The secret to leadership may not boil down to that vision thing. It may not be some exceptional ability to inspire others, nor the courage to zig when all signs point to zag.
Fresh research by top leadership gurus suggest that if great leaders have something in common, it could be this: a knack at escaping lapses of bad judgment. Or, at least the luck to do so.
The latest judgment victims are Stanley O’Neal and Charles Prince, CEOs who made good calls to rise to the top of Merrill Lynch and Citigroup. But under their charge, the companies waded deeply into subprime mortgages that cost the companies billions of dollars and cost O’Neal and Prince their jobs. Time Warner’s new CEO Jeff Bewkes won respect in 2000 by opposing then-CEO Gerald Levin’s decision to merge Time Warner with AOL, what has since gone down as one of the worst business judgment calls of the decade.
David Novak has been CEO since 1999 of Yum Brands, the giant fast-food company that includes KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W. Back in his days as Pepsi’s marketing chief, he thought he had hit a grand slam. Crystal Pepsi, a cola that looked like 7Up, was his breakout idea. “CBS Evening News” devoted 140 minutes to it in 1992. Trouble was, the media lapped it up, but consumers didn’t, and about the only evidence left that Crystal Pepsi existed is the 1993 Super Bowl commercial on YouTube.
In an interview, Novak chalks up the failure to bad judgment and says he landed back on his feet with a valuable lesson. He says he had rightly determined early in his career that big ideas always produce naysayers who will chirp, “It can’t be done.” He trained himself to ignore them. His judgment lapse was that sometimes the naysayers have a point.
Authors on judgment
Novak, author of “The Education of an Accidental CEO: Lessons Learned from the Trailer Park to the Corner Office,” now listens and weighs criticism for merit. Other leaders never made adjustments, or never had the chance, and the battlefields of war and business are strewn with fallen generals who had but one major lapse in judgment.
As crucial as judgment is to success, when Noel Tichy, author of a dozen books on leadership, and Warren Bennis, author of more than 30, researched the literature, they found almost nothing about it. The two decided to co-author “Judgment: How Winning Leaders Make Great Calls.”
Tichy, professor at the Ross School of Business at the University of Michigan, says they didn’t consider Enron-like illegalities and ethical lapses but focused on CEOs who made judgment calls with the companies’ best interests at heart.
Judgment doesn’t involve a simple decision, or what Tichy describes as “the call,” but a process that begins with acquiring the right information and continues through execution. Judgment is not good judgment until it’s backed up by execution, he says, and mistakes must be recognized and course corrections made.
Making course corrections
George Jones, CEO of giant book retailer Borders Group, says he learned about course correction when he was CEO of Saks Department Store Group from 2001 to 2005. He says he arrived to find both the company and the industry issuing so many discount coupons in newspapers and via direct mail that customers ignored other efforts at luring them into the stores.
Jones says he rightly identified the unhealthy coupon practice but says he forgot that Saks was not operating in a vacuum and customers were soon stampeding, coupons in hand, to the competition.
Course correction: “If you take something away from your customer, you must be prepared to immediately give them something meaningful back,” such as a distinctive product, customer service or enhanced assortments, Jones said.
