Sydney Finkelstein was a rank-and-file staff member at Tuck School of Business at Dartmouth College when he started his study of companies that failed to achieve success and their executives. His research idea was not received with much enthusiasm in a business school world that is inebriated with things going right. Most colleagues were skeptical and students who were slowly being weaned on his findings came to classes without expecting too much. But their doubts were quickly dispelled and when Finkelstein published his book titled “Why executives fail”, it sold in a stunning number of copies and attracted glowing reviews. He was elevated to a status of a business education superstar and his approach gained recognition. Failure was finally reinstated as something that deserved to be investigated so as to maximize the chances of success along the way or guard against things going wrong in your own business. Now it was something that was included in leadership training programs and developed by other scholars.
Sydney Finkelstein identified four major danger zones for executives: mindset failure, delusion, information breakdown and managerial habits. This was a systematic review of mistakes companies and their leaders can make, with plenty of examples and reflections from corporate actors who went through similar cases. It later served as the foundation for the creation of the early warning system firms can use to avoid the same fate in their own operations. It was also the right fodder for leadership training around the world.
By mindset failure Finkelstein did not mean the fact that top decision-makers are dishonest or intellectually incapable. This is the message the public often gets after spectacular debacles. In the media, it is often the question of greed, dysfunction, corruption and primitiveness, but this kind of analysis tells more about the way we suddenly shift our perception of the situation when it is clear something or somebody was a mistake. But truth be told, it is a misguided diagnosis. In reality, it is a failure in strategic thinking, poorly investigating opportunities and threats, making analytical mistakes.
This is closely connected with the second category, which is delusion. Managers who do not have anyone around to question their line of thinking become to self-confident and live in a fantasy of their approach being flawless. Since his subordinates and peer are afraid to incur their anger, they do not voice dissenting opinions and this is how one person's error accumulates into an inevitable collapse.
Another reason for large corporate failures is inability to institute powerful oversight, with audits or other types of vigilance. Loose or otherwise inadequate approach in this field gradually leads to mistakes piling up and procuring disaster of one kind or another.
Leadership training experts would also make a good decision including Sydney Finkelstein's typology of managerial habits that lead to failure. They might not be that exciting to listen to since leaders stand a chance of self-diagnosing one or more of them, but it is necessary to be honest.