Francis Wade | End-of-life CEOs

You are acquainted with a few chief executives who are nearing the end of their tenure.

As they approach the twilight of their careers, there is a common failure you have noticed. Some of their behaviours are destroying long-term value. In other words, they are now posing a threat.

To explain why, consider the assertion: The longer a CEO stays in office, the more likely she is to be surrounded by ‘yes-men’. These are colleagues who have become increasingly pliant. Together, they adjust their views to align with those of the CEO’s.

Critics would argue that this phenomenon is a consequence of her intentional misconduct. To support their claim, they point out the removal of independent and dissenting voices at every level - board, executive, management, staff, union, customer, supplier, regulator, etc. In their minds, she has become Machiavellian.

I offer a more sanguine perspective.

Instead, a long-time CEO faces natural problems which arise just by virtue of his tenure. In their 2013 Harvard Business Review article, Luo, Kanuri and Andrews argue that a pattern of low performance by leaders in their later years is common. They describe it as an inevitable change in “seasons”.

If their analysis is to be believed, why is it that this feature of governance present in every company is almost never discussed openly at board levels? Here are two elements to tackle for the sake of all concerned.

Ego factor

CEOs are typically ego-driven and results-oriented. As they advance in their careers and interact with other leaders, their competitive instincts intensify, leading them to constantly compare themselves with others.

While this strong drive to be the ‘best’ is normal and even necessary for someone aiming for the top position, it can become harmful. Once ambitious managers attain power, their unchecked egos gradually foster a group of sycophants around them.

In the 19th century, Lord Acton stated: “Power tends to corrupt, and absolute power corrupts absolutely” But modern leaders already know his dictum. As such, we should add this phrase to the end to provide more clarity “and invisibly”.

In other words, a CEO’s power inexorably grows to blind her vision. How does it manifest?

For example, there are CEOs who don’t make succession plans. Others take ridiculous advice. Some bend over backwards to hide corruption.

Fortunately, I have seen exceptions. A tiny number of leaders I have met ask me directly to point out their shortcomings. In other words, they empower me to become their ‘court jester’.

Back in medieval times, the jester was empowered to criticise the monarch, thereby representing the views of ordinary folk. Their job was to say difficult things skilfully, to get the message across without being abrasive.

With respect to this newspaper column, I understand that braver souls do the same by forwarding my articles to those in power as a hint. I imagine that sometimes it works.

What else can a company do besides bringing in contrary ideas via internal and external change-agents?

Enablers

Many board members I have met are ineffective. Though they are smart, likeable, and ethical, they lack the necessary skills to challenge the CEO effectively.

They don’t understand the importance of being rigorously principled even when it’s uncomfortable. Consequently, they seldom seek out and defend unpopular opinions to safeguard long-term value.

Their CEOs fall into an echo chamber of beliefs.

Take the case of Olympus, the Japanese camera company. In 2011, their COO, Michael Woodford, was promoted in the hope that it would shut him up. Why? A 20-year-old financial scandal was quietly engulfing its leadership team, and as a newcomer, he wouldn’t accept it as a fact of life.

Only when he was summarily dismissed for asking too many questions did he become a public whistle-blower. Ultimately, he caused the entire top cohort to be fired. The drastic actions he took solved the problem and saved the company. It remains a stunning result for one of the most profitable and admired companies in the world.

Could the organisation have empowered other leaders to act differently? Or did he need to be a non-native who barely spoke Japanese to break through the bonds of cultural loyalty?

Perhaps board members and executives should be proactively trained to explore and engage their blind spots. They could be taught that their judgement deteriorates over time while being given the appropriate tools to alleviate their blindness.

With this awareness and some training in difficult communication, your company can escape the consequences of Lord Acton’s dictum. Only then would they see the challenge as universal rather than personal.

Therefore, your intervention could limit the chance that a well-liked, widely admired CEO may unwittingly become a public danger.

Francis Wade is a management consultant and author of Perfect Time-Based Productivity. To search past columns on productivity, strategy and business processes, or give feedback, email: columns@fwconsulting.com