11: Problem - Leadership and Culture Alignment
(EN: This is one of four chapters that the author means to provide practical advice for a common problem via an extended case study. Her case studies throughout the rest of the book have seemed rather melodramatic and contrived, so I will likely preserve some of the key points while leaving out much of the detail.)
Leaders set the tone for the culture of the organization. A focused leader creates a focused culture, and vice-versa. The leaders must not only embody the culture, but communicate it explicitly because without explanation his followers are left to interpret his behavior and what it might mean, and often get it quite wrong.
In this chapter, she will discuss a particular problem of "founderitis" - in which an ambitious founder leads a company to fast success, and then to equally fast failure when he becomes overwhelmed by his own success.
She names Jerry Yang, the founder of Yahoo, the web's first successful search engine that enjoyed tremendous success - but then faltered. Yang was unable to cope with his success, as the skills to pioneer a new firm are different to those needed to run an established one, and he couldn't make the transition. The fact that the price of the firm's stock jumped on news of his resignation is strong evidence that his leadership had become toxic.
While the charisma of a founder is an asset in some ways, it can become poisonous when it forms a "cult of personality" that shields the leader from signs that things are going poorly, or sanctifies decisions that are clearly bad. She lists five warning signs:
- Shunning Golden Opportunities. The markets were amazed when Yahoo refused Microsoft's offer to buy them out at a premium when the firm was floundering, which would have been great for investors and the founder. This was a leader hanging on to his kingdom at the expense of his subjects. Yang was delusional in thinking he could revitalize the firm without outside help - but he had no plan for doing so and was clearly in denial that the ship was sinking.
- Severe Reality Distortion. For this, she turns to Netflix's disastrous announcement that it would split up its firm into two companies (video by main and video streaming) that was devastating to their market value. The CEO declared it's what the customers wanted, and truly believed it - and was insulated by a cadre of yes-men who were afraid to contradict his will. She lauds him from recognizing his mistake, albeit a bit late, and reversing the decision. (EN: but what she doesn't know, or at least disclose, that he had made this very same mistake before and didn't learn his lesson - so it wasn't one bad decision that spooked investors, but a pattern of behavior.)
- Misguided Mergers. Corporate mergers became a fashion in the 1980s and are still in style, in spite of the fact that many of the mergers are ill-conceived and harmful. The author compares them to designer shoes that cost a lot and damage your feet, but a CEO is driven out of narcissism to have a pair. In fairness, there are good mergers and even great ones, but many are very badly conceived in ways that seem obvious to everyone but the executives and a few investors who are looking to cash out in the process and avoid the messy aftermath.
- Neglecting Key Stakeholders. A charismatic CEO may become autocratic and narcissistic, feeling that it is his actions alone that drive the company. In particular, the employees are neglected and thoroughly abused - being made to work inhumane hours, having no career path, and being told they're not doing enough. Without the support of the employees, the grandiloquent speeches of executives are just smoke. Without the support of their leadership, the employees leave. Neglecting partners, investors, and especially customers can be just as deadly.
- Micromanagement and Lack of Delegation. Particularly when a firm was founded on one person's vision, the founder may fail to develop a leadership team and try to continue to carry the ball himself when the firm, and the job, have outgrown the abilities of one person. He will try to do it all, manage at a whim, hector his people, and pursue the wrong goals because he is overwhelmed and will not admit it.
Companies that grow quickly may sail through the first few inflection points, but inevitably run into a brick wall unless they adjust and adapt to accommodate their growth. They cannot keep doing the same things they did that make them successful when they are small and nimble.
She speaks to her experience in dealing with bad managers: if a leader comes to her with a desire for success and is willing to make changes in his own management style, she feels it is a curable case. However, if a leader staunchly insists that he is not to blame and wants her to work on his people, she turns down the client - it's incurable. While it's inevitable that a leader who is told he is to blame to become defensive, even when confronted with hard evidence (from her cultural assessment), at some point he has to get over himself or the company will never be put right.
As an aside: your competition is not a good measurement of your success as an organization. You're not doing well because you're doing better than those who are worse - you're only doing well if you're doing the right things for your own stakeholders and your own future. Additionally, all financial reports are historical - they speak of the past, so when you are ahead of the pack it doesn't mean you are presently doing the right things - it means you used to be doing the right things. By the time your financial performance shows downward momentum, the disease has already spread throughout your system.
(EN: There's rather a long story about working with a specific firm, which reiterates much of what was said in previous chapters, and may be too specific to the case presented to have widespread applicability.)