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| Home - Articles by Sterling-Hoffman - Jan 03 Issue |
Tragic Flaws: Why Companies Really Fail - Part 2
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The problem arises when the desire to hit a ‘home run’ remains unchecked by rational business sense. The fact of the matter is that in most cases, business success is achieved through a series of small, subtle victories. This is why value investors will disregard any capital gains that come from non-core business operations when evaluating a company’s financial statements. From time to time, companies do receive significant earnings boosts from homerun investments that are outside the company’s primary domain – but these windfalls cannot be relied on when trying to predict future earnings. Long term success is achieved by making the process of securing small wins repeatable – a project that ‘Home Run or No Run’ executives have little interest in. Left to their own devices, they either get repeatedly in over their heads or remain paralysed when no available option seems big enough to be worthy of their time. As such, these personalities can cost a company dearly – particularly in the sales organization, when they insist on marshalling resources just to bid on elephant-size deals that have little to no chance of closing.
What many candidates fail to understand is that the same principle applies to building successful careers. The vast majority of executives & entrepreneurs that have ‘made it’, so to speak, do so over a period of years – focusing on doing the little things right - day in, day out. In relentlessly chasing down the pot of gold at the end of the rainbow, executives suffering from the ‘Home Run or No Run’ illness simply ignore the many pieces of bronze and silver along the way. This is why Executive Recruiters generally discard the resumes of people who have changed jobs so frequently. Search consultants want no part of a candidate that has made a career out of pursuing ‘overnight success’. It implies that the candidate lacks the patient determination required to actually build a business. Even during the bubble, the vast majority of software executives that attempted to ‘job hop’ their way to business celebrity failed – and have ugly stains on their resumes as a result. To complete the analogy, the pieces of bronze and silver accumulated and polished over a lifetime can become just as valuable as the pot of gold originally sought.
I should note further that there is a distinction to be made between courage and vision on one hand, and the psychological illness I am describing on the other. Our economy (our world, in fact) requires ‘unreasonable’ people that have the vision to see things differently, and the courage to try and bring that vision into reality. The fundamental difference between courageous visionaries and the dangerous personality type I am describing is that the former group are willing to build their castles one brick at a time. The ‘home run or no run’ executive, on the other hand, wants it now, now, now! Consider, for example, the CEO that justifies his job hopping by citing examples of ultra-young millionaires who seemingly gambled everything on a high risk opportunity, and won. “I had to go for the big score!” or “I’m a ‘change the world’ type”, he’ll say. There are two problems with this form of justification. First, people that gamble everything and grace the covers of Forbes before turning 30 are in the minority – the media does not usually bother with people that failed to get rich quick. Second, the problem with many ‘change the world’ candidates is that they are interested in changing the world only if it can be done overnight. A long term commitment to the cause is out of the question, primarily because such candidates are more concerned with obtaining the ego stroking (eg. media accolades) that accompanies the ‘big score’ than they are with the accomplishment itself. People that have a real desire to create lasting impact are prepared to work at their goals consistently over a period of years. They recognize the speed at which millionaires were minted in the bubble as an aberration in our economy’s history and don’t allow themselves to be seduced by the fantasy of making the ‘Smartest People in the World’ list of any given trade magazine.
2. Eyes Wide Shut
People that move through life with their ‘eyes wide shut’ seem to have dulled senses to external feedback. Imagine the predicament of a child that happens to lack pain receptors in his right hand. If that child accidentally rests his right hand on a heated stove, the child could literally burn through three layers of skin without ever knowing something was wrong. Of course, the child has been horribly injured – he simply failed to recognize it because he felt no pain while it was happening. The point of having pain receptors is to alert the body when it is being damaged, and to provoke a response that moves the body out of harm’s way.
Executives that lack sensitivity to external feedback are like people without pain receptors. They are unaware of how their words or actions impact their peers, and therefore rarely make an effort to modify their behaviour – even if their behaviour consistently produces negative results. The feedback loop simply does not function. So, they continue making the same mistakes; continue following the old map, while everyone around them has already discovered a new map. There is no doubt that executives suffering from this disability can have a disastrous impact on any company.
Luckily, however, spotting executives that suffer from this weakness is relatively simple. For example, every search consultant has encountered a candidate, at some point, that simply talks too much – despite the fact that effective listening skills are said to be ‘101’. What never ceases to amaze me is just how far up in some organizations the problems seems to exist. Several years ago, I interviewed an executive that had recently become President of a billion dollar ISV. Only recently having been promoted, he was already having serious difficulty with the organization. His sales force was ‘dysfunctional’, as he put it. They often refused to cooperate when he instructed them to help setup customer meetings. I quickly discovered why. Our conversation lasted 4 hours, over which time I asked a total of maybe 3 questions. The candidate talked – without pause – the entire time. I actually caught myself nodding off at one point, and jerked myself back to attention – mortified, because the executive had no doubt seen my eyes close. Amazingly, he continued talking - completely unaware that I had literally fallen asleep in front of his eyes. How, I wondered, could a sales rep ever justify bringing a CEO like this in front of an important customer? Needless to say, we discarded the candidate from consideration for all active searches and haven’t made contact since.
Of course, the candidate described above was an extreme example. Most people that suffer from this disability usually display more subtle symptoms. The consequences are almost always negative, however. Executives that lack an ability to take action based on external feedback usually alienate key people and end up making horrible business decisions. In summary, it is a terrible handicap – to a career, or to an organization – and one that we should all be on the lookout for, either within ourselves or when evaluating potential hires.
Solving the Problem
The goal of this article (and it’s predecessor) was simply to convince readers that emotional maturity is a real business problem, and to provide some basic insight into how it manifests within an organization. I have no doubt that an organizational psychologist would be able to improve upon the two flaws described above, but for our purposes, it should suffice. Either way, once we have a basic understanding of destructive personalities and the damage they can cause, the obvious question becomes what next? How do venture investors use this knowledge to achieve greater returns? How do CEO’s recognize destructive tendencies in their management teams? How do we as a collective group enhance our own emotional IQ’s?
As this article has already morphed into an essay, I will end here and save these questions for a final piece – one that will focus on practical strategies for dealing with the problems described above. (I also want to encourage readers to pursue the work of Daniel Goleman, a thought leader on the subject of emotional maturity and it’s importance. I am currently in the process of reading Dan Goleman’s latest book and will attempt to incorporate some of his findings into my next essay.) As always, I look forward to your feedback.
Angel Mehta is Managing Director at Sterling-Hoffman Executive Search, and moonlights as a leadership / personal growth speaker. Sterling-Hoffman is a retained executive search firm focused exclusively on VP Sales & VP Marketing searches for enterprise software companies. You can reach him via email: amehta@sterlinghoffman.net.
 
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