# 614    Innovative Leader           Volume 14, Number 3                 July-September 2005

Winners Want to Hear About the Problems, Losers Don’t
by Allen Fox, Ph.D.

Allen Fox reached the quarterfinals at Wimbleton, was tennis coach of Pepperdine University and now consults on the mental issues of competition.  This article is based on his book,  The Winner’s Mind:  A Competitor’s Guide to Sports and Business Success (Racquet Tech Publishing, Vista, CA, 2005). 

Successful people are alert and sensitive to problems.  They understand their own weaknesses.  They want to find out about them because they want to fix them.  The losers, on the other hand, are insecure and don’t really believe they can fix the problems, so they would rather not hear about them.  They only want to hear the good news.  This holds true for business as well as sport.

In their 1988 book, Lessons of Experience, authors McCall, Lombardo, and Morrison describe a group of business executives who started out very successfully but ultimately failed.  The researchers determined that these men and women relied almost exclusively on their strengths in doing their work.  They made little or no effort to identify their weaknesses and fix them.  Ultimately, these weaknesses proved their undoing.

I ran into an example of this kind some years ago when I was consulting for an investment firm.  It had acquired a sportswear company (call it Company S).  Company S sold its line through its own small chain of retail shops as well as by catalog.  It was inefficiently run but still slightly profitable because its products were so clever and attractive that the company was able to charge high prices and extract extraordinarily high markups.  The head of the investment company, whom we will call Mr. Smith, liked the products, loved the markups, and was optimistic about expanding Company S.  He just needed a good president for Company S to do this for him.

But management at Company S had been an ongoing headache.  In the two years since he bought it, Mr. Smith had been forced to replace the president of Company S twice and was spending more time on Company S’s affairs than he liked.  Mr. Smith did not usually become this involved in his investments, most of which were passive stock positions in public companies.  In this case, Mr. Smith was getting in deeper and hearing more than he wanted about Company S’s daily affairs, and he was hoping his most recent appointment as president would straighten things out.  He wanted to refocus his energies on his own core business.

The new president was a reliable gentleman with an accounting background—excellent with numbers but not experienced in the retail business.  Because of this, I suggested that the first order of business should be for him to spend the next few months running a retail store in order to learn the intricacies of retailing from the bottom up.  Only then, I felt, could he understand what was behind the numbers on the financial reports and, with any conviction, tell his employees what to do.  The new president strongly disagreed and refused to do it.  He felt that he could understand the business just fine by talking to the employees and looking at the numbers.  Mr. Smith, tired of looking for new company presidents, backed up the president.  I was overruled.

The company limped along for the next several years, growing slowly, losing a little money, and was as inefficient as ever.  Dissatisfied, Mr. Smith wanted action and faster growth.  Eventually he ran across a replacement for the president who was a real hotshot salesman and an aggressive dealmaker.  Once in place, this fellow acquired two other companies and bought a huge warehouse to store enormous new inventories.  Mr. Smith began to pour millions of dollars into the expansion program, and the losses, explained as necessary in any rapid company expansion, were astronomical.

Rumors from reliable sources began to circulate that the new president was not always truthful and that he might even be involved in certain shady dealings.  I brought this to Mr. Smith’s attention, and he countered with, “I checked this gentleman out before I hired him, and his character and honesty are impeccable.”  With that, he cut off further discussion of the matter, and I did not attempt to bring it up again.  The prior president, who still worked for Mr. Smith in another capacity, also heard the rumors and attempted to warn Mr. Smith, but he encountered a reception no warmer than mine.  “Sour grapes,” he was told by Mr. Smith, whose mind was already made up and who simply did not want to hear about such problems.  Subliminally Mr. Smith knew that if he acknowledged the problems, he would have to act on them, and he was not prepared to do so.

A year later, the bubble burst.  It was discovered that the new president was in cahoots with his warehouse manager, and they were both taking kickbacks from suppliers.  The warehouse was a mess—hundreds of thousands of dollars of useless inventory were scattered all over the place without proper inventory systems or complete records.  The losses totaled in the millions of dollars.

All of this happened because Mr. Smith was not alert to problems, and without this information, he was unable to fix them.  He had plenty of early warnings but reacted like a kid who sticks his fingers in his ears and starts singing loudly to drown out unwelcome words from his parents.  Mr. Smith ran a wealthy and well-financed investment company that was quite successful investing passively in public stocks.  He should have stuck to that business.  Mr. Smith was not prepared for his role in overseeing an active investment.  Yes, his company could afford the losses in this relatively small investment, which would be buried among the profits of his other investments, but there was no need to take such losses.  If even one person told him that his president was illicit, he should have investigated or at least become suspicious, and he certainly should have done so after the second warning. 

The person in charge must be sensitive to what is working and what isn’t and take corrective actions early rather than late.  He must want to hear problems.  Only then can he solve them.