Boards Need Truth (Whether They Want It or Not)
Nearly every organization is grappling with huge strategic and organizational challenges on account of the Covid-19 pandemic and now a new consciousness about the potential systemic racism inside corporations. Most of these efforts to transform will fail, but not because of the huge challenges these twin crises represent. They fail, even in ordinary times, because the organization isn’t aligned with senior management’s new direction and senior management doesn’t realize it. To take just two recent examples, employees at both Wells Fargo and Boeing knew that their company was creating great danger for itself (not to mention Boeing’s passengers), but they had no safe or even effective way to wake top management up. CEOs and numerous board members in these companies were forced to resign. If you are a board member, do you want to tolerate that risk to your company and yourself?
There is a way out of this trap, but it calls for the board to encourage—even require—the CEO to lead a companywide honest conversation about the effectiveness of the organization: is it aligned with top management’s direction, and if it is not what are the barriers to alignment and what needs to change? But is such a conversation even possible?
Yes, it is. Decades of research by myself and my colleagues has shown that a structured process we call the Strategic Fitness Process enabled courageous leaders to learn the truth and take action that saved them and their businesses. Its underlying principles (see Exhibit 1) can be applied by purpose-driven CEOs anywhere – leaders who put the larger good of the enterprise ahead of their own comfort or career. Does your CEO?
We also found six underlying deficiencies—the “silent killers”—that are almost always the root causes of failure to carry out a strategic transformation. Like the medical silent killers, hypertension and high cholesterol, these six can proceed undetected until they finally produce drastic or fatal effects. The silent killers are what tends to come out in a companywide honest conversation—because those below senior management are painfully aware of them—but not otherwise.
The Silent Killers
The silent killers typically form a syndrome; that is, they are interrelated and mutually reinforcing. Boards need to know about them and require CEOs to correct them. We found that honest conversations did correct them and led to changes–often dramatic–in trust and effectiveness of the enterprise. What are they?
1. Unclear strategy, conflicting priorities, and unclear values. At Boeing, for example, high engineering standards vs. profits and deadlines.
2. An ineffective senior team. The individuals may be highly effective, but they are not seen as a collaborative and effective team.
3. A leader whose management style is top-down or laissez-faire. Both styles prevent open and constructive dialogue required to come to grips with serious threats.
4. Poor coordination and collaboration between businesses, functions, and/or regions. Many leaders are unaware of how their own leadership style, corporate culture, and management practices undermine coordination and collaboration.
5. Inadequate leadership development. Ineffective senior teams concerned about their own fiefdoms typically fail to develop a companywide talent management system.
6. Organizational silence. When lower levels have no way to speak truth to power, problems fester and eventually explode.
What makes these “killers” deadly is that they prevent CEOs and their organizations from dealing with problems rapidly and effectively. Lower levels may be well aware that they can’t carry out senior management’s strategic objectives due to turf conflicts between units. Unit managers know, too, but don’t want to confess their own ineffectiveness. Top management might know, too, but they don’t want to confess their own ineffectiveness to each other. The board—who bear ultimate responsibility for the organization’s health—may have no idea at all.
Corporate Stewardship Demands Honest Conversations
My research provides empirical evidence that CEOs who require senior managers to lead honest conversations and hold them accountable for acting on their findings, trust, effectiveness and performance improve. Vince Forlenza, CEO of Becton Dickinson (BD), led and had some of his key business unit, regional, and functional leaders lead company- or unit-wide honest conversations. The results gave Forlenza and his senior team the insights they needed to lead a highly successful transformation between 2010 and 2020. Both Forlenza and his predecessor, Ed Ludwig, voluntarily reported what they learned to BD’s board.
Fred Lynch, CEO of Masonite, went one step further. He invited board members to attend a meeting of his top 200 people at which he shared the feedback he had received from a companywide honest conversation and what he planned to change. His board chair told Lynch that the board now understood much better the transformation he was leading and that this level of openness had convinced them that they would never be blindsided.
So why couldn’t boards that aspire to be good stewards of the company’s future work collaboratively with their CEO to make honest conversations about the company’s strengths and barriers to success a norm? What if the CEO—or a candidate CEO—resists or refuses? That tells you he or she lacks some essential leadership characteristics. Effective leaders put the organization ahead of their own interests and comfort. They are secure enough to ask those over whom they have authority for the truth and to respond nondefensively and constructively.
Honesty is the best policy even in corporate life. But it won’t happen by itself.
Exhibit 1:
Principles for Leading Honest, Collective, and Public Conversations That Reveal the Truth
The conversation must be initiated by the senior team.
Focus on the strategic, organizational, and cultural issues that matter most.
Iterate between advocacy and inquiry:
• The senior team advocates where it wants to take the organization and then launches an inquiry into the organization's strengths and its barriers to success.
• In response, the senior team advocates an action plan and then launches an inquiry into the strengths and faults of that plan.
Make it safe to share the whole truth. The process must be structured and guided by rules of engagement to prevent missteps (blaming and defensiveness) that will shut down the conversation.
Reflect on the truth, diagnose root causes of problems, and develop a systemic action plan for change that will realign the organization with the leadership team’s espoused strategy and cultural values. (This is Principle 3, second bullet.)
Make yourself (the leadership team) accountable to lower levels who provided the feedback; that is, be accountable for having listened accurately and for the transformative action actions you plan to take.
Repeat the process periodically. This generates continuous organizational leaning.
How does your corporation compare? Take the Silent Killer Assessment here.