But the reality is that most CEOs and their leadership teams are relatively immune to such swings thanks to carefully-negotiated employment contracts which essentially secure a lifetime of well-being no matter what their performance may be.
No, the predominant reason for hastier-than-aniticpated termination, as the following article explains, has to do with what some analysts still refer to as 'soft issues.' Like leadership style, ineffective change management (post-merger integration problems are a minefield into which all too many carelessly wander), insufficiently harsh cost-cutting and matters of corporate or personal reputation.
The importance of intangibles has grown exponentially in the post-industrial service economy, especially the rising impact of human and intellectual capital in producing greater value over lesser time horizons thanks to strategies based on data rather than tangible assets. The only surprise, given these well-publicized developments is that these issues are still considered 'soft.' JL
Mark Murphy reports in Forbes
Most CEOs get fired for “soft issues.” Thirty-one percent of CEOs got fired for poor change management, 28% for ignoring customers, 27% for tolerating low performers, 23% for denying reality and 22% for too much talk and not enough action.
It’s a long-held belief that CEOs get fired (or forced to resign or retire under pressure) because of “current financial performance.” But one of my past studies found that’s wrong. My team and I interviewed 1,087 board members from 286 organizations that fired, or otherwise forced out, their chief executive. And we found that most CEOs get fired for “soft issues.” Thirty-one percent of CEOs got fired for poor change management, 28% for ignoring customers, 27% for tolerating low performers, 23% for denying reality and 22% for too much talk and not enough action.
Competence is certainly part of this; it is possible for a CEO to mangle a change management initiative by making one stupid mistake after another. But it’s more often the case that the CEO isn’t dumb, but rather their leadership styles are just inappropriate for their particular culture.
Maybe a new CEO’s leadership style is highly directive and competitive but their corporate culture is very creative and collaborative. Or maybe a CEO enters a turnaround situation with a style that emphasizes brainstorming, when formality and clear direction would be more helpful. (If you want to learn what kind of leadership style you have, take this free Leadership Styles Assessment.)
Look at the recent resignation of Ellen Pao from Reddit. After banning five subreddits and firing perhaps its most popular employee, all heck broke loose. There were Reddit protests, a Change.org petition and more. Pao ended up apologizing, saying:
I want to apologize for how we handled the transition yesterday. We should have informed the moderators earlier and provided more detail on the transition plan. We are working to make improvements and create the best experience for our users and we aren’t always perfect. Our community is what makes reddit, reddit and we let you down yesterday.
Less than a week later, Pao resigned. Without getting into the rightness/wrongness of this situation, what’s clear from the brouhaha is that this whole mess was more about soft issues and leadership styles than the quarterly P&L.
Look at the ouster of Time Inc. CEO Jack Griffin a few years ago. As Forbes reported:
Jack Griffin joined Time Inc. from Meredith Corp. last August and immediately started rearranging the furniture at the world’s largest magazine publisher, shuffling the executive ranks and making a slew of other small but significant changes. Many of them apparently did not sit well with senior employees there, and today Griffin is out.In a memo, Griffin’s boss said:
Although Jack is an extremely accomplished executive, I concluded that his leadership style and approach did not mesh with Time Inc. and Time Warner.
Or let’s go way back to 2007, when Home Depot’s then-CEO Bob Nardelli was ousted. After years of excellent earnings-per-share increases, issues emerged around leadership styles. At the time, Edward Jones analyst Stephanie Hoff said, “I think his gruff demeanor, while some people would consider that refreshing, sometimes hurt him.” Matthew Fassler, an analyst at Goldman Sachs said Nardelli’s “numbers were quite good…[but] the fact is that this retail organization never really embraced his leadership style.”
Less than a week later, Pao resigned. Without getting into the rightness/wrongness of this situation, what’s clear from the brouhaha is that this whole mess was more about soft issues and leadership styles than the quarterly P&L.Nardelli did make some missteps to be sure. But when a CEO is in sync with their culture, it’s a lot easier for employees and shareholders to forgive mistakes. The list of CEOs running into problems because of leadership styles is pretty long. Just Google the words ‘ceo fired leadership style’ and you’ll find more examples than you’ll care to read.
It’s important for CEOs to understand both their own leadership style and the leadership styles that work best in their organization’s culture. Because if there’s not a great fit, the CEO could be in real trouble.
My research has identified four fundamental leadership styles: Pragmatist, Idealist, Steward and Diplomat (see my previous Forbes article for a deeper dive).
If your company is in crisis turnaround mode or has an alpha-male culture (think the Wall Street stereotype), perhaps leadership styles like the Diplomat aren’t the best fit. Conversely, in cultures like Home Depot or Southwest Airlines, known for being highly affiliative, I probably wouldn’t recommend leadership styles like the Pragmatist.
- Pragmatists are driven, competitive, and they value hitting their goals above all else.
- Idealists want to learn and grow, and they want everyone else on the team to do the same.
- Stewards are dependable, loyal and helpful, and they provide a stabilizing and calming force for their employees.
- Diplomats are the affiliative force that keeps groups together and typically build deep personal bonds with their employees.
It’s easy to look at ousted CEOs and point out their obvious mistakes. Hindsight is always 20-20. But what drove those mistakes in the first place? When a CEO decides to quickly fire a popular employee, did they think they were being stupid? Or was it just a natural outgrowth of a demanding competitive leadership style that doesn’t emphasize social bonds? When a CEO spends weeks arranging the office locations of top executives while the company is losing money, are they being dumb? Or is that action a natural outgrowth of leadership styles that emphasize social connections and collaboration rather than immediate financial performance?
Big mistakes and losing tons of money will always be risks for CEOs. But I’d urge everyone to also consider leadership styles. As my research shows, when you get Board members alone, they’ll often pinpoint those issues as major drivers of their confidence in the CEO.
Look at the ouster of Time Inc. CEO Jack Griffin a few years ago. As Forbes reported:
Jack Griffin joined Time Inc. from Meredith Corp. last August and immediately started rearranging the furniture at the world’s largest magazine publisher, shuffling the executive ranks and making a slew of other small but significant changes. Many of them apparently did not sit well with senior employees there, and today Griffin is out.In a memo, Griffin’s boss said:
Although Jack is an extremely accomplished executive, I concluded that his leadership style and approach did not mesh with Time Inc. and Time Warner.
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