CEO Failure Mode: The Cheerleader

The next in a potentially endless series on the pitfalls of the CEO role

Several years ago, I was out at a local gathering of technology company executives when I ran into the CEO of one of the early-stage companies in town.

I had visited with him a few times before, but we weren’t close friends and had never worked together. He quickly launched into a detailed and passionate monologue about how great business was and how his company was going to be the next billion-dollar company. He seemed to be trying hard to convince me of how well things were going.

The whole conversation struck me as a little odd, but I’m all for entrepreneurs being passionate about their businesses, so I didn’t give it much thought. The next day, I happened to have lunch with a former employee of mine who was now working for this CEO. I mentioned that I had visited with his CEO and that things seemed to be going well. To my surprise, he grimaced and said that they had missed revenue in the most recent quarter by 30 percent!

Now, a 30 percent miss is not something most CEOs would refer to as a great quarter. Why had this CEO gone out of his way to tell me how well things were going when that wasn’t really the case? He could have just said business was fine and left it at that. Instead, he essentially lied. It doesn’t matter that this CEO lost credibility with me. I wasn’t a key stakeholder in his company.

But I wondered: If he was spinning the news for me, had he done the same thing with employees, and might he do the same thing if he had public shareholders?

This CEO was later replaced when he lost credibility with his board. The answer was yes.

The Perils of Cheerleading

How many times have you seen public company CEOs stand in front of the camera and say everything is fine, only to announce a massive layoff a few weeks later? Once they lose credibility with their teams, I have never seen any CEOs fully recover.

An obvious challenge for the CEO is how to balance the required enthusiasm for the business while maintaining the credibility necessary to lead. Many CEOs shoot themselves in the foot when they talk about where the business is headed by over-promising and under-delivering or by overreacting to every negative bit of news about the economy or the market. Balancing the perspective on and messaging about the company’s progress is critical to success as a CEO, but it is probably the most common mistake I see CEOs make.