A business does well for a period of time.
The CEO becomes a celebrated guru.
He/She writes a book about their 5 steps to success.
Folks read the book and try to copy the foolproof system.
The results are blah so they give up.
Eventually the business of the amazing guru CEO falls back to earth.
This scenario plays out over and over for one sobering reason. The success of the celebrated CEO probably wasn’t a result of their business brilliance. Same as in these cases…
Firms with the best ratings in Fortune Magazines “Most Admired Companies” didn’t do so well in the long term. Even though they had lots of books written about them, they stumbled. Over 20 years the firms with the “worst” ratings had much higher stock market returns than the “best”.
The firms glorified in the business classic “Built to Last” fell back to earth over time.
The firms glorified in the business classic “In Search of Excellence” fell back to earth in short order.
Here’s how my favorite Nobel Prize winning psychologist, Daniel Kahneman, describes what's happening. This quote is from page 209 of his book Thinking Fast and Slow.
“Stories of how businesses rise and fall strike a chord with readers by offering what the human mind needs: a simple message of triumph and failure that identifies clear causes and ignores the determinative power of luck and the inevitability of regression. The stories induce and maintain an illusion of understanding, imparting lessons of little enduring value to readers who are all too eager to believe them.”
So we ignore luck and regression and we idolize these companies - and their CEO’s. They are the golden ones that led these amazing successes, so they must be worthy of our praise. Here, from page 205 of Thinking Fast and Slow, is what Kahneman has to say about them.
“…You would find the stronger CEO leading the stronger firm in about 60% of the pairs - an improvement of a mere 10 percentage points over random guessing, hardly grist for the hero worship of CEO’s we so often witness.”
DOES THE LEADER MATTER?
Kahneman suggests that leaders of successful companies get too much credit (and blame). But don't interpret that as meaning they're irrelevant. In a competitive market a 10% improvement over guessing is valuable.
But it does suggest that even the best leaders are going to head down the wrong path - a lot. And, being a strong leader, they’re probably going to head down those wrong paths with conviction. Here’s another Kahneman quote (page 212)…
“Declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true.”
So they’re not a helluva lot smarter than random guessing AND they tend to have oversized confidence in their ideas. This sounds bad. Especially if I assume their number one job is strategic decision making.
Fortunately, I don’t believe it is. In the average small business how many huge, strategic, bet the farm decisions are made in a year?
The cardboard box company down the street isn't making huge risky bets on intellectual property. And they aren’t trying to corner the world market.
They’re trying to find and hold onto good employees that can keep the boxes rolling out the door.
They’re trying to find a few new accounts so they aren’t beholden to their one or two biggest customers.
They’re trying to keep that damn machine on line 2 up and running for more than an hour at a time.
This stuff doesn’t require a silver-tongued genius CEO that's hellbent on world domination. And it doesn’t require someone that’s right all the time.
It requires someone that has a sincere vision for the company.
It requires someone that can create and maintain a sincere, consistent environment.
It requires someone that has the guts to take the lead even though they’re going to be wrong a lot.
This stuff isn’t Hollywood - it’s basic blocking and tackling.
(This site is all about building a Map that will help me do work and life better. So at the end of each post I check in to see if any changes / insights come to mind.)
This post hits my Maps in a couple key spots.
Confront Wrong Stories - CEO’s have some effect on performance, but it’s nowhere near what we might think. So the amazing, bronzed leader is a myth.
Alignment - Your SELF Map WHY and ME need to be in alignment with your WORK Map WHY and WE. If you fail in this area you don’t have a sincere vision and you can’t build a sincere, consistent environment.
Get these two right and you're on a path to Growth and Connection - and that’s as good as it gets.
A SUMMER SERIES
Daniel Kahneman’s book - Thinking Fast and Slow - is my favorite Wrong Stories book. He does a great job of explaining how we come to wrong or biased conclusions. And that’s why I’m doing this series of posts covering the topics that Kahneman writes about. Here’s a list of the prior posts in the series.
I hope you enjoy them.
***Note: This site works best when you read the posts in order. So please head to the ARCHIVE to get started.