Last week, I covered the seven habits of highly successful CEOs. With this week’s firing of J.C. Penney CEO Rob Johnson—the man credited with creating the massively successful Apple stores—I figured it’s time to talk about what gets CEOs fired.
Over the last decade the folks at Hewlett-Packard seemingly got this down to a science, so I’ll be referencing HP’s recent history a great deal. But we can also pull material from recent examples, ranging from Yahoo to the situation at JCP, which is how Johnson unsuccessfully rebranded J.C. Penney.
The CEO Job: It’s Yours, You Can Have It
Let’s start with what makes a CEO different than any other employee in a large company. Unlike every other employee, CEOs doesn’t have a manager. Rather, they have three power groups to keep happy: Investors, who are represented by the board; customers, who control revenue, and employees, who control production. Even politicians may not have to deal with such a diverse group that can materially impact their success.
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These days, CEOs command salaries that can be several times that of the next employee down the line. They’re generally protected by contracts and have their salaries set by the board’s compensation committee, which isn’t measured by this decision and can use this number to raise its own executive salaries.
CEOs can delegate most work to others. Hours spent on the job can range from massive commitments by some to several hours a month for others. There is little formal CEO training, and the skills needed to do this job successfully are different than anything else a CEO has ever done. While some are mentored into the job, this practice is more of the exception than the rule, which really stacks the deck against the new CEO.
It doesn’t help that CEOs are often surrounded by god-like expectations, where folks expect them to wave their hands and accomplish amazing things, but they are human, bound by physical and organizational limitations that would make even a god unable to do much of what stakeholders expect. It’s not unusual to see CEOs go through several marriages, have issues with children and experience unhappiness in retirement as a result of losing the power and status that come with the job. Bill Gates is one of the few CEOs to escape what’s often a horrible end to a successful stint as a CEO.
I know a lot of CEOs. There are very few whom I envy—and none I’d ever want to replace. Sometimes the firms they work for make their jobs impossible. Sometimes, though, they are their own worst enemy. Here are the seven things that most often get a CEO fired.
Micromanagers should never be CEOs of large companies. This is because they are simply too complex to micromanage. Steve Jobs is the perfect example of what can happen when a micromanager stays too long. Yes, he executed masterfully but the level of stress and commitment he put upon himself for an extended period of time clearly shortened his life; even when he found he had cancer, he couldn’t extract himself from the job to focus on his health.
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If you want to destroy a CEO, then engage him at all levels of the company, make him worry about the little things and defer all decisions to him. The resulting stress should burn him out and force him to leave for health reasons.
2. Making CEOs Executive Chairman
You’d think CEOs would know better by now that this can lead to a lot of bad things. Take a job that has few controls and little day-to-day oversight and add to it the authority of that job’s one boss and you have a recipe for career suicide.
It’s bad enough when a CEO battles his chairman. Remove the chairman, though, and the risk of a CEO acting badly goes up exponentially because he, in effect, becomes his own boss. Often an experienced chairman can mentor a CEO and keep him from making avoidable mistakes.
CEOs love to take over the chairman job because they feel it gives them power, but instead it generally gives them the rope they appear to gleefully want to use to hang themselves. Of HP’s four dismissed CEOs, two made themselves executive chairman first. Mark Hurd was likely poster child for this, choosing an unfortunate hire as his “hostess”—a woman he’d seen in adult-themed movies. Executive oversight from someone who wasn’t thinking with his hormones might have prevented this.
3. Letting CEOs Run Wild
Even if a CEO isn’t chairman, the job can still lead CEOs to believe that rules simply don’t apply. Even Jobs was guilty of this; early in his career, and without proper authorization, had his stock options backdated; this nearly cost him his job. Meanwhile, HP’s Carly Fiorina and Mark Hurd both lost their jobs largely because they felt they were different, a belief fostered through the use of company jet, exclusive perks and a lack of board oversight.
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Speaking of hormones, affairs are all too common among CEOs who think they’re invincible. I’ve seen CEOs get fired for having sex with employees on fire escapes or hiring a perspective mistress.
Generally a CEO who feels that rules don’t apply to him will learn this the hard way, with devastating results. CEOs rarely come back from such a catastrophic end.
4. Making CEOs Do It Alone
If you can create an environment where a CEO is scared that someone else is gunning for the job, he’ll avoid building a good team around him. This is particularly true when you hire a CEO with little IT industry experience, as was the case with Carol Bartz at Yahoo and Carly Fiorina at HP.
Fiorina is the better example. She came from the telecommunications industry, which most wrongly assumed was similar, and didn’t want to risk having anyone near her who might deem her unqualified for the role. That’s why she forced out ex-Compaq CEO Michael Capellas.
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Contrast this with IBM, where the board hired CFO Jerry York, an accomplished turnaround wizard, to assure that CEO Louis Gerstner would build a team to make up for his personal lack of industry knowledge. Let a CEO think he’s scammed his way into the job and invariably he’ll avoid getting competent people to make up for his shortcomings.
5. Failing to Protect Their Image
This should be the first chapter of how to get rid of a CEO at HP, given how often this has been a major part of the CEOs demise. Leo Apotheker was the poster child for this problem, as HP seemed to throw the poor guy to the wolves almost from day 1—the board should have realized, given the nature of his departure from SAP, that hed be seen as a bad choice. To make up for this, he’d need extra damage control, but he didn’t get any and lasted just a few months. Apotheker’s lack of support was legendary in a very bad way.
A CEO is the face of the company. If someone can destroy her image, that does significant damage to the company’s image as well. Unprotected, bad or misunderstood decisions can quickly force a board to vote a CEO off the island.
6. Surrounding CEOs With ‘Yes Men’
This killed John Akers at IBM. He was one of the best-trained CEOs in the industry but was laid low because he was surrounded with people who told him what he wanted to hear. He literally didn’t see IBM’s near-downfall coming and became the only CEO that IBM ever fired.
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Akers didn’t fail. He was denied access to the information he needed to run the company he’d been trained to run most of his adult life. When you can take out someone of that quality, the power of the weapon must be impressive. Isolating a CEO behind an attractive facade of false information is one of the best ways to ensure they eventually have a catastrophic job experience.
7. Leaving a Powerful Rival in Place
CEOs, particularly new ones, are easy to trick into doing something stupid. They may not realize yet who they can trust. Apotheker was certainly hurt by HP’s lack of image protection, but Palm was what really got him shot. Here was a company in an area about which he had no knowledge that was acquired with a merger plan that should have assured its success. However, the merger plan was thrown out. A high-profile tablet was designed instead, it failed spectacularly, and the blame flowed uphill to the CEO.
This was the most masterful sabotage of a CEO that I’ve ever seen. The guy who appears to have pulled this off was clearly hoping to get the CEO nod as a result. He didn’t. Meg Whitman better watch her back, then, or else she may become the poster child for this next time someone writes a column like this.
Another way to approach this situation is to leave a prior CEO in place after the new one is selected. Odds are good the founding CEO will, intentionally or otherwise, sabotage the new CEO. People are trained to turn to the old leader, and the founding CEO may catastrophically try to defend what was his turf and come back to replace the new CEO—which is what just happened at JCP. A retained founding CEO or passed-over rival is often a ticking time bomb just waiting to go off.
Good Help Is Hard to Find
It isn’t that hard to get rid of a CEO, particularly a new one. The Peter Principle tells us that virtually all of them are incapable of doing the job and must depend on others to close the gaps.
In any large company, there are always people who dislike the CEO for some reason and want him gone. There should be folks tasked with protecting the CEO; this group generally includes the board, particularly the chairman. But the CEO himself may assure no such responsibility exists—and even if it does, the need to be liked may turn this function more into a wall that shields the CEO from the world he must see to succeed.
Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.
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