A cautionary tale Featured

12:35pm EDT March 2, 2011
Julian K. Hutton, president, Merlin Hospitality Management Julian K. Hutton, president, Merlin Hospitality Management

A year or so after a certain company was started, the lead investor brought “Len” on as COO. He had an impressive career in some of the world’s best known companies — Disney, Citibank, Colgate Palmolive, PepsiCo and Cendant. His arrival was welcomed, an expectation that he would be able to bring large corporation discipline, structures and procedures to an undisciplined and sometimes chaotic startup. So with such a notable pedigree, why was he such an abject failure?

As it turned out, Len’s most impressive (and almost only) skill was his exceptional ability to manage upward. What had clearly taken him to the top in large corporations, and what retained the confidence of the company investors until the very end, was the sort of earnest flirtatiousness that makes otherwise intelligent, rich widows give all of their money to sleazy adventurers half their age. He told them exactly what they wanted to hear. He enthusiastically agreed with all of their ideas, however unrealistic, and convincingly blamed every failure for their realization on the incompetence of his subordinates. He created a climate of fear and confusion by constantly firing people and bringing on new ones so that he was the only one who knew what they had been told and what was going on. By so doing, he was able to assure the investors that he was a strong leader taking decisive action.

Big companies are in many ways like grand armies, and big company managers are their generals. Similarities include: absolute respect for rank, gold braid, scarlet uniforms, parade grounds for troop reviews, massed bands, saluting, stamping of feet, red-tabbed staff officers, large budgets for exciting new equipment and prison for the defaulters.

But if big companies are like grand armies, then entrepreneurial startups invariably have to behave like guerilla bands, living off the land and operating from the cover of the forests and mountains. They need to be nimble, quick to adapt, making do with what they have or can acquire, carrying everything they need on their backs. They must move lightly, gaining ground with clever tactics and minimal resources, not to hold it with costly set piece battles. They have to build a climate of creativeness and inclusiveness. Their leaders can only earn the respect of their subordinates by treating them as partners in a common enterprise, formal rank counts for little. When Len arrived without his staff car, without his polished general staff, pulled from the comfortable and respectful atmosphere of his headquarters chateau far behind the lines, and found himself living in the caves and sharing the danger and discomfort with his troops, he simply went to pieces. There was nowhere to hide or nobody to hide behind. People could see the fear in his eyes when the shooting started; they watched him nervously wipe his sweaty palms as he was expected to make a decision and give a clear command. His rank was no substitute for his lack of moral fiber, his talk of all the big companies he’d worked for couldn’t hide his current incompetence and his bombast didn’t fool the people who were expected to carry out the plans.

Out of his depth and unable to control the situation, Len’s behavior became increasingly irrational, his accusations more wild, his blame more extravagant, his actions more bizarre until he appeared to suffer some sort of nervous breakdown.

In the end, Len simply ran away, without a word to anyone, leaving behind everyone else to try and deal with the mess. But by that time he had bankrupted the company.

Julian K. Hutton is president of Merlin Hospitality Management, where he oversees the company’s Hotel Management and Distressed Asset Management operations, drawing on 20 years experience in the worldwide travel and hospitality industry.