Should the CEO Be Fired? That Depends

In the wake of multiple problems splashed across headlines worldwide, speculation has run rampant that Uber co-founder and CEO Travis Kalanick may be on his way out. Issues include claims of sexual harassment at the company, massive loss of users and even a widely circulated video of the billionaire getting in a fight with a driver over fares for black cars.

In an article on Mashable, 5 Ways to Save Uber From Itself, the number one suggestion to save the global company is to fire Kalanick. “If you cut off the head, the body can function … at least temporarily,” the writer claims. Other business analysts claim that while he was once the ride-sharing company’s biggest asset, he is now their biggest liability.

But is firing the CEO the best solution? I advise companies that the decision to fire a CEO is never a simple one and should not be done in haste. There are several factors to take into consideration. And firing a CEO can often set the company back, especially in a time of difficulty.

A recent article in Fast Company, “Why Uber Shouldn’t Fire Its Bad Boy CEO,” made the case that Uber may actually benefit from keeping Kalanick in the CEO’s chair.

The article references this article on the Harvard Business Review, “Holes at the Top: Why CEOs Firings Backfire,” which explains why CEOs are often swiftly shown the door when times are bad.

“When companies do well, their CEOs are showered with money, perks, and adulation. When they do poorly, they’re given the blame—and the boot.”

The writer, Margaret Wiersema, is a leader in corporate strategy and CEO replacement and succession. She studied all instances of CEO turnover for a period of two years and found most CEOs were replaced not by the board after careful thought and deliberation, but at the insistence of investors upset over returns.

She compared performance of the companies from two years before a dismissal to two years after, compared performance with industry averages and then compared the performance of companies whose CEOs had retired as opposed to those whose had been fired.

Wiersema came to the same conclusion that I have after decades of working with companies in turmoil. “Most companies perform no better – in terms of earnings or stock-price performance – after they dismiss their CEOs than they did in the years leading up to the dismissals. Worse, the organizational disruption created by rushed firings – particularly the bypassing of normal succession processes – can leave companies with deep and lasting scars. Far from being a silver bullet, the replacement of a CEO often amounts to little more than a self-inflicted wound.”

I’ve seen companies where CEOs were fired for far fewer infractions. For example, perhaps the CEO didn’t make the numbers for a year or two. The business was still profitable, but it was below expectations and not as profitable as projected. Those CEOs often get fired within 3-6 months, rarely leading to the increase in profits that was hoped for. As for Kalanick, while Uber may be in a public relations crisis, and thousands of users have protested conditions at the company by following the instructions on the social media hashtag #deleteuber, the company is still growing. The head of North American operations claimed growth during the first 10 weeks of 2017 was better than the first 10 weeks of 2016. So maybe he is here to stay. At least for now.

Firing a CEO is not an easy or simple decision and shouldn’t be rushed, especially if big changes are being made to turn a company around. Those changes can take time.

Ultimately, it’s up to the board of directors. They have to make the decision based on a number of factors. But more often than not, it pays to keep the CEO because he can be a part of the solution, even if he was originally perceived as part of the problem.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

You Can Fight Fraud. And Win.

We all know Smokey the Bear’s slogan. “Remember – only you can prevent forest fires.” You can use the same slogan for fraud: only you can prevent fraud in your company.

I couldn’t let National Fraud Awareness Month slip by without mentioning a major contributor to revenue loss for a company. In its 2016 Global Fraud Study, the Association of Certified Fraud Examiners (ACFE) reported that a typical organization loses 5% of its revenue in a given year as a result of fraud.

Let that sink in a minute – 5% of your total revenue. Billing schemes and check tampering pose the greatest risk. And here’s another thing to think about, the perpetrator’s level of authority is strongly correlated with the size of the fraud. The higher up the thief, the bigger the theft.

I have written extensively about fraud as it can severely damage a company, and can even cause it to fail. While you can’t prevent fraud 100 percent, you can lessen its effect on your business. Does your company have strong enough fraud prevention measures in place? Here are a few articles to get you started.

Best friends, grandmothers, partners, even church ladies – I’ve seen them all commit fraud. When it comes to protecting your assets, trust no one. Don’t ever think that you know someone well enough to say, “He would never do that.” Maybe not. But don’t find out the hard way.

Sadly, the same goes for family members. Just read about the sad case of Gladys Knight and her son and what he did to her poor chicken and waffles restaurants.

I once worked with a company where the younger brother was running the business and took a salary beyond the limits allowed by the corporate minutes. Unfortunately, the fraud was only discovered after Daddy died and the statute of limitations had run out.

Fraud can occur when you have three elements: pressure, opportunity and rationalization. Knowledge of the fraud triangle is the basis of any successful fraud-deterrence program.

To catch fraud early, you need to know what the red flags are. One of these is when an employee exhibits behavioral changes, undergoes a sudden change in lifestyle or has financial difficulties. Read the article for four other red flags you need to be on the alert for.

According to the ACFE, the most common way internal fraud is detected is by receiving a tip from someone. One of the things your company can do is set up an anonymous hotline for anyone to report suspected theft. Their numbers show that organizations that had one were much more likely to detect fraud than those that didn’t – 45.3% to 28.2%.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

#1 Lesson for Leaders From the Academy Awards

It will undoubtedly be Hollywood’s most famous unscripted moment ever. In front of a worldwide audience of close to 33 million people, Warren Beatty and Faye Dunaway were handed the wrong envelope and presented the award for Best Picture to “La La Land” at the Academy Awards.

Except that movie wasn’t actually the winner of the Best Picture Academy Award, as we all now know. A partner with PricewaterhouseCooper had handed the stars the wrong envelope, a mistake that will follow him the rest of his life.

academy-awards

Jordan Horowitz demonstrating leadership when he stepped up to the microphone to correct the mistake at the Academy Awards.

In the midst of emotional acceptance speeches, producer of “La La Land” Jordan Horowitz learned of the mistake. He immediately stepped right up to the microphone and said, “There’s a mistake. Moonlight, you guys won best picture.” He stayed on stage during the resulting chaos and graciously said, “I’m gonna be really proud to hand this to my friends from ‘Moonlight.’”

The young producer is being heralded for his grace under pressure. He did what a good leader does under a stressful situation: he took charge and handled the problem.

In TV interviews afterwards, Jordan said, “My heart was a little broken, but it’s one of those things that just gets thrown at you. You can choose to lean into it or break away from it.”

In my career in the turnaround industry, I often deal with leaders in a crisis situation. Things do get thrown at them. They lost their number 2, their biggest customer went to a competitor, they can’t make their loan payments. Whatever it is, a business is going to face tough times.

I’ve seen a full range of responses from leaders in these situations. They may choose to be dishonest with their lenders, they may put their heads in the sand or they may continue blindly down the same path that put them in that position, hoping for a miracle.

The first step these leaders have to take is to face reality. They have to take a good luck at what the situation is so they can deal with it. Then a good leader has to take charge.

As Jordan said, “It happened really fast. Listen, I’m a producer. I gather things together and I change directions and I march things forward.”

In a nutshell, that’s what happens with CEOs. They gather the information they need, make decisions and march forward. Luckily, most leaders don’t have to do so on live TV in front of tens of millions of people.

Another company trying to march things forward right now is PricewaterhouseCooper, the second largest accounting firm in the world. The New York City-based company has overseen the Oscars balloting and presentation for 83 years, an association it takes great pride in and leverages with new and existing clients.

Tim Ryan, U.S. chairman and senior partner, was in the audience at the Academy Awards when the incident happened – that moment when two members of his firm came out of the wings and his business would soon move into the spotlight.

“I knew something was up,” he said in an article in the New York Times discussing the moment when he saw the two PwC employees interrupting the best picture acceptance speeches. “It’s not their job to come out on stage.”

The reviews for PwC’s performance that night came in and they were not good. Many people had comments along the lines of “You had one job.” Les Moonves, Chairman and CEO of CBS, said “If they were my accountant, I would fire them.”

PwC apologized for the error and took full responsibility. Monday night, 24 hours after the mistake, PwC issued a statement that read in part, “For the past 83 years, the Academy has entrusted PwC with the integrity of the awards process during the ceremony, and last night we failed the Academy.”

(Soon after, the firm placed the blame on partner Brian Cullinan, U.S. board chairman and managing partner for PwC’s Southern California practice. I was surprised that they singled out one of their employees so quickly, which shows a lack of support for a partner of their firm.)

What happens to Brian’s career, PwC’s reputation and whether they are around for year 84 of the Oscars remains to be seen.  Both leaders stepped forward to take charge. But while Jordan handled the crisis perfectly, Tim took responsibility for the mistake, but in doing so threw his partner under the bus – which is not the way to handle a crisis.

3 Ways to Discover Your Super Powers and Your Kryptonite

 

If leaders want to succeed they need to be self aware, a topic I covered in the recent blog, “What to Grow as a Leader? Become This.” A study I referenced found that a high self-awareness score was the strongest predictor of overall success.

A good leader needs to know what his super powers are. And his kryptonite.

A good leader needs to know what his super powers are. And his kryptonite.

As Anthony Tjan wrote, “In my experience — and in the research my co-authors and I did for our new book, Heart, Smarts, Guts, and Luck — there is one quality that trumps all, evident in virtually every great entrepreneur, manager, and leader. That quality is self-awareness. The best thing leaders can do to improve their effectiveness is to become more aware of what motivates them and their decision-making.”

To grow as leaders, we need to know what our strengths and weaknesses are, or as Tjan puts it, your super powers versus your kryptonite. So how do you go about becoming more self-aware?

  1. Feedback Analysis

In his popular book “Managing Oneself,” management consultant Peter Drucker recommended the process of Feedback Analysis as the only way to identify your strengths. Write down your expected outcomes for key decisions, then compare that with the results 9-12 months later.

This method will show you within a few years where your strengths are, which is the most important thing to discover about yourself. For example, he wrote, “The feedback analysis showed me, for instance—and to my great surprise—that I have an intuitive understanding of technical people, whether they are engineers or accountants or market researchers.”

  1. Assessment Instruments

Tjan recommends you take personality tests to learn more about yourself. Think about it – many businesses use assessment tools to test potential employees. But what about testing yourself and your senior managers? Here are three he mentions.

  • The Predictive Index Behavioral Assessment. This simple test is designed to determine your four core behavioral drives: dominance, extraversion, patience and formality. You can then identify patterns of behavior and motivations.
  • Myers-Briggs. The Myers-Briggs Type Indicator identifies basic preferences in four areas. Are you more introverted or extraverted? (E or I) Do you prefer to look at logic first or interpret facts and add meaning? (S or N). When making decisions, do you look at logic or take into account people and special circumstances? (T or F) And lastly, do you prefer to make decisions or leave your options open? (J or P) Answers to the questions will determine which of 16 personality types you are with a four-letter code, such as INFP, ENTP or ESFJ. (A friend once told me she thought she was an ESPN. I told her to take the test again.)
  • Entrepreneurial Aptitude Test (E.A.T.) Tjan developed this test that measures the four key drivers for entrepreneurial success he wrote about in his book: heart, smarts, guts and luck. This brief survey measures your HSGL distribution with a graph showing the percentage of each trait.
  1. Ask for feedback from co-workers

This method can be a bit trickier than just taking a test or assessing yourself. People, especially those who work for you, can be reluctant to be honest in their feedback.

In the article “How to Get Feedback When You’re the Boss,” James Detert, associate professor at the Cornell Johnson Graduate School of Management recommends constantly asking for feedback with requests for specific examples. If someone recommends you communicate more with employees, ask them for a suggestion on how to do that.

Or turn to a few trusted co-workers with this question, recommended by Dr. Marshall Goldsmith: “How can I do better?”

And when you get the feedback, listen without interruption. Ask for clarification where needed and thank them for their comments at the end of the discussion. Responding gracefully to their feedback can encourage them to continue to offer it. And putting their suggestions into action when advisable sets a good example to them of a leader working to grow and improve.

You can also enlist professional help in this area, especially as anonymous feedback is generally more honest.  Hiring a qualified professional counselor or coach can help you elicit feedback by sending out anonymous evaluations and compiling the answers for you.

With all this information, you can learn which are your super powers and what is your kryptonite.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

Funny, But True: Shaking My Pom-Poms

I never fantasized about being a cheerleader. But there I was, in a court of law, waving my pom-poms wildly with the rest of the courtroom.

I’ve done a lot of things in my career I never would have predicted. Handing out pom-poms to a judge and to everyone in attendance in a courtroom ranks high on the list of unforeseen events.

Cheerleader Supply was a $65 million a year revenue business, selling cheerleading supplies and uniforms. When the company’s financial situation was in dire straits, I was brought in for a Chapter 11 restructuring. That was early in my career and I learned a lot from working with that company.

It was a tough fourth quarter at the Super Bowl for Atlanta Falcons fans. But those Falcons cheerleaders never stopped yelling and waving their pom-poms.

It was a tough fourth quarter at the Super Bowl for Atlanta Falcons fans. But those Falcons cheerleaders never stopped yelling and waving their pom-poms. (Photo courtesy of Yahoo Sports)

One of those early lessons is no matter how bad things are at your office, as CEO, it’s your job to be a cheerleader for your team. You have to keep up the morale of your team, no matter how bad things look. Your team members will be looking to you for inspiration during the fight to keep your company growing and thriving.

With Cheerleader Supply, my job as leader was made easier by the fact that everyone involved wanted to see the company succeed – the judge, lawyers and bankers were all on board with my restructuring plan. It was a lot of hard work, but we made it. On the day we emerged from bankruptcy, I gave everyone in the courtroom and the judge pom-poms to celebrate our win after coming back from so far behind. I still have that pom-pom in my office as a reminder that no matter how tough things get, one of my major roles in working with companies is that of cheerleader.

Dr. Robert Gerwig, who writes the Lead Strategic blog, wrote, “Great leaders are cheerleaders. If you’re not one, start today. You don’t have to be an extrovert to provide encouragement, support, recognition and inspiration. Do it your way, do it authentically, but become a great cheerleader. You’ll be amazed at the results and long-lasting benefits.”

I was recently looking at the bio of the leader of a company and saw this: “John serves as CEO and Cheer­leader for his busi­ness.” That’s a line that should be in every CEO’s bio.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

Want to Grow as a Leader? Become This

I was speaking with a friend about our experiences with interviewing and hiring. He once interviewed a woman and asked her what mistakes she had made and what she had learned from them, a fairly common interview question. “I haven’t made a mistake,” she responded.

That would be the end of any interview for me. That woman demonstrated she wasn’t self-aware enough to know what mistakes she had made, much less learned anything from them.

We all have unique strengths and weaknesses, and if you want to grow as a leader, you need a firm grasp on what yours are. The single best way to grow as a leader is to be truly self-aware. As Benjamin Franklin said, “Observe all men: thy self most.”

Self-awarenessOnce you know your own strengths and weaknesses you can leverage and maximize your strengths to the best of your ability. As for your weaknesses, identify the ones you can improve on and take steps to improve those skills. Then hire people who excel in those areas you have identified as weak for you.

I’ve written about the Disney brothers before in Famous Sibling Partnerships That Worked. Walt Disney, the more famous of the two, was the visionary. The creator of Mickey Mouse, the most famous mouse in history. But his vision would never have become a reality without his co-founder, his brother Roy, who was the money guy and the one who made Walt’s visions a reality.

The results of a study done by Green Peak Partners and Cornell’s School of Industrial and Labor Relations in 2010 emphasized the quality of self-awareness and its importance for a leader. The study examined 72 executives at companies with revenues from $50 million to $5 billion.

One of its findings? “Leadership searches give short shrift to ‘self-awareness,’ which should actually be a top criterion.  Interestingly, a high self-awareness score was the strongest predictor of overall success. This is not altogether surprising as executives who are aware of their weaknesses are often better able to hire subordinates who perform well in categories in which the leader lacks acumen. These leaders are also more able to entertain the idea that someone on their team may have an idea that is even better than their own.”

Erika Anderson is a business coach and writer and says when people with low self-awareness want to grow, “it’s like someone who wants to travel to New York and he thinks he’s starting in Philadelphia – but he’s actually in Botswana.  The steps he would take to get to New York, thinking that he’s in Philly, will definitely not work for him (that pesky ocean is going to be a big shock).”

It’s only by being brutally honest with yourself about your own weaknesses that you are able to find people to fill in those gaps to help your company grow. I have an entire section in my book, “How Not to Hire a Guy Like Me” on leveraging the talents of others to your advantage. It’s critical when growing a business, which is why you hear that interview question about strengths and weaknesses so often.

Focuses on our weaknesses may not be fun. Author Aldous Huxley said, “If most of us remain ignorant of ourselves, it is because self-knowledge is painful and we prefer the pleasures of illusion.” But those pleasures of illusion do nothing to help you grow as a leader.

Knowing herself even helped a World No. 1 professional tennis player.  “I think self-awareness is probably the most important thing towards being a champion,” said Billie Jean King.

Coming soon: How leaders can become more self-aware, and how high self-awareness affects team performance

Funny, But True: Give a Second Thought to That Second Chance

You have an employee who makes a big mistake, but comes to you to admit it and offers a solution. So, you forgive him and move on. We all mess up sometimes, and this employee handled it correctly. You give him a second chance.

As Warren Buffett said, “I make plenty of mistakes and I’ll make plenty more mistakes, too. You’ve just got to make sure that the right things overcome the wrong ones.”

But some mistakes aren’t forgivable and employees who make them don’t deserve a second chance.

publishing-scamI once worked with a company whose sales manager was running a scheme. He would sell their widgets to a customer who was a partner in his crime. After the sale, the sales manager would issue a credit, reducing the price of each widget by $1 to that customer. The sales manager and the customer split the extra $1.

The scheme went undetected and over time amassed both the sales manager and the accounts receivable manager a lot of money.

The fraud was only detected because the sales manager accidentally sent a credit to the wrong company, which reported the error. The fraud was uncovered and both managers were fired. But they were not prosecuted for their crimes. (I always advise business owners to prosecute thieves. Read more about that in “Why You Should Always Prosecute Fraud”)

And it turns out the sales manager was actually really good at sales, and once he left, sales declined 25 percent. The CEO couldn’t find a suitable replacement in the following year, so what did he do? He hired back the thieving sales manager.

The CEO’s explanation? While the sales manager never paid any of the money back, he said he was sorry. During that past year, he had found God, repented his sins and begged for forgiveness as a friend and long-term employee.

He lasted six months, until he moved. To jail. Where he was sent for stealing again.

Beyond the obvious lessons of prosecuting fraud and not rehiring people who steal, the other lesson is that some people deserve a second chance and some don’t. As a business owner/CEO you need to know the difference.