The too smart CEO

Are you sure you know it all?

Fred Mael

A recent book about the rise and fall of Enron by Fortune magazine writers Bethany McLean and Peter Elkind describes the many failures and crimes of those who ran the company into the ground. The authors detail a long list of foibles by managers: greed, deceit, theft, mismanagement, cruel disregard of employees and retirees, and heavy indulgence in drinking, gambling, adultery, and adult entertainment. The litany leaves little room for sympathy for those who embraced the strategies and tactics that plunged Enron into bankruptcy.

For many people, the book will serve as an indictment of poor safeguards in the accounting, investment banking, risk management and political sectors. Sarbanes-Oxley notwithstanding, the problems have arguably still not been fixed. Others will simply choose to gloat at arrogant, very rich people getting (in some cases) their comeuppance. At very least, no one at Enron seemed to stop working or scheming long enough to enjoy their riches. The phenomenal amount of money made and spent and the over-the-top expense accounts mattered mainly for keeping score. Most of the key players in the book trash their marriages, their families, or health while ostensibly setting up their families for life.

But what about you? Assuming that that’s not your life style, that you want to run your organization well within the rules – what can you learn from all this? Perhaps the one thing that is right in the book’s title: “The Smartest Guys in the Room”.

The pitfalls of being a too-smart CEOFormer Enron CEO Jeff Skilling could outdebate just about everyone he met. He also treated others with arrogant dismissal. McLean and Elkins write: “If he thought he was smarter than someone – and he usually did – he would treat him harshly if he had the temerity to disagree with him.” Other partners at McKinsey, his previous employer, would say of Skilling “Sometimes wrong, never in doubt”. On the other hand, he was not on top of everything: “He could get to the essence of an issue faster than anybody, but once he felt he understood the strategy, he lost interest. Execution bored him”.

Of Skilling’s successor, Greg Whalley, McLean and Elkins write:

”He had zero patience for those he felt lacked the kind of pure intellect he admired and could instantly reduce just about anyone to red-faced, quivering shame. ‘Whalley had a vicious intelligence to him’ says a former colleague. ‘If you didn’t know what you were talking about, he would pick you to pieces.’”

You’re probably real smart – in some ways

As a CEO or senior manager, there is a good chance that you are smarter than most of your employees and much of the public – but only in some ways. You may be quicker and better able to refute arguments than most. You may be tops at reducing all pro and con arguments down to their bottom line more clearly than your staff. You may be more decisive. Perhaps instead you are a clearer, more analytic thinker. Maybe you are somewhat of a visionary, aware of possibilities others cannot anticipate. That’s great. But you are unlikely to be smarter than all your subordinates, clients, watchdogs or critics in all these ways.

And one more thing: You are also likely to be more confident and dominant than others, probably by nature. Having succeeded in business is likely to have increased your positive self-evaluation. Others’ dependence on you, looking up to you, or flattering you – may have added to your sense that you see everything more clearly than others. But that’s where the danger lies: Intelligence and dominance can be the components of true leadership – or they can be a toxic combination.

If you need to see examples of people who are smart in one way but presume that they are much smarter than the rest of mankind, try any one of a number of talk shows hosts. They can be good examples of the quick, whip-like type of smartness that can be accompanied by superficiality and arrogance. While they can be charming (especially when interviewing and fawning over celebrities) they can also talk without thinking, can’t always process what a caller just said, can be notoriously thin-skinned when challenged, and get used to always having the last word. In a talk-show host, those qualities are either entertaining, designed to provoke, or harmless. In a leader, the same qualities could be costly.

Many types of intelligence

Some people’s smartness is to be deliberative and see both sides of an issue. Others may be priceless for their ability to see the good and bad implications of actions down the road. Both of these types may not be best at forcefully expressing their views well in a debate or at meetings. An impatient CEO may portray any doubts as negativity, even cowardice – even when they’re not. That’s one of the ways that the in-crowd at Enron, intent on making big deals, steamrolled the risk management department, essentially rendering it irrelevant. Conversely, some leaders are convinced that whatever strategy succeeded until now will always work best. Because innovations are wrong unless proven otherwise, no one else may be able to cut through the bluster to advance a new direction until it’s too late.

Democracy is not the issue

This is not an argument for being democratic or “nice” and asking every employee to comment on all decisions. Or for expanding meetings that need three people for 15 minutes to large timewasters so that everyone can “be in the loop” and “have a say”. You may actually have employees who don’t think about larger issues, who are not creative thinkers, who are in fact always opposed to change, and will never provide a good counterpoint to you. You don’t need to waste your time polling them on every issue.

But you have other people in your work life who are smart, who you’ve hired or consulted because they did have something to offer. If now, in your impatience or dislike for being corrected or disagreed with, you dismiss their input – you will be losing vital checks and balances on your own blind spots. If you get frustrated quickly because others need you to speak slower, explain yourself, or repeat yourself until they can process and respond effectively – you may need to take a deep breath and let the world catch up to you. Before you drive your company over a cliff.

If you are a very smart CEO, you need to stay that way by leaving room for others to be smart as well.

Fred Mael, PhD, consults in areas such as talent retention, organizational culture, performance management, and executive coaching This article appeared originally in the November 2005 issue of Washington SmartCEO magazine.