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Tragic Flaws: Why Companies Really Fail - Part 2

By Angel Mehta, Managing Director, Sterling-Hoffman Management Consultants

In the August edition of this magazine, I published an introduction to the concept of emotional maturity and it’s relevance in any success or failure story – especially the latter. This article is a continuation of that thought stream. As always I am indebted to those who offered their own stories of success and failure to help supplement my writing. One other note: this article actually represents writing for both the December AND January edition of the Sterling Report. As such, it has morphed into more of an essay, hence the length.

Who this Article is For

This essay is for those executives that believe first and foremost in having the best marketing message, the best cash flow management, the best sales process, the best R&D, etc. My experiences as an executive recruiter suggest that emotional maturity as a factor in business success is generally underestimated , often brushed aside by CEO’s and investors that dismiss the notion as ‘touchy feely’. My goal, quite simply, is to persuade as many people as possible that the concept of emotional maturity is at least as critical to success as any other area of domain expertise.

Emotional Maturity Revisited - Why does it matter?

Recall once again the article published last year in Fortune Magazine, recognizing ‘poor execution’ as the number one reason companies fail. At it’s core, to ‘execute’ means to get stuff done. But the assertion that companies fail because they cannot ‘get stuff done’ begs the question: Why? In other words, why do some companies execute superbly, while others do not?

I credit Pat Lencioni’s writing with helping to point me in the direction of an answer to this very critical question. Simply stated: A company can have great technology, brilliant engineers, top tier venture backing, world class executives, first mover advantage in a large expanding market – and still fail miserably, if that company lacks organizational health. Lencioni’s latest book “Five Dysfunctions of a Team” places this point within the context of teamwork (hence the title) – which certainly makes the concept easier to understand (a precursor to being able to get stuff done). But at a high level, Lencioni’s books are so useful because they prescribe concrete strategies for creating emotional maturity (health) across an organization.

To the point: If a company lacks organizational health, it will execute poorly.

It is my view, however, that understanding the importance of team work is only half the battle. It is all well and good to accept that companies fail due to a lack of organizational health. But companies are made up of human beings. Business processes break down because the people responsible for driving them fail to execute. The real question is, why are some individuals great at execution, whereas other individuals seem unable to follow through even on the simplest tasks?

Herein lies the central thesis of this article:

Emotional Maturity (or a lack thereof) is the single biggest reason people FAIL to execute.

Put another way, an organization cannot be healthy if it’s individual employees (executives in particular) are not healthy, any more than an animal can be healthy if it’s individual organs are sick. Indeed, readers of Pat Lencioni’s last two books will notice that within each fable, there exists one character that represents the virus – an executive that needs to be removed from the organization before further progress can be made. To build a healthy company that executes well, it is necessary to identify and hire healthy (emotionally mature) people.

When explaining this concept to clients, I find it useful to employ a stock market analogy. Market pundits are almost unanimous in accepting that in the short term, equity markets are greatly influenced by two emotions: fear and greed. This was particularly true of the 90’s bubble market. As a thought experiment, consider how the stock market might function if investors were suddenly freed of such emotions. What would happen if fear and greed were completely eliminated, and investors worldwide were magically able to bring a Warren Buffet-like mathematical approach to investment activity? Suffice to say, the market as we know it would cease to exist. Trading volume would drop through the floor and valuations would more closely reflect (gasp!) the company’s ability to make money!

Fear, greed, and a variety of other psychological weaknesses assume similar roles in mucking up day to day business operations. The problem exists across industries, hierarchies, cultures, and nations. To arrive at a vision of just how different a company might function by healing itself of such issues, one need only imagine the dramatic change the stock market would undergo should investors ever manage to switch off fear and greed. I am actually unsure of whether a stock market free of fear and greed would be in the public interests or not, but I have no doubt whatsoever that emotionally mature companies would run circles around their dysfunctional competitors.

The Opposite of Emotional Maturity

Pornography, as they say, is impossible to define. Rather, you know it when you see it. Emotional maturity as a concept has an inverse property. It easier to understand what emotional maturity is once you have seen a person display the exact opposite. The following case study will be especially familiar to any executive that may have encountered Procurement or Purchasing Managers that use the vendor selection process as a means of enhancing their own self image. These are the types that force you to jump through endless hoops, ask stupid questions, remind you constantly that THEY are the authority figure in this process, etc., and in doing so hurt not only the vendors but also the organizations they are paid to support. Such personalities are so commonly encountered in sales situations that dealing with them is often regarded as sales 101. Of course, encountering people like these in sales situations can be tolerated; you do not need to work with them every day and most of us accept it as ‘part of the job’. These individuals cause more damage to their own companies (and their own lives) than to external parties. The danger factor increases substantially, however, when such personalities work alongside you, or worse, are charged with running your portfolio companies.

Two Tragic Flaws that Kill Companies

The first step in treating any illness is to gain understanding. Doctors will not prescribe serious medication without first identifying the nature of a disease. For this reason, I believe it may be useful to categorize two of the most common executive ‘illnesses’ that Sterling-Hoffman attempts to screen for when conducting executive search projects. In a sense, search consultants study failure with every interview we conduct; and over time, certain patterns start to emerge. The balance of this article will be dedicated to outlining two ‘tragic flaws’ that I’ve seen the most of in recent years.

1. Home Run or No Run Syndrome

Every organization has what are commonly referred to as ‘home run hitters’; those people that seem focused exclusively on elephant hunting – interested in pursuing only the biggest deals. These are the candidates that often refuse to devote bandwidth to smaller, easier to manage initiatives and seem excited only by the highest risk, highest return projects – preferably the kind that promise to draw media attention.

All software companies have a need for this kind of spirit. Venture backed startups rely on ‘Home Run Hitters’ to energize their teams, and compensate for employees that may lack the confidence (or perhaps the insanity) required to launch a full scale attack on an established market leader. Large companies can also benefit a great deal as such people serve to push the company into new, uncharted territory – often dragging their status quo loving co-workers up with them. Indeed, organizations completely lacking the kind of raw ambition that ‘home run hitters’ possess endless amounts of may (and often do) become obsolete.


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