Peter R. Worrell, MAPP '09 is the Managing Director/CEO of The Bigelow Company LLC. Bigelow, originally established in 1935, is an independently owned merger and acquisition advisory firm whose clients are exclusively highly successful private entrepreneur owned enterprises. Worrell is passionately committed to the practical application of positive psychology to optimize entrepreneurs' decision making in the domain of risk. Full Bio. Peter's articles are here.
A Chief Executive Officer’s decline almost always begins during the most successful period of his (or her) business life. Often, it is a time when accomplishments become increasingly interrupted by preoccupation with the ultimate reality of succession, the final test of stewardship. How does a CEO get this message? What awakens him? Must he be reminded that sound decisions are best made when things are going well, the poorest when they are not?Times of Immense Uncertainty
Evidently many CEO’s are poor students of history. Uncertainty is upon us in historically dramatic form. What was sufficient or exciting when the entrepreneur entered the business thirty short years ago has morphed into a landscape of constant change, at a pace and extent never before experienced. Market changes loom everywhere, threatening as well as supporting. No CEO can fully avoid preoccupation with this new world confronting his business and most especially, his leadership.
The Management “family” that shared his passion and mission resulted in an operating culture which produced outstanding results. The enterprise grew and grew. With good luck falling upon great talent, stockholder value increased dramatically—far beyond what the Owner-CEO ever imagined. As Miller and colleagues point out, too often, a time of peak performance and gratitude for the business “family” leads to a wish for protection that actually accelerates the CEO’s decline.
Suddenly there is a personality change. He becomes abrupt, preoccupied, risk avoiding, some might say depressed. The boss seems more and more distracted in meetings and on the phone. His behavior may be perceived as “inauthentic.” He seeks soothing for his fears, first outside the company: his forum group, accountant, lawyer, a “personal coach.” Customers often sense personality change from afar. Internally, his self-concerns can spread like a disease. He attempts to give more responsibility for critical decisions to “the team.” But what is the impact to the team upon seeing the symptoms they now recognize of an Owner-CEO who has stayed on the job too long?Regression to the Mean
Evidently many CEO’s are poor students of probability theory. Over time, performance will naturally revert back to the mean. The conclusion that future individual or enterprise performance will tend to be closer to the mean is built on the assumption that performance is, at least in some part, due to chance or luck.
But often, as Harbaugh indicates, reputational effects become more important than the direct material gain or loss. So, you may hear your rational brain urgently whisper, “transition out; you are holding the company back,” but that ancient limbic portion of the brain that Haidt describes continues to desire gain and power.
This is the Age of the Entrepreneur. Are we skilled at knowing ourselves well enough to overcome the ancient limbic brain? Do we dare acknowledge the consequences of good luck combined with our skill, and initiate needed management and ownership succession with the same energy that launched an outstanding business thirty short years ago?
Miller, D., Steier, L., & Le Breton-Miller, I. (2003). Lost in Time: Intergenerational Succession, Change and Failure in Family Business. Journal of Business Venturing, 18(4), 513-531.
Haidt, J. (2006). The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom. New York: Basic Books.
Harbaugh, Richmond, Ph.D. (2010). Prospect Theory or Skill Signaling? Under revision for invited resubmission to American Economic Review.