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1-Page Summary of Derailed
Spectacular “Derailments”
When new managers come in, they’re expected to do well. They should be able to handle the transition smoothly and turn around the company’s fortunes. However, even if their intentions are good, things can go horribly wrong. Studying why talented leaders fail reveals a lot about corporate values and morality – as well as about ordinary people. The executives discussed here didn’t engage in criminal behavior; instead, they allowed their darker side to dominate their decision-making process. They derailed because of what any successful leader could experience: “a failure of character.” Derailment means a leader has “gone off track”, diverting so far from the company’s goals that he or she has to leave the organization. This situation is costly for both companies and individuals alike; firms may suffer financial losses or lose touch with their culture.
Owning the Dark Side
We all have many aspects to our personalities, and it’s important to understand them. If you don’t take the time to reflect on your own weaknesses, they can emerge when you’re under stress or in a position of power. You also need to be aware that when people are stressed out or in positions of power, their true nature may come out—even if it’s something they usually try to hide.
The Derailed
These six leaders all failed in their endeavors because of one thing: arrogance. They were all convinced that they knew best and didn’t listen to others, which led to problems for them. The first leader was Robert Nardelli, who worked at General Electric before moving on to Home Depot. He thought he’d be the next CEO of GE but wasn’t; instead, he became the CEO of Home Depot without having any experience with a decentralized company like it. His mistakes caused his downfall, and when people started cheering in the hallways after his firing, you could tell how relieved everyone was that he had been removed from power.
Carly Fiorina was a very effective communicator during her time at Hewlett-Packard. However, she also had her weaknesses. She would often use the word “I” 129 times in a 30 minute speech and never took responsibility for any of the company’s problems. Carly made drastic changes to HP when she became CEO but those changes didn’t seem to work out as well as planned because they were more about promoting herself than actually helping the company grow. After five years of steadily dwindling market share, Fiorina was fired from her position with H-P and after that their stock rose 10%.
Durk Jager was an outstanding strategist. He rode his reputation to become the CEO of Procter & Gamble. However, when he became the CEO, he initiated a lot of change in the company that went against P&G’s 150 years of history. He demanded cultural transition and sought huge mergers while searching for rebels among his staffers. His style ended up alienating him from employees who feared him and lost respect for him because they thought he was arrogant and uninterested in P&G’s culture. After 17 months, the board ousted Jager as CEO.
Steven Heyer had a great reputation when he became CEO of Starwood Hotels. However, that changed when he was accused of sending inappropriate emails to female employees and having an affair with one of them. Although the accusations were false, Heyer resigned from his position at Starwood rather than fighting for his reputation. This mistake cost him millions of dollars in compensation and severance pay.
Frank Raines – Despite his working-class origins, he attended Harvard College and Oxford. He then worked at the White House as the director of its Office of Management and Budget. After that, he became CEO of government-chartered mortgage giant Fannie Mae. His stock rose under his leadership, and he earned roughly $90 million while there. Raines expanded Fannie Mae’s reach to low-income borrowers who previously didn’t have a chance at home ownership because they couldn’t get loans from banks or other lenders. A whistleblower told the government about alleged accounting irregularities at Fannie Mae, which was confirmed by an internal report from the Office of Federal Housing Enterprise Oversight (OFHEO). Refusing responsibility for these allegations, Raines resigned with $19 million in severance pay after being accused of violating federal securities laws by OFHEO officials in 2004. Later on, it was revealed that Raines had paid more than $24 million in fines for his role in accounting fraud during his tenure as head of Fannie Mae. He also surrendered nearly $15 million worth of company stock options.
