The Merrill/BofA mess and its lessons for leaders
John Thain is a great example!
He’s a great example of what leadership should NOT be about.
I have no intent here to pile on. Others have beat Thain up almost as much as he deserves. But this case can represent a huge lesson: Why after all that’s been said and done over the past 25-30 years (In Search of Excellence was published in 1982) about the need for leaders to shape values through everything they say and do are companies still selecting “leaders” who are long on degrees and cash in the bank, but terribly short on common sense and a strong moral compass?
John Thain, in case you missed it, is the recently-fired Merrill Lynch CEO who despite three straight quarters of losses thought he needed another $10 million on top of his $15 million signing bonus and $750,000 salary. The board backed down. Then recently he spent $1.2 million redecorating the office he inherited from the previous CEO because it “would have been difficult for me to use it in the form it was in.” Thain now says he’ll pay for the renovation, which was “a mistake in the light of the world we live in today.”
Today’s great leaders are asking the same question of everything their companies invest in. “Are our customers willing to pay for this? Does this cost add value to our customers and shareholders? If so, we might do it. If not, we won’t.” Thain misses the point. It’s not about today’s economy. It’s about knowing what’s right by your customers. It’s not a stretch to consider the fact that a $1.2 million office redecoration may never be the right thing to do if you’re obsessed with your customers.
Great leaders know that little things they say and do signal their values and priorities. They’re clear about what’s acceptable and what represents organizational violations. For a leader to act in a way that’s inconsistent with the best interests of the customers is inexcusable. Thain’s gone for now. So should a lot of other leaders who you wouldn’t want your sons or daughters emulating.
Action needed now around integrity…
Integrity is a value most often touted by posters on hallway and conference room walls. However, most companies haven’t spent time REALLY defining what integrity is and isn’t. “Integrity is…well…you know…integrity,” people might say. But, what is it really?
It’s not time for an integrity fad, but it is time that every CEO of every company to use some of the recent “misunderstandings” of what integrity means to clarify it to their employees.
Leaders need to be absolutely clear about what following the book looks like and what an integrity violation looks like. There are too many people in too many organizations who roam in integrity’s gray areas. You must be clear about what’s in bounds and what’s in the dark edges; what is good and bad.
Here’s what you can do now.
Using two flip charts, list on one flip chart what integrity means in excruciating detail. Be very specific. What does it look like, i.e. what do people who operate with integrity do? How will we know when we are doing things with integrity? How do we measure this?
On the other flip chart, list violations of integrity. Don’t make them up. Use specific situations that you know/suspect are going on today. What does it look like? What do people who operate inappropriately in the dark edges do? Be very specific and let people know that you have absolutely no tolerance—NO TOLERANCE—for someone working in the dark edges.
After you’ve done this, promise yourself that you will use a public hanging (It’s called getting Thained.) to show your entire company what a clear violation looks like. Lou Holtz is among those who have done this best. Here’s the story.
In the final 1988 regular season game, Holtz took Notre Dame west to play against USC, a big game for both teams. Holtz always emphasized the importance of being on time, for games, practice and pre-game meals. Tony Brooks was a sophomore tailback and the team’s leading rusher. Ricky Waters was a sophomore wide receiver and the team’s leading pass receiver. On the night before the USC game, both players showed up late for dinner. Many coaches might have overlooked their star players showing up late, especially when a big game was scheduled the next day.
Holtz immediately sent both players back to South Bend. Without their star players, Notre Dame beat USC 27-10.
It’s my understanding that since that game, no one on a Lou Holtz team has ever been late for dinner.
(The deeper story: By suspending critical players, Holtz was both easing the burden and inspiring the players who remained. If the Irish lost, they had an excuse. If they won, it was because the players rallied around a fundamental team-oriented value in what was probably the biggest game of their lives.)
Do you make it very clear what you will and won’t tolerate around ethical and integrity issues – or are you a wuss?
Layoffs don’t necessarily raise performance
A poor economy always causes a layoff twitch in the C-Suite, even though Stanford’s business school finds that layoffs can have a negative effect on long term performance.
Bob Sutton, a Stanford professor and author of several excellent books on people performance, including The No Asshole Rule, says they’ve found no research to show layoffs improve long term financial performance. In fact, those who delay layoffs for as long as possible tend to bounce back faster than those relying more heavily on layoffs.
What would Toyota do? Toyota and numerous other companies are using the downturn to train people, so they’ll be in a stronger position when the economy improves.
Across-the-board cuts are almost always a bad idea
Reading the following should prompt your “Isn’t that a stupid idea,” button: “We’re cutting budgets across the board by five percent. We’re cutting all travel. We’re cutting all meetings. We’re cutting people in every department by 10 percent.”
This language may sound appeasing to the board but it’s probably not very smart business. Not all departments might be equally “fat,” so it penalizes the opportunity to improve performance in departments that run lean. Conversely, if your big sales come from customer relationships, maybe your sales people need to kick their travel up by half. If a project is generating a 1,500 percent return, you might think, “I’ll take as many 1,500 percent returns as I can get. Let’s invest more, not cut more.”
Across the board cuts may sound good but my experience is that leaders do this because it’s easy, not because it represents good leadership or sound business practices.
Get More Performance With High Fives
Leaders have huge opportunities to boost performance through recognition—high fives,” thank you’s”, “way to go’s.” Employees tell me every day that their recognition tanks are near empty. “All we want is someone to acknowledge our contribution. Just a simple thank you is all we want,” Chad, a project engineer, told me the other day in Texas.
When I mentioned this to some managers they complained that they don’t have “recognition budgets.” Neither the Pittsburgh Steelers nor the Arizona Cardinals have “recognition budgets.” But somehow in that Super Bowl thriller they managed to recognize some damned good runs and catches without feeling constrained.
Recognition budgets. Jeez!
Jim Shaffer