Why a CEO's Credibility Is More Fragile Than a Politician's Chances for Election
Business leaders are paid for results much easier to measure than the promises that get candidates elected.
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After recently recording four and a half hours of Donald Trump's stump speeches and press conferences, Politico found more than 60 statements judged to be mischaracterizations, exaggerations, or totally false. While Trump seems to take dishonesty to a new level, it's nothing new in American political campaigns. While running for office is all about generating enthusiasm among the voters, serving in office is fundamentally different.
Once elected the candidate becomes the president of everyone, requiring credibility to serve effectively. There will always be some people who believe in a candidate no matter what, but all leaders need a majority of people to trust them or at least believe they are moderately competent.
This is true for business leaders as well as elected officials, but CEOs are particularly vulnerable to a loss of credibility: It only takes a few instances of delivering non-credible statements to totally lose the people's trust. Once credibility is lost, it becomes almost impossible to lead effectively.
Why credibility is crucial for CEOs.
The immediacy of the position is one thing that makes credibility so critical for corporate heads. The CEO is held directly responsible for the performance of the company. Employees understand that this person is vital to their livelihood. This is not to diminish the role of the most powerful person in the world, but the president is far removed from the people, has checks and balances ideally, and often has little direct control over the behemoth that is the federal government.
Also essential for CEOs is dependence on employees to execute on their vision and strategy. CEOs don't command an army: To lead successfully, they need employees to freely commit to their vision. Their employees have choices: They can disengage or seek other employment.
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Employees who disengage are less likely to do their best. This will have dire consequences for even the largest companies. When their leadership fails, CEOs are fairly easy to remove. On the other hand, presidents are less dependent upon the performance of employees in every agency and have to make colossal mistakes in the eyes of the country to even get near to being impeached.
Indeed, a LeadershipIQ.com study found that most CEOs are not fired due to financial performance but because of soft issues such as credibility. The organization surveyed more than 1,000 board members from 286 public, private, business and healthcare organizations that fired, or otherwise forced out, their CEO. For example, 27 percent said they fired CEOs because of "tolerating low performers." According to the study, "Board members shared that when CEOs allowed an obvious low performer to linger (without any improvement or discipline), it destroyed their credibility and made it politically difficult for them to hold others accountable."
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What can CEOs do to remain credible? A big part of it is simple honesty: Employees must believe that CEOs are telling them the honest truth (as the CEO sees it) at all times. Telling the truth 90 percent of the time is little better than telling the truth 10 percent of the time.
Another aspect is being transparent. Many CEOs start out with the best of intentions. It's easy to share positive information. However, when things turn south, CEOs often are reticent to share the negatives. They cannot face the responsibility of leading people through tough times, or the realization that they may have no control. They try to pretend that it isn't happening, hoping that things will improve (The LeadshipIQ.com research also found that 23 percent fired their CEOs for "denying reality"). When cutbacks and layoffs come after the CEO has claimed that everything is okay, all credibility with employees is lost. Regaining credibility becomes almost impossible in this situation, and a change of leadership may be the only answer.
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This doesn't mean that CEOs can't make mistakes. Employees understand that everyone is human and prone to issues; but CEOs can't hide behind that excuse when it comes to integrity. If they make a mistake, they must quickly come forward and take responsibility by being absolutely honest about the problem. While the media might assert that it's difficult to find a CEO whose behavior is guided by ethics, integrity, and honesty, this isn't the case.
Time will tell who our presidential candidates will be in the general election, but odds are that neither will be taken down by a dishonesty smoking gun in the meantime. The standards are much higher for CEOs.