Truth 27. When leadership isn’t important

Jim Collins, noted management expert and author of the best-selling books Good to Great and Built to Last, has thrown some cold water on the leadership fire. “In the 1500s, people ascribed all events they didn’t understand to God. Why did the crops fail? God. Why did someone die? God. Now our all-purpose explanation is leadership.” Collins notes that when a company succeeds, people need someone to give the credit to. And that’s typically the firm’s CEO. Similarly, when the company does poorly, people need someone to blame. CEOs also play this role. But much of a company’s success or failure is due to factors outside the influence of leadership. In many cases, success or failure is just a matter of being in the right or wrong place at a given time. Would Eric Schmidt, who is widely credited for guiding Google to its dominant place among search engines, have been equally successful had he taken the head job in 2001 at Yahoo! instead of Google? Not likely. Google’s patented technology gave it a significant advantage over its competitors.

When the housing market was exploding in 2004 and 2005, and new home prices were increasing 5 percent a month, CEOs at home builders like Lennar, D. R. Horton, and Pulte Homes were geniuses. But in 2007, with the new home market in a deep recession, these same leaders were criticized for their firms’ poor financial performance. Some of these CEOs were even replaced as profits sank. The key leadership question would be this one: In a housing recession, when buyers for new homes are scarce, how is firing a CEO going to increase the demand for new homes? The answer, of course, is it can’t.