When Success is Undermined by Past Success

03 May 2018 When Success is Undermined by Past Success

Posted at 02:07h in Uncategorized by
All leaders have a range of skills. Those that are successful are invariably promoted because they have leveraged their key skills successfully and this has yielded positive business results for which they have been duly rewarded. Most leaders also have some weaknesses that are minor and overlooked. Other leaders have areas of strength that apply in some aspects of a business or in some environments, that are either taken to the extreme, that are extended into the wrong aspects of business, or are employed to overwhelm weaknesses. On occasion, these can become fatal flaws causing the executive and the organization to fall short or even fail.
We have all heard of the Peter principle where one is promoted beyond their ability. That is not what is being addressed in this article. An example will be enlightening. A very successful sales leader is dependent upon his or her confidently presenting the benefits of a product or service. The benefits address either a previously unknown need or more likely describe a product or service that is superior in some ways to the competitor’s offering. In making the presentation it is incumbent upon the sales leader to emphasize those attributes or features which are differentiated and better than the competitor’s. At the same time, if the competitor’s features in some area are superior, then as a minimum these will not be presented. So far all is good. Many times, the emphasis results in over-embellishing and moves into a grey area. Sometimes, the competitor’s flaws are presented, again not necessarily a problem. Sometimes, these flaws are exaggerated and again move into a grey area. Either of these taken a bit too far starts to become an issue and it may be a thin line between integrity and falsehood or lying. Let’s say the successful sales leader lives on the edge and is promoted into general management. Here the constituencies are different and instead of it being incumbent upon the buyer to beware, the organization is expected to believe the leader. The board of directors accepts the presentation of operating results with the spin the former sales leader places on things. The leader presents the positives without highlighting the risks since they may be detrimental to the overall impression that is intended. Another risk is to highlight or potentially blame an area (usually a subordinate leader) for some shortcoming that is presented as a major limitation when in fact it is somewhat immaterial to the issue that is being presented.
Once the line is crossed from embellishment to spin to integrity issues, the organization and leader are headed toward larger performance issues. In one organization, we were struggling with bringing to market a new product based upon a highly innovative technology. This product idea was birthed by previous ownership and was believed to be an extremely fortuitous discovery that could add significant revenue and thus value for the new sponsors. Obviously, there was pressure to deliver on this new product. However, this product had serious technical issues that had already taken several years to bring it to market but was still incapable of performing for more than a short period of time, well short of what the end user would require. Eventually, R & D and Engineering were added to my areas of responsibility and upon delving into the development effort and discovering that the problem-solving effort was not going to solve the current problem, the CEO and I participated in a two-hour meeting with our developers and concluded that it would be another 3 months before the product was ready to ship. Unfortunately, it had been promised to a major customer and that had been communicated to the sponsors, so the expectation was high that the initial shipment would be made in the next 30 days. After the meeting the senior board member called on the phone and the CEO asked me to join the call. To my surprise, the flat statement was made by the CEO that there was difficulty, but that the problem would be resolved in time to meet the shipment date. When the call had ended, and the question was asked as to why such a statement was made, the answer was that in another month, we would present an update and communicate a new problem had developed causing an additional delay. The sales tactic of communicating a delay to a customer, now becomes something more.

Inflated Belief in Personal Ability

The successful leader believes inherently in their ability to achieve and succeed. This is admirable, but also may reach its limit as generally business complexity increases with roles at higher levels in organizations. If the individual surrounds him or herself with a great team and delegates well success is more likely. If he or she is relying on their own ability, then there is inherent danger.
There are always pluses and minuses to achieving a long-term record of success. For the successful executive, the pluses more than offset the failures. This is generally through greater success in areas that are more relevant to a specific organization. The caution is that when the executive becomes accustomed to this pattern and intuitively feels that this will always be the case in all organizations. If the shortfall in what has previously been in an area that has been somewhat inconsequential, but in the new organization is material and significant, this may lead a serious overall failure. Again, having surrounded himself with a strong team will minimize this possibility.

Then there is the whole area of power and control. The higher in an organization we are, the less it is about particular skills and the more about influencing others. With higher level roles, there is a higher level of power and authority. This includes the power and ability to cover up the failure.

We have all heard Lord Acton’s “power tends to corrupt, and absolute power corrupts absolutely.” This probably does not occur in a corporate or company environment as there are constraints imposed by government, society, and corporate governance. However, extraordinary power has the propensity to corrupt and it encourages distraction, hubris, narcissism, and excess.

Privileged Access

At the more senior levels, there is simply greater information available. Subordinates can rarely see the big picture and generally see things from a functional or limited perspective. This overall level of information is extremely valuable to the executive and allows a more informed decision. The issue arises if there is a character issue with the executive, and he or she is inappropriately controlling access so that they can control the outcome.
Privileged access goes beyond information to areas like benefits, perks, and other areas. Again, these are positive things unless the executive comes to believe that they are entitled to them and that they are not a function of the role. When we hear a statement like “don’t you know who I am,” clearly there is a sense of entitlement and the executive is more concerned about themselves than the business.
One of the key areas of access concerns indiscretions of subordinates. Sometimes the CEO will suppress this information because it is too disruptive to address. What comes to mind is tolerating harassment because the executive is too valuable (?) to the business. The inappropriateness of the toleration is in suppressing the information or results of an inquiry rather than taking a strong action. For a less valuable person, the action would be clear and direct.

Emotionally Expansive

Success is emotionally rewarding on several levels and emotions. In many cases, the thirst and drive become unending propositions. The highs are not ultimately satisfying, and the next accomplishment or promotion becomes all consuming as there may be an insufficient level of satisfaction with the present role. “Emptiness Syndrome” may be present in that the executive questions himself when at the new level with a lack of fulfillment and basically asking himself “is this all there is?’
Should there be an addiction to the emotional aspects of success and the present role does not fulfill this need, then there is the risk of the executive trying to fulfill himself in less appropriate ways. This may result in inappropriate behaviors towards others or in creating success through unethical ways.

Success Has Financial Rewards

The latter is particularly true if the individual is too money oriented. While we all believe that success deserves its rewards and we design compensation systems with high monetary rewards for delivering the results, there is a risk when the rewards seem unsustainable. For example, I served in an organization as operations leader and desired to be a general manager which required demonstrating success in the commercial aspects of the business. The parent organization intentionally bought a business with that in mind (as well as to increase the overall bottom line through product line extensions). Adding the general manager responsibilities for this new business entity and continuing to deliver exceptional results in my historical areas, seemed to be a path forward to becoming a president/general manager of a larger company within the overall portfolio of 30 plus companies. Monthly, I prepared a separate report concerning the growth in sales and profits of the newly acquired business and sent them to my president knowing that he would share the results with the corporate executives. After a couple of years, I was traveling in Europe with one of the corporate executives with direct responsibility for our company (my direct superior was not on the trip as we were exploring an acquisition that would not fall under his area of responsibility). As I had previously directly worked for the corporate executive while serving on corporate staff, I felt that I could seek his advice and asked him for his perspective on my performance as general manager and how he viewed the reports that I was certain were being forwarded (which my president assured me he was doing on a monthly basis), he was surprised and stated that he had never seen any of the reports. Upon my return, I inquired as to if the reports were being forwarded as previously told and was informed that they were not. When asked why this was the case, the president shared that he did not because he could not afford for me to move to another company and feared that results would decline such that he would not maximize his bonus payout. In short, it was acceptable in his mind to lie if it would benefit him personally.

Isolated Due to Diminishing Number of Organizational Peers

Having peer relationships when in an organization allows for socialization and to some extent these peers are an informal accountability group to which the executive can consult, explore ideas and potential impacts on others or results, and otherwise relieve stress.
The role of the CEO or senior executive at a site is plagued with another issue. Being the one who is ultimately responsible for success and failure, the alternating between emotional highs and lows can be extreme and frequent. Sometimes, I would characterize the role as alternating between feelings of near euphoria when things were going well such as a team member achieving something extraordinary or a customer accepting a proposal to near depression when the opposite happened. As businesses are complex, there are many individual wins and losses in a given period.
Before we have achieved the level which naturally separates us from all others on the site, we need to have an informal peer or accountability group that allows for the sharing of ideas and emotions.

Inability of Superior to Address Known Issues

At some point in time, the executive may consider themselves irreplaceable. In and of itself, this is not a problem. It is appropriate that the executive have a strong self-confidence in his or her ability and thus may perform better than others. It is however a major issue if the executive feels that he is indispensable and therefor can act with impunity particularly if the results are positive.
When the superior becomes aware of an issue, of course, he or she should weigh the plusses and minuses and make an overall decision. When the issue is one of morals including integrity, then there should be action possibly including immediate dismissal. These types of issues are extremely detrimental to the health or the organization.
In the private equity arena, the range of options for the sponsor to act is even more limited. Oftentimes, the PE firm will have limited industry experience and must rely heavily on the CEO. The range of tools available is basically limited to retention or separation. Given this general lack of industry experience, there is a fear of not only loss of the executive, but also a significant decrease in enterprise value which then compounds the potential of business harm to include damage to the PE firm’s standing with investors.

Warren Buffet’s Advice in Hiring and Conclusions

Recently Warren Buffet was asked what were the most important attributes that should be factors in hiring executives. These were intelligence, energy, and integrity. Of the three, the most important one is integrity. Knowing that the executive may be adversely impacted by joining the wrong CEO, quite possibly the same attributes should be paramount. In my past, I have minimized the signs during the interview process where I was asked not to disclose that I already had an offer before interviewing with executives who wrongly thought that they were part of the hiring decision making process. On other occasions, I had the sense of the CEO’s potentially over-inflated ego. “Caveat Emptor” no doubt is a two-sided warning.
A CEO who has high integrity and some degree of humility in addition to a track record of success would seem to offset many of the potential risks that success may bring. This degree of humility coupled with periodic self-reflection is no doubt difficult for some high achievers. However, self-correction may reduce high turnover as most individuals do not leave a company but leave their boss. Just as CEOs must constantly review their team for proper alignment and the right skills, so too do subordinates balance their concerns for income and family against their ability to contribute in an environment where the leader may be flawed.

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Contact Jeffrey Cartwright to talk with us about your objectives and how we can help you achieve them.

jcartwright@shoreviewadvisors.com

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