Editor's PicksLearning from mistakes without paying the price

Learning from mistakes without paying the price

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Let’s look at the case of Kenneth Lee Lay who was born in 1942 in Tyrone, Missouri – a so-called bellweather state in the United States on account of its mirroring the demographic, economic and political makeup of the nation. It was a modest upbringing. Lays father was a Baptist minister and a tractor salesman, but the pair shared a work ethic and intellect.

He was lauded as one of America’s greatest business leaders after he transformed a small, unremarkable regional company into one of the nation’s most prominent organisations. Under his leadership, his company became a Wall Street superstar.

He became one of the highest paid CEOs in the United States. He owned lavish homes across the country. In February 2001, Fortune magazine’s ranking of America’s most admired companies listed his company as number-one for ‘innovativeness’ and number two for ‘quality of management’.

Image source: www.alamy.com

Moreover, Fortune rated his company as ‘America’s Most Innovative Company’ for six consecutive years. He became personal friends with the president of the United States and was an advisor to world leaders.

What added to his aura was his rags-to-riches story. He became the poster-child for living the American dream. He had a less than modest childhood, growing up in poverty. Even though his father worked multiple jobs, the family did not have running water in their house. He, too, had to work multiple jobs to help his family survive – even though he was just a child. But he always dreamed of having a better life. He once told a reporter that spending hours performing manual labour gave him time to think about that life, about how he would get into business rather than create a future similar to his past.

As a young man, he obtained the support of a local university professor, who described him as an “outstanding student”, based on the strong work ethic he had learned out of necessity as a child. This same professor figured out a way of fundim him to earn a Master’s degree in economics.

After serving four years in the U.S. military, he took a job with the U.S. government to learn how policies are made. He then decided to continue his education and received a Ph.D. in economics. Armed with a solid work ethic and a good education, he was on his way. Shortly after entering industry, he quickly realised success beyond his wildest dreams – ultimately attaining celebrity status as one of the greatest leaders in industry. Some even called him a hero.

As an individual, he was described as an extraordinarily giving man. What was most unique was his ability to support issues without having an obvious person-agenda.

He supported numerous charities, including everything from ballet and museums to the Urban League. He also funded numerous scholarships and provided millions of dollars to political campaigns for both Republicans and Democrats. And most impressive – even with all of his successes and recognition – he donated a considerable amount of his time, serving as chair for numerous worthy causes.

Leadership gurus described him with terms like “cutting-edge”, “trustworthy”, and “supportive”. His leadership philosophy was to hire the brightest people possible and then have them “push the business envelope”.

His confidence was one of his greatest sources of strength. His employees described him as mild-mannered and quiet, but stern and demanding when necessary. In fact, the views of his employees were so strong that his company was ranked by Fortune as Best Company to Work For from 1999 to 2001. He had a knack for picking the best employees and then giving them freedom to do their jobs without micro-managing.

Ultimately, his leadership approach was profiled in newspapers, magazines and leadership books. His success story became inspirational. Everybody at that time who desired his leadership read about him and he was admired by everyone. And when ‘leadership experts’ said that to become a great leader all you need to do is mimic great leaders, we even sent our aspiring managers to executive-development forums to hear about him. Such people are seen as a ‘God’ and are said to have special qualities that young leaders can aspire to. They are always listened to by the media, and tend to become regarded as smarter and wiser in society.

But have you ever noticed that many ‘successful’ leaders profiled in leadership books have failed when faced with challenging situations? The leader we just profiled was Ken Lay, the former chair and CEO of Enron – the man at the centre of the largest business scandal in the United States in its time. In the final years at Enron, its president Jeffery Skilling and CFO Andrew Fastow used accounting loopholes and unethical financial reporting to hide billions of dollars in debt incurred through failed ventures.

When mistakes – failed deals and failed projects – were brought to Lay’s attention, he had two choices: (1) admit the mistakes, move on and try to learn from them in order to improve performance on future ventures; or

(2) Hide the mistakes and look the other way. He chose the latter path – the way that meant he wouldn’t have to admit failure. Subsequently, Lay not only approved the unethical actions of Fastow and Skilling, but he also refused to know the details. Not only did Lay fail to learn from his mistakes and the mistakes of others, but he also misled Enron’s board of directors by using misrepresented earnings and falsified financial statements to show inflated performance. Ultimately, the company went bankrupt – bilking shareholders of US$11billion.

In the end, Ken Lay’s leadership style became synonymous with lying, disgrace and humiliation. The same man that so many aspired to be is today profiled in books like The Book of Bastards: 101 Worst Scoundrels and Scandals from the World of Politics and Power. Following convictions on fraud and conspiracy, Lay died of a heart-attack in 2006 – a few months before he would have been sentenced to prison for the rest of his life. Lay’s example of how not to be a leader resulted in fundamental changes in how Ghanaian companies view leadership, governance and accountability.

The Bank of Ghana has reiterated that sanity and confidence in the banking industry has improved significantly due to the Corporate Governance directive introduced in 2018 and some other measures.

The country’s financial sector was negatively impacted a few years ago, due to dominant roles by some shareholders in the governance of banks, weak controls and regulatory breaches, among others.

Speaking at the UPSA Quarterly Banking Roundtable on the topic ‘Banks, Corporate Governance and Risk Dealings’, Mr. Adam said: “I must say this governance code together with other reforms that have been undertaken by the Bank of Ghana has brought sanity into the banking space. This is also being complemented by the Company’s Act that was issued in 2019, Act 992 which also has a lot of disclosures all aimed at improving the governance structure and systems in our institutions in Ghana”. Mr. Adam pointed out that corporate governance is becoming a topical issue in the world today because of company failures, citing examples like the collapse of Enron and Lehman Brothers.

“When it comes to banking business, the most important stakeholder is the customer who is putting his money with you to trade with. Corporate governance is becoming a topical issue in the whole world, including academia, because of the history of corporate failures like Enron and Lehman Brothers. You can talk of the need to protect the stakeholders, including the customer – whom I said in banking business is the most important stakeholder”.

Lay’s path is a spectacular example of the fact that there are two sides to every story: it was the best of times, it was the worst of times; you take the bitter with the sweet; every rose has its thorns. But when it comes to great leadership, we tend to tell ourselves only half of the story – there is a discernible gap in our fundamental understanding of what it takes to be an effective leader.

There are thousands of books written about leadership success, books that want us to believe the sky above the great leader’s head is always blue and their road is always smooth. These books make us feel good. Unfortunately, they also lull us into a false understanding of what it means to be a great leader. What about the flip-side? Great leaders don’t always have blue skies or smooth paths – not by a long shot.

The reality is that we don’t – and can’t – learn how to be great leaders by just imitating great leaders’ accomplishments. It’s not that easy. Being a great leader isn’t exclusively about making the ‘right’ decisions; often, as illustrated by the case of Ken Lay, it is about how to proactively avoid making the wrong decisions ‘irrespective of the consequences’. He made plenty of right ones – and then he was seemingly unable to avoid making some catastrophically wrong ones. Why?

Ken had policies and a code of ethics that governed the company, yet he chose the wrong side. To really understand why he did that is very difficult; but as scholars we believe he knew what he was doing, and that drive led him to choose wrongly. Choices between right and wrong have been around since Adam and Eve, and even when ethical standards are straightforward it’s not always easy to choose a hard right way over an easy wrong one.

The best leaders know the potential consequences of their unethical choices, and they create policies that discourage overstepping moral bounds. However, recent efforts to dampen unethical behaviour in organisations – with codes of ethics, compliance departments, ethics training and the like – have often been stunningly ineffective, to put it bluntly. Moral scandals keep emerging, and trust in business keeps falling. Remember, Enron had an industry-leading code of ethics.

As Leaders we need to use learning opportunities in ways we have historically never done. And also cultivate the ability to observe and learn from these failures – not only Kens Lays’ but those of others that helped make us effective leaders.

Leaders must ‘start paying close attention to the what’s and whys of the company’s mistakes’, and learn from them and develop as a business.

If the company keeps on going through the storm again and again, the final storm might collapse it.

This is so because one has failed to learn from his mistakes and grow out of them. You are able to determine signs of this storm as and when it shows up. Because you have failed to learn from your own experience, the last choice is to fade out of business.

We can be effective leaders if we keep looking inward and stubbornly hang onto strategies that have worked in the past.

“No one can hand you wisdom,” says Howard C. Nussbaum – Professor of Psychology at the University of Chicago and director and founder of the Chicago Centre for Practical Wisdom.

“It’s like a skill. You can get better at it.”

So, how do you practice? It’s about slowing down and giving yourself time to interrogate decisions.

The following can help.

  1. Reflecting Back

We all make mistakes. And it helps, per Nussbaum, to get your bearings by doing a post-game analysis on decisions that don’t go well. Directions aren’t needed to discern those situations. We know when we’re off. “We’re practical, and we can be lazy and stupid,” he says. “We don’t always do our best.”

When you do interrogate your failures, rather than asking what you could have done better, ask what you could have done differently. Ask yourself, “When I made that choice, what was I thinking about? Could I have thought of other things?” Grossmann adds that evaluating behaviour is easier when you’re specific with the questions, “How did I handle that situation?” and “Did I pay attention to other people?”

Then ask others how you did, and if you could have considered something else or done something differently. Make the questions open-ended so you’re not assuming anything but letting the person answer. The point is not to criticise but to expand your perspective for the next time. Or, per Nussbaum, to think: “I may have been wise, but I could have been wiser”.

Rather than something to obtain, being wise is a form of deliberation about the best course of action in a complex social situation, says Igor Grossmann, associate professor of psychology at the University of Waterloo and director of the Wisdom and Culture Lab.

We tend to feel that we’ve built up knowledge over time. We also don’t love uncertainty. “We like answers,” Nussbaum says. But we don’t know all the answers; and even when we’re self-aware, recognising our limits is almost a counterintuitive feat.

“An intellectually humble person will be the last one to say they are most intellectually humble,” Grossmann says.

But when faced with a situation, before you do anything, pause. Taking a beat lets you consider your options. Then ask yourself, “What don’t I know right now?” “What could I learn?” And as a reminder of the reflection you’ve done in the past and a way to apply it, ask yourself: “What could I do differently here?”

  1. Involve the Family

Decisions that have a moral bearing involve other people, like your spouse, children, relatives and friends. You want to bring them in. You need to. It’s taking the village concept to problems, Grossmann says. But it’s not just thinking of others. It’s tapping into how they would feel. That will cause you to weigh other options.

“When you have affective engagement, it influences other parts of your brain,” Nusbaum says.

And in doing this, there’s a two-fold benefit. The solution becomes richer when multiple perspectives are taken into account. It also takes the pressure off. When you argue for a position, you feel something personal is at stake so you dig in. But when everyone gets a say, the focus isn’t all on you. you don’t own the answer. “You don’t have to impress anyone anymore.”

It is important to follow those who do well in their jobs. Experience will teach you how to handle setbacks, which can be a vital measure of true Leadership. “Success is lousy teacher,” says Rick Dreiling: “The more successful you tend to be, the more behind you can get.”

Lucas Chow, CEO of the Singapore-based media conglomerate Mediacorp Group, echoed Dreiling’s warning about the perils of too much success. You can celebrate success for a short duration of time, but it is soon forgotten. But you benefit from mistakes for a lifetime.

I have worked with great executives over the years, and what I have learnt is that none of them is perfect. And when you see someone at the top make a mistake, never say “when I get to that position I will never, ever do something like that”. Rather, learn two lessons from them; how not to make that mistake yourself and how they rectified the mistake.

Reuben Odame-Mensah is a Banker and a Theologian. He has fourteen years’ experience in banking and Insurance.  He is currently Sales Manager Mobile Branches at Izwe Savings and Loans. He is the Author of the book “The Position Of The Believer In Christ”.

Contact email: reuben.mensah@izweghana.com and r0mensah82@gmail.com

Tel: 0501456526

Reference

How They Blew It: The CEOs and Entrepreneurs Behind some of the World’s most catastrophic Business Failures by Jamine Oliver & Tony Goodwin,2010

Joy online

Sanity and confidence in Banking Industry improved significantly-BoG Charles Nixon Yeboah 17th July 2021.

Applying Wisdom to contemporary World Problems Edited by Robert J. Sternberg Howardc.Nusbaum, Judith Gluck palgrave Marcmillan 1st edition2019

ISBN-1397830202866

Asian Leadership: What works.

Edited by UlrichDave,Sutton Robert, Chatterjee Debashis,Chow Lucas, chung cordelia Publisher McGraw-Hill Education-Europe september, 2010

Wise reasoning in an uncertain world:

Igor Grossmann, Associate Professor of Psychology at the University of Waterloo and director of the Wisdom and Culture Lab.

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