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Why Smart
Executives Fail - And What You Can Learn from Their Mistakes
Book Author- Sydney Finkelstein
Book Review by -Sanjib Dutta
Faculty, ICMR Case Studies and Management Resources
The recent fall of many ‘smart’ companies and ‘smart’ executives have
benefited one section for sure. The authors and publishers have benefited from
the resources at their disposal. One could see many books on a single topic:
corporate failures or failure of the so called smart executives. Why Smart
Executives Fail is one more addition to the already existing literature on
corporate failures or executive failures.
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A recently written book on asimilar subject is Why CEOs fail which was covered in the September issue of
Effective Executive.
Why Smart Executives Fail examines some of the often quoted reasons for
executive failures. In fact it examines some seven ‘theories’ of executive
failure. The first explanation for failure of executives is that they were
stupid and incompetent. But the question is can we really go by this
assumption? From the track record of the executives who have recently failed
one cannot conclude that they were incompetent.
They were highly intelligent
with exceptionally good qualifications. Most of these executives reached the
top because of their competence and intelligence. So this explanation doesn’t
seem valid. The second assumption is that these executives could not
predict the changes that are going to happen in the future. However smart they
were, they could not manage the sudden change in business environment. But the
author feels that none of the executives covered in his research failed due to
this reason. According to him, all the executives could foresee the changes
that are going to take place in their respective industries.
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Failure to execute policies is another possible explanation for the fall of
smart executives. But very few would buy this theory because if execution
guaranteed success then CEOs who were advised by top notch consultancy firms
would not have failed. But even many such executives failed.
Thus failure to
execute is not the reason for executive failures. Some would say that executives
who failed did not give their best. But why would not an executive give his
best. After all he too gains if the company performs well. If one examines the
routine of failed CEOs, it would be clear that they put extraordinary long
hours, and did everything possible to make their companies great. It would be
naïve to assume that they lacked motivation. Still they failed.
Lack of leadership qualities could have been another reason for their failure.
But most of the failed CEOs were great personalities, mesmerized people with
their charm and charisma and had great following. They were forceful, commanded
the attention and respect of people and were visionaries. Would anyone say that
Jeffrey Skilling, the former CEO of Enron and Dennis Kozlowski, the former CEO
of Tyco did not have leadership qualities? But we all know what happened to them
and the companies they led. Some also suggest that great executives failed
because the companies which they led did not have technological resources,
capabilities or assets. Let’s examine this assumption. Many companies that
failed were technology giants, then why did they fail?
When all assumptions fail, one can say that the executives who failed were
driven by greed. But the vast majority of CEOs who led the companies which
failed were scrupulous people. And if we still believe that greed led to their
failure, we have to question why these CEOs became greedy? Some would say that
greed and dishonesty were characteristic of all the failed CEOs, but that would
bring us to the question why were they not exposed and thrown out when their
behavior threatened the survival of companies?
More....Next Page
2004, ICMR Case Studies and Management Resources. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means - electronic or mechanical, without permission.
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email info@icmrindia.org. Website: www.icmrindia.org
This case study is intended to be used as a basis for class discussion rather
than to illustrate either effective or ineffective handling of a management
situation. This case was compiled from published sources.
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