Lately you’ve seen a few columns here on the topic of leadership: Namely, how to do it well.
Invoking the equal time rule, today I want to talk about failed, misguided, and destructive leadership, using two examples from very different walks of life. The first, a CEO of a Fortune 50 firm, is a matter of public record, but the second, a Protestant minister, is someone I’ve learned about recently and must understandably remain unidentified.
The Fortune 50 CEO
Namely, Ed Zander of Motorola from 2004 to 2008, during which the company’s market cap went from a high of over $50-billion to a low of barely $10-billion. What did Zander do wrong and how did he do it?
Much of the material that follows comes from Chicago magazine’s September 2014 story, “What happened to Motorola?”
Now, to be fair to Zander, plenty of damage had been done to Motorola well before he arrived. In 1994, Motorola peaked at #23 on the Fortune 500, with $22-billion in revenue and $2-billion in profits; 60% of mobile phones sold in the US were Motorolas. But under Gary Tooker (CEO, 1993—1997), Motorola became a company at war with itself. Its network business was an early developer of digital cellular technology that was rapidly supplanting analog in Europe and Asia, while its handset business remained firmly committed to analog.
A Motorola executive at the time describes visiting the network engineers’ headquarters and seeing “a thousand” of them all using digital phones made by Qualcomm, “even though the other side of the company was engaged in a bloody fight against Qualcomm that went on for years.”
Meanwhile, Finland’s Nokia was frantically reinventing itself for the new digital landscape and Motorola “was about to fall off a cliff;” Nokia became the world’s largest maker of mobile phones for the next 15 years.
When Zander arrived in 2004, fresh from being COO of Sun Microsystems, he’s introduced as “a skilled corporate showman who entertained with verve and humor.” It goes downhill from there.
Meanwhile, in arguably one of the worst decisions ever made by a major corporate CEO, Zander struck a deal with his Silicon Valley friend Steve Jobs, the CEO of Apple. Together their companies created a Motorola iTunes phone, the first phone connected to Apple’s music store. “We can’t think of a more natural partnership than this one with Apple,” Zander said at the time. Named the Rokr, the phone launched in the fall of 2005. Jobs, who introduced it, called it “an iPod Shuffle right on your phone.”
Zander says he believed that by working with Apple, Motorola could become cool again. But Motorola was teaching one of the most creative, competitive, and consumer-savvy companies of all time how to make a phone.
In other words, Zander was sharing Motorola’s crown jewels in intellectual property—how to make sleek and cool and big fat profit margin (all at the time) phones with the most dangerous possible competitor, all in the name of juicing short-term revenue and profits.
Doubling down on his short-termism, Zander also slashed the firm’s R&D budget. Long among the top 10 US firms in patent registrations, it dropped to #34 in 2006.
The last item on the bill of particulars indicting Zander is that he was disengaged. Motorola—before it shared its crown jewels with Apple—had shared them with China (in fairness, this was on prior leadership’s watch). Nevertheless, China was a critical market for Motorola, and one Zander never engaged with. So when China enhanced its network from 2G to 3G, Motorola had no 3G capable phones. Motorola managers on the ground, wanting to report back a solid market share to the US, dumped 2G phones at fire sale prices. When the shouting was over, Samsung had stepped in and topped Motorola in phone sales for the first time. As the article drily reports, “it never looked back.”
Carl Icahn, smelling corporate breakup blood, stepped in and in short order owned 6% of Motorola, proposing to break it it into a phone division and a public safety/security (think cop/firemen walkie-talkies) division. For Zander, the jig was essentially up: He was out in 2008. For Motorola, the jig was less immediately, but just as clearly, also up.
The spun-off phone division, “Motorola Mobility,” ended up in Google’s hands in mid-2012 for $12.5-billion, only to be sold yet again to Lenovo about 20 months later for under $3-billion. Sounds like a disaster, but many analysts actually thought Google came out ahead after all in that they kept 17,000 patents and all the engineers involved in creating them and shed a division losing a quarter of a billion dollars a year.
Be that as it may, Motorola had been broken up for parts.
The end.
The minister
About 20 years ago, a new minister was selected to run an urban parish in a formerly well-to-do city neighborhood that had fallen on hard times; crime and poverty had risen and the middle class had long since left. The city itself had been given up for nearly dead by many.
The church building (close to a century old) was without doubt architecturally impressive but, realistically larger than needed for the current congregation, and a maintenance headache. Still, the community was a diverse and ever-changing and the promise of new and slightly exotic blood—the minister found himself called to the church mid-career and had one successful professional vocation behind him—seemed ideal. From the perspective of the leadership higher up in the denomination, it might not have been clear that this church had a terribly rosy future, and the new minister represented promise.
As the years went by, the neighborhood began to gentrify, with first some relative pioneers and then an increasing tide of better-off new residents finding the local architectural infrastructure sturdy and attractive and the prices still reasonable. Followed as the night the day the immediate corollary of rising property values.
The church, with history on its side, owned a vacant piece of property in the neighborhood, which assumed more and more importance in the parish’s planning for its future, and the minister took the lead in trying to extract value from the lot. He was a forceful personality and valued getting his way.
Without going into detail—which is also at this point, speculative to try to reconstruct second-hand and years later—during the minister’s watch the church sold the vacant lot for $X-million while the market was still rising, bought it back (still vacant) from that same purchaser a few years later for about two and a half times $X-million, and then entered into a putative agreement with a developer who never developed anything. It required litigation to get out of the last deal.
You should not be surprised to learn that all this led to a loss of confidence in the parish leadership by many members of the congregation with all the negative consequences you’d expect in attendance, donations, and enthusiasm in general.
Fortunately, the story has a happy ending: The congregation realized no one was going to solve this problem for them, united within itself, and ultimately persuaded the minister to leave voluntarily, with some incentives encouraging him to do so. And the church still owns the still-vacant lot.
Lessons
There’s a rich tradition in literature of narrators’ letting stories (parables, fables, myths) “speak for themselves,” relying on the audience to draw their own conclusions, and you are amply capable of doing so.
But I want to highlight a few commonalities between these two examples from utterly different walks of life; because as different as the contexts might be, both are stories of leaders at the helm of organizations with proud traditions but which found themselves navigating unexpected turbulent waters as the world around them changed in ways it never had before.
What mistakes did these two leaders have in common? What “failure modes” do these two stories exemplify?
- A “my way or the highway” approach.
No single individual has all the answers, or even most of them. Entertaining different views invariably (in my experience) enhances the power and effectiveness, not to mention the consensus behind, an ultimate decision. “Brooking dissent,” a pejorative phrase, actually helps you lead. - Hubris.
Closely related to our first issue here, but broader and more encompassing. Hubris embraces every unattractive characteristic from supercilious haughtiness to overbearing presumption about one’s own invincible judgment. Zander thought Motorola could learn from Apple; the opposite happened. Our minister thought he could outfox real estate deal-makers; the deal-makers won. - Disengagement from your real job and a focus on image.
Zander seemed to think (we don’t actually know his motivation) he was “above” getting involved with the all-important China market. Maybe it was a more powerful ego-gratification to be the “showman” on the corporate stage. The minister spent great emotional energy on the vacant lot, almost inevitably at the expense of day to day parish leadership and what’s quaintly referred to as “pastoral” duties. In both cases, when the organizations lost confidence in the leader, who should really have been surprised? The moral: Do your job and leave your legacy to the historians. - You’re smarter than the market.
Guess again. For Motorola (before Zander): Analog or digital? Who cares?! We’re comfortable going our own Balkanized ways internally. And under Zander: China? I don’t know, it’s a long way away. For the church: Well, it’s fairly obvious. I can outsmart the real estate professionals.
None of this new; much of it is in fact ancient. But it never hurts to re-learn and reincorporate enduring truths into your behavior and, if I may say so, your very being as a leader. St. Augustine defined the sin of pride as “love of one’s own excellence.” Whether in the 4th Century or today, beware.
