Business Character In Crisis

The Oz Principle
by Roger Connors, Tom Smith, Craig R. Hickman

(Page 2 of 5)

Most companies fail because of managerial error, but not many CEOs and senior executives involved will admit that fact. Instead of taking responsibility for shortfalls and failures, far too many of today's business leaders offer every conceivable excuse from a shortage of resources to inept staff to competitor sabotage. From presidents in the Oval Office to entrepreneurs in the garage, no one wants to take responsibility for their misjudgments and mistakes. Yes, shortfalls and failures occur every day. This is a natural part of business and life, part of the human experience, but attempting to duck responsibility for such shortfalls and failures serves only to prolong suffering, retard correction, and prevent learning. Only acceptance of greater accountability for results can get a person, a team, or an organization back on the path to success.

Unfortunately, no one wants to hear the brutal facts associated with bad news, especially Wall Street. No wonder the public's confidence in the economy, the stock market, business in general, and CEOs in particular, has plummeted to new lows. After Lucent's stock price dropped in value by more than 80 percent, CEO Rich McGinn was replaced because he had listened and responded to Wall Street rather than to his own company's scientists and salespeople. Lucent scientists were telling him that the company was losing its position in new optical technology; his salespeople were telling him that sales were being propped up by deep discounting. But that wasn't the sort of news that Wall Street wanted to hear, and McGinn knew it. McGinn had gotten very good at delivering unwavering growth, and stock analysts loved it. As a result, Wall Street glorified McGinn and his executive team. McGinn and Wall Street, it was a match made in economic heaven. Sadly, however, it was a fool's match made in a temporary heaven. Lucent's scientists and salespeople were eventually proven right. Competitor Nortel eclipsed Lucent by introducing improved voice and data transmission technology with huge market success, leaving Lucent lagging far behind, and the deep discounting eventually devastated the bottom line. McGinn was finally replaced by Henry Schacht, who spent his first few months on the job reminding Lucent shareholders and the rest of the world that a company's stock price is a byproduct, not a driver, of success. When the entire global economic system seems to favor rhetoric and excuses over results and accountability, the problem threatens us all.

It threatened Xerox, even though Xerox CEO Anne Mulcahy finally faced reality and told Wall Street analysts that the company had an "unsustainable business model." Her acceptance of that reality came too late, as Xerox teetered on the brink of bankruptcy. For years, Xerox executives had been blaming the company's poor performance on everything from international politics to economic fluctuations to market upheavals, never facing the bad news of the company's deeply flawed business model. Management wizard Jim Collins, best-selling author of Good to Great and Built to Last, argues that what must glaringly separate great companies from mediocre ones is the latter's tendency "to explain away the brutal facts rather than to confront the brutal facts head-on." Companies such as Lucent and Xerox sank into mediocrity because they attempted to avoid accountability for the underlying causes of their bad news. They're not alone. The list of well-known companies that encounter problems, fail to face bad news and deal with it, and waste time justifying and explaining inadequate performance continues to grow. Enron, Arthur Andersen, Global Crossing, Kmart, Sunbeam, Tyco, WorldCom, AT&T, Polaroid, and Qwest all became slaves to Wall Street, turned a deaf ear to bad news, oversold their strategies, dumbed down their cultures, glorified their bosses, and made countless other mistakes that destroyed value.

Even though Wall Street sends its share of wrong messages and certainly needs revamping, that's no excuse for any company to sit back and wait for the government to fix the system, or to blame others or circumstances beyond their control for poor results. When bad things unexpectedly happen, as they always do, or when serious errors in judgment occur, as they do more often than most of us wish to admit, accountable companies and their executives take action to control the damage and set a new course for achieving results. Much of Intel's current success dates back to a pivotal moment of accountability almost two decades ago. Japanese companies were pushing Intel's main line of business, memory chips, into the realm of cheap commodities. In a now famous interchange that still guides Intel's culture, CEO Andy Grove asked COO Gordon Moore, "If we got kicked out and the board brought in a new CEO, what do you think he would do?" They answered that question by acknowledging the hard facts, facing reality, and taking decisive action. They got out of the memory chip business and into microprocessors. After that, they did what they had to do to redirect the company, and that has made all the difference. Andy Grove's and Gordon Moore's decision to face some harsh realities and take their company in a whole new direction showed their employees, shareholders, and those on Wall Street who were willing to face reality that accountability pays, and pays handsomely, if you can only muster the necessary courage, heart, and wisdom to accept it.

Most people in organizations today, when confronted with poor performance or unsatisfactory results, immediately begin to formulate excuses, rationalizations, and arguments for why they should not be held accountable, or at least, not fully accountable for an organization's problems. Such cultures of failed accountability or victimization have weakened business character, stressing ease over difficulty, feeling good over being good, appearance over substance, saving face over solving problems, and illusion over reality. This trend toward victimization will only further weaken business character, deluding business leaders into providing quick fixes over long-term solutions, immediate gains over enduring progress, and process over results. If left uncorrected in an organization, victim attitudes can erode productivity, competitiveness, morale, and trust to the point that correction becomes so difficult and expensive that the organization can never fully heal itself or its people.

Copyright © 2004, Portfolio Books, a division of Penguin Putnam, Inc. All rights reserved.

About the Author

Roger Connors and Tom Smith are cofounders of Partners in Leadership, an international management consulting firm with hundreds of clients in almost all major industries. They are also the coauthors of Journey to the Emerald City, a sequel to The Oz Principle.