Why CEOs Fail

Since 1994 I’ve worked with many CEO clients, both privately and in groups. In more than 3,000 individual conferences and more than 400 all-day group meetings, I’ve begun to recognize some patterns.

First, there is a positive side to failure — successful people almost have to fail more frequently than others because they’re making more attempts. Few of us were sent off to school by mothers who said, “Take risks!” yet successful CEOs have to learn to do this, decisively. With this “systems view” of failure, successful CEOs take losses in stride, even if that stride includes an occasional kick at the cat. So — one answer to “why CEOs fail” is “Because they understand that calculated risks are necessary to succeed, and such ventures will involve failure.” Most of these CEOs recognize the status quo is not an option, and by “playing it safe” the organization may actually be put at peril.

Failures teach successful CEOs, and over time the following lessons seem to account for most of the learning:

  1. An inability to see the bigger picture. If you’re being eaten by a lion, it’s tough to see the lion. Some pressures are industry-wide, even global, and the successful CEO may have to divest a core business to succeed (John Teets revamped Greyhound by selling the buses). This is difficult, and it is why so many successful CEOs surround themselves with good peers and mentors.
  2. An aversion to using solid financial practices. A CEO I know once shared with me over dinner that he didn’t pay enough attention to financials before he saw his publicly traded company forced into bankruptcy. The reason, he said, was that the numbers would simply “swim together,” overwhelming his discomfort with financial indicators. Although it’s not hard to remedy — I have seen hundreds of CEOs do it — a CEO first has to admit there’s a compelling need to learn how to avoid going broke.
  3. A lack of clear vision. Successful CEOs lead the organization to where it needs to be, and find ways to get buy-in at all levels. This is hard — otherwise, all organizations would do it well. Done right, clear vision can substitute for the field manual, empowering everyone to make crisp decisions in the company’s interest.
  4. Lack of passion. Most organizations no longer need arms and legs (command and control); instead, they need hearts and minds (sell and enroll). People need to be led more than they need to be managed. Provided things are going well, a lack of passion is usually burnout, which comes from solving the same problem over and over. When things aren’t going well, avoidance may look the same as ‘lack of passion,’ but it’s not — CEOs may talk about packing it in when instead they really need to face the difficult task at hand. Some years ago Fortune magazine polled 500 of its more successful readers and learned their strategies for success: (1) know thyself (2) seize opportunity, and (3) pursue meaning. When I encounter a lack of passion in an otherwise successful CEO, I gently suggest a process to revisit personal core beliefs. The fundamental questions of Who am I? Why am I here? beg to be answered, and if urgent tasks continually pull me away from considering these important questions, burnout and depression may be the result. Passion matters, greatly.
  5. Lack of clarity on the reasons for success. Great CEOs hold their associates accountable for knowing what activities cause results. CEOs focus on what to do, and let associates take care of the “how.” Then, on a regular basis, associates monitor the activities that lead to success. For a sales manager this might mean counting and publicly posting the number of cold calls and referrals every week, in addition to the actual sales results. The difference between champions and good performers isn’t terribly great sometimes, but champions win consistently because they understand what causes a win. Finally, successful CEOs foster (and insist on) the use of reliable, continuously improving, and innovative methods for getting work done before they let their associates take care of the “how.”
  6. Distractions such as acquisitions (most of these fail), golf, and other anxiety management techniques.Successful CEOs pay attention to the central task, which is putting the organization in touch with reality, and leading.
  7. Disconnecting from customers. Some of my most successful CEO clients are on the road over half the time, talking to customers.
  8. Disconnecting from employees. The best leaders find ways to keep in touch with their employees, not only because they’re genuinely interested in their lives, but also because they realize there is profound knowledge in the ranks. After nearly 44,000 responses, our algorithms at www.effectiveorganization.com frequently identify serious disconnects between leaders and employees: happily, where there is commitment, such tools can help reconnect.
  9. Integrity outages. I’ve heard many MBA candidates complain about leadership that says one thing and does another. I don’t have hard data on this, but I suspect that associates will tolerate no more than about three inconsistencies before they start to tune out.

My CEO clients work hard, teaching me every day what it means to be decisive and fully engaged in life. I am certain of only two things: Confusion is a precondition to learning, and losses accompany success.

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