THE FOUR HORSEMEN OF THE EXECUTIVE APOCALYPSE

Posted under Uncategorized on April 1st, 2008 by Steve Kellar with one response

DENIAL, FEAR, GREED AND PRIDE: THE FOUR HORSEMEN OF THE EXECUTIVE APOCALYPSE
by John McCallum

John S. McCallum is Professor of Finance at the I. H. Asper School of Business, University of Manitoba. His column is a regular feature in Ivey Business Journal.

For several years, I have run a course for our graduating MBAs called “The CEO.” Over a term, eight or so CEOs spend two hours each with students in a lively question and answer session that covers the waterfront: the job; how they got it; what they like or dislike about it; their strengths and weaknesses; rewards; pressures; challenges; balance; effects on family and health.

After each session, the students and I spend an hour talking about what the CEO said and preparing for the next CEO. Not surprisingly, this is a very popular course with imagery that is very appealing to me: faculty turning students over to their next teachers, practicing executives who are welcoming them as junior partners into the great endeavour of running good businesses. Many of the students make contacts which are invaluable in their careers.

A question the students inevitably explore with the CEOs is the personal characteristics that are most likely to get in the way of a successful executive career. Over many visiting CEOs and over many years, there is remarkable commonality in the responses: denial, fear, greed and pride, a kind of four horsemen of the executive apocalypse. Interestingly, lack of smarts is rarely mentioned. This article looks at those four horsemen. I note the original four horsemen of the apocalypse of the Book of Revelation were war, famine, pestilence and death. Apocalypse, indeed!

Denial

Denial is a psychological device through which people convince themselves that a painful reality really is not. It is a defensive mechanism that enables people to cope with something unpleasant. When we are in denial, we are denying the existence of that which is causing the pain. So as long as we deny, then presto, we feel better. In the human arsenal for dealing with difficulties, denial is one of the most important bullets.

Denial can take many forms including ignoring, minimizing, pretending, rationalizing, and at the extreme, just plain asserting that such and such does not exist at all. People have a remarkable capacity to deny even what stares them directly in the face. Elizabeth Kubler-Ross, in her 1969 book, On Death and Dying, identified denial as the first of her five stages of dealing with grief and tragedy. The others are anger, bargaining, depression and acceptance.

Denial may or may not be a good stop on the road to dealing with the pain of something like the death of a loved one or divorce. For executives, there is no such ambiguity. Executives in denial are at best no help, and more likely, a great hindrance to an organization. In executives, denial for long enough of serious enough issues can be lethal for their businesses. Boards should be watchful for denial in executives.

The reason denial is such a show stopper in executives is straightforward. Executive in denial are almost certainly denying a problem with important and wide-reaching negative organizational implications and consequences. Who in their right mind goes into denial over the minor?

The problem denied is the problem not dealt with and if there is one thing executives are supposed to do, it is deal with problems. If executives do not deal with problems in an organization, who else will or even can?

A problem not dealt with inevitably grows until someone either takes the bull by the horns or the organization goes into full blown crisis. Few references for executives looking to move up or even keep their jobs are worse than “Does not deal with serious problems”.

Close to the top of the list of problems executives deny and do not deal with are non-performing people in important jobs. I paraphrase, but in class I have heard executives from time to time say something like this: “I knew so and so was probably not going to make it but I did not want to deal with it so I convinced myself so and so might turn it around if I just provided some time, guidance and support. I was in denial. Inevitably, so and so did not turn it around, things got worse and I had to act. After the fact, the unpleasantness was not what I thought it would be, the relief was considerable and so and so in time even ended up better off. I should have acted sooner and did after that experience”.

A line that I particularly like: “Your first loss is your smallest.” That notion can snap one out of denial and into action. Other problems that executives are prone to denying include rising costs, declining market share, diminished quality, declining morale and ethics violations. All are serious; all require action; none will sort themselves out on their own; all get worse when not dealt with; all are fertile ground for denial. As Mark Twain said “Denial ain’t just a river in Egypt”.

Fear

Fear is a response to perceived risk. Managed it is useful; but when exaggerated, look out! You get so worked up about possible disaster that the worry and anxiety imperils your ability to think rationally, consider options, make good decisions and effectively execute. You are scared!

Fear is a human defense mechanism ingrained in us over evolutionary centuries of bad things happening. It has no place in the executive suite! When the future is looking worst is when organizations most need a calm, prudent, focused, deliberate hand on the tiller; a hand guided by a realistic view of the future and the probabilities of various outcomes. Fearful executives bring none of this.

Fear can adversely affect executives in two ways. It is hard to say which is worse. First, and more likely, it can paralyze decision-making. Executives become flat out unable to act. They become expert in fashioning reasons why nothing should be done about anything. They are deer caught in the headlights.

The role of the executive is to assess business and competitive conditions, bring the plan to the board that is best, given those conditions, pull together the human, physical and financial resources needed to execute the plan, then execute. In spades, it takes energy, judgement, willpower, focus, decisiveness and courage. Fear saps energy; impairs judgment across the board, but especially about risk; dissipates resolve, distracts mightily, promotes vacillation and creates cowards.

Courage is particularly important in executives. Churchill called courage the most important of the virtues because the rest depend on it. Consider Mark Twain again: “Courage is resistance to fear, mastery of fear – not absence of fear.” When the executive plays chicken, it is a bad scene for everyone associated with an organization.

It is less likely, but fearful executives may also react by going to the other extreme in an effort to convince both themselves and others that they are actually not afraid. Executives become rash and reckless. They are willing to make huge bets with the odds stacked very much against the organization or worse still, no concept of the odds at all. Fear can turn executives into all or nothing players willing to bet the house for not much in return. Falsely brave executives are dangerous.

Stakeholders of organizations run by fearful executives should hope those executives are awfully lucky because that is the only salvation. Listen to the poet Robert Frost on fear: “There is nothing I’m afraid of like scared people.”

Greed

Greed is an excessive desire for and preoccupation with acquiring money, wealth and expensive material things. It, and its relatives envy and jealousy usually take executives down roads that are not good for organizations.

The key word in the definition of greed is excessive. Tempered, greed can motivate effort and commitment: ou
t of control, it wrecks decision-making, compromises ethics and ruins careers. Remember Gordon Gekko’s (Michael Douglas’s) classic defense of greed at the Teldar Paper shareholders’ meeting in the 1987 Oliver Stone movie Wall Street: “The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed … has marked the upward surge of mankind.”

Greed adversely affects executives in many ways. It can lead executives to see transactions and deals through rose coloured glasses. It can lead executives to misjudge the effects on employees, customers and suppliers of them wanting and getting ever more – greed often stokes resentment in those who can really hurt an organization. Greed can make it impossible for executives to deal with unions. “We only want a part of the excess you already have” is the union mantra. Greed can embarrass executives with shareholders, regulators and the general public negatively impacting their ability to get things done.

For greedy executives, it is a slippery slope from bending the rules a bit to get more to bending them a lot to outright criminal behaviour. Greed was surely a factor in many of the recent high-profile misconduct cases involving some of the who’s who of North American industry. The end game of greed can be jail.

The Catholic church has thought a lot about sin over the centuries. They judge greed to be one of only seven cardinal sins. In Catholic theology, the opposite virtue to greed is temperance but too much of that can be a problem for an executive too. Boldness and risk taking are, after all, necessities for the executive job. Tricky business being an executive!

Pride

Pride is also a Catholic church cardinal sin. Its opposing virtue is humility. Prideful people like themselves too much. They think too highly of themselves. They tend to be arrogant, egotistical and conceited. They tend to have an insatiable need for the limelight.

In an executive, pride can be very destructive. You cannot be an executive without a healthy dose of self respect, self esteem and outright self love. But pride is self respect, self esteem and self love taken too far.

As is so often the case, the best line on pride is an old line from the Bible: “Pride goes before destruction and a haughty spirit before a fall” (Proverb 16:18). Haughty is a synonym for arrogant. This is one line executives should contemplate at regular intervals.

Pride gets executives in a number of ways. It is a quality of character that rubs most everyone who is exposed to it the wrong way. Prideful executives at best will not get the most out of people; in time, they will find people outright working against their interests and quietly promoting their failure.

Prideful executives find it hard to admit they were wrong or do not know something. Hence another line I like: “It is not what you do not know as an executive that gets you into trouble; it is what you know for sure that is not so”. Prideful executives have trouble asking for help and not asking for help when it is needed just makes the problem at hand worse. Prideful executives tend to think they know it all or at least give that appearance. Either way, information critical to good decision-making does not flow to them the way it should. Prideful executives are often told what people think they want to hear, not what they need to hear. Prideful executives are very susceptible to flattery and stroking.

Denial. Fear. Greed. Pride. They really are the four horsemen of the executive apocalypse. Executives would do well from time to time to assess themselves on each. They would also do well to get some objective third party opinion. Hard to say which of the four is the worst. Together they are a terrible cocktail in an executive’s make-up, and for everyone associated with an organization.

Personal Ministry of Steve Kellar