“Why Smart Executives Fail” is a great new book that provides a great insight into the failures of corporate America. Not just little dumpy companies, but companies like Enron, Schwinn, Microsoft, Wang and more. I’ve see these signs that they talk about in big companies.
Click to read the exerpt and listen to the audio snippet of the “Seven Habits of Spectacularly Unsuccessful People.”
Audio Exerpt: 7 Habits of Spectacularly Unsuccessful People
(Click here to listen)
Here’s a surprise. Want to know one of the best generic warning signs you can look for? How about success, lots of it! Leaving aside the unfortunately reality that many of the companies we studied were quite successful before the really bad stuff happenedâ€â€?Rubbermaid, Motorola, Wang Labs, Sony, Conseco, Johnson & Johnson, Snow Brand Milk, LTCM, Barneys, the list goes onâ€â€?there are several reasons why we should be on the alert.
First, the zombie businesses of Chapter 7 were uniformly successful at one time, but fell into a wide swath of delusional attitudes that were an outgrowth of that success. Second, companies that are successful in their marketplace act as an advertisement for others to enter the same arena. Lacking powerful barriers to entry, new companies will take some share away from incumbents. Third, success breeds arrogance. Even a company as powerful as Microsoft was not immune to the perils of success, and probably should count itself lucky that the antitrust suit ended up where it did.
Fourth, it’s easy to let our guard down when we are awash in profits. It’s only natural; “there is a common failing of mankind, never to anticipate a storm when the sea is calm.” Finally, success creates its own momentum that in the scheme of things is remarkably difficult to maintain. One of the reasons WorldCom turned to fraudulent accounting was because that was the only way they could keep the great numbers up; the regular course of business was no longer doing it.
The extreme case of a successful company that loses all semblance of constraint and responsibility to standard norms of business conduct may well be Adelphia. When we think of Adelphia, we think of the classic Mel Brooks movie, Blazing Saddles. There’s a scene in that film when everyone converges on this one town where the saloon, the stores, the bank, and even the sheriff share the same nameâ€â€?Johnson. The town is totally dominated by this one man and his family, and while Mel Brooks used the name Johnson, in reality the name was Rigas. John Rigas and his family were the kings of the town of Coudersport, PA.
Most of the people in town worked for Adelphia, and Adelphia and the Rigas family owned most of the town. The real estate, the restaurant, the movie theatre, the golf courseâ€â€?all part of the family. And perhaps the defining principle of the company, and the family, was that you took care of your own. So, John’s wife, Doris, decorated the Adelphia buildings with $12.4 million in furniture from a Rigas family business; son in law Peter Venetis ran a venture capital fund with company money; when the company needed a vehicle, they bought it from the family car dealership; snow removal, lawn mowing, maintenanceâ€â€?that’s rightâ€â€?all from family-run businesses.
The Rigas family created Adelphiaâ€â€?the word itself means “brothers” in Greekâ€â€?as an island unto itself, but when they ventured to the outside world in search of capital, and proceeded to abuse that capital, the game was up.
Why Smart Executives Fail : Causes of Failure
