The Disillusioned Internet Executive

Alongside the plunge in Internet stock prices, something else is in danger of falling: the self-confidence of New Economy leaders, writes Kerry J. Sulkowicz.

While most of the attention has focused on the huge financial losses suffered by investors in Internet startups, there has been a relatively hidden toll on those who have taken some of the biggest risks of all, the CEO's. While these leaders are often entrepreneurs with the founding idea, many of them jumped from secure Old Economy jobs to head up promising ebusinesses over the past few years.

A hidden toll

More recently, we have begun to witness a reverse migration. Joe Galli, after brief stints at Amazon and VerticalNet, has apparently had enough of the New Thing and opted for the relative security of Rubbermaid. And who knows how long George Shaheen will remain at troubled Webvan, which he joined after rising to the top of Andersen Consulting (now Accenture).

While not privy to the emotional states of these two highly driven and successful men, it's probably safe to assume that they might not be as enthusiastic as they once were about life in the world of pure Internet plays. And those who remain should beware the risks of disillusionment – to themselves, and to their companies. Reality dictates a more sanguine view of the possibilities in this sector. As a consultant to a number of New and Old Economy leaders, I think it is clear that there is a dawning disillusionment among some executives, with far-reaching implications for employee morale and, ultimately, profitability.

How to spot a disillusioned CEO

The disillusionment among Internet leaders shows itself in subtle as well as bold variations. It's easy to spot that something is not right when a Joe Galli leaves an Internet high-flyer to run a company making plastic containers for a more traditional kind of challenge.

More importantly, it's the ones who stay the course that are of greater interest and concern. Maintaining a high level of commitment and morale is even more critical now that the business world has turned against the Internet tide.

There are several ways to detect a potentially disillusioned CEO (especially in the absence of direct confirmation). As this loss of hope often operates covertly – and sometimes outside of the awareness of even the CEO himself – it is most readily discerned in messages communicated between the lines.

We can suspect it, for instance, when the business plan shifts in ways that are overly geared towards making the company more appealing as an acquired asset rather than a self-sustaining business, or when the CEO seems to be trying too hard to maintain a previous level of manic excitement as a leader rather than adapting to the economic realities of the current climate. In one company, a B2C operation that had developed a sizeable database of potential clients but no profits, the CEO was growing increasingly discouraged and depressed. Rather than focusing his highly talented staff on making more sales – a realistic goal given the company's business model and brand identity – the leader lacked the flexibility necessary to shift his attention and withdrew, secretly entering into negotiations to sell the database and close the company. He profited, but many of his people found themselves precipitously unemployed.

Alternatively, inexperienced CEO's who are reluctant to bring in more seasoned managers or to consider a merger or consolidation may be refusing to acknowledge the need for sounder business principles and denying their deeper self-doubts. These leaders tend to have less tolerance for ambiguity and adversity, and may deny the severity of their difficulties until they find themselves in receivership or facing charges of misconduct, when it is usually too late to adapt and make necessary systemic changes. And the CEO whose leadership style changes for the worse – more angry outbursts, less interest in the creative ideas of employees, and diminished accessibility, to name a few – may be masking disillusionment through these behavioral trends.

Post-bubble hangovers

Disillusionment is often the flip side of idealisation, that emotional process in which the power of an idea is inflated beyond what is realistically possible. This is what happened to the entire Internet economy before the bubble inevitably burst last year, leading to the current slump in not only stock prices but enthusiasm as well. I have argued elsewhere that this can be understood as a necessary phase in the developmental life cycle of the industry, which can be traversed successfully by retaining the spirit of excitement and innovation while tempering it with more mature expectations and sound management.

The dangers of disillusionment are, of course, not limited to the leader alone. All employees, from the second-in-command to the newly hired night custodian, keep one eye on the chief executive. His attitudes and emotions do have an impact on corporate culture, employee morale, and ultimately, the bottom line. And as much as some CEO's want to believe that they are masters at putting on a good front, no one can hide a waning sense of confidence and a diminished belief in one's business for long.

Ways to help

What can be done about a disillusioned executive? There are a surprising number of options, for the employees, for the Board, and for the CEO himself. It certainly helps when the CEO recognises his own dispirited feelings; far better because there's more that can be done when caught earlier by a self-aware, enlightened chief who can confer with trusted colleagues or with an executive coach about the sources of his feelings. Executive coaches can be particularly helpful in this situation, as they may be able to offer more objective and original feedback than someone immersed in the day to day operations of the company and its culture. Coaches who are trained in the psychology of management and leadership can provide specific recommendations for action that can quickly make a difference.

Close peers or board members can take the CEO aside and tactfully point out their perceptions. This is better done with specific examples not only of changes in the executive, but of the effects these changes are having on the organization. Subordinates are, of course, generally more reluctant to provide sensitive and straightforward feedback on an executive's performance and demeanor, and when one does, it's not always clear whether it's an act of courage or self-destruction. Outside consultants may play a role here, too – those trained in the psychological side of business may be more attuned to the dynamics of leadership and, importantly, more free to deliver their observations directly and constructively.

When a sector of the economy is performing well, there tends to be less introspection about the underlying causes. On the other hand, when an industry takes a dive, brow-beating and hand-wringing often take the place of serious inquiry and reflection. The high-tech space is clearly experiencing growing pains now, yet the ability to learn and evolve from the hubris of the pre-crash state must be a central part of the maturing now taking place. Leaders who are covertly disillusioned rather than being realistically cautious may unwittingly inhibit competitiveness, creativity and necessary risk-taking. Attention to the psychological facets of leadership can help assure that companies will move into the future armed with the fewest barriers to profitability.

Kerry J. Sulkowicz is a psychoanalyst and President of The Boswell Group, LLC, a consulting firm in New York City. He consults to companies on psychological aspects of management and leadership, including dysfunctional management teams, human capital assessments for succession and mergers, corporate culture change, and executive coaching. Dr. Sulkowicz can be reached at kjs@boswellgroup.com.