And what you can do to learn from their mis­takes? Author Syd­ney Fin­klestein

By Fareeha Qay­oom


have always been inter­ested in the anatomy of mis­takes. Mis­takes hap­pen in all kinds of cor­po­rate cul­tures, across the board, glob­ally. Mis­takes are cov­ered up and white washed. They are hid­den so deep that some­times it would take a com­bi­na­tion of intu­ition, intel­li­gence, time and per­sis­tence to uncover them. Most exec­u­tives don’t have the lux­ury and mis­takes are allowed to be filed away quickly with incor­rect data and causes. Not only is this prac­tice unfair, it also causes the under­ly­ing causes to remain unde­tected too long and it even­tu­ally destroys the whole orga­ni­za­tion.

why smart executives fail book cover

Early this year, I came across a mar­velous book by Pro­fes­sor Finkel­stein that answers the great­est mys­tery in the world – why smart exec­u­tives fail? It’s a hard-hitting yet enter­tain­ing book that gets to the heart of the mat­ter. It’s instruc­tive, smart, and by focus­ing his research and sto­ry­telling on the roots of cor­po­rate fail­ures, Pro­fes­sor Finkel­stein demon­strates a unique tal­ent for iden­ti­fy­ing impor­tant busi­ness lessons that should be obvi­ous but are not. “Despite the vast num­bers of things that could go wrong in some­thing as com­plex as busi­ness enter­prises, the really dev­as­tat­ing fail­ures turned out to have a sur­pris­ingly lim­ited num­ber of causes. This is one of the major find­ings of the study. Pat­terns of fail­ure emerged that could be applied not only to the scores of clas­sic, almost com­mon busi­ness break­downs – think Rub­ber­maid, L.A. Gear, Bar­neys– but also to the inter­net one-year won­ders and the rogue com­pa­nies that have dom­i­nated the news over the past two years. The case his­to­ries and results from our research are laid out in three sec­tions: ‘Great cor­po­rate mis­takes,’ ‘The causes of fail­ure,’ and ‘Learn­ing from mis­takes,’ ” asserts Finkel­stein in his book.

“The seven Habits of spec­tac­u­larly unsuc­cess­ful peo­ple” accord­ing to Finkelstein’s the­sis are: “1. They see them­selves and their com­pa­nies as dom­i­nat­ing their envi­ron­ments, not sim­ply respond­ing to the devel­op­ments in those envi­ron­ments. 2. They iden­tify so com­pletely with the com­pany that there is no clear bound­ary between their per­sonal inter­ests and cor­po­rate inter­ests. 3. They seem to have all the answers, often daz­zling peo­ple with the speed and deci­sive­ness with which they can deal with chal­leng­ing issues. 4. They make sure that every­one is 100 per­cent behind them, ruth­lessly elim­i­nat­ing any­one who might under­mine their efforts. 5. They are con­sum­mate com­pany spokesper­sons, often devot­ing the largest por­tion of their efforts to man­ag­ing and devel­op­ing the com­pany image. 6. They treat intim­i­dat­ing dif­fi­cult obsta­cles as tem­po­rary imped­i­ments to be removed or over­come. 7. They never hes­i­tate to return to the strate­gies and tac­tics that made them and their com­pa­nies suc­cess­ful in the first place.”

“Per­haps the sin­gle most impor­tant indi­ca­tor of poten­tial exec­u­tive fail­ure is the one that is hard­est to pre­cisely define – the ques­tion of char­ac­ter. A per­son who has high eth­i­cal stan­dards and deep com­pe­tence, who desires to suc­ceed by help­ing oth­ers to be bet­ter than they would oth­er­wise be on their own, who can face real­ity even when its unpleas­ant and acknowl­edge when some­thing is wrong, and who engen­ders trust and pro­motes hon­esty in the orga­ni­za­tions they cre­ate and lead. That may sound like a tall order, but the real prob­lem is that some of the exec­u­tives at the helm of com­pa­nies we’ve pro­filed in this book weren’t even close. Tony Gal­ban, a D&O under­writer at Chubb, zeroed right in on this issue: ‘the three things behind every bad D&O lia­bil­ity sit­u­a­tion are greed, crony­ism, and denial.’ Even many of the scrupu­lously hon­est exec­u­tives we stud­ied – and there were many– stum­bled when they couldn’t accept the real­ity of changed world. For these exec­u­tives, the prob­lem wasn’t of ethics, but of defen­sive­ness,” declares Finkel­stein.

It is a com­pelling the­sis— a must-read for busi­ness lead­ers and cor­po­rate exec­u­tives. ■

About the author: Syd­ney Finkel­stein is Steven Roth Pro­fes­sor of Man­age­ment at Dartmouth’s Tuck School of Busi­ness. His writ­ing has appeared in the Har­vard Busi­ness Review and other busi­ness jour­nals. He lives in Hanover, New Hamp­shire, USA.

This arti­cle was orig­i­nally pub­lished in the print edi­tion of “The Knit-Xtyle Fash­ion Review,” (Tkfr), issue 12, Octo­ber 2005

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