The Seven Habits of Spectacularly Unsuccessful Executives (Forbes)
Sydney Finkelstein, the Steven Roth Professor of Management at the Tuck
School of Business at Dartmouth College, published “Why Smart Executives Fail”
8 years ago.
In it, he shared some of his research on what over 50 former high-flying
companies – like Enron, Tyco, WorldCom, Rubbermaid, and Schwinn – did to become
complete failures. It turns out that the
senior executives at the companies all had 7 Habits in common. Finkelstein calls them the Seven Habits of
Spectacularly Unsuccessful Executives.
These traits can be found in the leaders of current failures like
Research In Motion (RIMM), but they should be early-warning signs (cautionary
tales) to currently unbeatable firms like Apple (AAPL), Google (GOOG), and
Amazon.com (AMZN). Here are the habits,
as Finkelstein described in a 2004 article:
Habit # 1: They see themselves
and their companies as dominating their environment
This first habit may be the most insidious, since it appears to be
highly desirable. Shouldn’t a company
try to dominate its business environment, shape thefuture of its markets and
set the pace within them? Yes,but
there’s a catch. Unlike successful
leaders, failed leaders who never question their dominance fail torealize they
are at the mercy of changing circumstances.They vastly overestimate the extent
to which they actually control events and vastly underestimate the role of
chance and circumstance in their success.
CEOs who fall prey to this belief suffer from the illusion of personal
pre-eminence: Like certain film directors, they see themselves as the auteurs
of their companies. As far as they’re
concerned, everyone else in the company is there to execute their personal
visionfor the company. Samsung’s CEO
Kun-Hee Lee was so successful with electronics that he thought he could repeat
this success with automobiles. He
invested $5 billion in an already oversaturated auto market. Why? There was no business case. Lee simply loved cars and had dreamed of
being in the auto business.
Warning Sign for #1: A lack of
respect
Habit #2: They identify so
completely with the company that there is no clear boundary between their
personal interests and their corporation’s interests
Like the first habit, this one seems innocuous, perhaps even
beneficial. We want business leaders to
be completely committed to their companies, with their interests tightly
aligned with those of the company. But
digging deeper, you find that failed executives weren’t identifying too little
with the company, but rather too much.
Instead of treating companies as enterprises that they needed to
nurture, failed leaders treated them as extensions of themselves. And with that, a “private empire” mentality
took hold.
CEOs who possess this outlook often use their companies to carry out
personal ambitions. The most slippery
slope of all for these executives is their tendency to use corporate funds for
personal reasons. CEOs who have a long
or impressive track record may come to feel that they’ve made so much money for
the company that the expenditures they make on themselves, even if extravagant,
are trivial by comparison. This twisted
logic seems to have been one of the factors that shaped the behavior of Dennis
Kozlowski of Tyco. His pride in his
company and his pride in his own extravagance seem to have reinforced each
other. This is why he could sound so
sincere making speeches about ethics while using corporate funds for personal
purposes. Being the CEO of a sizable corporation today is probably the closest
thing to being king of your own country, and that’s a dangerous title to
assume.
Warning Sign for #2: A question of character
Habit #3: They think they have
all the answers
Here’s the image of executive competence that we’ve been taught to
admire for decades: a dynamic leader making a dozen decisions a minute, dealing
with many crises simultaneously, and taking only seconds to size up situations
that have stumped everyone else for days. The problem with this picture is that
it’s a fraud. Leaders who are invariably crisp and decisive tend to settle
issues so quickly they have no opportunity to grasp the ramifications. Worse,
because these leaders need to feel they have all the answers, they aren’t open
to learning new ones.
CEO Wolfgang Schmitt of Rubbermaid was fond of demonstrating his ability
to sort out difficult issues in a flash. A former colleague remembers that
under Schmitt,” the joke went, ‘Wolf
knows everything about everything.’
In one discussion, where we were talking about a particularly complex
acquisition we made in Europe, Wolf, without hearing different points of view,
just said, ‘Well, this is what we are going to do.’” Leaders who need to have all the answers shut
out other points of view. When your company or organization is run by someone
like this, you’d better hope the answers he comes up with are going to be the
right ones. At Rubbermaid they
weren’t. The company went from being
Fortune’s most admired company in America in1993 to being acquired by the
conglomerate Newell a few years later.
Warning Sign for #3: A leader
without followers
Habit #4: They ruthlessly eliminate anyone who isn’t
completely behind them
CEOs who think their job is to instill belief in their vision also think
that it is their job to get everyone to buy into it. Anyone who doesn’t rally to the cause is
undermining the vision. Hesitant
managers have a choice: Get with the plan or leave.
The problem with this approach is that it’s both unnecessary and
destructive. CEOs don’t need to have everyone unanimously endorse their vision
to have it carried out successfully. In
fact, by eliminating all dissenting and contrasting viewpoints, destructive
CEOs cut themselves off from their best chance of seeing and correcting
problems as they arise. Sometimes CEOs
who seek to stifle dissent only drive it underground. Once this happens, the
entire organization falters. At Mattel,
Jill Barad removed her senior lieutenants if she thought they harbored serious
reservations about the way that she was running things. Schmitt created such a threatening atmosphere
at Rubbermaid that firings were often unnecessary. When new executives realized that they’d get
no support from the CEO, many of them left almost as fast as they’d come on
board. Eventually, these CEOs had
everyone on their staff completely behind them. But where they were headed was
toward disaster. And no one was left to
warn them.
Warning Sign for #4: Executive
departures
Habit #5: They are consummate spokespersons, obsessed with the company
image
You know these CEOs: high-profile executives whoare constantly in the
public eye. The problem is that amid all
the media frenzy and accolades, these leaders’ management efforts become
shallow and ineffective. Instead of actually accomplishing things, they often
settle for the appearance of accomplishing things.
Behind these media darlings is a simple fact of executive life: CEOs
don’t achieve a high level of media attention without devoting themselves
assiduously to public relations. When
CEOs are obsessed with their image, they have little time for operational
details. Tyco’s Dennis Kozlowski sometimes intervened in remarkably minor
matters, but left most of the company’s
day-to-day operations unsupervised.
As a final negative twist, when CEOs make the company’s image their top
priority, they run the risk of using financial-reporting practices to promote
that image. Instead of treating their
financial accounts as a control tool, they treat them as a public-relations
tool. The creative accounting that was apparently practiced by such executives
as Enron’s Jeffrey Skilling or Tyco’sKozlowski is as much or more an attempt to
promote the company’s image as it is to deceive the public: In their eyes,
everything that the company does is public relations.
Warning Sign of #5: Blatant
attention-seeking
Habit #6: They underestimate obstacles
Part of the allure of being a CEO is the opportunity to espouse a
vision. Yet, when CEOs become so enamored of their vision, they often overlook
or underestimate the difficulty of actually getting there. And when it turns out that the obstacles they
casually waved aside are more troublesome than they anticipated, these CEO have
a habit of plunging full-steam into the abyss.
For example, when Webvan’s core business was racking up huge losses, CEO
George Shaheen was busy expanding those operations at an awesome rate.
Why don’t CEOs in this situation re-evaluate their course of action, or
at least hold back for a while until it becomes clearer whether their policies
will work? Some feel an enormous need to
be right in every important decision they make, because if they admit to being
fallible, their position as CEO might seem precarious. Once a CEO admits that
he or she made the wrong call, there will always be people who say the CEO
wasn’t up to the job. These unrealistic
expectations make it exceedingly hard for a CEO to pull back from any chosen
course of action, which not surprisingly causes them to push that much harder. That’s why leaders at Iridium and Motorola
(MMI) kept investing billions of dollars to launch satellites even after it had
become apparent that land-based cellphones were a better alternative.
Warning Sign of #6: Excessive
hype
Habit #7: They stubbornly rely on what worked for them in the past
Many CEOs on their way to becoming spectacularly unsuccessful accelerate
their company’s decline by reverting to what they regard as tried-and-true
methods. In their desire to make the most of what they regard as their core
strengths, they cling to a static business model.They insist on providing a
product to a market that no longer exists, or they fail to consider innovations
in areas other than those that made the company successful in the past. Instead
of considering a range of options that fit new circumstances, they use their
own careers as the only point of reference and do the things that made them
successful in the past. For example,
when Jill Barad was trying to promote educational software at Mattel,she used
the promotional techniques that had been effective for her when she was
promoting Barbie dolls, despite the fact that software is not distributed or
bought the way dolls are.
Frequently, CEOs who fall prey to this habit owe their careers to some
“defining moment,” a critical decision or policy choice that resulted in their
most notable success. It’s usually the
one thing that they’re most known for and the thing that gets them all of their
subsequent jobs. The problem is that
after people have had the experience of that defining moment, if they become
the CEO of a large company, they allow their defining moment to define the
company as well – no matter how unrealistic it has become.
Warning Sign of #7: Constantly
referring to what worked in the past
The bottom line: If you exhibit several of these traits, now is the time
to stamp them out from your repertoire.
If your boss or several senior executives at your company exhibit
several of these traits, now is the time to start looking for a new job.
