What Future Executives Can Learn from Poor Leadership

View all blog posts under Articles

Poor leadership is often an executive’s biggest downfall. Over the past few years, numerous business leaders have been plagued by the consequences of their bad decisions and strategies. In many cases, executives have resigned as a form of public atonement for their actions.

To avoid these pitfalls, students and aspiring business leaders should observe these cases when preparing for their roles as tomorrow’s leaders. Below are 3 lessons future executives can learn from recent examples of poor leadership:

1. Goals Should Motivate Employees, Not Compel Them to Act Unethically

Businesses often create goals and incentives to guide employee productivity. This strategy is not inherently bad or good, but as many observed in 2016, the intensity of employee goals can result in public uproar.

One example of unrealistic goals leading to trouble is the San Francisco-based Wells Fargo, which was at the center of one of the biggest business scandals of that year. The company was accused of creating millions of fake bank and credit card accounts. As of Aug. 31, 2017, the total number of allegedly fraudulent accounts totaled up to 3.5 million, according to CNN Money. Approximately 190,000 of these accounts incurred fees for which Wells Fargo customers were originally responsible, despite not knowing about or authorizing the accounts. In addition, the company discovered 528,000 fraudulent online bill-pay enrollments.

The situation created public backlash against the bank along with severe financial repercussions. As a result, Wells Fargo announced it would pay $6.1 million in customer refunds for fraudulent bank and credit card accounts and $910,000 in refunds for bill-pay enrollments, per CNN Money. Furthermore, the bank’s CEO, John Stumpf, retired in October 2016.

This uproar was a demonstration of how unreachable goals can damage a company’s public position and reputation. As Strategic Finance magazine noted, the entire scandal violates both Wells Fargo’s “Code of Ethics and Business Conduct” and its public “Vision and Values of Wells Fargo” statement. The bank blamed unrealistic sales goals that forced employees to compromise stated Wells Fargo ethics in favor of keeping their jobs.

Aspirational sales goals are a staple of competitive businesses, but in this case, the expectations were unrealistically high. Such objectives and incentives must be designed in a way that motivates employees yet does not compel them to act unethically. Otherwise, staff members will be forced to work against their employers by conducting improper and possibly illegal activities that, when discovered, hurt their employers’ credibility.

Employees should not feel compelled to behave unethically to achieve their goals.

2. Timeliness Is Key When Addressing a Crisis

Often, high-profile businesses are quick to quell internal situations but slow to address external ones. For a recent example, one should look to the Equifax situation. On July 29, 2017, the credit agency discovered a data breach that had occurred earlier that year. However, Equifax did not go public with this information until more than a month later, on Sept. 7. Again, the public grew angry, and Equifax shares fell 13.7 percent after the announcement, according to USA Today. This mishandling was made even worse when news agencies reported that 3 executives sold nearly $2 million worth of Equifax stock soon after the hack was discovered but before it was publicly announced.

Overall, 3 executives—CEO Richard Smith, Chief Information Officer Susan Mauldin, and Chief Security Officer David Webb—retired as a result of the situation. In fact, Smith was called to testify before the House Digital Commerce and Consumer Protection subcommittee and admitted his former company made mistakes.

The lesson here is not about proper cybersecurity. Although Equifax failed to properly protect customer information, even companies that use secure best practices are still at risk of a breach. Rather, future executives can learn from Equifax’s poor response to the situation. By delaying action, not only did the executive decision makers involved put their customers at further risk, but they also sabotaged their careers.

Alternatively, when companies promptly and publicly address a crisis, public backlash tends to be minimal. Both consumers and government officials appreciate when a business owns up to its mistakes and visibly works to do better in the future.

Future executives may be tempted to hide or minimize anything that could be considered bad publicity. However, the security of their jobs and their companies depends on their ability to respond quickly and appropriately to a crisis.

3. Human Resources Is More than a Recruitment Tool

Some businesses use their HR departments primarily for recruiting. This trend is common among startups and other fast-growing companies and, as the Harvard Business Review explained, tends to happen because hiring numbers are most visible to leadership teams and executives. Other aspects of HR, such as legal compliance, employee development, and workplace safety, have results that aren’t as easily quantified and are therefore deemed less important.

It is this recruitment-first mindset that may have led to Uber’s HR debacle earlier this year. In February, a former engineer publicly detailed a series of sexual harassment claims on her personal blog, along with the HR department’s failure to address these accusations appropriately. As a result of the negative press stirred up by the revelations, Uber conducted an internal investigation into more than 200 workplace misconduct claims. The ride-hailing company then fired 20 employees, and CEO and founder Travis Kalanick eventually resigned amid this and other scandals.

Although its story was the most newsworthy of the year, Uber is not the only technology company or startup to face a culture of sexual harassment. In addition, it was not the only one with a poor HR response to such accusations.

To avoid such troubling situations, future executives should learn from this series of events and establish HR protocols and employee guidelines as early as possible, especially if they are leading a new business. Doing so reiterates the importance of workplace safety and culture from the outset. Without detailing proper conduct in the beginning, certain improper behavior may slide by. As time passes, such activities will be increasingly difficult to reprimand, and can lead to crisis within the company.

HR guidelines lead to better company cultures.

Learning Executive Leadership at the Carson College

Professionals do not gain the skills to become executives overnight; rather, they generally need years of business experience and, in some cases, additional training. Enrolling in the Washington State University Carson College of Business can help working adults with prior management experience gain the knowledge they need to reach the executive level.

Students in the online Executive Master of Business Administration program will study both high-level business concepts and executive leadership strategies. As part of the curriculum, students must create a complete business plan. As they go about this project, it will be helpful to remember the leadership lessons detailed here.

Recommended Readings:
Exploring the Success of Glassdoor’s Highest Rated CEOs

3 Executive Lessons From Top Business Leaders

Sources:

http://money.cnn.com/2017/08/31/investing/wells-fargo-fake-accounts/index.html

LESSONS FROM THE WELLS FARGO SCANDAL


https://www.usatoday.com/story/tech/2017/09/26/timeline-events-surrounding-equifax-data-breach/703691001/
https://hbr.org/2017/03/uber-is-finally-realizing-hr-isnt-just-for-recruiting
https://onlinemba.wsu.edu/executive-mba/enrollment-details/
https://onlinemba.wsu.edu/executive-mba/