In the last 9 months or so, if you think about smart people making dumb decisions, we have seen some beauties. Let’s take a look at a few.
When J.C. Penny hired as CEO the architect and implementer of the Apple stores, and he quickly announced the end of discount-after-discount marketing, people thought the technology-marketing genius was surely the savior. Now, with the stock price off 55% since those decisions, and revenue down many billions versus year ago, he has had to quickly put those changes aside and go back to a heavy discount-oriented plan.
When the Hostess Brands CEO initiated a companywide pay cut of about 8%, he decided he didn’t need that pay cut and continued to collect his $125,000 a month salary. As one business publication put it,” he showed a remarkably tin ear to public and employee perception in the face of an eminent Hostess bankruptcy.”
Two memorable events took place for Apple in September, 2012. First, on Sept. 17, the stock price hit $700 per share. Second, the company launched its long-awaited Apple Maps. Disaster quickly hit, since the maps gave terrible directions and ignored key landmarks. The screw-up was so serious that the CEO had to write an apology letter to customers.
We are not talking about stupid people here. These are seasoned business veterans who have proven over the years that they are very talented. So why do they, on certain occasions, do really dumb things? Here are a few reasons that I believe are operative here:
1.) Overconfidence Trumps Paranoia: Andy Grove gave the business world the best advice I believe it has ever received: namely, only the paranoid survive. No matter how many business wins you have achieved, you still need to probe all possibilities and take action to guard against negative scenarios.
2.) Believing You Are Smarter: People get seduced by success and actually begin to believe they are better than they are, and that they are superior to others. The litany of ousted leaders is full of examples of big egos that ignored the input of others.
3.) Forgetting About Your “Customers”: A leader of an organization can have many constituents that can be considered as customers: the employees in the organization, people who use the organization’s output (internal and external), suppliers, shareholders, etc. All decisions need to be evaluated from all of these perspectives.
In summary, don’t let anything impact your ability to think clearly, be thorough and use common sense.