Hubris destroys businesses

As a fair warning to business owners on the dangers of foolish pride and dangerous overconfidence

(HUBRIS), allow me to borrow a quote from

Charles Koch, the second generation successor and

CEO of Koch Industries when he said, “Success is one of the worst enemies of success, because success tends to breed complacency and lack of humility.”

Koch Industries is America’s second largest privately held family enterprise with 2017 revenues of $115 Billion and employing 120,000 people. When Charles assumed the leadership mantle of Koch Industries, the very first words that his ailing father Fred Koch told him before turning over the CEO reins was, “I hope your first deal is a loser, otherwise you’ll think you’re a lot smarter than you are.”

And as a refresher to my previous article, wikipedia described Hubris as “a personality quality of extreme or foolish pride or dangerous overconfidence, often in combination with arrogance. It often indicates a loss of contact with reality and an overestimation of one’s own competence, accomplishments or capabilities. In modern usage, it is also referred to as “pride that blinds” because it often causes the person to act in foolish ways that belie common sense.”

In my years coaching family businesses across Asia, I can conclude with certainty that there are a lot of founders and small business owners who never should have been running a business in the first place. Three-quarters of business initiatives disappear, new manufacturing plants close prematurely, joint venture deals and its partners end up in courts, start-ups fail to gain market share. Why? Aside from incompetence, poor hiring process, obsession to cost, ill equipped and entitled next generation offspring prematurely running the business, the likely culprit falls on founder arrogance with a mindset of invincibility. Pure and simple, it is called hubris.

In a Forbes article penned by Tom Eisenmann, he describes founder ego and arrogance succinctly, “it’s all in the founder’s head, the drive to build something great, the resilience to dust yourself off when you repeatedly get knocked down but inside a founder’s head may also be delusional arrogance, an overly impulsive “ready-fireaim” bias for action; a preoccupation with control; fear of failure; and self-doubt.”

When the leader fails to recognize it in himself, admit to it, or take steps to correct it, arrogance can demoralize his workforce and undermine the success of his business.

When I started advocating corporate governance more than a decade ago, I have found arrogance to be one of the most destructive behaviors a leader can possess. It is dangerous because it can lead to making poorly flawed and unplanned decisions. Decisions that range from whimsical termination of good employees just because the owner felt disrespected or was not greeted in the corridor, to the unnecessary purchasing of personal hobbies that they believe will immortalize them, draining company resources and destabilizing the business.

These dangers become exponentially destructive to the organization when they compromise the company of precious resources both financial and human. And a family advisor’s role is not only to diagnose the current state of governance (or the lack of it) but to question the status quo and articulate assert a change in the vision and embed the values that governance brings to the enterprise.

Every good advisor worth his salt must stand his ground against arrogant owners and entitled family members and still get “paid to disagree with the founders and next generation leaders.” So my advice to colleagues is this: if you want to get the desired results without compromising your values, be “ready to walk away” when the bloated ego manifests an erratic, irrational self-centered behavior. Hubris will destroy the business. In the end, it is there loss, not yours./