Why Smart Executives Fail

Why Smart Executives Fail

“We’re suffering an epidemic of leadership failures. By 1995, sixty-percent of the very large companies that made up the 1955 Fortune 100 list — the Blue Chip 100 — had gone bankrupt, been acquired, or still existed but had become invisible. By 2005, another 10-15 are likely to fail and be replaced by others. A look at those that are left — among them GM, Ford and several financial and oil companies — reveals a pattern of very deep pockets more than a pattern of executive wisdom. Their ability to continue operating may be built on cash reserves, size and momentum rather than on good executive performance. Thus, for some of them “failure” is a future that has not yet come to head.

What caused this monumental fallout? Bad luck? Bad timing? Product obsolescence? Or is it the legacy of smart executives — otherwise intelligent managers who were deservedly respected in business — who turned in astonishingly bad performances and failed miserably at maintaining the vitality of their companies?

In the largest research project ever devoted to business failure, Sydney Finkelstein and his team of Dartmouth associates conducted a six-year, in-depth examination of 51 companies. Their goal was to find what led to the failures. After nearly 200 interviews, they were startled to find that even businesses that seem to have nothing in common failed for exactly the same reasons, and that the multi-billion dollar failures can be blamed on surprisingly few causes. Consistently, the executives of failed companies:

• chose to not cope with innovation and change
• misread the competition
• brilliantly fulfilled the wrong vision
• clung to an inaccurate view of reality
• ignored vital information
• identified too closely with the company

Why Smart Executives Fail provides a vital wake-up call for current and future organizations. Whether your interest in executive competence is from historical, investment or employment perspectives, Dr. Finkelstein’s research is highly instructive. By identifying the makeup of executive failures and providing abundant examples, he shows how they can be predicted and perhaps avoided.”