Why Leaders Fail

Why Leaders Fail

In 1999, respected author and management consultant, Ram Charan, wrote an article for Fortune Magazine entitled, “Why CEOs Fail.” Charan examined the commonalities of notable CEO failures at major corporations between 1990-1999. The writing became influential within both the academic and business communities. Even though it is more than a decade old, the insight and lessons that Charan set forth remain equally relevant today, not just for CEOs, but for all leaders; especially, people leaders. Consequently, I will use the word leader versus CEO throughout this post while revisiting the lessons.

Business Strategy. Leaders rarely fail because of vision or strategy. The majority of leaders (70%) fail because of bad execution. That is, the ability to get things done. In fact, in 1993, when Lou Gerstner was hired as Chairman and CEO of IBM to turn the company around he said, “the last thing IBM needs right now is a vision [or more strategy].” Instead, Gerstner focused on execution and subsequently saved IBM. There is a mistaken belief that strategy alone is enough to cause a company to win. The problem is that strategy ultimately becomes public and easy to replicate, which is why execution is the true differentiator.

Operational Execution. Execution is the discipline of initiating and sustaining a process for getting things done. It is about being decisive, confronting reality and following through. It is about delivering commitments. Business is highly competitive due to globalization. Institutional investors own half of the equities in U.S. companies and are relentless in demanding results. Leaders must deliver or face termination. This is why strong operators are externally focused. They do what needs to be done, not what they want to do. Failed leaders do not face reality. They look to consultants for advice or remain in denial.

People Leadership. Successful strategy execution requires the right person in the right role at the right time. Failed leaders often wait to address people problems until it is too late. In contrast, successful leaders know that poor performance is harmful to the company. They understand that decisive, fast action is imperative. According to Larry Bossidy, former Chairman and CEO of Allied Signal, “If [people] come up short, you cannot wait. You have to make a change.” The six most common excuses and rationalizations that leaders make for not addressing people problems in a timely manner include:

  1. Coaching – Even though he or she missed their commitments, I have not given them enough coaching.
  2. Familiarity – I would rather have the devil that I know than the devil that I do not.
  3. Likeability – I/we like having him or her on the team.
  4. Loyalty – I have worked with him or her a long time (causing the leader’s judgment to become blurred).
  5. Perception – I have fired a lot of people lately, so my management skill could be perceived as the problem.
  6. Succession – He or she has been identified as a strong candidate to succeed me.

The best leaders never hesitate to terminate an employee when it is needed. While they are willing to make difficult and tough decisions, the best leaders are first and foremost deeply interested in people and developing them to their fullest potential. For example, Jack Welsh, former Chairman and CEO of General Electric, made developing people the company’s core competency. Culling the weak and cultivating the strong gives companies a sustainable competitive advantage in the global economy. The motto of successful leaders should then become people first, execution second and strategy third.

Top Priorities. Effective leaders focus on five to seven key initiatives or top priorities to drive positive change and results within their companies. They focus on these top priorities (e.g., e-commerce at General Electric in the mid-1990s) until they become embedded in the company’s culture and DNA. Accountable and disciplined leaders create accountable and disciplined organizations and teams. Delivering commitments becomes everything. Failed leaders are not focused. They have a flavor-of-the-month mentality where they move from initiative-to-initiative causing poor clarity, prioritization and results.

Making execution the core competency of a company or team is the most effective way for a leader to keep his or her position and increase their influence. Execution is the critical differentiator for success. It is the reason Toyota does not fear offering its competitors free, in-depth tours of its U.S. operations. Why? Because its strategy is well known. Its real competitive advantage is the way it executes the strategy. While having a strong strategy is necessary for success, it is not sufficient for survival. Execution is. So then, why do leaders fail? Because they do not worry enough about execution, people and priorities. Do you?

All contents copyright © 2011, Josh Lowry. All rights reserved.

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