In my National Post article entitled The Seven Deadly Habits of CEOs, I said, "In the past decade, one-third of Fortune 500 CEOs have lasted less than three years. Top executive failure rates are estimated as high as 75% and rarely less than 30%. Chief executives now are lasting 7.6 years on a global average, down form 9.5 years in l995. According to a recent study published in the Harvard Business Review, two out of five new CEOs fail in their first 18 months on the job."
Research shows when someone assumes a new or different leadership role they have a 40% change of demonstrating disappointing performance. Furthermore, 82% of newly appointed leaders derail because they fail to build partnerships with subordinates and peers. Imagine if the same failure rate was tolerated for employees at lower levels? And it's ironic that while the failure rate of CEOs is at an all time high, so is their compensation.
Sydney Finkelstein, author of Why Smart Executives Fail (2003), researched several spectacular failures during a six year period. He concluded that CEOs had similar deadly habits:They see themselves and their companies as being dominant; they identify close closely with the company, losing the boundary between personal and corporate identify; they think they have all the answers; they ruthlessly eliminate anyone who isn't completely supportive; they are obsessed with their image in the public and media; they underestimate obstacles; and they stubbornly rely on past achievements.
In a Fortune Magazine article, management gurus Ram Charan and Geoffrey Colvin argue that contrary to popular opinion, 70% of the real problem isn't the the high level mistakes that CEOs make in relation to vision or strategy, it's their lack of good execution. In other words, it's the failure to be decisive, get things done and not delivering on commitments.
Charan and Colvin go on to say tht failed CEO are neither stupid nor malevolent. Quite the opposite, they often are the most intelligent, accomplished, hard-working and dedicated. Part of the failure lies in the CEOs failure to deal with people issues--finding the right talent, putting them in the right roles, developing that talent and dealing with people with performance problems quickly.
The implications for CEOs is to focus more on the people side of the business, building a strong team, getting honest and accurate feedback from employees and customers and not being so egotistical. Citing great CEOs like Jack Welch, the authors argue the superior CEO is a master at execution; they rarely have COOs to do their work; they are the masters of people acumen and know how to develop and coach people so the organization makes the right decisions quickly and effectively.
When we search for the causes for our current economic crisis, the failure of CEOs can't be overlooked.