New Processes

New Processes

Corporate failures are in the news every day, as are CEOs who lose their jobs when their companies’ fortunes decline. General Motors, perhaps the most iconic of these failures, took more than thirty years to die and could only be resurrected after bankruptcy. Many of the great and much-admired companies described in the books Built to Last and Good to Great are no longer high performers; nor have they sustained the cultural values of their founders.1 Hewlett-Packard, a most respected company for its first five decades, is still alive but is no longer the venerated, high-commitment, high-performance company it used to be.

Numerous explanations for corporate failures are offered: poor strategy, ineffective CEO leadership, bad culture, unethical behavior, low morale, rapidly changing technology or industry, wrong structure, poor customer service, and high prices, among others. While such explanations often do apply, they fail to identify the underlying root cause. I hope you have become convinced that the real root of corporate failure in many of its forms is the company’s failure to overcome organizational silence through honest, collective, and public conversation.

Paradoxically, it is silence—the sixth silent killer—that prevents discussion of the five other silent killers that impede development and execution of strategy. Normal human defensiveness makes discussing the silent killers difficult. I hope you are convinced now that a strategic learning and governance process like SFP makes safe and productive discussion of silent killers possible and that it leads to timely and effective organizational transformation to which people are committed. (Transformations to which people are not committed are transformations that aren’t going to transform much.)

Given this evidence, surprisingly few corporate boards of directors, CEOs, or unit executives make a serious attempt to engage their organizations in honest conversations about potential vulnerabilities—the kind that Jim Collins properly warns us about in the opening quote. As a consequence, most leaders forfeit the opportunity seized by the leaders in this book: the opportunity to be good stewards of their organization’s future and investments.

Virtually every type of institution—business, government, nonprofit, and nongovernmental organization—is vulnerable to deterioration in organizational health, and this vulnerability often goes unnoticed. This lack of awareness can be seen as a failure of stewardship. People responsible for protecting an organization’s value and effectiveness are allowing these qualities to be lost. As my experience with Gov. Inc. illustrates, boards can become better stewards of a company’s future when honest conversations become a norm. In that company’s case, organizational silence prevented the board from learning in a timely and systemic way that the CEO’s leadership was undermining the company’s effectiveness.

A board must, of course, review a CEO’s strategy and the projected economic outcomes such as growth in revenues, profits, and return on investment. But if a company is to have the culture and moral purpose (honesty and the will to do the right thing) required for long-term performance and for the sustainable commitment that—as I will show below—most employees desperately want, the board must also review the company’s socioemotional health.3 It is far easier for businesspeople to knowledgeably discuss hard business goals and outcomes than it is to similarly discuss socioemotional problems such as leadership, culture, and unethical or even illegal activities. Yet the latter group of problems can sink a company.

Attention to the system of organizing, managing, and leading was upper most in the mind of David Packard, cofounder and then chairman of Hewlett-Packard. Asked by a journalist about the company’s hottest product at the time—a small handheld engineering calculator—Packard surprised his interviewer by focusing not on the technology but on the careful design of HP’s organization and the culture it created. Packard added that the system had required a “good deal of thought” and attention by senior management. The resulting headline for the article was “Hewlett-Packard Chairman Built Company by Design, Calculator by Chance.”

Unfortunately, Packard did not select and develop a board of directors who shared his view of how important HP’s organization was to its success. The board later chose a CEO—Carly Fiorina—with a conventional top-down management philosophy and style. Lacking a discipline of honest conversation, the board failed to learn (that is, if they even wanted to learn) that her management approach was to liquidate human and cultural assets that had been developed over five decades by the founders.

Like most boards, the boards of Gov. Inc. and HP had not institutionalized a strategic learning and governance process that would regularly reveal a nonbiased evaluation of the three major outcomes essential for long-term success: fitness to perform, fit for trust and commitment, and fitness to learn and adapt. Few boards have valid data about the six silent killers, the deficiencies in the six core leadership and organizational capabilities that make these outcomes possible. Today, more than ever, responsible stewardship by a board requires that it adopt a perspective like Packard’s and that it develop a strategic learning and governance process to prevent its own blindness. This is why I urge boards to require that CEOs enforce a discipline of honest conversation, and I urge CEOs to do the same with their unit leaders. Gov. Inc. and HP became more vulnerable because in both cases—and, unfortunately, as in most companies—the board was flying blind.

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