Number One Worst CEO(s) of 2011

It is quite an accomplishment to be the #1 Worst CEO of the Year, and it’s fair to say that the pair at the top of Blackberry maker RIMM truly deserve it.  They beat out tough competition in incompetence, but their powerful combination of arrogance and complacency got them to top spot. 

What did co-CEOs Mike Lazaridis and Jim Balsillie do right in 2011?  Unfortunately, not a heck of a lot.  Let’s start with the bottom line, a 70% drop in market cap.  Like Reed Hastings at Neflix (this year’s #2 Worst CEO of the Year), the market extracts a huge price for failure.  Blackberry’s market share is now by some estimates in single digits, a remarkable turn of affairs for the company that revolutionized mobile email.  Perhaps most fundamentally, Mike and Jim were completely unable to stem the bleeding at RIMM, providing virtually no comfort to investors, and customers, who wanted to believe in the company.  Blackberry outages that made front-page headlines around the world, ill-advised forays into tablet computers, and self-inflicted distractions to buy hockey teams all contributed to a view of leadership as AWOL.

In some ways, the freefall of RIMM was years in the making.  For example, the iPhone was seen as a toy, not serious.  Google’s Android was irrelevant.  We are the kings of mobile email, look at all our customers on their “CrackBerries.”  Unfortunately, this turns out to be one addiction that is not all that difficult to kick.

Will RIMM recover?  The history of business does not provide an encouraging answer.  Once Palm pilots began to lose favor with customers, were they able to make a comeback?  No.  Has Motorola made up lost ground from their refusal to move from analog to digital in the mid-1990s?  No.  Is Nokia back on top after taking their eye off the ball for too long?  No.  But there may be hope.  Palm was acquired by H-P, Motorola Mobility was acquired by Google, and Nokia is locked into a partnership with Microsoft.  At some point so much value has been lost that the company starts to attract attention by acquirers who remember the past more than the present.  RIMM shareholders can only hope.

With this last selection, the #1 Worst CEO(s) of the Year 2011 are now in the record books.  Stay tuned in 2012 as I dissect the best, and worst, of what leaders in business, non-profits, and government have been up to, and what we can learn from their mistakes.  

Worst CEOs of 2011 Countdown - Number 2

This week I’ve been profiling the 5 worst CEOs of 2011.  I think readers may quibble with the order I’ve put them into, and perhaps are wondering why some leaders have yet to appear, but it’s hard to imagine not including Reed Hastings near the top (or the bottom) of the list.  What a year for the wonderboy of content delivery.

The outline of the story is well-known.  Netflix announced they are splitting the company into two – the more traditional DVD mail order business, and the newer online streaming business.  This to better serve customers, or something like that.  At the same time, Netflix announces different customer interfaces, different websites, and – this was the killer – much higher prices.  Instantly Netflix goes from being the darling of the entertainment business, beloved by customers for building such a reliable and useful platform for watching movies at home, to just another giant corporate ogre, ripping off customers as fast as they can.

Never mind that Hastings backtracked a little, issued an apology or three, and launched a new communications effort to win back customers.  In this case, the damage has been done, and he did it.  Stock price down around 70% in 2011, a performance good enough for 2nd place in the Worst CEOs of 2011.

The countdown ends tomorrow on my blog with the #1 Worst CEO of the Year.  You’ll want to call and tell people, if you have service.

Worst CEOs of 2011 Countdown - Number 3

What a guy!  Jon Corzine ran Goldman Sachs (before he was pushed out by former Goldman Sachs CEO and former Treasury Secretary Hank Paulson).  Then he served as United States Senator for New Jersey (before he left to run for Governor).  Then he served as Governor of New Jersey (before losing his re-election bid to Chris Christie in 2008).  What a resume!

Next stop:  CEO of MF Global, a sleepy not-particularly-profitable financial institution.  Corzine transformed the company into an aggressive trading machine that valued risk-taking and looked to make it big.  The Goldman Sachs wannabe under Corzine took big risks and disregarded repeated warnings from Chief Risk Officers about those risks.

The big bet was of European sovereign debt, which Corzine pushed and led from the start.  Ironically, it’s not that the bet lost money, but rather this was the bet that led to the eventual downfall of the company.  In the post-2008 financial crisis era, regulators are paying a little more attention, and when they questioned the trade and the leverage behind it, they also demanded more collateral in case it went bad.  Corzine had stretched MF Global to the limit in his bet-the-company strategy, and when demands for more capital could not be met, the run on the bank was on.  MF Global is now bankrupt, a mere 20 months after Jon Corzine took over as CEO.

The denouement will take some time, as there is still the little matter of a billion dollars or so that has gone missing.  Corzine has testified that he knew nothing of this, and he may well be telling the truth.  But, if the buck doesn’t stop with the CEO, where does it stop?

Tomorrow I reveal my choice for #2 Worst CEO of the Year.  I hear there might be a movie version of this person’s stellar year.

Worst CEOs of 2011 Countdown - Number 4

Graham Spanier is the only top executive of a non-profit institution making my 5 Worst CEOs of 2011 list, and I’m not happy to write about it.  This was a horrible year for Spanier, and for Penn State.  As most people know, Jerry Sandusky, the former assistant coach of the Nittany Lions under Joe Paterno, has been indicted by a grand jury for sexually molesting young boys.  There will be a plea bargain, or a trial, in 2012 and of course every man is considered innocent until proven guilty.

But, the facts of the case as they related to President Spanier are very disturbing.  Two Penn State administrators informed Spanier that Sandusky was seen in the locker room showers with a child.  As several media outlets have now reported, Spanier told the grand jury that he was never informed that this incident was sexual in nature.  This is very, very hard to take.  I can’t imagine there is anyone reading this blog who thinks it is acceptable for a man and a child to be in a shower together, and allegedly, this is the tip of the iceberg.

Spanier was told that something bad had happened, yet he didn’t do anything about it.  He was arrogant, and he was complacent.  Then, when questioned about it, he derives some narrow excuse that would have made Bill Clinton proud.  If this is leadership, we don’t need any.

As it turns out, Spanier led Penn State for years in a manner designed to lock down disagreements, circling the wagons when anything went wrong.  He did this when an earlier sexual scandal occurred, as well as when he resisted attempts to release compensation data of Penn State administrators.  He created a culture of secrecy, and in the Jerry Sandusky case, all of this led to an incredibly bad decision he made years ago and that he has finally paid for this year.  What a shame.

Tomorrow on my blog: The King of Wall Street.

Worst CEOs of 2011 Countdown - Number 5

Over the last dozen years, I have studied failure and leader's career ending mistakes. Each year I announce my list of the worst CEOs -- this year releasing my worst five of the year. The "best" of the worst, in the number five spot, is Leo Apotheker, HP's former CEO.

Is there another CEO in 2011 who had as many missteps as Apotheker?  There are others who made even bigger mistakes (coming to the blog in the next days), but I don’t know who actually did more things wrong in one year than this guy.

Where to start?  Decided to sell or spin-off the consumer PC business, then changed his mind and said he would keep it.  Launched the H-P tablet to great fanfare, and mothballed it just a couple of months later.  Announced financial targets then proceeded to miss them. Acquired enterprise software company Autonomy by paying a rich $10 billion for the company.  Throw in a few leaked memos and you’ve got the makings of a great case study for “Why Smart Executives Fail.”

Let’s also not forget, however, that Apotheker was aided and abetted by a dismal board of directors.  First they chose the guy without even meeting with him together as a board.  Coming from SAP sounded great, but did he really understand consumer businesses (witness the PC debacle)?  And did he want to remake H-P in the image of his former employer (witness the Autonomy acquisition)?

The track record of the H-P board when it comes to hiring and firing CEOs is not particularly good, a remarkable point when one considers that the people in the boardroom seats have changed over time.  Carly Fiorina was a dismal failure, the wrong person for the job.  Mark Hurd had a great run, but the numbers dramatically tailed off in the last couple of years of his tenure.  And then he was dismissed in a highly controversial manner.  Enter Apotheker.  Exit Apotheker.  And now Meg Whitman of eBay fame is the CEO, hired without a significant search process.  I have confidence in Meg, but I don’t like the process the board undertook to bring her on.

Will 2012 bring more of the same to H-P?  I think Meg Whitman will bring adult supervision to an unruly crowd, and the strong assets and talent base of the company will begin to rise up after what must have been an upsetting run to put up with.  Nonetheless, I can’t help but compare H-P boardroom turmoil to the seamless CEO succession process at IBM in 2011.  I hope the H-P board goes to school on IBM and tries to emulate how professional organizations manage at the top.  It may be galling for H-P to look to IBM for anything, but the events of 2011 really highlight worst, and best, practice in executive leadership. 

Stay tuned tomorrow, when I reveal my selection of the #4 Worst CEO of 2011. Hint: he’s the only one of the Worst 5 that runs a non-profit, and unfortunately, he’s been very much in the news this fall.  

New Leadership Insights Video: Ernie Parizeau’s Leadership Lessons in Venture Capital

In the first video from my my two part interview with Ernie Parizeau, a 1984 graduate of the Tuck School of Business at Dartmouth, we covered a lot of ground.   Ernie and I focused our conversation on entrepreneurship and venture capital.  Mainly, we touch on the factors that go into a decision to back a business up, what makes someone successful and how leaders in the industry address challenging obstacles.  Additionally, he provides some advice for new Tuck graduates looking to restart their careers.

I'll post the second half of the interview early next week.  Don't forget to access my other Leadership Insights interviews with Rick Routhier and Mickey Drexler.

Syd

Twitter: @sydfinkelstein

Leadership Insights Video Series - Rick Routhier on Picking Talent

In the second part of my interview with Rick Routhier, we discuss the topic of talent picking and why some managers get it right, and some don't.  Additionally, Rick provides his thoughts on what new recruits should look for when identifying a good manager, and reflects on what he likes most about visiting Tuck.

You can also access here the first part of our interview.

Syd

@sydfinkelstein

Same Question, Different Answer - Reflecting on Recent Interview with J. Crew's CEO

I recently read an interview in the Financial Times with J. Crew’s CEO, Mickey Drexler.  This interview was of particular interest given the reporter’s focus on one question she asked Mickey - “ What was your biggest mistake?”  As Mickey would say, "Love that question!"

Back when I interviewed Mickey at the Tuck School of Business at Dartmouth, I asked him this very question.  Although I don’t think it’s unusual for executives to be asked similar questions by various interviewers, I did find it interesting how differently Mickey answered this question in these two separate instances.

During my interview with Mickey, although he took a few pauses or moments to reflect during the actual taping of the interview, he did eventually answer the question.  He described his greatest career mistake as when he tried to change something too quickly or when clothing items were redesigned too aggressively.   More recently, he recounted his greatest mistake to be when J. Crew a few seasons ago lost its way creatively, getting too trendy and swaying from its core designs.

However, the answer Mickey provided – to the same question – was drastically different when talking to the Financial Times.  Maybe it’s a coincidence, but after reportedly reading the news about Gap closing a bunch of stores in the US, he told the FT reporter his biggest mistake was not fighting the board hard enough to stop the increase in real estate - a move Mickey opposed, but went along with.

Does a mistake only become a mistake when your executive decision at the time is later reversed?

Syd

@sydfinkelstein

O.N. - "Occupy Netflix"

Boy oh boy is Netflix in a pickle.  Following Strategy 101 – create a separate organizational unit for an emerging business that has the potential to disrupt (e.g., destroy) the core business (thereby protecting the new from the old) – has now led to a customer revolt.  I guess the problem is not so much that anyone is occupying Netflix, but that they're not!

Netflix is facing what I like to call, with only some irony, the "Blockbuster Problem."  When you are the top dog in a business segment, not only is it easy to get complacent about who got you there in the first place – your customers – but you also draw the attention of everyone else in the wider business environment.  That means copycats, more competition for key resources, and more difficulty differentiating your offering from others.  Groupon has yet to solve this very same dilemma.  For Netflix, this translates into much higher acquisition prices for content, more attention paid by DISH, Direct TV, Comcast, Time Warner, and company, and less of that magical "We're the underdog, so entrepreneurial, and cool" that has characterized rocket growth from Nike to Starbucks.

Isn't love so ephemeral?

New Leadership Insights Video: Interview with Rick Routhier

For the next installment of my Leadership Insights series, I sat down with Rick Routhier, Senior Director, Spencer Stuart and Associates.  Rick and I covered so much in our interview that I had to break it up into two parts.  The first part – which I’m sharing today - features Rick and I discussing some top-of-mind questions related to leadership, including talent recruitment and top leadership development companies.  You can watch the video here.

If you haven’t already, be sure to watch the first video interview in my Leadership Insights series – a great one-on-one conversation with the CEO of J. Crew, Mickey Drexler.

Syd

Follow me on twitter @sydfinkelstein

Hulu: Too Many Owners Spoil the Broth?

The company has a promising technology, one that has the potential to significantly alter the competitive landscape of the industry.  The big guys know this, and they smartly invest in the startup to make sure that if it actually works, they'll have a piece of the action.  Call it a hedge, and on the face of it, what's not to like?

Well, there is something not to like: the owners!  At Hulu, which just stepped away from a sale that would have enabled lots of people to monetize their investments and sweat equity, major shareholders like News Corp., Walt Disney Co., and Comcast nixed all sorts of exit options.  Holding onto their stake, just in case – the hedge – makes sense, but the real risk when the boardroom is loaded with interested parties is that they'll vote the interests of their own business, and not the start-up's.

For business history buffs, take a look at General Magic, a company I recounted in my book Why Smart Executives Fail. As you might remember, it was once Apple Computer’s top-secret company designed to attack the PDA market.  Just five years before the company’s 1995 IPO, General Magic had raised $90 million in venture capital from top consumer electronic and telecommunication companies.  The Apple connection opened the door for other investors, which included Sony, Motorola and AT&T.  Although the PDA market was crowded, General Magic had the best and the brightest, but in the end turmoil and conflicts of interest among board members/investors derailed the company and it folded in 2002.

Will this happen at Hulu?  Hu knows?  But News Corp. et al. may look back on their decision not to sell and rue the day.