Eric Jackson
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The Seven Habits of Spectacularly Unsuccessful Executives
By ERIC JACKSON
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
shave 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.
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
shave 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
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 theybecome 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.
[Jackson was long AAPL at time of writing]
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 theybecome 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.
[Jackson was long AAPL at time of writing]
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