All too frequently, an exceptional executive encounters a corporate trapdoor, falls and then derails. Executives knowingly or unknowingly step into a critical situation in which their savvy and experience fails them. Predictably, boards move in to take charge and it's game over. Patrick Dailey looks at how they can avoid that fate.
Corporate trapdoors can open to swallow even exceptional executives. For this article, a panel of board executives, operating executives and corporate psychologists was surveyed to assemble a contemporary understanding of derailment, and how it can be prevented.
It was clear to the panel that the competitive landscape is vastly different to how it was only 20 years ago. Many new risks have emerged that threaten an executive's corporate survivability. With intensifying global challenges, the instability of capital markets, increasing demand for personal and corporate transparency, a dizzying work pace and intensified corporate regulations, success in the role of a chief executive has become a more treacherous physical, mental and political gauntlet.
Derailment's toll
Over just a five-year period, 70% of companies will change CEOs as a result of planned succession, the aftermath of M&A, or force-outs resulting from derailment. The median tenure of outgoing CEOs runs at 7.9 years. A bit more than one third of this turnover (35%) is due to involuntary derailment.
Globally, chief executive turnover runs at the rate of about 14% annually. This has been fairly constant over a number of years, with the range being 11% to 18% year-to-year in North America and broader in Europe, at 3% to 16+% (source: CEO Succession 2008, Booz & Company).
Outgoing CEOs are leaving at an older age - 59 in North America and 57 in Europe - and there are sector differences. CEOs in financial services and energy companies have been understandably harder hit recently. Stability was detected in the industrial, utility and consumer staple sectors.
Derailment surfaces in three ways
- Business failure. The most prevalent causes of derailment are poor financial performance, liquidity, access to capital and credit, and plunging market capitalisation; benchmarked comparisons are the key litmus tests of executive survivability.
- Board surprise. Derailment can arrive quickly; it may follow a bungled acquisition, a catastrophic customer blunder, a personal or ethical gaffe or a 'dust up' with the board. The board is unexpectedly surprised with unsettling information and moves quickly to reset the leadership team and/or settle shareholders or regulators.
- Cumulative assessment of executive fitness to lead. The most common variety results from small miscues, which accumulate over time and ultimately paint an irrefutable picture of fissures in the executive's leadership, navigation skills and/or personal style. As these miscues incubate, an executive finds him/herself on a slippery slope of discredit and decline until there is often one catalytic moment in which the 'sudden' reality of the executive's failure becomes undeniable and irreversible.
Missteps in critical situations
Executives deal with countless situations each day. Most are benign, familiar and perhaps routine occurrences that can be well-managed with experience and judgement from prior lessons learned with temperament well under control. These are business-as-usual episodes.
Other situations take on greater significance and these are the critical situations that may become trapdoors. These are moments of truth that carry more weight and special significance in determining an executive's overall success or derailment. They may be a major challenge or a small encounter, but somehow these situations frame out the executive's competency and compatibility, and weigh heavily in shaping the confidence that board members and stakeholders have for the leader to continue to serve.
Determining which situations are routine and which are critically important is often straightforward, yet other times deceptively difficult. There are no warning flags, and a situation that was previously benign can mutate into one of high-risk without an astute reading of the contextual cues that accompany every situation.
Traps can be intentionally set. Single-minded activists armed with litmus-test questions, prime-time media players on investigative witch-hunts, discontented shareholders with the intent to discredit or embarrass, corporate raiders with an eye on buyout targets, and dysfunctional board members and disloyal senior leaders can and do create pernicious situations that test, distract and disable exceptional executives.
Trapdoors become lethal when the executive has no game plan in his or her repertoire of lessons of experience and is unable to generalise from the familiar to this novel or unexpected situation. There is failure to read a situation accurately or rapidly enough; action is unsuccessful, unsupported, late or off target. Competency 'blemishes' somehow become more noticeable, less manageable and more critical determinants of derailment.
Challenges for the 21st century
Executives now face a significantly different array of challenges than they did just 20 years ago, most notably more complex, external challenges that arguably carry heightened risk. They spend more time dealing with external matters, stakeholders and constituencies, and this time investment will have greater impact in their overall contribution. External outreach, coalition building, dealing with regulators, personal presence/propriety and brand management - especially in the face of a threat - are more essential skills.
Dailey's Executive Leadership Model presents four roles that executives must successfully fulfil within a contemporary, commercial enterprise. At the core of the model are temperament and critical-thinking capabilities that serve as the foundation of behaviour. The model is used to catalogue the various trapdoors.
Tactics for avoiding derailment
Executives are confronted with a number of trapdoors. While these critical situations may not always snare an executive and derail them, they do represent heightened risk to an executive's security, status and survivability. But there are tactics for stepping round them.
1. Enlist an inner circle
Derailment can be avoided by proactively enlisting an inner circle to provide advice and coaching. Trusted board members, the chairman or lead director, or a consigliere such as the senior HR leader provide multi-channel information and insight.
The role of the inner circle is twofold. The inner circle acts to protect, by sharing wisdom, providing insight and early warning. The inner circle also acts to direct, by shaping the executive's thought processes, and by questioning and testing their choices for action and conclusion.
2. Be alert to your dark side behaviours
Increased self-awareness protects executives from maladaptive behavioural episodes. Personality is firmly set by early adulthood. One's fundamental disposition for critical thinking and emotional control is hard-wired by that time. Yet, this hard-wired persona is often not 'seen'. The fundamental disposition is overlaid with adaptive behaviour learned during years of trial and error experiences.
Learned behaviour enables exceptional executives to successfully problem solve, influence and, generally, excel. There is nothing sinister here; it's the natural learning process to achieve mastery. Colleagues and boards come to know the executive from their learned behaviour repertoire, like a façade.
This front may break down when the executive encounters the stress and unfamiliar challenge associated with corporate trapdoors. Behavioural dysfunction, or so-called 'dark side behaviour', a phrase coined by psychologist Dr Robert Hogan, tends to surface when an executive finds themselves operating out of their comfort zone.
When learned behaviour fails, stress levels ramp up and the executive, sensing this deconstruction, switches to 'high alert'. Regrettably, these behaviours may be maladaptive, triggering career-destructive behaviours to emerge from behind the previously well-managed façade.
According to Hogan and Dr Marilyn Buckner, president of leadership development firm National Training Systems, dark side behaviour veers off in two, diametrically opposite directions. 'Flight' behaviours become maladaptive when the executive demonstrates characteristics perceived as excessively insecure, mistrustful, withdrawn and risk-averse. At the other extreme, 'fight' behaviours become maladaptive when the executive demonstrates characteristics perceived as excessively competitive or aggressive with colleagues and the board.
There are certain red flags of maladaptive behaviour to be aware of, which can be spotted using Hogan's personality model and Buckner's explanation. Hogan defines seven personality factors and their adaptive characteristics, along with examples of maladaptive flight and fight behaviours. These out-of-bounds behaviours exacerbate the inability to navigate trapdoors, which means that executive derailment becomes more likely.
3. Improve the cipher of context cues
Derailment can be avoided by becoming astute at reading context cues. Education in the corporate world predominately focuses on development of job content skills, for example technical, professional, personal, team and leadership. These skills are largely within the individual's control to master and then apply. Executives are hired and appointed for these skills, and rewarded for applying these skills. Across a career, they are honed and supplemented. Rarely are executives deficient in job content areas.
In contrast, developing an executive's ability to decipher context clues is overlooked. It is infrequently a topic during the succession-planning process. Yet context conveys vital, embedded messaging about how to initiate change, set strategy and solve problems. An astute read of the context - history, protocol, boundaries - unlocks the keys for fine-tuning management style, pace, communications and collaboration. It can be the difference between clumsy missteps and savvy leadership.
Deciphering context often appears instinctive, but it is a skill that can be learned. In application, deciphering context is a quick, if not instantaneous, disciplined gathering of contextual cues - peripheral information that enables a savvy executive to accurately perceive those visible, presenting issues as well as the hidden or obscured ones, understand the forces at play and set boundaries.
Critically importantly, this brief period provides the executive a momentary step back, a brief moment to gather themselves emotionally, allow constructive values to rise to the top, and for the job-content skills and the action or investigative processes to be mobilised.
4. Have a learning agenda
Executive learning prepares executives to navigate new and morphed trapdoors. It is an antidote to derailment.
As a discipline, executive learning is an easy to discuss, harder to initiate, and difficult to complete. Time is elusive in light of the 24/7 demands placed upon corporate executives. Often at fault are learning projects that are over-engineered with lofty aspirations requiring excessive time investment and too much accountability dumped upon subordinates.
Executive learning is not about sponsoring, overseeing or presiding. Learning typically begins with listening and the acceptance of a failure or an upcoming opportunity, along with encouragement from an inner circle board member. Today, experimentation, practice and competency-mastery are often played out in the full view of employees, stakeholders, bloggers and maybe the media. Usually it involves learning from others - role models and experts. A learning cycle concludes with relatively permanent changes in skill or perspective about self. The executive thinks and behaves differently.
Without personal learning and renewal, executives can find themselves playing with old rules, old tools and worn-out game plans. They may stress and revert to more basic behaviour, rather than apply lessons of experience. They lose their edge and fall behind others who remain fit, fresh and competitive, connected to the workforce and to the emerging market.
Commit to only one or two personal learning projects. Keep plans simple, doable, and personal. Do not allow these to become organisational projects.
Lessons to learn
Most executives arrive in the C-suite strategically and emotionally well-prepared for the high-stake risk-reward choices in what is perhaps their final career stop. Many navigate risk superbly. While all leaders experience failure of some magnitude, a surprisingly high number of chief executives do pay the price by surrendering their jobs to externally-sourced 'top graders' ushered in for turnaround or strategic redirection and occasionally lose their companies altogether due to a cataclysmic crisis occurring on their watch.
As previously mentioned, the antidote to this derailment is an ongoing commitment to executive learning - learning to build and repair relationships, renewing market and customer perspectives, and fostering organisational trust, candour, risk-taking and innovation. The payoff goes well beyond the executive's mental health and job survivability, to a sustained high-performance culture and a bolstered brand reputation.
