People have a well evidenced tendency to overestimate their own abilities. This characteristic, common in the population at large, is particularly marked in business and political leaders.
George Washington left office to spend the three remaining years of his life at Mount Vernon. In retiring, he sought to emphasise the difference between a president and a king. Thomas Jefferson, one of the ablest men to hold the presidency, refused to stand for a third term despite strong pressure. He argued that a limit to tenure must be defined by convention or constitution. The convention remained until defied by Franklin Roosevelt. After Roosevelt’s death it became a constitutional requirement.
As a business speaker droned on recently, my neighbour turned and asked: “What is the ratio of speeches you have heard that were too long to those that were too short?” As with speeches, so it is with business and political leaders. The number that go on too long far exceeds the number that finish too soon. Gamblers often stay in the casino until they have lost. So do statesmen and chief executives, and for similar reasons.
Whenever there is a component of luck, people who have performed well in the past tend to perform worse thereafter, while people who have performed badly tend to do better. But people who have recently performed well are generally those who are appointed to top jobs. So the hopes of appointment committees and electorates are often disappointed.
People also have a tendency to overestimate their own abilities. This characteristic is particularly marked in business and political leaders. Most people leaving a job are surprised to discover that others can do it equally well. And if they do not discover that others can also do it, they are probably less than averagely honest and impartial in judgment.
Such honesty and impartiality is hard to maintain in high office. From the earliest days of hierarchy, leaders were surrounded by flattering courtiers. Few people can hear a chorus of approbation every day of their working lives without suspecting there may be some truth in it. Frequent reassurance that one’s decisions have been wise increases the confidence with which one makes decisions in future – often to dangerous levels.
And so Henry Ford, the greatest businessman of the 20th century, ended his life a sad and risible figure. He remained in charge because he owned a controlling stake in his company, but only his chief of security was sufficiently deferential to be his confidant. He railed against Jews and tobacco as he issued peremptory commands. Margaret Thatcher, having triumphed over advisers who had told her that her policies would not work, finally espoused a policy – the poll tax – that really would not work. Arnold Weinstock, the most accomplished British businessman of his generation, diminished his reputation as he stayed on for three decades. Michael Eisner made the same mistake more quickly. Jack Welch postponed retirement to enjoy the triumph of a deal with Honeywell and instead experienced the humiliation of seeing its failure.
Few match the recent self-discipline of James Crosby of HBOS. Appointed as one of the youngest chief executives of a British public company, he retired from the job while still under 50 and passed the baton to an even younger successor. Jefferson shrewdly perceived that it was in the interests of the individuals concerned to take the decision out of their hands. There is the utility of conventional or legal limits. The second-term president loses authority because his tenure is coming to an end, but gains strength because his position is invulnerable. In saying he would go but not when he would go, Tony Blair, the British prime minister, unwisely achieved the first of these effects but not the second. He gave up some influence but made his hold on office less secure.
It is hard to muster unstinting admiration for a process that selects George W. Bush: but the same mechanism found Jefferson and Lincoln, Roosevelt and Kennedy. The four-year term renewable once only allows the correction of mistakes, gives capable candidates sufficient time to deliver their promises and eliminates the problem of telling the leader that it is time to go. Other jurisdictions, and large companies, would do well to emulate this proven system.