A news story the other day included a list of a certain CEO’s business activities, all on top of his “day” job: part-owner of a golf course, a hunt club and a new marina, each in a different part of the country; silent partner in his son’s startup venture; prime mover behind a regional ski resort development; and boutique winemaker at his country estate, where he was also active in the local film festival.
The general tone of the article was respectful, even fawning.
The following week, after the release of quarterly earnings, the CEO’s company’s stock price fell almost 10 percent. The same newspaper reported this without once drawing the connection between the company’s poor performance and its CEO’s very full dance card.
But it didn’t go unnoticed by a former CEO, one who is currently on the pier waiting for his next ship to come in. “This is a classic case of Fatal Distraction,” he said to one of our executives who was staying with him at his weekend place. “And I ought to know, because it happened to me.”
With that, he served our executive his very own estate-bottled merlot to go with a steak butchered from his own herd of bison.
Any of today’s CEOs should have enough on his plate, you would think, that he’d be content just to let his financial manager handle his money — put it in some nice safe real estate, secure bonds, a couple of growth mutual funds and maybe a vineyard or two. But that’s not how it works.
It takes a busy man to lose focus
There is in fact no such thing as a “safe” investment, when it comes to a CEO. Something in nature must abhor the sight of an under-burdened chief executive, because it’s almost impossible to find one — that is, a CEO who isn’t juggling, in addition to his demanding job, a handful of formal and ad hoc projects.
There are two sources of these potential Fatal Distractions. First is the so-called passive investment that runs into trouble and requires the CEO’s expertise. It’s always hard to say no to this kind of involvement, because you’re risking the loss of your investment should you let events run their course.
So, of course, a CEO will say yes. Once he takes a look at the books, at the organizational chart, and meets his managers, what are the odds that he’ll speak a few words of advice and back off? Not great. More than likely he’ll soon be scheduling weekly conference calls and engaging in a little enlightened micromanaging.
Then the golf course development he put some money into runs into a snag. Maybe sales are slow, maybe there’s a drought and environmental restrictions kick in, maybe somebody is suing somebody — it’s always something. Naturally the board comes to him for his opinion. So he gets involved here, too, because these are good guys, rpeople he socializes with.
And so it goes. In fact, it’s not uncommon for a CEO to be asked to play fireman at some point for every major project in which he agrees to invest. Why? Because that’s why he was approached in the first place: In the minds of the pitchmen, he represented a hole card they could play if things turned sour.
Flattering, yes. But do take the time to notice that he has been induced to go to work, without salary, for the privilege of risking his capital. Once he absorbs this fundamental truth, he ought to get a little angry; then it becomes a lot easier to just say no. No to the needy executives of these other companies, no to the son-in-law who needs a 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: You.
Let’s face it, the driving passion of a CEO is the charge he gets from running things, which makes him antsy whenever he’s not in the driver’s seat. No matter if he’s put his earnings in the hands of a trusted adviser who has found the right blend of financial instruments and passive investments, the first time there’s an earnings in the hands of a trusted adviser who has found the right blend of financial instruments and passive investments, 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 zinfandel is in, and so forth.
The seed to his downfall is planted
Sooner or later, the more he knows, the more he figures he ought to get involved. It’s only natural — he’s used to running things. That’s when the seed to his downfall is planted, and he has nobody to blame but himself.
The self-discipline to know oneself and to over-ride one’s impulses is often the only difference between the successful and the formerly successful. If you want to avoid a bad case of the Fatal Distractions, then seek to become the one busy man nobody thinks to ask for help.
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