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 UncertaintyEvidently 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.
Conclusion
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?
REFERENCES
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.
Images
Stressed and Worried courtesy of Bhernandez
Riding an elephant courtesy of Michael Coghlan
2 comments
This does make sense. The mean is there for a reason, so it is a good guess that the probability of performance reverting the mean is high. CEO’s need to be able to keep their heads on straight when the going gets tough, otherwise (like this article states) they could possibly speed up their demise. Keeping your head on straight will help you to get through the rough patches and get back to the mean performance, or even to a new peak performance. Interesting post.
Peter,
The idea that the CEO/Entrepreneur has to know when to step aside is critical. And, though it is a major issue in the transformation of any company I would also proffer that it a critical decision for any of us to know when it is time to allow the next generation to take over and ensure they are prepared for that moment. You are right. That kind of thinking needs planning in the good times.
You specified CEOs at the end of a thirty year run, but I would also add that there are some leaders whose strength is in creating and building, others are masterful at change and transformation, and still others are great at maintenance. When people know their strengths and can identify their weakness or even what they don’t enjoy, it makes the transition easier. They can move on when their job is done.
Knowing one’s strengths and weaknesses helps in knowing when to transition (or get out of the way), but it is also important knowing what you can transition to. Having built a successful company, I might understand when I need to step out, but step out to do what? William Bridges in Transitions notes that not only do we have to ritualize what is ending, and deal with the unknown, we also have to have new beginnings to move to.
All of us can benefit from your reflection. Planning for any future requires an honest assessment when the person is not in fight, flight or freeze mode, but open to the future. Thanks for the thoughts.
Scott