The ability to quickly interpret a previously undefined scenario and act appropriately is a key driver of successful management in this era of hyper-competition and turbulent market conditions. To gain a nuanced understanding of the importance of interpretative framework for effective leadership, we selected a small high-pace startup organization that has experienced significant leadership turnover. It is a small organization with a flat structure, and organizational power resides in the hands of the private equity (PE) appointed board of directors. Its technology focus and start-up nature made operations highly uncertain for stakeholders.
In 2005, a private equity firm purchased Resources Inc, an exploration and production company. Since the purchase of the business, the PE board has dispensed two management teams for lack of performance and competency. The company promoted an internal engineer as CEO. This was an atypical selection as this individual was two layers below in the succession hierarchy and lacked leadership skills.
Given this and the organization's turbulent past, we focused on answering the question - why is this individual who lacks the organizational leadership experience succeeding where the others failed?In order to obtain a better understanding of this anomaly, we gathered information through examining the board minutes and the annual review of the CEO. We also conducted interviews with the Chairman of the Board, the CEO, and employees. Through the board minutes, we gained insights in the decision making process, the roles of employees, and governance of the board. The interviews gave actual illustrations of the CEO's decision making process.
Our study revealed the CEO encompasses an interpretative framework, i.e., his ability to understand the situation and affect the outcome by varying his behavior accordingly. For example, given that each exploration well costs $10 million, the CEO must make critical decisions during the drilling...