Seven pitfalls CEOs must watch out for

By Sydney Finkelstein
For a CEO to be truly effective there are certain pitfalls he must watch out for.

1. Closed mindedness

While there is no doubt that the CEO is very talented and capable, there is the danger of him believing that he has all the answers. This is a slippery slope to be on because he has been successful at solving problems in the past which is why he has done well in his career. You may think that you know it all and have all the answers, but if you boss over your team, grab power and make decisions without any interest in what people say, you make it very unattractive for anyone to be on your team.

2. Ineffective communication

The vision is a critical part of the job description of the CEO. Having a vision is one thing, but executing and communicating it are completely different. The inability to articulate a compelling vision of the future of the organisation can be a huge problem for a CEO. The job of the CEO is to be the energiser and inspire people, to come up with a great vision and communicate it in a way that it means something to people. I have seen many senior leaders get derailed because they presume that everyone gets their vision and don't spend time to get people to embrace it. As a leader, it can get dangerous if you get too far ahead of the rest of the organisation because you'll turn around to find that you have no followers. Nothing gets done because of poor communication and this then requires you to go back and do a stronger job of selling the vision; even adjusting it if required.

3. Lack of self-awareness

This is a soft idea but a very powerful one. Very few of us are aware of how we are perceived by others or of the role of our biases and pre-judgements in decision making. This lack of awareness is dangerous for a CEO as he has increased responsibility. If you don't have a handle on why you do what you do, or what biases are driving your decisions then you will be vulnerable to going down the wrong path. If we are not aware of our mistakes then we cannot make refinements to the path we are on, whether personal or strategic.

4. Creating the right culture

To be successful as a CEO, you need to have the greatest and best team working for you at multiple levels. Since most of us are not aware of our biases and pre-judgements, it is critical to create a culture where people will share their views honestly. However, very few people end up getting this right and most CEOs end up surrounded by 'yes men'. CEOs have to consciously fight this and make it a major part of what they are doing. The best CEOs understand the importance of diversity in decision making and this adds a lot of value to the business.

5. Building teams

You would think that CEOs know this - companies fail because CEOs fail to hire people better than them —but many of them don't. The best CEOs wouldn't be afraid of talent superior to them - instead they would insist on it and seek it out. Hiring and development of talent is an important part of the CEOs role. To be successful in a changing world, generation and regeneration of talent is going to be critical as access to the right external talent gets difficult.

6. Relying too much on experience

CEOs can fall into a trap where they overestimate the relevance of past experiences in decision making. They forget that the solution to yesterday's problem is not necessarily the solution to today's problem. There is also a tendency to overgeneralise from a small sample size. For instance, a US company entering a new market may have tried something that was successful in Mexico, but that same strategy might not necessarily work in Brazil. CEOs in particular are vulnerable to this because they've got to where they are on the basis of this experience, and there is always the tendency to fall back on it.

7. Managing the board of directors

Failed CEOs often make many mistakes in how they manage their board. They often don't pick up on signals because the board members tend to disguise what they are saying so that they don't come across as not supporting the CEO. These things may come out when board members talk to each other. Ultimately, when the CEO fails it's the board that takes the call to remove him. As the CEO, make it a habit to have an open and well managed relationship with your board.

(The author is the Steven Roth Professor of Management, Associate Dean for Executive Education, Faculty Director, Tuck Center for Leadership)