Leadership Styles

The Three Forgotten Reasons Why CEOs Fail

Steven Sonsino asked:

A decline in a company’s financial position may be the fastest way a chief executive can lose his or her job, as the global credit crunch has shown. But it’s easy to forget that several other factors can be just as threatening to the person at the top.

Some of them may seem to be out of your control – a campaign by the media, for example, or the unpopularity of your own personal style of leadership. But there are always things you can do. So if you plan to be chief executive one day, here are some strategies you can employ to improve your chances of success.

1) CEOs forget the damage media pressure can cause.

Sometimes CEOs become victims of a media campaign. Investors are stirred up by journalists’ attacks on issues such as ‘fat cat’ salaries, and your actual business performance becomes irrelevant.

One classic example is Gerald Ratner, who headed the Ratner jewellery chain in the UK. At an Institute of Directors meeting he described one of his company’s sherry decanters as ‘crap’. From then on, every article about him repeated this story. The company’s share price sank. He resigned.

What you can do:

Don’t forget your wider audience. In Ratner’s case, the audience comprised not only the business community but also reporters. If handling the media doesn’t come naturally, there are skills you can learn to promote your business and limit damage.

If you haven’t already put yourself through a ‘handling the media’ program, do it now. Better still, take the whole board.

2) They don’t change their leadership style.

There is a fashion in leaders, just as there is in clothing. This season, the diplomatic leader is in and the autocrat is out. If you need proof, look at the appointment of Sir Howard Stringer as chairman and chief executive at Sony, the Japanese media conglomerate. Words used to describe Sir Howard and his style include ‘willing to chat genially’, ‘humour’, ‘charm’, ‘rejuvenating’, ‘persuading’.

In contrast, Carly Fiorina was criticized for her imperious style when she was removed as head of computer-maker Hewlett-Packard.

What you can do:

Few CEOs pander to fashion. But frankly it’s always useful to be known as a CEO who listens and learns. Strength and decisiveness are important, yes, but in the bad times it’s the way you yourself can learn and change that can save your neck. And – importantly – do people actually believe you can listen and learn? (You can’t fake this.)

An imperious style may work in certain companies at certain times, but a leader who truly listens to peers, employees, investors and customers has the advantage. And keeps his or her job.

3) They are economical with the truth.

Now ‘be more than honest’ might seem like a no-brainer as a piece of advice. The shock waves caused by fraudulent activities at Enron and WorldCom are still being felt around the world. But an action doesn’t have to be criminal to result in a leader’s downfall. The mere suggestion that the whole truth wasn’t revealed, or that there was a cover-up, can do tremendous damage.

At Royal Dutch/Shell, the concealment of a gap in the oil giant’s oil reserves led eventually to the resignation of chairman Sir Philip Watts. And even though the business still performs dramatically well, Sir Philip had to go.

At a time when corporate governance is such a hot issue, CEOs must be careful not only to act with complete honesty, but also to be seen to act with complete honesty.

What you can do:

If it’s not clear what you ought to do, ask yourself whether you would be happy for your actions to be reported fully in the financial press. And talk to your fellow directors and staff: make sure they’re asking themselves the same question.

When in doubt, play the integrity card and tell it like it is. Even in the event of your going, your next role will be easier to come by and actually your integrity will stand you in good stead.

Well, that’s it for the often forgotten reasons CEOs fail. It boils down to having clear channels of communication and clear direction. There is a hard business case for making sure you know and understand how you come across as a CEO. Hire someone who can work with you to communicate in the good times and the bad.

Your job depends on it.


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