“All too frequently, an exceptional executive encounters a corporate trap door, falls, and then derails. This article presents 21st century challenges—corporate trap doors—that arise to snare exceptional executives.”
All too frequently, an exceptional executive encounters a corporate trap door, falls, and then derails.
Executives knowingly or unknowingly step into a critical situation in which their savvy and experience fails them. They may have been surprised. They may have seen the storm building only to push too hard. They over-correct. Predictably, boards move in to take charge. Game over.
What brings an exceptional executive’s run to an unceremonial conclusion?
This article presents 21st century challenges—corporate trap doors—that arise to snare exceptional executives. A panel of Board and operating executives plus corporate psychologists was surveyed to assemble a contemporary understanding of derailment and prevention. It’s clear to the panel that the competitive landscape is vastly different than just 20 years ago. Many new risks have emerged that threaten an executive’s corporate survivability. With intensifying global challenges, instability of capital markets, increasing demand for personal and corporate transparency, a dizzying work pace and intensified corporate regulations, success in the role of a chief executive has become a more treacherous physical, mental, and political gauntlet.
Derailment accounts for 35% of executive turnover
Over just a five year period, 70% of companies will change CEOs as a result of planned succession, the aftermath of M&A, and force-outs resulting from derailment. A bit more than one-third of this turnover (35%) is due to involuntary derailment.
CEOs are being appointed later. In 2000, the average age at appointment was 50.2 years, in 2010, it was 52.2 years.
CEOs are remaining in office a shorter period of time. During 2000, outgoing CEO tenure averaged 8.1 years. In 2010, average tenure was down to 6.6 years with insider CEO appointments lasting longer in their jobs than outsiders (7.1 years versus 4.3 years).
Globally, chief executive turnover runs at the rate of about 14% annually. This rate has been fairly constant over a number of years with the range being 11% to 18% year to year in North America and broader in Europe, at 3% to 16+%. The emergence of Chinese companies in the global sample plus the lingering global recession has influenced a decrease in CEO turnover down to 11.6% during 2010—the lowest rate of turnover since 2003.
With the rapid emergence of China and other developing nations among the 2,500 largest public companies comprising the sample for study, Western European and North American companies may soon become a minority in the global mix—with 895 companies in the sample representing Asian-headquartered companies; 772 from North America; and 619 from Western Europe. (CEO Succession 2010. Booz & Company).
Derailment surfaces in three ways
• Business Failure
The most prevalent cause of derailment is failed financial performance. Liquidity, access to capital and credit, plunging market capitalization, and benchmarked comparisons are the key litmus tests of executive survivability.
• Board Surprise
Derailment can arrive quickly. It may follow a bungled acquisition, a catastrophic customer blunder, personal or ethical gaffe or a “dust up” with the board. The Board is unexpectedly surprised with unsettling information and moves quickly to reset the leadership team and/or settle shareholders or regulators.
• Cumulative Assessment of Executive Fitness to Lead
The more common variety results from small miscues which accumulate over time and ultimately paint an irrefutable picture of fissures in the executive’s leadership, navigation skills and/or personal style. As these miscues incubate, an executive finds him/herself on a slippery slope of discredit and decline until there is often one catalytic moment in which the “sudden” reality of the executive’s failure becomes undeniable and irreversible.
Derailment is triggered by missteps in critical situations
Executives deal with countless situations each day. Most are benign, familiar, perhaps, routine meetings or situations…situations that can be well-managed with experience and judgment from prior lessons learned with temperament well under control. These are business as usual episodes.
Other situations take on greater significance—these are critical situations that may become trap doors. These are moments of truth that carry more weight and special significance in determining an executive’s overall success or derailment. They may be a major challenge or a small encounter but somehow these situations frame out the executive’s competency, compatibility, and weigh heavily in shaping the confidence that Board members and stakeholders have for the leader to continue to serve. While these situations may appear routine, they can be packed with surprise, novelty or cloaked as a Trojan horse.
Deciphering which situations are routine vs. those critically important is often straightforward yet other times deceptively difficult. There are no warning flags, and a situation that was previously benign can mutate into a high risk situation without an astute reading of the contextual cues that accompany every situation.
Traps appear naturally. The competitive landscape changes, the pace quickens, the rules of the game change, the signs of change mutate, and reliable lessons learned turn obsolete, lose relevance or turn faulty.
Traps can be intentionally set. Single-minded activists armed with litmus test questions, prime time media players on investigative witch hunts, discontent shareholders with the intent to discredit or embarrass, corporate raiders with an eye on buyout targets, and dysfunctional board members and disloyal senior leaders can and do create pernicious situations that test, distract, and disable exceptional executives.
Trap doors become lethal when the executive has no game plan in his or her repertoire of lessons of experience and is unable to generalize from the familiar to this novel or unexpected situation—there is failure to read a situation accurately or rapidly enough; action is unsuccessful, unsupported, late or off target. Competency “blemishes” somehow become more noticeable, less manageable and more critical determinants of derailment. Derailment is triggered by:
• Previously learned lessons have become irrelevant, obsolete, and faulty. Competency “voids” surface,
• Insufficient time is available for new learning or practice time to occur, and
• Generalization attempts fail. Leader cannot bridge from prior successes to current challenge.
21st century executives face vastly different challenges
Contemporary executives now face a significantly different array of challenges than faced just 20 years ago—most notably, more complex, external challenges that arguably carry heightened risk. 21st century executives spend more time dealing with external matters, stakeholders and constituencies. This time investment will have greater impact in their overall contribution. Executives need to be more agile and emotionally-gathered in dealing with issues that are a consequence of decision transparency, unchecked flow and availability of information, plus social, political and corporate activism that lead to scurrilous attacks, inquiries and accusations. Novel and treacherous trap doors lie in wait around these matters. External outreach, coalition building, dealing with regulators, personal presence/propriety and brand management especially in the face of a threat are more essential skills.
Dailey’s Executive Leadership Model presents four roles executives must successfully fulfill within a contemporary, commercial enterprise. At the core of the Model are temperament and critical thinking capabilities that serve as the foundation of behavior. The Model is used to catalogue the various trap doors.
Trap Doors are catalogued and described
Our panel provided their insight in assembling a list of the most insidious trap doors that confront executives. While these critical situations may not always snare an executive and derail them, these trap doors do represent heightened risk to an executive’s security, status and survivability. Every executive, his/her Board, consigliore and/or advisors should be on high alert for these looming traps.
See Note 1.
Tactics for Avoiding Derailment
• Enlist your Inner Circle.
Derailment can be avoided by proactively enlisting your inner circle for advice and coaching.
Trusted Board members, the Chairman or Lead Director, or a consigliore such as the senior HR leader provide multi-channel information and insight. High on the list of information is contextual information, confidential feedback and prudent ideas for pacing and directing your business strategy, building your team, interacting with stakeholders, and managing your reputation.
The role of the inner circle is twofold. Your inner circle acts to protect-by sharing wisdom, providing insight and early warning. Your inner circle also acts to direct-by shaping your thought processes, and by questioning and testing your choices for action and conclusion.
• Be alert to your dark side behaviors
Increased self-awareness protects you from maladaptive behavioral episodes.
Personality is firmly set by early adulthood. One’s fundamental disposition for critical thinking and emotional control—i.e., our temperament is hard-wired by that time. Yet, this hard-wired persona is often not “seen”. The fundamental disposition is overlaid with adaptive behavior learned during years of trial and error experiences. Learned behavior enables exceptional executives to successfully problem solve, influence, and generally, excel. There is nothing sinister; it’s the natural learning process to achieve mastery. Colleagues and boards come to know the executive from his/her learned behavior repertoire, i.e., the façade.
This façade may breakdown when the executive encounters stress and unfamiliar challenges associated with corporate trap doors. Behavioral dysfunction or so called dark side behavior, a phrased coined by Dr. Robert Hogan, tends to surface when an executive finds him/herself operating out of his/her comfort zone. When learned behavior fails, stress levels ramp up and the executive, sensing this deconstruction, switches to “high alert.” Self-protective flight or fight behavioral characteristics are automatically mobilized. Regrettably, these behaviors may be maladaptive in the context of 21st century leadership requirements triggering career-destructive behaviors to emerge from behind the previously well-managed façade. These maladaptive behaviors can emerge instantaneously or can incubate over lengthy periods of time before emerging — but when flight or fight capabilities are triggered, any executive becomes vulnerable.
According to Drs. Robert Hogan and Marilyn Buckner, dark side behavior veers off in two, diametrically opposite directions. Flight behaviors become maladaptive when the executive demonstrates characteristics perceived as excessively insecure, mistrustful, withdrawn, and risk adverse—the executive copes with stress by dramatically moving away from problems and colleagues. At the other extreme, fight behaviors become maladaptive when the executive demonstrates characteristics perceived as excessively competitive with colleagues and the Board, overwhelms people and problems, manipulates and intimidates—the executive copes with stress by aggressively acting to dominate and control people and situations.
The table on the next page provides a simple breakdown of the red flags of maladaptive behavior using Hogan’s personality model and Buckner’s explanation. Adaptive characteristics for Hogan’s seven personality factors are displayed in the chart’s center. At the extremes of the table are examples of maladaptive flight and fight behaviors. These out-of-bounds behaviors exacerbate and accelerate inability to navigate trap doors. Derailment becomes more likely.
• Improve your cipher of context cues.
Derailment can be avoided by becoming astute at reading context cues.
Education in the corporate world predominately focuses on development of job content skills—i.e., technical, professional, personal, team and leadership. These skills are largely within the individual’s control to master and then apply. Executives are hired and appointed for these skills; rewarded for applying these skills. Across a career, these are honed and supplemented. Rarely are executives deficient in job content areas.
In contrast, developing an executive’s ability to decipher context clues is overlooked. It is infrequently a topic during the succession planning process. Yet, context conveys vital, embedded messaging about—-how to initiate change, set strategy and solve problems. An astute read of the context—history, protocol, boundaries –unlocks keys for fine tuning management style, pace, communications and collaboration. It can be the difference between clumsy missteps vs. savvy leadership.
Deciphering context often appears instinctive. Yet, it is a skill that can be learned. In application, deciphering context is a quick, if not instantaneous, disciplined gathering of contextual cues—peripheral information that enables a savvy executive to accurately perceive those visible, presenting issues as well as intuit hidden or obscured ones, understand the forces at play, and set boundaries. Critically important, this brief period provides the executive a momentary step back—a brief moment to gather him/herself emotionally, allow constructive values to rise to the top and for the job content skills, investigative or action processes to be mobilized. This instantaneous gathering period is an essential step in avoiding maladaptive temperament and defective critical thinking from sending the executive down a self-inflicted trap door.
• Have a Learning Agenda
Executive learning prepares you to navigate new and morphed trap doors. It is an antidote to derailment.
Executive learning is easy to discuss, harder to initiate, and difficult to complete— discipline and time are illusive in light of the 24/7 demands placed upon corporate executives. Often at fault are learning projects that are over-engineered with lofty aspirations requiring excessive time investment and too much accountability dumped upon subordinates—the objectives of bona fide executive learning are high-jacked and morphed into nothing more than delegated organizational projects— which leaders are quite comfortable sponsoring, overseeing, reviewing or generally presiding over. This is not executive learning; it’s the traditional management role in operation.
Executive learning is not about sponsoring, overseeing or presiding. Learning typically begins with listening and acceptance of a failure or upcoming opportunity along with encouragement from an inner circle board member, a consigliore; perhaps, the HR leader. Today, experimentation, practice, and competency-mastery are often played out in the full view of employees, stakeholders, bloggers, and maybe, media. Usually, it involves learning from others—role models and experts. A learning cycle concludes with relatively permanent changes in skill or perspective about self. The executive thinks and behaves differently. With most over engineered learning, we instinctively resort to our “base behaviors” instead of our “learned behaviors” during times of stress.
Without personal learning and renewal, executives can find themselves playing with old rules, old tools and worn out game plans. They may stress and revert to more basic behavior rather than apply lessons of experience. They lose their edge and fall behind others that remain fit, fresh, competitive, connected to the workforce and to the emerging market. Commit to only one or two personal learning projects. Keep your plans simple, doable, and personal—don’t allow these to become organizational projects.
Most executives arrive in the C-suite strategically and emotionally well-prepared for high stakes risk-reward choices in perhaps their final career stop. Yet, success as a 21st century executive requires different capabilities—temperament and mastery around pace, complexity, transparency, global competitors, stakeholders and mounting governmental intrusion. Novel, fast-emerging and rapidly mutating obstacles—trap doors—confront executives’ as they pursue achievement, build reputation, and strive for long-term survivability. Many navigate risk superbly. While all leaders experience failure of some magnitude, a surprisingly high number of chief executives do pay the price by surrendering their jobs to externally-sourced “top graders” ushered in for turnaround or strategic redirection and occasionally lose their companies altogether due to cataclysmic crisis occurring on their watch.
In summary, what brings an exceptional executive’s run to an unceremonial conclusion?
The essential antidote to derailment is an ongoing commitment to executive learning—learning to build and repair relationships, renew market and customer perspectives and fostering organizational trust, candor, risking taking and then, innovation. The payoff goes well beyond the executive’s mental health and job survivability to a sustained high performance culture and a bolstered brand reputation.
About the author
Dr. Patrick R. Dailey is a founder of Board Quest, LLC. a board of director consultancy. Patrick has held senior level Human Resources positions in Fortune 100 firms…all undergoing significant strategic and cultural change. Dr. Dailey has worked in the technology sector for Hewlett-Packard and Lucent Technologies; consumer products for PepsiCo and Herbalife; chemicals and pharmaceuticals UK-based The BOC Group; and consulting for Korn/Ferry International and Chicago Change Partners, with the firm’s founder, Dr. Charles Bishop. Patrick serves on the Board of the National Association of Corporate Directors- Atlanta Chapter. He also serves as a director for a private business. He received a Ph.D. in Industrial and Organizational Psychology from the University of Houston, Texas, U.S.A.
Patrick can be reached at [email protected] or 310.400.9992
Executive Trap Door