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.
By:Eric Jackson