Overconfidence kills businesses
The column’s title is linked to Steve Tobak’s insightful article entitled, “Hubris kills businesses, humility saves them.” In that article, the writer remarked that “overconfidence has caused the tragic demise of many executives and their companies.”
I could not agree more. In fact, if an organization has just one or two people who are power-trippers, it can demotivate key managers, cause valuable professionals to jump ship (and transfer to competitors), and impair organizational growth.
If you are a family member, shareholder, director, president, senior executive or a human resource manager with a deep concern for the enterprise, it is important to understand how hubris works so you can prevent the damaging effects on the employees and your company.
It is particularly worrisome when any of the three critical work horses (the business owner, a non-family chief executive officer and the entitled family members) suffer from hubris. Their sweeping powers make them more likely to suffer from excessive arrogance, and likely to be in a position that can cause the organization further harm.
In a survey conducted by the family business unit of my consulting firm, W+B Strategic Advisory, in collaboration with C-Suite Executive Search firms ICON and Maverick Groups, nearly 50 percent of professional executives resign out of frustration and disgust, not because of the challenges that go with their job description, but primarily due to the self-centered nature and arrogant behavior of their superiors/owners.
When leaders openly boast to all and sundry that they are extremely successful, think that they’re better than other people, and exhibit a feeling of invincibility, there is a tendency to develop an attitude that rules don’t apply to them anymore. It is highly likely that hubris has consumed them.
As they continue to compromise the business and ignore shareholder concerns, it will just be
Nearly 50 percent of professionals resign out of frustration and disgust, not because of the challenges that go with their jobs, but primarily due to the self-centered nature and arrogant behavior of their superiors.
a matter of time when headwinds shift, market cycle heads south, and regulatory regime changes. Mixing all these events spells real danger and also signals the beginning of the end of the leader’s business.
Unless the organization initiates a culture change and vows to reverse the tide, the leader’s (and the company’s) downfall is inevitable.
In Tobak’s article, he cited Enron and WorldCom as clear examples of corporate failures, and it all started when their leadership became afflicted with hubris. It must also be noted that these debacles were no coincidence. All these financial scandals took place during the dot-com era-–a market bubble built entirely on irrational exuberance, which is just another way of saying hubris.
We were also witnesses to the Asian financial contagion in 1997 that brought most Asian economies to their knees, and decimated property giants, leaving some that survived gasping for air. Ten years later, another financial “tsunami” triggered a global financial meltdown, and again, we had front row seats of how the once mighty organizations like Lehman Brothers (assets of US$691.1 billion) and Washington Mutual ($327.9 billion) fell like houses of cards with their assets completely cut up and sold to investors for a pittance.
Reflecting on all of these unfortunate events, what lessons can we learn from these debacles that will spare emerging family-owned enterprises regardless of size, from leader/owner overconfidence? Firstly, just like governance, this malady called overconfidence is so easily preventable. That’s what makes it tragic because the leadership allowed it to happen.
Secondly, the solution lies on powerful values that must be embedded and cascaded in the organization’s DNA: A culture of stewardship that is vision-driven, customer-centric and the reintroduction of a plain old value that our teachers and parents would always remind us to embrace--humility.