Leading in Turbulent Times

by Gary E Hayes and Kevin Kelly
Berrett-Koehler Publishers February 2010

  • Shows what every leader must do to cope with perpetual change--the key characteristic of twenty-first century business

  • Provides unrivalled access to the best managed boardrooms in the world through unique interviews with some of today's most resilient and innovative leaders

  • Combines inspirational anecdotes and case studies with solid, practical advice

Turbulent times are here to stay. The global recession is today's current dramatic headline, but accelerating change and economic uncertainty are the hallmarks of twenty-first century business. Signs like the volatility of commodity prices and fluctuations in currencies are all part of a broader weather system affecting business everywhere. These powerful forces for change are the corporate equivalent of headwinds, something which must be faced and navigated by all leaders and those they lead. The challenge of the next few years is learning to maneuver confidentially in perpetual turbulence.
So what should you do as a leader to keep your business on course? Kevin Kelly and Gary Hayes have interviewed frontline leaders with proven track records for adapting to rapid change and helping their companies thrive. In Leading in Turbulent Times these extraordinary executives--from such successful international companies as McDonald's, General Electric, Nissan, Coca-Cola, Kaiser Permanents, Marks & Spencer and more--share how they have confronted the challenges every leader must now face.

You'll discover how to recognize the early signs of rough seas ahead and mobilize and inspire your people to respond. Kelly and Hayes explain what top leaders do to chart new strategies that build on existing strengths and, when necessary, change direction quickly and decisively. But a different course is not always welcomed by everyone, so Leading in Turbulent Times offers advice on putting down mutinies in ways that acknowledge legitimate concerns without distracting or alienating loyal crewmembers. And they focus on how to cope with the personal stress that comes with guiding your organization and your people through the turmoil.

Leading in Turbulent Times shows how you can use change to your advantage, at a time when everyone else is being blown off course.

The Enron Cult: 'Groupthink' caused everyone associated with Enron to contribute to its downfall

by Roger Brunswick, MD
and Gary E. Hayes, PhD
Hayes, Brunswick & Partners

Ken Lay understandably is among the least admired individuals in America today. Enron Corp.'s former chief executive officer allegedly oversaw one of the biggest accounting scams in corporate history, the full repercussions of which are still unknown as each day seems to bring a new twist to the horrific scandal.

Yet, it would be somewhat comforting if it turns out that Lay conceived and executed the scandal knowing in advance the repercussions of his actions, much like Frank Gruttadauria, the Cleveland stockbroker who allegedly bilked old ladies and other clients out of millions of dollars by doctoring their account statements. Gruttadauria reportedly displayed all the signs of a classic sociopath, including beguiling charm and feigned empathy for his victims. He apparently acted alone and mysteriously disappeared before his scheme was discovered, the telltale signs of a classic scam. How neat and simple it would be to similarly lay Enron's demise at the feet of one person.

But Lay did not act alone -- and that may very well be one of the most disturbing elements of the Enron debacle. He had the enthusiastic support of a venerable cast of characters, including some high-priced lawyers, accountants, investment bankers and management consultants. Did Lay systematically entwine his advisers into a preconceived web of deception? Highly unlikely. Indeed, it's becoming increasingly clear that financial legerdemain was not unique to Enron; several other companies disclosed this week that they are delaying or reconsidering their earnings. In what may be another ominous sign, The Wall Street Journal reported that Moody's Investor Service has quietly sent out letters to more than 4,000 companies the agency rates asking for more information on their "off-balance-sheet financial arrangements."

Given the tragic fallout resulting from Enron's collapse, the cacophony of voices clamoring to bring the scandal's alleged masterminds to justice will no doubt grow louder still in the weeks ahead. But it is naive to think that culpability rests entirely with Lay, his lieutenants, and some wayward lawyers and auditors. The tragedy of Enron is that it was caused by what is known as "groupthink." Truth be told, almost everyone associated with the company contributed in some way to its collapse. The concept of groupthink was identified and coined by Dr. Irving Janis, a professor of psychology at the University of California-Berkeley and at Yale University, to explain the faulty decisions that led to some of our nation's biggest tragedies, including the Bay of Pigs invasion, the escalation of the Vietnam War, the Watergate break-in and the explosion of the Challenger space shuttle. Janis defines groupthink as "a mode of thinking where pressure for unanimity overwhelms the members' motivation to realistically appraise the alternative courses of action. Group pressure leads to carelessness and poor decisions. This eventually results in irrational thinking and action." In the case of the Challenger space shuttle, for example, NASA engineers knew about the dangers of conducting a launch in 36-degree weather but chose to minimize them. The pressures from NASA's top brass not to further delay the historic mission were just too great.

Enron was fertile ground for groupthink to take hold. The company's macho ethos was to feed Wall Street's insatiable appetite for spectacular earnings at all costs. This led to the creation of "killer apps," "new paradigms" and a plethora of esoteric financial instruments that few people even understood. But given Wall Street's unmitigated support for (and vested interest in) the arcane products, it hardly mattered. The regulators nodded. Investors cheered. And the media trumpeted the innovations.

Lay and his management team eventually came to see themselves as true masters of their universe, replete with the inevitable illusion of invulnerability. The company proudly fostered a Darwinian atmosphere, in which employees falling into the lower percentiles of performance were summarily dismissed. In Enron's heyday, it was sheer folly for an employee to question Enron's innovative management practices, and the few that did either voluntarily resigned or were fired. Enron's accountants and lawyers no doubt knew that if they didn't go along and bless the company's activities, management could easily find some other high-priced firms that would. Enron was a cult, and there were no shortage of takers lining up for the company's sucrative Kool-Aid, oblivious that the sweet drink would have a very bitter aftertaste.

Groupthink is an enclosed system of thought, a folie, where those engaged cross the boundary into unreality. Clearly, it leads to defective decision-making, resulting in a low probability of successful outcome. In the end, at Enron, there was a massive failure to examine and appreciate the risks taken, along with a failure of contingency planning. The results speak for themselves. In the wake of Enron, responsible boards of directors should be aggressively investigating whether groupthink is permeating the companies they oversee. A healthy organization fosters a culture whereby employees are both empowered and expected to debate and challenge each other and consider alternative courses of action. A mechanism must be in place where employees can report any perceived irregularities without fear of retribution. It is incumbent on directors to ensure that the information on which they base decisions comes from sources other than the CEO and advisors or consultants that are beholden to the executive. It would be wise to occasionally bring in outside parties to conduct a "reality check."

At the end of the day, Lay was an inspired -- though highly flawed leader -- working in a company that lost its way. The policies and actions that caused Enron's downfall were years in the making. The "horse was out of the barn" and no one, including Lay, could change the adverse course of events once their world began to unravel. It appears that legions of normally thoughtful people crossed the boundary into unreality; they all "drank the Kool-Aid," reinforcing one another's view of reality and entered into a world of their own design and creation. It's likely that the growing pressures, as problems arose, drove Lay and his senior managers further beyond the boundary of accountability, and then deluded themselves further into believing that they could get away with their machinations and schemes.

Unfortunately, we all are victims of their delusion. It will be up to the courts to decide an appropriate punishment for their misguided ways.

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RX for a dysfunctional company: Wake up the board
by Roger Brunswick, MD
and Gary E. Hayes, PhD
Hayes, Brunswick & Partners

The resignation of Mattel's chairman and CEO in February was overdue. In fact, it was apparent long ago to those of us who deal with the human dynamics of top executives at Fortune 500 companies that Jill Barad's leadership was seriously troubled. The warning bells sounded long before Mattel shareholders watched their investments plummet more than 70 percent in value. Unfortunately these signs went unheeded. Any one of them should have triggered a board "intervention" a mandate for the chief executive to get the professional guidance needed to change her ways and reverse the company's rocky course. Moreover, had Mattel's board provided the critical oversight that Ms. Barad clearly needed, the company would now have a management team in place capable of steering the company until a successor is hired. Instead, Mattel is now being run on a part-time basis by two outside directors and is faced with unusual demands from the American Federation of State, County and Municipal Workers that major shareholders be consulted on the choice of a new chief executive. In hindsight, Ms. Barad's three-year tenure as CEO provides a textbook example of the telltale signs of dysfunctional management that is guaranteed to sabotage the best of companies. Here are "leading indicators" of management in free fall.

  • Extensive management turnover: Mattel in recent years sustained a steady stream of management defections, including the recently announced departure of the company's CFO. Executive turnover, of course, is not necessarily an ominous sign; General Electric CEO John F. Welch has "lost" more than his share of top lieutenants over the years. The difference is that Welch's defections are the result of highly talented and well-trained executives leaving to become CEOs of major corporations. Mattel's defections typically were the result of the CEO's volatile interaction style that made open communication virtually impossible. In the end, the very individuals charged with helping her to grow the company and to deliver shareholder value became alienated and left the company. The board's decision (or indecision) to allow Ms. Barad's problematic management style to go unheeded and without consequence, virtually assured that Mattel's ability to attract or retain top-flight executives would be diminished.

  • Performance surprises: Given the CEO's management style, it was hardly surprising that Mattel investors would sustain a steady stream of earnings and other major disappointments such as the stalling of the company's Internet operations in the midst of the crucial holiday season. Ms. Barad did not take any responsibility for these announcements; rather, she blamed her subordinates and fired them. However, we have learned from experience that executives who regularly claim they didn't know in advance of potential problems because subordinates kept them in the dark were, in most instances, directly responsible for their ignorance. They didn't hear because they don't listen.

  • Docile board: Despite Mattel's dramatic erosion of market value, it appears that the company's board until recently was not closely monitoring - let alone seeking to correct - the obvious shortcomings of the CEO's management. We suspect directors relied entirely on information supplied to them by Ms. Barad and merely rubberstamped her decisions. There were no signs that even the most cursory levels of investigation were ever conducted. The deafening cacophony of dissident shareholders was ignored.

    The Mattel experience provides a compelling case for corporate boards to assume an active, hands-on approach towards leadership development and support, oversight that goes well beyond reviewing balance sheets and analyzing marketing projections. An active and responsible board gets its information from multiple sources, including senior and mid-level employees who work on the front lines of a company's business. It gathers its own empirical data to gauge the effectiveness of senior management and ensure the integrity of leadership. Some companies, most notably GE, Chevron, International Paper and the former AlliedSignal, have board committees that address management development and successions issues. An alternative approach is to use impartial outside specialists to gather management development data; however, companies that retain outsiders to do this should require that they be responsible directly to the board, not through the CEO.

    In particular, board members should actively monitor and analyze interpersonal data. They must be on the lookout for signs as to whether a CEO intimidates the senior team to a point that no one will dare tell him or her bad news. Is there a healthy exchange of views and ideas? Has a rivalry between two members of the senior team gone beyond the point of healthy competition to the point that it is hurting the quality of senior management's decision-making? Is information from the trenches reaching the top? Boards should conduct their own exit interviews when a significant number of senior executives or high potential employees leave the organization.

    Not only should the board question the top layer of management about its efforts to develop the next management level, but also it should ask mid-level managers for their views of senior leadership and direction. G. Richard Wagoner, Jr., who takes over as CEO of General Motors in June, is to be applauded for his reported practice of regularly calling rank-and-file employees to get first-hand reports on the state of their areas of business. Presumably, those views are incorporated into Wagoner's operating plans and management assessments.

    Successful corporations are comprised of people who communicate and interact with each other in a constructive way. And CEOs who cannot ensure a healthy human dynamic among their managers are invariably going to fail because at the end of the day it takes a lot more than one person to make a company successful. The people in an organization, and their smooth interaction, are as critical to success as are the development of new products and new markets. To quote Jack Welch on leading GE, "The day we screw up the people thing, this company is over."

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    Preemptive Advice: The Perils of Overseas Postings
    by Roger Brunswick, MD
    and Gary E. Hayes, PhD
    Hayes, Brunswick & Partners

    Up-front discussions can help address potential trouble before it arises, thereby ensuring the success of expatriate assignments.

    Posting executives overseas is an HR challenge fraught with incredible risk. In addition to the logistical and cultural issues that must be addressed, there is an equally important-but decidedly more sensitive-factor to be considered: The emotional and family stability of the executive who is being sent abroad. We have learned from experience that companies that fail to ferret out this critical information before sending their executives packing experience an inordinately higher degree of failed overseas postings.

    The inherent stress of moving to a foreign country often exposes the emotional fault lines in the life of an executive and his or her family. Problems that can be managed, or at least dealt with, while living in the U.S. - a spouse who drinks too much, a problem child, a sick parent - can quickly become major crisis situations when an executive is relocated overseas. Moving abroad usually results in executives losing their typical sources of counsel and support (i.e. friends, family, doctor), and that is why it is imperative that emotional issues and concerns are discussed before the move, so that appropriate actions are taken to avert a potential crisis. As significant as these emotional issues are for the success of an expatriate assignment, it is unrealistic to expect senior executives to reveal their vulnerabilities to an HR executive. Concerns about confidentiality are the primary barrier. As sensitive and as well trained as an HR executive may be, embarrassment and fear of negative career implications act as significant obstacles. If asked about a potential drinking problem in the family, it would simply be denied. Eldercare issues may not be revealed out of fear of compromising the potential overseas assignment.

    That is why an increasing number of Fortune 500 companies are retaining outsiders to manage the emotional and personal aspects of relocating an executive overseas. An outside professional has a decided advantage to accurately bring to the surface potential trouble that may threaten the whole assignment.

    These professionals must have expertise in cross-cultural transitions and, at the same time, be psychologically sophisticated. Prior experience in living and working abroad is a major asset for establishing credibility and ability to empathize with the expatriating family. But even more important, these professionals must establish trust, so that the expatriate and the family know that voicing their concerns and exposing their vulnerabilities will not be made available to the company. And the bedrock of trust is to insure confidentiality.

    The purpose of building such a relationship is twofold-to best prepare for the stresses that lie ahead and to use the professional as a lifeline should problems arise. The goal is to maximize the likelihood of a successful adaptation abroad and to avoid crises.

    Common Concerns

    There are issues that characteristically cause difficulty for an executive and/or his family when moving abroad. The most common emotional issues that most often derail an overseas assignment are:

    • Reluctance or difficulty to reach out to build new relationships;
    • Lack of emotional flexibility to adapt to a new culture;
    • Inability to negotiate cultural differences in problem solving and communication in the workplace;
    • A history of emotional difficulties;
    • Marital tensions;
    • Children's difficulty adjusting to the new environment (school and community);
    • Unresolved eldercare responsibilities at home;
    • Ineffective coping strategies for stress (use of alcohol v. exercise or other hobbies);
    • Overly dependent relationships (either with spouse or with individuals in home country).

    The best predictor of the future is how someone is functioning in the present and how he or she has functioned in the past. To get the best glimpse of the future, and to make an assignment abroad most successful, the relocation professional must learn about the expatriate and/or the family. Or put another way, the professional should obtain a life history. This means setting a stage so that people will speak about themselves, so that one can learn about their lives, both in the present and in the past. In doing so, one learns about a person's emotional repertoire, how they've managed their lives and how they're likely to manage under the stress of the overseas assignment.

    During conversations with the executive and/or the family, the relocation professional is privately referencing the derailers. Does the life story suggest potential difficulties when moving abroad? Will the stress of the cross-cultural experience cause former emotional wounds to resurface? How can these issues be best prepared for and/or managed? Is the spouse someone whose primary relationships are with his or her mother and siblings, with few friends outside the family? How, then, will the spouse fair abroad, away from his or her major support system?

    Discussions must be held and plans made to manage such a situation. Is there a child that has finally made friends at his/her school and now doesn't wish to leave? Is the child unable to talk about the issue with his/her high powered executive parent? An airing of the child's thoughts and feelings can avoid later difficulties.

    Take the following case:

    Susan was asked to go to the UK to head up a team of 12 people for the London office of an American insurance company. Susan's husband had been unemployed for two months since his company had moved its manufacturing facilities abroad. The timing of the assignment was ideal, as he had not yet instituted a job search. Three months into the assignment, Susan's performance was lagging. She often left work early and appeared distracted and irritable.

    What happened to Susan, a highly valued executive?

    Susan's boss, with whom she had developed a close relationship, asked her about her performance. She confided that her husband, who had always enjoyed his beer, had begun drinking seriously, and often returned home at 3 a.m. or 4 a.m., quite inebriated. Their relationship had deteriorated markedly.

    Another example:

    Sergio, a high potential executive from Argentina, was transferred to the USA along with his wife and two children for a two-year assignment. He had traveled often to the USA, and the couple knew many people in the city where they had moved. After seven months, he requested to return to Argentina, stating only that his wife was not happy living away from home.

    What would cause Sergio to leave a great opportunity for career advancement?

    Sergio's wife had very much enjoyed her life in the USA, but as time passed, it became increasingly clear that her mother, who remained in Argentina caring for her ill husband, was becoming increasingly overwhelmed with her responsibilities. Sergio's wife had been a great support for her mother. Sergio's wife came to feel that she could not remain in the U.S., and that she needed to return home to assist her mother. Sergio accompanied his wife home.

    Different Outcome

    Had an outside professional consulted in these cases in advance, a different outcome could have occurred.

    In meeting Susan and her husband, say the outside professional learned that Susan's husband had begun working at his former employer while in high school and that he had risen through the ranks. He was initially dismayed at learning of the company's move but "got used to it," finding consolation in his severance pay. On further questioning, it was learned that he spent his days at home "taking care of things." Susan stated that he hadn't played softball for weeks, something he usually enjoyed. She added that he wasn't seeing his friends as often.

    In setting the right tone to learn about the lives of both Susan and her husband, the relocation professional might have learned that Susan's husband had not adapted well to the loss of his job. Further discussion may have revealed that he had been depressed and discouraged. Bringing this issue to the surface and working with the husband to make meaningful plans while in London could have become crucial in helping the couple make a successful adaptation to the overseas assignment.

    In Sergio's situation, a possible scenario could have been as follows:

    Sergio's wife told the professional that her mother was caring for her ill husband and that no other family lived close by. While she had great misgivings about leaving her mother, she knew that coming to the United States was a great opportunity for her husband. In addition, there had been marital discord, and she wanted "to be a good wife." Upon hearing of his wife's dilemma and concerns, the couple began talking more openly with each other.

    With the newly found cooperation between husband and wife, better plans might have been made to support Sergio's mother-in-law during the overseas assignment.

    A third case illustrates how personal and professional issues are intensified overseas.

    Matt, during his visit with a relocation professional, confided that he had occasional episodes of anxiety that he was able to control by retreating to his office for brief periods to "collect himself." He believed that his method of controlling anxiety would suffice, even though he realized that the initial transition period would be stressful.

    The relocation professional was able to convince him of the need to become better informed about treatment options and coping methods for his condition. No other action was taken at this time, but a trusting relationship was established to which Matt could return if his anxiety worsened. In addition, the relocation specialist did pick up on Matt's worries about his new job, specifically about his concern that he'd not managed others before. At the predeparture meeting, the importance of reaching out to one's new staff early in the course of an expatriate assignment was discussed.

    Upon arriving in Germany, Matt did experience several anxiety attacks. As arranged, he contacted the relocation specialist. A referral was made to a local physician. Through the facilitation of the relocation specialist, Matt also quickly established a relationship with the local HR resource. Working with HR, Matt was able to better understand the concerns of his staff and to initiate improved communications with them. as well. The support offered was instrumental in helping Matt overcome his anxiety and make a successful transition to his new role.

    Having met with the counselor prior to moving overseas, Matt began a relationship with a trusted resource. When problems worsened during his assignment, he was able to access this resource and to obtain confidential assistance and advice before the difficulties escalated into a crisis.

    It is beyond the scope of any corporation's responsibility to become a therapist to its employees. In some instances, it can even be envisioned that psychological or other referral could be made by the relocation specialist.

    When the focus of the relocation specialist is on the emotional issues and concerns that can interfere with the success of an overseas assignment, ultimately the corporation is looking out for itself, protecting its most valuable asset, its human capital. It is protecting its "investment" in an executive being sent abroad. And it is the emotional issues-i.e., the difficulties an employee or an employee's family has in adjusting to an overseas assignment-that most often compromises the assignment and the career of a high potential employee.

    By developing a methodology that addresses these concerns, companies can do much to protect their investment and have better success with their global strategies.

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