Trying times call for a dose of perspective, and in “Leadership
Lessons for Hard Times” McKinsey tries to provide just that.
As they say in the preface, their goal is not to excavate the mistakes that
led us to this crisis–quite enough ink has been spilled on that elsewhere–but
to interview 14 CEOs on what they felt they had learned from this, and as importantly,
previous, crises or turnaround situations. They’re in very different
industries–ranging from Tyco, 3M, and Ingersoll Rand, all industrial
conglomerates, to Travelers Insurance, Pepsi, P&G, Macy’s, and AutoNation–but
through the interviews common strategic themes emerge.
First and foremost is one of the simplest in theory but most difficult in
practice: Confront reality.
Do not sugarcoat bad news or assume that a few minor blips here or there are
safe to ignore. Early warnings are just that–early–and therefore
not loud, conspicuous, and unmistakable. By the time they’re those three,
it’s far too late for you to be ahead of the curve.
Think of the stories of Native Americans’ seemingly supernatural abilities
to “read” the vestiges of a trail left by potential prey or a potential enemy,
and to construct their own mental landscape, which had its counterpart in reality,
of who or what had passed through here when, where it was going, and what its
intentions might be. The business analogy may be to Herbert Henkel, chairman
and CEO of Ingersoll Rand, who noted over a year ago that orders for the company’s
transport refrigeration business in Europe had dropped off. So what,
you’re asking? How many individual lines of business is a CEO supposed
to stay on top of?
But Henkel read it differently:
He was alarmed: a fall in the delivery of perishable foods surely indicated
trouble in the supply chain. “I couldn’t help thinking, what if that figure
really is indicative of what’s out ahead? What are we going to do about
it?”Henkel, squaring up to what he detected, forecast zero growth in Europe during
the third quarter, though analysts thought he was “nuts.” His forecast was
wrong: growth fell by 15 percent. Yet Ingersoll Rand got ahead of the curve
by quickly putting contingency plans in place, restructuring, and running down
inventory.
This takes courage, especially if the rest of the firm seems to be thriving. Particularly
if you need to make decisions in a hurry, it can be hard to persuade others
to go along without decisive data. But again, waiting until the data
makes the decision for you is no substitute for leadership: Don’t let
perfect information be the enemy of a strong decision based on some data, plus
educated intuition.
A tremendous aid to this is an atmosphere where dissent and disagreement are
openly aired, welcomed, and greeted with sincere interest and probing interactions. Why
are contrary points of view so welcome, nay essential?
The difference between
good news and bad news–from
the perspective of a leader or manager–is that good news will take care
of itself. In
fact, it doesn’t really matter when you, as a leader, hear the good news. It’s
fine if you hear it early, if you hear it late, or if you never hear it, in
fact. But bad news doesn’t age well. Bad news you need to
know, and you need to know it at once: At least then you have a fighting
chance of being able to do something about it. If you’ve cultivated an
environment where dissent is discouraged, count on bad news staying under wraps
until the stench is unmistakable.
The next precept emerging from the interviews follows hard on the heels of
openness to diverse perspectives: At leadership meetings, put strategy
first.
Consider how the nature of “meetings” themselves has changed: They’re
conducted on a rolling, continuous basis, through email, intranet updates,
conference calls, and informal spur-of-the-moment “subcommittee” discussions. And
consider how much better off you are when decisions need to be made quickly
if everyone is up to speed to begin with. It’s not that all are prepared
for the rubber stamp–it’s that all are prepared to participate in a genuine
conversation about pros and cons, risks and benefits, whether to move faster
or slower.
And what about the rank and file?
The only way to address uncertainty is to communicate and communicate.
And when you think you’ve just about got to everybody, then communicate some
more.–Terry Lundgren, chairman, president, and CEO of Macy’s.
And:
Our policy is: “If in doubt, communicate.” We always want to conduct
our business with integrity and forthrightness.–Ron Sugar, chairman
and CEO of Northrop Grumman.
That says it all, doesn’t it?
The challenge, of course, is not to mouth it or endorse it with your head,
but do it. Here, I suspect the challenge lies more between your
own ears than in the external environment or with your management team. You
presumably can have all the “air time” you want to communicate with the firm,
and your team members are not going to second-guess your efforts to talk to
the firm about topics they’ve already, presumably, given their blessing to. No: The
obstacle is that you know what you want to say, you feel you’ve said it, perhaps
ad nauseum, and you’ve (admit it) lost interest in saying it again.
Not good enough.
Especially in times like these, openness at the top cannot be over-valued. People
are famished for information, and if you don’t provide it, rumors will rush
in to fill the vacuum. But there’s more to it than that. Which
of the following values are in your firm’s values statement, or would be if
you drafted one today?:
- Honesty
- Integrity
- Trust
- Respect
All, I submit, are honored by candid and relentless communication from
management and all are undermined by passivity, silence, or, perhaps worst,
the episodic and surely insincere firm-wide blasts about pet projects, causes,
and favorite sons.
Think people don’t see through this?
In a prior life, I worked for a major Wall Street brokerage and investment
bank where, consistently, the highest annual tonnage of information from senior
management devoted to a single topic concerned?: Your United Way contributions,and
progress of the campaign. (This was, for better or worse, some years
before the United Way was exposed as having its own, shall we say, “values”
challenges.) A friend of mine who worked elsewhere on the Street once
asked me what I thought the firm’s strategy centered around, and I replied
that if you were a Martian and were to judge by the content of communications
from senior management, the only rational conclusion would be that the firm’s
over-riding mission was to dun people for United Way contributions.
Yes, people see through it. In a heartbeat.
Which brings us to the next point.
If those back-of-the-envelope values summarily enumerated above are to mean
anything, they mean that you believe in, care about, and strongly support your
firm’s “culture.”
Culture is not a loose and baggy value, but one premised on clarity, and making
short-run-stupid, long-run-smart decisions to reinforce the culture and send
a clear and convincing message that it means something. Culture, in other
words, doesn’t come cheap.
[Michael] Jackson [Chairman of 20,000-employee AutoNation] says that the
most critical battle he waged when he arrived at AutoNation was destroying
the “growth at any cost” culture. “We wanted entrepreneurialism, but we also
wanted the highest standards of integrity.” Over the next three years, he
worked hard to nurture and recruit the right people for the company’s top
350 positions and to purge the “high-performing money makers whose risk profile
would keep you awake at night.”At Travelers, [Jay] Fishman [Chairman and CEO] is proud of the culture
he has nurtured, which rewards returns on capital rather than revenue and
has offered some protection during the financial crisis. “We never criticize
anyone for a transaction not done, not ever–not ever,” he says.
Where does this leave us?
Faithful readers know that I’m an unrelenting optimist.
So I can’t help but be delighted that McKinsey ends on essentially this same
note, by stressing “keep faith with the future.” In other words,
as A.G. Lafley of P&G puts it, despite the pressures for short-term performance,
don’t short-change the future for benefit of the present.
All easier said than done, you’re probably thinking right around this point.
No argument.
I’m having an ongoing conversation with a friend about what qualities are
most important in a firm’s Executive Director, and while we can readily agree
on the “compulsory events” that one has to master, which include financial
sophistication, operational savviness, a high degree of organization, the ability
to delegate, strong skills at prioritizing, [add components
from job description here], I’ve decided there’s one attribute not commonly
mentioned, but which may be the most important of all, which is:
- Courage
Executive Directors surely need the courage to call suboptimal practices suboptimal,
even if someone’s high-profile ox may be gored,, but more importantly they
need the courage to meet senior firm management on an equal footing,
Do you find this surprising? So did I.
But courage may be the highest leadership value of all. Now or never.
