How many times have you seen a “safe” leader appointed as CEO? It’s usually a man, and he’s a guy who won’t rock the boat. He’s not bold, imaginative or forward-thinking. But the board members perceive that he is steady and predictable enough to allow them to sleep at night.
This is an illusion.
Such leaders destroy a company’s future in the name of a few months or perhaps years of “no drama” existence. Here’s how:
1. They cause exceptional talent to flee: No ambitious, talented professional wants to work for a safe, unimaginative leader. Doing so is a ticket to stagnation. It risks sinking your career. The best you can hope for is keeping your job. Top talent wants to grow and thrive, not merely exist.
2. They fail to spot strategic new opportunities: We live in a dynamic, ever-changing world. It’s hard to predict what’s likely to happen even 12 months from now. To keep up, companies need to continually scan the horizon for opportunities. They need to gather and test new ideas, and to explore potential partnerships.
Safe leaders don’t want to do any of these “messy” things. They want to “stick to the knitting” and stick their heads in the sand.
3. They seldom keep enough options open: Twenty years ago, a paper published by McKinsey Quarterly highlighted “The Real Power of Real Options” (PDF download). It described the strategy of managing risk by investing in new initiatives with the goal of keeping your options open long enough that you can shift the odds in your favor. In other words, by taking a bit more risk initially, companies can lower their risk in the long term. Here’s a quick excerpt from the paper:
Our work in the energy sector reveals that a number of excellent performers do instinctively or intuitively view their investment opportunities as real options, positioning themselves to tap possible future cash flows without fully committing to investments until the potential is confirmed.
This is antithetical to safe leaders. More risk upfront? Never!
4. They create “float”: Float is what happens when leaders say one thing but do another. It’s a fuzzy zone that causes employees to have difficulty judging how they should behave.
When a board says, “we want to grow,” but they appoint a CEO who is anything but dynamic or visionary, they create float. No one knows how to act. Paralysis and indecision result.
5. They steer through the rear window: When you add up my first four points, you get a leader who is obsessed with the past and maybe—just maybe—the present. By failing to scan the horizon for change, by pushing away insightful talent, by refusing to experiment or take enough calculated risks… the only guidance they have is what has happened in the past.
In a dynamic market, what happened in the past isn’t nearly enough information. No sane person would try to drive a car by looking out their back window, and no sane board should think that a safe choice as a leader is actually safe.
Too little risk is the most dangerous strategy of all.