Why Smart Executives Fail and What You Can Learn From Their Mistakes, by Sidney Finkelstein. New York: Portfolio Penguin Group, 2003.318 pp.

Why Smart People Can Be so Stupid, edited by Robert J. Sternberg. New Haven: Yale University Press, 2002. 254 pp. DOI: 10.1177/0021943604268662

A research methods professor once counseled me that for academic career success, my statistical results should reveal positive but realistic correlations. People in general and journal editors in particular, he explained from experience, simply prefer positive research findings. In a similar manner, positive research is cited by teachers and consultants to explain what personal actions will lead to effective communication and leadership performance. Alternatively, it is assumed that individuals who do not undertake those actions will fail to provide good communication or leadership.

Why Smart Executives Fail reflects 6 years of research by Sidney Finkelstein, a management professor at the Tuck School of Business at Dartmouth University. Why Smart People Can Be so Stupid was supported by a National Science Foundation and U.S. Department of Education grant and was edited by Robert J. Sternberg, the IBM Professor of Psychology and Education at Yale University. These books claim to be the first to report on and synthesize academic research efforts on extraordinary leadership failure. Their work convincingly demonstrates that failure is not just the mirror image of success, and analyzing the root causes of failure can provide insights not possible with any other approach to data mining. Most important, each volume suggests new opportunities for meaningful research in communication studies.

The research for Why Smart Executives Fail, as the first chapter explains, was begun in 1997, with the task of creating a representative sample of companies that had gone through a major financial loss. To be major, a loss had to be proportionally large for the company and range from millions of dollars to more than 1 billion dollars. A second criterion for selection ensured that the sample of companies was widely diversified by industry. The result was a sample of 51 companies, which the author claims to be the largest sample of corporate failures ever investigated in extensive detail. Finkelstein and his team then analyzed the organizations for trends and conducted exhaustive interviews of the senior executives involved in the disasters.

Part I, "Great Corporate Mistakes," examines four different business challenges where large-scale executive errors were made, beginning with situations in which the CEO had been previously very successful: Apple (computers), Motorola (Irradium), Samsung (electronics), and Borders (Webvan). In each case, the CEO backed a foolish idea, no systematic opposition arose within the organization, and a pet project ultimately failed. The extent of the losses incurred before each project was halted revealed a massive breakdown in internal communication systems that otherwise were thought to be functioning well. In chapter 3, "Innovation and Change," the focus shifts to three companies that lost huge market share in certain products within 1 to 3 years: Johnson and Johnson (medical stents), Rubbermaid (household goods), and Motorola (cell phones). This time, the cause was not executive malfeasance but rather, the failure of internal communication systems to convince executives that changes in market conditions would result in disaster. Mergers and acquisitions are the subject of the next chapter, including the merger of Quaker Oats and Snapple, the acquisition of Columbia Pictures by Sony, and the acquisition of the Hay Group and some 37 other companies by Saatchi & Saatchi. These organizations did not gather appropriate information about the companies about to be acquired, and they also engaged in insufficient planning for integration after the merger or acquisition. Overconfidence ruled the day, it was unchecked by any internal communication system, and the result was massive financial loss.

In chapter 5, "Strategy Gone Bad: Doing the Wrong Thing," Finkelstein confronts a puzzle. There are a large number of books, consultants, and employees all communicating to the CEO or top management team the principles of good strategy. So why has all this good advice seemed to have had little effect? The author uses his research on Wang Laboratories, Snow Brand Milk of Japan, and General Motors to illustrate that in spite of such information being available within an organization, the culture may block its delivery to the top strategist, the CEO.

Part II of the book examines the overall causes of executive leadership failure, with each of the four chapters highlighting a particular destructive syndrome. In chapter 6, "Brilliantly Fulfilling the Wrong Vision," senior executive failures result in huge losses because smart executives execute strategy well, even when it is the wrong strategy. Finkelstein's research did not reveal a single major breakdown resulting from a company ineffectively carrying out operations, as executives uniformly were good at using communication techniques to put their policies into play. An implication for communication research is that we may unduly focus on which communication techniques to use, as opposed to what data gathering should go into decisions that are to be communicated.

Finkelstein further explores communication issues in the next chapter. He finds that internal communication systems would appear to be successful if they increase employee loyalty to a company, add to an employee's sense of working for the best company in its industry, and inspire employees not to settle for less than perfect performance. The author points out that it is exactly such companies that become insular over time, whose employees develop a feeling of contentment and superiority, and whose senior managers end up making major mistakes. Bad and threatening news must be allowed to seep into the communications network at all levels if workers and senior managers are actually going to be aware of market threats and the potential weaknesses of their own products and systems.

Chapter 8, "Tracking Down the Lost Signals or Why Businesses Don't Act on Vital Information," asks the question of why there are so many cases of vital pieces of information ignored in large organizations. The answer in the companies studied was not the size of the organization or incompetent management but rather, the lack of communication channels that would deliver information effectively between those who received it and those who could act on it. Many employees who received information did not communicate it forward because they had not been shown that such information was important. If they did forward the information to a level above them, their superiors also often were insufficiently trained to understand its value.

The last chapter in this part of the book deals with the personal qualities of leaders of companies that undergo major business failures. Such managers see themselves and their companies as dominating their environments, set no clear boundaries between their personal interests and their company's interests, think they have all the answers to important questions, are obsessed with the company image, underestimate major obstacles, and tend to rely on what has worked for them in the past. Ironically, such individuals often are excellent communicators, both speaking and writing with great skill, and they also can be charismatic and persuasive. They are simply not adept at soliciting and recognizing the right messages and are overly adept at communicating to others the wrong messages. This chapter thus, makes a powerful argument for seeing communication as more than a skill set.

Part III concludes the book with two chapters emphasizing how smart executives (and smart communications researchers) can learn from the study's findings. In chapter 10, Finkelstein argues that the use of unnecessary complexity, management speeding out of control, a distracted CEO, excessive hype about a product or event, and lack of trust of the management team are early warnings of possible impending danger. The author suggests that research on how CEOs communicate in their annual report letter to the stockholders and how they respond to analysts' questions will yield signs of potential future disasters. In the final chapter, the author claims that it is unreasonable for a CEO to be able to know and forecast every possible outcome correctly, but it is reasonable for the CEO to ensure the organization structure, including the internal communication structure, will make this happen. Finkelstein points out a good communication system should ensure that the lessons learned from corporate mistakes be communicated throughout the company in real time.

The second book, Why Smart People Can Be so Stupid, continues to explore the effects of poor communication choices. The 11 chapters represent research results from 15 scholars, beginning with Ray Hyman, a professor emeritus of the University of Oregon, who defines smartness as an enduring property of an individual and stupidity as representing a particular act or series of acts that most dispassionate observers would label as stupid. In the second chapter, "Beliefs That Make Smart People Dumb," Carol S. Dweck reports on years of research of the relationship between self-analysis of intelligence or abilities and performance. The suggested implications for communication research are that if individuals believe they innately are good communicators, and that this is an externally endowed gift of nature, they will tend to choose situations that provide them constant positive feedback. In turn, they will not tend to put themselves in situations where their communication skills can receive helpful criticism and where they can grow as a communicator. Furthermore, if they receive negative feedback, they are likely to be poor communicators in the future. On the other hand, if they believe they can increase their communication skills from effort, they will invest in long-term communication self-growth. In sum, communication researchers need to be aware that internal beliefs about communication skills and the type of feedback research participants are given about their communication performance are variables to be controlled in analysis, and these conclusions obviously have important implications for effective pedagogy.

Chapter 3, titled "Smart People Doing Dumb Things: The Case of Managerial Incompetence" by Richard K. Wagner, particularly reinforces the findings in the Finkelstein book, as the author explores the apparent difference between book smarts, defined as academic intelligence, and street smarts. Wagner describes two competing strands of research; the first focuses on rational decision rules for rational managers, and the second focuses on a growing body of research indicating that managers do not act rationally, and that they have a number of biases and errors in understanding when they process information. It is the latter strand that the author believes is worth exploring and is most relevant for communication researchers. The next chapter, "The Engine of Folly," also picks up threads from Finkelstein as the author, David N. Perkins, discusses research that reflects how and why individuals may engage in ineffective behavior even when they know what they are doing is ineffective. The chapter provides insights into why just studying the effective ways managers can communicate is insufficient; as a field we also need to study when and how managers choose to use or override effective communication skills they know they possess.

Chapter 6, "Sex, Lies, and Audiotapes" by Diane F. Halpern, is a case study of arguably dumb behavior by an intelligent president and his inability to communicate honestly to others about his behavior. Drawing on psycholinguistics, the psychology of language usage, one of the questions of this chapter is why the president would communicate using denials that could be construed as lies and in other ways violate the basic tenets of damage control found in many basic business communication courses. The author argues that because denials worked in the past for this individual, it was plausible for him to use a denial again. The chapter goes on to discuss how in approaching communication events, individuals draw on past experience stored in memory rather than more carefully assessing the situation from facts on hand.

The next chapter, by Keith E. Stanovich, is based on occasional dumb decisions that separate raw intelligence from thinking dispositions or cognitive styles. The latter deal with the degree to which individuals are open to arguments and evidence in such a way that is not significantly affected by prior beliefs. This notion is the heart of what educators call and attempt to teach--critical thinking. Simply put, if smart people hold on to previous beliefs regardless of new evidence, they will make logical errors. This chapter provides insights with respect to how smart people may or may not absorb communication lessons regardless of their knowledge of a particular situation that requires extensive communication.

Chapter 8, "Smart Is as Stupid Does" by Elena L. Grigorenko and Donna Lockery, uses written and film presentations of disabilities to illustrate how communication techniques of mass media create stereotypes. They trace a large body of research that demonstrates how presumably smart people make a number of cognitive errors about individuals with disabilities because of fallacies gained from and spread by various media practices. The next chapter, by Elizabeth J. Austin and Ian J. Deary of the University of Edinburgh, provides an overview of the research relating personality to inappropriate decisions. Among the significant findings is that personality does not strongly affect intelligence, but it can strongly affect decision making and can overwhelm an intellectual understanding of an issue. Thus, although it is not typical in communication research or in communication teaching of best practices to consider personality, personality itself may overwhelm our research findings and our teaching.

Chapter 10, "When Stupid Is Smarter Than We Are: Mindlessness and the Attribution of Stupidity" by Mihnea Moldoveanu and Ellen Langer, provides an overview of some 30 years of research in cognition and the vast implications of a simple observation: that language is used literally by some and more figuratively by others. The problem for the observer is to be mindful of the context in which communication takes place. Otherwise, as the authors illustrate, language becomes a cognitive trap. Particularly tantalizing in this chapter is a discussion of the potential biases of researchers studying biases in the communication activities of their participants. Moldoveanu and Langer provide numerous examples from research where people often process information received using different models from those used by individuals delivering the information. In such situations, observers may attribute a lack of judgment to a communicated statement, yet it makes perfect sense within the context of the person delivering the statement.

The final chapter, by Robert J. Sternberg, the editor of the book, makes an attempt to develop a difference between stupidity and foolishness based on Sternberg's own research that might be considered by some as more semantic than real.

Why Smart Executives Fail and Why Smart People Can Be so Stupid are major contributions to our understanding of how humans actually use the skills, including communication skills, that can help or hurt their organizations. Both the communication researcher and the communication teacher will gain valuable insights into the communication process by reading these books.

In particular, after reading these two books, one will never again teach a course that simply gives top marks to those who best regurgitate communication principles on tests, and then assume that he or she has done an effective teaching job. The authors instruct us that good communication skills are not the same thing as good communication practices, and that the field of communication studies is a much more complex field of study than the casual observer and the casual practitioner realize.

Alfred N. Page

University of Missouri-Kansas City