“Why Smart Executives Fail” is a book written by Sydney Finkelstein, a Professor of Management at the Tuck School of Business at Dartmouth College. Eric Jackson, a contributor to Forbes.com, summarized the book about the common habits exhibited among the senior executives of highly recognized failed companies. These included companies such as Enron, Tyco, WorldCom, Rubbermaid and Schwinn.

While these are public companies and much larger than yours the lessons are applicable to those of you leading privately-held companies of any size.

Habit #1: They see themselves and their companies as dominating their environment.
While this can be a highly desired characteristic of a senior leader a failed executive never questions her or his dominance. They fail to take into consideration that they do not totally control their success. There are circumstances beyond their control that shape their destiny, i.e. competition, the economy, technology, etc.
The lesson for you: You are not bulletproof

Habit #2: They identify so completely with the company that there is no clear boundary between their personal interests and their corporation’s interests
Finkelstein found that the failed executives were identifying too much with their company to the point of treating it as an extension of themselves, their own private empire. We remember the stories of how many of these failed executives used company money for extravagant personal expenses.
The lesson for you: As the founder/owner/leader of your privately-held company do not jeopardize its financial security by “living large”.

Habit #3: They think they have all the answers
As the leader of your company/department you are expected to make the tough decisions and you do this many times a day. Failed leaders think their answers are always right and do not seek the opinion of their leadership team. The risk is you will make decisions based on incomplete or no data and your leadership team will move to a company who’s leader will seek their input.
The lesson for you: Surround yourself with people smarter than you and use them.

Habit #4: They ruthlessly eliminate anyone who isn’t completely behind them
An extension of Habit #3, when you think you have all the answers then anyone who disagrees with you is seen as a foe and not on board with your vision. The solution…get rid of them. Unfortunately you will lose really good people. Now you have a team of “yes” men and women with no one with the courage to challenge your decisions.
The lesson for you: Seek the advice of your leadership team. Conflict is a characteristic of a high performing team.

Habit #5: They are consummate spokespersons, obsessed with the company image
This is not as prevalent in a privately-held company such as yours. Public company CEOs are almost always seeking publicity for their firms to the point of neglecting their main duty of leading the company. However, you can get very involved in your community (Chamber of Commerce, service club or serving on non-profit boards) that you take your eye off the ball of your company’s business.
The lesson for you: Create a life balance for you that includes time to lead your company, serve your community and have a personal life.

Habit #6: They underestimate obstacles
Many failed executives did not see how difficult it would be to overcome the obstacles to their vision. When these obstacles appeared they did not tackle them head on, instead they kept moving ahead. An example of this was when Webvan’s core business was losing money CEO George Shaheen kept expanding operations instead of focusing on returning to profitability.
The lesson for you: When faced with an obstacle to your vision address it with your leadership team…do not ignore it.

Habit #7: They stubbornly rely on what worked for them in the past
We only know what we know and, unfortunately, sometimes we fall back on what has brought us success without considering newer more relevant options. Leaders who do not rely on the input from others eventually fail because they are behind the times. They are not considering other ways to do things or other technologies that will improve quality and performance. This is the value of belonging to a CEO private advisory board like a Vistage group, where CEOs put issues on the table to get feedback from their CEO peers thus learning from the experience of others.
The lesson for you: Join a Vistage CEO group to have your decisions challenged by men and women in a similar role

Consider Reading This
Why Smart Executives Fail: And What You Can Learn from Their Mistakes by Sydney Finkelstein. Based on a six year study Finkelstein tells the stories of more than fifty great business disasters and shares what characteristics their leaders had in common.