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 / Winter 2007 / Issue 49(originally published by Booz & Company)


Best Business Books: Human Capital

The key idea in his book is about overconfidence. Hayward does not deprecate overconfidence, which he says is essential for corporate success. On each of the three or four occasions when I have been involved in turning around a company, I must confess to exhibiting great confidence even though I did not know exactly how success would be achieved. But there is a good and a bad overconfidence.

Ego Check examines the bad kind of overconfidence and its four sources, all of which are easily recognizable. The first is “excessive or exaggerated pride.” This might come from a person’s concern with impressing other people. Or it can arise from the false sense of satisfaction leaders get from using self-serving data to inflate their accomplishments. Think about corporate leaders who try to show a positive turn in business performance at about the time they took charge.

The second source of the bad kind of overconfidence is “isolation.” In a chapter called “Getting Out of Our Own Way,” Hayward focuses on former Hewlett-Packard CEO Carly Fiorina. The pride she exhibited before her fall leads him to the conclusion that “few people were willing to tell her that she was wrong…. She insulated herself behind assistants within the executive suite and blamed deteriorating performance on subordinates. And she used guilt to tell people how much they had let her, the board, and the firm down.”

The third source for bad overconfidence: Executives get valuable feedback from people, but because it is contrary to their own views, they ignore or discount it. This Hayward describes as “selective judgment,” or “our propensity to make decisions about situations that are based on feedback that pleases us or fits our preconceptions of our situations.” Here he makes an example of Merck leaders who did not listen to the feedback on the harmful side effects and questionable safety of Vioxx. (The author reminds us that on September 30, 2004, the day then CEO Ray Gilmartin took the $2.5 billion-in-revenue drug used by 20 million Americans off the market, Merck lost $25 million in market capitalization.)

During the early 1990s, I witnessed a similar demonstration of bad overconfidence when working at Unilever: the fiasco in the U.K. over Persil laundry detergent. Persil contained a proprietary ingredient called the “accelerator” that helped it remove dirt significantly better than other products. It was launched with great fanfare, which died down when it became apparent that the accelerator not only cleaned garments, but shredded them. Photos of underwear with holes were displayed on the front pages of British newspapers to dramatize our failure to fully research the effects of this special cleaning ingredient.

The fourth source of bad overconfidence is leaders “underestimating the consequences” of their decisions. Quoting Stephen Covey from The Seven Habits of Highly Effective People, “While we are free to choose our actions, we are not free to choose the consequences,” Hayward similarly argues that failing to think about tomorrow fuels hubris in decision making today. Leadership failures during recent world news events, such as the Iraq war and Hurricane Katrina, illustrate his point without too many words.

High-Carb Wisdom
Karen Otazo, the author of The Truth about Being a Leader, is an executive coach with impressive international experience. She has worked with senior executives in multinationals around the world and claims fluency in Spanish, English, French, and Indonesian. But her book of 52 truths, arranged in 10 sections, each no more than four pages, seems to have a single and culturally universal message: Leaders are sized up by those they lead on the basis of how they speak, think, and behave.

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