Wharton, in a recent inter view with Michael Porter, ex-plains, "When Porter started out studying strategy, he believed most strategic errors were caused by external factors, such as consumer trends or technological change." Porter himself asserts, "But I have come to the realization after 25 to 30 years that many, if not most, strategic errors come from within. The company does it to itself." Does it not sound strange? Why would a company that (desperately) wants to stay ahead of competition, gain competitive advantage, and obtain market leadership, indulge in self-inflicting damage? The answer to this lies in the presumption that the company is built with the management (including CEO) that acts as its cerebral unit. In most cases, a CEO does not act as an inherent unit of the company, but as an entity who does not always act rational. More often than not, the failure of a company is traced to the failure of a CEO. In some cases, the CEO fails the company and moves on (e.g., Shabir Bhatia of Arzoo or Kenneth Lay of Enron), and at some other times, a company not doing well may sack its CEO (e.g., Carly Fiorina of Hewlett-Packard) or and get a new one (e.g., Lee Iacocca sacked from Ford and hired by Chrysler) for a turnaround.
Analysts and the market easily link the success of the CEO with the success of a company. Yet, the success of the company may be for reasons that are external to the company that are largely uncontrollable. Further, the failure of a company should not be solely attributed to the failure of the CEO as the company's failure is also attributable to external and some internal conditions that are uncontrollable. Nevertheless, this article argues that the reasons why companies fail primarily have the CEO at the core (heart of things). If the success of a CEO is linked with the success of the company, it is natural that the failure of a company should be linked with the failure of the company. |
