Leading Culture Change

In an MIT SLOAN MANAGEMENT REVIEW about how newly hired leaders fail, Maryanne Peabody and I spoke about the need for leaders to have clearly articulated Leadership Mandates. If the Mandates were not explicit or mixed messages were given, leaders were being positioned by hiring authorities for failure.

A summary of this article appears in one of my “Platform for Success” articles in PSYCHOLOGY TODAY MAGAZINE.

Stealth Turnaround Mandates:

The Turn-Around Mandate is an explicit recognition that the plumbing is sprouted leaks. Fix the leaks and then move us in a new direction. Private Equity dominated Boards of Directors are very clear when they give such Mandates and newly hired CEOs “get” the message. There is even a Turnaround Management Association to focus on the leadership requirements of such organization changes.

Other industries are not necessarily as clear in describing Leadership Mandates.

Sometimes a new leader is given a Good to Great Mandate. That leader can assume that it is perfectly fine to get the team to first focus on “strategy” sessions, articulate and articulate a “vision” for the future. Build upon strengths. That is the essence of Good to Great.

Sometimes these Good to Great Mandates are valid.

And sometimes newly hired leaders are given what we called Stealth Turnaround Mandates. This is a formula for failure from Day 1.

In Stealth Turnaround, the stated Message to the organization and to the newly hired leader is Good to Great. But the hiring authority really does not mean it. The hiring authority really wants a turnaround yet is not willing/able to provide support for the leader if key stakeholders complain.

We discuss ways newly hired/newly promoted leaders can have discussions to hiring authorities about articulating the distinction between the stated Going in Mandate versus the real Going in Mandate. (2007)

Huggy Rao and Robert Sutton are organization behavior professors at Stanford University. Their book SCALING UP EXCELLENCE (2014) is a nice compliment to our article and extends some of the themes. Below are some key ideas plus sample interventions:

Bad Trumps Good:

Organizational behavior researcher Andrew Miner and his colleagues measured the moods of 41 employees at random intervals throughout the workday. The team discovered that negative interactions with bosses and coworkers had 5x more impact on mood than positive interactions in other words negative interactions have a 5x power over positive interactions.

Research done by the Customer Contact Council of the Corporate Executive Board found that 25% of customers are likely to say something positive about good customer service experience. On the other hand, 65% are likely to say something negative about their bad customer experience.

General Electric once surveyed customer response to positive interactions with GE products versus negative interactions. If the interaction was positive customers tended to praise the GE product with 1.3 people in their networks. If the interactions were negative, however, customers would tell seven people. And this study was done before social media become common!

One Question Measures How Bad Things Are:

A practical implication for newly hired/newly promoted leaders: first get a practical measure of how bad things are.

This is one reason why newly hired leaders who are promoted from within have an edge over external hires. The leaders who are promoted from within do not need to conduct a survey. They already know.

But newly hired leaders might consider doing a survey to find out just how bad things are.

Below is an example:

In our surveys, we ask customers and employees only one question. We ask customers, “On a scale of 0 to 10, how likely are you to recommend friends or colleagues use our products/services?” We ask employees, “On a scale of 0 to 10, how likely are you to recommend friends or colleagues come to work here?” This is called The Customer Loyalty Index and it was by Fred Reicheld when he was with Bain Consulting (2003). The Index continues to be used by Bain Capital and Bain Consulting.

If you are a newly hired leader, first get an objective measurement about how bad things are before you focus on the positive goals you wish to achieve. Use the negative scores as justification for moving forward.

“Good Guys” Finish Last:

In 1982 criminologist George L. Kelling and political science James Q Wilson described the “broken windows” theory: if one broken window is left unrepaired, other windows will soon be broken.” The “broken windows” theory means that a “nice guy” attempt to give a pass to undesired behavior sends the message to the organization that the leader does not care.

Charles O’Reilly and Barton Weitz studied 141 supervisors in a large retail chain. First line leaders at the most productive units tended to confront performance problems early on. They issued more formal warnings and fired more employees.

Perry Kelbahn teaches creativity for visiting executives at Stanford University Hasso Plattner Institute of Design. When he identifies “bad apples” in student groups, he quickly removes them and places them in a newly formed “bad apples” team. They work in the corner, physically away from others. His quick action quickly isolates negative students and keeps them from infecting others.

Fire Those Nurses:

Alameda health system in Oakland California had churned through 10 Chief Executive Officers in 11 years. The system was losing $1 million a month and had a deficit of more than $50 million. Morale was so poor, a doctor was beaten and strangled by a patient and left on the floor for half hour.

New CEO Wright Lassiter III decided so many things were broken that talking about positive values would backfire. He decided to focus on one broken part at a time starting with nurses. Most of the hospital nurses were professionals and knew who the “rotten apple” nurses were. Previous CEOs had been afraid to touch them because they were protected by their union. CEO Lassiter worked with unions to fire the rotten apples.

Adequacy First; Excellence Later:

The Customer Contact Council of the Corporate Executive Board found that 89% of surveyed companies had an explicit mission of “exceeding customer expectations.” But a survey of more than 75,000 customers revealed that what drives customers them away is bad service. The bad trumps the good. “They exact revenge on airlines who lose their bags, cable providers whose technicians keep them waiting, cellular companies whose representatives put them on permanent hold, and dry cleaners who don’t understand what ‘rush order’ means.”

In other words, focusing on excellence of customer service is a nice thing to say. But in terms of where leaders should put time and money, focus on fixing the leaks.

Fix the plumbing and then spout poetry.

One of our clients is in the robotics business. Using The Most Important Question with seven industrial customers representing 80% of gross revenue we found low scores. Customers thought that the robots were too expensive and replacement parts were too expensive. Scores went from 2 to 8 within 24 months with one simple fix: we stopped recruiting engineers from MIT and start recruiting engineers from the University of Massachusetts at Dartmouth. MIT graduates have a passion for building the world best robots….and charging customers accordingly. The U Massachusetts graduates were satisfied with building robots that will get the job done with the least cost.

Fix the plumbing first.

Hire and Leverage Powerful People:

In an information based society, powerful people are well connected and admired. Hire powerful people and use them as the role models you need as change catalysts. When recruiting Board members and CEOs, we use a Personal Power Index containing 60,000 names. It provides an objective measure of how esteemed/networked a person is. But you don’t need a Personal Power Index. Examine the quality (not quantity) of linkedin.com relationships. Check out the individual on news.google.com

Once you have identified powerful people, use them as role models for the behavior you wish to see others produce. For example:

The CEO of a retail chain was fed up with direct reports using mobile devices during meetings despite his repeated requests to put them away. The CEO had individual meetings with two of the most admired members of the team. They happened to be the worst offenders. He asked them to turn their phones off and keep the phones off the table during meetings. Others observed what these two were doing and copied their behavior.

Make it Unsafe to Say Nothing:

When meeting with your direct reports, do you explicitly reserve time at the beginning of the meeting to ask your people to bring up problems that are not necessarily on your agenda?

Make it safe for people to bring up problems. Silence is destructive of learning and self-criticism.

In a study of drug treatment errors in eight nursing units, Amy Edmondson was bewildered because units with the best manager/coworker relationships reported as many as 10 times more mistakes than he nurses in the worst units. She sent a researcher with no knowledge of these findings to spend two months doing interviews in the eight units. Eventually, Edmondson realized that nurses in the worst units reported fewer mistakes. In the best units, on the other hand, nurses expected everyone to report mistakes immediately and to discuss causes.

When it is Time to Say ‘Goodbye’, give a Mt. Blanc:

At the beginning of this article, we spoke about Leadership Mandates. The Turnaround Leadership Mandate is clear: fix the plumbing.

Good to Great Leadership Mandates are also clear: build on our success.

But some Good to Great Leadership Mandates are actually Stealth Turnaround Mandates. You will need clarity.

If the Leadership Mandate is Turnaround, you will not achieve the positive results you wish without first focusing on the negative things that must be eliminated. Outplacement is the provision of corporate sponsored assistance to help fired employees land on their feet. The word “outplacement” means a variety of services ranging from 1:1 consultation to webinars for hundreds of people. Helping craft a resume and then saying, “Now read this book and attend this webinar” is also called “outplacement.

It is important to remember the business rationale for quality outplacement: leaders do not have to compromise the desire to see themselves as humane versus meet their professional commitment to improving the organization.

A “bad apple” in one organization can be transformed into a treasure in a new system.

If you fire people as part of your job, Human Resources may way want you to provide a BIC pen of outplacement. This is understandable. HR must be cost sensitive.

If you want to present the Mt. Blanc pen of outplacement, the world’s best career consultants are certified by the Institute for Career Certification International. You can look up members by going to www.iccicertification.org

We are big believers in giving terminated employees choices. They will be more committed to the decision if the decision was theirs.

References:

Reichheld, F. F. (2003). The one number you need to grow. Harvard business review, 81(12), 46-55.

Stybel, L., & Peabody, M. (2007). Beware the stealth mandate. MIT Sloan Management Review, Spring, 48(3), 11-14.

Sutton, R. I., & Rao, H. (2014). Scaling up Excellence. Random House.