WHY CEOs FAIL
April 9, 2012 1 Comment
A lot of CEOs don’t succeed, and some who do, do so only for a short time. I have come to the conclusion that there are a number of different reasons that CEOs fail. Here are 10 of the most common ones.
1. Outlive the Founder/CEO role
There comes a time when the most successful founder has to step aside and hand over to professional management, and I have seen too many founders who did not see that their time had come and gone. In my own career, Ken Olsen of Digital is one such example. Olsen, a visionary who pioneered the minicomputer revolution was well past his use by date when he uttered the phrase “There is no reason for any individual to have a computer in his home.”
2. Believe their own marketing
Being a successful CEO is heady stuff. You are loved by your people, your customers, the markets and the press. It is not hard to get to a point where you lose all humility and start to believe that you have all the answers, and start to believe in your own brilliance and omniscience. CEOs can lose contact with their own people, their customers and their markets, after all, when one is so important, why bother with anyone else ? CEOs who lose perspective are unlikely to be able to continue to succeed.
3. Run out of steam
Some CEOs just run out of momentum. The business world today is a tough, competitive, ever changing environment which requires continuous rethought and re-invention, and not all CEOs have the ability to live through more than a limited number of product and technology generational shifts. For example Olsen at DEC did not prepare for the PC revolution and Wang did not manage to live past proprietary operating systems being replaced by the likes of Unix.
4. Lose the faith
It’s not easy to stay motivated and lead a company on a downward slope, and at any given time about half the companies in any industry, are heading in the wrong direction. Once great companies like Kodak, who pioneered and once dominated their industry can lose the way completely and the CEO, no matter how skilled, may not be able to reverse the slide once the downward momentum is too steep.
5. Peter strikes
The Peter Principle is alive and well. Great divisional heads do not necessarily make great CEOs, and even CEOs who have been successful in one company can hit their competence ceiling in another company in the musical chair movement of CEOs that we see in some industries.
6. Generational shifts
Some successful CEOs just get non-chronologically too old and out of date too quickly and do not adjust to the changing expectations in the new generations of workers. Younger employees have different expectations of “the meaning of work”, and CEOs who do not understand these differences will find it hard to lead and motivate their organisations
7. Diverge from the corporate path
I have seen Country MDs who decide that the global corporate direction just isn’t right for their country, and therefore decide that they will just continue to head on in their current well-trodden path rather that toe the company line. This is fine if you own the company, but is not acceptable to global management in a large, multinational, publicly listed company. I have recently seen one country MD in a large global F-1000 company who just made the decision that his market was not subject to the quarterly reporting requirements imposed, and started just doing an annual forecast. He didn’t last much longer.
8. Test of time
What we did yesterday to be successful will not necessarily work today, and what we do well today will not necessarily work tomorrow. You can be surfing on the crest of a wave one moment and the find yourself buried head first in the sand in the next. The markets and customers can be very fickle and in the dynamic and changeable environment in most industries today, not all strategies will necessarily have a long shelf life.
9. Cultural misfit
Some executives can be great in their own environment but cannot make the shift to a global CEO role because they do not understand nor accept that there are serious cultural differences that need to be complied with and honoured. One company I worked for had the global CEO come and visit a major account of ours in the waste disposal business in Asia. The customer CEO was always very serious, very decorous and had never exhibited an open sense of humour, all which fitted well with the local cultural standards. During the meeting, despite a clear briefing, our CEO suddenly decided that he had come up with a wonderful slogan for the customer’s company being “Your trash is our cash”, and could not resist uttering this pearl of wisdom again and again. It took us months after the visit to convince the customer that our CEO was just exhibiting an American sense of humour and was not a raving lunatic.
10. Lose the plot.
Some CEOs just lose the plot. The quirks and peculiarities that helped to get them to the top just get more pronounced and more unbalanced after they get to the top office. As we age our personality traits tend to become more pronounced, and some characteristics that seemed somewhat endearing and mildly idiosyncratic can turn into serious lunacies. I knew one CEO who was a fairly aggressive driver, who always kept a running commentary going about the stupidities of everyone else on the road. When his chairman visited him at his holiday home in Marbella Spain one time, he completely lost the plot while driving to a restaurant, and gave chase and finally rammed another driver who had moments before suddenly cut in front of him. This incident made the chairman question the CEO’s sanity and ultimately resulted in his removal.
As M.H. Alderson, American sports coach said “If at first you don’t succeed, you are running about average”.