Success Secrets: Dangerous Liaisons

A recent news story included certain CEO’s list of business activities, all in addition to his ‘day’ job. They included: part-owner of golf course, hunt club and new marina, each in different part of the US; silent partner in his son’s start-up venture; prime mover behind regional ski-resort development; and boutique winemaker at his country estate, where he was also active in promoting the local film festival.

The tone of the article was respectful, even fawning.

The following week, after the release of its quarterly earnings, the CEO’s company’s stock price fell almost 10 percent. The same newspapers reported this without once drawing connection between the company’s poor performance and its CEO’s very full dance card.

The news didn’t, however, go unnoticed by former CEO who is currently on the pier waiting for his next ship to come in. “This is classic case of fatal distraction,” he said to an executive who was staying with him at his weekend place. “And I ought to know, because it happened to me.” With that, he poured the executive glass of his very own estate-bottled merlot to accompany the steak butchered from his own herd of bison.

You would think today’s CEOs would have enough on their plates to be content to let financial manager handle their money – put it in some nice safe real estate, secure bonds, couple of growth mutual funds and maybe vineyard or two. But that’s not how it works.

Busy execs lose focus
There is, of course, no such thing as ‘safe’ investment for CEOs. Something in nature must abhor the sight of an under-burdened chief executive, because it’s almost impossible to find one who isn’t juggling, in addition to demanding job, handful of formal and ad-hoc projects.

There are two sources of these potential fatal distractions. First is the so-called ‘passive investment’ that inevitably runs into trouble and requires the CEO’s expertise. It’s hard to say no to this kind of involvement, because the executive risks losing the investment by letting events run their course.

So, of course, the CEO says yes. Having taken look at the books, the organisational chart, and met the managers, what are the odds of delivering few well-chosen words and backing off? Not great. More than likely the investor CEO will be scheduling weekly conference calls and engaging in little enlightened micro-managing.

Meanwhile the golf course development into which sum has been sunk hits bogey. Maybe sales are slow, maybe there’s drought and environmental restrictions kick in, maybe somebody is suing somebody. The board calls up for an opinion. The CEO is suddenly hooked in again because these are good guys, people he or she socialises with.

And so it goes. At some point CEOs become firemen for every major project in which they invest. Why? It’s why promoters approach them in the first place. In the minds of the pitchmen, smart CEOs represent hold card to play if things turn sour.

Flattering? Well, yes. But notice the price tag. The CEO has been induced to go to work, gratis, for the privilege of risking his or her capital. Having absorbed this fundamental truth, our CEO should get little angry; then it becomes easier to simply say no. No to the needy executives of these other companies, no to the son-in-law who needs silent partner, no to the wrong investment, period.

This, however, doesn’t go far enough, because it still doesn’t eliminate the second source of the classic fatal distraction: the CEO him or herself.

Let’s face it, the driving passion of CEO is the charge delivered by running things. It makes them antsy whenever they’re not in the driver’s seat. They put personal earnings in the hands of trusted adviser who has found the right blend of financial instruments and passive investments, and the first time there’s an earnings glitch the average CEO will demand to know the cash flow, the bottom line, the store-by-store sales figures, the reason chardonnay grapes are out and zinfindel is in, and so on.

Sooner or later, the more CEOs know, the more they figure they should get involved. It’s natural – they’re used to running things. That’s when the seeds of downfall are planted and there’s nobody to blame but themselves.

Self-knowledge and the ability to override natural impulses is frequently the difference between the successful and the formerly successful. If you want to avoid bad case of fatal distraction, become the busy CEO nobody thinks to ask for help.

Mark McCormack is the founder of International Management Group. www.successsecrets.com.

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