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When Fortune 100 executives lose their jobs over spectacular errors of judgment or
behavior, it’s always their innate nature that leads them astray. Dynamic, forceful,
ambitious executives have no monopoly on blindness about their darker urges, but if
you want to achieve success under stress and manifest your goals, you must look inside our self and be honest about what you see. Leadership guru Tim Irwin dissects six large than- life executives who derailed and explains what you can learn from each of them and from all of them. His easy, readable, compassionate tone conceals the profundity of his insights, but he delivers his message.

Published in: Business, Education


  1. 1. Tim Irwin Some Impressionistic takes from the book “Derailed “ by Ramki
  2. 2. About Tim Irwin, Ph.D. Tim Irwin, Ph.D., is an author, speaker and leading authority on leadership development, organizational effectiveness and executive selection. For more than 20 years, he has consulted with many of America's most well-respected organizations and top Fortune 100 companies. He has also served in a senior management post for a U.S.-based company with more than 300 offices worldwide. Presently, he is managing partner of Irwin Inc., a provider of psychological services to businesses
  3. 3. There must be a million books out there on leadership. And whether we’re aspiring leaders or analytical followers, leadership is something that we all have an opinion on. As a result, books about the great leadership successes draw us like magnets. But Tim Irwin, Ph.D., looks at the discussion of leadership from the opposite perspective—leadership failures. That’s what makes “DERAILED: Five Lessons Learned from Catastrophic Failures of Leadership” such a compelling book. Irwin examines the collapse of some of the biggest names in business:  Robert Nardelli at Home Depot;  Carly Fiorina at Hewlett-Packard;  Durk Jager at Procter & Gamble;  Steven Heyer at Starwood Hotels & Resorts & Worldwide;  Frank Raines at Fannie Mae; and  Dick “Richard” Fuld at Lehman Brothers. Happy Reading …… Prelude
  4. 4.  5 feet 10 inches tall & 195 pounds  His dream of playing professional football was a stretch. “The rest of the world got bigger,” he recalled, “and I didn’t grow anymore.”  Perhaps this was when the chip began to form on Nardelli’s shoulder.  From that point on, he seemed wrought with something to prove, if not to the NFL, then to the hard-hitting, high dollar corporate world.  He earned a business degree and took a job at General Electric(GE)  Not a blazing intellect, he worked the longest hours, tackled the toughest turnarounds, and became, in the words of GE’s CEO at the time, Jack Welch, “the best operating executive I’ve ever seen.”  He was duly nicknamed “Little Jack.”  He was primed to succeed his namesake as GE’s next CEO, but he came up short yet again, and this time it had nothing to do with his height  Soon after Welch let him go, Nardelli was offered the CEO position at Home Depot in 2000. Nardelli’s charge: Tidy the chaos of Home Depot’s rapid, uncontrolled expansion
  5. 5. Robert Nardelli in Home Depot  Nardelli brought discipline to Home Depot but the shifting of gears was shocking to a lot of people who were well accustomed to his predecessor Bernie Marcus’ laid-back style.  By many benchmarks, including sales, gross margins, and profits, Bob Nardelli did a fairly good job at Home Depot.  He came under fire and extreme criticism for his gargantuan compensation package relative to the stock's weak performance, slowing profits and a regulatory probe about its options practices, and his management style.  98% turnover in the company’s top executives – with 56% new hires coming in from outside the company- supports this notion.  People simply couldn’t and wouldn’t work passionately for their command- and-control leader  Home Depot had to fight growing competition from Lowe’s and it needed to reinvigorate growth in the U.S. market and boost overseas growth.  If there is a generalization about Nardelli’s mistake, it is that he usurped Home Depot’s identity. This was the result of a much deeper mistake than alienating employees & angering stockholders
  6. 6. Robert Nardelli- Leadership style Let us analyse his Leadership style  Nardelli displayed an unprecedented level of arrogance at Home Depot. It was marked with heavy-handedness and inflexibility.  He embarked on an embarked on an aggressive plan to centralize control.  He neglected the touchy-feely stuff, enthusiasm of his people, a sense of humility before his board, the care of his shareholders.  He was maniacal about goals, objectivity, accomplishments within the boundaries of the values of the company.  He invested heavily in technology.  He also wanted to virtually measure everything in the company and hold top managers strictly accountable for meeting the numbers.  It was his way or the highway.  His tone-deaf response to criticism was only slightly overshadowed by an ego that served as the antithesis of his physical stature. His intolerance for imperfect people and those who could not be controlled sent only one message: Get it right or get out
  7. 7. Robert Nardelli- The result  While no one will argue that Nardelli is highly capable, he will likely not fulfil his potential as a leader until he learns what all great leaders know: Greatness does not result from competence only; it flows from an inspired work force that trusts the character of its leader.  Business slowed down & the competition Lowe’s started enjoying better reputation.  It had a more appealing store design & women shoppers endorsed it.  Better customer service, customer experience, & personalized product offerings gave Lowe’s stores the competitive advantage which eventually moved it directly onto Home Depot turf.  Nardelli’s reign at Home Depot was characterized by the “callous” and “inflexible” management style.  However his reputation suffered when Home Depot's smaller archrival, “Lowe's Companies, soared more than 200% since 2000, while Home Depot's shares declined 6%”, according to Bloomberg data.  The retail organization never really embraced his leadership style. The company needed a more innovative and constructive leadership.  Nardelli stepped down and exited the company at the beginning of 2007.
  8. 8. Leadership –Take away  Results are important in leadership. Business leaders also need to pay attention to soft organizational skills: intangible leadership, organization, and people stuff.  The previous section clearly indicated that Robert Nardelli improved financial metrics. However, he failed to codify what he learned in the past at GE.  He should have adapted the principle behind the experience he acquired to appropriately respond in the situation.  He is reputed to be high-handed and authoritarian.  Home Depot was a haven for independent-minded employees. When Nardelli came in with new ideas for change, the employees did not have the desire for transformation since they did not feel the need for change and their morale was good.  He believed that managing by metrics was the best way to guarantee fairness in judging a person’s performance.  Nardelli acquired control, the store managers felt that they lost their autonomy and independence. This led to the failure of unification of commitment and enthusiasm of his followers.
  9. 9.  CEO & Chairman HP 1999-2005  AT&T 1980-1998  Led Lucent IPO 1998-1999  Six time Forbes Businesswoman of the year ‘98-05  First woman to lead Fortune 20 Company  Born September 6, 1954  Stanford BA, Smith School of Business MBA, Sloan School of Business at MIT Masters Science in Business  Was a candidate for U. S. Senate – California  Pushed the controversial merger with Compaq in 2002 overcoming the opposition from the board & Hewlett family member
  10. 10. Traditional HP way  HP’s culture was consensus-style & this was sharp disadvantage in the fast growing internet market & change of business environment.  There was a need to make the transformation  Carly Florina took some drastic steps to improve the performance of HP, which proved a major departure from a cultural point of view.  Traditional HP way  Life long employment and employee satisfaction  Collaborative & Relaxed culture  Open door policy & communication  Management by walking around – treating employees as family members  Recognizing individual achievements , treating all with trust & respect  Encouraging flexibility & teamwork  Uncompromising on professional & personal integrity  Focus on high level of achievement & contribution
  11. 11. Challenges faced by HP  Retirement of Hewlett – followed by Packard  Intense increase in competition- Competition progressed by HP - Stagnant  Traditional culture has resulted into consensus culture  Problem of bureaucracy  Lack of innovation & sense of urgency not there
  12. 12. Carly Fiorina –Her way  Implemented several cost cutting measures  Laid off- 1700 employees  Focus on performance , not on team  Further lay off of 6000 employees  Pay cut  Merger with Compaq  No more life long employment  360 degree feedback concept  Focus on R & D – increase in innovation  Bonus based on HP vs. Competitors performance  Tried to change organizational culture too much and too fast
  13. 13. Carly Fiorina- Leadership Style Democratic Leadership Style  Unique, sometimes outrageous  Branding - Her companies - Herself  Feisty and aggressive attitude  Ambitious  High Structure & High Consideration Traits & Characteristics  Drive change – or be swallowed by it  People skills – meet & greet sessions  Shared Vision  Progress and innovation through debate Behaviour & Motivation Strike the right balance Overcome fear & Manage desire Culture – CEO sets the tone Accountability – hold people accountable
  14. 14. Carly Fiorina –Leadership Take away Positives  Driving the massive transformation of culture & she understood if HP has to survive there is a need to change the culture across the organization  The HP way requires people to work together , agility & nimble  HP to master the commoditized technology business ( system business)instead of sticking its old innovation driven engineering business  Focused on innovation Negatives  No team work & Lack of empowerment  Star approach & Degrading moral value of the organization  Dissatisfaction in employees  Too much competence culture & destroying company’s cherished culture  Hire-fire policy leading to insecurity , fearful work environment  Seeing the shortcomings in others, but did not acknowledge in herself.  Self-focussed & disingenuous
  15. 15.  Born 30 April 1943, Netherlands) is an American businessman, private investor and consultant.  As of 2012, he is the Director of Chiquita Brands International (since December 2002).  He was the CEO of Procter & Gamble from 1 September 1999 to 2000.  He has served on the Board of Directors of Eastman Kodak & United Negro College fund  On the Board of Governors of The nature conservancy, as the chairman of the Japan America Society of Greater Cincinnati, and a member of the International Council, J.P. Morgan & Co.  Tough, Autocratic & joined as COO and four years later became the CEO  He was adamant that rapid restructuring and cultural change were necessary to free innovation from the many layers of bureaucracy.  He was dead-on in theory — structural and cultural change were necessary to survive.  However, he was way off track in the application.
  16. 16. Durk Jager  Within 9 months in the job he announced 13% cut in manpower.  He then disregarded business managers responsible for current products and transferred their responsibilities to global brand managers.  He simultaneously established “innovation teams” that displaced the company’s best and brightest from important daily roles to the ongoing development and launching of the best new brands  Jager failed by over-focusing the company’s resources on generating the next big idea and introducing products that “left customers yawning,”  Under-investing in the development and marketing of established brands. This was very glaring, fiscally tangible reasons for Jager’s short and unsuccessful tenure –– he missed earnings projections twice in six months, and the company’s price per share declined 52 %  His ultimate deraliers were less tangible failures of character.
  17. 17. Durk Jager- His way  Change can be orchestrated respectfully and incrementally, but it was not Jager’s way.  He went about the change forcefully and immediately, and his actions showed a gross disregard for P&G’s existing culture.  More than that, his approach displayed a disregard for the lives his demands were affecting.  He clearly displayed all of the four categories of derailers.  Throughout his tenure, he maintained an intense — even feared — degree of arrogance.  He openly despised the old mores of the company, making it clear that he found P&G’s culture to be intolerable and wholly to blame for the company’s problems.  He also cultivated a ruthless image in an attempt to convey his hard- charging commitment toward turning the company around.  The inauthentic veneer intimidated employees & implanted an intended sense of insecurity about their place in the company.
  18. 18. Durk Jager –Leadership Take away His derailment teaches us a further lesson: Neither speed nor good business sense are substitutes for good leadership
  19. 19.  Born on Jun 13th , 1952  Graduated from Cornell in 1974 in Industrial Relations  Nick named in his college as “ The tank” for his relentless ways.  Joined Booz, Allen & Hamilton – International Strategy consulting firm in 1976 & rose to Sr.V.P in 15 years.  President & COO – Young & Rubicam advertising - 1992-1994.  President – Turner Broadcasting System –responsible for CNN in late 2000  Moved Coca-Cola in 2001. and walked away with US $ 24 M in 2004  Moved to Starwood Hotels & resorts in Oct 2004 – Franchise for 850 hotels  Prolific mass Marketer  In 2007 the Starwood Hotels Board had issues regarding his management style which lead to loss of confidence in his leadership ( Forbes)  Starwood hotels income doubled over 2006 in 2007, but he failed to win the board’s backing.
  20. 20.  In Starwood , the master marketer made a very basic marketing blunder: He failed to keep up appearances –– namely his own.  As was his protocol, he went right to polishing the branding side of the Starwood business.  While he was turning the company’s brands to gold, he was losing touch with the people he was leading.  It was the beginning of an internal branding issue and he was the problem product.
  21. 21.  Leaders make mistakes. While they are held to a higher standard, they still have lapses in judgment.  Certain mistakes, handled tactfully, wilfully and humbly, are often forgivable to the point where the position of leadership is salvageable.  The same mistakes avoided and handled irresponsibly — or worse, flippantly and arrogantly— often say a lot more about a leader than the mistakes ever did.  This was the case with Steven Heyer.  The Starwood board had been willing to overlook his rough edges given his continued accomplishments. Yet, Heyer was flippant in his self-consumption.  His lack of humility was first evident by his roguish work habits, opting to commute from his Atlanta office instead of remaining a steady presence at headquarters in White Plains, N.Y.  However the real straw that broke the camel’s back was His handling of the accusations of his inappropriate activity with female employees.  His approach “ I did it , but owe no explanation “  His derailment ensued because he never committed himself to the role of a leader within Starwood.  He grew the company, boosted the stock and polished its brands, but he remained dangerously detached.  He was a steam engine attempting to pull the rest of the train without being attached to it.  While Heyer knew the company brands, he never knew the company –– and the company never knew him.  His detachment only exasperated the allegations of his inappropriate behaviour.
  22. 22.  Born on Jan 14th , 1949  Former Chairman and Chief Executive officer of the Federal National Mortgage Association, commonly known as Fannie Mae, who served as White House budget director under President Bill Clinton.  His role leading Fannie Mae came under scrutiny.  In 1969, Raines first worked in national politics, preparing a report for the Nixon administration on the causes and patterns of youth unrest around the country related to the Vietnam War.  He served in the Carter Administration as associate director for economics & government in the Office of Management and Budget and assistant director of the White House Domestic Policy Tariff from 1977 to 1979.  Then he joined Lazard Freres & Co, where he worked for 11 years and became a general partner.  In 1991 he became Fannie's Mae's Vice Chairman, a post he left in 1996 in order to join the Clinton Administration as the Director of the U.S Office of Management & Budget , where he served until 1998.  In 1999, he returned to Fannie Mae as CEO.
  23. 23.  In the late 1990s, middle-class homeownership looked to be peaking after nearly a decade-long run of good fortune for any company in the mortgage business, especially for the government-chartered and sponsored Fannie Mae.  Under chief executive James A. Johnson, the value of its assets had tripled and its share price had risen sevenfold.  Johnson left his office for the last time in December 1998, Fannie Mae faced the challenge of sustaining its run on double-digit growth and its reputation as the “dominant force in the mortgage industry.”  There was a need to be creative, non-traditional efforts to expand the housing market through “groups –– black and Hispanic families, immigrants and single people –– that traditionally have been far less likely to buy houses.”  Fannie Mae needed a leader who not only understood all sides of the government- backed mortgage business but also understood the people who would become their most important customers.  Franklin Delano Raines seemed perfectly suited.  Raines leveraged the work ethic and financial wisdom passed down from his parents into a noteworthy career.  Reputation for tight accounting, results-driven leadership and shrewd diplomacy, simultaneously climbing the political, legal and corporate ladders and working with the Nixon, Carter and Clinton administrations.
  24. 24.  With Raines conducting, Fannie Mae not only sustained double-digit income growth but vastly expanded its reach with new technology and products.  The biggest — and costliest — of Fannie’s expansions was Raines’s commitment to invest $2 trillion in mortgage programs that would make homeownership & rental housing more affordable for 18 million more families.  The program included sub-prime mortgages.  This greater opportunity of homeownership, Raines believed, was Fannie Mae’s mission personified.  He was hailed a hero by many.  Fannie Mae was constantly under attack from mortgage industry rivals who insisted the company maintained an unfair advantage with its government ties and under-regulated procedures. Raines rose to each challenge with the nimble diplomacy for which he was known.  There was one attack, however, for which Raines was neither prepared nor deft enough to defeat.
  25. 25.  From 1999 to 2002, Fannie Mae accountant Roger Barnes sent repeated correspondence to a “wider range of Fannie Mae managers and executives,” including Frank Raines and Fannie Mae Chief Financial Officer  Timothy Howard, urging them to look into accounting irregularities he had discovered.  It is said that adverse circumstances do not make or break you; they reveal you.  It is a fitting maxim given Raines’s telling response to the confirmation of illegal accounting.  His unwillingness to accept responsibility revealed his three primary derailers: 1) lack of authenticity, 2) lack of humility and 3) lack of courage.
  26. 26.  The discrepancy between the legal conclusions & Raines’s vague posturing sends the wrong message:  The leader is larger than both the company and the bodies that govern the company’s practices.  Whether Raines understood it as such is debatable. Perhaps he was not entirely aware of the illegal nature of the practices he was allowing.  He believed certain accounting measures were relative to circumstances.  Still one thing cannot be debated: Raines had and still has every opportunity to admit, in the very least, to poor judgment, lax standards or subjective governance.  He has admitted none.
  27. 27.  Born April 26, 1946) is an American banker best known as the final Chairman and Chief Executive Officer of Lehman Brother.  He had held this position since the firm's 1994 spinoff from American Express until 2008.  Lehman Brothers filed for Bankruptcy Protection under Chapter 11on September 15, 2008,[5] and subsequently announced a sale of major operations to parties including Barclays Bank & Nomura Securities.  Fuld was nicknamed the "Gorilla" on Wall Street for his competitiveness  Conde Nast Portfolio ranked Fuld number one on their Worst American CEOs of All Time list, stating he was "belligerent and unrepentant".  His belligerent philosophy is remarkably frankly revealed in an internal company video (about shortsellers) "I am soft, I'm lovable but what I really want to do is reach in, rip out their heart and eat it before they die.  Fuld was also named in Timemagazine's list of "25 People to Blame for the Financial Crisis"
  28. 28. Strength is weakness well harnessed  Under Fuld’s stewardship, Lehman soared.  By 2006 Institutional Investor magazine had named him America’s top chief executive.  By the end of 2007, he was at the pinnacle of the financial world, having turned a $102 million loss in 1993 into a $4.2 billion profit in 2007.  In March 2008, Fuld was named to Barron’s list of the World’s 30 best CEOs and dubbed “Mr. Wall Street.”  The financial world would believe him, until the credit crisis came — perhaps the only force tougher than the Wall Street brawler.  Markets were crashing; investors were pulling funds; and the American public was pocketing their pennies and losing their homes, their jobs and their confidence.  For the first time, Fuld was facing a fight bigger than Wall Street. It was then he made the classic competitive error  He grossly underestimated his opponent and overestimated his strength
  29. 29. Weakness is Strength well Un-harnessed  In June 2008, Lehman Brothers posted a second-quarter loss of $2.8 billion, its first loss since going public in 1994.  The blow was crushing to the organization and to Fuld — the man whose track record had, for more than a decade, continued to overshadow itself year after year.  Fuld had been struck with a solid left hook. As he had always done before, he shook it off and fought harder.  Unfortunately, Lehman had been cut bad, and forceful Fuld could not stop the bleeding.  In September 2008, Lehman reported yet another loss — this time of $3.9 billion. Days later, the firm filed for bankruptcy protection and eventually bankruptcy itself –– the largest in history.  While it’s easy to respect the strength of a man like Fuld, one has to also take into account that such strength is a weakness when it cannot be harnessed.  Ultimately, it was Fuld’s intensity-turned-stubborn-arrogance that did him in. His derailment resulted from two things: He refused to quit fighting and he failed to size up his opponent.
  30. 30. Derailment in Slow Motion  Each of these leaders’ downfalls involves a complex set of reasons.  We see them in the media & its coverage and read the voyeuristic details of their demise.  The smoldering piles of wreckage mark ruined companies, ruined careers and ruined reputations. It looks as if the crash took place in one cataclysmic instant — one wrong turn and then the screeching sound of twisting metal — a massive derailment. It is not the whole story.  Derailment occurs over time — and it occurs in a predictable progression — a process that those who derail seem to follow.  Derailed leaders progress through five stages as they head toward their demise.  Perhaps there’s hope for us to learn about these escalating stages of derailment and stay on track.
  31. 31. Stage I: A Failure of Self-/Other-Awareness  Derailed leaders seem to manifest a lack of self-awareness.  Self-awareness is a prerequisite for managing ourselves well. Derailed leaders also seem to lack awareness of and concern for others.  This type of insight informs us as to the needs, desires, hopes and moods of others that we might respond appropriately.  It involves empathy, consideration and general attentiveness to the interests of others.  Derailed leaders seem oblivious to the impact of their behaviour on others.
  32. 32. Stage II: Hubris –– Pride Before the Fall  Hubris –– extreme arrogance –– manifests itself in the leader who believes he or she is the epicentre of an organization’s success.  Despite Home Depot’s storied entrepreneurial, fraternal culture, Nardelli presumed his controlling methodology was better. Instead of using the positive momentum with Home Depot’s culture, he cut loose from the culture entirely and bled the orange blooded faithful to death.  No matter how bright and capable a leader might be, the work of the organization must be accomplished by trusted colleagues.
  33. 33. Stage III: Missed Early Warning Signals  The early warning signals of derailment were there for all six leaders but went unheeded.  People were yelling and waving their hands, but these engineers paid no attention. In their arrogance, they missed the signals.  Fuld was born a winner, yet he was so focused on winning the financial prize that he failed to see the chasm into which he was guiding Lehman. He had tunnel vision. These otherwise talented leaders did not see the warning signals represented by subtle but persistent feedback about their own inner states, others’ diminishing confidence in them or the wrong direction in which they were leading the company. Early warning signals should have jarred their attention to avoid the danger ahead. Instead, our profiled leaders barreled ahead toward the inevitable crash.
  34. 34. Stage IV: Rationalizing  When it becomes apparent to a leader that he or she is losing the confidence of colleagues or a board, his or her defences are heightened.  A siege mentality takes over, and the leader begins to rationalize his or her actions, further insulating him- or herself from the very information that could either fend off disaster or greatly limit the damage.
  35. 35. Stage V: Derailment  The emissary comes to the leader’s office and says, “I’m sorry … it’s over. We all had high hopes for you here, but we need to help you leave in a way that preserves the company and maintains your dignity.”  An irony of Stage V is that despite the board’s actions to preserve their CEO’s dignity, our six profiled leaders undid this preservation of dignity with their own actions.
  36. 36.  Character as expressed in authenticity, wisdom, humility and courage must ultimately form the substance of who we are if we want to have great impact. Lesson 1- Character trumps competence
  37. 37.  It is commonly at the root of a leader’s undoing.  Aloofness, being critical, self-promotion and not listening to others all tie to arrogance. Lesson 2- Arrogance is the mother of all derailers
  38. 38. Lesson 3- Lack of Self-/other- awareness is a common denominator for all derailers
  39. 39. Lesson Four: We are always who we are ... Especially under stress. If we will always be who we are, it pays to consider deeply who we want to become and to make choices consistent with that intention.
  40. 40. Lesson Five:  Derailment is not inevitable, but without attention to development, it is probable. In moments of gut-wrenching candor, many self-aware leaders acknowledge a dark side to their character.  Leaders who have great strengths also possess significant weaknesses, which cannot be ignored.  Sadly, we, too, have the innate capacity for narcissism, arrogance or disregard of other’s opinions and interests in favour of our own.  Perceptive executives control these impulses and choose to manage their darker sides’ intrusion on decisions and relationships. Those who are more likely to stay out of trouble, constantly remind themselves of their own vulnerability.
  41. 41.  Business leaders must be tough, strong, resourceful & decisive. Yet these very qualities can blind leaders to their own faults and cause “derailments.”  Even powerful leaders can suffer derailment. Home Depot’s former CEO Bob Nardelli fell off the tracks when he believed he was bigger than the company.  Carly Fiorina suffered a similar fate when she refused to take responsibility for her erroneous decisions as CEO of Hewlett-Packard.  Durk Jager’s arrogant, bullying personality led to his derailment at Procter & Gamble.  Derailing happens in five stages:  First, a leader displays “a lack of self-awareness.”  Second, he or she becomes drunk on pride and arrogance.  Third, the leader develops “tunnel vision” and often ignores the nonverbal  communications that signal danger ahead.  Fourth, he or she makes excuses for bad decisions and shirks blame for failures.  Fifth, derailment. The board fi res the leader to benefit the company.  To avoid derailment, develop “authenticity, self-management, humility and courage.”  Know who you are, including recognizing aspects of yourself that you dislike..
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