Why leaders fail
Hardly does any leader set out to fail. Most leaders ascend their offices with great plans to effect a great change in their organization or nation. They know that occupying a leadership position is a rare opportunity to write their names in gold by stretching themselves to accomplish a lot for their organizations. But quite often that does not happen; in the course of carrying out their functions, many leaders act contrary to their avowed intention and head south.
Douglas Ivester was the natural choice of Coca Cola board as the successor of Roberto Goizueta who died suddenly. The reason was that Ivester had worked closely with the former CEO and was a number cruncher and a balance sheet expert. Ivester was respected by Goizueta who was in return revered by the board. The board knew that if Goizueta had a chance to pick his successor he would have chosen Ivester. So, the board picked Goizueta’s man to continue with his job.
Ivester’s rise in the company had been meteoric. After joining the beverage company in 1979 as assistant controller and director of corporate auditing, he became the youngest vice president in the company’s history in 1981 at the age of 34. Two years, later he was elected senior vice president of finance, and was in 1985 elected Chief Finance Officer.
Goizueta’s interest in Ivester rose after the latter became the CFO. He saw in him a possible successor and began to groom him. He was exposed to every detail that would make him stand out as the company’s CEO. He was exposed to marketing, public speaking, politics and global affairs. Goizueta provided the opportunity for Ivester to have a feel of all the critical segments of the company.
So, Ivester assumed the role of the CEO highly recommended and the board expected him to sustain the feat of Goizuela if he could not surpass same.
However, shortly after Ivester’s assumption of office as the CEO, Coca Cola was hit by hard times. In 1997, the Asian financial problem became pronounced. This affected Coca Cola’s overall performance because of its investments in the region. Then the company was on the back end of a bottler-consolidation strategy that had given it a steady stream of extra earnings. To further compound the woes of the company, the weak dollar which had helped its earnings for years suddenly bounced back.
The cumulative effect of all these was that under the leadership of Ivester, Coca Cola’s earnings dipped continuously for two years. The company’s return on shareholders’ equity slid from 56.5 per cent in 1997 to 42 per cent in 1998 and further down to 35 per cent in 1999. Coca Cola’s market value, which grew 34-fold to $147 billion from $4.3 billion during the tenure of Goizueta, only managed to climb up to $148 billion in over two years that Ivester was in charge.
As far as the board was concerned, the continuous slide Coca Cola was experiencing was indicative of Ivester’s lack of capacity to lead the company. So, to save it from further slide, the board had to relieve Ivester of his duty, albeit he was allowed to tender his resignation.
Why did an experienced executive like Ivester fail to seize the moment to improve the lot of his company? Why did someone who had a great mentor in his predecessor fail to build on the legacy of his mentor to leave an indelible mark on the sand of time? Why, in spite of the exposure and training, did Ivester fail to leave the company better than it was handed over to him?
Leaders fail for various reasons. Some of them are considered hereunder.
Loss of focus
Most leaders assume office with specific plans on what they intend to accomplish while in office. As a matter of fact, before a leader is appointed in most companies, he is asked to make a presentation on what he hopes to do in office. If his presentation does not gel with the board, he is unlikely to get the appointment.
However, soon after getting into office, the leader realizes that he has other issues to contend with apart from what he had decided to devote his attention to. Oftentimes, the pressure of office forces him to abandon his original plan. Thus, instead of taking initiative on what matters most to the organization, he becomes reactive. Invariably, he loses momentum and begins to slip.
Unless the leader is disciplined enough to consistently put the accomplishment of his stated mission on the priority list, he will soon find out that he has little or no time to attend to those issues. Meanwhile, the board will assess his performance primarily by what he had promised to do.
So, probably more than anything else, it is incumbent on the leader to keep in focus the stated mission to ensure that his energies and other resources are not misdirected.
Way out of this is for the leader to resolve that he will devote his time only to those things that nobody else in the company can do and delegate every other task. By so doing, he extricates himself from being bogged down by seemingly important routine matters and concentrates on only issues that are critical to the progress of the organization.
Inability to respond to changing times
The business environment is dynamic. What worked hitherto may fail to work henceforth. A leader must be versed enough to realize this and proffer workable solutions. Leaders get executive pay essentially to solve problems. A leader is not expected to leave a company at the same level it was handed over to him. Great business leaders understand this; hence they stretch themselves no end to ensure that their organizations never have a better last year.
A leader who fails to proffer solutions to an organization in crisis has failed the basic test of his leadership. That is what happened to Douglas Ivester. He got into office hoping to use the same system employed by his predecessor in changing economic environment. His strategy failed the first year but he did not know enough to try another strategy. When the trend continued the following year, the board had to show him the door.
Employing situational ethics
Leaders fail when their reputation does not line up with their character. One of the key responsibilities of a leader to the rest of the crew is demonstration of unquestionable integrity. A leader must always live by his word. A leader must never allow himself to fall into the rut of situational ethics, the suspension of the universal law on the altar of exigencies. The greatest capital of a leader is his integrity. Once that is lost, not much is left. If a leader loses the trust of his followers, he has lost the followers.
Inability to move into the new role
Every leader has a background in an area. But by the time he is appointed as the CEO, he ought to leave his old role and allegiance to it behind him. He should desist from working primarily for the interest of his erstwhile constituency and ensure that he operates as an overall CEO, not a sectional one.
Ivester found it difficult to move into his new role as the CEO, he was said to have operated more like a finance person than the overall CEO.
Failure to make the right move at the right time
Many a leader gets to a point that he does not want to rock the boat. He is comfortable with merely maintaining the status quo and managing to get by rather than taking a risk and losing what has been accomplished. But history has repeatedly vindicated leaders that took risky decisions. A leader who fails to make the right move at the right time loses momentum and may never recover from that. For a leader, opting against risk-taking is a risky venture.
Gauging the people wrongly
A leader must learn to gauge the followers correctly otherwise what is meant for their good could be turned to the leader’s woe. Before carrying out any major policy change that will affect the followers, a leader must ensure a buy-in by the people first. Until that is done, the leader should not embark on any fundamental change.
The defeat suffered by President Goodluck Jonathan in the 2015 general election started long before the election. It started with the attempt to remove fuel subsidy in January 2012. The president had enjoyed massive support across many states in the country in April 2011 when the presidential election that gave him his first term was held. The president said he planned to stop the corruption which the subsidy regime had become by eliminating the subsidy in its entirety. The government also claimed that the poor for whom the subsidy was meant were not getting the benefits.
However, the nation was against the move because the people felt that as a petroleum producing country, they should be made to enjoy some benefits. They also believed that after giving the president their votes in April, inflicting them with fuel price hike eight months later was inappropriate.
Without ensuring adequate buy-in of the idea, the government went ahead to announce the removal of subsidy on the eve of January 1, 2012. Not unexpectedly, the people rose against it and the nation was grounded for over a week. Although the government and labour unions later agreed to a reduction in the pump price of fuel, the damage had already been done. From that point, the goodwill hitherto enjoyed by the president in some areas of the country, hit rock bottom.
Lack of people skills
Leaders love to sound and act tough so as not to be viewed as a weakling by those they lead. Consequently, they lose their soft power. A leader should not only be technically sound, he should also have a high level of people skill. A leader must be able to touch base with those he leads; otherwise he will lose either the followers or his seat.
A leader must be emotionally sound; he must be able to feel his people; he must be able to connect with them beyond official matters. He must resist the temptation to build a wall around himself. He must avoid getting a group that will be tagged ‘the leader’s gang’ or some other derogatory terms. If he does not do that, he will one day look behind him and find out that he is all alone.
One of the factors that worked against Ivester during his tenure as Coca Cola boss was his low rating in people skill. When hundreds of Belgians took ill consequent upon consuming Coke, the CEO vacillated for over a week before travelling down to the country to show his company’s concern. The company took the backlash and this affected the performance of the company in that country as well as the bottom line.
Soft skills are essential to leaders who want to go the distance.
Leadership success is not a given, it is earned.