Is Executive Hubris Ruining Companies?

Is Executive Hubris Ruining Companies?

Inflated egos can destroy products.

In his new book, Ego Check: Why Executive Hubris Is Wrecking Companies And Careers And How To Avoid The Trap, Mathew Hayward, assistant professor at the University of Colorado, shows how executives' inflated egos can impact what they choose to produce, the manufacturing decisions they make and how they market their products.

IndustryWeek recently caught up with Hayward in the following Q&A.

Q: Your book discusses how hubris can affect product development and manufacturing. Where do you think hubris has the greatest impact?

A: What emerges from my research is the potential for executive hubris to destroy products, whether in the development, manufacturing or marketing stage. Some examples will help.

It's easy to forget that Apple under John Sculley was first to the Personal Digital Assistant market with the Newton. At the time, Sculley fashioned himself as a technology guru, actually appointing himself the firm's Chief Technology Officer, much to the disgust of experienced and talented developers. Trying to prove himself to be the next Steve Jobs, Sculley tried to do too much with Newton, over pricing the product with handwriting recognition capabilities. Lamenting the missed opportunity, Sculley now accepts that "Newton was too ambitious technically, it was probably too open-ended and it didn't try to anticipate what its applications would be."

Contrast the Newton with the development of the iPod, which is usually attributed to Steve Jobs. Rather than throw money to develop a large team, Jobs entrusted the project to a young hardware engineer, Tony Fadell, and let him collaborate with a no-name firm, PortalPlayer, which had already completed up to 80% of the needed technology. Rather than build a state of the art product, and develop features like PDA and cell phone capabilities, Jobs settled for a 'good enough' player that could be continuously upgraded.

The iPod experience highlights how world-class innovators are always going to have technical experts who know how to find, as well as develop, innovations. By contrast, the 'not invented here syndrome' with its premise that in-house innovations will trump outside ones, is a hallmark of hubris.

It's also easy to overlook how hubris can interfere with efficient manufacturing. Take the Segway, Dean Kamen's self balancing, two wheel scooter that riders operate while standing. With all the hype, Kamen built a 75,000 square foot manufacturing facility in New Hampshire that is setup to produce at least 40,000 units a month. This was based on his estimate that the firm could capture 0.1% of the global population of 6 billion people and sell 6 million Segways each year. Weeks later, the Segway was forced into an embarrassing recall of its entire installed base of 23,500 scooters. You could not find a better example of an executive getting ahead of himself: After all, Kamen setup his company to produce 40,000 units a month but has sold a total of 23,500 over 5 years!!

The point is that hubris and over investment go hand in hand, whether in product development or manufacturing. Like the iPod, the Newton and the Segway could have been blockbusters. A critical difference is that Sculley's hubris undermined the Newton and Kamen's hubris got in the way of the Segway's success.

Q: So, how would you know in advance whether hubris will strike?

A: It's impossible to know with complete certainty when and where hubris will strike. But, having conducted over 200 interviews with leading executives and having led a number of major academic research projects on the subject, four conditions emerge as highly conducive to hubris.

First, executives are vulnerable when they get too full of themselves, as Kamen's case expensively highlights. Unfortunately, I've seen many executives who are more driven by a need to feed their ego rather than by true pride in doing great work. There's a narcotic-like effect in which executives become preoccupied with extrinsic results and benefits -- unrealistic and often phony targets, an undue need to impress one's boss, outsized compensation -- in a way that becomes unsustainable. We tend to inflate positive feedback and discount negative feedback about ourselves, thereby developing an unrealistic view of who we are and what we can do.

Second, executives often fail to get out of their own way. Let's face it, most of us like to take charge and decide. The problem is that there are many cases in which we just don't have the right skill-set to be taking decisions and actions or we're pressured into making decisions in the wrong time and place.

Third, it's all too easy for us to kid ourselves about our situation. Naturally, project managers like to see their projects in a favorable light, especially as there is more riding on project success. But, most of us receive vague, weak and untimely feedback about our projects that we are not always highly motivated to act upon. It's a recipe for exaggerating the potential of our projects.

Finally, hubris will strike when we fail to manage the consequences of our decisions and actions today. Planning is not about developing a forecast and hoping that it will come true; it is about trial and error experiments. As Southwest Airlines founder Herb Kelleher says, "We have a plan. It's called doing things."

Much like you don't want to ignore the potential for bad cholesterol to produce heart disease, it's important to remember that these five conditions will induce hubris.

Q: How can the problems created by executive hubris and ego be more effectively managed?

A: That's really what the book is about. It offers a comprehensive framework and supporting examples to help prevent us from getting too full of ourselves, getting in own way, kidding ourselves about our situation and choosing forecasts over trial and error.

Just to take one example from the second source of hubris described above. We all know the tale and moral of Hans Christian Andersen's story about the Emperor's New Clothes. In industry, the idea is that every successful executive needs to have a cadre of senior advisors who can candidly and cleverly tell him when he's walking around buck naked and does not necessarily look like Brad Pitt!! The question becomes: What are the right qualities of such advisors? In Ego Check, I highlight the need for 'foils' or close advisors who share our agenda (obviously not those who want our jobs!), with whom we have a deep level of personal trust and even affection and who have complementary skills that make us better. Think here of Charlie Munger and Warren Buffett, Steve Ballmer and Bill Gates and Kevin Rollins and Michael Dell.

Others have kindly said that the book is a sure fire cure for the out of control egos that damage our careers and companies. I'm not so sure. But I can assure you that following the guidelines in the book will be an important first step towards saving your company from the fortune that can be lost from hubris; and a means of improving your career.

Mathew Hayward is an assistant professor at the Leeds School of Business at the University of Colorado. He worked as an investment banker with UBS Warburg and as a capital investor with AusAsean ventures. Mathew has consulted worldwide with major organizations including Dell, Ericsson, Intel and Pearson. www.ego-check.com

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