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Wednesday
Jul122017

Dr. Alexander Stein: What corporate boards really need to consider when looking for a replacement CEO

Choosing a replacement chief executive is among the most consequential decisions a company’s board may ever tackle. Consider this new article which purports to detail what Uber should look for in a new CEO.

It reads like a recipe for manufacturing a good person compiled by a committee whose contributors included Pygmalion, Baron von Frankenstein, the founder of E-Harmony, the writers of a Disney show, and a disgruntled 6-year old trying to concoct a nicer dad. It’s a short list of ingredients -- emotional intelligence, empathy, altruism -- which are, on their face, apparently supposed to magically combine into a good-hearted, thoughtful, non-jerky but effective corporate chief.

Like most psychology-lite business writing (and essentially everything I’ve read describing the so-called “human characteristics” of AI), there’s little of substance in this sort of parsing, and nothing of applicable value for Uber’s or any other company’s board trying to assess a current or future leader.

The marketplace is impatient; publishers, broadcast producers, and thought-leaders looking to have content impact understand the rules: boil away the complexity, make points quickly, and in easily understood and readily re-Tweetable soundbite form. Low-hanging concepts only. And try to reference quantifiable empirical data, preferably studies from pedigreed research labs, to implicitly signify heft.

That formula might sell human-interest stories, drive click-throughs, and appease busy institutional directors’ and stakeholders’ duty to sort-of know something about some things. But none of it, unfortunately, delivers much toward the mission-critical goal of actually understanding people.

To say that people are complicated is so hackneyed a phrase as to be trite; but that doesn’t make it less true. The qualities, characteristics, attributes, and many other psycho-social components of a person we bundle into the idea of and statements about who a person is -- their personality -- may be distillable into a profile for discussion or reporting purposes. That might help to suggest a probable style of decision-making or predisposition for conduct. But it must not be mistaken as comprehensive nor even fully accurate insight into who a person actually may be. Or, more importantly, reliably claim to have predicted how s/he might respond, react, or behave in certain contexts and conditions.

There are two major problems (together with numerous minor ones) in these all-too common fallacies in understanding who people are, how and why they come to be that way (and why that matters), and what to do once ineffective, undesirable, damaging, situationally inappropriate or a host of other tendencies and psychological potentialities are revealed or, worse, unleashed.

The first has two parts: 1.1 is, as I’m saying, that there’s an over reliance on oversimplification. Details matter, and when complexity is compressed or omitted for expedience, efficiency, or outright disinterest it doesn’t mean the complexity isn't still actually there. You’ve just overlooked or willfully ignored it. Until it hits you in the head. 1.2 is that most of these assessments of personality -- as well as nearly all threat risk flagging mechanisms -- are exo-observational. That is, looking at the outer layer of what’s happening -- behavior -- and then retro-fitting a causal hypothesis to explain what generated it. Info-Sec professionals and risk managers like to call this “real time awareness.” But it’s not. This is always after-the-fact intelligence -- by definition in these scenarios, you cannot know anything until you see something. And it is also invariably anemic intelligence -- root cause analysis lite -- because it is both grounded only (or primarily) in observable data and the conclusions derived are predicated on a minimization or even dismissal of multifaceted shadow-data -- fragmented and distorted contradictory and seemingly nonsensical dynamic internal mental forces which can give rise to ostensibly illogical unanticipatable ideation and behavior.

The second major error is that too much emphasis is placed on one person. This is not to suggest that CEOs are not singularly important, or that corporate organizations should be re-structured so as to give CEOs less significant influence. No and no. But it is a misstep to isolate and super-value one factor without understanding dynamic interactions with others. CEO instability (or pathology) alone is a serious problem but only one issue in a mix.

In Uber’s case (but, really, take your blindfolded pick among an ever-expanding roster of other similar headline-gathering CEO disasters: Elizabeth Holmes, Martin Shkreli, John Stumpf, Martin Winterkorn, Roger Ailes, Sepp Blatter, Mike Pearson, etc,), responsibility for the company’s problems are not solely Kalanick’s doing. Nor can the repairs be exclusively tasked to his replacement. And merely selecting a leader who embraces or postures a different leadership style -- an anti-Kalanick -- would just repeat the first mistake (though it might be disguised as a remedy for a time) and then compound it by mistakenly thinking it’s not a mistake.

There’s an unformulazirable admixture of psychological and environmental factors which can promote or impede good judgment, ethical conduct, behavioral restraint or, conversely, foster and unleash destructive or malicious misbehavior, turn decent apples into rotten ones, or otherwise send people down any number of slippery slopes. For more detail on these and related issues, these short articles about corporate leaders who’ve gone off the rails, on ethics and integrity in leadership, understanding and stopping executive misconduct, and the commonalities between entrepreneurs and con men will be of interest.

Uber’s board is right to advance its CEO search with the sobering if uncomfortable understanding that everyone, without exception, possesses potentially damaging or counterproductive personality traits and behavioral tendencies and that these cannot realistically be eliminated or pre-solved for. My advice to them and any other board is not to stop there. Prudent and incisive human factor due diligence involves sophisticated deeply knowledgeable modeling of human risk: knowing as much as possible about -- leaning deeply into, not turning away from -- the fullness and complexity, whether considered ‘dark’ or otherwise, of any person’s humanness. And that the job of selecting is just one early step in an interrative process.

The greatest CEOs -- even preternaturally talented and well-supported ones -- are only human. They will always benefit from knowing themselves better, acquiring new or refining established psychological skills, and learning more effective ways of enhancing their capacity to lead.

There’s no simple recipe for picking good CEOs or even the right one for any given organization. But an excellent and truly effective starting point is actually knowing whom you’re selecting, not just choosing somebody who appears to conform to a checklist of desirable ingredients.

____

Dr. Alexander Stein is the founder of Dolus Advisors, a NY-based consultancy that employs expertise in human risk forecasting -- actionable insight in human behavior and its drivers -- and the psychodynamics of ethics, compliance, and culture to help companies proactively mitigate and defend against white-collar and cyber malfeasance risks. Also a Principal in the Boswell Group, Dr. Stein advises senior executives and boards, combining clinically-informed insight with practical strategies to productively address challenging people issues in leadership, boardroom and senior team dynamics and assessments, and corporate culture.

Reader Comments (2)

Interesting article. I've stopped reading rehashed "recipe" articles and boycott certain publications for the reasons you outline and what I call "sloppy journalism." Two thoughts come to mind.

1. There is also no simple recipe for Board composition or any guarantee that any given Board has the right "tools" to select the next CEO. Think Wells Fargo.

2. My guess is that selecting a new corporate CEO post crisis presents certain added "challenges."

And finally, in this particular case, my hunch is the ex CEO is NOT riding off into the sunset. The "investors" (see link below) are still banking on his brilliance and a financial windfall, and are not going to sit idly on the sidelines while a new CEO drafts a long-term plan to "get it right." A more "politically correct" replacement will be named, bringing with him/her lots of talk of culture change and trust building, tons of media coverage on those "plans" and maybe even some new "policies." But goes on behind the scenes may just be a whole different story. http://www.investopedia.com/insights/ubers-top-investors/
July 13, 2017 | Unregistered CommenterBarbara Kimmel
Thanks, #Barbara Kimmel, for your insightful comment. There are many decisions which directors and senior teams consider and settle differently in crisis (or post-crisis) scenarios from during even-keel times. Often, the challenges are inadvertently amplified not reduced because the problem set is approached as strategic, economic, and reputational, rather than recognizing that the multi-faceted problems center on human character and group psychodynamics. As you aptly describe re the politically correct and investor supported replacement, the issues are over-simplistically assessed as just swapping out a faulty component for a better working one. That remedy misdiagnoses the probable multiple interconnected root causes, loses the remarkable opportunity to deeply understand why it actually happened and how a repetition (or other unintended negative consequences) can be avoided.
July 16, 2017 | Unregistered CommenterDr Alexander Stein

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