- Most CEO failures are self-made and so CEOs need to guard against their own weaknesses
- Clarity in direction and communication are key to CEO success
- In addition, effective media campaigning and flexibility in leadership style can also evade CEO failure
Many would agree that the race to the corner office is not as trying as the fight to stay on! In the recent past the corporate world has witnessed many leadership failures making one think twice before jet setting for the most coveted office in business. Leadership failures are never isolated in nature and have a whole story around them. This also means that before the doomsday leaders, unconsciously though, begin to drop hints about the coming disaster. One of the most obvious tell tale signs of failing leadership is when the leaders begin to change their leadership styles for want of better command and control over the organisation. Besides, there are other signs too that signal the coming disaster. While the symptoms are obvious, the causes continue to elude human logic. Analysing keenly one realizes that leadership failure can be because of many reasons that may otherwise seem harmless but can lead to bigger problems.
An understanding of the reasons for leadership failure can help leaders stay cautious of their own mistakes and provide timely corrective measures or ensure sufficient preparedness for the onslaught.
An analysis of corporate leadership failures shows that there are seven reasons for failure. These reasons have been found in leadership failures across the globe and so are applicable to every leadership style. However, they do not represent the causes in totality. There may be other reasons for leadership failure, but these seven reasons are most common.
Poor show at the bottom-line
The first and foremost reason that sets the bomb ticking is dismal bottom-line figures. Business is all about padding the bottom-line with impressive numbers and making a notable financial report. Leaders, who fail to uphold this basic responsibility, instantly get the crowd against them triggering anti-leadership sentiment. The case of Chuck Prince the CEO of Citigroup is a good example of how CEOs who fail to show impressive bottom-line growth are asked to leave.
Boost communication efforts in tough times
A constant crib of employees especially in tough times is that leaders tend to become unapproachable by shutting themselves out from others in the organisation. Experts believe that leaders should do just the opposite. Closing communication channels in tough times leads to rumour mongering and creates unnecessary nervousness among employees, which further effects their performance by making the entire act more complicated.
Leaders should open up in tough times and share with others the proposed plans and business ideas for revival. Open communication not only gives others hope but also makes them feel like a part of the solution. Passing wrong information to employees and other shareholders can prove to be extremely fatal for organisational well-being. The case of Jean Paul Vortron, the Chief Executive of Fortis, the Dutch financial services company presents an example of how wrong communication can come heavily on executive leadership. Earlier in the year the shareholders were reassured of their dividends but later the dividends were cancelled without any word from the management. This made the shareholders both angry and curious about the company’s credibility.
Leaders should therefore communicate the facts and not fabricate information for short-term gains. A good explanation by the leader gives employees, shareholders and customers a clear sense of what to expect in future. Misleading shareholders boomerangs with twice the force. So leaders beware!
Do not undermine shareholder support
Investor confidence is an important prerequisite for leadership success. Therefore, undermining shareholder support can land CEOs in big trouble. Appointing non-executive directors can help CEOs keep shareholder support as non-executive directors would represent shareholder interest by ensuring that CEO decisions are not shot down for lack of concern towards shareholder interest.
Ego battles and boardroom confrontations
Another reason why CEOs are forced to step down despite a good performance record is their endless confrontation with the Chairman or other important members of the board. Fred Kindle, the Ex-CEO of ABB is a victim of the boardroom battle. Kindle is credited with exemplary performance both on professional as well as personal front. However, his continous battles with the Chairman went against him compelling him to step down.
The case of Fred Kindle reflects strongly on the need to maintain cordial relations in the boardroom and build tolerance to criticism. CEOs must appoint facilitators to bring out issues that are sensitive and may result in inconsolable differences.
Many CEOs succumb to their own ambitions. The case of Carly Fiorina, of Hewlett-Packard is an example of just how CEOs make over-ambitious promises and later step down because they fail to deliver. Mergers and acquisitions make for a perfect success strategy if executed well. However the strategy could well backfire with double force if it fails to push up profits. Thus, CEOs should stop from making unrealistic promises and focus on performance by leveraging parameters that lie within their performance radius.
Media campaigns can have very serious repercussions for CEOs. From attacking corporate leaders for their fat pay packages to their personal friendships, media is indeed what it takes to become both popular and unpopular. So, CEOs should be skilled at media management and should hone skills that would enable them to use media to their advantage.
Rigid leadership style
CEOs should be flexible and adaptive. If their signature leadership style fails to work for them in a given situation then they should be quick to adopt a style that they believe would work better, Rigidity in leadership style can be detrimental to CEO success making flexibility an important success parameter.
In addition to the earlier causes, there are other pitfalls to CEO failure too. However, the previous reasons represent the most common pitfalls as they account for more than eighty per cent of CEO failures. CEOs thus need to guard against them and make their moves with clarity and precision.