Page 64 - The Resilient Organization

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It is all well and good to try and seek great performance in the future by
managing from the future back, but unless the potentially toxic conse-
quences of past performance are tamed, no resilience can be achieved (see
the sidebar “Summary of the Toxic Consequences of Past Performance”).
Why? Because high success in the past has, over and over again, been seen
to result in effects that are known to be detrimental to continued success.
Examples of these effects are overconfidence, hubris, and undue attribution
of merit to oneself (the fallacy of “I deserved it,” which has been shown to
emerge even in clinical tests where the “winner” is assigned randomly). Kets
de Vries, in Leaders, Fools, and Impostors (2003), recounts multiple stories
in which, eventually, the exercise of executive power leads to outrageous,
risky, pathological, bad judgment–encroached acts. Why did then CEO of
Enron, Jeffrey Skilling, call attendees in an earnings call “idiots” (a short
time before Enron fell)? It was hubris talking. Tellingly, the 2003 Fortune
editors’ documentary about Enron is titled The Smartest Guys in the Room.
Similarly, the London-headquartered bank HSBC acquired the con-
sumer finance firm Household International for $14.2 billion and “sur-
prised Wall Street” at the height of its drive to expand to the United States.
Having run into severe difficulty due to subprime mortgage losses, multiple
sources claim the bank later admitted that “with the benefit of hindsight,
this is an acquisition we wish we had not undertaken; . . . the takeover was
an absolute disaster.” Yet it was at its conclusion hailed as the “deal of the
first decade of the twenty-first century” by a U.K. banking journal (Banker,
October 6, 2003). The lesson is: When you are at the very height of the per-
formance curve, it is really time to be careful.
But past performance management should not be limited to extreme
success only—mediocre and poor performances are equally dangerous.
Think of past performance, no matter how good or bad, as the enemy of
resilience because therein lies many of the company’s vulnerabilities.

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