A merger between two venerable firms six years ago created one of the largest financial services firms in the world. After a robust debate and extensive political manoeuvring, the individual selected as the new firm’s CEO emerged from the handful of contenders. This CEO seemed a logical choice – a bright, youthful, charismatic, and ambitious leader from one of the legacy firms who had demonstrated his business-building acumen by successfully leading the corporate development function in the United States. Yet, despite these impressive credentials and the initial support provided to the newly appointed CEO, this individual earned a vote of no confidence within two years of his appointment date and resigned “in order to pursue other opportunities”. As an advisor to this merger, I was struck by this CEO’s premature derailment, which led me to pursue the following question: Why did this leader, as do many newly appointed senior executives, fail to lead?
Studying derailment helps us to better understand why leaders fail to lead. But virtually all derailment studies have examined only the individual as the unit of analysis – we explore why the leader failed his company. However, after analysing the responses from a research initiative into how to grow great leaders, I was struck by another thought: Executives don’t fail on their own – they have plenty of help along the way. This led to perhaps a more interesting question: Do leaders fail their companies or do companies fail their leaders?
Addressing both individual and the organisational accountabilities will enable companies to construct their leadership development practices to increase the odds that a greater percentage of those who aspire to lead will do so successfully. It should also help them to think about leadership effectiveness less as a list of traits and competencies and more as the product of the interactions among the leader, those being led, and the context within which one is challenged to lead.
This is the product of research conducted in 2005 on 32 companies from around the world. The purpose of the research was threefold:
- To examine why, despite significant academic research and managerial applications, so many managers who aspire to leadership roles become victims of executive derailment;
- To understand what policies, practices, or other factors might be operational in companies that are unintentionally contributing to an insufficient bench strength of leadership talent; and
- To offer recommendations concerning what companies can do to develop their next generation senior leaders more effectively.
Why leaders fail their companies
The responses from the 32 companies gave the greatest weight to seven key reasons why leaders fail to lead in their organisations.
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