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Executive Failure: A Look at the Dark Side
Why have some very smart executives failed in recent years, bringing
down whole companies, costing billions of dollars, and causing
incredible losses to shareholders, customers and employees? What
can be learned to avoid such huge failures?
Recent
corporate scandals and bankruptcies reveal that some CEOs fail
on such a scale that they bring the company down with them. Enron,
Iridiuim, Webvan, WorldCom, and Tyco are examples. CEOs at GM,
Motorola, Rite Aid, Mattel, Quaker, and Saatchi & Saatchi
have led their companies to the brink of collapse at one time.
These companies were led by executives with stellar track records
of previous success.
CEOs are now lasting just 7.6 years in office on a global average,
down from 9.5 years in 1995, according to consulting firm Booz
Allen Hamilton. Two out of every five new CEOs fail in the first
18 months (HBR, January 2005).
“We live and work in a world where organizational failure
is endemic—but where frank, comprehensive dissections of
those failures are still woefully infrequent; where success is
too easily celebrated and failures are too quickly forgotten; where
short-term earnings and publicity concerns block us from confronting— much
less, learning from—our stumbles and our blunders.” —Jena
McGregor, Fast Company Magazine, February 2005
The
same underlying explanations can be seen as the cause of failure
for all businesses and their leaders—whether they occurred
during the 80s, 90s, or more recently. While the corporate cultures
of failed businesses vary widely, there are visible patterns of
similarity across CEOs.
Tracking Underlying Causes of Failure
Sidney Finkelstein, author of Why Smart Executives Fail (2003),
researched several spectacular CEO failures and their causes over
a six year period. He found several patterns that explain what
went wrong.
At
some point, every successful organization is a victim of its
own success stemming from a distorted view of reality. Many
executives saw the signs—competitors or customers were asking for a
change—and yet they chose to ignore them.
Why did they fail? What are the patterns and warning signs? How
can we detect the warning signs in organizations before it is too
late?
Four Explanations
Finkelstein offers four explanations for CEO behaviors that lead
to failure:
1. Executive Mindset Failures - Breakdowns
in how executives perceive reality for their companies
2. Delusions of a Dream Company - How people within an organization
face up to their reality
3. Lost Signals - How information and control systems in the organization
are mismanaged
4. Patterns of Unsuccessful Executive Habits - How organizational
leaders adopt unsuccessful behaviors
In the CEO failures he studied, Finkelstein emphasizes that it
was not unforeseeable events that brought their companies down.
In all cases, these CEOs of failed companies knew there was trouble
coming, but they chose not to act.
Seven Deadly Habits
Finkelstein identifies seven patterns of faulty behaviors, each
with a warning sign. He arranges these into seven habits which
are:
Habit #1: They see themselves and their companies as dominating
their environment. On the positive side, this attitude is seen
as highly optimistic. Optimism is a primary trait of successful
leaders and it contributes to the ability to inspire and communicate
vision. Carried to extreme, it causes one to lose touch with reality.
Warning sign: A lack of respect.
Habit #2: They identify too closely with the company, losing the
boundary between personal and corporate interests. On the positive
side, this trait means that an executive works long, hard hours
over and above what is expected. However, carried to extreme, a
leader gains a sense of entitlement to compensate for his or her
sacrifices. It paves the way for unethical decisions.
Warning sign: A question of character.
Habit #3: They think they have all the answers. High intelligence
and an ability to solve problems quickly and decisively are essential
for leadership. When one forgets to ask for input or adequate information
before making and acting on a decision, decisions can be inappropriate.
Warning sign: A leader without followers.
Habit #4: They
ruthlessly eliminate anyone who isn’t completely
behind them. While knowing who to promote and who to reassign or
fire is an essential responsibility of any leader, decisions based
on favoritism are irresponsible and risky. When the senior team
is comprised of ‘yes’ people, there isn’t enough
dissention to evaluate risks appropriately.
Warning sign: Executive departures.
Habit #5: They are consummate spokespersons, obsessed with the
company image. While getting press coverage is seen as good for
share prices, when CEOs appear to be promoting themselves more
than the company, beware. Warning sign: Blatant attention-seeking.
Habit #6: They underestimate obstacles. Optimism is the underlying
trait that works for motivating and inspiring, but carried to extreme,
it can obliterate adequate risk evaluation and reality checks.
Warning sign: Excessive hype.
Habit #7: They
stubbornly rely on what worked for them in the past. The problem
is, nothing stays the same. It is human nature to go back to
what worked before when things get tough. But applying yesterday’s solutions to tomorrow’s problems can’t
work. Knowing which problems to solve is a challenge for CEOs.
Warning sign: Constantly referring to what worked in the past.
11 Common Causes of Derailment
David L. Dolitch and Peter C. Cairo
describe eleven derailers that lead to failure in their book
Why CEOs Fail (2003). It is important
to recognize these characteristics as being a part of one’s character, that they can’t be eliminated. They
are part of the “dark side” of leadership characteristics—there
is even some strength in each of these under normal conditions.
Under stress, these characteristics lead to errors in judgment
that can be fatal to a career and often to an organization. The
key is to recognize their existence and to manage them before they
become damaging.
1. Arrogance: You’re
right and everybody else is wrong.
2. Melodrama: You always grab the
center of attention.
3. Volatility: Your mood swings
drive business swings.
4. Excessive Caution: The next
decision you make may be your first.
5. Habitual Distrust: You focus
on the negatives.
6. Aloofness: You disengage and
disconnect.
7. Mischievousness: Rules are made
to be broken.
8. Eccentricity: It’s fun
to be different just for the sake of it.
9. Passive Resistance: Your silence
is misinterpreted as agreement.
10. Perfectionism: Get the little
things right even if the big things go wrong.
11. Eagerness to Please: Winning
the popularity contest matters most.
Some derailers are both strengths and weaknesses. The average
person has two or three derailers. Some CEOs are more vulnerable
than others to derailment. The stress of being at the top, the
intense pressures can activate the derailers. In addition, the
higher you go in an organization, the less likely other people
are to tell you about your failure-producing characteristics.
Identifying 7 Bad Leadership Styles
In another study of executive failure, author Barbara Kellerman
identifies seven types of dysfunctional leadership characteristics.
In her book, Bad Leadership (2004), she says that identifying and
studying the seven types teaches us what not to do or reinforce
in leaders. Bad leadership is either inefficient or unethical.
The seven types of bad leadership are:
| 1. |
Incompetent:
The leader and some of his/her followers lack the will or skill
to sustain effective action. |
| 2. |
Rigid:
The leader and his/her followers are stiff, unyielding, and
unwilling to adapt to new ideas, new information or changing
times. |
| 3. |
Intemperate:
The leader lacks self-control and is aided and abetted by followers
who do not intervene. |
| 4. |
Callous:
The leader is uncaring or unkind; he/she ignores or discounts
the needs of the rest of the organization, or of stakeholders. |
| 5. |
Corrupt:
These leaders lie, cheat, or steal their way to the top position
putting self interest above all else. |
| 6. |
Insular:
They disregard or minimize the health and welfare of those
outside the core group. |
| 7. |
Evil:
Some leaders and their followers commit atrocities and/or tragedies. |
While these seven types of bad leadership may seem obviously wrong,
in most cases, dysfunctional characteristics exist in combination
with strengths. Reality often masks a personality in shades of
grey. There is a fine line at which leaders cross over from right
to wrong, and like all humans, they are capable of switching back
and forth at any given time. That is why it is difficult to recognize
when the line has been crossed, when unethical behaviors become
serious, when bad decisions become incompetence, and when a leader
begins the slippery slope into bad leadership.
Preventing Executive Failure
There are no universal means for preventing failures, except perhaps
for being alert for the warning signals that appear. In all cases
of executive failures there have been warning signs that people
chose not to heed.
Businesspeople like to think of themselves as realists, but the
fact is that wishful thinking, denial, and other forms of avoiding
reality are deeply embedded in most corporate cultures.
How to Fight Failure
Review the list of 11 common causes of derailment. Chances are
you will recognize some of them as part of your personality. In
fact, some of these characteristics serve you well in getting ahead
in your organization.
Here are three things you can do to take a closer, realistic look
at your dark side.
| 1. |
Do
an adversity analysis. Take a long hard look at your five biggest
failures in your career. Ask yourself the following questions:
What behaviors in these circumstances didn’t serve you
well?
What would your worst critics say about how you acted?
Do you see a theme or pattern in your behaviors?
Do any of the 11 derailers fit this pattern?
In what way did you contribute to the failure? |
| 2. |
Do
a feedback session with your direct reports. Ask them to report
to you with brutal honesty about your behaviors. This can be
delivered to you in the form of a confidential anonymous report,
or delivered as a group in person, but you must reassure them
that nothing will be held against them and follow through with
this promise. Ask them these questions:
What do I do that drives you nuts?
How do I force you to work around me rather than with me?
When you get together to complain about me, what do you complain
about?
When I’m under stress, what do I do that you think is
counter-productive? |
| 3. |
Work
with your own coach, mentor, or trusted confident. An external
coach works well for reviewing your dark side, as they are
non-judgmental, professionally trained, and not politically
involved with your organization. In order to get value from
talking with someone, you must have complete trust in the person
and process. You must be willing to expose your vulnerabilities
in order to grow beyond your usual psychological defenses.
Just knowing that other CEOs and executives have these common
derailers and that they are not unusual can make it easier
to admit them and learn how to manage them. |
Leaders are Human Beings Too
We live in a celebrity culture where
leaders, and especially CEOs, are expected to be perfect examples.
They are held up as icons. We
don’t like to admit they
have flaws, or that the traits that make them special can also
lead to failure.
We crave the heroic leader to whom
we can look up to and derive a sense of safety and security.
We can’t do this when we
see flaws. And so we may contribute to the heroic myth and enable
leaders to plunge full steam ahead, even when their character defects
can bring everyone—shareholders, customers and employees—down.
We must abandon this hero-worship.
People can be great leaders and
fallible human beings. Those leaders that don’t recognize
their dark side greatly increase the odds that derailers will strike.
Our greatest leaders, both in business and politics have always
been fallible. The key is in accepting rather than denying the
existence of flaws and working to manage them.
Resources:
Dotlich, D. & Cairo, P. (2003). Why CEOs Fail: The 11 Behaviors
that Can Derail Your Climb to the Top – and How to Manage
Them. John Wiley & Sons, Inc.
Finkelstein, S. (2003) Why Smart Executives Fail, and What You
Can Learn from Their Mistakes. Penguin Group.
Kellerman, B. (2004). Bad Leadership, What It Is, How It Happens,
Why It Matters. Harvard Business School Press.
Lipman-Blumen, J. The Allure of Toxic Leaders: Why We Follow Destructive
Bosses and Corrupt Politicians- and How We Can Survive Them. (2004)
Oxford University Press.
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