people with great systems will achieve average results. Great people with crap systems will kill it. And I've seen that over and over and over again. So it ends up being about people. And people don't understand that. If you're an organization, there are some rules about organic life that rule the organization.

[B]

They grow and die.

[C]

Yeah, exactly. There are only two stages. There are only two stages of organic life and therefore human life. And they are growth and death. Most people don't realize it. If you, if you want to read a book about it, if you're starting to get into your 30s, there's a great book called Younger Next Year. It teaches, a doctor teaches basically the way to think about how you have been aging in your life. And basically, if you don't send your body signals that you want to stay alive a longer time, if you don't do things that say, I want to get up earlier, I want to work out, I want to eat well, I'm going to cut back on my fat because fat's bad relative. There's some fat that's good, but fat is bad generally in terms of how much it makes your heart work. If you don't do that, your, your body will intuit from your behavior that you want to die. And what you will do is start taking naps. This is part of the reason why I've never taken a nap in my life. Nor will I. I just don't know. I don't want to.

[B]

You're missing something terribly sweet.

[C]

I'm sure I am. And so are you. So this growth and death principle isn't understood. And the easiest way to teach that to you is ask yourself, how many people in your organizations just want things to stop changing for a little while? You know, just. Just give me a breather. By the way. Let the competition take a breather. Yeah, right. When we're in fourth gear and going as fast as we can, we want to be in fifth. And every chief executive. I know, Elton sitting right here in the front row, he wants a sixth gear. Don't you? Yeah. And you want people who say, I'm in four. I know I can get to five, and I want a boss that will get me to six and teach me how to be at six, and then we'll learn seven. And that people want to achieve this steady state idea so their jobs can remain unchanged. It's a terribly dangerous mindset. It leads to behaviors that become stagnant. You get people who say, I'm good here, boss, while the company's growing by 5%, and you actually have to explain to them, if the company grows by 5% and you don't, you are falling behind, and if you fall behind for two more years, you're going to fall out of the organization. And most. Most managers are not willing to have those conversations. But that's what a growth mindset is. It's.

[B]

It's interesting because I remember in past organizations, people would say, like, yeah, I need a breather. Right. I need steady state. I need lack of. I need some recovery time from the last project. Right. And they believe that we could go for a month or two, steady state, and all of a sudden we can just put our foot on the pedal and accelerate out of that. And that is not the way organization.

[C]

That's the way it works. Yeah. Particularly if a boss who drives you, if you're. She's a driver, they're not going to say, let's have a. I mean, do you do that? Alden? You say like, okay, guys, take the month. It's easy, right? No problem. Like, hey, we want. We won. Okay. How quickly can we win again? Where is it? Where we need to go? And so on.

[B]

And it's kind of like the difference between, say, an army jeep and a Navy ship. Like a jeep, you can accelerate real fast, but organizations are more like ships. They're slow. They accelerate very poorly. We have a Navy graduate.

[C]

For those of you who don't know who are in the audience listening. But not here live with us there. There is at least one nav grad in the room. Do we also have an Air Force grad in the room as well? We have two Air Force grads, which adds up to one Navy grad.

[B]

I couldn't have said it better. Thank you.

[C]

There's an old saying, I need a man for a secret and dangerous mission. I need a West Point football player. He didn't say Navy. Okay. All right, so now I want to get to something that's a little theoretical. And I think I've said over the years, listening, if you've been listening, exact tools. In fact, raise your hand. I think I've said a number of times. And it should have sank in, maybe it didn't. That when we got to exact tools, when we finally started putting out exact tools guidance, there would be some stuff that was less purely actionable because we had to describe the derivation. Did we do that? Did you guys raise your hand? Okay, good. And let me just add. Is it okay? Do you ever go like. I wish. They just go back to Pure, detailed 17 step models. Are you okay with us giving you the derivation and so on. I get less hands. Okay, you're okay. All right, good. So we're gonna go back to Peter Drucker here because Drucker, right there's a rule. Because Drucker, he has this famous axiom that there are only two fundamental functions of all organizations. Raise your hand if you know what they are. Okay, anybody? Graham? Marketing and innovation. Thank you. Graham Cochran, down from Canada. Thanks for coming. And this actually is the second most important thing he said relative to organizations, because those are the functions. Okay? What he said that gets you to. That is the purpose of every organization is to. And Eldon's giving me a big thumbs up is to create a customer. And I freely admit, guys, when I was reading Drucker, well before I really had the scope to appreciate him in all of his genius and brilliance, I was like, what? Like, don't they already serve customers? But Drucker was thinking even more fundamentally about how organ. Why human organizations exist. What he meant was, organizations exist to serve society. And by the way, keep that in mind when people on the outside of your organization attack the organization, tell you you're a terrible, profitable. You're. You're a profit mongering, capitalistic organization. Actually, probably what you should say to that is, yes, please, thank you. And they. They attack the idea of human organizations that are good at what they do and growing. Because the only reason you grow is you provide a product or service that is so valuable to people on the outside that they're willing to part with their hard earned money in order to improve their lives. And thanks to freedom, individual freedom, at least in the vast majority of the world today, Keep in mind that 250 years ago, the vast majority of the world was not free. And the world continued to get better every day, every month, every year, every decade and so on. But what Drucker was saying was organizations exist to serve society and they make society better through the miracle of specialization of labor that human organizations create. In fact, I've said this before on air, I'm sure you've heard me say it. Raise your hand actually here in LA if you have that. What was I going to say? That organizations serve society. Right. And I have said this over and over and over again. And people just like, yeah, I'm not really sure about that. But ask yourself, could you live your life as you live it today without large human organizations? Probably not. In fact, maybe one of the biggest social problems we have in the world today is the lack, the erosion of trust between the large organizations that help make our lives better and the individuals who are living their lives. So.

[B]

And one of the real problems is that people here, people listening to this podcast, not enough of us are willing to make that case. Yeah, when it gets raised.

[C]

Right, I agree. So look, if you can't create a customer, if you provide a product or service that is, that is designed to help somebody's life out in society, wherever it might be, if you can't create it, motivating someone to purchase your products or services because it's a better use of their money than saving it, or better use of their time than accomplishing the intent of your product or service or whatever in some other way, then the organization has no reason to exist. And if it has no reason to exist and it cannot create a customer, it will in fact cease to exist. Again. That's the beauty of the free market.

[B]

And it should.

[C]

It should. Exactly right. And we don't say should that often when it comes to our world. Right. Joer's further principle, you take that about creating a customer out of society, the, the principle that marketing innovation are the core functions is, to me, it's my favorite insight, mainly because I struggled to understand it when I first read it, I'm like, that makes no sense. Because of course, in my mind, marketing was advertising. Why would advertising and innovation be important? Shouldn't manufacturing and sales Be important is kind of what I thought to myself. And what he's saying is that organizations must change and grow in order to maintain relevance and therefore existence. Drucker doesn't mean when he says marketing what we think of as marketing, which is a Marlboro ad or an Apple podcast ad or a Gallo ad or whatever it might be. What he means by marketing is what the original definition of marketing was, which is understanding the market. So if you put understanding the market together with innovation, what Drucker is basically telling us is the only way you can continue to be an organization that has value is pay attention to what people need in society and then be good enough at innovating that as they change, you can change what you deliver for them and you can hopefully have a long life. And if you don't have a long life, it's because you didn't have the right marketing or you weren't able to innovate enough in order to provide their products and services. If our organizations, the ones we have now, are going to continue to exist, and by the way, this assumes that your mission is perennial and not finite. And we'll get more to that in a minute. If we assume that we're going to continue to exist and there are only two stages of organic life, growth and death, then executives, by definition this is just pure logic, must be responsible for growing results rather than attempting to achieve some stasis of results. And if society is always changing and people will have no argument there, although they wish it were not so, then executives have got to be willing to change the inside of the organization and deliver what customers and societies more broadly need. If you're still thinking stasis, ask yourself what happens to a company who trains to maintain stability in a fast changing external world. The only solution, the only thing of those three, growth, stasis or death, is growth. So the growth obligation, which actually upsets people internally in organizations all the time, you know, I wish we'd kind of stop growing. I wish we'd stop growing. Like, are you kidding? Do you understand that? That. And by the way, thanks to demographics, it's going to get even harder in the next 50 years. Sustained growth. Up until now, we've had a little juice to our growth and that was the growth of human population. That's changing now. So it's a massive concept for executives to internalize and act upon. It's a change from being a manager where you're working for today and perhaps maybe the next three months, if you're a super forward thinker your timelines, your planning horizons get extended. Your decisions are not evaluated immediately. That's one of the biggest frustrations of people who become executives and really want to be there. It takes two years to find out whether or not you were right. Admit it, you like immediate results. You like knowing. Right. You like that you open the can and you taste the high noon. I mean seriously, you like that having to wait 15 minutes, decide whether or not you like it and have three more sips. It's not good. Your decisions are evaluated immediately if you're a manager. Not so as an executive.

[B]

Something you said really struck me because we talk about it a lot, which is seems very much outside. In outside first, then internal. And a lot of folks, that's not the way they think, particularly managers.

[C]

Right?

[B]

But become an executive, you need to think outside.

[C]

I don't say it very often, but I've said it too many times. If I could wave a wand, that is the thing that I would wave a wand about that issue of external focus. Now, we talked about this recently, I think in the last month or two, the black widow mistake. Did we do that? Okay, good. We have some head nods out there. Yeah, it's. I don't think people understand the extent to which all results, all, every one of the results of an organization happen outside of the company. And so therefore, if you're responsible for growing results, you have to start thinking outside of the company. And the vast majority of executives, except at the very, very, very top, who are very, very, very good, spend all their time thinking about internal processes and systems and politics and deliverables and all that kind of stuff. Executives, we have to concern ourselves much more with customers, competition, the markets, vendors, and all the forces acting on the organization from the outside. We've said it before, internal results are not actually results. They're activities. And what's more, they're costs. Anything that happens internally is a cost. If everything is done perfectly internally, frictionless, beautiful, incredible, and society doesn't respond and become a customer, external results collapse despite internal perfection. When I heard that from a professor who I didn't think was very smart, but he said that line, I said, wow, that's really, really good. And how many managers, people you know, maybe that are above you or your peers or below you still think, when I get it perfect, then everything will be great. And what they're realizing is they're focusing over here, when in fact what's going on is outside. Now, look, there are exceptions to these general principles. They tend to be edge cases. If an Organization has a mission that is finite and measurable. It's possible that the organization will accomplish its mission and unwind itself in some way. This is why, by the way, take a look. Most organizations mission. By Most, I mean 99.9% do not have measurable, achievable outcomes because they don't want to have the difficult decision of, oh, we changed our outcome, we changed, we achieved our result. What should we do now? That's why you don't have. You have something like companies say things like enhance the wealth, health and welfare of its customers. Right. If you do that, there's no end.

[B]

To that mission and you're not supporting that. You don't think that's right to be too clear, or do you?

[C]

Oh, I absolutely believe that human organization depends on the organization. I think that there's a place in the world for organizations to have a finite mission. But if you have a finite mission, think about a project. A project has a goal. When you achieve the goal, do you continue working on the project? No. If you have a mission that is very particular, let's say your mission is to eradicate cancer or malaria or dengue fever, whatever, or aids, for instance. If that is your mission and it is in fact eradicated, then you should disband and you should celebrate. You should save some of your budget for a massive celebration and total up the number of lives you've saved in the next 50 years. Because the lack of dengue fever or malaria or whatever it might be, they should.

[B]

Just like government organizations.

[A]

Right?

[B]

Just works.

[C]

Yeah. But here's the thing. Humans are fundamentally, in part, selfish creatures. What you'll find is that many organizations, in the interest of their own self, self preservation rather than the furtherance of the society that they serve, will change their mission to allow their continuance. It's usually done with gradual mission creep as organizations realizing, approaching. They're approaching their natural limit. Right. And they're getting close to be able to achieve their stated goal. It happens frequently in charitable organizations. Organizations you probably don't notice, but as somebody who's been approached a lot by charitable organizations to serve on boards and to donate money and so on, you'll discover that after they get very close to their first one, they expand it to be something else. I'm not going to mention charities, specific charities, although privately I might, because every time I've done it, the people who benefit from that charity attack me and say I'm a terrible person. And again, I console myself with being right. And I'm sure they're not listeners, so it doesn't matter. So. But look, look, I'm sorry. If you're right about something, you should stand up and defend it. Now, there are times where politically or socially, in terms of your friends, you don't need to say things that will cause your friends emotional distress and so on. But when you're talking about something that's important, it's okay to be right and it's okay to state your opinion. Now, somebody may disagree with me, but disagree isn't right or wrong.

[B]

They make their case.

[C]

Yeah, it's okay. And it's okay if they can't make their case and you don't have to lord it over them. That's one of my many weaknesses. But we take no pleasure in pointing out, but we rather do so in the interest of reinforcing the core principles of all this stuff about how human organizations work. You have to be careful about not letting edge cases like charities or government institutions change the way you think about the underlying principles that cause organizations to be who they are and do what they do. And you cannot understand for the people at the top of the organization, the people responsible for the future of the organization, against its mission, whatever it might be. It is folly to think you can without an understanding of why organizations exist, what organizations do and how organizations are, are responsible externally rather than internally. Organizations don't exist to employ people. You cannot do that kind of work to understand what executives are supposed to do and what they're responsible for without understanding the broader socio and economic systems that affect it. And too many people say, well, what about government? Or what about charities? I said, yeah, okay, yeah, they're a special case. And as the saying goes, there's nothing closer to immortality than a governmental bureaucracy. In fact, my favorite example of this is in the US which we have a lot of these, is the Rural Electrification Administration, created during the Great Depression in the United States. It was a jobs program that actually was well aligned with a necessary service because only about 10% of farms in the 1930s had electricity and farms needed electricity just like everybody else benefited from electricity. But by the 1950s, virtually every farm, and definitely all farms that said they wanted it, believe it or not, there was a small percentage that didn't want it. And the government spent a lot of money marketing to people about how great electricity was. After they discovered those people said, I don't want it. Nevertheless, we electrified the vast majority of rural America. And do you think in the 1940s or early 1950s that we got rid of the rural Electrification Administration, which we'll call the REA from now on.

[B]

I'm thinking not.

[C]

Nope. In the 1940s, the mission of the REA was expanded to include delivering phone service to rural areas, even though there was another government agency that existed to do that very thing. This was accomplished as well. I think you can go pretty much everywhere in the United States and probably all the first world, and everybody has a phone, even maybe not a landline, but now we have cell phones. But then at that point, after they'd also done telephone service, REA was subsumed into the Rural Utilities Service, and the REA was not eliminated until the 1990s, long after any and all of their missions has been achieved. That's why Reagan said. Ronald Reagan said the only, the closest thing to immortality is a government bureau. Those are edge cases. Okay? The vast majority of human organizations are by definition dynamic because they know they serve society. And if you are a manager in our community and you are listening to this and you don't get the idea that results are outside and you have to change your focus to outside the organization and you don't understand why your two responsibilities are growth of results and developing future leaders, you're going to be at a disadvantage. Now, some people, we could just say results, growth, and they'd be like, okay, fine. We think understanding the underlying principles makes you better at both defending it, but also persuading your people why you do what you do. Boss. Why do we have to grow? And you walk them through this. If they're a direct viewers and you're a licensee, print the show notes out or email them the show notes and say, this is why. Because that's how human organizations work.

[B]

Okay, so that finishes the first point, growth, Right? The second executive. The executive second responsibility is leader development.

[C]

Can I make one more thing about growth?

[B]

Sure.

[C]

One more thing. One more thing. Thank you for the woo. Just one. Okay. There are three parts of growth, too. Okay. I think this is funny. There's not. It really is. Eldon knows this. If you're a chief executive, you know this. Let's say zero is stasis, right? You can get 1% and that's growth. You get 4%. That's also growth. You can get 7%. Does 1% count as growth if your industry grows at 4%? No. So you see, there's a whole nother criteria. It's not just growth. It's growth relative to the rest of the market. And if you don't think that's hard, it's very, very hard. How many firms are still in the Dow Jones Industrial Average? 100 years. I think it's just now 100 years. It may have been 110. How many firms have been there since the beginning? Zero. I thought it was 60, but it's very likely zero, right? Yeah, it's really, really hard. Now, in many cases, firms technically might still be considered on it because they got bought by a company that became big and that they're still part of that company. But, yeah, it's really, really, really hard. So if you whine to your spouse that your job is really hard and he or she also has a job as an executive, I hope they roll their eyes at you because it is hard. And if it were easy, we'd have third graders doing it and the pay would be a lot less. So build a bridge and get over it. Okay.

[B]

Now, can we move on now?

[C]

Yeah, we can. Yeah. Okay, sure. I said nine things, so I went way past one. Okay.

[B]

Executive second responsibility.

[C]

Yeah.

[B]

Leader development.

[C]

Yeah. So I've been saying, sharing this statistic. We're recording this in September, October of 2025. I've been sharing this for, like, the last nine months, and I still get surprised from people. I think probably everybody here. Raise your hand if you list Listen to exactools. So I've mentioned this. Good. I think I. I've mentioned this. Bill vav's on his phone, so I don't think he heard my question. I know he listens to exactools. So despite what you glean, not just you, but executives and professionals generally glean from news reporting, CEOs are rarely hired from outside. It's almost perfect that we were just talking about a CEO search, and Bill.

[B]

Said people think it's exactly the opposite.

[C]

Yeah, they think it's 95% are hired from the outside. About 5 or 6% are hired from the outside. Now, there's another statistic that's come out just recently that external hires across several thousand companies at more than that. But that will change in the next five or 10 years. Their choice of companies was a little bit skewed, in my opinion. And essentially what organizations who do have fire do hire from outside are saying with that external hire is that the board and leadership team did a poor job on their second most important responsibility, which is growing future leaders. It does happen. It really does. A company does a fundamental technological fissure or earthquake or volcano, and you realize we don't have anybody. But it's rare. One out of 20 CEOs come in from the outside. Now, why do we? Why does the general populace and a healthy percentage, a majority of professionals, and probably a plurality, if not a majority of executives. Executives think companies are always bringing in outside CEOs.

[B]

Big news makes makes the headlines.

[C]

Yes, that's exactly right. Because it is rare enough to warrant being a headline. But the only knowledge most of us have about a CEO succession is the headlines. And our own company, maybe you know a little bit about industry. And by the way, we're going to do a future exact tools cast. We're going to share with you a couple of exact tools, licensees, AI models for how built, something that'll share with you about your competition, about your company, about customers and what they're doing and so on. Like a weekly dashboard that you can look at on a regular basis.

[B]

The key here is, right, just to be clear, that if it happens, an organization goes outside to hire the next CEO, for example, that's an indictment of the previous leadership for sure, right?

[C]

Oh, but, but look, what do you think they have PR departments for? Say, look how smart we were. Look how cool we were. We got this new person. She's awesome, right? Yeah. But it's a fundamental misunderstanding and everybody who's anybody at an executive level knows, shame on you. We'll let it go. Nothing we can do about it. In fact, it's kind of like, that's good because guess what it tells you. If one of your competitors bring a CEO in from outside, they're weak at layer two and layer three. And that's where you ought to be poking them. And you shouldn't be recruiting from there. That's not a good sign. So, okay, so we all hear about airplane takeoffs or airplane crashes, right? But you don't hear anything about successful takeoffs and landings. Fatal automobile crashes make the news. How far in the last hundred years has have fatal automobile crashes been reduced? How far have they fallen per capita? Anybody? Take a guess here in the audience. 60. 60 is a good guess. Anybody? A couple others. 60. No, no, no, no. 95%. Peter Salstrom with the win. 95%. The world's getting taller, stronger, more successful, richer. Less deaths through natural disasters, longer lived, less deaths from plague, pestilence, famine, everything else, because we continue to make the world a better and better. And if 95% of companies are promoting people from within, the fundamental source and engine of all future leaders of virtually every organization that is going to be successful long term, is the internal managers and executives in the organization the source.

[B]

Of all future growth?

[C]

Yes.

[A]

Is the.

[C]

Okay, yeah, exactly. If a Manager's job is to retain her employees in an organization that almost exclusively promotes from within retention. Focusing on current state it's obvious that the state change to becoming an executive focusing on external results growth would cause the retention to morph into future retention, long term retention. Right. But by definition future retention must also include growth because the organization is growing. Right. And that's going to take more people. Although there are systems, there are technologies like AI that will perhaps reduce the growth of the number of employees required to add a billion dollars in revenue or profit as the case might be. Right. But if you don't have growth in there, the org chart simply becomes full of people who can only do their existing job. And that's a whole really, really bad thing. It's a bit like a government bureaucracy. No offense to the people who are here with the government. No, wait, the government shut down. I don't think we have. Do we have government employees here? I don't think we do. We do, Sean. Yeah. Good. And yeah, okay, fair enough. They're poor.

[B]

They're poor today. But.

[C]

And the government has some special problems. The idea that you can have a new leader appointed politically in a human organization and when human organizations get big like 5,000 or 10,000 so on, there's a lot of internal friction. And it takes really, really smart, driven, hard working, ethical people who are easy to get along with and so on. And those people are really, really rare. And you also have to have trade skill, you have to know what you're managing. And there are a lot of people in government who don't because they're political appointees. All you have to do is look at the ambassador ranks to learn that one. Right. And what happens is you have these people sitting in these roles and there's nowhere for them to go. And the political leader doesn't have responsibility for creating a sustainable future flow of leaders because nobody can be at the top because it's political leadership only at the top. And what ends up happening is people who aspire to something more leave and go do something else. So if you're wishing that the government is going to get better matter. And I'm speaking largely about the U.S. but I've worked with, let's say 10 of the next 20 biggest economies in the world, not counting China. They're all the same in that regard. And it's, there's nothing you can do about it unless you change the fundamental principles that guide those organizations. And so that's why so often government bureaus are really, really hard to work with the primary ways that executive leaders create future leaders is through one of the three core operating systems of effective organizations. Does anybody know? I heard somebody talk about it. What are the three systems that run all human organizations that are fairly large? Strategy, operations, people?

[B]

Yeah.

[C]

And the primary one that we develop people through is obviously the people system. Even though it happens in the operations field, but it's the people system gets credit for it. And we're going to cover those in a cast coming up in the next couple of months. We're going to talk about strategy, operations and people, how they work together in exec tools. And the people system is underappreciated under, valued under Ms. It's also misunderstood. It takes rigorous, candid evaluation systems. And I can assure you, no offense guys, candor is in short supply in your organization. And it's too bad. And it takes it at the very, very top to really, really find who can run a billion dollar organization. If you can run a billion dollar organization, you're not in the 1%. I'm not talking about wealth, I'm talking about in terms of ability. You're in the 1% of the 1% of the 1% of the 1%. Somebody who can run a billion dollar human organization is essentially the equivalent of a Nobel prize winner. And there's not a prize. In fact, companies that steadily grow, I mean other than a heart attack, companies that steadily grow, this. The really good chief executives don't want a prize. They don't want it about them. They want it about their organization. They want it about their customers. They want it about what the people they serve and how much better they're making people's lives. And that's why oftentimes we get executives who get promoted to a very high level and unfortunately make it about themselves. I think. What's the phrase we use for that? The imperial CEO. And that's generally a bad thing. So the primary way future organizational leaders are grown is through challenging assignments designed to teach them new skills. And here's one for the record books. And their immediate leaders challenging them and their existing roles through. Oh, you're killing me. Smalls. Delegation. Yeah, so, okay, I've talked enough, right? Summarizing the two responsibilities of all executives. Results. Growth leader development. These directly flow from the responsibilities, from the purpose of the organization, the nature of the society we serve and the core competencies in successful organizations. And if executive doesn't understand these principles and responsibilities, they'll be whipsawed by new and changing demands. They won't have the guideposts they need to make the right decisions that help a company both grow, but more importantly, change to help serve society.

[B]

If there are only a place where you could go to get help with.

[C]

That, it's just would somebody email me and tell me market manager-Souls.com email me and tell me where you could go to get almost free compared to its value.

[B]

Right? Yeah.

[C]

Advice like that, it's great. Good.

[B]

Hey, thanks dude. That was awesome.

[C]

It's always fun. It's never not been fun in 20 years of doing it.