As an advisor to CEOs, I’m often asked what’s the most frequent mistake they make. While there are many –Â after all, they’re human –Â 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.Â In an interview in the theÂ New York Times Magazine,Â 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:
- 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.
- 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.
- 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.
- 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 –Â 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 –Â which is what it really might take to make a dent in their behavior –Â 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 –Â 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 –Â 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.