One of the great ironies of organizational life is that success can kill a company.
The reason success can lead to failure is that it often creates an intermediate result: arrogance.
Arrogance causes leaders to lap up information that confirms their world view and marginalize news that contradicts that view.
For example, if customers are bolting to a rival's products with a better deal, an arrogant leader will praise the clients who remained loyal and consider those who departed as traitors.
For the sake of the survival of the company, its board had better recognize the need to replace the chief before all the customers become what that CEO deems to be traitors.
How do CEOs keep themselves from being cocooned by arrogance? Here are five ways:
1. Maintain a healthy paranoia
To ward off arrogance after initial success a leader must maintain what former Intel CEO Andy Grove referred in 1999 to as "healthy paranoia."
Have enough insight into the rise and fall of companies to realize the odds are against you if you think you can become successful and not attract competitors who will try to copy your product and take your customers.
Let success roll off your back like water off a duck. A healthy paranoia will keep you looking for ways to stay ahead of rivals and keep abreast of new technologies and changing customer needs that could make your company's product obsolete.
2. Seek out bad news.
When leaders receive bad news, that pain can deter arrogance.
I would argue that the willingness to seek out bad news and take remedial action is a great reason to pay a leader more than others in an organization.
After all, receiving negative feedback hurts. But unless a leader feels that pain, the company won't improve.
In an interview earlier this month Don Bulens, CEO of Marlborough, Mass.-based software company Unidesk, tells me he had two failures under his belt before he scored his first success. When asked to distill what he learned from the failures for the benefit of first-time entrepreneurs, he says, "Become self-aware by seeking out bad news."
3. Talk to line employees.
Leaders are generally kept in a bubble, surrounded by a group of ambitious people who report to them. Those in the bubble aren't above salving the leader's ego to get a promotion.
One way to escape the bubble and see what's really going on in an organization is to develop relationships with line employees, including manufacturing workers and salespeople who know a great deal about the company's interactions with the outside world.
I learned about this technique in researching my 2007 book about Boeing CEO James McNerney.
When McNerney arrived at the aerospace firm, he was trying to fix an organization in crisis. So he spent a significant amount of time with line employees to learn what was going well and where to seek improvements. In so doing, he was also able to determine whether his direct reports were providing him the information he needed about the company or were filtering out important data.
Employees' insight can help a leader determine where a company needs to improve -- and figure out which staffers really deserve a promotion.
4. Listen to customers.
Another crucial way a leader can withstand arrogance is to spend a significant amount of time with customers.
You could make yourself the chief customer service officer, a term coined by Yuval Baron, CEO of computer-security company Algosec.
As Baron explained to me in 2011, his role as chief customer service officer involved reading customer-satisfaction surveys, calling clients six months into a new relationship, fixing any problems that arose and refunding money to those who were unhappy.
5. Get a 360 degree review.
One way to ensure the chief receives bad news is to conduct a so-called 360 degree review. The 360 degree review is the executive class of performance review: An executive coach talks to all the planets that orbit around the CEO and serves the top executive finely prepared feedback on an ego-salving silver platter.
Hire a consultant to talk to your board, your peers and direct reports and ask them what you do well and what needs betterment.
If you're really hungry for bad news, add investors, suppliers and customers to the list of people solicited for feedback.
I recently interviewed Aaron Vermut, CEO of peer-to-peer lender Prosper, about a 360 degree review he received with the help of an executive coach. "It's hard to see yourself objectively; you're in a bubble and lonely," he said.
"Getting feedback is not easy," Vermut said. "I thought I was doing well but realized I could get better at helping people in the company to be successful."
Try one of these five techniques to keep you from becoming arrogant -- and this will make you a more successful entrepreneur.