Ten Biases that Destroy Modern CEOs

Ten Biases that Destroy Modern CEOs

By Dr. Al Naqvi

CEOs are storytellers. They tell stories about their people, strategies, and business. Some storytellers blew up their companies, others built them. Some underperformed, others broke the records. We captured the stories of the failure of CEOs via ethnographic research and broke them into datasets from which we extracted some lessons. Here are our findings in which we share the ten lessons:

1.???“We have a great team. Wish we operated under different circumstances.”?

When you declare “we have a great team”, measure it with the most important criteria: did this team deliver against the promises made to the shareholders or not? If not, then stop making the claim that you have a great team. Greatness is not an attribute of the team itself but instead of what the team has been able to accomplish. What makes teams great is their ability to overcome adversity and turn unfavorable circumstances in their favor. Stop making excuses. If your team failed to achieve what was promised to the shareholders, your team isn’t a great team. Any team would appear great if it operated in ideal circumstances.

2.??“He is good guy and I like him. He will make a great executive.”

Anytime you feel you are giving a position to someone because you like him or her, take a step back and be honest to yourself. Does this person make you feel comfortable because you have shared interests (for example, you play golf or like the same football team, you are alumni from the same school or members of the same country club)? Stop. Think again. Ask the most fundamental question first: is this person the most qualified for the job? Can this person get the job done? Your team members are not there to make you feel comfortable or to feed your ego. There are not there to add cushion to your comfort zone. They are there to perform a job. Stop making favorites based on your comfort zone. That way you will alienate people with great skills.

3.??“She is just technical. She will not make a good executive because technical people don’t have good people skills.”

Have you come across CEOs who brag about that their direct reports come from “business” and not “technical” backgrounds? Well, technology is the name of the game. Major executive recruitment firms are now claiming that too many executives in marketing, finance, and supply chain roles lack the in-depth understanding of technology necessary to lead and transform those functions. Don’t label or stereotype people based upon their technical skills. People with technical skills have made great companies – just look around. People with good business training can also have bad people skills.

4.??“My consulting company surveyed other executives and the survey says _______ and that’s why I think we should do this”

When you make your strategy based upon the averages of what other executives are saying, you are destined for mediocre results. Surveys of what peer executives say can be a data point, at best, but never use that to develop your strategy. Your strategy needs to be unique and based upon your own creativity and analytical rigor. Forget those surveys. ?

5.??“My consulting firm completely agrees with my vision”

Your consulting firm told you what you wanted to hear. Face it. That’s the truth. There are only a few consultants who will tell you what you need to hear (and it’s likely you will hate or dislike them). If you feel that your consultant is not challenging you, then think again about the value the consultant is bringing for you. You need sincere and talented advisors and not flattery poets sucking up to you.

6.??“I understand technology and know what technology my business needs. Technology is there to augment our strategy.” ?

First, technology is advancing at such a rapid pace that even those who are trained in technology can’t claim that they fully understand technology. And second, technology is not there to augment your business needs; your business needs to be designed around technology. Know the difference.

7.??“All I need is capital”

Capital follows good opportunities. If you can create one, it is likely that you will get the capital. Don’t complain that you don’t have the capital. Create a great opportunity and capital will follow. If you don’t have the capital, it is an effect and not a cause. The cause, most likely, is your inability to develop or communicate a great opportunity.

8.?“I don’t want to tell my direct report that her work is substandard. It will hurt her feelings.”

The worst thing you can do as a CEO is to fail to provide direct, honest, and healthy feedback to your direct reports. You are not there to protect people’s feelings at the expense of business results. Learn how to provide feedback in a positive and assertive way. But stop protecting people based upon your “like” of them. Be judicious. Be just. Yes, it is important to be sensitive and have empathy, but that does not justify accepting substandard performance and hurting the interests of the shareholders or customers.

9.??“My board loves me. They’re all my friends.”

Many companies are destroyed because CEOs handpick their friends as board members. These board members do not criticize the CEOs or question their decisions. In the long run this destroys value. These days it is easy to determine true independence of the board members. If your board members are not actively challenging you, there is a problem. Create an environment where open and critical discussions can take place – with or without friends. Get rid of the rubberstamping board.

10.??“My gut feel and instincts are that …”

The field of statistics was created to counter the instinctive decision-making which evolution has naturally embedded in our genetic makeup. It is ok to have your gut feel as a guide as long as it is based upon proper and independent analytics. You can make the worst mistakes with your gut feel if you don’t back it up with analytical approaches. Ron Johnson, former CEO of JCpenney made changes in the retailer’s pricing strategy – replacement of coupon sales with everyday low prices – without understanding what customers wanted. JCpenney couldn’t recover from that mistake for years. Don’t let your instincts guide you without proper analysis.

?

American Institute of Artificial Intelligence uses machine learning in qualitative and quantitative research to analyze stories of firms.?