‘Someone told me that I am poor at taking on board criticism so I quickly pointed out they were wrong.’ This little witticism is at the core of many a corporate disaster.

Martin Luther
Martin Luther

The Catholic magazine the Tablet, recently ran an editorial with the intriguing headline ‘Was the Reformation really necessary?’ It points out that Luther and the early Protestants wanted to reform the Church rather than break with it and that many of their complaints were perfectly valid and did not relate to fundamental doctrine. The Catholic Church could have reviewed the grievances and reformed; instead it reacted with confrontation issuing excommunications and anathemas. Countless lives would have been saved if the Church’s leaders had listened to criticisms rather than rejecting them.

Let’s move from the 16th century to the 20th. Pehr Gyllenhammar was CEO of Sweden’s Volvo from 1970 to 1994. Initially he had great success. He built model factories where the assembly line was replaced with teams of craftsmen. But his success led to complacency and arrogance. He pursued risky business deals and adopted a high media profile. He ignored the concerns of Volvo’s staff in trying to set up a merger with Renault. The idea was highly unpopular with employees but Gyllenhammar was deaf to complaints. When the merger failed he had to resign.

On April 17, 2001, Jeffrey Skilling, CEO of Enron, made what became an infamous comment during a conference call with financial analysts. In response to Richard Grubman saying, ‘You know, you are the only financial institution that can’t produce a balance sheet or cash flow statement with their earnings,’ Skilling replied: ‘Thank you very much, we appreciate that… asshole.’ Following the collapse of Enron In 2006, Skilling was convicted of federal felony charges and served 14 years at the Federal Prison Camp in Montgomery, Alabama.

Dick Fuld, CEO of Lehman Brothers, and Fred Goodwin, CEO of Royal Bank of Scotland, were two eminently successful business leaders who were famed for their arrogance, self-confidence and lack of willingness to accept criticism. They both led their companies to the brink of oblivion. In his 2009 book A Colossal Failure Of Common Sense, Larry McDonald wrote that Fuld’s “smouldering envy” of Goldman Sachs and other banking competitors led him to ignore warnings from Lehman executives about the impending crash. He even insisted the firm’s chief risk officer left the boardroom during critical discussions. Fred Goodwin became obsessed with growth through acquisition. He ignored the concerns of shareholders, some of whom described him as a megalomaniac. When RBS collapsed the Daily Mail reported that Goodwin was ‘regarded by analysts as among the most arrogant figures in the City of London.’

Leaders need self-confidence and a positive outlook but dismissal of criticism or even reluctance to listen to disapproving comments are both signs of disaster ahead. Skilling, Fuld and Goodwin were all smart but each believed his own PR and disdained questioning voices.

When their cherished policies and strategies are criticised many leaders take it as a personal attack and react aggressively. They would do better to calmly listen and tell themselves that there is at least a germ of truth in every objection.