When Great Leaders Make Bad Decisions
If as a leader, you worry less about results and focus more on doing the right things, the results will definitely take care of themselves.
It is self-evident that leadership determines how an organisation turns out. When you get leadership right, everything is just going to be okay. When people have the habit of not taking responsibilities in communities, in nations, in corporations things cannot change for the better. Decisions are the cornerstone and the building blocks of every outcome. Now outcomes are dependent variables, results are dependent variables. If as a leader, you worry less about results and focus more on doing the right things, the results will definitely take care of themselves. The trouble that we have in the world is that more people are more concerned about the results than the process that creates the result. It is important that we understand that the micro elements of our outcomes are decisions, if the micro elements are great the outcome will be great. So already you have a problem when you try to manipulate the results.
Every failure is the result of bad choices. When leaders make bad choices or decisions the result is failure. But what I want to focus on is what happens when great leaders make bad decisions. Now that’s an irony because the reason they are called great leaders is because they produce great results. Every organisation that is termed great is run by great leaders. The organisation is great because behind the scene, there are great decisions driving the process that leads up to the results. So what builds ordinary organizations into extraordinary organizations is the greatness of the choices and the decisions made by the leaders. When nations or organizations fail it is proof that some bad decisions have been made irrespective of how great the leader may be.
So the question is why would a great leader make a bad decision? Oh how that happens leads to corporate and national failure! That’s why several nations that you heard about in history lost their place because at some point in time somebody made the wrong choice. That’s the reason why businesses fail or lose their place and become absolved into more successful organizations. Now you understand that no organization is immune to failure, the factor behind the rise of organizations is the quality of decisions being made. When the leaders making those decisions lose sight of why greatness happens in the first instances everything falls like a pack of cards. So if you want to keep an organization strong, you want to keep a nation strong, you have to make great decisionsand keep making them.
First of all, what happens when great leaders make bad choices is that failure begins. It’s like a sickness, it begins to attack the body as time goes on you realize that changes start taking place. The thing is when organizations and nations are very successful they never believe that anything can ever go wrong, it seems like the towering success will ever remain. But history shows otherwise. Companies have gone up to come down, Nations have fallen. So you don’t really believe that it could ever get that way but it happens and once that difficulty sets in, once a firm or a nation sets on the path of decline, recovery is always very difficult. There are a few companies like IBM and Apple that were able to make a great comeback after some terrible experiences. Not so many companies can have great leaders that can turn things around that way.
For some, like Wang Laboratries their own decline was sharp and instant. Some tried to turn things around like Kmart and eventually they took the way out. Some will limp along for some time and still fail. Imagine for Kodak, they were able to manage their difficulty for more than a decade before they eventually gave in and signed for bankruptcy. When that happens there is this a tendency for leaders to think that the reason for the decline is the environment. While that could be true when we think about a company like Northern Rock in the UK. During the 2008 recession Northern Rock was starved of funds and the company failed. That’s actually more of an exception than a rule.
The trouble that we have in the world is that more people are more concerned about the results than the process that creates the result.
To even get some things in context, great leaders produce great results, great results come from great decisions made by these great leaders. The results of great decisions can be instant but it can also take a while and the same goes for the result of bad decisions. I remember when J C Penny was trying to turn around their business and they hired Ron Johnson as a CEO. Roy Johnson was a remarkable leader with an impressive track record. It was him that Mr Steve Jobs hired when he wanted to set up the Apple Store for example. The level of trust and faith that people had for Ron Johnson was evident as the stock price of J C Penny went up the very day the news of his new position was reported. Since there was no other announcement about JC Penny that day it was clear that people had respect for Mr Johnson and his ability to turn things around at JC Penny. So that was an instant result of a decision that was made.
However over the few months that followed, it turned out that the choice of Roy Johnson to run J C Penny was a lousy one. The respected executive who has produced amazing results in the past couldn’t produce a great result in J C Penny. Why did this happen? If you read the story you will find out why Ron Johnson could not produce the intended result. He made choices which even the other managers thought were wrong. In some cases they raised an alarm and suggested that some of Mr Johnson’s ideas should be tested before they are rolled out company wise but Mr Johnson insisted they didn’t test at Apple. How would Roy Johnson think that way? Here is an excellent example of a great leader making bad decisions. At the time of those decisions they hardly appear to be bad decisions, but they really were.
The same is true of the 900 million dollars in advert money from Google to Myspace which accelerated the decline of Myspace. But just as the case of Ron Johnson, in 2006 when it happened it was highly praised and celebrated in the media. Everyone thought that this was the best deal ever, that this was the best call of action for the both companies. Well the next few years proved that it was not. By 2007 just a year after that, the company Myspace was worth billions of dollars but in matter of a year Myspace has lost so much value that it was eventually sold for 35 million dollars! That’s a company that was worth over a billion dollars. The decline didn’t start in one day, it began the day they realized they needed the advert money more than what their users cared about. They annoyed their users and all of them left them for Facebook.
So clearly, great leaders can make bad decisions and that is not a surprise because leaders are tenants of time and context and when leaders are not awake to changing context and changing times they could make the wrong decisions without even realizing.
But what is the bad decision? A bad decision is that decision which is inadequate, unsatisfactory and worthless. So bad decisions are cases specific. What applies as a bad decision to company No leader ever sets out to make bad decisions. Everybody wants to succeed. So the question is how can a great leader make a bad decision?
The first case is making the right decision for the wrong context. That means the decision is a good one but under the context in consideration it is wrong. For example, reorganisation is a good decision. Imagine an organisation having issues of performance. When performance is not the way it should be, reorganising will not a bad decision. There is only one problem- you don’t reorganise if the problem is a contextual problem. In other words, if the business environment has changed rendering your strategic direction meaningless, reorganization can’t help the organisation. Reorganisation is rather going to accelerate failure for the organisation. Reorganisation in the face of changing business context only means you are doing the wrong things more effectively. So because you are effective in the wrong things, you fail even faster. This is one case in which a great leader can make a bad decision because he is not aware that times have changed. In this case he is making a right decision for a wrong context, this is called contextual ignorance. Contextual ignorance can lead a great leader to make a bad decision. That was what happened to Roy Johnson. He took decisions in Apple and plugged it into J C Penney. He failed to realize that the customer segment was different. This contextually ignorance came with a heavy cost and very serious losses for the company and for Ron Johnson himself.
The second case is when the leader is unable to make a right decision. In this case he cannot make the right decision as a result of structural hindrance. The way the organization is designed could disable a leader from making the right decision. Here the way the business or the organization is structured doesn’t let the leader make the right decision. Think about a situation where the board has an overbearing influence over the manager, that can create a problem.
The third case is rather ironic. It is when a leader is unwilling to make the right decision as a result of vested interest. In the case of Kodak, they focused on reorganisation and reorganised for up to 8 times in 10 years because they were fighting digital photography as a result of their very strong competitive advantage in the film and chemical industry. They were controlling up to 60 per cent of the market in the United States. As a result of this they were unwilling to make the right decision. They knew the right thing to do but they refused to take their position as tenants of time and context. As a result, in only a decade later Kodak was no more. They knew the right decision but they were afraid because they were concerned about the asset they had built, the relationship they had built,the investment they had made. Kodak was great because of the greatness of the leaders. Kodak failed because the leaders willfully made bad decisions.
Dr Brian Reuben has impacted leaders in governments and large organisations from in over 20 countries including the United States of America, United Kingdom, South Africa, Ghana, Kenya, Nigeria, Israel, Egypt, UAE, The Gambia, Nigeria, Canada and India among others as an international business development consultant, strategist, researcher, author, speaker and teacher. He is the Chairman of The Sixteenth Council United Kingdom.
