Not-so-risky business: Why CEOs stop taking chances

By Ryan Galloway
The Brief
CEOs who’ve been at it a while often lose their stomach for the bold move. Blame complacency and anxiety about late-stage career failure. Problem is, the safe road leads their companies straight into trouble.    

In 1998, the Philadelphia Eagles were a league-worst 3-13. Out went veteran coach Ray Rhodes, in came first-timer Andy Reid. In the next 14 seasons, the Eagles racked up 120 wins––including 10 in the playoffs––and played in a Super Bowl. But in 2012, after two uncharacteristically down seasons, Reid, the league’s longest-tenured coach at the time, was let go. His replacement was another first-timer, Chip Kelly. And in Kelly’s first year, the Eagles went 10-6 and won their division.

This lifecycle of leaders is as common in the corner office as it is on the sidelines:

  • Early: Newly hired CEO aggressively pushes innovation, posts big wins.
  • Mid: CEO sticks with what works, company’s performance stabilizes.
  • Late: Risk aversion increases, strategic adjustments and company performance declines. 

We don’t have to tell you what happens next. Consider the following from “CEO Investment Cycles,” a 2013 National Bureau of Economic Research study:

“CEOs are reluctant to divest or reoptimize on bad investments that they have made due to private benefits or career concerns. It often takes a new CEO to enforce optimal disinvestment…”

As CEOs age, they cling to familiar practices and personnel. Reid chose to stick with his once tried-and-true strategies and players long after they both stopped working. Likewise, long-sitting business executives often refuse to divest their organizations of underperforming investments and strategies. And like Reid, sooner or later, they’re likely to earn a pink slip in return.

This self-sabotaging stubbornness is understandable given the stakes in these situations. The fear of failure—generously euphemized above by the NBER as “career concerns”—is a powerfully negative motivator for those who have been hailed for delivering seismic gains. But it’s not the only anxiety that drives a CEO’s late-career stagnation.

In a recent Harvard Business Review article, organizational change expert Manfred F. R. Kets de Vries notes that CEOs nearing the end of their run can experience “death anxiety.” This sudden confrontation with career mortality can lead to behaviors and choices that are as disastrous for companies as they are for the leaders themselves. Specifically, Kets de Vries says, it manifests in a studious avoidance of succession issues and an “edifice complex”—the desire to leave a grandiose, concrete mark (think: the Taj Mahal or a presidential library). Execs too busy protecting their position or legacy aren’t likely to take a chance on anything that could undermine those self-preservation instincts.

Breaking out of that narcissistic rut is difficult, but not impossible. Warren Buffett, the paragon of CEO longevity, puts it best:

“You want a restlessness, a feeling that somebody’s always after you, but you’re going to stay ahead.”

Because when that restlessness is gone, the CEO is sure to follow.

The Takeaway: Fresh insight is key to avoiding complacency and anxiety. And that comes from connecting with bright minds across and outside your industry. Whether you’re C-suite or not, as your career lengthens, it’s important to build a diverse cache of advisors and peers—new hands and old dogs alike, both in and outside your organization—who can help evaluate bold opportunities objectively and aren’t afraid to point out when fear is getting in the way of smart decision making. 


Ryan Galloway oversees content for The Hired Guns, a digital marketing and talent consulting firm in New York City. He has written for Business Insider and Forbes.com and is a frequent contributor to this blog. 

RelSci is a technology solutions company that helps create competitive advantage for legal, nonprofit, corporate and financial organizations through a crucial yet vastly underutilized asset: relationship capital with influential decision makers.

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