How to avoid failure at the top: assessing & preventing leadership derailments

27 Mar 2013

Failed hiring practices

Have you heard or read about senior leaders such as Jimmy Cayne, Bernie Ebbers, Angelo Mozilo, Dick Fuld or Ken Lay?

Jimmy Cayne oversaw the collapse of Lehman Brothers (613 billion dollar bankruptcy) that started a worldwide financial panic.

Angelo Mozilo was the CEO of Countrywide Financial that made the term “subprime mortgage” a household term and triggered the collapse of the US economy and a stumbling world economy.

Ken Lay had a dishonest management that resulted in wiping out a 90 billion dollar energy company that culminated in stock value dropping by 99.7% in less than 6 months.

Jimmy Cayne was accused of smoking pot and playing bridge when two Bear Stearns hedge funds collapsed sending share price from $170 to $10 virtually overnight.

Bernie Ebbers became the king of fraudulent accounting practices when he tried to cover up massive debt resulting from incompetent deal making.

(Source: CNBC ranking of the top 25 greatest leadership)

In Romania, the list could go as long as the one above, as during the last 10-20 years we have witnessed a big amount of business failure due to leadership derailments. Once the economic crisis effects felt stronger, the leadership incompetence was even more obvious.

Business reality shows that worldwide the rate of failed managers is very high especially when they are recruited from outside the organization (up to 66%) and many of them fail within first 1 year and a half.

4 critical points in understanding Leadership incompetence: can we predict it?

During the early 70’s, a big retailer in US started to get confronted with leadership failure. Some successful leaders, high performing for a long period of time, became obsolete and got in trouble. Company shareholders wanted to investigate and find out more about leadership failure causes. A high caliber psychologist was invited to figure it out. His findings were supported by other prestigious consulting firms later on, such as Hogan Assessments Systems and Center for Creative Leadership.

Several interesting findings about leadership incompetence that led to failure:
• Leaders who failed were uniformly bright and socially skilled just as those who did not fail.
• Sometimes, many executives are hired for the very characteristics that ultimately lead them to fail. (e.g.: energetic and enthusiastic - displays outbursts and emotional volatility; Courageous, confident, charismatic - Unable to admit mistakes; sense of entitlement

• Leadership failure was attributed to:

Uncontrolled emotions that cloud leaders’ judgment
Insensitivity (abrasive, intimidating, bully)
Aloofness
Arrogance and incapacity to assume own mistakes and learn from them
Tendencies to manipulate, cheat and act impulsively
Exaggerated suspicion
Micro-managing tendencies (failure to delegate)
Submissiveness (overly dependence on a superior)

• Leadership derailments are hard to detect for two reasons: on the one hand, they coexist with well-developed social skills. On the other hand these tendencies although flawed, are intended to make a positive impression on others, and they do in the short run.

So, when it comes to measurement, we cannot predict failure using a Big Five Personality tool as it does not capture valuable information about leadership derailments.

Psychologists found out that some exaggerated personality traits lead, coexisting with good qualities, led to: bad decisions, alienation of co-workers and poor team morale of teams. David Dotlich& Peter Cairo, the authors of the famous book “Why CEO fail”, state that “leadership failure is a behavioral phenomenon”.

As we look higher in organizations, the problems associated with “leadership derailments” are worse as leaders’ personality is most important at the top because of more “discretion”.

Hogan Assessments Systems is the only company providing validated, premium tool for screening and predicting the “leadership derailments”. Hogan Development Survey is a survey of personality (measuring the dark side of personality) extensively validated on working adults from different business sectors.

Sample of the 11 dimensions measured by Hogan Development Survey.

Conclusions:

It is simply not enough to know what makes an effective leader. It is very important to understand also what may predict failure
Developing your high potential employees: assess¬ing derailers early in the high-potential identification process can provide insight into developmental areas.
You have to know what makes and effective or ineffective leader in your organization
Understanding failure in your organization increases selection success

5 critical points for a Talent Acquisition Strategy to feed continuously the Leadership Pipeline

Start with a high quality forecast about organizational needs
Use professional recruiting to fill the candidate funnel
Use a competency structure as the foundation for the hiring process
Include proven selection tools in the hiring process (e.g.: Hogan Assessments)
Define a retention process from offer to on-board and beyond.

More about Romanian leadership styles and values you can learn during the HART Consulting conference on the 22nd of May.

Madalina Balan is specialized in organizational psychology, psychologist, Managing Partner and Senior Consultant at HART Consulting. Madalina is certified in Hogan Assessment methodology since 2007 and the Master trainer for Romania and Moldova in this methodology. With more than 12 years` experience as a trainer and consultant in human resources, Madalina has managed various projects on talent management, selection and leadership development for manifold Romanian and multinational organizations.

HART Consulting (www.hart.ro) is on the local market since 2006, offering consulting services in areas such as: selection (ROI, internal benchmark studies, personality and abilities assessments), assessment and development programs for individuals and teams (Hogan Assessments, 360 feedback, A & D centers), organizational surveys, coaching, HR seminars. We are part of international networks Hogan Assessment Systems and CCi Surveys International and authorized distributor for Romania and Republic of Moldova for these diagnostic tools.

Contact: consulting@hart.ro, +40 21.310.54.57 / 59

Madalina Balan
Managing Partner
HART Consulting