Why Are We Bad at Picking Good Leaders? A Better Way to Evaluate Leadership Potential

Jeffrey Cohn, Jay Moran

• Publisher: Jossey-Bass
• Year: 2011
• Print ISBN: 9780470601945
• eBook ISBN: 9781118062203
• Edition: 1
• Topic: Business
• Subtopic: Leadership
• Index: Business

Silver Medal Winner, Business and Leadership, 2012 Nautilus Book Awards

Almost 70% of Americans believe that we are suffering from a crisis of leadership, but rather than asking, why are leaders failing, we need to ask, "Why aren't we choosing better leaders?"

Ever wonder what goes on behind closed board room doors when organizations pick their top leaders? It can be a contentious, secretive, even brutal process. Most of our leaders look good on paper—they have charisma, credentials, and confidence—yet they lack the real qualities that are necessary to succeed. In Why Are We Bad at Picking Good Leaders?, Cohn and Moran share the same insights and ideas they use to help organizations make better choices. Revealing seven essential attributes of all great leaders, they offer a fresh and powerful evaluation technique anyone can use to assess leader potential.

Through dynamic, first-hand accounts from the business world, entertainment, sports, politics, education, and philanthropy, the authors offer the ultimate insider access and reveal how top organizations find and choose the best talent.

• Offers multiple ways to evaluate leaders, and how these7 leadership attributes combine to create the best (and worst) in leaders
• Features interviews with with Mike Krzyzewski, Coach, 2008 US Men's Olympic Basketball team, Jeff Bezos, CEO of Amazon; George Steinbrenner, Scott Davis, CEO of UPS; Peter Loscher, CEO of Siemens; Toby Cosgrove, CEO, Cleveland Clinic; Hollywood movie directors, and many others
• Includes academic study and field training at institutions such as Harvard, Yale, INSEAD, and IMD for developing future leaders.

Fresh and compelling, Why Are We Bad at Picking Good Leaders? shows how great leaders can be spotted and why they succeed – and is soon to the definitive resource guide for about choosing better leaders.

Chapter 1

Integrity

One of the truly famous leaders of our time became president of a Fortune 500 company when he was only forty-four. At an age when most people are still struggling for professional recognition, he had reached the top. People called him a genius. A rainmaker. A superstar.

His story didn’t start that way, however. He wasn’t born with a silver spoon. The son of a machine-parts salesman, he spent his youth in blue-collar towns. He was a rather nerdy child, a self-described loner who earned good grades. He worked hard; as a teenager, he saved fifteen thousand dollars at an after-school job. Later he won an engineering scholarship to Southern Methodist University and then distinguished himself as a junior bank officer in Texas. Everyone who knew him agreed that this man possessed great passion. He was definitely determined to get ahead.

He earned an M.B.A. from Harvard Business School, where he again distinguished himself by graduating with honors. In the classroom, he showed a special interest in free markets. From there, he moved to McKinsey & Company, a premiere consulting practice, and became one of the youngest partners in the firm’s history.

Here was a person whose intellectual horsepower was beyond question. People described him with words such as “incandescently brilliant” and “the smartest guy I ever met.” He was a visionary too. A paradigm changer. The kind of person who sees the world differently than the rest of us do. He could sift through data, recognize trends, uncover hidden opportunities.

His specialty was the energy business, in particular the labyrinthine market for natural gas. He came up with novel ideas for how to transform the industry. His innovative thinking showed no end.

He later left the consulting firm to join a major client, and the next several years were a meteoric rise to the top. He created new business units, discovered untapped revenue streams, and almost single-handedly revolutionized the energy sector. Magazine covers lauded him. They celebrated his leadership and marveled at his ambitious ideas. During the span of a decade, his company’s market capitalization increased from $4 billion to over $100 billion, and he became a very wealthy man.

Today he is retired and leads a quiet life in Englewood, Colorado, where he is serving a twenty-four-year prison sentence for mass fraud.

The person we just described is Jeffrey Skilling, the former CEO of Enron. His story is well documented, and most of the world immediately associates his name with crime. And yet until the sudden collapse of Enron, he displayed the passion, intellect, and vision of a great leader. What went wrong?

INTEGRITY IS THE FOUNDATION

Integrity is the fundamental leadership attribute. Nobody can lead effectively without it. Former Wyoming senator Alan Simpson once said, “If you have integrity, nothing else matters. If you don’t have integrity, nothing else matters.”1

Simpson’s words aren’t exactly true; other aspects of leadership are critically important as well. But if you need to make a list, integrity belongs at the very top. It’s where you start. It’s what holds everything else together.

Integrity is like the foundation of a house. It’s not the first thing people notice, yet without it, all the granite countertops and wood floors don’t have a place to stand. In fact, without integrity, all those amenities are merely a waste of money. Other aspects are important, to be sure: no one would want to live in a house with poor heating or faulty plumbing, for instance, and a leaky roof is an energy killer and a real nuisance. These problems, however, can be fixed. When a house lacks a solid foundation, on the other hand, you might as well tear the place apart and start over. Otherwise you’re likely to be crushed beneath the rubble when it all comes crashing down.

The same is true in leadership. Integrity is the fundamental attribute that keeps everything else secure. A leader who possesses integrity but lacks vision or passion, for example, will at worst be incompetent. He might muddle through or create temporary setbacks. By contrast, be wary of leaders who dazzle the world with brainpower or charisma at the expense of deeper ethics. These people might lie, cheat, and steal their path to the top. And like Jeff Skilling at Enron, they might destroy the organization along the way.

As a concept, integrity is a complex part of human character. Most of us have a vague sense of what it means, although we might have difficulty describing how it works in practice. In essence, integrity boils down to honesty, consistency, and solid ethics. Leaders who possess integrity follow up on their promises. They match their words with deeds. They eschew deception. They treat people consistently and apply rules evenly. Finally, leaders with integrity don’t unfairly jeopardize others in order to advance their own agendas.

Of these characteristics, honesty may seem to be the most straightforward, but it means a lot more than just telling the truth. Mere silence is not enough. Honest leaders are accountable and own up to their mistakes. They are capable of delivering bad news even though doing so might be painful. This includes holding others accountable too. Imagine the boss who avoids having a tough conversation with an underperforming employee. Instead, she puts off the discussion until any remedial steps are too late. That’s not acting with integrity.

The most common problem with honesty is when leaders believe that it is limited to avoiding outright lies. According to this way of thinking, omissions of truth are acceptable, and it is okay to deceive. But as we like to point out to colleagues and friends, another word for deceive is mislead.

To be sure, there are times when leaders must be cautious about what they say. The president of the United States, for example, must take steps to avoid the onset of public euphoria or panic. Sometimes this means bending or omitting segments of the truth. But this is discretion, done with the group’s welfare in mind. Deceit, by contrast, is undertaken to protect individual interest. Usually the person who operates this way parses words as a stratagem for self-preservation. He finds loopholes. He rationalizes the bad outcomes of others. He tells himself, It’s not my fault if they didn’t read between the lines, or, I didn’t lie—they just weren’t clever enough to work out all the possible ramifications. This isn’t the way to lead a group of people. Whenever we meet someone who deflects questions like a trial lawyer, we know that candidate would not make for an effective leader.

This potential for deceit also underscores why a lack of integrity is so dangerous in the hands of those who are intellectually gifted and can use their impressive cognitive skills in dramatic, undetectable ways. Given their access to power and information, they are in a unique position to exploit organizational interests. But effective leaders do not conduct themselves in this manner. Their sense of integrity does not permit it. For them, transparency and leadership are one and the same.

GOOD LEADERS ACT ETHICALLY

Of course, honesty by itself does not constitute integrity. A criminal might be perfectly forthcoming, but we wouldn’t want him to lead. With this in mind, people with integrity also know the difference between right and wrong. They treat others fairly, consistently, and with a just hand.

They begin by living up to their promises. Leaders with integrity stay true to their commitments. They never back-pedal to serve their immediate needs. Watch out for people who constantly claim, “Circumstances have changed,” or “I wouldn’t have said that if I had known,” or “That’s not what I meant,” only to leave others hanging. Good leaders deliver on their word.

When it comes to other issues of right and wrong, good leaders exercise strong ethics. Some people claim that the concept of ethics is too vague and leaves too much room for personal interpretation. According to this view, fairness is in the eyes of the beholder. “One person’s terrorist is another’s freedom fighter” is this argument’s familiar refrain. So how can we expect leaders to adhere to any definable standard?

Although it’s true that no universal sense of right or wrong is readily apparent with respect to abstract human issues (such as the meaning of equality or the proper role of the state), this fact does not mean that we have to throw ethics out the window and resort to nihilism. On the contrary, most of the practical problems that leaders face every day are amenable to a rather straightforward ethical rule: one’s own interests cannot count for more than the interests of others. Stated differently, treat others the way you would expect to be treated. In other words, follow the Golden Rule, a principle that has stood the test of time in different cultures around the world. For example, the wisdom of the Golden Rule was rediscovered by Jesus and Confucius; by the Stoic philosophers of the Roman Empire; by Leviticus and the Mahabharata; by social contract theorists such as Hobbes, Rousseau, and Locke; and by moral philosophers such as Kant in his categorical imperative.2

If this litany is a little too rich for your blood, consider what we in the business community often refer to as the “newspaper” or “mother” test. Would you be comfortable if what you are doing were printed on the front page of the Wall Street Journal, with all the facts laid out for everyone to see? Would you be comfortable if your mother knew the truth behind your decision? Viewed in this light, most ethical issues that leaders face aren’t as difficult as they might appear.

Let’s consider a couple of common examples. Is it okay to punish one employee for breaking company policy while permitting another to escape with a lesser decree? Obviously not. Each should be treated consistently. If you were in their shoes, you would expect the same. Is it okay to accept special favors from vendors knowing that it might create bias with respect to a future procurement decision? What would your shareholders expect? Would they react favorably knowing that their investment is subject to this kind of influence? As a leader, would you feel okay having such information printed on the front page of your annual report?

Toys-R-Us CEO Jerry Storch told us that this last issue is something that his company pays especially close attention to: “We have a zero-tolerance policy towards even slight gifts from a vendor. If there is something that trades hands, then there needs to be an invoice and compensation for it.”3 For Storch, this rule is critical for fostering an ethical culture. Moreover, he believes that making it stick occurs only if direction comes from the top. “The first year I got here,” he told us, “the auditors said, ‘Hey, do you and your wife want to go to the U.S. Open tennis tournament?’ They were nice guys, so I said sure. But I also said that I have to pay for the tickets. They agreed, although they told me they weren’t thinking that because they were sponsors of the event. So then I received the tickets, and they were some ridiculous price, like a thousand dollars apiece. So I wrote a personal check for two thousand dollars, or whatever it was.” Hearing this story, we couldn’t help but tell Storch that we hoped he at least ended up with good seats. “They were good seats,” he laughed. “I would never have paid that on my own, but I did.”

For many professionals, distinguishing between appropriate and inappropriate offerings can be a particularly difficult lesson to learn. Perhaps due to inexperience, they see kickbacks as a legitimate part of moving up the corporate ladder, and they are eager for all the perks that might come their way. The stories they’ve heard from friends or colleagues who enjoy VIP treats fan the fire by making such splurges seem like standard fare. Rising professionals, especially successful ones, can easily be lured into thinking that they too are entitled.

But this is a dangerous path because it is easy to lose sight of the fact that not all perks are the same. When a middle manager’s company sends her on a training conference to Las Vegas, this is different from accepting special favors from a vendor or other third party, a situation that poses a potential conflict of interest. The manager might feel a sense of indebtedness that is not easy to shake.

Top leaders should be particularly wary of believing that they deserve special treatment. This kind of thinking can severely cloud their judgment. And the risk is compounded by the fact that it is a common trap for people in positions of authority. Simply stated, power can corrupt, and leaders who are not grounded with a strong sense of integrity often end up traveling down a slippery slope. They create their own shifting, internal calculus until nothing is off limits—first U.S. Open tickets, then a private jet, then perhaps the corporate treasury.

When Dennis Kozlowski was CEO of Tyco International from 1992 to 2002, he funded much of his lavish lifestyle at company expense. He used $5 million of Tyco money to buy his second wife’s wedding ring, and on her fortieth birthday, the company paid for a toga party on the Italian island of Sardinia, complete with a private concert by Jimmy Buffett and a giant ice sculpture of Michelangelo’s David with vodka flowing out of its penis. Tyco spent almost $17 million on a luxury eighteen-room Manhattan apartment in Kozlowski’s name, plus an extra $12 million for furnishings (including a six thousand dollar gold shower curtain). Yet through it all, Kozlowski never thought that he was doing anything wrong because there was no cover-up, no criminal intent. He simply felt he deserved these perks because he was the CEO.

At Enron, executive behavior was even worse. Top brass there resorted to elaborate schemes in order to cover up the company’s real financial condition. Once all the smoke cleared following bankruptcy, a complex web of offshore accounts and phony partnerships appeared. Enron had been falsifying records. Its CFO, Andy Fastow, used shell companies to hide massive losses from Enron’s financial statements. In theory, these companies were supposed to be independent, but Fastow worked both sides of every transaction. Even worse, he cut out a piece for himself and put it in his pocket. All in all, he defrauded Enron shareholders out of tens of millions of dollars this way. This number pales in comparison to the amount that Enron illegally shifted, however: at the height of Enron’s debt, its balance sheet showed that it owed nothing, when in reality it owed $30 billion.

LEADERS WITH INTEGRITY GET RESULTS

The Enron and Kozlowski examples are extreme cases, but (sadly) not as surprising as they should be. As a society, we are accustomed to leaders with big egos, and we often expect them to act in self-absorbed ways. In fact, we almost believe they should display a certain degree of swagger. The truth is that most of us like a little bit of rock star in our leaders. We respond to their magnetism, their celebrity. Unfortunately, a variety of research shows that by placing too much emphasis on these other qualities and not enough on integrity, we are doing ourselves a great disservice. Leaders who possess integrity get results, and the organizations they lead consistently outperform the rest.

From a commonsense standpoint, we all understand the personal benefits of dealing with someone who possesses integrity. We trust and respect them. They are the kind of people we want as relatives, colleagues, neighbors, friends. But what about at the organizational level? Does integrity translate into a quantifiable difference at the bottom line? Or is it just some touchy-feely concept? How do we know that integrity works?

Tony Simons, a professor at Cornell University who studies organizational behavior and leadership, researched these questions and tested whether staying true to one’s word and treating others fairly is correlated with higher company performance. The kind of person he had in mind was Stan Myers, CEO of SEMI, a global semiconductor industry association. Many years ago when Myers was CEO of Mitsubishi Silicon America, the company decided to move its headquarters from the San Francisco Bay Area to Dallas. Employees were offered an option: relocate to Dallas and stay with Mitsubishi, or accept a severance package consisting of eight months of salary. A year after the move, Myers learned that a former employee named Alan had left the company without receiving his severance. The company never cut him a check, and Alan never asked for one. Instead, each party had simply gone its separate way. Without hesitation, Myers immediately tracked down Alan and made sure that the company sent him a check. Then he visited Alan’s new...

Table of contents

• Cover
• Contents
• Copyright
• Introduction
• Chapter 1 : Integrity
• Chapter 2 : Empathy
• Chapter 3 : Emotional Intelligence
• Chapter 4 : Vision
• Chapter 5 : Judgment
• Chapter 6 : Courage
• Chapter 7 : Passion
• Chapter 8 : A Better Way to Choose Leaders
• Appendix A : Commonly Used (and Misused) Leadership Terms
• Appendix B : The DNA of Leadership Competencies
• Notes
• Acknowledgments
• About the Authors
• Index