Cocky CEOs can be the downfall of SME businesses

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Proud and over-confident CEOs are often likely to be leaders of collapsed businesses because they wait too long to seek help in tough times or don’t bother at all until the bank forces them to.

Having worked with hundreds of SMEs and large companies to improve their sustainability and performance, Vantage Performance has found that what sets successful businesses apart from those that go under are how soon they seek external help (many leave it too late), and how receptive they are to specialist assistance.

Michael Fingland, managing director of Vantage Performance, said this largely came down to the personality of the CEO or owner(s): "It is very personality-driven – it's so much more a part of success or failure than other factors such as what industry you are in, or what state the business is based in."

A recent survey by Vantage Performance of the bankers, lawyers and accountants who refer troubled clients found clients don't seek help early due to:
  • Self-belief – a genuine but often misguided and over-confident belief in their own ability to fix the problem (top response of 73% of survey participants)
  • Pride and ego (68%)
  • Denial and delusion (68%)
Other issues, such as the cost of consultants, fear for their reputation if they call for external help and a general lack of awareness that such help exists, were much smaller factors than the three personality issues outlined above.

"CEO personality can be a huge factor, for better or for worse. If deluded self-belief and ego come into it, they often mess around trying to fix the problem themselves and their bank eventually forces them to take action – by then they’ve lost six to 12 months of time and the company is in much worse shape financially," Fingland said.
 
"You hire experts to head up your sales team, operations and HR, so why do CEOs feel they can handle a crisis themselves without calling in experts who deal with this every day?

"On the positive side, a CEO who seeks specialist help early, communicates clearly with his or her people and stakeholders, and is willing to take the hard decisions, is much more likely to maintain the support of their stakeholders and stabilise their business.

"With the economy still struggling and expectations of a less than stellar Christmas period, if a business is underperforming, is it equipped to deal with further shocks to the system?" Fingland asked. "The best thing directors can do is not leave it too late to get help.”
  • Angela Wong-Liao - Invis on 2014-10-29 2:56:18 PM

    After almost 4 decades in the business world, I always find the worst enemy to CEOs are pride and because of their pride, they are not as objective as they should. Sometimes, these CEOs are so confident in their own abilities, they simply refused to accept that they may require external and objective opinion to move forward until too late.

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