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.
August 19, 2009 7:43 AM
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