Seeing through the mists

John Keats described autumn as the ‘season of mists and mellow fruitfulness’. Even a casual glance at today’s business world will see more evidence of mists than any mellow fruitfulness.

Last week, GE announced an ‘unacceptable’ set of results following a wholesale change of leadership. To show he is serious in tackling what is seen as bloated corporate costs, the new CEO, John Flannery, has grounded the fleet of corporate jets and cancelled the executive car scheme ahead of a more fundamental shift to be announced in November. One can see more drastic changes coming at what was once seen as a standard bearer for good leadership and tight cost control.

Even the usually reliable UK consumer goods company Reckitt Benckiser has issued its second sales warning of the year, with third quarter revenues declining by 1%, prompting a management shake up. Perhaps the simultaneous departure of four senior executives in September was a clue that something was seriously amiss.

More troubling still is the growing list of corporate malpractice. Kobe Steel and 2 Sisters Food Group were the most recent additions to the regulatory naughty step with the falsification of aluminium and copper product certification and the alleged tampering of ‘use by’ dates on meat bound for supermarkets, respectively. The Kobe Steel case, on the heels of quality scandals at Nissan, Mitsubishi Motors and Toyota, has the potential to cast doubt on the structural integrity of aircraft, cars and nuclear reactors. Gulp.

In addition, PwC and KPMG have been recently fined by regulators for failures in external audits with probes into other firms being announced over the course of the year. KPMG lost the entire management team of its South African subsidiary over their links to the Gupta family, corruption and government influence. This scandal engulfed Bell Pottinger, which called in the administrators earlier this month, and has even tarnished McKinsey’s reputation.

What’s going on?

An absence of doubt

It’s possible to see these events as isolated, with their own drivers and driven by separate events. But we see a connection – an absence of doubt.

Wise leaders, and the boards that supervise them, pay attention to three dynamics that contribute to organisations losing their way and are at play in all of the examples given above:

The first (and most easily spotted) failing is when a business that was once at the top of its industry, with its business product or service riding a wave of innovation and positive market forces, settles into success by stagnating and stopping the innovation that made it successful in the first place. Businesses like this eventually lose their relevance and, by the time the gravity of the situation is finally understood, it’s too late. Examples of this blindness – call it ‘death by complacency’ – abound, with Nokia and Kodak being the most well-known culprits.

The second pitfall comes when the pursuit of growth and profit becomes all-consuming for a company, obscuring the reputational risks and poisonous culture that can be generated if ethics are seen as expendable. Many of the examples given earlier appear to conform to this pressure, with pressure to ‘meet the numbers’ playing a part in corners being cut. National, as well as organisational, culture play a role here, often reinforcing a sense of deference, a preference for conformity and lack of willingness to speak up. If the corporate culture is strong enough, this can occur anywhere – see the difficulties that whistle-blowers have in organisations as diverse as banking and football.

Thirdly, and the most prevalent as well as dangerous, is when a leader’s views stop being questioned. This can happen as a result of their leadership style stifling dissent, past successes leading to a belief that, as a leader, they have all the answers or the hiring of people who either think in similar ways to the leader and/or who are too compliant to speak up.

A leader’s role in creating dissent

To avoid similar corporate mishaps and navigate out of such ‘mists’, it is every leader’s responsibility to create an environment where questioning and dissent is seen as healthy, positive and a demonstration of good leadership.

Only occasionally do we come across a leadership team that questions more than it makes statements. Too often good leadership (which is, at its heart, curious) is substituted for bold statements, expertise and advocacy, creating an environment that stifles debate where the loudest voice wins. Frequently, leaders struggle with the balance between curiosity and openness whilst at the same time providing the organisation with the clarity and direction it seeks.

And if not?

We once read of a general, careful to ensure that his thinking was challenged (even by himself), who kept a note in his pocket that said simply: “and if not?”. At its heart, this simple practice embraces an understanding that no leader has all the answers, that there will always be blind spots and filters in decision-making and that the best leaders are always asking what it is that they do not know, rather than focusing on what they already know.

It’s also worth remembering that Japan’s manufacturing prowess, particularly in the automotive sector, was built on every member of the team having the right (even obligation) to question and improve how things were done and one of McKinsey’s core values is to ‘uphold the obligation to dissent’. These two examples demonstrate how important it is to question continually, not only what the orthodoxies are in an organisation, but also how well you are living up to them. If you don’t, they can quickly drop into the background, carrying the unspoken assumption – often incorrect – that everything is fine.

In meteorological terms, when a mist becomes so thick to reduce visibility below a certain minimum it becomes fog. Let’s hope that sufficient doubt and readiness to question established thinking prevails in enough leadership teams to prevent today’s mist turning into a fog.

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