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 / Fourth Quarter 1996 / Issue 5(originally published by Booz & Company)


Why C.E.O.'s Succeed (and Why They Fail): Hunters and Gatherers in the Corporate Life

If, in fact, the C.E.O. does not lead the board, the board's other members, who are operating out of their primitive, innate rule book, have little conscious insight into the situation. They are confused and become unruly. The C.E.O. and sometimes the organization itself then fail. Often, neither the board members nor the C.E.O. can explain the failure. They then go on to repeat the pattern until, in the case of the board, they get a C.E.O. who will lead, or in the case of the C.E.O., he accepts his leadership role or returns to a subsidiary role in another company.

Problems With Becoming Big: The Faltering Founder

Unless he has access to an enormous amount of money, the founder of a company must first found a camp. In a camp, as we have seen, there is little specialization; in a new company, it is common to hear, "I wear a lot of hats." It is also common to operate by consensus: members marvel at the speed with which decisions are made, and at their feeling of mutual support, clear objectives and clean, unambiguous communication. Employees at all levels speak as though they know what is going on throughout the company. Most of the company's people work far more hours than a normal workday; they enjoy their work.

If the company succeeds, it grows. At first, the company's members are elated with the growth, and point to the company's new people as evidence of its success. Soon, however, typically when the company reaches 25 people, a few dissonant voices are heard: "He's trying to do my job," "I don't know what's going on anymore," and, as the company continues to grow, "We've lost something important. I don't know what it is, but it's gone. It isn't fun anymore." At this point, one or two key employees decide to leave, or simply begin to work 40-hour weeks.

If he doesn't understand what is happening, an insensitive C.E.O. will say that his people are ungrateful and will withdraw; a sensitive C.E.O. will redouble his efforts to communicate. Both will fail.

The appropriate action is to assemble a hierarchy, using experienced people, when the company's staff numbers more than 20. Some key people will be dissatisfied and will leave, because they left a hierarchy for the camp-like feeling of the small company; some will feel betrayed. Others will adjust. The C.E.O. must gradually abandon his role as consensus leader and take on the role of chief.(8)

This is a difficult transition even for C.E.O.'s who understand the problem. Often, a founder has chosen his role because of difficulties in a hierarchy; he sees the transformation of his company to a hierarchy as a personal failure. At best, he must deal with alienation and feelings of betrayal in people with whom he has worked closely, and with whom he shared the bonding and elation of a successful working party. Sometimes, even if his company succeeds, he is unhappy and unfulfilled.

Problems With Going Small: A Chief Without a Tribe

The opposite occurs when a C.E.O. is recruited from a large company to run a young one. Such people often have no experience with consensus-based groups.

When the C.E.O. arrives at his new company and finds that everyone has a title and a place in an organization chart, he is pleased, and often begins the process of interviewing his people to see if they are well-qualified for their positions.

He is then usually dismayed. If he concludes that he has an incompetent staff, however, he will be wrong. If, on the other hand, he believes that the titles and the organization chart describe the real organization, and then attempts to operate the company accordingly, he will fail immediately.

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