Tip Sheet: Prevent the ‘Iago Effect’ From Dooming a CEO

MF Global. Penn State. Syracuse. Greece. Italy. We live in a world of the rolling crisis. However, what the public sees and what is really going on within a company in a crisis can be two different things. Fault lines of various types exist within any organization. In all the literature on crisis management, some of the least discussed and yet most impactful of those fault lines has to do with executive behaviors.

The most damaging of those behavior-based issues, especially for the CEO, is what could be termed the “Iago Effect.” This is the phenomenon where a CEO turns to a trusted lieutenant to help in a crisis and that person ends up doing more harm than good.

The concept of the Iago Effect is derived, of course, from the famous villain of Shakespeare’s Othello. In the examples I’ve seen, the CEO has created the circumstances for his own ultimate failure by empowering his “Iago” to serve as an alter ego.

Good CEOs find people who do certain things better than them all the time. That’s considered a leadership best practice. With the Iago Effect the CEO finds someone to carry out the tasks he considers inconsistent with his self-image as a leader, both in business terms and on the human level.

The CEO’s primary comfort level resides in a role as more the strategic visionary—to inspire and encourage the leadership team, middle management and the rank and file. He then empowers someone else to be his corporate enforcer. That person becomes the Iago to the CEO’s Othello.

One of the most extreme cases I worked on was a company that was started by an entrepreneurial CEO who over 20 years grew the company into a multibillion dollar public company.

The CEO evolved into a kindly, avuncular visionary who devoted himself to thinking big thoughts for the company. It then ran into a series of regulatory and law enforcement issues that ultimately led to formal investigations, shareholder lawsuits and the predictable negative media coverage. It quickly seemed adrift in the vortex of intersecting crises.

In many ways, the biggest challenge it faced was in the C-suite. The CEO retreated into a caricature of someone befuddled by his critics and struggling to retain the adoring admiration of constituents.

I was hired to advise both as crisis strategist and communications counsel by the chief compliance officer. He knew that the management team needed fixing as much as the message needed to get out. The first thing we did was assess whether the CEO truly understood the seriousness of the company’s situation and to what extent he may be in denial about the likely consequences.

The situation had all the markings of the Iago Effect. Everyone seemed to believe that the CEO was somehow above all this and that they were handling the situation effectively. The person most invested in that view was the chief operating officer. He was the Iago.

The CEO wasn’t hearing the truth because everyone around him feared the COO. He had taken the CEO and the C-suite hostage. What I had to do was free the CEO. That’s done by beginning with the end in mind. I asked the CEO: “If you had it in your power to solve all of your current problems, what would your solution be and what would you want to do next?” He looked at me, paused and then with tears welling up in his eyes said: “I’d sell the company.”

For the Othellos held hostage by an Iago, selling the company is a form of metaphorical death, and thus release. Under pressure from shareholders, the board had to take action. The CEO was eventually pushed out.

The CEO today is enjoying his retirement. From time to time I check in on him to see how he’s doing. On one such call, he said: “Founding and building a company was easy for me. Evolving into the CEO I needed to become was hard.”

If you ever experience the Iago Effect, here are some tips on how to handle it:

  • The Iago is never the one who hires the PR firm. He sees that as giving up control. Don’t confront him directly.

  • If the CEO can’t privately acknowledge his imprisonment, gently suggest attending a board meeting to discuss the crisis. Chances are someone on the board is aware of the Iago problem and it will surface there.

  • Get the CEO in front of as many employee groups as possible so he can hear their concerns. This will remind him why he loves his company and inspire him to take action.

As a communicator, it’s your duty to make sure your leader—and organization—never experiences this slow and painful “death.” PRN


Montieth M. Illingworth is president of Montieth & Company, a communications consultancy. He can be reached at montieth@montiethco.com.