Headquarters staff was anorexic, and its primary purpose was to support the general managers of operating units. There were no vice presidents in functional areas like marketing, strategic planning, or human resources; no corporate counsel and no public relations department (Murphy’s secretary fielded all calls from the media).

We’ve touched on the former already. The latter is, however, also critically important, and here again the outsider CEOs shared an unconventional approach, one that emphasized flat organizations and dehydrated corporate staffs.

Louis Pasteur once observed, “Chance favors . . . the prepared mind,”

Murphy’s approach to the roll-up was different. He moved slowly, developed real operational expertise, and focused on a small number of large acquisitions that he knew to be high-probability bets. Under Murphy, Capital Cities combined excellence in both operations and capital allocation to an unusual degree. As Murphy told me, “The business of busi

was the belief that the primary goal for any CEO was to optimize long-term value per share, not organizational growth.

“The system in place corrupts you with so much autonomy and authority that you can’t imagine leaving.”

There are two basic types of resources that any CEO needs to allocate: financial and human.

believed the key to long-term value creation was to optimize free cash flow,

Gawande advises that these lists are best kept to ten items or fewer, and we will conclude with a checklist drawn from the experiences of these outsider CEOs, to aid in making effective resource allocation decisions (and hopefully avoiding value-destroying ones). So, here we go: 1. The allocation process should be CEO led, not delegated to finance