Why CEOs Behave Like Cowards

“The times they are a-changin'”, as Bob Dylan put it and that’s more true than ever today. Software is eating the world. Every firm is a software company now, whether they understand it or not. We’re in what Steve Denning calls the creative economy, driven by customers with an infinite amount of information at their disposal.

In these times of upheaval you might guess that many companies are going through major internal reflection and restructuring. The general answer is sadly, no. Many companies are still by-and-large acting like product pushers to the ignorant masses. Almost every traditional company is still leaning on tenets of management created in the 1800s. Radical changes are far and few apart. As a result of this fundamental inability to adapt, the life expectancy of firms have dropped significantly, now less than fifteen years and declining rapidly (Fortune 500 companies).

I think it’s fair to say that many existing organisations are in desperate need for major redesign, not just structurally but dynamically, how they work to create value. Nothing happens. It seems to me that CEOs opt for a safe tactic, maintaining the system instead of fundamentally changing it. CEOs are playing not to lose instead of playing to win.

Now this made me curious. I mean, why is that? I mean, are they idiots or just incompetent? Hardly. Perhaps some other forces are at play?

Man in the desert sticks his head in the sand

Is fear keeping you from saving the company?

I think it’s time for a story. At one of my first gigs as a software development contractor I maintained a few departments of a major newspaper’s web site. Ads for apartments and houses where one of them. I did what they told me. I fixed the bugs and implemented a few new functions. I even improved the design in some small ways. I thought I was pretty good. I was careful and didn’t introduce any new defects. Sure, there were always problems with the ad imports and the design was, well, incoherent, but hey, that was before my time. To be honest, I felt I didn’t have enough knowledge to change stuff. Even more honestly, I was too afraid. You might say I maintained the system, but not much more.

After some time a new consultant came in, much more experienced than I was. He was put in charge of some other departments of the site. He started out like the rest of us, but after a few months we spoke over lunch. He told me he was almost finished with a major redesign/rewrite of one of his departments, a famously horrid one. This rewrite improved the design significantly and removed many of the problems that had haunted the site since its infancy. I was terribly impressed – and secretly a little indignant. Maybe he introduced a few new bugs, but the value he created was infinitely bigger than mine. He had the knowledge and guts to rip stuff out and put it back in a much more usable, and well thought-through way. He didn’t maintain the system, he maintained (and improved) the long-term value it represented to its owners.

Back to CEOs. I think many CEOs are in the same situation that I was back then. Most CEOs are job-hoppers. They often don’t have intimate knowledge of the business they lead. Habitually, they are handed stretch targets by profit-hungry, short-sighted boards that “demand results” the first year. This creates fear, of course. In this situation, how would you act? Would you go for a major redesign of the whole company, risking profits for years? Would you start a cultural improvement program lasting perhaps a decade? Of course not. Any human would find it logical to just sit tight and do the best with what they’ve given you. Sure, make a cosmetic re-organisation when you come in, to show initiative, but then…

Most CEOs simply won’t dare a major organisational overhaul, bringing the company into the 21st century. Breaking up large enterprises into a network of independent, faster, more agile businesses is unthinkable. Pushing responsibility down to the people who do the actual work, firing most managers, and creating a more democratic organisation would be crazy. Deep-diving into lean culture and embarking on a quest to change the minds and hearts of thousands of employees is out of the question. This situation turns even the most action-oriented and decisive CEO into a simple maintainer of “the system”, a person controlled by their fear of failure, a commander on the Titanic.

What most organisations desperately need are maintainers of the value an organisation creates; someone with enough knowledge, bravery, and long-term thinking to rip out the guts of the company and together with the co-workers redesign it from the ground up. How do we serve customers best? How do we find their needs? How do we work quickly and with quality? How do we compensate people? How do we make decisions? Do we really need budgets? Do we really need managers? Hierarchies? Nothing should be sacred.

This will destroy the current fiscal year, but it may be your only chance of reversing the current catastrophic course and make the company fit for the next couple of decades. As a side-effect, it would of course turn turn the CEO into a legend. So the question you have to ask yourself, dear CEO, is this: Do you want to have slightly more money, killing the company in the long run, or do you want to be a legend?