|
LVD
2-12
06/04
ABSTRACT
WHAT WENT WRONG: WHY CEOs FAIL
Prepared
by: Renée A. Daugherty,
Ph.D.
342 HES Building
Oklahoma State University
Stillwater, OK 74078-6111
405-744-6231
radaugh@okstate.edu
Nadler, D.
A. (2004, April). What went wrong: Why CEOs fail. Wharton
Leadership Digest, 8(7). Accessed May 13, 2004 from
http://leadership.wharton.upenn.edu/digest/04-04.shtml
|
IMPLICATIONS FOR COOPERATIVE
EXTENSION. While the
study examined CEO failure in for-profit business, the
principles apply to employees and officers in organizations such
as the Oklahoma Cooperative Extension Service, Oklahoma Home and
Community Education, and 4-H. |
The research was based
on in-depth interviews with people who closely observed eight CEOs
who failed and was supplemented by analysis of secondary accounts
of forty-five other cases of CEO failure at major U.S. and
European corporations. It focused mainly on early career failures
involving promising chief executives who seemed “just right” for
the job but failed in their early years.
Major Factors That
Impact a CEO’s Ability to Succeed
Legacy Actions of
Outgoing CEOs. Three particular legacies can derail incoming CEOs.
1.
Some
CEOs, weary of the job prior to actually stepping down, don’t
tackle difficult issues or address significant changes towards the
end of their tenures. This leaves a host of big problems for the
new CEO.
2.
Narcissistic CEOs either don’t want to give up their posts (thus
handling succession poorly) or refuse to nurture and groom
competent internal replacement candidates.
3.
Some
outgoing CEOs want to leave on a “high note” and make big
strategic mistakes (such as a high-visibility acquisition, heavy
investment in a new product or technology, or a dramatic change in
the company’s strategic direction) that the incoming CEO has to
correct.
The Succession
Process.
Poorly planned and executed succession processes, insufficient
probing of a candidate’s ability to perform in a CEO role, and/or
an over-reliance on either external executive searches or internal
“grooming” of potential successors can set the stage for CEO
failure.
CEO Orientations.
There were two
distinct CEO orientations – the different sets of issues to which
he or she is drawn and where his/her interests, enthusiasm, and
capabilities tend to lie.
-
Content
oriented,
focusing on the substance of the company’s business, or
-
Context
oriented,
with a primary focus on environment
and culture, values, and purpose.
[Note: The distinction here highlights
the extremes, and most CEOs demonstrate a mix of content and
context orientations – though typically with a clear tendency
towards one or the other.]
Determining a CEO’s
orientation enabled Nadler to identify a common pattern in the cases
of early career CEO failure. In each case, failed CEOs followed
outgoing CEOs with very strong context orientations,
while the incoming CEOs had strong content skills.
These new CEOs could not sustain the contexts created by their
predecessors and, consequently, could not marshal the full
capabilities or forces of the organization.
Learning from the Study
Fortunately,
both the outgoing and incoming CEOs and the Board of Directors can
take certain steps to minimize the risk of CEO failure:
Create development plans
for promising candidates.
Early
in their tenure, CEOs should create development plans and
opportunities for promising internal candidates. They should make
context skills a critical variable for candidate selection, use the
board as a resource to assess candidates, and manage the entire
succession process carefully and consistently. CEOs need to
position their successors with all key stakeholders.
Develop context skills.
CEO
candidates should reflect carefully on their own experiences and,
throughout the course of their careers, seek out opportunities to
develop their context skills. Before accepting a position,
candidates should invest the necessary time in due diligence,
examine closely the tenure of the outgoing CEO, and assess, through
interviews, the quality of the outgoing CEO’s executive team.
Examine the out-going CEO.
Incoming CEOs should gauge the extent to
which their predecessors are prepared to let go, determine the level
of support they’ll need from a predecessor, and perform an intense
self-assessment to determine what other organizational support he or
she will need.
Involve the Board.
Boards should take an active hand in
succession, focus on developing internal candidates, beware of
external CEO searches, and continue to be sensitive to context
management once a new CEO is installed.
|
