Wednesday, 24 May 2017

Chief Executives and their seven deadly sins

From: Inside out

The resignation this week of Andrea Hill, the controversial chief executive of Suffolk County Council, has been big news in the  East of England. Whistle-blowing allegations of a bullying management style and fraudulent expense claims were not substantiated, but the Council decided that they needed to move on and so she received a £218,000 pay-off – her annual salary. She famously refused to take a cut in her pay, even though she was overseeing a major programme of cuts. But according to a recent article by Financial Times journalist Lucy Kellaway (available on the BBC website) chief executives are a special breed who rarely admit to any failings. When asked the classic interview question, “What are your weaknesses?” they inevitably give answers that double as strengths: “I am too impatient…I am a perfectionist…I work too hard and people have problems keeping up with me.”

Kellaway has been studying chief executives for the past fifteen years and has drawn up her own list of their seven deadly sins: “They are control freaks. They are vain. They are ditherers. They don’t listen. They are bullies. They are afraid of conflict. And they can’t do small talk.” That seems a tad harsh to me, and I know many chief executives who are innocent of at least some of the items on that list, but her conclusion is that people are afraid of speaking “truth to power”.

I wrote recently about some interesting work by Professor Geert Hofstede, a Dutch academic, and it’s worth repeating. He studied what he calls the Power-Distance index, a measure of the extent to which power is either deferred to or challenged within any culture or organisation. It has been used to study crashes in the airline industry. Korean Air lost sixteen planes and 700 lives between 1981 and 1997. The primary cause was found to be a culture where junior pilots were too subservient to senior pilots. They used “mitigating language” to query or challenge their captains. So they would say, “Captain, I beg to inform you that the fuel tanks are nearly empty”, instead of, “Captain, unless you land this plane within ten minutes we will all die!” By tackling this subservient culture the airline has lost no planes since 1997.  (See Malcolm Gladwell’s “Outliers: The Story of Success” for a brilliant account of this episode.) The moral of the story is that staff must feel comfortable about challenging their leaders if disasters are to be averted.  

The case of Fred “the shred” Goodwin is one of the more extreme examples of an out-of-control chief executive. He ran RBS as if it was his personal property, overseeing a ruthless expansion programme that culminated in the disastrous purchase of ABN Amro at the height of the boom. He built a £350m headquarters in Edinburgh and used a private jet. On his watch RBS lost £24.1 billion, the biggest in UK corporate history. One of his former managers said of him: “Many executives are scared of him. He runs the place with an iron fist, sets out what is wanted, and you are expected to deliver”. His bullying style created a lemming-like culture and he took the entire organisation over the cliff. Strong leadership is one thing but where were the RBS Board and the whistleblowers? I am convinced that the affordable housing sector contains a number of mini-Goodwins, who run their organisations like their own personal property and are deaf to any dissent. Their Boards are weak and incompetent. With the withdrawal of effective regulation it is becoming increasingly likely that we will see a major scandal in the sector within the next few years. Speaking truth to power needs to become embedded in every organisation.


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