The reasons that compel some business leaders and executives to behave in ways that damage their careers or risk the financial viability of their companies are examined in a new book by CU-Boulder business Professor Mathew Hayward.
Hayward explains what causes leaders to cross the thin line from confidence to hubris -- the excessive pride at the root of so many business failures in his book "Ego Check: Why Executive Hubris Is Wrecking Careers and Companies and How To Avoid the Trap." Hayward is an assistant professor of management at the University of Colorado at Boulder's Leeds School of Business.
Hayward analyzes the successes and failures of such executives as Carly Fiorina, Michael Dell, Jean-Marie Messier, Steve Jobs and Warren Buffett; identifies four sources of the false confidence that spurs disastrous business decisions; and provides approaches for managing those sources. The book was published this month by Kaplan Publishing.
"The hubris of business leaders is stamped on commercial failure, from Parmalat, Swissair and Vivendi in Europe, to Enron and WorldCom in the United States and the National Kidney Foundation in Singapore," writes Hayward, a former investment banker and venture capital investor whose research included more than 200 interviews.
The sources of false confidence that Hayward identifies are:
Getting Too Full of Themselves -- Hayward uses Apple Inc. CEOs Steve Jobs and John Sculley to illustrate how excessive pride led to each being ousted from his leadership position prior to Jobs learning to bring that pride under control and leading a number of successes after returning to Apple.
Failing To Get Out of Their Own Way -- In order to avoid the temptation to rely solely on their own judgment, Hayward urges executives to cultivate a number of "foils," people who share their agenda and goals, but present facts and serve to curb false confidence. He explains that Carly Fiorina's isolation at Hewlett-Packard made her more susceptible to a false sense of confidence, while Oracle founder and CEO Larry Ellison has worked effectively with the right foils.
Kidding Themselves About Their Situation -- Using Merck's handling of allegations regarding the safety of Vioxx, Hayward asserts that executives may promise more than they can deliver because they underestimate the situations their companies face.
Failing To Manage Tomorrow Today -- Hayward urges leaders to embrace the potential negative consequences of their decisions, illustrating his point by contrasting NASA's underestimation of potential problems in the space shuttle program with the "just-in-case" strategies and procedures in the space program of Scaled Composites, a private aerospace and specialty composites development company.
To further illustrate his points, Hayward includes chapters on the downfall of Jean-Marie Messier of Vivendi and the successes of Michael Dell of Dell Inc. He explores how all four sources of false confidence contributed to Messier's downfall, and how Dell, having learned from costly mistakes, developed a decision-making approach that makes him less susceptible to hubris.
Additionally, Hayward demonstrates that hubris is ingrained in today's culture using examples such as students having false confidence in what they know because their confidence is bolstered by grade inflation, and investors believing that they can beat the market despite evidence to the contrary.
"Hubris is so deeply ingrained in our culture that it is a latent force within each of us," writes Hayward.