Seven symptoms of “Executive Think”
Netflix's stock is rapidly becoming almost worthless, thanks to the failures of its executive team. Todd Ordal recently wrote a great article called "Netflix's CEO: Traitor or Hero." While I understand and appreciate Todd's point about leaders needing to make difficult and controversial decisions, I also think that (Netflix CEO) Reed Hastings and the debacle at Netflix is emblematic of a large problem in American businesses - "Executive Think."
"Executive Think" is the tendency of the people at the top (of a business or a country) to surround themselves with others who think in dysfunctional ways that have little to do with the real world. Here are some symptoms of Executive Think.
1). An overly optimistic view of the company or organization. Those in the executive suite tend to see their company as being able to run faster and jump higher...and even leap tall buildings in a single bound. This is often delusional, sometimes pathologically so. As stock plunges (as Netflix stock has been doing) and customers scream, many of the good ol' boy networks pat one another on the back and tell themselves they're doing a "heckuva job."
2). Inability to change direction. Today's business environment requires a speedboat, not a battleship. Larger companies (and many smaller ones) persist in counter-productive behaviors long past the time they should recognize a problem and take counter-measures.
3). Lack of a customer center. Executives often neglect to poll customers or do research on customer reactions to company moves. They frequently discount warnings of negative reactions to company moves (New Coke and Quickster, for example), and underestimate the reaction on the part of customers.
4). Underestimating negative customer reaction impact on the business. Netflix executives knew there would be some negative customer impact to their pricing plans. What they underestimated, and what many businesses underestimate, was the degree to which such negative customer reaction would hurt their business.
5). "Foxhole mentality." When a company gets in trouble, rather than face the issue, many executives hunker down in the "foxhole" and come up with dysfunctional explanations for why their "great" idea is tanking hard. The reasons they come up with are rarely the correct ones, and usually add to the problem rather than solve it.
6). Lack of understanding regarding finances of the majority of people. "Broke" for many executives means that they're down to their last $5M. There is a general "let them eat cake" attitude among many executives that assumes the rest of the country, when they say they're broke, actually has a great deal of assets. Ummm...no. The 90% of Americans who are not at the top are facing very real financial issues. Companies like McDonalds and Denny's who understand this, and offer their product at a very low price, are doing much better than companies that are unconscious to this fact. But executives tell themselves that they just need to make their product more attractive and people will "find the money" to buy. This may be true in good times. It is not in our current economy. Pro-active companies take the financial climate into account before making pricing decisions.
7). "Group-think." It can be very dangerous for an executive to raise these issues in the executive suite. Rather than being rewarded for wisdom, the dissenting executive is likely to be ridiculed or even fired. They'll be seen as a traitor who is just "thinking negatively." In executive suites, any introduction of reality is pilloried as "negativity." This keeps executives from facing very real problems in the real world, and can result in the downfall of the whole company...with everyone remaining "positive" until the massive lay-offs start.
The solutions to these issues of Executive Think are not easy. In fact, as stated above, an executive who breaks ranks with this kind of thinking might well become unemployed. Restricting "incestuous" board memberships, having outside advisors (the proper role for a board), and constant customer input can help. In the end, though, it is business Darwinism. Those companies that persist in operating in Executive Think will, sooner or later, go extinct. Those who overcome it are the next stage of corporate evolution.
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