What Causes CEO Failure?
Yahoo has had six CEOs in five years. At HP one CEO lasted six months. According to some studies up to a third of Fortune 500 CEOs have lasted three years with top executive failure rates as high as 75 percent and rarely less than 30 percent. In a study by Booz. Consultants, CEO tenure today is 7.6 years on a global average down from 9.5 years in 1995. According to the Harvard Business Review, two out of five new CEOs fail in their first 18 months on the job. What is causing this and what can leaders do to avoid falling victim to missteps?
August 29 2012 by ChiefExecutive.net
Experts say leadership failure has many signs but they have narrowed the cause to a few that stand out. Few site competence, or knowledge, or lack of experience. When Claudio Fernando-Araoz, head of research for the executive recruitment firm Egon Zehnder International, looked at CEOs who had succeeded and those who had failed, he found the same pattern in America, Germany and Japan: those who failed were hired on the basis of their drive, IQ, and business expertise – but fired for lack of emotional intelligence. They simply could not win over, or sometimes even just get along with, their board of directors, or their direct reports, or others on whom their own success depended.”
In 1999, CEO consultant and advisor RamCharan and Fortune’s Geoffrey Colvin studied over 40 failed CEOs from Fortune 500 companies to see what went wrong. They identified the fatal flaw of these CEOs as execution. But the reason for the execution failure was even simpler and more basic. The problem was with people, specifically their inability in not having the right person in the right job. In some case they held on to some people too long, in other cases they were unable to coach them in the desired direction.
In their Fortune article, Charan and Colvin explained that unsuccessful CEOs lacked emotional strength when it came down to personnel decisions. In short, the fatal flaw of “failure to execute” was due to bad personnel decisions.
Ronald Riggio, the Henry Kravis professor of leadership and organizationqal Psychology at Claremont McKenna College, and author of “The Clueless Leader,” thinks leaders in dysfunctional organizations are simply out of touch with how bad things are. He compares them to Michael Scott from the TV show “The Office,” who simply doesn’t realize how bad thing are or simply doesn’t care. Riggio recalls discussing with the president of one organization the possibility of an employee survey to try to get a handle on how disgruntled employees had become. “Why would we want to do that?” was the clueless response.
In their book, “Why CEOs Fail: The 11 Behaviors That Can Derail Your Climb To The Top And How To Manage Them, “ David Dotlich, a former Honeywell executive and Peter Cairo offer 11 cogent reasons why CEOs fail, most of which have to do with hubris, ego and a lack of emotional intelligence. They describe the most common characteristics of derailed top executives and how you can avoid them:
§ Arrogance— you think that you’re right, and everyone else is wrong.
§ Melodrama— you need to be the center of attention.
§ Volatility— you’re subject to mood swings.
§ Excessive Caution— you’re afraid to make decisions.
§ Habitual Distrust— you focus on the negatives.
§ Aloofness — you’re disengaged and disconnected.
§ Mischievousness— you believe that rules are made to be broken.
§ Eccentricity— you try to be different just for the sake of it.
§ Passive Resistance— what you say is not what you really believe.
§ Perfectionism— you get the little things right and the big things wrong.
§ Eagerness to Please— you try to win the popularity contest.
There are no universal ways to prevent failures, except perhaps to be alert for the warning signs. In today’s culture some executives are larger than life and expected to be perfect. Few like to admit they have flaws—even when those around them can plainly see their flaws.
Candid feedback is seen as helpful and a corrective, but who can provide this? Not employees or board members. A confidante, mentor or a trusted coach can help. But in today’s high-pressure environment, leaders need someone they can trust to tell the truth about their behavior. This is where an outside professional executive coach can help leaders reduce or eliminate blind spots and be open to constructive feedback, not only reducing the likelihood of failure, and premature burnout, but also provide an atmosphere in which the executive can express fears, failures and dreams.