An Interview with Sydney Finkelstein Tuck School of Business, Dartmouth College
Sydney Finkelstein knows a lot about failure. Not his own. His own life has been marked by accomplishment and success. The failures Finkelstein has studied are those of CEOs and other leaders of organizations. Finkelstein studied their failures as part of his research at the Tuck School of Business at Dartmouth College, where he has been teaching, developing courses and writing for the past 21 years.
Much of the subject matter Finkelstein studies, and the conclusions that stem from it, have found their way into print. He is a prolific writer of articles in academic journals, case studies, popular columns and best-selling books.
Finkelstein is the Steven Roth Professor of Management and the faculty director at the Tuck Executive Program and Tuck Center for Leadership. He teaches courses on leadership, management and strategy to graduate students and students in executive education courses.
Before Tuck, Finkelstein taught at the University of Southern California, where his colleagues included the late Warren Bennis, Jay Conger and other luminaries of strategy, leadership and organizational development. At U.S.C., Finkelstein began writing his international best-selling book, “Why Smart Executives Fail: And What You Can Learn from Their Mistakes.” Over the past few years, Finkelstein’s work changed from focusing on failure to examining the qualities needed to succeed.
What follows is an edited version of a discussion between Professor Sydney Finkelstein and Joel Kurtzman, editor-in-chief of Korn Ferry’s Briefings on Talent & Leadership. The discussion took place on Oct. 13, 2015 at Korn Ferry’s offices in New York City. Finkelstein’s newest book, “Superbosses: How Exceptional Leaders Master the Flow of Talent,” will be coming out in February 2016.
You are best known for your work asking why some leaders fail. What interested you in that topic?
There was an endless cascade of books written by CEOs talking about how great they were. The books would say, “Do these five things.” As I read those books, I realized that first, not all of those five things worked and second, there are dozens of books listing five things to do so the list must be getting longer and longer. I began to wonder what really was happening — and what actually worked. I wondered about patterns of success and failure and whether you can recognize them early — especially if you are in an organization that is spiraling downward.
What did you find?
In my book “Why Smart Executives Fail: And What You Can Learn from Their Mistakes” I identified four underlying drivers of failure. It starts with getting your strategy wrong, usually because leaders create a make-believe view of reality. Relying on the wrong strategic lessons from the past is another. As great and important as experience is, it cuts both ways. We don’t talk about it very much, but you can actually learn the wrong lessons from history. Psychologists have known about this and have been studying it for probably 80 years. They have a name for it—“negative transfer,” by which they mean transferring knowledge that’s just not correct. You can understand how difficult it is when leaders look at their prior success, learn the wrong lessons from those observations and then teach their incorrect findings to their teams.
Sounds like a problem.
It certainly is. The second issue regarding failure is cultural. There are two big evils that can develop here. One is a kind of delusional view where if things worked in the past, you think they’ll work now. Because you were successful in the past, you will be successful now. The other related problem is arrogance. You were right in the past, so you’ll always be right. Together these are a bad — and sometimes lethal — combination. They really hurt your chances of success. They create blind spots, or what I call “delusions of a dream company.” When a leadership team believes its own hype, it creates lots of problems. Pushback disappears in meetings, and the leadership team starts missing the warning signs that things are amiss.
Such as people start leaving the company, and leaders miss the significance of the fact that some of their best talent is walking out the door—not because they’re ready for the next step in their careers, but because they feel they can’t survive in the make-believe culture leaders have created. Or, the CEO is on an earnings call and misses the reason the analysts ask the same questions and why they do it in certain ways. In other words, the warning signs are out there, but they are being missed.
What are some other warnings that leaders miss?
At meetings, there is a lot less pushback. People are afraid to disagree. These are cultural problems, and they are subtle but very significant. They can create a culture that is rigid, and you might not even realize it.
Now of course, no one can get it right all the time. But what you don’t want to do is build a culture that keeps people from performing as well as they can and that keeps you from hearing what people really think.
How does a management team deal with obstacles like the ones you just mentioned?
That’s a good question. Sometimes what works for entrepreneurs doesn’t work in a company that’s older and established. Instead of pushing forward no matter what, as entrepreneurs have to do to survive, in mature companies, barreling ahead is not always the right way to go. Some companies miss that.
They’re not reading the signals. If brute force doesn’t work, what does that say? What is it telling you? Maybe it means the strategy is wrong or the product mix is wrong, or something else is happening you are not seeing. Confidence is essential, but you can go too far. You have to pay attention. What got you to the top is not necessarily the same as what will keep you there or enable you to re-ascend to the peak you slipped from. Rather than arrogance and overconfidence, leaders need to act with courage and curiosity.
After writing a hugely successful book about why executives and teams fail, why turn it on its head and write about success? Aren’t the lessons the same?
I wouldn’t say the lessons are the same. I would say they are related. And, I came to believe that something was missing in “Why Smart Executives Fail.” For example, one of the things I now understand is that there is no substitute for the ability to generate and regenerate talent on a continuous basis in an organization. It’s like brain cells. They have to keep regenerating or else you’re gone. So, why do companies die? I’m not talking about when some big, secular change happens—a war is waged, the financial crisis hits. I’m talking about a company like, say, Kodak, which once was a high flier and owned an entire category. Now it hardly exists. In “Superbosses” I found some of the best generators of talent the world has ever seen, and lay out what I call the “Superboss Playbook” that teaches leaders, and managers, how to generate and regenerate talent on a continuous basis. What happened to Kodak was not preordained.
A number of companies are starting to understand the importance of talent. They make a big point of identifying high-potential people. They go after them and send out an alert if one of these people says she or he is going to leave. When the alert goes out, one company I know well, a Fortune 100 company, alerts its CEO that it’s time for him to get involved to prevent the high-potential player from leaving. Do you agree with that approach? Keep the talent from going elsewhere, no matter the cost?
No. Don’t get me wrong: Losing good people can be an indicator that something big is wrong inside the company. And, if the leadership is aware that good people keep leaving, she or he might have time to act. However, pulling out all the stops for a rising executive—especially if you don’t really understand the reasons she is ready to move on — might actually be counterproductive. You have to understand what’s really going on and why the rising executive is moving out. Once you know that, you can decide what to do.
Sometimes it’s just not a good fit.
You’d probably know that already. I mean if the person who is threatening to leave is considered important enough for the head of H.R. to call the CEO, the CEO should already know whether it’s a good fit.
So what should the proper response be?
Sometimes if an employee is ready to leave, it might be best to let them leave. Look at it this way. You don’t get a vote on whether a high performer stays or goes; she decides. The best talent will want to take on bigger challenges and run their own show at some point. Helping them transition out, as radical as that might sound, is actually the right move because of the loyalty it engenders. And by the way, becoming known as a launching pad for great talent is one of the best ways I know to solidify your position as a talent magnet. The net result is you’re managing the flow of talent to achieve what you’re really after: generating and regenerating talent on a continuous basis. That’s at the heart of what superbosses do.
You mentioned pushback is necessary, and when it is absent or when people are afraid to say what they think, it is a danger sign that other things could be broken. How do you know when the balance is right between pushback and agreement?
I wish I could recognize the precise point where the balance was about to shift from too much to too little pushback. The truth is we don’t really know. But we can help leaders become more self-aware so they’ll be more likely to notice when there is too little and too much pushback. They can tell when nothing gets done or when the wrong things are the only things getting done. They can grasp people’s level of frustration. The point is, it is fluid and the balance changes. When the balance changes there are consequences. Paying attention to the level of debate and discussion in a team is critical. Comparing it to the past is also critical.
Are there any tools you’ve seen or used to get at whether the balance of pushback is right?
Paying attention to the level of feedback in discussions is important. One tool for doing this is beginning some meetings with a discussion of the “mistake of the month (or quarter),”starting with the CEO. The point isn’t to punish or embarrass anyone, it’s to raise the question and get honest discussion. That can set the tone for the rest of the meeting. Occasionally, when I’ve brought this up, the response is, “but Sydney, I’m going to lose credibility if I talk about my mistake.” To that my response is, “Are you the only person who knows? Does anyone else know?” And of course, other people always know. Does credibility really go to a “leader” who pretends bad stuff never happened? We know better.
I’ve heard from leaders at smaller companies with boards that don’t play strong roles asking for that type of meeting. Some of those CEOs join organizations that get them more and hopefully better feedback and pushback. Or, they hire coaches.
That shows how important it is to generate real debate and discussion from people you work with. Superbosses expect, even demand, that the people who work for them challenge them. In a well-run company, you should be able to give and receive feedback from your colleagues. It’s certainly something I talk about a lot in my own executive coaching.
What about successful bosses who don’t like when others do well? Maybe they feel jealous. Or, they want to be the only ones who get credit. Or they feel threatened.
Unfortunately, there are a lot of people like that. But the best leaders want the people who work for them to shine. Superbosses are proud when they are able to hire people who are better than they are. They have a lot of confidence. In “Superbosses” I write about Gene Roberts, a former executive editor of the Philadelphia Inquirer. Roberts was at the Inquirer for 18 years. Before he arrived the paper had never won a Pulitzer Prize — which is the top prize in journalism. During his tenure, the paper won an amazing 17 Pulitzers. Roberts was a guy who thrived on giving people who worked with him the room and resources they needed to shine. He loved it when they did well, and he loved it when they got credit for their successes.
Are you saying that when it comes to talent, it’s not just hiring the best people, it’s about giving them enough freedom so they can pursue their dreams?
In a way. When you think about talent, it’s not just about hiring the best people and then protecting them so you don’t lose them — as you mentioned in your example about a CEO. It’s also about being willing to support the people you hire when they’re ready to take on a bigger challenge that you can’t offer them. When they succeed, you and the company succeed. Sure, you want to protect the people you hire who have lots of talent by ideally creating huge growth opportunities for them. But the truth is that one of the best ways to be successful as a leader is to surround yourself with world-class talent. And world-class talent tends to have very high aspirations. I’d rather keep them on my team for a few years before they head off than work with a team of second-stringers.
Some books on leadership imply that anyone can be a leader. And, like you said at the outset, they give you rules on how to do it. But that doesn’t seem right. It is tough to be a leader, or so it seems. It’s a tough job. Leading a business may be tougher than any other type of leadership because there are so many different things to pay attention to, and then there is the audience of shareholders, media, analysts and so on. People are voting on your performance every day, every second of the day. So, it’s a pretty tough job. Would you agree?
Yes. This is why learning both from people who didn’t do so well and from people who did well is so useful. If we watch what real leaders do, how they go about their jobs, we’re not all going to be like Jamie Dimon at J.P. Morgan or Jack Welch at G.E., but we’ll get better. It takes time. It takes continuous learning, introspection and continuous feedback. The key thing is, wouldn’t we want to accelerate the curve? I think the answer is yes. But it’s not like you can sit in a classroom and all of a sudden you’re a great leader. There’s a lot you have to learn. You have to want to learn, you have to be open to feedback, and you have to learn the nuances. And if you’re lucky — or maybe “smart” is a better word — you’ll find a superboss to work for who will make all of these things happen.
How do you judge a leader? Is it simply about performance, or are there other issues you have to take note of?
It’s about more than absolute performance. Some things are just out of your control because of economic conditions, so relative performance (to competitors) is a relevant metric. Also, you can hit short-term performance goals while paying a price in the intermediate or even long term. In some cases, you can cut back excessively on R&D, or on marketing, to hit a number, but at a great cost to the future. And then there is your legacy. Norman Brinker, one of my superbosses, was the godfather of the casual restaurant chain industry. When he died, a group of his former employees who became big stars in their own right took out full-page ads in newspapers around the country to thank him for what he did for them and their careers. That’s what legacy is. So the answer is, there are a lot of important things to focus on beside simply the numbers, especially short-term numbers.