Pinning the blame for strategy failures on the CEO

Abstract

Company presidents frequently have short memories, if we judge by their annual report messages. All too often a project touted in the Message from the President one year as an exciting new venture is “forgotten” by the next annual report. Every corporate success has a proud father, but failures are doomed to bastardy. Some annual reports attempt to draw attention away from failures by highlighting a category called Profits from Continuing Operations. Thus a president can discreetly abandon the venture that failed by categorizing it in the annual report as a Discontinued Operation — a seemingly unimportant item. Such public relations devices may salve the chief executive officer's conscience, but they make fair assessment of his performance difficult. Discontinued operations are also a product of the CEO, and are an end result of his strategy. As failures, they deserve careful examination by directors, stockholders, employees, and press. And for the CEO, analysis of past mistakes is his best way to prevent future strategy failures.