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Why Smart CEOs Fail, Finkelstein

The document outlines 7 "faulty habits" of CEOs that can potentially lead companies to fail. These habits include: 1) Assuming dominance over customers, competitors, and employees. 2) Over-identifying with the company to the point where the CEO's interests are no longer aligned with shareholders. 3) Thinking they have all the answers and refusing to accept new information or criticism. 4) Eliminating anyone who disagrees with them, leaving them without feedback. 5) Focusing too much on image and publicity rather than operations. 6) Underestimating obstacles and refusing to admit past mistakes. 7) Stubbornly relying only on past strategies without flexibility. These habits restrict learning and problem-solving, prior

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Yared Ashagre
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51 views3 pages

Why Smart CEOs Fail, Finkelstein

The document outlines 7 "faulty habits" of CEOs that can potentially lead companies to fail. These habits include: 1) Assuming dominance over customers, competitors, and employees. 2) Over-identifying with the company to the point where the CEO's interests are no longer aligned with shareholders. 3) Thinking they have all the answers and refusing to accept new information or criticism. 4) Eliminating anyone who disagrees with them, leaving them without feedback. 5) Focusing too much on image and publicity rather than operations. 6) Underestimating obstacles and refusing to admit past mistakes. 7) Stubbornly relying only on past strategies without flexibility. These habits restrict learning and problem-solving, prior

Uploaded by

Yared Ashagre
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Seven ‘faulty habits’ of CEOs:

Finkelstein
1. Assuming dominance: Being overconfident about their own and the company’s

predominance in the market reduces proactivity and care which potentially leads to failure.

Underestimating the role of chance and overestimating their abilities and skills leads to

delusions of excessive control and to viewing other people as tools to execute their goals.

Moreover, those CEOs often consider their company’s products as best in the market and

therefore assume that their clients should consider themselves lucky to have access to them.

Ultimately, customer and company roles are reversed and competitors take advantage of that.

They treat customers better leading them to leave their current preferred supplier.

2. Identifying with the company: Two of the major problems that companies might face are the

principal–agent and the principal–principal problems. The former occurs when CEOs act on

behalf of their own self-interest rather than on that of the shareholders. The latter occurs when

one person is both the CEO and the owner of a company. In this way, this person obtains absolute

power and overidentifies with the company to such degree that they can no longer distinguish

between the company’s and their own interests. In these cases, CEOs become less careful with

the company’s assets and more likely to use corporate funds for personal reasons. They also lose

the ability necessary to be able to make critical evaluation in order for the company to benefit.

Moreover, having total control and power removes any authority from the board of directors.

Therefore, they cannot offer effective feedback or criticism to the actions of the CEO, and they

may even be afraid to confront them. This leads to a toxic work environment and consequently

harms the organization as the board members are not able to prevent or report mistakes before

it is too late.

3. Thinking they have all the answers: It is impossible to know the answers to every issue in

general and especially in a business environment where change is a constant phenomenon. CEOs
who feel they have all the answers assume total control, as discussed earlier. Therefore, they

believe that there is no need for them to learn new things, refuse any suggestions and advance

or reject criticism and opposition and consequently trust no one. Once again, this leaves the

board of executives powerless and intoxicates the organization’s culture.

4. Eliminating anyone who does not follow by 100 per cent: Another problem of a ‘faulty’

CEO is that in the rare case of showing opposition to their actions, the CEO eliminates the

opposing party. The CEO feels that employees and board members who do not blindly follow

their aspirations, undermine their vision. However, these kinds of actions affect organizational

culture but their most

negative consequence is that they leave the CEO without any chance of being corrected. By firing

people who oppose to some of their actions, CEOs are let loose to keep doing what they consider

to be correct which in such cases is actually harmful for the organization.

5. Obsessing over the company’s image: CEOs who have this habit tend to focus excessively on

the image of the company. Although this may prove beneficial in the long run, this habit often

leads the CEO to overlook everyday operations that are essential for the normal functioning of

the organization and consequently their management efforts become shallow and ineffective.

When shifting their focus from the running to the image of the company, they tend to settle for

what appears to be an accomplished thing and not the actual accomplishment. Clearly, this habit

once again leads to catastrophic consequences for the organization since problems are not really

dealt with.

6. Underestimating major obstacles: Similar to the previous one, this habit focuses too much

on the ultimate strategy, the vision of the corporation, and this leads to overlooking other major

obstacles. Although more subtle at the beginning, minor issues can grow and have a significant

negative impact if left unsupervised. CEOs who ignore these signs tend to not admit that their
past choices are wrong and commit to them even more in order to prove their effectiveness.

Using these

ineffective strategies can cause damage to the organization.

7. Stubbornly relying on what worked for them in the past: This habit derives from the

aforementioned one and causes CEOs to lack flexibility as far as the solutions they use are

concerned. They use patents that have worked for them in the past because they consider them

the characteristics of their success. This mentality, however, can only prove destructive for the

corporation since flexibility and openness are essential.

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