Today Bernie Ebbers was sentenced to 25 years in prison. For some it is seen as a signal to all CEOs they had better not commit fraud. For others it’s revenge for the ruination of a large corporation. For others it’s yet another sign of America’s misguided business leadership. And for others this is just an isolated, and irregular, activity by a wildman CEO. No matter what the view, unless this decision is overturned on appeal it’s very likely Bernie Ebbers will die in prison.
What we know from the trial is that Bernie Ebbers worked hard to pursue quarterly revenue and earnings goals. He never for a moment took his eyes off the P&L. He was so single-minded, he was found guilty of altering his books in a massive fraud in order to produce those desperately sought after results. Yet during his leadership at WorldCom he was hailed as a great leader by those in and out of his company who admired his single-minded behavior and focus on results.
Ebbers forgot the basic rule – the P&L is about RESULTS. You don’t create results, they happen because of the business decisions you make. When results don’t come in as favorably as desired it’s not the results you should focus upon, but instead the business decisions which create those results.
Bernie Ebbers is nothing more than another manager who fell victim to Defending and Extending a broken Success Formula. He went farther than most – to the point of fraud – in order to defend and extend that Success Formula. As such, he represents just how far Locked-In management can go to practice D&E Management. All managers who fall into the trap of D&E thinking, and D&E practices, run the risk of facing the reality that the RESULTS simply aren’t what they projected. Then they face very, very difficult choices.
There are other such victims in management today. Some are going through the wringer for it – AIG, Enron, Healthsouth to name a few. And there are many, many more that aren’t on the front page of today’s business section or under investigation. But all represent a common threat to their organizations and investors. The threat created by locking-in, focusing on the results and thereby not preparing to make strategic shifts when market changes require them. Then these managers don’t know what to do when the RESULTS aren’t what was projected.
It appears that Bernie Ebbers may well die in prison because of the decisions he made. Everyone loses – the wiped out WorldCom shareholders, the laid-off employees, the stranded customers, the defaulted suppliers and now the leader himself. And this could have been avoided if Worldcom management (led by Ebbers) simply hadn’t locked-in on that Success Formula and become single-mindedly devoted to Defending and Extending it. And that is the lesson for us all, we have much to fear from Lock-In and D&E Management practices.
