Why CEOs Are So Committed to Their Mistakes—And How a COO Can Help
The CEO's role is one of direction, lofty goals, and leadership—more emotion. COOs fall more into the camp of process, systems, and management—more logic.
The marketing director for one of my clients has a favorite saying: "People are committed to their mistakes." Worse, the more invested we are in our mistakes, the more deluded we'll be about being wrong, wasting even more time and money.
We stick with bad product ideas for too long. We give bad hires too many chances. And the more something costs us in time, money, and effort, the less likely we are to cut our losses and move on.
The Psychological Trap of Sunk Costs
This tendency to throw good money after bad and even escalate a commitment to losing projects or people is known as the psychology of sunk costs. It's one of the most-understood phenomena in human behavior, and CEOs are particularly susceptible.
It's the job of a founder to sell a vision to investors, employees, and potential customers. She must convince her spouse why investing a large portion of her life savings makes sense, or explain to skeptical friends and family members why she's quitting her job.
Owners of established businesses must fight against the same psychology. Do you really want to admit that the $40,000 you invested over the last few months in that new salesperson was a mistake? Or are they just about to "get it," if you only stay the course?
Persevere? Or Pull the Plug?
To that end, an entire cottage industry of self-help books, coaching courses, and entrepreneur support groups has emerged, encouraging entrepreneurs to "stay the course." Stories are told of courage and perseverance, of overcoming doubt and fear, casting entrepreneurs as heroes in an epic fight against a world that's dead-set on tricking them into giving up too soon.
In Napoleon Hill's classic self-help book Think and Grow Rich, a man buys a gold mine, digs and digs for years, and finally gives up—literally two feet from a massive store of gold. Someone else buys the mine for almost nothing, digs for a few days and becomes massively rich.
The story that isn't told often enough is the humble but heroic decision to pull the plug when losses mount, milestones aren't met, and "finding gold" through the current course of action is delusional.
Every CEO Needs a COO
A CEO who isn't sold on her own vision won't be able to lead. She has to "drink her own Kool-Aid." She must paint a picture of possibilities, and get her team to dig deep to find answers to difficult problems. That's fundamental to any creative endeavor.
As eternal optimists, CEOs see nearly every challenge as temporary. Underperforming people just needing a bit of coaching. The marketing campaign just needs more tweaking. And their teams mostly tell them what they want to hear, reassuring them that the projects under their care are approaching the corner of the "J" curve.
And that's why every CEO needs a COO, or someone charged with that role. It's not just that the job duties of a CEO and COO are different, they're entirely different personas. And it's nearly impossible for the same person to play both personas effectively.
Whereas a CEO is the visionary, the COO is about logistics. A CEO declares the what and why, while a COO determines how.
The CEO's role is one of direction, lofty goals, and leadership—more emotion. JFK, Martin Luther King, Jr., and Nelson Mandela all embody CEO energy.
COOs fall more into the camp of process, systems, and management—more logic. COOs are people like Gene Kranz, NASA's "COO" (in reality, the Chief Flight Director) who got us to the moon. Or Henry Flagler, John Rockefeller's #2 at Standard Oil Company. Tim Cook took on the key operations role at Apple (first as VP of Operations, and later as Chief Operating Officer) shortly after Steve Jobs returned to the company in 1997.
You need your own Tim Cook: someone close to you—whether on your team or outsourced—who will ask the hard questions you're not asking. Someone who will look at reality and speak with candor. An expert in accountability, who will build systems, keep score, and not let things slip through the cracks.
Someone who will remind you that "pulling the plug" is a valid option. Because the greatest cost in business is spending too much time on the wrong idea.