Arthur Andersen suggest once again that even
large, supposedly sound companies can rapidly
implode. And research shows that, over time,
many companies do not survive after their
initial period of growth.
actually in place.
less CEO with whom I worked provides a
good example here. When I confronted
her about her perceived failure to respect
others in the company in accordance with
it’s values, she said her behavior was nec-
essary for the company’s success. Need-
less to say, the CEO continued to act the
same way, and built a new senior manage-
ment team with very similar characteris-
tics. The upshot was a culture of fear,
where good ideas remained buried, and
individual initiative was squelched.
thus their value, both to their shareholders and
to other stakeholders, such as employees, cus-
tomers, and vendors? More important, is there
an Achilles heel that can change the direction of
a firm, or tip it into an inevitable downhill
slide? As a consultant, business owner and
executive coach, I have seen a wide variety of
actions (and inactions!) taken that destroy value
to stakeholders. Here are my top ten:
ment fads, without analyzing what will
and what is unlikely to work.
consultant, Dr. William Schneider,
recounts the tale of a company that spent
over $20 million on consultants over five
years, trying to implement a team
approach in a highly structured industry
setting. However, the mission, strategy
and environment of the company made a
more directive culture much more effec-
tive. As a result, either employees balked
(in this case, they certainly knew more
than their management) or, where they did
change, the results in terms of sales and
profits weren’t effective. The end result,
millions of dollars and several years later,
was a decision to go back to their old
culture.
stakeholders. Enron’s management, with
their apparent focus on their own greed,
clearly get an award this year, especially
with regard to their own employees. An-
other example: A director of a company
where I was brought in as CEO to fix
various compliance issues said: “Gary,
don’t forget that our first priority is quar-
terly earnings.” The company’s problems
were much worse than I suspected and the
few remaining assets were sold within two
years. The worrisome thread of consistency
in these and other examples is that at least
one generation of management/directors
tend to get relatively rich, while most other
stakeholders suffer.
that fail in their merger and/or acquisition
efforts are often guilty of this one. Exam-
ple: The software company that developed
an elaborate, function-by-function plan
for absorbing another entity. They forgot
to concentrate on the broad factors cutting
across the combined companies, like strat-
egy, organizational culture, and supply
chain management. Result? An acquisi-
tion whose additive value is still very
much in doubt.
ers, and vendors have to say about your
performance and that of your subordi-
nates. If you ignore good intelligence,
you are likely to fail. Example: An
acquisition situation where the acquirer’s
CEO ignored the comments of his own
middle- and lower-level managers that the
absorption of the acquired entity was
going to be much more difficult than top
management wanted to believe. The
result: Real questions about whether
stakeholder value will be created.
adequate consideration of background
and management style. A highly suc-
cessful software company recently
brought in a senior team member to
develop a critical core competency that
may spell success or failure for the com-
pany in the future. The problem? To do
her job effectively, this person must work
well with key people across operations
and finance. Yet in hiring this individual,
senior management used their own judg-
ment exclusively, failed to get independ-
ent viewpoints, and ignored a history of
failed interpersonal relationships in the
new manager’s resume. Result: The rest
of the management team is up in arms and
the project is in doubt.
management style impacts the perform-
ance, behaviors, and attitudes of your
subordinates.
ple: The CEO of a financial services firm
who was focused on performance above
all else didn’t realize that, while he had
good values, by focusing only on per-
formance, he was letting others on his
team with not-so-positive values tear the
team apart.
Kmart might be seen as a victim of this,
with its obsession with beating Wal-Mart
and the consequent failure of its board and
senior management to ask the question,
“Do we in fact have the core competen-
cies to beat Wal-Mart?”
has little impact on organizational suc-
cess. The failure to appreciate the various
ways in which organizational culture
impacts an organization, its strategy and
its leadership is a common theme in
organizational failure. Example: The way
GE tried to run Kidder, Peabody after
acquiring it. Several years and several
billion dollars later, GE gave up - I submit
because GE’s control culture didn’t work
well in an investment organization that
has to be focused on competence.
failures outlined above may cover many
of the most common weaknesses that lead
to value declines for stakeholders, but
there will always be another type of fail-
ure. If that wasn’t the case, management
could be reduced to a simple check list,
the mantra of many management “how to”
books. How to avoid many of these fail-
ures can be learned through history, but
others are yet to be discovered - try not to
be the leader who finds one of them!