What not to do in 2012: Learning from last year’s worst CEOs
Tuck professor lists the biggest CEO blunders to avoid in 2012
January 2012 — As the New Year begins, it might be a worthy exercise for CEOs to look at the glaring mistakes made by other CEOs last year and take note. Sydney Finkelstein is author of "Why Smart Executives Fail” and a professor of management at the Tuck School of Business at Dartmouth. He has selected the worst CEOs of 2011 and explained their missteps.
1. Former co-CEOs Mike Lazaridis and Jim Balsillie of Research in Motion (RIM)
CEO Blunder: Unadaptive, co-CEO structure.
The Canadian company RIM designs, manufactures and markets the BlackBerry, one of the world’s most popular Smartphones. Yet RIM’s former co-CEOs weren’t able to adapt their product at all, even as adversaries, such as iPhone and the Android, begin encroaching on its market share. Additionally, having two CEOs at the helm only caused more confusion and slowed progress, according to Finkelstein. What remains to be seen is the impact former CEO Mike Lazaridis will have in his new role of vice-chairman and head of a new board committee. According to Finkelstein, when they stay, they inevitably fight change.
"The co-CEO structure is almost a guaranteed model for failure. It hardly ever works,” said Finkelstein. "It makes it difficult to know who is in charge and I think that slowed down their ability to adapt to competitors.”
2. Former CEO Leo Apotheker, Hewlett Packard
CEO Blunder: Wishy-washy, poor strategy execution.
As head of the world’s largest PC manufacturer, Apotheker ended up losing more than $30 billion in market capitalization over less than 11 months on the job. He tried to get rid of its $40 million dollar personal computer business, then finally decided to keep it. He changed his mind again by creating a new tablet and then subsequently dropped it.
"These people that become CEOs of HP and then are shown the door typically walk away with $25 million or $30 million in severance. That's not going to make a lot of people or shareholders happy,” said Finkelstein.
3. Reed Hastings, Netflix
CEO Blunder: Poor communication, decreased ease of product use.
Netflix made a name for itself by offering customers a flat-rate DVD rental by-mail service in the United States. It has since begun offering Internet video streaming and has plans to expand to Europe in 2012. Hastings decided to split the business in two – traditional DVD mail order business and the newer streaming business. While doing this he raised prices and made it much more complicated for people to get what they want.
"In fact, I like the idea of splitting the company in two. In some ways that's textbook strategy. You split the company in two to protect the new fledging business, but the process that he went through has been a disaster,” said Finkelstein. "His communication wasn't very good, and I think there are a lot of people that are wondering what is new that they are doing that nobody else can do. And I don't actually think there's very much.”
4. William Weldon, Johnson & Johnson
CEO Blunder: Shirked safety.
Over the past year there were an incredible number of product recalls in this huge multinational pharmaceutical, medical devices and consumer packaged goods manufacturer: insulin pumps, sutures, syringes, hip implants, contact lenses, Tylenol, Benadryl, Rolaids, and baby shampoo.
"William Weldon is almost like a Teflon CEO because there's a lot of stuff that went wrong this past year and hardly anyone ever talked about it. For a company like this to fall down when it comes to quality and safety is, I think, shocking. And William Weldon is the CEO and it's happening on his watch,” said Finkelstein.