The Most Common Mistake CEOs Make — and How to Fix It

As an advisor to CEOs, I’m often asked what’s the most frequent mistake they make. While there are many  after all, they’re human  I’d say the most common one is not acting quickly enough on “people problems.”

The consequences can be disastrous. Keeping bad apples too long, especially in key roles, breeds all kinds of difficulties including dysfunctional teams, poor morale, and various liability risks. Ultimately, failing to address the problem of an under-performing or misbehaving senior executive undermines the credibility and authority of the CEO, and that sort of damage is hard to repair. In an interview in the the New York Times Magazine, Alan Greenberg, the former Chairman of Bear Stearns, was asked why he didn’t fire James Cayne, his successor as CEO, who famously played bridge and golf during the week the company was going under and reportedly smoked pot in his office. Greenberg’s responses are classic rationalization: Cayne “owned about 5 percent of the company”; “it was hard to complain when things looked so rosy.” Owning 5 percent of nothing turns out not to be such a big deal, and everyone knows that things can look rosy but be rotten underneath.

It’s worth thinking about why CEOs often have so much trouble pulling the trigger. Some of the most decisive, visionary, principled business leaders I know still have trouble with this one issue. Here are a few reasons I’ve encountered, offered not as excuses but as explanations:

  1. The CEO is too far removed from the executive in question and doesn’t quite see the extent of the problem. This can be compounded by a failure of talent management, in which the CEO doesn’t get the full scoop on problem people.
  2. The CEO is too close to the executive in question. Either he or she is blinded by personal feelings of affection or loyalty, or others in the organization believe the executive is “protected” and are afraid to offer critical feedback about the CEO’s friend.
  3. The CEO is aware of the problem, and showers the executive with all kinds of resources like 360 feedback, coaching, leadership development training, reassignment to another role, reading the latest bestseller on leadership, etc., all of which turn out to be exercises in wishful thinking and a big waste of time, because most people really don’t change very much.
  4. The executive is high performing. The CEO makes the calculated decision that the benefits of keeping the person outweigh, or at least justify, the risks. This can be an exercise in self-delusion, because the benefits of the high producer are often eventually overtaken by the harm to the organization  and to the CEO’s reputation.

So what’s to be done? Perhaps most important is the need for CEOs to be more realistic about the malleability of human behavior. Our personalities are largely set by the time we’re adolescents or young adults. It’s not like you can send a problematic executive off for five years of psychoanalysis  which is what it really might take to make a dent in their behavior  and say “Come back and see me when you’re done.” My clinical background often comes in handy when assessing an executive’s capacity for change, and it allows me to tell CEOs that, in some cases, what they see is what they’re gonna get.

CEOs also need to recognize that their own emotions  their guilt about letting someone go, or their desire for financial performance at all costs, or their desire to be liked, or their fear of mustering the courage to be proactive and assertive  are major factors in this common conundrum. But what I also remind my CEO clients is that, as hard as these decisions are, people are usually tremendously relieved after they’ve made them and wish they’d acted sooner.

Kaczinski Plane Crash: Pilot Error or Deadly Leadership?

The recent tragic death of Polish President Lech Kaczynski and 95 others in a plane crash in Russia was an unprecedented disaster for Poland. But some of the facts emerging from the investigation raise important, and alarming, questions about the dangers of leadership. The investigation is focusing on “pilot error” as the likely cause of the crash. But early news reports suggested that Kaczinski might have ordered the pilots to land in heavy fog, despite the horrible weather and an aborted first attempt at bringing the plane down safely. We may never know exactly what happened: what, if anything, was said between the pilot and his powerful passengers, and even (in the absence of a misguided order to land the plane) what the pilot might have been thinking about the consequences for his career if he chose to displease the president by not landing the plane under those conditions.

What is clear from my work with powerful chief executives, especially those who rule by fear, is that variations on this dynamic can result in disastrous consequences. The fear of a punitive authority figure can lead to the stifling of independent thinking and sound judgment. If the pilot of the doomed Polish jet indeed felt he had no choice but to submit to desires of his powerful boss, then it was not so much “pilot error” (which suggests that the pilot was acting alone is his fatal mistake) as it was a case of a pilot acting under the influence of deadly group dynamics.

Non-lethal versions of this situation play out every day in the corporate setting. Managers who are terrified of being punished if they question the status quo or raise unpopular points of view will usually just clam up, even if their ideas could do tremendous good. While some may say that people should have the courage to voice their views regardless, it is psychologically naive to place all the responsibility on the employee. Never underestimate the greater power of group dynamics  and of the inhibiting effects of powerful authority figures. It is up to leaders to have enough self-awareness to recognize that they may be inadvertently stifling free speech and dissent, and to alter their leadership style before it’s too late. They rule by fear at their own  and everyone else’s  peril.

Next time you’re afraid to disagree with your boss’s wrongheaded idea, remember what happened to the Polish pilot. And if you’re in a position of authority, ask yourself if you are really creating an atmosphere in which your pilot can comfortably and directly tell you that he knows better than you.

Is Tiger Woods a Leader or a Golfer?

Tiger Woods’ return to the Masters following his sex scandal gives me a chance to underscore the difference between a celebrity and a true leader. We sometimes confuse the two, or assume that since a public figure has a high profile, then he must know something about leadership. Woods is  or at least has been  the leading golfer in the world. But being the best in something doesn’t necessarily make you a leader of anything. We shouldn’t confuse the two.

Billy Payne, the Chairman of Augusta National Golf Club, where the Masters is played, delivered a gratuitous lecture to Woods the day before the tournament began. In his rather misguided and self-righteous sermon, Payne said, “Our hero did not live up to the expectations of the role model we saw for our children.” Give me a break! A pro golfer as a role model for our children? If Woods was a leader (in business, government, the clergy, etc.), then yes, Payne’s comments would have been spot on. But it strikes me as dumb to hold the the world’s best golfer up to the same standards to which we should hold real leaders. Here’s why. The word “leader” is misleading: it means being the head of an organization or group, a role that includes inspiring everyone else and galvanizing followership. But it can also refer to the person with the lowest score on the golf course (the “leader” on the scoreboard). We’re talking about two very different things here. Part of real leadership is serving as a behavioral role model. Barack Obama recognizes this and does it admirably. But Tiger Woods is supposed to be really good at golf, period. While I’m not defending what he did in his private life, to cast it in such moralistic terms rather than seeing it as a fundamentally private, emotional problem strikes me as misdirected and hypocritical.

In fact, if Billy Payne, who is supposed to be the “leader” of a golf club, were acting as a real leader, he would have stuck to his knitting and graciously welcomed us all to the Masters. True leaders lead people. Celebrities are not generally leaders of other people. There’s nothing wrong with being a star, but they’re usually looking out for Number One.

GM’s CEO Gets Company Culture. Do You?

GM CEO Edward Whitacre appears to be doing what his predecessors seemed incapable of doing: being a red-blooded, true leader. And it looks like it’s starting to pay off with a much needed culture change.

The Wall Street Journal reports that the 68-year-old Whitacre does such shocking things as walking around GM offices and talking to people; dropping in on employees unexpectedly, while wearing jeans and a T-shirt; giving a junior GM employee who lives in Whitacre’s apartment building a ride to work and a tour of the executive suite; and  get this  actually appearing to listen when engaged in conversation!

He apparently has gotten the message that GM’s “plodding culture” is a big part of the auto giant’s problems, and he just may be on his way to fixing it. Corporate culture is, in some ways, analogous to the personality of an individual. It’s the way it feels, over time, to work in and interact with an organization. Culture gets deeply embedded in the people and structures of companies, and therefore is extremely resistant to change. GM’s culture was notoriously slow-moving, hierarchical and bureaucratic. The Journal piece includes the amazing detail that, several years ago, in an effort to stamp out bureaucracy, the company  in its infinite bureaucratic wisdom  appointed a committee to study how many committee meetings should be held.

Whitacre seems to understand what I tell my CEO clients all the time: that culture, while ingrained, starts at the top, and the CEO is by far the person most able to change it. His spontaneous visits with employees, his real rather than entirely scripted conversations, and his willingness to grant managers greater autonomy all signal that he means business when it comes to shaking the place up. And the stories about his behavior undoubtedly spread like wildfire within GM, long before you read about them in the Wall Street Journal. As long as the CEO’s actions are perceived as real, they will do good. Some employees will be nervous about their jobs, particularly the more senior ones who prefer the status quo or who are incapable of adapting. But it’s a good thing that he may have some people squirming, and nothing for Whitacre to worry about. Not everyone will make it to the other side in a time of necessary transition.

If I were on the GM board, I’d be feeling cautiously optimistic that the company finally got the right guy in the driver’s seat.

Why the Best Person to Run the Family Business Isn’t Always Family

The announcement in the New York Times that the Rothschild banking family had named Nigel Higgins its new CEO was not only a sign of intelligence and far-sighted wisdom on the part of Baron David de Rothschild, it was welcome news for those of us who advise family-owned businesses.

One of the biggest mistakes made by family businesses  and one that may be directly related to why so many of them fail at the transition from one generation to another  is that many believe they can only be led by a member of the clan. What Baron Rothschild did underscores the idea that family businesses, like any other business, should be led by the person most qualified to do so. Period, end of story.

As an advisor to several large family businesses around the world, I often speak with patriarchs about their passionate and understandable desire to keep the business in the family. They’re all aware of the statistics that show how the majority of family businesses fail during the second or third generations.Paradoxically, I tell them, sometimes the best way to preserve their legacy is to give up control and select an outsider as their successor, rather than clinging desperately to their mistaken notion of control at all costs and looking only within the family for succession candidates. Choosing an outsider can also mitigate some of the natural competition among siblings who are vying for control.

One of the main reasons it’s so hard for a patriarch to hand the keys to an outsider (even if, as in the case of the Rothschilds, the “outsider” has been working in the business for 27 years!) is that they have a very hard time trusting people who aren’t in their family. This despite the fact that members of their family may have demonstrated over and over again just how untrustworthy they are. Only considering family members constitutes a paranoid choice, rather than a sound business decision. A deeper, darker reason why patriarchs, particularly founders, choose an unqualified family member has to do with their narcissism: some of these founders believe that they are ultimately irreplaceable  “nobody could possibly run this but me”  so they unconsciously choose a successor who is destined to fail, thus proving their point, albeit from the grave.

All things being equal (which occasionally they are), then sure, it makes sense to anoint a member of the next generation to run the business. Presumably the son, daughter or cousin shares in the patriarch’s family values and takes a similarly long-term view of the business. But there’s nothing that says an outsider can’t also hold these perspectives. Handing the reins over to a family member can be done for several wrong reasons, too, including a desire to please one’s child or spouse (or, to be more accurate, a fear of displeasing them), or the mistaken belief that, once turned over to an outsider, the family will lose control forever (there are plenty of legal and financial ways to insure this doesn’t happen).

Ultimately all situations of CEO succession, in family businesses and in public companies, should be based on a meritocracy rather than the gene pool. The right leader keeps the family business thriving; the wrong one just adds to the statistics.

Leadership Lessons from Manual Transmission

When traveling in Europe, you can’t help noticing all the cultural differences between “the Continent” and home. But one that always strikes me is the prevalence of manual transmission in cars in Europe, compared to the virtual absence of it in the US. While there are many things the Europeans emulate about our ways, American business leaders might want to borrow an occasional page from the European playbook, and the stick shift is the perfect metaphor.

I’ve always had a preference for manual transmission. I used to think this was just the frustrated Mario Andretti in me. Sports cars are the last bastion of “manual” in America. Assuming that cars are generally made for those who buy them  not necessarily a complimentary assumption, given the state of American cars until recently  European drivers clearly have preferred the clutch.

What’s this all about, and what can we learn from it? Driving standard gives the feeling of being more in control of the car and suggests wanting a more nuanced relationship between the car and the road. It’s seeking an elemental, and at times exhilarating, experience of driving, rather than the more passive experience of being driven in hermetically sealed comfort. It’s more work for the driver, which  paradoxically  makes it a lot more fun.

Those business leaders in the U.S. who feel they can run a business from a comfortable drivers seat, far from the maddening cobblestone roads and the vicissitudes of driving, assuming that their corporate engines will seamlessly shift gears for them, would do well to heed the lesson from European drivers: the best way to lead is with that fingertip touch. Alas, I’ve learned from some of my European friends that the popularity of standard transmission in Europe has been waning of late. But the idea  and the pleasures of the stick  remain unchanged.

7 Tips for Giving Advice That People Will Follow

Much has been said about how to deliver feedback, because giving it is so often fraught with anxiety. Bosses shy away from the negative, critical part, even though they know it’s one of their most important responsibilities. But relatively little has been written about the art of giving good, old-fashioned advice. Unencumbered by some of the complications of performance reviews — nothing official, nothing related to compensation or promotion, nothing necessarily critical or painful to hear — well-intentioned advice should be a treat to give and to receive.

Why should you get better at giving advice? Lots of reasons: it’s helpful to pass your wisdom on to others; it extends your own influence, regardless of whether you ever get “paid back”; it’s a way to gain trust, stature and gravitas; and it’s just plain gratifying to be valued for what’s in your head. This is ego gratification of the very best sort.

So why do people who are sought for advice still manage to screw it up? In my experience, it’s less about the quality of advice and more because of the way it’s delivered. The way advice is given can inadvertently increase the receiver’s resistance to hearing it or acting on it, which is such a shame, because that undoes the best of intentions. You want the advisee to come away with good advice, rather than bad feelings about the advisor. Here are four tips on how to give advice well. (Remember that giving it well doesn’t necessarily make it good advice. Caveat emptor.) 

1. Bear in mind the difference between solicited and unsolicited advice. Both are perfectly fine ways to be helpful, but remember that the unsolicited variety may not always be welcome, so the recipient might be more vulnerable to a bruised ego if you push the advice too far.

2. Say thank you before plunging in. This applies to solicited advice. Before offering any of your wisdom, express some gratitude for being asked. After all, it’s flattering to be seen as wise and helpful. I don’t know anyone who doesn’t like being asked for advice. In fact, doing so is one of the best ways to deepen a relationship, because it’s a mutually gratifying human interaction and flattering without being obsequious.

3. Make sure you understand the limits of the question. There’s nothing more annoying than asking for advice on one thing (like “What do I need to do to get a promotion?”) and getting advice on your marriage and your vacations plans, with a few golf tips thrown in. Stick to the subject at hand, unless somehow there’s a connection.

4. Be confident, but not arrogant. This distinction is blurry for some folks. There really is a difference between coming across as authoritative (presumably the solicitor wouldn’t be seeking your advice if they didn’t think you knew your stuff) as opposed to authoritarian (using your power to compel someone to follow your advice, or being pathologically certain that you’re always right). Being authoritative can be done with humility, like saying “I’ve seen a lot of situations like this, and I’m concerned that if you don’t deal with this problem executive now, the damage will only get worse with time.” An authoritarian way of giving the same advice might be, “Look, you have to get rid of that guy now, or else I’ll do it for you.” The latter is obnoxious, off-putting, and not helpful.

5. Give the recipient an “out.” This is related to No. 4. While there’s plenty of room for passion in the giving advice, a bit of humility also helps. You can say, for instance, that you’ve seen such-and-such approach work for yourself and for others, but it might not be for everybody. Or you can preface it with a turn of phrase like, “I’m not sure about this, but I think you could benefit from doing x, y, and z.” Or my personal favorite: “Have you considered…?”

6. After giving advice, ask how it sounds. Often the best advice is created in an iterative way, rather than being delivered from on high. So after you’re done expounding, ask the recipient if that makes sense, or how they might feel about acting on your advice. Their reactions can help you refine it together and make it even more meaningful.

7. Ask for follow-up. Not only does it show you care if you ask your advice-seeker to let you know how it goes, but it also conveys that you have a stake in giving good advice. Whether or not they take you up on the offer, it will leave them feeling even better about you and more confident in acting on what you’ve shared.

I’ve learned that giving advice is one of life’s great pleasures, especially when it turns out that I was right. I’m also grateful for all the good advice I’ve received over the years.

CEO Succession: How Many Leaders Does a Company Need?

How many CEOs does a company really need? The answer, obviously, is one, but with corporate boards increasingly focused on succession planning, it’s worth considering how realistic it is to have more than one CEO-in-waiting. Do those who are truly “CEO material” really want to stick around until their day comes? Have we gone overboard with succession planning? Boards take succession very seriously. Along with ensuring that a business remains profitable, the hiring and firing of a CEO is arguably their most important job. Prompted in part by Sarbanes-Oxley and the wave of corporate governance scandals that preceded it, boards are insisting that their CEOs develop or hire at least one, if not more, CEO succession candidates, even when they have a capable CEO who is several years from retirement.

The most frequently cited reason I’ve heard for this, in numerous conversations with directors, is some version of the “hit by a bus” scenario: the need to have a senior executive in place who can take over in the unlikely, tragic event of the CEO’s death. Boards are more reticent about acknowledging a second, far more common event: a CEO’s failure. Why? Because the board that has to make the hard decision to fire a CEO is usually the same board that picked him or her in the first place. Admitting this possibility involves acknowledging responsibility for a mistake in people judgment.

It’s hard to argue with the need to protect a company from being leaderless, as well as with the desire to nurture future leaders. On the plus side, the devils you know are often better than the ones you don’t, so it can be a lot safer to promote an insider to the top job than to gamble on a relative unknown. Having one clear heir apparent can be demotivating to a few others who see themselves in the role, but can be equally reassuring about the continuity and stability of the company.

Let’s take a look at the downside to preparing several of them at the same time. Having more than one candidate often sets up a horse race between them. No matter how mature they are and how much the CEO tells them that distracting competitive tensions won’t be tolerated, it’s unavoidable. On a deeper level, some of the best CEOs I know are truly entrepreneurial (a terribly overused word these days, like “leadership” itself), and they are much more likely to climb a different ladder, from top job to top job, rather than putting in the long years of working their way up in one company.

The CEOs I know who were elevated from within often joined the company at a high level to begin with, jumping up a notch within an industry, or stuck it out at one place primarily because they knew that, barring some stupid mistake, they would eventually inherit the corner office. They’re not being arrogant; it’s a combination of healthy self-regard and organizational clarity. Contrary to some prevailing wisdom about leadership, companies don’t need many leaders. They really just need one, with maybe one to spare.

CEOs With Kids: 4 Ways to Correct the Parenting Balance

In my conversations with CEOs, one of the hardest issues for them to confront isn’t their newest business strategy or which market they should enter next or who they should name to succeed them. Instead, it’s their regret about the toll their careers have taken on their children. It’s hard to hear, too, as I spend a lot of time on the road as a consultant away from my own family.

It usually starts with the predictable rationalizations: it’s necessary for the business; it’s a sacrifice they’ve consciously chosen to make; they’ve turned parenting over to their spouses, who are so much better at it anyway; they can make it up to their kids later on. Of course, there’s a degree of truth in all these factors, which is what makes them such great rationalizations.

Regret is complicated. A big part of it is the guilt they feel when then see the grown-up consequences of their absence. They watch their adult kids having marital trouble, jumping from job to job, or simply complaining that their dad was never around. Another part is the feeling of lost opportunity — a nostalgia for how things could have been. Sometimes this is prompted by seeing how their children are such devoted and available parents themselves, in part making up for the kind of parenting they didn’t get from their dad. (Most of the time this is about fathers, but women CEOs have to deal with a similar set of issues.)

Some of the CEOs I talk to feel terribly guilty about this and try to make up for it by spending lots time with their families during retirement, or by being doting grandparents. Others take a more “tough love” approach and don’t try to make amends beyond an acknowledgment of the truth. Some shower their offspring with money, as if that will undo the past.

But some really have managed to be successful as CEOs and as parents. What can we learn from them? Contrary to popular wisdom, being a good father doesn’t have to detract from being a good CEO. In fact the best CEOs are the ones who take a benevolent paternal (or maternal) attitude toward their employees and set an example at work for how to be a good parent at home. There’s no formula for getting it right, but consider the following four suggestions:

1. Above all, stop offering rationalizations. They may make you feel better, but they’re not helping your kids at all. The only way to resolve an inner struggle is to acknowledge that it exists in the first place. Sometimes just accepting the fact that your absences have consequences will be enough to cause subtle but meaningful changes in behavior.

2. Don’t act like a CEO at home. It may serve you well at work, but it really isn’t very attractive or constructive with your family.

3. Be honest about your schedule. If you can’t carve out more time for your family during the work week, then tell them that openly and devote yourself to them on the weekends or during vacations.

4. Take pride in your priorities. When I’m assessing a CEO or a potential CEO, the only cell-phone call I like to see them take during our meeting is a call from their spouse or kids. It says something important about their priorities.

US President’s Father-Hunger

Sir, I agree with your editorial “Palace intrigue on Pennsylvania Ave” (March 11), which assigns responsibility to Barack Obama for the internal feuds at the White House. As a corporate psychoanalyst who advises chief executives and political leaders, may I offer him my advice?

The dysfunction among his senior team was not inevitable, despite the president having assembled his own version of a “team of rivals”. Such squabbles arise in a well-known phenomenon of organizational dynamics called group regression, in which a perceived leadership vacuum causes a team to retreat to less adaptive modes of functioning, turning against one another and pointing fingers internally rather than focusing on the true adversaries, namely the economy, the wars, the Republicans, the entrenched obstacles in American culture, and so on.

What can President Obama do to reverse this situation? It is not simply a matter of being tougher, nor would it be enough to just demand that his advisers stop fighting. Neither approach would address his team’s –and his country’s – underlying feeling of being “fatherless”. His own actual father-hunger probably makes it hard for him to evolve into a warmer, more benevolent paternalistic role. But if he can unlock his own emotional development and progress from being the brilliant son to the wise man with gravitas that we need, the entire world might be better for it.

Kerry Sulkowicz,
Professor of Psychiatry,
New York University School of Medicine,
New York, NY, US