Monthly Archives: August 2016
Signs of narcissism offer the most critical indicator of hubris ahead. In the classic Greek myth, Narcissus perished after becoming captivated by his own image reflected in water. Psychologists characterize a narcissist as someone with a grandiose view of his or her own talents and a craving for admiration. Narcissists exhibit these qualities to the point where they lose perspective and begin to make unreasonable, destructive decisions.
A narcissistic CEO becomes focused on his or her ego rather than the company’s stakeholders. This trait is all too prevalent among executive leaders, as Arijit Chatterjee and Donald C. Hambrick of Penn State University showed in a wonderfully titled 2007 paper, “It’s All about Me: Narcissistic Chief Executive Officers and Their Effects on Company Strategy and Performance.” Their study of 111 CEOs in the computer industry found that those who demonstrated narcissistic traits tended to make more and larger acquisitions, which led to “extreme and fluctuating organizational performance.” Other studies have tied acquisition premiums explicitly to media praise and relative pay for the CEO.
A prime case study of the destructive impact of a narcissistic CEO features Joseph Nacchio, former CEO of Qwest Communications. Nacchio launched his business career in the telecommunications industry through serendipity: At a career fair, he mistakenly ended up in an interview room for AT&T instead of Procter & Gamble. Starting as a young engineer in 1969, he advanced through the business ranks while also extending his educational credentials by earning a master’s degree in business from NYU and a Sloan Fellowship from MIT. In 1993 he became the youngest executive leading a major AT&T business unit: the struggling consumer long-distance business. While the unit continued to struggle, Nacchio’s intelligent but highly competitive manner made him stand out. He gained the respect of colleagues, but he could also instill fear. In a 2005 Denver Post article about Nacchio, former fellow AT&T executive Dick Martin would later recall, “He can be very cutting in a meeting where he’s in charge. He doesn’t suffer fools easily.”
Indeed, one of the earliest signs of narcissism that Nacchio displayed was a propensity for building himself up at the expense of his colleagues, going beyond the competitiveness one might expect from someone who was openly angling for the chief executive role. As a 2000 Forbes profile put it, he was known for having “sniped at [AT&T’s] top executives, impugned their intelligence and even questioned their psychological stability.” The same article quoted Nacchio asserting that he could have been “a powerful asset” to them as CEO.
But when it became clear in the mid-1990s that Nacchio wouldn’t be chosen as CEO, he began looking elsewhere. He landed the chief executive position at Qwest in 1997, on the strength of a plan to turn this relatively small, Denver-based telecom company (US$697 million in 1997 revenues, compared with AT&T’s $53 billion) into an industry leader. Launched just a decade earlier, in 1988, Qwest had originally been an offshoot of the Southern Pacific railroad line, installing fiber-optic cable for companies such as MCI along its rights of way. Qwest had grown by laying its own cables alongside those of its customers. Now, in the early years of the Internet, Nacchio proposed that Qwest could step out in front on the basis of its technological prowess.
Upon accepting the CEO offer, Nacchio quickly developed a business plan — purportedly on the back of an envelope — for an IPO later that year. He was no longer held in check by a staid culture, as he had been at AT&T, and he articulated increasingly grandiose views when talking to journalists. In a 1998 Wired magazine article, “Building the Future-Proof Telco,” he commented, “I feel like an emerging oil baron.” A Fortune article published the same year, “Wild, Wild Qwest — The Gunslinger in Telecom,” described Nacchio as a “modern-day Wyatt Earp” building a new form of telecommunications company. “People ask if we’re telecom guys or Silicon Valley guys,” Nacchio said in the opening paragraph. “I like to say we are a Silicon Valley company on the other side of the Rockies.”
Some governance experts argue that when it comes to a company’s strategy, the buck stops with the CEO. They say the board’s most important purpose is to choose the CEO, evaluate his or her performance, and make a change if and when necessary. Their view is that inserting the board into the company’s strategy just muddies the CEO’s accountability.
But most CEOs see value in having their boards actively involved in strategy, and most directors want to spend more time on their companies’ strategies, too. This makes perfect sense. Often by design, boards are usually stacked with people who have experience, contacts, knowledge, and perspective that can be tremendously helpful to guiding a company’s strategy.
Moreover, a board can, should, and usually does have a strong role in implementing a company’s strategy by, for example, reviewing and approving its implementation plans, signing off on large capital expenditures it calls for, and making connections through their networks to support it.
Take the typical planning process. It ends each year with a formal request of the board to approve next year’s budget and bless the company’s longer-term plan. The board is pummeled with detailed forecasts of the company’s financials. Left implicit are the choices that differentiate where and how a company competes: what business the company is in, how it adds value to its businesses, who its target customers are, its value propositions, and its winning capabilities. These choices comprise the company’s strategy and give life to its strategic plan. It may be a planning process, but it’s hardly strategic — and it leaves boards hard-pressed to contribute much to their companies’ strategies.
Perhaps realizing that the usual planning process is not enough for effectively engaging directors in strategy, most companies have adopted the practice of having board “off-sites.” These are typically an all-day (or even two-day) event that’s meant to engage directors once a year in deep discussion about the company’s strategy. They tend to occur between annual planning cycles, well after the previous one ended and just before the next one kicks off. There is usually a roll call of presentations from each of the company’s businesses, geographies, or functions. There’s a discussion of goals, market developments, competition, and performance. Often there’s some dialog around possible market expansion (“adjacencies”) and M&A. And, sometimes, there are interesting outside speakers, entertaining videos, and other bells and whistles to spice things up a bit.
Companies carry out Market Research to gather and analyse data to understand and explain what people think about products or adverts, to find out about customer satisfaction and to predict how customers might respond to a new product on the market.
Market Research can be categorised under two subheadings – Quantitative Research and Qualitative Research. The questions asked with Quantitative Research are structured whereas Qualitative Research questions are much more open and can often reveal consumption habits which the researchers hadn’t previously considered. You carry out Quantitative Research when you need to know how many people have certain habits and the Qualitative Research when you need to know why and how people do what they do.
Companies involved in Market Research include the Research Buyer and the Research Agency. The research agency carries out the market research in ways previously discussed with their clients – the research buyer. Sometimes companies only need their own data analysed, or are simply looking for advice on how to carry out their own research. Points that are discussed between the two parties can include:
- The time duration of the research
- The budget available
- Who the target groups are
- Predictions of results
- How the results will be helpful
- Street Surveys – stopping people in the street
- Phone or postal – people fill in questionnaires and send them back
- Internet surveys – a relatively new technique which functions in a similar way to other surveys except that a large number of people are interviewed at the same time
- Am I asking the right groups of people?
- How many people should I speak to in order to get representative answers to my questions?
- Are my questions easy to understand?
- How am I going to analyse the data?
- Focus groups – discussion between a small number of people about a product, or advert etc. to find out their views or habits
- Personal interviews – in-depth discussions on a one-to-one basis
- CAPI – computer assisted personal interviewing where questions are ‘asked’ by the computer and the answers are typed by the interviewee directly into the database for analysis
- Observation – this can be used as a complement to asking questions to see how people do what they do