Worse Than Enemies: The CEO’s Destructive Confidant

The article by psychoanalyst Kerry J. Sulkowicz in HBR, Feb 2004 explores how trusted insiders to the CEO can at most times complement their strengths, deriving their gratification vicariously – ie. Steve Ballmer to Bill Gates, Charlie Munger to Warren Buffett – but sometimes the confidant relationship can become toxic.

“Dangerous confidants come in all shapes and sizes. They are sometimes intentionally scheming and deceitful. Like Rasputin, the crafty manipulator of the Russian imperial family, these overtly bad confidants have sociopathic personalities: They habitually lie and cheat to achieve their aims without any apparent constraints of conscience.

“Take someone we’ll call Sanford Anderson. (I have changed the names in our examples to protect the privacy of the individuals and companies depicted.)

The CEO of a privately held real estate business in the Midwest, a company worth billions, Anderson fell victim to just such a confidant. Early in his career, Anderson’s corporate attorney, Gregg Mayer, had saved the firm millions by deftly handling a discrimination lawsuit, which earned him Anderson’s undying gratitude and respect.

“As the years passed, Anderson came to rely on Mayer’s advice about everything from investment strategy, architecture and design, to personnel development.

“Although Anderson was in most respects a highly effective CEO, he had never seriously contemplated the prospect of retiring. Anderson’s worries about retirement took the form of denial of his own mortality.

“Instead of acknowledging his anxiety, he manifested it by plunging even more deeply into work, while ignoring his fatigue and gradual loss of passion. Consequently, he had never set in place an adequate succession plan.

“Given the toxic confidant that he was, Mayer used the lack of succession planning as an opportunity to advance his own interests. Mayer preyed on Anderson’s anxieties about aging and retirement by fueling his fears about whom might want to wrest control of his business.

“… When Anderson stepped down, he impulsively handed the reins of power to Mayer. Shocked by the announcement of the new CEO, several key members of the management team stormed out in protest. Unfortunately , without the skills of these key players, the company was soon in trouble, and Anderson’s legacy was ruined…”

Sulkowicz describes three distinct types of destructive confidants:

1. Reflector: Mirrors the CEO, constantly reassuring him that “he is the fairest of them all.”
2. Insulator: Buffers CEO from organization, preventing critical info from getting out and in.
3. Usurper: Cunningly ingratiates himself with the CEO, in a desperate bid for power.

He says most CEOs are narcissistic – or else they wouldn’t be leaders – and select reflector confidants who cater to their fragile self-esteem but are themselves driven by their own neurotic needs to please authority.

CEOS who seek insulators tend to arrogant, abusive and abrasive and so at odds with their subordinates they need a mediator who can translate their poorly communicated ideas. The insulator is constantly apologizing to the others on the CEO’s behalf and shielding the CEO to a point where he gets cut off from senior management and the grassroots.

Usurpers are the worst of the lot. They are sociopaths, deliberately scheming and ambitious, and only uses the relationship to empower himself.

The best literary example of this: Shakespeare’s Iago who manipulated Othello to kills his beloved Desdemona.

Sulkowicz cautions that ousting the toxic confidant is often difficult because of the personal stake the CEO has in it. The most unaware CEOs choose the worst confidants, and may repeat this pattern if unable to see how destructive the relationship has become.

Often, the best thing to do is jettison both at the same time.

(Requires subscription)

Active Inertia: Why good companies go bad

“The difference between ‘involvement’ and ‘commitment’ is like an eggs-and-ham breakfast: the chicken was ‘involved’ – the pig was ‘committed.’” – Unknown

Donald Sull introduced the term active inertia to represent how a company’s reluctance to change can have disastrous consequences.

Sull believes these companies are so wedded to their past successes they can’t divorce themselves from what worked before, whether it’s a core strategy, a key customer, product, service, or method.

“When the competitive situation changes, they respond to the future by doing more of what worked in the past – I refer to this as active inertia.“, he tells Steve Kayser.

Q: What is active inertia?

A: When companies fail, people often assume the problem is paralysis. Managers freeze like the proverbial deer caught in headlights. I’ve found the opposite is true. Most environmental shifts happen gradually, and managers anticipate them and respond quickly and forcefully. Their response, however, is often ineffective. Sometimes the problem is managerial arrogance or insufficient resources. My research, however, suggests another cause.

They respond to disruptive changes by accelerating activities that succeeded in the past. When the world changes, in other words, they respond with more of what worked before. A better analogy is a car stuck in a rut: managers put the pedal to the metal and dig the rut deeper.

Examples of prominent companies that fell prey to the active inertia trap include Laura Ashley, National Westminster Bank, Daewoo, Firestone, and McDonalds. Attempts to break out of active inertia can derail for any number of reasons, including time pressure, lack of resources, or just plain bad luck. But patterns of failure do emerge.

Q: How can active inertia be overcome?

A: Commitments. Transforming commitments.

Q: Which are?

A: Pay to play. To fundamentally overcome and transform a company, you must commit to taking actions that break the status quo. To do this, the price (and pain) of not changing has to be higher than the price of changing.

Managers must explicitly commit bold actions that remake an organization’s success formula.

Q: Bold actions? Give me an example.

A: Managers might, for example, exit a legacy business, publicly commit to a new goal, or fire powerful executives who oppose the new direction.

Q: Fire powerful executives?

A: Yes, if they backslide into the old status quo pattern or don’t support the new goal.

Q: Companies that have done that?

A: In the book, I describe several successful transformations, including IBM, Nokia, Asahi Breweries, Samsung, and Lloyds-TSB.

Q: Do or die?

A: Yes, but only if it’s right for the company. Sometimes transforming commitments aren’t necessary. Transforming commitments are not a panacea. They can work wonders, but they also have serious side effects.

Q: Not for the fainthearted – or lazy – is it?

A: No. The transformation might destabilize the core business and jeopardize a predictable profit stream. They leave a company particularly vulnerable because they simultaneously set out on a risky new direction while destabilizing the core. Managers shouldn’t take these actions lightly.

Q: How can you make sure your transforming commitment is effective?

A: Don’t make 397 of them.

Q: Granted, but …

A: Effective transforming commitments share three characteristics: they are credible, clear, and courageous.

Q: Credible?

A: A manager’s commitments are credible to the extent that other people believe they will stay the course even when changes in the business context might promote another course of action in the future. If customers, employees, colleagues, partners, or other stakeholders believe that the manager will be steadfast in honoring their commitment, then they will adjust their own behavior accordingly.

Q: Sounds like trust to me. They have to trust their leader. Clear commitments?

A: Yes. Trust. You are right. Clear commitments increase credibility, are easier to communicate internally and externally, and they provide an easy-to-visualize alternative to the status quo.

Q: Simple. Short. Easy to understand?

A: Yes….And finally, transforming commitments are risky business that requires managers to break from the existing formula rather than fortify it. If your company’s survival depends on transforming commitments, then you will require courage.

Q: Are there certain mistakes that always seem to surface?

A: Yes. In studying transformational efforts, I have observed a small number of common mistakes that managers consistently make. I call them the seven deadly sins of transforming commitments because any one of them can kill a transformation. Most are errors of commission actions that managers should not have taken but did anyway. Others are errors of omission actions that a manager should have taken but failed to.

The Seven Deadly Sins of Transforming Commitments

1) Repeating what worked last time.

2) Failing to run the numbers.

3) Not sweating the details.

4) Delegating the hard work.

5) “Half Tackles” Recognizing problems that arise but failing to act on them.

6) Ignoring core values.

7) Sticking with transformational commitments past their sell-by date.

In the book, I illustrate these common mistakes with examples including Enron, Arthur Andersen, Apple Computer, Bertelsmann Group, Compaq, Kmart, Sunbeam and Vivendi.

Q: How would a great leader begin this process … take decisive action to fulfill the mission?

A: Transforming an organization is messy and complicated. But at its essence, it’s a three-step process. But first, let me tell you how not to choose an anchor.

How Not to Choose an Anchor.

1) It worked last time.

2) It worked in my last job.

3) It works in theory.

4) It worked for our competition.

5) It worked for GE.

Q: Okay. (Sounds vaguely familiar, where have I heard that before?) The first step?

A: In the first step, a leader selects an anchor. The anchor is what the manager commits to, a new strategic frame, process improvement, renewing the company’s resource base, stretching relationships with external parties, or novel values. Different anchors have advantages and limitations as levers to pull an organization out of active inertia. Anchors provide an overarching objective to prioritize actions. They help managers avoid trying to change everything all at once.

In the second step, a manager secures the anchor with transforming commitment actions such as exiting a business, public promises, or personnel decisions that prevent a company from falling back into the status quo.

Q: So, if one had the opportunity to choose a business model in the typewriter market or a forensic DNA testing service, one would choose an anchor between those two?

A: Yes.

Q: And the choice would be?

A: Doesn’t take a Harvard Business School professor to answer that. Perhaps you should read “All I Really Need to Know I Learned in Kindergarten” by Robert Fulgum.

Q: Thanks, I don’t typically delve into theoretical intellectual treatises. But I appreciate your suggestion. Next?

A: In the final step, the manager realigns the organization’s remaining frames, resources, processes, relationships and values. The leader’s transforming commitments will create tension with elements of the existing success formula and employees can easily slip into the status quo. In this third step, the leader must struggle against backsliding as he brings the success formula into a new alignment.

Q: What type leaders (attributes/personality traits) have the most success at leading change and successfully executing transforming commitments?

A: The best candidates share a few characteristics: they are familiar with the company’s business without being trapped in the existing success formula. Their personal values and professional backgrounds are consistent with the anchor chosen and the commitments made. And they don’t try to do it all themselves.

They surround themselves with a strong and diverse team. And they have the necessary support, tenure, and incentives to succeed in this leadership role. If these criteria don’t fit, then it’s dangerous to undertake the transformation.

Q: Any final thoughts?

A: Transforming the status quo demands a personal commitment that feels very different from business as usual. Making bold commitments requires managers to stick their necks out and they have to decide whether they are the right person to do that.

They have choices; committing isn’t the only option. They can sit and wait it out or they can quit and do nothing. The last chapter gives people the license to say, “I’m not ready for this.” It will help managers think about not only what needs to be done, but also whether they are the right person for the job.

Employee gets US$152,000 bonus for great idea

How do you reward ideas from employees?

By giving them half the savings generated from the idea.

Consulting firm Interminds did just that. According to this Harvard Business Review article, this company put its money where its mouth is.

An $38,000-a-year executive assistant came up with a process improvement to automate the laborious system of manually tracking 900 field representatives. She built the business case with an individual in the finance department.

The company implemented her plan and saved US$304,000 in the first year. She earned a US$152,000 bonus that year.

The company’s employee entrepreneurship program proved its value in drawing out an workable money-saving idea that will save the company millions over time.

It can happen at your company, too. If only media companies thought more like this.

The pilot who cares

[via WSJ.com and Church of the Customer Blog]

Here’s a heartwarming story of a pilot who cares. WSJ describes the unusual lengths by which Capt Denny Flanagan of UA will go to keep passengers happy.

He passes out information cards to passengers with fun facts about the plane; he signs two of them, whose owners will win a bottle of wine.

He snaps pictures of animals in the cargo hold to show owners their pets are safely on board.

He instructs flight attendants to pass out napkins asking passengers to write notes about experiences on United, good or bad.

He orders 200 McDonald’s hamburgers for passengers if his flight is delayed or diverted.

Capt Flanagan personally calls parents of unaccompanied children to give them reassurances when there are delays.

Kenneth Klein, whose 12-year-old son was delayed by thunderstorms in Chicago last month on a trip from Los Angeles to see his grandfather in Toronto, relates: “I picked up the phone and he said, ‘This is the captain from your son’s flight.’ It was unbelievable. One of the big problems is kids sit on planes and no one tells you what’s happening, and this was the exact opposite.”

Capt Flanagan explains his technique: “I just treat everyone like it’s the first flight they’ve ever flown.” The 56-year-old Navy veteran who lives on an Ohio farm and cuts the figure of a classic airline captain – trim and gray-haired – says: “The customer deserves a good travel experience.”

Randall Levelle of Morgantown, W.Va., and his family were flying to San Francisco because his father-in-law had just died. Capt. Flanagan invited Mr. Levelle’s three children into the cockpit during boarding.

“If other folks in the airline industry had the same attitude, it would go a long way to mitigating some of the negative stuff that has come about in the last four or five years,” Mr. Levelle said.


Larry Winget: Shut up, stop whining and get a life

This guy Larry Winget has been appearing on CNBC’s Millionaire Inside programme and defies all conventions of the motivational guru, putting down all the usual positive-thinking, happy-talk as hogwash.

He is bald, sports a goatee, earrings, tattoos and wears colourful shirts and boots.

He wrote two books It’s Called Work for a Reason! and Shut Up Stop Whining & Get a Life.

Apparently, he was once a suited guy who use to spout the very guru-ish stuff he now ditches until he went to the desert and was struck by an epiphany.

That’s pretty much contained in his manifesto at changethis.com.

Some choice quotes:

Get this: There are over 46,000 books that contain the word “team” or “teamwork.” All selling a load of crap. Teamwork doesn’t work. Yes, I know that is business blasphemy, but I am right and everyone else is wrong. Teamwork doesn’t work. And the reason is because someone on the team won’t work—which means you no longer have a team. You have a few good people who have to pick up the slack for the bozo that isn’t doing her share. They are frankly pissed off about it too. Because they know, at the end of the project, they will have to share the credit with her because after all, she is on the team. Stupid. Stupid. Stupid.

Again. There are simply no secrets. When you see the word “secret” you should run! And when you hear that someone has a brand new concept for how to be successful, beware. You don’t need anything brand new; you need to go back to the old and simple stuff that makes sense. The world doesn’t want to change or it already would have changed all on its own and without any help from me.

People change their lives when they want to, not because I want them to.

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