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When Leaders Hide – Bureaucracy or Structure what is the Difference?

Bureaucracy by definition is a system of administration based upon organization into bureaus, division of labor, a hierarchy of authority, etc.: designed to dispose of a large body of work in a routine way.  Bureaucracies work well if the work is routine. However a limited number of tasks in today’s environment of rapid discontinuous change that are best done by systems.  Bureaucracies work well in interfacing with government regulations or analyzing past performance.  What makes bureaucracy go wrong?  Bureaucracies go awry when leaders lose courage, lose energy or fear they not be able to arise to the challenges at hand it is easier to create barriers to protect the status quo.  Hiding behind the status quo is never a means of identifying and releasing new leaders or of refining the effectiveness of an organization’s operations.
Bureaucracy becomes a means by which management insulates themselves from the fierce conversations they must have with their employees and direct reports when it takes on any of the following characteristics. Here are a few of the poor practices I have seen and suggestions for reversing these poor practices.

  • Erect buffers and baffles. One VP created a web-based form to manage requests for interaction from his direct reports to avoid face to face interaction. After creating the form he hired a secretary to serve as an extra buffer.  Suggestion: take time to interact with your direct reports especially in times of conflict.  Insulating yourself not only frustrates direct reports it undermines trust, sets up power plays that cut efficiency and contributes to an exodus of your best talent.
  • Design policies to avoid dealing with a problem employee.  The director announced a new organization wide policy designed to address the misdeeds of one person the result was not enhanced efficiency – it dispirited and penalized the most productive by imposing ridiculous restrictions. Suggestion: personally debrief the problem employee offering feedback on what behavior is unacceptable and set proper limits for future behavior.  Define the consequences of future violations and then stick to guidelines outlined in the feedback.
  • Absorb, avoid and redirect.   The president simply ignored his emails and refused to acknowledge those who attempted to talk with him about anything he deemed controversial. This behavior ignores critical communication.  Suggestion: listen to the feedback of your direct reports – it provides insight into the impact of your behavior on others and insight into the situation that demands your attention.
  • Launch into threatening tirades. When leaders feel threatened or challenged by creativity or differences of opinion some launch intimidation tactics meant to subdue the perceived threat.  Suggestion: stop and think.  What has triggered your anger?  A threat? Before launching on the employee explore the theat.  Use the opportunity to mentor your employees and test your own responses. After your interaction debrief with your coach to check your own leadership capacity.
  • Responsibility hopscotch (also called delegation on a bungee cord).  Leaders who don’t know how to mentor and name their direct reports’ capabilities may panic when they see assignments go sideways. Rather than intervene with questions and directives that name capability gaps they pull back key assignments and do it themselves. While this may serve the short-term to “save” a project or assignment it does nothing to develop the employee’s capabilities. Often it does little more than train employees that they can by-pass accountability knowing that the boss will step in and do it himself. Suggestion: ask yourself how well the pattern of “rescuing” your employees is working.  Who is doing your job if you are doing their job?  Is this pattern of behavior sustainable?  Does it generate value? Seek out feedback from a trusted mentor or coach to expand your leadership capabilities.
  • Demand performance based on assumed communication and standards.  Unspoken expectations are unknown. While this makes sense when I write it I am still surprised when I watch leaders express react in anger and frustration because their employees could not intuit their preferences. There is a difference between employees practicing critical thinking and demands that they intuit personal preferences. Suggestion: explain your expectations as well as the task and ask employees to clarify what you have said to make sure that you have communicated effectively.  Do not rely on written instructions alone when a significant assignment is on the line. Written instructions often contain implicit background or expectations that the reader does not have.

Conclusion

How do you handle a boss who exhibits this kind of behavior?  If you are the boss how did you change?  What was the catalyst to change?

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You Can Make a Difference – Why Don't You?

We Saw it in the Arab Spring – How about a Corporate Spring?

You say you want a revolution
Well, you know
We all want to change the world[1]

The events of the Arab Spring affirm the observation that revolutions do not start at the top where the past and tradition is especially venerated – revolutions start at the bottom where the most diversity and possibility of broad-based adoption. But the Arab Spring could dwindle into narcissistic self-absorption like many of the “revolutionaries” of the 1970s in the United States who are now near retirement some of them wondering what happened to the idealism of their youth.
I was talking to a more experienced friend of mine about the challenges I faced in one organizational context in which I work.  “You need,” he said after listening for while, “to read Gary Hamel’s book.”
He loaned Leading the Revolution and I have thought about a couple of the insights that live between the covers of this fascinating thesis.
Hamel insists that in business (or any organization) the responsibility for innovation must be broadly distributed.  I know from experience that the caveat is that those at the top typically derail attempts at broadly distributing responsibility for innovation as a means of protecting precedent (the prerogative of a few). In fact when operating models, business models, mental models and political models are in perfect alignment then the chance of innovation breaks down under the pressure to silence dissenters who threaten the status quo and the rewards inherent in being at the top.
Nurturing innovation requires that the organization’s mental model (deeply cherished beliefs) be challenged (pushed out of alignment with the business model) so that assumptions can be rethought.  This however is not possible without first throwing the political model (distribution of power) out of alignment long enough to redistribute power so innovation can take hold. If power remains narrowly distributed at the top then the chance of successfully innovating from the bottom is next to impossible.  This gives me pause to think about (1) how I have acted when I have been at the top and face dissenters who want to review how we do things and (2) how I manage the political power of organizations in which I do not exist at the top.
Figure 1: Creating Space for Business Concept Innovation[2]

So what is it that moves the mental and political models of an organization to make room for innovation as illustrated in Figure 1?
It takes two things to push mental and political models off-balance enough to introduce innovation according to Hamel: imagination and passion.  The risk is the potential for political backlash (e.g., Bashar al-Hassad in Syria during the Syrian uprising of 2012).  However, without becoming an imaginative and passionate activist unleashing innovation has little or no chance of occurring. Hamel makes an important point about becoming an activist in an organizational sense:

Activists are not anarchists.  They are, the “loyal opposition.” Their goal is to create a movement within their company and a revolution outside in.[3]

In discussing activism in a purely organization sense, activists are committed to their company and to a cause that is at odds with pervading values or practices within the organization. Activists can behave responsibly and be a source of alternative ideas according to Hamel. Activists refuse to fit in on the one hand and live out street-smart pragmatism on the other hand.  It is this second point – street smart pragmatism – that is often missing in inexperienced activists.  They fail to see the potential backlash or pitfalls inherent in activism and so become the walking wounded who give up because they miscalculated the severity of the backlash.
So why care enough to engage in the behaviors of an activist?  Hamel offers three compelling reasons:

  1. A person needs to live and work with purpose over and above their paycheck.  Research demonstrates that those people who experience flow are also people who work out of a sense of purpose.[4]
  2. The organization is not “them” – it’s you. Whining about “them” is simply an excuse to justify inaction.
  3. You owe activism to your friends and colleagues – they deserve to make a very cool difference in the world.

Conclusion
Many of the leaders I work with both in the class room and in the board room can profit from this insight by Hamel. They don’t want to be  an empty suit or disillusioned has-been. On the other hand some people simply don’t want to risk the potential backlash nor the work needed to engage in true innovation. How about you?  Are you an imaginative and passionate contributor to purpose and meaning in work?
Here is another question, what if you are at the top?  Are you ready to be an activist?  What does it mean for those who follow you?  What does street smart pragmatism look like for you around your board or other stake holders?  Remember, your employees and colleagues deserve to make a very cool difference in the world.

[1] John Lennon (credited as Lennon-McCartney) Recorded: July 10-12, 1968 (Studio 2, Abbey Road Studios, London, England)
[2] Gary Hamel. Leading the Revolution  (Boston, MA: Harvard University Press, 2000), 150.
[3] Hamel 153
[4] Csikszentmihalyi, M & Rathunde, K (1993). “The measurement of flow in everyday life: Towards a theory of emergent motivation”. In Jacobs, JE. Developmental perspectives on motivation. Nebraska symposium on motivation. Lincoln: University of Nebraska Press. p. 60.ISBN 0803292104.  Csíkszentmihályi, Mihály (1975), Beyond Boredom and Anxiety, San Francisco, CA: Jossey-Bass,ISBN 0875892612. The concept of happiness and “flow” both observe that happy people or people who experience flow possess a sense of purpose in their work.
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You Can Make a Difference – Why Don’t You?

We Saw it in the Arab Spring – How about a Corporate Spring?

You say you want a revolution
Well, you know
We all want to change the world[1]

The events of the Arab Spring affirm the observation that revolutions do not start at the top where the past and tradition is especially venerated – revolutions start at the bottom where the most diversity and possibility of broad-based adoption. But the Arab Spring could dwindle into narcissistic self-absorption like many of the “revolutionaries” of the 1970s in the United States who are now near retirement some of them wondering what happened to the idealism of their youth.

I was talking to a more experienced friend of mine about the challenges I faced in one organizational context in which I work.  “You need,” he said after listening for while, “to read Gary Hamel’s book.”

He loaned Leading the Revolution and I have thought about a couple of the insights that live between the covers of this fascinating thesis.

Hamel insists that in business (or any organization) the responsibility for innovation must be broadly distributed.  I know from experience that the caveat is that those at the top typically derail attempts at broadly distributing responsibility for innovation as a means of protecting precedent (the prerogative of a few). In fact when operating models, business models, mental models and political models are in perfect alignment then the chance of innovation breaks down under the pressure to silence dissenters who threaten the status quo and the rewards inherent in being at the top.

Nurturing innovation requires that the organization’s mental model (deeply cherished beliefs) be challenged (pushed out of alignment with the business model) so that assumptions can be rethought.  This however is not possible without first throwing the political model (distribution of power) out of alignment long enough to redistribute power so innovation can take hold. If power remains narrowly distributed at the top then the chance of successfully innovating from the bottom is next to impossible.  This gives me pause to think about (1) how I have acted when I have been at the top and face dissenters who want to review how we do things and (2) how I manage the political power of organizations in which I do not exist at the top.

Figure 1: Creating Space for Business Concept Innovation[2]

So what is it that moves the mental and political models of an organization to make room for innovation as illustrated in Figure 1?

It takes two things to push mental and political models off-balance enough to introduce innovation according to Hamel: imagination and passion.  The risk is the potential for political backlash (e.g., Bashar al-Hassad in Syria during the Syrian uprising of 2012).  However, without becoming an imaginative and passionate activist unleashing innovation has little or no chance of occurring. Hamel makes an important point about becoming an activist in an organizational sense:

Activists are not anarchists.  They are, the “loyal opposition.” Their goal is to create a movement within their company and a revolution outside in.[3]

In discussing activism in a purely organization sense, activists are committed to their company and to a cause that is at odds with pervading values or practices within the organization. Activists can behave responsibly and be a source of alternative ideas according to Hamel. Activists refuse to fit in on the one hand and live out street-smart pragmatism on the other hand.  It is this second point – street smart pragmatism – that is often missing in inexperienced activists.  They fail to see the potential backlash or pitfalls inherent in activism and so become the walking wounded who give up because they miscalculated the severity of the backlash.

So why care enough to engage in the behaviors of an activist?  Hamel offers three compelling reasons:

  1. A person needs to live and work with purpose over and above their paycheck.  Research demonstrates that those people who experience flow are also people who work out of a sense of purpose.[4]
  2. The organization is not “them” – it’s you. Whining about “them” is simply an excuse to justify inaction.
  3. You owe activism to your friends and colleagues – they deserve to make a very cool difference in the world.

Conclusion

Many of the leaders I work with both in the class room and in the board room can profit from this insight by Hamel. They don’t want to be  an empty suit or disillusioned has-been. On the other hand some people simply don’t want to risk the potential backlash nor the work needed to engage in true innovation. How about you?  Are you an imaginative and passionate contributor to purpose and meaning in work?

Here is another question, what if you are at the top?  Are you ready to be an activist?  What does it mean for those who follow you?  What does street smart pragmatism look like for you around your board or other stake holders?  Remember, your employees and colleagues deserve to make a very cool difference in the world.

[1] John Lennon (credited as Lennon-McCartney) Recorded: July 10-12, 1968 (Studio 2, Abbey Road Studios, London, England)

[2] Gary Hamel. Leading the Revolution  (Boston, MA: Harvard University Press, 2000), 150.

[3] Hamel 153

[4] Csikszentmihalyi, M & Rathunde, K (1993). “The measurement of flow in everyday life: Towards a theory of emergent motivation”. In Jacobs, JE. Developmental perspectives on motivation. Nebraska symposium on motivation. Lincoln: University of Nebraska Press. p. 60.ISBN 0803292104.  Csíkszentmihályi, Mihály (1975), Beyond Boredom and Anxiety, San Francisco, CA: Jossey-Bass,ISBN 0875892612. The concept of happiness and “flow” both observe that happy people or people who experience flow possess a sense of purpose in their work.

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Business Acumen – the Tale of Two Companies

Developing Leaders Must Include Business Acumen
A friend of mine described his firm’s leadership development process.  They defined what their leaders needed to know at every level of their organization.  This publicly traded company maintains consistently high profits and draws top talent.  Their talent assessments and succession planning was impressive.  They created development plans for every leader.  In contrast I know another manufacturing firm that dreams of being successful.  Their idea of leadership development is showing a video recording on the 21 unsupported anecdotes of motivational gibberish.

I interviewed both teams.  One significant difference emerged like a slap in the face.  The leaders of the publicly traded firm were clear about their purpose. They were clear about their metrics and driven to achieve results. They exercised business in daily decision-making.

The leaders of the privately held firm were ambitious but could not define business acumen.  As I interviewed more of the management I found that managers had no P&L responsibility.  They were unable to offer concrete descriptions of their market and what their customers wanted.  They had a ball-park mentality best described as “if we build it they will buy it.”  The difference between the two teams was stunning.

Business acumen integrates financial literacy (the ability to interpret numbers on financial statements) with business literacy (recognizing how daily decisions and strategies affect the financial numbers).

Great organizations require that every leader have and refine business acumen.  The bottom line is that when managers, sales professionals and employees increase their business acumen they are capable of thinking and acting with the bigger picture of organizational success in mind.

Business Acumen Defined

Business acumen is a perspective of the total business and a resultant ability to make decisions that enhance its overall performance.  It is a characteristic that enhances personal capacity and increases effectiveness in personal decision-making. The basics of business included in business acumen include: sales forecasting, inventory, merchandising, advertising, (increase the value to the customer through lower prices or other value proposition) product mix, cash, profit margin, return on assets, consumer focus, best practices, and shareholders.[1]

Explanation the Basics

Charan contends that every business is the same inside. The challenge is cutting through to cash, margin, velocity (movement of inventory), growth and customers.  The goal of any business is to turn their product into cash to continue operations.[2]  To carry out this they work with pricing, advertising and product mix to design the greatest yield.  Problems occur when companies sink cash into inventories or debt and therefore cannot generate enough cash to stay in business.  As a child Charan learned best practices (what the competition was doing well) by listening to his father and uncle debrief their days.

Business acumen requires that one learn the building blocks of money i.e., cutting through to cash, margin, velocity (the speed at which inventory is turned over to generate cash), growth and customers.  Note that return = margin x velocity (R= M x V).

The rule is that the cost of capital has to be less than the return on assets or the business is loosing money. Everything in a business emanates from this focus.  Besides understanding what products generate cash every firm needs to have cash management (including AR and Debt collection) practices that enhance their cash flow.  If cash is not being generated a company must look at why.  In a small business this may mean seeing the need to generate cash for the business as well as personal living needs – to set the sights higher.  Everyone impacts cash generation.  Everyone impacts how cash is used.

Margin is the net profit after taxes or the money the company earns after paying all its expenses.  The gross margin is the total sales of a product line less its cost.  Gross profit is also critical to business management because it provides clues about changes affecting the nature of the business – if the gross margin falls then ask why.

Growth is sustainable profit. Sustainable profit energizes a company and draws top talent to it.  It is important to note that size is not the ultimate measure of growth – profitability and return are the benchmarks. “If the money-making is improving and the cash is growing too, you have some interesting choices.  You can use the funds to develop a new product, buy another company, or expand into a new country.”[3]

Regardless of how a company measures the responses of customers to their products the importance of being close to the customer is essential for survival.  When thinking about customers, keep it simple – what are they buying or not buying and why?  Stay close to customers and talk with them about what they are looking for.  Observe them directly – not through middle men.  Put the entire set of concepts to work by using the return formula to test company performance one period to the next and to ask why this may be the case.  This is how all the pieces come together.

Business Acumen in the Real World.  Exercising business acumen is a leader’s responsibility, “The world has complexity, leaders provide clarity.”[4] Using business acumen the leader has to gauge the environment and make decisions on prices, margins and purchases.  Leaders with business acumen scan the environment and look for trends that offer opportunities.  Business acumen helps the leader find the three or four business priorities that will leverage the business toward growth by retaining customers and achieve all the important money-making goals at the same time.  Setting the right priorities and communicating them consistently is essential to success of the business.

Doing the right things day in and day out builds value.  In publicly traded companies this is measured in their P/E ratio i.e., price of the stock as compared to the earnings per share. The higher the better such as if the P/E is 7 then for every dollar of earnings per share the stock is worth seven times that much thus creating wealth.  The significance of this ratio is especially clear if a company misses its forecasted earnings – investors begin to question whether the company has the discipline to meet its future obligations.  How can mid-level managers affect P/E?  How about overcoming the “not designed here” syndrome and modifying an important part from an existing supplier thus increasing their volume and lowering your cost.

Getting Things Done.  “Leaders have to deliver results day in, day out, relentlessly over a long period.  Delivering results is what gives an organization energy, builds confidence, and generates the resources to go forward.”[5] The drive to achieve results is characteristic of every effective leader.  Without a results orientation an organization suffers from a lack of clarity that makes it little more than a mechanism for evasion of responsibility and leadership.[6]

Conclusion

I would work for the publicly traded company.  People there want to achieve results together.  They possessed a sense of purpose and mission.  In the private firm on the other hand one manager described the environment as a “need to know” Theory X monarchy – this is not exactly the recruiting slogan one wants to promote. So what does business acumen look like at your company?  Use the prompts below to define what your leadership/management team members need to know.  When you complete your definitions train your team and hold them accountable for their results.

Cash

Margin

Velocity

Growth

Customers

[1] Ram Charan. What the CEO Wants You to Know: Using Business Acumen to Understand How Your Company Really Works.  (New York,NY: Crown Business, Crow Publishing Group, 2001), 20.

[2] Charan 24

[3] Charan 49-50

[4] Ibid 67

[5] Ibid 93

[6] Warren Bennis and Joan Goldsmith. Learning to Lead: A Workbook on Becoming a Leader 4th ed.  (New York,NY: Basic Books, 2010).

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Cross-cultural Lessons – Learning to See Through Other Frames

Elephants and Power
The lecture was on ethics in decision-making and the discussion moved, as it always does when I teach outside the USA toward American foreign policy.  In the midst of the discussion these Kenyan graduate students gave me a proverb that fits political realities all leaders have to work with in corporate as well as in public service contexts.

“When elephants fight the grass gets crushed, when elephants make love the grass gets crushed.”

Effective leadership (leadership that does not destroy or damage people) recognizes how organizations allot and display power. It is not uncommon for good leaders to get crushed not-with-standing their skill, insight and alliances when they are at the wrong place and time e.g., a regime change or economic downturn. Such experiences push leaders through crucible experiences and boundaries to growth. I did not catch a sense of fatalism from these students as much as a clear view of reality and a warning to know where the elephants were at all times. I found this helpful in corporate life. One of my graduate professors was a specialist on organizational change.  “Ray” he said on several occasions, “remember power wins.”  It was his way of reminding me to be aware of the elephants.

Eels and Change

A friend of mine had invited me to China to help train managers in a start-up hospitality consulting firm. The hospitality market in China was on fire, hotels and motels were springing up everywhere.  The challenge for my friend (we had met in graduate school) resulted from a rate of growth that threatened to outstrip the firm’s ability to develop the necessary leadership skills not to mention any kind of bench.  At the end of the session on recognizing the predictable barriers to personal development in career and personal growth my interpreter turned to me with the mixture of epiphany and interrogation.

“You are an eel.”

“Help me understand what you mean by that,” I said.

“Do you see the fish in the market when you come to the office?”  He aked. “They sit in the tanks all day and over time they become listless.  When this occurs no one will buy them because they don’t look fresh.  So, the fisherman places an eel in the tank.  This makes the fish come back to life,” he explained.

The insight about change has a bearing on trust.  The effect of the eel depends on the perspective of the viewer.  To the fish the eel is a threat.  The fish snap to in the presence of the eel yet the effect is short-lived. The observation of my interpreter made me stop and think about the pace at which I was moving and whether I was helping these managers think through the concepts I explained in the lens of their own worldview.  From the owner’s perspective I challenged lethargy and encouraged action. The larger challenge my interpreter helped me see was how to synthesize the needs of the owners for rapid change with the needs of the managers for deeper understanding and engagement i.e., a function of trust.

Can an eel be simultaneously a source of change and hope?  Not if you are a fish.  Leaders must exercise awareness of how followers perceive your actions. The ends you expect may not be the results others generate. Learn to use a variety of leadership roles and styles.

Storks, Frogs and Epiphanies

I was still chewing on the what to do with the eel story a couple of days later when my interpreter served also as my mentor with another bit of wisdom.

“You are a stork.”

“Is a stork better than an eel?” I queried.

“No, a stork is different.” He responded in what I understood as a correction of my western proclivity for either/or resolutions to ambiguity or dissonance. He reminded me to exercise an “opposable mind” as Martin calls it. Highly creative leaders avoid reducing decisions between alternative options but seek instead to hold the tension of apparently opposing decisions to create an entirely different kind of approach.  This ability to rest comfortably in the ambiguity of tension results in an integrative thinking that seeks out “…less obvious but potentially relevant factors…” then considers “…multidirectional and nonlinear relationships among variables….”[1]   With this done the effective leader pursues the problem as a whole and not the parts and “Creatively resolve tensions among opposing ideas; generate innovative outcomes.”[2]

“What does the stork do?” I asked with a greater awareness of my need to learn.

“The stork shows the frog that there is a greater reality than that which the frog sees from the bottom of the well.  You see, the stork appears to be supernatural (read exceptional or unreachable) to the frog.  It appears and disappears at will at the top of the well and the frog cannot understand how the stork accomplishes such a miraculous feat.  One day the frog asked the stork to help him understand the wonders of the stork’s miraculous existence.  The stork laughed and lifted the frog from the bottom of the well to see the world from on top of the well.  You are helping us see a different world.” (Remember Plato’s cave of allegory?)

I was moved and encouraged – apparently I inspired both fear and hope in my time with these leaders.  More importantly I was learning to hold apparently opposite or mutually exclusive views of reality in a dynamic tension.

Conclusion

Parables or stories connect with the experience of the hearer and offer a lens for dynamic reflection.  So, my conclusion is simply a launching point for many more insights in fact if you have other cultural unique parables please share them with me in the comments.

  1. Highly effective leaders exercise awareness of how organizations assign and use power.  Leaders who lack this awareness end up trampled to death. The leader who is unaware of their power will trample to death those he/she leads.  All good leaders have a tool kit of influence, authority and power.  Power is the last of the tools a leader should use.  Those leaders who abuse the use of power are like a rogue elephant. The destruction caused by rogue elephants and toxic leaders motivates people to end the threat of damage by changing jobs or eliminating the threat.
  2. Highly effective leaders exercise self-awareness and situational awareness.  There are times all leaders must act like eels.  Recognize however that change management requires an awareness of the fear change engenders. In experienced leaders scare their employees to death resulting in disengagement and turn over. Neither alternative generates long-term success in meeting business goals. Great leaders understand that change is only as effective as a shift in how people see their situation.
  3. Highly effective leaders work to redefine reality.  They work with an opposable mind that discovers new alternatives and inspires people with the possibilities inherent in seeing a problem or challenge differently.

My students and the employees I work with often become my mentors and teachers. Part of the delight I have in leading rests in the influence I exert but the greater joy rests in the exposure I have to new insights and learning from the lives of those I have the privilege to serve.  Are you learning?

[1] Roger Martin, “How Successful Leaders Think,” Harvard Business Review, June 2007, 60-67.

[2] Ibid. 65.

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When Followers Attack: Facing the Inevitable Interpersonal Conflict of Leadership

Every leader endures the challenge of being under the microscope of critical dissatisfaction.  In my experience effective change agents and leaders face a myriad of disheartening personal attacks often from people they know and always with gut wrenching repercussions.  Slander, inference and complete misrepresentation are part and parcel of the leadership experience.  I was reminded of this again from a friend of mine grieving the betrayal they felt by members of their own leadership team. Members of my friend’s team masterfully undermined my friend’s leadership without ever specifically talking with them about the dissatisfaction they felt.
The conundrum faced by many leaders I work with is rooted in a misconception about conflict i.e., that interpersonal conflict is to be endured not addressed in hopes that at some future point the integrity of their motives and their service would be recognized by all and their leadership decisions vindicated. Often this misconception is rooted in faith convictions around the actions of Jesus Christ during his trial.  A quotation anticipating the betrayal and kangaroo court Jesus faced from the prophet Isaiah is regularly repeated to me as I ask them about their response, “He was oppressed and afflicted, yet he did not open his mouth; he was led like a lamb to the slaughter, and as a sheep before its shearers is silent, so he did not open his mouth.” (Isaiah 53:7, NIV)  This strategy of silence is great if one anticipates dying I suppose.  However, while it reflects the outward confidence and inner character Jesus exhibited in the face of false accusation during his trial it is not literal – Jesus did speak during his arrest and trial and questioned the inconsistencies of his accusers and answered their direct inquiries.

When Making a Defense is Important

Silent leaders in times of conflict abdicate the narrative of the situation to their critics. The result is that followers feel rudderless in the organization and ultimately feel betrayed by the leader’s unwillingness to step up to the demands of the pressure. (See my Article, “Servant Leadership and the Exercise of Discipline” at http://raywheeler.wordpress.com/2011/03/21/servant-leadership-and-the-exercise-of-discipline/)

It occurred to me once in reading Paul’s second letter to the Corinthians that I was reading a blatant defense of his role (authority and influence) as a leader. Clearly the legitimacy of Paul’s leadership was at stake in the minds of the Corinthians who had already received a rather pointed missive correcting their misapplication of the Christian message.  The resulting dissonance in the relationship between the Corinthian church and Paul forced him to defend his integrity, position and role toward the Corinthians.  Apparently his first letter generated controversy and even rejection.  As is often the case in conflict, his authority was challenged (7:8-16).

Paul wrote his second letter to the Corinthians anticipating seeing them after his exposure to their slanderous incrimination of his character and motives (13:1).  Paul states he prefers a warm and collegial reception, but is prepared to be a disciplinarian if need be for the sake of the health of the Corinthian church (12:20-13:1).

The entire letter of 2 Corinthians models transparent and authentic leadership conversation.  Read Paul’s second letter to the Corinthians. Pay specific attention to the fact that Paul defends himself and does not allow misconceptions or accusations about his motives and intention to assert themselves without a challenge.

Recriminations Are Unoriginal – Don’t Give Them Too Much Power

The recriminations aimed at Paul were personal and direct.  They came from people for whom he cared deeply and for whom he had suffered greatly.  I found it to be extremely encouraging to simply list the recriminations Paul faced.  Why?  Because they once they are down on paper two things emerge. First, they are unoriginal.  Recriminations are common place and rooted in a variety of motives. Second, when I observed how common the recriminations leveled at Paul were (the same recriminations have been leveled at me as a leader) innuendo and incrimination lost the power to command my attention to the point of immobilizing my ability to make decisions and lead.  If you are a leader you will face incrimination unjustly delivered.  You will also make your share of mistakes.

Put Recriminations into Proper Perspective  

Review the list of recriminations made against the Apostle Paul.  As you read these think about the recriminations you face or have faced as a leader.  I am certain your experience will parallel Paul’s – you are not a distinctively bad leader if you face these recriminations.

  • 1:17; that he was two-faced, saying one thing and doing another (6:8).
  • 2:4; that he was insensitive and uncaring (6:12).
  • 2:10; that he was unforgiving.
  • 2:17; that he was into the gospel for the money or personal advancement (7:2).
  • 3:5; that he was ineffective (specifically inadequate to the task).
  • 4:2; that he was self-seeking and manipulative (7:2).
  • 4:5; that he was self promoting.
  • 5:9; that he was ambitious.
  • 5:12; that he was arrogant (boastful, 10:8).
  • 7:2; that he took advantage of others (11:9; 12:14; 12:11-17)
  • 8:13; that he was inconsistent in his policies.
  • 8:20; that he absconded with church funds.
  • 10:1; that he was a coward, afraid to personally face the issues.
  • 10:10; that he was not much of a teacher.
  • 10:14; that he claimed credit for things he had not done.
  • 11:5; that he was inferior in his gifts and abilities (it was this summary accusation that he pointedly addresses in ch.s 11-13).
  • 12:13; that he had treated the Corinthians as inferior.
  • 13:6; that he had failed the test.
  • 13:10; that he was overly severe in his treatment of failure.

Admit Mistakes Quickly and Learn from Them

Paul’s tone in response to these recriminations is authentic (personal) and direct.  He addresses both the overt and the implied attacks on his character and motives by holding out his life as an illustration and explaining details surrounding his decisions that the Corinthians could not have known.  Similarly Paul exhibits and openness to learning and feedback from the Corinthians.  The letter does not smack of arrogance of excuses.

Paul’s response indicates clear boundaries – he served, he willingly accepted suffering but also expected reciprocity.  He was neither a patsy nor a pushover.

Conclusion

If you lead well expect conflict from those closest to you. Engage the conflict humbly and honestly.  Keep the mission of your organization clearly in front of you.  Hold people accountable to that mission – hold yourself accountable to the mission. Do not shirk from defending decisions made with information not commonly available. On the other hand do not hesitate to admit bad decisions based on poor or incomplete information – they happen. Those who follow want to know two important things.

First, followers want the assurance that leaders stay engaged in the realities the organization faces and are willing to both listen and make difficult decisions.

Second, followers want leaders to help them define reality.  What external pressures challenge the organization?  What internal resources are needed to meet the challenge?  What strategy is in place to secure more resources if the internal resources are insufficient? What support exists for followers who are called upon to sacrifice for some future benefit?

If your communication as a leader is anything but authentic and personal the confidence of your followers (employees, stake holders, peers) will wane accordingly. Take a lesson from Paul and embrace conflict, address innuendo and communicate transparently.

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Is Your Corporate Culture Healthy or Toxic?

Corporate Culture – The Non-verbal Accelerator of Corporate Efficiency and Resilience
I was intrigued with the article (and the ensuing flap) over Greg Smith’s New York Times essay on why he left Goldman Sachs. In the middle of all that was written one thing stood out as a consistent theme – corporate culture is important.  What does corporate culture do?  How does it help an organization to be efficient?  When does it hurt profitability in the long run?  The questions are important to anyone at the helm of an organization.

Corporate Culture Defined

What is corporate culture?  A corporate culture is a shared (inculcated) way of seeing and making sense of the world internally and externally. Corporate culture is reflected in statements like, “That is how we do things around here.” The values and systems that grow around an organization can be one of the most powerful tools available for ensuring consistent decisions, seeing new possibilities, reinforcing quality actions and communicating a consistent brand. It is the corporate culture that support and leverage the discrete functions of the organization and that inhibit them from becoming silos of independent functions that undermine efficiency. I have adapted the idea of culture to the corporate setting.[1]  Organizational culture is:

  • The total way of life inside the corporation;
  • the social legacy individuals acquire from the corporation as typically modeled by the founder or chief executive(s);
  • a way of thinking, feeling and believing;
  • a theory on the part of management about the way in which employees as a group of people in fact behave;
  • a storehouse of pooled learning and belief;
  • a set of standardized orientations to recurrent problems;
  • learned behavior;
  • a mechanism for the normative regulation of behavior;
  • a set of techniques for adjusting both to the external environment and to competitors;
  • a precipitate (impulse) of the firm’s history.

Identifying corporate culture is sometimes like catching a slippery fish – it is more difficult to do when one is inside the culture.

Because corporate culture is a set of assumptions that define reality and response to reality it is important to make an effort to define how our organization behaves.  What if an organization’s cultural assumptions are inaccurate? Some argue that because business deals primarily with facts and numbers that such subjective things as “organizational culture” do not actually impact real business decisions.  The fallacy in this is that truly objective data does not exist.  The selection important data is an act of cultural filtering. When the interpretation of what the numbers mean is turned into actionable milestones the full force of the organization’s culture surfaces.

Corporate Culture Can Go Awry

Organizational culture is both formative and resilient.  It is not permanent. This point is critical for leaders to understand.  Organizational culture can withstand severe stresses and the occasional lapses of executive or managerial judgment. Organizational culture reinforced by the consistent behavior of its leaders serves as a check to lapses of executive or managerial judgment and as a guide and check for employee behavior.  The formative nature of organizational culture reinforces the discrete actions of the organization that create value.

On the other hand organizational culture is adaptive. The rather scary point is that organizational culture follows the behavior of leaders over time.  Culture reflects and structures the values that drive it.   This can result in a corporate culture that evolves to meet new market pressures effectively.  Or the adaptive nature of corporate culture may just as possible create a toxic environment that supports or masks its own toxicity.  Read Smith’s description again:

“It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.”[2]

Smith asserts that the organizational culture (the systems and values inculcated by the leadership over time as demonstrated in their behavior and decisions) became toxic internally and externally at Goldman Sachs and thus undermined employee engagement and loss of client focus.

Even the responses critical of Smith’s essay made the same observation of Goldman and Sach’s toxic culture.  Matt Levine’s critique of Smith’s motives and timing did not undo Smith’s thesis but confirmed it:

“One question on everyone’s mind is…why did it take him 12 years to figure out that Goldman’s culture was rotten? After all, Matt Taibbi and the SEC have been saying similar things for years.”[3]

Former Federal Reserve Chairman Paul Volcker also confirmed Smith’s observation about eroding organizational culture.[4] Great leaders pay attention to their organization’s reputation. This is not a Pollyannaish denial of the fact that successful organizations generate their share of envious critics’ hell bent on blackening the eye of success.  Every great leadership team and great organizational culture has its detractors. However, if an organization’s reputation differs substantially from the organization’s espoused values it is time to stop and assess the organization’s health.

I contend that the leader who fails to pay attention to the nuances of the culture he/she influences through their own behavior, decisions and reward structures are already well down the road of an organizational failure whether that failure be the loss of talent, an ethical/legal lapse, or financial collapse. Why?  What does organizational culture do in operational terms?

Three Operational Impacts of Organizational Culture                          

Organizational culture is critical to the support of the organization’s discrete actions. Discrete actions recognize the unique disciplines that make up the organization’s competitive advantage.  Organizational culture is the framework on which all support actions build.  As noted above organizational culture is the sum of its history, approach to implementing strategy and its understanding of the underlying economics of the activities themselves.  Organizational culture is most visible in support activities such as human resource management, firm infrastructure and technology development.

Organizational culture is essential to identifying and bridging the threat of isolated actions. Isolated actions indicate competition internally that add to costs and reduce value.  Isolated actions may either indicate a dissonance emerging in the organization’s culture or may be the cause of dissonance in the organization’s culture.  Where the organizational culture is working it becomes the informal mechanism for pulling attempts at isolated action back into the appropriate discrete actions of the company.

Organizational culture is the character and feel of the organization that draws and retains the firm’s top talent.  As noted in Levine’s critique of Smith’s commentary Goldman Sachs has hemorrhaged talent.  Levine contends the hemorrhaging talent is the result of an economy that has readjusted the financial rewards possible in the industry.  Levine’s parallel observations are interesting.  The correlation of toxic culture and loss of income potential or value creation seems to affirm the first two impacts of organizational culture.  The demise of corporate culture creates the kind of internal dissonance that clearly sends talent searching for something employees can take pride in.  Do your employees take pride in the work of your firm?  If they don’t then it is time to look at your organization’s culture and its mission carefully.

Assessing Organizational Culture

So where does a leader start in evaluating the culture of their organization?

Artifacts and creations – how do people dress, what art is in the building, how is the building structured and decorated?  These are clues not conclusions.  This is the constructed physical and social environment, written and spoken language and overt behavior of members.  Determine whether a change has occurred and how the change impacted the organization.

A friend of mine, the president of an organization, once redesigned the corporate office space by moving his office from the seventh floor to the third floor with all the divisional offices and consolidated the second and third floors to house the entire corporate structure so he could actually walk around and talk with his team.  He told that his initial move prior to the total remodel was to move his office from the seventh to the third floor.

The day after he completed his move he returned to find his office vacated.  He asked what happened to his office.  It was moved back over night to the seventh floor.  The board did not want to flatten the organization.  My friend created cultural dissonance by moving opposite the culture with the intention of changing the culture.  My friend succeeded in the remodel project. He won the approval of his senior management team.  However the board ultimately removed him. The board hired someone whose values mirrored a more hierarchical approach to organizational culture. Had my friend been more observant he would have paced the change he attempted differently.

Reevaluate the espoused values – what ought to be; the non-negotiable of the organization.  Determine whether the actual values imbedded in decisions reflect the espoused values.  Pay special attention to episodic events of inconsistency i.e., periods when espoused values are forgotten or ignored in decisions.  This usually occurs in crisis.  Pay attention to what triggers the abandonment of espoused values and ask two questions.  First what was the trigger and does this trigger represent a toxic starting point?  Will behavior that seems to be the exception actually become the rule and result in a toxic culture that may undermine the long-term support of the firm’s discrete activities thus eroding its value making potential?

Second, ask whether the espoused value is sufficient for the organization?  One organization I worked in espoused “family values” which was interpreted as willing to pay for health insurance, provide extended leave in extenuating circumstances and overlooking poor performance if a family problem could be identified as the cause.  The dissonance that occurred in this privately held organization was that poor performers were viewed recipients of financial reward at the expense of those top performers.  In a debate among the executive team this dissonance came to the surface. The dissonance was never really addressed.  The result, a new set of isolated activities emerged as managers worked around the dissonance at the cost of the firm’s profitability.  The solution would not be to cut the “family value” but to define it more clearly in light of the other driving values of the firm.  In this case the executive team failed to address an insufficient value and thus contributed to the emergence of a toxic reaction.

Review the firm’s basic assumptions. Assumptions are perceptions taken for granted and therefore happen all the time in the cultural unit.  These assumptions affect five areas:

  1. Humanity’s relationship to nature – whether the perceived total environment can be controlled or must be harmonized or people are subjugate to nature.
  2. Nature of Reality, Time and space – what is real and how one discovers what is real. Event or time oriented.
  3. The nature of humanness – what it means to be human and inhuman in behavior.  Helps determine who fits and who does not
  4. The nature of human activity – whether humans can be perfected or you can’t influence behavior at all – fate.
  5. The nature of relationship – what is the proper way to relate to each other?

It may first appear that reviewing assumptions has no bearing on what the organization does to generate value.  However assumptions are the crux of managerial decisions from the line to the C Suite. If the organizational culture is in the throes of dissonance assessing the firm’s assumption’s can often bring the root of the problem to light.

Conclusion

The power of understanding and deliberately framing corporate culture rests in the fact that corporate culture can serve as the non-verbal accelerator of corporate efficiency and resilience.  The down side of a culture’s adaptability is that it can devolve into toxicity as it mirrors the behaviors of its executives and managers in the market place.

When corporate culture is effectively evaluated and monitored it provides one of the most power tools to maintaining the discrete actions of the firm and is essential is to identifying and bridging the threat of isolated actions.

Finally, by reviewing the firm’s artifacts and creations, espoused values and basic assumptions leaders can decide the health of the culture they manage relative to the firm’s value creation and talent retention activities.

[1]  Clifford Geertz. Available Light (Princeton,NJ: Princeton University Press, 2000), 4-5.

[2] Greg Smith, “Why I am Leaving Goldman Sachs” Source: http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html; accessed 14 Mar 2012.

[3] Marc Levine, “Attack on Goldman Sachs Misfires” Source: http://www.cnn.com/2012/03/14/opinion/levine-goldman-sachs/index.html?npt=NP1; accessed 14 Mar 2012.

[4] Jennifer Liberto, “Volcker: Goldman Turning Away from Clients” Source: http://money.cnn.com/2012/03/14/markets/goldman-volcker/?npt=NP1; accessed 14 March 2012.

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The Betrayal Part 3: Building Trust Not Toxicity in Leadership

The Challenge of Lost Trust
In the first and second installment of this series I looked at what makes trusted friends turn into fatal enemies in business.  When trust dissipates into posturing and the emergence of win/loose competition or attempts to annihilate a foe the result is a toxic impasse. In my example I cited the situation in which an owner became his own worst enemy – his quest for power, prestige and privilege divorced from the responsibility, discipline and trust needed to sustain his quest ended in the demise of his business and the blatant quest of his partner to put him out of business.

There is no single issue at work in the demise of interpersonal relationships. Personal histories show up in the stressors of a startup business with wildly different sets of assumptions.  Yet in the growth of any organization (for profit or non-profit) a tipping point exists that predicts stressors in the relationship among leaders and one of two outcomes: (1) leadership divorce or (2) leadership conflict toward discovery.

Predictable Tension Points

Dynamic organizations grow as a result of the driving vision of an entrepreneurial founder and reach a point at which the founder can no longer keep up with the multiple demands of the organization.  At this crossroad the owner or founder (remember this stage of organizational development occurs in non-profit and for profit organizations) realizes that he/she needs help.

The organization must develop its own identity and processes that move the vision and mission of the Founder forward beyond the skills and abilities of the founder.  One of my favorite organizational theorist calls this the need for organizational versus personal sovereignty.

Organizational sovereignty is an essential building block to the development of great internal structures and processes.  Leaders need to understand the logic behind the development of processes and rules that make sure consistent quality and accountability in the performance of the core competencies of a company or organization as it pursues the vision that birthed it in the first place.

Vision First

In my view organizations won’t die for lack of core competencies per se. I have been a part of growing organizations that suffered for lack of competence but survived because their vision temporarily moved them past the restrictions of incompetence.  This is not to say that the lack of competence in leadership has no eventual adverse or destructive impact.  When an organization possesses a vision for a different reality, and that the vision permeates every aspect of the organization it can weather periods of slowed momentum regardless of incomplete competencies.

However, when an owner/founder recognizes the need for new management talent yet consistently usurps their input once hired the talent will disengage. If this occurs the organization reverts to a earlier stage of development or begins a death cycle.  Owners or founders who find their organizations repeating the same growth and loss patterns should look in the mirror.

Conceptualizing the Tension Points – Organizational Sovereignty

The challenge an owner/founder faces is how to alter his or her perspective on leadership to proactively engage in the development of leadership at every level of their organization – this sounds simple until the owner realizes that developing leadership means redefining control. Two classic mistakes occur.

On the one hand the cost of talent leads an owner to reject the right talent in favor of the almost right talent.  The results of a bad hire are obvious almost immediately multiplying the owner/founder’s worries and work than streamlining both.

Similarly owners who hire the right talent, delegate the right decisions then panic and revert to withdrawing control also face the likelihood that (a) their talent will leave or (b) they will fire their new managers because they don’t know how to redefine the locus of control from themselves to the organization.  The result is disastrous.

If the organization is to thrive then it must successfully carry out a different approach to authority.  Adizes (1988) makes this observation:

The move to Adolescence requires delegation of authority.  In a society this is analogous to making the move from an absolute monarchy to a constitutional monarch where the king is willing to abide by a constitution.  The Founder must be willing to say, “I am willing to subject myself to the company rather than have the company subject to me.  I will be bound by the same policies that bind everyone else.”[1]

The illustration of a constitutional monarchy is an important one. In a privately held company the owner does bear the bulk of the risk in the early days.  Typically it is the owner’s house, savings, or equity that is on the line when it comes to the financial performance of the organization.  It is this risk that causes owners to jerk back on the reigns of delegation to override organizational sovereignty.  History demonstrates that any monarch’s attempt to reassert absolute control after having set up a constitutional existence is sure to end poorly.

In non-profits the same dynamic works.  It is still the founder’s assets, equity and sweat equity that has built the original organization (e.g., church startups). In this situation a pastor feels all the same sense of threat and fear a business owner does at the prospect of relinquishing control by subjecting themselves to an emerging leadership team of staff and governance members. The question remains – will the pastor abide by the same policies that bind everyone else?

The move toward organizational sovereignty is a screening time — “…it separates those organizations which will advance and flourish from those which will flounder.  It separates those organizations that have self-discipline and those that don’t.”[2] To become a great organization requires self-discipline to control urges and short-term temptations.  Organizational self-discipline keeps its focus on the long-term while simultaneously turning its attention to its internal controls and processes with the goal of doing fewer things better as defined by its core vision and core competencies.[3]

The transition even when done well is not instantaneous.  Adizes (1988) observed:

…management can spend a year defining the organization chart, determining its corporate mission (not only deciding what else its going to do but also deciding what it’s not going to do), developing training programs, salary administration systems, and incentive systems.  If this is done proactively, the reorganization can avoid the emergence of future problems such as lack of salary administration, lack of clarity in the organizational structure and hiring tomorrow, people who were needed yesterday.[4]

Does it take a year to carry out this kind of structuring?  Yes, my experience has been that organizations that need to define the systems of organizational sovereignty have already begun to experience the dissipation of their energy and resources by trying to be all things to all people – their leaders have already experienced mixed messages and bungee cord delegation that usually signals that the top decision maker or makers are overtaxed and not sure what the next steps should be.

What are the primary components involved in building organizational sovereignty?

1) Appropriately delegating authority (this is where defining organizational structure, determining mission and reviewing personnel occur).

2) Creating policies that consistently apply to all (this is where developing training programs, salary administration systems and hiring the right people occur).

3)  Creating a learning environment and the systems needed to help transform experience into knowledge.

Delegated Authority and Roles of Management

The definition of delegated authority depends on understanding the roles of management or leadership.  Managers or leaders must consistently solve problems and make decisions. Management defined here is the act, manner or practice of directing, supervising and controlling. Be careful to avoid mis-matching the adjectives in the definition to the wrong referent.  Management directs strategies and responses to market pressures and opportunities.  Management supervises the work of others offering mentoring, feedback and support.  Management controls processes and expenditures. Controls make sure the efficient use of resources produce a profit or execute a mission while retaining enough cash reserves.

If the activities and the referents (measurements or results) are confused, such as a manager may attempt to control people and not processes or expenditures then relationships turn dysfunctional and damage the morale and productivity of the company and set up the loss of trust that eventually leads to betrayal.  Management activities either undermine or reinforce the ownership of tasks in a department by the leadership skills employed.  In other words management either reinforces or undermines organizational sovereignty leading to an organization that is smart, responsible and agile or an organization that is stupid, irresponsible and impulsive. Management techniques characterized in Table 1 illustrate the difference in approach and outcome management activities and referents can have.

Table 1: Management Techniques

How can Owners Successfully Navigate the Change to Organizational Sovereignty?

In watching owners wrestle with the issue of organizational sovereignty I have several suggestions to offer:

Look for feedback from the right people.  Many owners suffer from self-inflicted injury by ignorance. Business schools, owner networking groups, consultants and successful entrepreneurs (who have already made the jump from personal to organizational sovereignty) offer a wealth of experience and insight.  There is an old adage that carries a lot of truth – if you hang around with turkeys you will never fly with eagles.    Some owners/founders find solace in those who are at the same level of development but that solace blinds them to the realities they should address.

Practice self-awareness. Stress and fear always distort a person’s most successful behavioral patterns. I have watched owners eviscerate their key talent with one of two common results.  In the best case talent that is consistently undermined leaves the company as a result.  This is best because it offers and immediate wake up call. In the worst case the talent stays but unplugs.  Demoralized talent looses its commitment and engagement with the critical issues.  Instead a survival mode results that resembles a brain-dead body animated with life support technology.  If the tension remains talent will work to sabotage all attempts to change the status quo (i.e., survival). Lipman-Blumen (2005) offers an important insight; “followers knowingly tolerate, seldom unseat, often prefer, and sometimes even create toxic leaders.”[5]  Why does this dynamic occur? Lipman-Blumen (2005) suggests that such behavior is motivated by six human needs:

Need for reassuring authority figures to fill our parent’s shoes

Need for security and certainty – which prompts us to surrender freedom

Need to feel chosen or special

Need for membership in the human community

Fear of ostracism, isolation and social death

Fear of personal powerlessness to challenge a bad leader

It is difficult to hear how others experience one’s behaviors. But if you will listen your business and your personal life will improve.  Find a coach. A good coach can help you identify the stress points in your behavior that tip the scales from creativity to chaos.

Realize that running a business is not being a technician.  Often people strike out on their own because they want to focus on what they love doing…if this is the goal the last place to be is a business owner unless you work out of your garage and make the kind of money that never requires the purchase of equipment, assets or hiring of employees.  If you dream of being a business success then you must learn to (a) run a business and find others who do the technical work or (b) hire someone to run the business while you run the R & D or the shop etc., while you learn how to read financials and balance sheets and check policies to make sure that the core values you set out to live by are invested in the daily operation of the company.  Assume a learning posture. The moment you stop learning is the moment you start your own demise in business.

Summary

The loss of trust is a contributor to organizational demise.  In young organizations the founder is often the biggest culprit in undermining trust because he or she does not understand the need for organizational sovereignty.  Organizations experience common developmental life cycles and predictable tensions.  The smart leader anticipates known tension points and learns how to navigate them successfully. The critical decision point young organizations face is the need to formalize structures away from the founder in a move toward organizational sovereignty.  If the founder fails to learn the power of delegation the odds for creating a toxic organization exponentially increase. Toxic organizations tend to be self-perpetuating because the creation of toxic leaders often helps people meet psychological needs. Diagnosing the existence of good delegation is possible by looking that the management techniques typically employed to decide if management behavior contributes to or undermines organizational sovereignty (Table 1). Organizational success or demise is not set in stone. Leaders, founders, owners committed to learning and open to input have the best possible chance of success.

What kind of organizational culture will you build or support?

[1] Ichak Adizes. Corporate Life Cycles (Englewood Cliffs, NJ: Prentice Hall, 1988), 46.

[2] Adizes 1988:193

[3] Adizes suggests that a company needs to move from a sales driven organization to a market driven organization.  The same concept is fundamental to the success of high-tech companies that attempt to jump from its sales to early adapters to securing a segment of the mainstream market.  It is Geoffrey Moore’s contention that the failure to capture a market segment from which to anchor this leap to the mainstream market is root of a company’s ultimate demise.  See, Crossing the Chasm, (New York,NY: Harper Collins Publishers, 2002), 68.  Translated into the context of the non-profit organization this means that a disciplined action must occur that defines the primary focus of the organization and achieves success at rooting into its niche prior to expanding its base to related areas.  In other words it must integrate its core values and driving vision into all aspects of its structure in a way that helps its leaders and workers know when it is time to say “no” to demanding opportunity to focus on how it answers to its primary purpose in a consistent and effective way.

[4] Adizes 1988:197

[5] Jean Lipman-Blumen. The Allure of Toxic Leaders: Why We Follow Destructive Bosses and Corrupt Politicians – and How We can Survive Them (New York, NY: Oxford University Press, 2005), 5.

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The Betrayal: What Leads to the Toxic Quest for Revenge? Part 2

What happened?
What makes trusted friends turn into fatal enemies in business?  There is no single issue at work in the demise of interpersonal relationships. Personal histories show up in the stresses of a start-up business with wildly different sets of assumptions.  Yet there are three variations I have seen in how stresses impact work relationships.  The first and most extreme is the toxic impasse.  The second and more common is the abnormal divorce.  The third and most constructive is the normal conflict toward discovery.  In this installment I will explore the toxic impasse.

I introduced the toxic impasse in part 1 of this series.  The surprising intensity of venom I saw in my replacement in the software company had a history.  The impact of the 9/11 attacks on our sales pipeline was survivable.  My replacement possessed the right credentials and experience to help the owner endure the temporary loss of revenue by restructuring the organization’s functions and debt. So, where did the relationship between these two friends derail?

The First Encounter

Brian had brought the employment paperwork to my second interview.  Both interviews occurred offsite so I never saw the offices prior to my first assignment – a trade show.  Brian gave me tickets for a flight to Orlando were I was to attend was a hospitality trade show.  There I would not only meet the rest of the turn around team but also meet the owner.

I arrived late in the afternoon and caught a taxi to the hotel.  I called Brian to announce my arrival and he asked me to meet the team and the owner for an early breakfast the next day.  I spent the night reviewing the features and technical detail of our software and familiarizing myself with the operational challenges of hotels.

The next morning I met the team.  I fielded questions from the owner with enough familiarity with his product to make a decent first impression.  We left breakfast for the trade show to see the booth the owner had hired workers to erect.  No one on the turn around team had seen the booth before.  If you have not been to a hospitality trade show what I am about to describe loses its impact.   Hospitality trade shows are like attending a Vegas variety show. They are loud, glitzy, and sexy. The graphics were impressive. The light shows were amazing and the multi-media were exhilarating.  We turned the corner to see our booth at the end of the aisle…in fact I did not see it at first because it was so nondescript.  Once the owner had focused our eyes on the booth I blurted out, “well, it won’t take much to raise the bar on this company!”

As soon as the words left my mouth I figured my job was over and my return flight would be a networking opportunity to find new work.  The owner however, turned, looked me in the eye and said, “Brian, I guess you hired the right team.”   We were off to a less than auspicious start.

The booth contained one computer to show the software.  I had no brochures.  I found business cards that looked designed circa 1950. Brian barked at Laura to go gather competitor intelligence.  He turned to the owner and said, “You did set up the meetings with the flags this morning right?” The owner answered yes.  Brian then turned to me and said, “work the booth, here is a technical manual – see if we can sell this software.” They all left.

I never saw any of the team again except Laura who dropped off competitor information, “hide this and bring it back to the room with you tonight,” she said then disappeared down another aisle.  The day was especially grueling.  Talking with technical buyers about software I had never used and only vaguely understood meant that I had to bypass questions and gather leads.  I was exhausted.  Brian had set up the next morning’s breakfast as a debriefing and strategy session for day two so I did not need to talk to any of the team that night.  I just wanted to get some sleep.  I went to my room and found my key card did not work.  The front desk told me the credit card used to reserve my room was over its limit. It took several calls to Brian’s room and conversations with the front desk to get back into my room.

I arrived at the debriefing meeting early to bend Brian’s ear.  “I thought you said this company was well capitalized,” I shot at him the moment we sat down.  “Was yesterday’s circus an indication that this ship has already sunk?”  Brian assured me the company was fine.  “Have you seen the financials?” I asked.

“Not yet, I just completed negotiating our salaries and the turnaround plan days before this show.”

My mouth was now hanging open.

“We’re fine, Ray.” Brian said then pointed with his eyes to the door where the owner had entered the room.

 The Second Impression

We flew back to Southern California after the show on a red-eye flight from Orlando.  Brian wanted to meet first thing the next morning to discuss what we needed to do to position the brand, reorganize the structure and slam through the database to start generating sales.

I arrived before sunrise at the offices the next day.  I could not help but notice the cobwebs that bedecked the main entrance.  I entered the lobby. A receptionist barely glanced up from her computer screen to acknowledge me.   I introduced myself and as I did the receptionist’s demeanor shifted from cranky to surly. “Oh” her voice now had an icy distance to it, “you are one of the new team.  Brian is in the upstairs conference room.”

“Thanks,” I said – I felt that sinking feeling I had felt in Orlando at the trade show.  I walked across the office space passed the skeletal remains of a once flourishing company.  The empty cubicles and closed off office space reminded me of dead ocean reef like those that show up on National Geographic specials – stark, empty shells.

“Geez Brian,” I said entering the conference room, “what happened to the receptionist?”

“She’s gone today,” Brian retorted.  “Let’s get to work.”

Laura walked in from the break room with the day’s mail in hand and we started the meeting.

In the months that followed we discovered:

  1. Women on the payroll who had no clear job function in the company.
  2. The financials revealed that the company was leveraged beyond its value – in private loans from the owner’s wife.
  3. Many of our largest customers were in the beginning of legal action against us.
  4. A growing number of significant clients were replacing our software with our competitor’s software.
  5. All but one of our developers (the only male) walked out one day complaining of sexual harassment.
  6. Our customer service manager (a female) was also the keeper of company gossip – which she used to secure her place as a manager and stay protected from termination for incompetence.

I dug around the files and storerooms for something that would give me an sign of what had transpired – my anthropological and ethnographic classes at work. I found that the owner had been a radical innovator in the industry.  He introduced the first commercially viable property management software, but he had not kept up with the technology.  Early successes and enormous revenue from the first sales had given the owner a false sense of security and success.  He lacked the discipline to follow through; he made a series of disastrous mistakes and asked his friend Bob (my replacement) to clean up the results.

Over time Bob restructured the company to protect the assets of the owner’s wife and to provide a profitable division he could manage without interference.  Hence the day I met Bob (to orient him on our operations) was the day Bob had anticipated and planned for years.

Toxic Leaders

The owner had become a toxic leader.  Toxic leaders are persons who, “…first charm but then manipulate, mistreat, undermine, and ultimately leave their followers worse off than they found them.”[1]  The owner was a smooth talking and very charming person.  I watched him in sales meetings with potential clients make promises that I knew we would never be able to keep – we simply did not have the programming budget.  I was seeing the impact of a toxic leader.

How do toxic leaders gain their power?  The fact is that followers often knowingly, “…tolerate, seldom unseat, frequently prefer, and sometimes even create toxic leaders.”[2]  Even good leaders have the seeds of toxicity – humans are inherently frail.  Toxic leaders exhibit observable behaviors such as:[3]

  • Violating basic standards of human rights
  • Consciously feeding their followers illusions that enhance the leader’s power and impair the follower’s capacity to act independently (e.g., persuading followers that they are the only one who can save them or the organization)
  • Playing to the basest fears and needs of followers
  • Stifling constructive criticism and teaching supporters to follow and not question the leader’s judgment and actions
  • Misleading followers through deliberate untruths and misdiagnosis of issues and problems
  • Subverting those structures and processes of the system intended to generate truth, justice, and excellence and engaging in unethical, illegal and criminal acts
  • Building totalitarian or narrowly dynastic regimes, including subverting the legal processes for selecting and supporting new leaders
  • Failing to nurture other leaders, including their own successors
  • Maliciously setting constituents against one another (in my observation this may not be malicious at first but manipulative – either way the damage is extensive)
  • Treating their own followers well, but persuading them to hate and/or destroy others (I have seen this occur between departments such as where one VP instructs his direct reports to undermine the efforts of another VP’s department)
  • Identifying scapegoats and inciting others to castigate them
  • Structuring the costs of overthrowing them as a trigger for the downfall of the system they lead, thus further endangering followers and non-followers alike
  • Ignoring or promoting incompetence, cronyism, and corruption

What is behind the behavior of toxic leaders?  Insatiable ambition, enormous egos, arrogance and lack of integrity all feed the reckless disregard for the consequences of their actions on others.  The more I learned about the company the more I realized the owner was a toxic leader – and the people in the company had allowed him to stay toxic – perhaps even needed him to be toxic for their own needs.

That day in my office I heard Bob’s version of Operation Valkyrie (the failed attempt by German military officers to assassinate Hitler in World War II). Bob was set on figuratively assassinating the owner.

The End Game

Toxic leaders stay in power because they are allowed to stay, perhaps even needed to remain in power by those who follow them.  Follower needs for safety, security, self-esteem affirmation, love, belonging, aesthetics, self-actualization, purpose and transcendence all factor into beliefs or myths that inform and calcify our behaviors. We see what we want to see.  In the extreme people wonder how so many Germans could be duped by the evil foisted upon them by Hitler…yet toxic leaders remain unchallenged for a variety of reasons in public, private and religious organizations today all around the globe.

Something about the owner’s last attempt to subvert his existing team by bringing in Brian’s turn around team had caused Bob to snap, to respond not with a healthy challenge but a toxic challenge of his own. Since my last meeting with Bob I have seen the pattern repeat itself again and again.  Toxic leaders charm and manipulate.  Toxic followers ignore the abuse for the promise of some need being fulfilled by the leader.  So what strategies are available to followers?  Followers are not passive victims; they are passive or active contributors to toxicity by leaders.   There are several actions an individual can take.

Counsel the toxic leader, help that leader improve.  This requires honest feedback and a level of vulnerability.  Many leaders express the need for feedback and personal insight (even if they resist it simultaneously). In fact the higher a leader moves up in organizational hierarchy the less likely it is that they will find honest feedback…why?  Followers need the leader to provide certain needs.  Evaluate your own needs, use self-awareness.  What do you need from the leader you consider toxic?  Is this leader the only way to meet this need?  Is the price worth it to you…or to them as a person?

Quietly work to undermine the leader.  This choice is a difficult one because it opens the temptation to become toxic to address toxicity.  This strategy can work if the toxicity of the leader has surpassed what the organization typically endures or you can form an alliance with people who have the organization power to withstand the backlash that may result.  A friend of mine once tried to have a toxic leader quietly removed from their role.  He built an alliance of those in the company who also recognized the negative impact this leader was greater than any benefit he brought to the company.  What they failed to calculate was the needs of the owner in this privately held company.  The owner needed the toxic leader because he had quadrupled revenue through engineered processes.  Losing the toxic leader threatened the income of the owner…my friend was eventually forced out of the company.

Join with others to confront the leader. There are internal politics to consider.  I once formed an alliance to address a toxic leader only to have the alliance blow up on my face as my “friends” denied their role in the alliance and sacrificed me to meet their own needs.  They hated the toxic leader…but that leader provided the security, belonging and esteem they needed and were afraid of losing.

Leave.  There are toxic environments that will not change…they meet or promise to meet needs the followers desperately want.  The only choice in this instance is to leave.  As one who once made this choice, and left a 25 year career behind to start all over in an entirely different field, I can tell you this is not easy.  However, if my own experience is any indication it is far better than staying in a toxic environment.  I have, even as a novice in my new career experienced far more of the type of work I wanted to do since I left than I ever had the opportunity to engage by staying.  Why did I stay so long?  Because the toxic leader dangled the promise of meeting my own needs in front of me repeatedly.  I needed the toxic leader until I discovered that what I needed had nothing to do with that leader or organization.

What if toxicity does not quite describe the challenges you face?  Organizations face predictable points of conflict (that may open the way to toxicity) at various points in their own development.  By anticipating the development life-cycle of the organization it is possible to predict points of conflict and design strategies to discuss this conflict. In Part 3 I explore ways to diagnose and address some of the more common sources of conflict organizations meet.  The challenge for all of us as leaders and followers is to honestly face the reality that toxic behavior is often motivated by valid needs clothed in the fear of loss.  Two questions help me reconsider my own behavior as a leader: (1) what am I willing to pay emotionally and relationally to meet this need; (2) have I been honest about my need and am I looking in the right place to meet it?

[1] Jean Lipman-Blumen. The Allure of Toxic Leaders: Why We Follow Destructive Bosses and Corrupt Politicians – and How We Can Survive Them (New York, NY: Oxford University Press, 2005), 3.

[2] Ibid 5

[3] Ibid 19-20

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The Betrayal: When Broken Trust Turns Toxic Part 1

Surprising Venom
“Look Ray,” he said, “I know you have your stuff together.  Sit here, gather your consulting fee and look for another job while you do. This is not about you.  This guy does not deserve to be in business.  I am going to take him down, take what cash I can and move to the job I already have lined up.”

These are the last words I heard upon exiting my first job after graduate school.  How in the world had this company come to such a venomous end?  The guy speaking was a man the owner trusted completely.  Upon receiving news that I would  be let go in the downsizing after the 9/11 attack on the World Trade Center I was told that based on performance I was a good choice.  However, the owner preferred to bring his longtime friend and director of the manufacturing division in to restructure the company to survive the hit we had taken in our cash flow as a result of a vanishing sales pipeline.

How did I get here?  Why was this guy so filled with poison toward this owner?  Why was the owner so clueless?

 The Back Story

I completed a master’s degree in intercultural studies with an emphasis on organizational development and leadership development.   I became more and more enamored with the subject of organizational design and leadership development. I knew I wanted to take this new knowledge into business and work to improve personal and organizational performance.   I did not know how to make the transition from directing and leading in the religious non-profit world to the business world.  I knew two things, I had something very valuable to offer and a lot to learn (the curse of graduate education is that it provides new knowledge and in so doing also catalogues every students ignorance).

I alerted several mentors and close friends that I was not interested in another non-profit role but wanted to enter the business world to test the wings of my newly acquired expertise.   Brian, a friend of mine (a recently minted MBA on his second post-graduate role) asked me to join his turn around team.  I remember his pitch.  The company he was hired to lead had a pioneering software product for managing the front desk operations of hotel and other hospitality property.  The company had developed and protected an innovation the big guys had not yet thought of.  The company was strongly capitalized.  The owner had made a poor hiring decision and was ready to listen to business/organizational talent that could structure and propel his innovation forward.  The owner would back away from daily operations and give Brian and his team the opportunity to lead forward. Brian recruited me to serve as director of operations, another experienced friend to lead sales.  We rebranded, reorganized, restructured our way through the first three months and began to see the promise of building sales momentum.

I went to work understanding the operational functions of programming, customer service, human resources, and sales.  I mapped a new organic organizational structure designed to leverage Brian’s business plan forward and began recruiting and retraining across all departments.   Lora went to work restructuring the sales department.  She worked through our database like a lioness stalking a herd of gazelle. Brian went to work rebranding the company and analyzing financials.  These were heady days. We were succeeding in turning things around.  The owner was happy, our customers were either happy or becoming happier and our innovation was protected and winning us sales from our bigger and more established competitors.

I was on the freeway traveling to the office in Anaheim, California before sunlight on the morning of 9/11 and heard the news of the first plan hitting the tower of the World Trade Center.  I drove to work glued to the radio and stunned at what I was hearing.  When I walked into the office instead of seeing the sales team on the phones to our Caribbean and east coast customers they were in the lunch room standing around a television set watching the horrifying drama unfold.  Before the day was even over potential customers started calling to cancel their orders for our software.  In the first 48 hours following 9/11 we lost our entire sales pipeline and began analyzing how long we could keep the doors open without any sales revenue.

The End – The Enigma of Human Relations

What a contrast to my first meeting with Brian. My last meeting with the owner ten months later was a dirge. “Ray,” the owner announced “I would like you to orient Bob (the director of operations at the company’s manufacturing division) on operations in the software division.  Bob will take over operations of both divisions as we merge to survive this set back.  I have known Bob for a long time and his law degree and experience are just what I think we need to survive.  If there were any way financially I could keep you and your skills I would but without sales we are going into a hole at an unrecoverable rate.”

We negotiated a consulting role that would last for two weeks.  I would have two weeks to find something new and turn over the reins of the software division.

I showed up to the office on my first day as an ex-employee turned consultant.  When Bob walked into my office and described in detail how he was going to destroy the owner financially and why.

What happened?

If you have insights into this catastrophic dynamic write your comments here.  Over the next several weeks I intend to write on how business relationships disintegrate to the point that trusted friends turn into fatal enemies.  The subject of betrayal and situations leading to betrayal are not new nor are they simply the fodder of English literature classes studying Julius Caesar.  Do strategies exist that help owners and managers avoid this collapse of trust? What are your insights?  Have you experienced a similar collapse of relationship?  Have you seen it?  Have you studied it?