Why Do Businesses and Leaders Fail?

I hate the term “soft skills”. To me, it’s a weak and misleading label that attempts to categorize everything that really matters about leadership and business success into a bucket of fluff. Any leadership development professional should know better.

Given that, I know it’s a common term used by every day people. It’s because they don’t know what else to call “it” or how to define that stuff that seems to separate the haves and have nots.

When I was first learning about competency modeling, I’ll never forget what a consultant said to me that underscored the importance of the “soft stuff”.

We were in the process of building a leadership competency model and curriculum for a former company. At the time, we were having a debate about having a balance between the “hard” stuff – things like marketing, finance, operations, sales, industry experience, etc… and the “soft” stuff (listening, peer relationships, composure, vision, etc…). Our executives were leaning towards the second – the traditional MBA topic list of functional management skills.

The consultant asked our executive team: “Name one business that ever failed because of a lack of functional or technical expertise”.

You could hear crickets chirping for a few minutes – we couldn’t. That was almost 20 years ago, so that consultant was way ahead of the conventional wisdom at that time. Think about the recent challenges of some of our great car companies and banks. It sure wasn’t due to a lack of engineering or financial expertise.

Fast forward to today: Jim Collins, in his book “How the Mighty Fall” spent four years researching how once great companies failed. He developed a five-stage model that describes the stages that each of these companies went though. They are:

1. Hubris born of success. Great companies can become insulated by success. People become arrogant, regarding success as an entitlement, and they lose sight of what made them successful in the first place.

2. Undisciplined pursuit of more. Companies stray from what led them to greatness in the first place and make undisciplined moves into areas where they can’t succeed.

3. Denial of risk and peril. Leaders discount negative data, amplify positive data, and post a positive spin on ambiguous data. They start to blame external factors rather than accept responsibility.

4. Grasping for salvation. They start looking for that “silver bullet” solution.

5. Capitulation to irrelevance or death. Turn out the lights, the fat lady is singing.

Collin’s recent work certainly supports the declaration made 20 years ago by my consultant friend – that organizations don’t fail because of a lack of technical, functional, or business skills – it’s always because of some kind of collective destructive mindset and behaviors.

The same is true for individual leaders.

The Center for Creative Leadership and Lominger has identified the following (through extensive research) as being executive “derailers” (I’ve combined elements of their research):

– Unable to adapt to differences
– Overly ambitious
– Arrogance
– Blocked personal learner
– Defensiveness
– Insensitive to others
– Non-strategic
– Failure to build a team
– Lack of composure
– Lack of ethics and values

Finally, in his groundbreaking research (200 large global companies) on “emotional intelligence” Daniel Goleman found the following components to be the biggest differentiators between leadership success and failure:

– Self-awareness
– Self-regulation (controlling your emotions)
– Motivation
– Empathy
– Social skills

Wow, all of this soft, squishy, touchy feely stuff….. hubris, denial, insensitivity, empathy – sounds more like an episode from the Dr. Phil show than what’s taught in most business schools these days.

To be fair, I’m not sure this kind of stuff can even be taught in a college course or training program. According to Goleman, emotional intelligence increases with age – it’s called “maturity”. That doesn’t mean “the right stuff” can’t be developed – it’s just going to take a different approach. Aspiring leaders need to know what to do and not do, be exposed to positive roles models, get opportunities to practice and get behavioral feedback, and perhaps even have access to some professional coaching.

We can, however, incorporate this “right stuff” into our competency models or hiring profiles for selection and promotion. There are even 360 assessments and behavioral assessments that have been validated to measure these factors.

So what should you take away from all this?

1. Understand what really matters when it comes to business and leadership success.
2. Get feedback (early in your career or when your business is doing great, before it’s too late).

3. Never give in – take action to improve. If companies or individuals heed the early warning signs of failure, they can usually take action to prevent it.

Note: Many thanks to GL reader and manager Jon Housknecht (@WSTheHouse), for bringing the Goleman article “What Makes a Leader” to my attention and inspiring this post.