5 Mastering mutinies

‘The bigger the company is, the more the job is really managing the people, putting the right people at the right place, thinking about the future of the company, trying to bring everything under one roof, setting the strategy.’

Monika Ribar CEO of Panalpina

Horses for courses¹

A young manager had a highly delegative management style. He delegated as much as he could and took great pride in doing so. Then a crisis arose and he needed things done and done in a hurry. He became more authoritative – we need to do this, we need to do that, I need you to do this by Friday, he told people. Did they rally to his flag? Did they appreciate that his formerly easy-going management style was a luxury the organisation could ill afford at that precise moment? No, of course not. The result was a complete backlash. His staff rapidly reached the point of rebellion.

Puzzled by this, the manager went to his boss and explained that his staff were mutinous and emotionally distraught. His leadership was simply not working, he confessed.

His boss was a highly experienced leader, one of those managerial sages you come across – hopefully early on in your career. ‘The problem is you’ve got winter horses’, he said straightaway. ‘What’s a winter horse?’ asked the confused manager.

The boss had grown up on a farm on the Minnesota, South Dakota border. He explained that on the farm they had some riding horses, which they would ride during the summer. Then, in the autumn, they would put them in the barn to protect them from the freezing temperatures of winter. Come spring, when they wanted to ride the horses again, they put the saddles on and the horses would buck them off. They would have to re-break the horses every spring.

To solve the problem and avoid the long-drawn-out process of breaking the horses in every year, they changed the process. At least once a month throughout the winter they went into each stall, put a saddle on the horse and then rode it around the barn, or in some cases, led the horse around the barn to get it used to the saddle. By spring, the horses were comfortable with saddles and being ridden.

‘What you have here are winter horses’, explained the boss, patiently. ‘You’ve delegated so completely that they have no sense at all that there’s a hierarchy. They have no sense that it’s a really good idea – good for everybody – for them to be doing team-like things with you to get through this crisis. They’re resisting you emotionally and probably don’t even know why. They’re just bucking you off because you haven’t done that kind of thing for a while. I recommend that what you do is meet with them at least once every month, but probably every week, to go through things as a group. Spend some time monitoring more closely what they’re doing and getting involved more directly in the management of their process. Not to micromanage them, but just to keep the emotional context in place that says that there is a hierarchy and that they’re in it.’

Unused to being told what to do, with no memory of previous recessions, there are a lot of winter horses out there. It is the leader’s job to understand them and to get them onside and extract great performances from them.

People first

Leading in turbulent times is firstly about getting people behind you. (Really it all comes down to people, doesn’t it?) If you are dealing with any sort of change then how you manage people is critical. What is amazing is that we study business at university or business school and spend 95 per cent of the time learning about strategy, marketing, corporate finance, organisational structures and the rest, and about 5 per cent on people skills. Yet when we finish our studies and start working we immediately find the ratio is exactly the inverse. Personnel issues fill the days, whether you’re working in an organisation of 10 or 10,000. Day to day, every plan you make and every strategy you devise revolves around having the right people in place.

There are three key factors that keep employees happy, engaged and loyal to the company. These constitute the underlying objectives in everything that leaders do. They are:

Interest in what they do – be it marketing, finance, consulting, or whatever.

Compensation – not just what people are paid and their bonuses but treating people fairly.

Learning – when candidates approach us as a search firm it is usually because they feel they have stopped learning and developing in their current firm.

Increasingly, as we look for the leaders of the future we find ourselves coming back to that third point – learning – as the most critical. Generation Y – those born between 1977 and 2005 – will have had an average of 14 jobs by the time they are 38. It seems to us that the organisations that are going to succeed in the long term are those that provide their employees with the right learning opportunities. When we are promoting people or looking for future leaders, we always look closely at how they encourage, develop and train the talent below them. There are few more effective tests of leadership potential.

Follow folly

Any leader is only as good as their followers. We heard a story about the founder of an international chain of hotels. His measure of success was whether the maid cleaning a room in one of the chain’s furthest outposts would neatly turn up the toilet paper. It is a very small thing to consider in a huge international operation, but it is built around realising that if the leader is doing their job well then it is having an impact on everyone in the organisation.

When we spoke with H. Patrick Swygert, he was president of Howard University, a job he held from 1995 until June 2008. Patrick studied law at Howard and was previously president at the University of Albany. Along the way, he has taught throughout the world and is on the board of Fannie Mae, United Technologies, the Hartford Financial Services Group and is on the CIA’s External Advisory Board.

‘You can be a great leader, or at least have the attributes of a great leader, and have no followers’, Patrick observed. ‘How often have we seen people who, at least on paper, fit the profile, but they just can’t get people to work and walk with them. I would say that comes about for two reasons. One, some believe they can act without the advice or input of others. They believe they know everything or know as much, or more, than anyone in the room. They tend to only half listen and people pick up on that very, very quickly.

‘Second, there are some people who don’t have that kind of all-encompassing, far-reaching intelligence; they’re intelligent in one way, but not intelligent enough to let other people have something to say, and a piece of the outcome. I think that’s one of the reasons why some, otherwise brilliant, people can’t do anything but lead themselves to the rest rooms.’ (On a similar theme, one amazed new leader told us, ‘People do actually follow you to the bathroom!’)

Strike quickly

None of this should suggest that managing people is easy. It isn’t. But to avoid mutinous outbreaks any crisis must first be thought of in human terms. Business is human. For the leaders we talked to this was automatically understood. You don’t – usually – get to lead a large organisation unless you are good at the people side of business.

‘This is a time when the true values of an organisation surface and I think leaders have to be very careful not to play favourites and not to send mixed messages. If you’ve got a prima donna out there, the way you treat that prima donna could undermine everything else you want to do. So, first you’ve got to engage that prima donna and make them part of the solution, not part of the problem. If they refuse to become part of the solution, you’ve got a tough call, because if you vary from your values your organisation may not come out of this anywhere close to its potential’, says PwC’s Sam DiPiazza. ‘We’re a partnership and we have our share of difficult people, but we also have a long history of saying, you don’t win as a star, you win as a member of a team. In professional services everything filters right through the organisation like it’s fibre optics.’

The second element in ensuring that mutinous thoughts were kept to a minimum was seizing the initiative immediately. A lot of the leaders we talked to jump-started organisational momentum as soon as they possibly could.

A great example of this approach comes from Henry Fernandez. ‘When the crisis hit, we immediately put into effect, in the first two to three months, a variety of programmes completely attacking the business as usual environment. A lot of the programmes had nothing to do with the fact that we were dealing with a crisis. They were my pet projects, what I wanted to change was harder to do in a normal environment.

‘I said to people, we have less resources than we did a year ago, but we still want to do a lot of things, so let’s go out and talk to other players in the industry to see what they have that we don’t that will be beneficial to incorporate in our business as opposed to inventing it here. People were very open to it and a year ago they were fighting me tooth and nail.

‘The key to change and dealing with resistors has been to take that force, really mould it and put it behind us to make it a positive as opposed to a negative force. So, the majority of the company has been significantly more open to change than was possible a year ago. The people who have resisted change have been ganged up on by the others who feel that their viability, their income, their bonus is at stake if everyone doesn’t run in the right direction. It has been positive. There is a crisis, you’ve got to monopolise it, you’ve got to take it, you’ve got to put it to work for you and that’s what we’ve done.’

This gets things started. Next come some even trickier issues. As Fernandez explains: ‘The harder question, which we’re now focused on, is have you spent enough time looking beyond the crisis to what the industry will look like? Can you make some assumptions of what the industry will look like, based on what you know today?

It’s hard. A lot of people don’t want to deal with it. They want to deal with the day-to-day. They’re tired. They’re stressed out. The free time that they have, they want to go and relax and get a drink and escape as opposed to thinking about business and things like this.

‘I tell people, go home and don’t talk about this. Try not to read the paper. Go to the park and play frisbee. Take your vacation, go and relax. No one is allowed not to take their vacation. Second, keep an optimistic perspective. We have a great business. We have cash in the balance sheet. We’re not going out of business. The only thing is how do we profit from this? So, it’s not a negative. We’re not covering the downside. We need to focus on covering the upside. That gets people optimistic and in high spirits.

‘We also have an advisory board that is composed of 15 to 20 of the who’s who of the investment world. I told them at the last meeting that when we next meet I don’t want to hear about this crisis anymore. I don’t want to hear about what happened, what didn’t happen, the factors involved. We don’t want to hear any of that stuff. We want to focus on what will the investment industry look like after the crisis.’

Rose on retail

One of the best examples of handling a crisis we have encountered was the story of Sir Stuart Rose. After working for the UK retailer Marks & Spencer (M&S), Rose worked for the Burton Group, Argos, Booker and Arcadia. As his career had taken off, M&S’s fortunes had declined.

In May 2004, it was announced that M&S’s chairman, Luc Vandevelde, was departing. Soon after, Stuart Rose had a Thursday morning meeting with non-executive director Kevin Lomax. Little did they know that a few hours later, the retailer Sir Philip Green would launch a hostile takeover for M&S with £8 billion tabled as his offer. Later that evening, M&S approached Stuart Rose and by the following Monday he was installed as the company’s CEO. Being in the right place at the right time is as important at the top of the corporate tree as it is anywhere else.

But before the new leader celebrates his or her luck, they need to remember that if everything were perfect the organisation probably wouldn’t need a new leader. The new hire – no matter what the job – usually encounters trouble. When Rose took over as CEO at M&S, the once legendary UK retailer was on its knees. To put its problems in perspective, in 1997 M&S was the second largest market capitalised retailer in the world after Wal-Mart; M&S was capitalised at $25 billion and Wal-Mart $60 billion. By 2005/6 M&S was capitalised as the 28th largest retailer, still at $25 billion (having been down to $12 billion), and Wal-Mart was at $300 billion. M&S was saddled with a mountain of inventory – £3 billion-worth. Its clothing range was confusingly branded, with 16 sub-brands. M&S was slow to move with fashion and its clothes looked increasingly dowdy in its cluttered high street stores. Among other problems, consultants were running 31 ‘strategic projects’.

The good news in such circumstances is that the leader may have nothing to lose. ‘Believe it or not, I don’t think they saw me as a white knight; I think they saw me as absolute desperation: “Well we are not sure he can do it but he is the last resort, so let’s give it a try.” I’m not being falsely modest!’ says Rose. ‘Obviously, if you come into a business that is in a crisis you have the disadvantage that you’re coming in at a crisis, but actually you have a bigger advantage – the advantage is that the board frankly would have agreed to anything. I had absolute control, which was key.

‘The second thing is that I’ve been in a few businesses that have been in a bit of trouble in the last 10 years or so and I think what I spotted fairly early on is that it wasn’t as if they were careering away in the wrong direction, they just weren’t doing anything at all.’

Stuart Rose spent the first weeks and months of his leadership of M&S fighting off Philip Green’s unwelcome takeover bid. It was not until July 2004 that the spectre of a takeover was exorcised. Having a clear short-term challenge helped focus energies.

The great thing about a crisis is that action is necessary immediately. There is no time to hatch a complex strategy and then to roll it out through the organisation. A willingness to roll your sleeves up and execute is what the organisation needs. It wasn’t so much that the company was continuing to make the wrong decisions. It had made them and was standing amid the results without much idea of what to do next.

This situation was made for Stuart Rose. ‘It’s a bit like the old stories – people are so desperate for leadership that even if you lead them the wrong way they’d rather go that way than go nowhere at all. People were almost literally standing around saying either, “There isn’t a problem, what problem?” Or, “There is a problem but we don’t know what to do about it.” Some were saying go left and some were saying go right; and the rest, well, it just passed over their heads.’

In such a pressured environment, nearly right now is often better than perfection tomorrow. In a complex and difficult business situation with the press and expectant employees hanging on your every word, the chances of hatching a watertight, perfect strategy are extremely slim. You have to compromise on perfection to execute in accordance with what the company desperately needs. Stuart Rose remembers what he told himself: ‘Be 95 per cent right rather than 100 per cent right; follow your gut instincts; cut back minimally on research; use the benefit of 30 years’ experience; you aren’t going to be right in every respect but mostly you could get it right by touch or feel, and then if you are in any doubt at all about doing something today or doing something tomorrow, do it today.’ Of course, as Rose candidly admits, mistakes are made.

Again the key was the human connection. The sooner you can get people on board the better. ‘I sat down with probably 20 managers in the first week’, says Stuart Rose. ‘I said, “Come in, sit down, you don’t know me” – though one or two of them did remember me from my previous time with the company. I said, “Tell me what you think the problems are in the business. Tell me what you think we should do, tell me how you think we should fix it.” There were those saying, “I’m so glad that somebody like you has come in. You’re talking about products, you’re talking about prices, you’re talking about shopkeeping. You know, if only we could do this, this, this or this.” So you put them down as a tick.

‘There were others saying, “There’s no problem here, absolutely alright, all you need to do is leave us to ourselves and go and do something else because my bit of the company’s absolutely fine.” And there were those who weren’t quite sure what to do. Interestingly enough, they were the most difficult ones because you had to make a very quick decision as to whether you could get them there or was it just going to take you too long. Can you teach this person to swim before the pool fills up, or can’t you?’

Tone setting

A final example of stopping mutinies in their tracks by getting people onboard comes from Seung-Yu Kim, who became CEO of the Hana Financial Group in Korea in 1997. The timing was not auspicious. ‘Our economy was really in trouble. Our currency was overvalued and in my first 100 days 12 of the 30 biggest Korean conglomerates were bankrupted. The last one was Kia Motors, which we had a big exposure to. It went bankrupt on 20 July. I still remember the date.’

Seung-Yu Kim had been with Hana since the time it had a mere 20 people. Hana developed its commercial banking in the early 1990s and Seung-Yu Kim was well placed because he had prior experience and a network in commercial banking. This did not, however, prepare him for taking over a company at the height of a far-reaching economic crisis. Faced with a crisis, Seung-Yu Kim focused on ‘awakening my people’, reshaping and restructuring.

From the start he worked at making all employees feel appreciated. After taking over as CEO in February, he led the purchase of a training centre in April. ‘At the time we had fewer than 1000 people so every week, in the evening, I met with some of them. In my first 100 days in particular I tried to appreciate them one by one.’

Surrounded by crisis, Seung-Yu Kim increased salaries by a mere 2 per cent in 1997, put his own pay rise on hold and cut costs. ‘For example, I took economy class when I had a business trip overseas. Most CEOs travel first class, but this was part of me showing my people how much I appreciated and valued them. My people followed me and trusted me, and that’s why we overcame the financial crisis.’ When Seung-Yu Kim insisted on flying economy, the airlines, aware of why he was flying economy, used to leave the neighbouring seat vacant.

Seung-Yu Kim was in the habit of heading home at 9 or 10 o’clock at night. On his way home, if he saw any of the bank’s branches with their lights on he stopped off and paid a visit. People working extra hours were regularly treated to pizzas courtesy of the CEO. The pizzas came with a message. ‘Whenever I made a surprise visit to our branches, I highlighted the significance of our customers. I always tried to tell people that our shareholders could leave us at any time were we not profitable, but our customers would stay with us if we did our best for them. I also reminded them that they didn’t need to look for market trends as market demand is nothing but the products and services which customers want us to provide them. They listened to me. And, now, the strong customer/market-oriented philosophy of the early days of Hana Bank has become the core value of the entire group.’

Beyond mutinies

None of this should suggest that people are not sometimes angry, unhappy and plain mutinous. It happens inevitably in any crisis. Overcoming these very natural emotions calls for empathy from the leader – the leader has to be able to put themselves in the shoes of their followers. From empathy must spring action, not action for the sake of it, but action that is based on being positive and forward-thinking. Mutinies tend to be focused on the troubled moment; leadership trumps this by creating an enticing and compelling future.

Resources

John Kotter, A Sense of Urgency, Harvard Press, 2008

Bruce Tulgan, Not Everyone Gets a Trophy: How to Manage Generation Y, Jossey Bass, 2009