The seven sins applied to corporate disasters
Managing for Success: Spotting Danger Signals and Fixing Problems Before They Happen
When we talk of the seven deadly sins, the reference is to the Catholic theologian’s version. But the same can be used to explain why companies fail, and this is where Morgen Witzel makes a difference in his book, Managing for Success. His approach to telling us how companies could be successful is by avoiding these pitfalls. He uses examples of several companies such as Ford, Swissair, GM, Lehman Brothers, Time Warner, etc, which show some characteristics akin to the seven sins. When all or most of them combine, the organisation goes down.
While we generally tend to blame individuals for companies going down, Witzel argues that it is the general level of incompetence that builds in companies that pushes them to low levels. While leaders influence the culture of an organisation, it also works the other way round, where toxic cultures constrain and subvert leaders, thus restricting their actions. We in India can identify with the public sector, where the culture influences the leader, who, in turn, may find it impossible to change things around.
The author links the seven deadly sins with incompetent organisations in a very cogent and entertaining manner.
The first is arrogance, when companies think they can do everything they want to. More interestingly, arrogance of good intentions is critical where we believe that the means justify the end. He calls this the ‘Titanic syndrome’, when this feeling of indestructibility builds up, leading to the sinking of the ship.
The second sin is of ignorance. Often people are promoted to positions for which they have no competence or knowledge. Leaders describe all failures as ‘black swans’ to cover up their incompetence. An example was well-known company Zara. It came up with a T-shirt for kids with a design resembling uniforms worn during the holocaust, which was withdrawn. They withdrew the design, but did not know what the hullabaloo was all about.
Clearly, it was the wrong persons at the top of the company.
The third is fear of uncertainty, the unknown and personal timidity. Here managers look to analyse all the unknown possibilities and get bogged down to the extent that they do not move because of this fear leading to planning paralysis. The fourth is greed for growth, profit, market share and victory. Continuous pursuit of increasing shareholder value makes one become too greedy and these companies end up milking customers, squeezing suppliers and paying low wages to employees.
Fifth is lust, and while physical desire did bring down several leaders, it manifests in other ways. The lust for power resides in most CEOs. The lust to expand in all fields leads to uncalled for diversification in a big way. The sixth sin is of linear thinking where he brings in the Descartes curse, where the philosopher argued that human behaviour can be explained by step-by-step causation. The last is what he calls a zombie company where nobody cares about the company and there is a clear lack of purpose.
His responses to the deadly corporate sins are straight forward. Retain humility all the time. Others matter more than you. Create a knowledge culture which is shared. Have courage and taking some risk is part of the business and inevitable, and so on.
This is an enjoyable book where readers can empathise with several situations. But, more importantly, one should recognise if one suffers from these ‘sins’. This is the ultimate crux.
Madan Sabnavis is chief economist, CARE Ratings