Leading at Light Speed by Eric Douglas » Governance Development

Crisis Management Reflections on the Gulf Oil Spill

admin — Mon, 17 May 2010 08:09:31 +0000

Watching executives from British Petroleum, Transocean and Halliburton testify before Congress about the Gulf oil spill on Tuesday reminded me of the cardinal rules of leading through a crisis. Unfortunately, it looks like the BP-TO-HB trio never got the memo.

There are two rules to follow in a crisis. Rule number one is this: Protect other people first – customers, employees and citizens. Not your shareholders or yourself. Protect the public and your customers, and the shareholders will follow. Why? Because the long-term reputation and goodwill of your organization are more important than any short-term risk to shareholder value or your own job security.

Rule number two is a corollary to the first: Be prepared to reframe and expand your level of responsibility. In other words, accept responsibility even if you’re not at fault. This may feel counter-intuitive, especially when someone else is clearly culpable. But reframing and expanding your level of responsibility will help lead you out of the crisis.

Consider the Exxon Valdez disaster. When it went aground in Alaska’s Prince William Sound in 1989, eleven million of oils spilled onto pristine shoreline. In the immediate aftermath, Exxon’s CEO Lawrence Rawl was slow to accept responsibility. Instead he issued a flurry of press releases stating that the company was investigating the accident. The opportunity to quickly contain the spill was squandered. Hundreds of miles of coastline were fouled.

Public furor built and the company’s reputation plunged. Several weeks passed before Rawl grudgingly announced that the company would take responsibility for the clean up. Eventually, thousands of workers and volunteers were mobilized to mop up the oil, save the wildlife, and minimize the damage to the extent possible. But Exxon’s public image was left in tatters because its immediate response was too slow. William Reilly, then head of the Environmental Protection Agency, said Rawl’s response was “a casebook example of how not to communicate to the public when your company messes up.” Rawl’s reputation never recovered.

In contrast, when a container of Odwalla apple juice contaminated by the bacteria e coli resulted in the death of a child in 1996, CEO Greg Stepensall stepped in right away and assumed personal responsibility. He recalled every Odwalla product. He paid out huge sums to the families affected by the tainted products. He held regular press conferences to ensure the public knew what was going on and how the company was responding. For more than a year, Odwalla retooled its production lines, adding flash pasteurization to ensure no future incidents could occur. Sales fell 90 percent but Odwalla survived with its reputation intact.

As the Exxon Valdez and Odwalla examples show, leaders have a clear choice in how they frame their response to a crisis. On the one hand, they can respond out of a “protect ourselves” mentality. Or leaders can think and act out of a larger ethical context, as Odwalla did.

The Tylenol scare in 1986 is another case in point. It was clear when cyanide-laced containers of Tylenol were found on supermarket shelves that a pathological killer was responsible. Johnson & Johnson’s executives could have focused on the criminal aspects and exhorted police to take responsibility for catching the perpetrator. (Indeed, he was caught within a matter of days.)

But Johnson & Johnson’s executives understood the need to immediately take responsibility for the safety of their consumers. This led the company to recall every Tylenol product, design strong anti-tampering packaging, and conduct a massive awareness-building campaign. It is estimated to have cost the company $2 billion, but Johnson & Johnson emerged the stronger for it.

The bottom line is this: When a crisis hits, two dynamics take over: Trust and Empathy. These dynamics are illustrated in the figure below.

The Trust/Empathy Matrix

The empathy scale is governed largely by facts outside your control. In the case of the Exxon Valdez tanker spill, there was little question that the captain was drunk and that Exxon, as his employer, was at fault. Exxon’s leaders had little control over the empathy scale. But they did have control over the trust scale, which they messed up. In the Tylenol case, Johnson & Johnson was clearly not at fault. Yet it chose to assume full responsibility. As a consequence, the company was rewarded.

In Japanese corporate cultures, managers are trained to accept personal responsibility for anything that goes wrong on their watch. To Western eyes, this seems odd. We’re amazed when a Japanese CEO resigns because of the incorrect action of a freighter captain or an accounting irregularity. Yet as the Trust/Empathy Matrix shows, it’s also smart business. When a crisis hits, assuming responsibility and taking immediate, corrective action is more important than safeguarding your job.

Too bad the folks at British Petroleum, Transocean and Halliburton haven’t learned that lesson.

Lessons for a Board President

admin — Mon, 22 Mar 2010 16:36:34 +0000

In passing the leadership torch at a non-profit organization, I was asked to name the things that effective Board presidents do. Here’s my list:

1. Facilitate and preside over the Board meetings, starting on time, ending on time, keeping the conversation on topic, calling on people who are quiet, trying to engage everyone.

2. Model the behaviors you want to see in others during Board meetings. Be present and attentive. Listen carefully, paraphrase people’s positions, and clarify the action steps. Provide positive feedback.

3. Be clear about the role of the Board. The Board needs to make decisions that are appropriate for the Board: i.e. adopt a strategic plan, approve a budget, and decide on other important matters. Treat those matters with the seriousness they deserve. Don’t let the Board slip into bureaucratic behaviors (for example, by appointing committees to oversee staff’s work).

4. Be direct and straightforward about any conflicts you see or issues before they become elephants in the room.

5. Keep a focus on the organization as a business. Keep focused on generating market-driven revenues, in addition to philanthropic fund-raising. Keep asking “who pays, who benefits” types of questions. Challenge people when they drift into non-business-like thinking.

6. Be actively engaged in planning the Board’s agendas. Feel free to elevate things that you think the Board needs more time with. Don’t rubber stamp staff’s suggested agendas.

7. Be available to the chief executive and staff as a sounding board. Spend time with them separately, talking through matters of importance and thinking through how best to optimize the expertise and talents of Board members. Help them understand the role of the Board.

8. Think about the legacy you want to leave as Board president. Pick one or two goals, such as diversifying the Board or elevating its fund-raising capabilities, and commit yourself publicly to achieving them.

9. Be thoughtful about who you want to succeed you. A Board president has a lot of sway over his or her successor.

Leadership Tools

Five Habits of High-Performing Boards

When a Board of Directors serves in a governing capacity (e.g. for a non-profit, a public agency, or a corporation), the Board needs to act in certain ways in order to assure high levels of performance throughout the organization. This tool lays out the five habits of high-performing governing boards.

The Evolution of Non-Profit Boards

The Board of a non-profit organization typically follows an evolutionary path as the organization matures. This tool lays out three stages of Board evolution and identifies the characteristic behaviors of each stage. This tool can apply to public agencies, city councils, non-profits, and co-ops. Board members can use this tool to help clarify their role and adapt the Board’s focus accordingly.

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Good Governance Development – A Consultant’s Story

admin — Fri, 18 Sep 2009 18:04:58 +0000

I worked recently with the Board of Directors of a large public power company. They needed stronger governance systems. I talked about how effective boards work. I detailed our approach.

“With our framework,” I told them, “the board expresses exactly what it wants the organization to achieve in the form of policies. By defining what it expects in writing, and by regularly monitoring those policies, the Board can do its job, staff can do its job, and the organization can achieve high levels of performance.”

“But we already have policies,” one board member said.

“You do have policies,” I said. “But those policies are not the board’s policies. They are a mixture of state and federal policy, with a lot of your staff’s policy thrown in for good measure. I’m talking about a separate set of policies that express only what the Board wants the organization to achieve.”

“Why would we need that?” said another board member. “Our policies seem fine to me.”

“Because it would enable the board to communicate as a board,” I said. “Right now, you communicate as individual board members. But the board of directors is a single entity, and the board needs to say what it wants. Otherwise, your staff has to guess. And that leads to all sorts of mischief and mayhem.”

“Maybe we like it that way,” said one board member. “We can then tell them to do what we want.”

“Is that really how you want to communicate?” I asked. “What if you had 20 bosses, all telling you different things? How long would you last in that organization?”

I let that sink in. “Look, the best boards in the country use this framework. I’ve seen the results. It enables the organization to be clear about its priorities, clear about its measures of success, and clear on how it’s going to evaluate the general manager or CEO. That’s good governance. All boards should aspire to it.”

“Well,” said one board member. “Maybe we just like doing it our way.”

At least that’s honest, I thought to myself. Out loud, I asked, “How many of you would like to move toward this framework? How many of you would like to try this?”

A few hands went up, and then a few more. I looked at the one board member who was most vocally resistant. Slowly his hand went up, too. I looked around. All the board members were raising their hands.

“All right,” I said. “It looks like you have made a decision. Let’s figure out what you want to do next.”

Related Article: “Good Governance and Performance Goals“

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Good Governance and Performance Goals

admin — Mon, 02 Mar 2009 22:04:26 +0000

I was talking about good governance with an elected official, a member of a city council. “What do you do to encourage good governance?” I asked him.

“I ask people what’s going on. I ask employees at all different levels how they’re doing. That’s how I find out which departments are well managed, and which are not.”

“Really?” I asked. “Is that how you spend your time?”

“I think that’s why the people elected me – to find out what’s going on.” He said the city charter permitted him to “get whatever information he wanted from whomever he wanted.” He could call a parks employee, ask why the grass hadn’t been watered, and expect the employee to tell him.

“Who would let the city manager know?” I asked.

“It’s not my job to tell the city manager,” said he said. “I assume the employee will tell him.”

“But couldn’t that lead to chaos?” I asked.

“I don’t know.”

“What about determining the overall direction of the city, and setting long-term policy, and setting performance goals for the city. Isn’t that the city council’s role?”

“We don’t have performance measures,” he replied.

“Well, that explains a lot.” I smiled. “Listen, you have no formal feedback mechanisms. So you’ve had to go out and invent your own. I can understand that.”

He nodded. “Do you know how I measure whether the streets are being cleaned? I put a newspaper in the gutter and then check a day later to see if it is still there.”

Imagine what would happen, I said, if the city council did define performance measures. “Then you could focus on measuring performance, not as individuals inventing your own measures, but using agreed-upon measures. That would create alignment at the top – and lead to a clear understanding of everyone’s role.”

The city councilman grinned. “That would be a good trick.” He said his goodbyes and left.

Yes, I thought to myself. It is a good trick.

Read Related Blog: “Good Governance Development“

Good People, Bad Partners: Conflict Resolution through Good Governance Policy

admin — Sat, 28 Feb 2009 21:59:22 +0000

What makes good people be bad partners? Over the past month I’ve witnessed the dissolution of a law firm’s 15-year partnership. It began when one of the senior partners filed for divorce. The timing was unfortunate. It came just weeks before two high-powered associates were scheduled to buy shares. A buy-in signals the value of the stock. Fearing the repercussions, the senior partner (the one with the looming divorce) announced he wanted to put the deal on hold. “We have to wait,” he told his colleagues. Secretly, he was holding out for more money.

Fast forward two months. Five partners split away, forming a new firm, taking several associates with them, including the two who were scheduled for the buy-in. The senior partner became one of four shareholders in the firm. Three months later, the firm filed for bankruptcy, citing an excess of debt and an inability to draw in new investors.

Could this have been prevented? Of course. With the appropriate governance mechanisms, the firm could have put in place systems to deal with conflicts such as these. It requires trust to build those types of systems – and a desire to make those decisions long before trouble occurs. Most important, everyone needs to assume responsibility. In this case, they hadn’t. And that made all the difference.

Next blog post: Our Change Management Model

A Balanced Scorecard for Public Agencies

admin — Tue, 13 Jan 2009 21:56:21 +0000

I work with a lot of public agencies and their Boards of Directors. Typically, my focus is on helping these Board develop a high-level scorecard that the Board can rely on for measuring the organization’s performance. This, in turn, will accelerate the organization to attain higher levels of performance.

The important thing about the scorecard is that it has to be balanced. It has to balance all the aspects of what is essential to the organization’s success – from financial sustainability to customer satisfaction, from product reliability to ethical integrity.

The organization’s core values are the things that, if the organization could speak for itself, it would say are most important to it. Each of them can be measured. A balanced scorecard will look at 8-10 different categories of core values and assign metrics and targets to each of them. A tool on our website called Developing Core Values explains this in detail.

An unbalanced scorecard, in contrast, will have too many metrics. They won’t be focused on outcomes, but rather on outputs. Too many of them will fall into one category, like financial. Other core values, like integrity or environmental stewardship, may be neglected.

Read Next Blog Article: “Corporate Leadership Development Program“

Executive Corporate Board and the Disruptive Member

admin — Wed, 24 Sep 2008 20:57:52 +0000

I facilitated the work of a Board of a major medical center on Monday. It was their second day-long offsite. The purpose of the first offsite was to clarify that the Board no longer governed the institution, but rather was an advisory, fund-raising board. This was a hard conversation, because three of the six founders of the institution still served on the Board – and they still saw themselves as “owners” and thus governors, even though the center was now governed by a much larger university. It took some powerful facilitation – and at times heated conversation – to iron that issue out.

This time, we focused on the need to expand the medical center campus. The Board needed to take the lead in raising $50 million. My goal was to get them to commit to raising the money as their top priority. Everything hinged on the preparation. I worked with the CEO, helping him polish his argument. I also worked with the fund development director, helping her hone her case for change. Their presentations came together nicely. By noon, I called the question. “Are you ready to commit to this as the Board’s top priority?” I went around the room, asking each person to declare his or her position.

It worked beautifully. Every single Board member agreed the top priority was raising the $50 million. We then spent the afternoon defining who would be responsible for what. Who was responsible for introducing new prospects (Board members), who was responsible for qualifying prospects (staff), and who was responsible for making the ask (senior staff).

Lewis, one of the founding fathers, joined the meeting in the late afternoon. He raised his hand, and when I called on him, he said he didn’t see the need for the expansion. I explained that we were now discussing how to implement the Board’s goal. He asked the CEO to explain the need. I cut him off. “We’ve already covered that,” I said. “We’re moving on.” I felt badly. But it was my job to keep the Board on track.

After the meeting adjourned, many people came up and told me I’d done a superb job. I took the Board chair aside. “What did you think of how I handled it?”

“You did exactly the right thing,” he said. “Even though he is capable of making a gift of $5 million, we can’t let him disrupt our meetings. You handled it just right.”

Related blog: “CEO Coaching Lesson: Board Development“

California in Crisis: My Modest Budget Proposal

admin — Sun, 07 Sep 2008 18:46:46 +0000

The great California budget deadlock of 2008 has now reached record territory. The business of the state has ground to a halt, programs aren’t able to move forward, schools are in disarray, people aren’t being paid – all because the governor and legislative leaders have boxed themselves into a corner. It is easy to say it represents a new low in California politics. It’s harder to say what the long-term solution might be.

Over dinner tonight, a friend of mine, a former state senator, suggested a constitutional convention. “We need to rethink everything,” he said. “We need to rethink how we elect people, the initiative process, the two-thirds vote. Everything.”

I suggested the solution was in my book “Straight Talk.” The key, I said, is that the players need to agree on the process up front. They need clear ground rules, and there needs to be a neutral facilitator. One of the ground rules should be that legislators and staff don’t get paid once the deadline expires. Another should be that no one can take a hard position in advance. For example, no signed statements against a tax increase or against a particular funding category. Another rule should be that lawmakers agree to support whatever budget comes out of the process.

“Do you really think it would work?” he asked.

“Yes, it would, if everyone agreed that the status quo is unacceptable.”

“Ah,” he said, ” I knew there was a catch!”

Managing the Board of Directors

admin — Fri, 27 Jun 2008 18:10:18 +0000

Today, I met with the head of a large public agency (10,000 employees) and we talked about managing his Board of Directors so that they are supportive of his vision.

“You need to engage them early in the process,” I said. “Ask them questions. Enable them to own the direction.”

He gave me a quizzical look. “They don’t see eye-to-eye,” he said. “How can I do that?”

“It’s all about leverage,” I replied. “You have two Board members who want to be seen as driving the direction. Leverage their desire to be perceived as leaders.”

We talked about a strategy for doing that, for giving them a platform to articulate their visions for the organization.

Bill said: “Can you help facilitate this discussion?”

“I can, but I would prefer that you do it.” I looked at him. “You’ve led a fighter squadron into battle. Surely you can manage this Board.”

He hemmed and hawed.

“Can you envision how much more quickly you could implement your changes if the Board was fully behind them?”

Yes, he nodded.

“Can you envision these two Board members buying into your vision, once you buy into theirs?”

Yes.

“Do you think your visions are incompatible, or is it only in the details of execution you disagree?”

We’re aligned overall, it’s just in the details that we have some differences.

“That’s pretty common,” I said. “So what’s the worse that could happen?”

Bill pushed back his chair from the table. “Certain Board members are loyal to certain groups,” he said. “If I’m not careful, those groups could become too powerful.”

“In my experience, power changes hands when there’s a vacuum of leadership.”

Bill nodded his head. “I see what you’re driving at. I need to do this in order to get the organization aligned.”

“Taking responsibility invariably means making a choice,” I said. “If you’ve made the choice, then we can talk about the details of how to engage them.”

Next blog article: “Board Development Training“