The Behaviour of Ailing Corporations

I once managed a portfolio company for a private equity firm. Its chairman didn’t teach me many things but he made up for it by by teaching me one big lesson. One day he told me that one of my Exec. Directors had been rude to ‘an outsider’. I apologized and said I would deal with it. “You’re not getting it”, he said. ” What I’m interested in is: what is it about your behaviour that makes him think  he has permission to act in this way”?

I’ve used that story in my coaching for over a decade – ending it with either of these two questions:

” What is it about your behaviour that allows your people to behave in this way?”

or

“What is it about your organization that gives permission to behave  in this way”?

My experience over the years is that creating space for certain kinds of behaviour can  quickly pervade entire institutions. It  may well be started, tolerated or even ignored by the leadership. More  interestingly, it may be the unforeseen result of a particular focus of business. Focus – human or institutional –  affects the way we see the world which, of course, affects the way we behave in the world.

As leaders, it’s important to reflect not just on how our organizations perform but on how they behave. Not just because  of the ethical contradictions but because neglecting to do so may threaten the entire business or service. How an institution behaves with all its stakeholders is a strong indicator of its state of health.  It is our responsibility to check those symptoms, regularly and honestly, ensuring we always widen our circles of enquiry; what a friend of mine recently called ‘increasing the circles of discomfort’. Don’t mistake the behaviour check as something ‘soft’ or driven by political correctness. The behaviour your colleagues display, both the consistencies and inconsistencies, will have a direct impact on your  purpose and business.

What I focus on, in the world impacts how I see the world; impacts how I deal with the world; impacts how the world sees me; impacts how the world deals with me.

An  institution’s strategic focus dictates what it views as important and what as not . This tends to create behaviour which favours the important as against the unimportant. If my strategic focus is  that my prices must be the lowest in the market, then I will favour those who help me achieve that focus: internal cost cutters,  tough bargaining, internal, buyers and (only) those suppliers who can deliver at the prices I require.  The ones I will not favour are my suppliers’ suppliers; my own staff development and welfare; in fact, anything that may affect my margins.

Now, that’s fine as long as I am aware of  the impact of that cycle of  strategic focus  and behaviour. If the institutional focus is on delivering lowest prices to its customers then that means, in  its behaviour, it may not focus on quality or even reliability of delivery. It will certainly mean it will not focus on the quality of life and welfare of its suppliers’ sub contractors. It may even try and minimise the costs of its waste disposal and environmental provision. And, if price is king, then customer service – which may be directly related to (costly) staff training and (costly) staff welfare – will be pauper. 

“Listen, you’re getting it cheap. What do you want? A smile or a damn bargain? Take your pick”.

Result?  You become linked with sweat shop labour; you get attacked for polluting the local environment (where  your customers live); your staff get grumpy and leave – or, worse still – get very grumpy and stay. Your customers dislike coming into your outlets and decide “You know what? I know the store down the road is 10c more expensive but at least it’s clean and I get treated like a human being”.

You may well end with no customers to offer your lowest prices to – or at least not in the volumes where they are viable.

How your company behaves to any one section of its stakeholders offers the world a window into its soul: its values, priorities, limitations, aspirations and ability to reach its outcomes.

As CEO of a technology company I once visited a media corporation to discuss a potential supply contract. I had a genuine interest in securing a contract but I also knew that our group wanted to buy it. So I was very interested to see what their behaviours could tell me. They kept me waiting for over an hour, they didn’t bother to even address my two associates  (clearly considering  them way too beneath them) and they  told me that they would only consider our technology if we agreed to an unsustainable price and terms. They did not – they declared – like my company or the group we belonged to but they would work with us at the ‘right price’.

We were a supplier of key technology that we would be obliged to  maintain to very precise standards  to ensure minimal disruption over at least five years. That required satisfactory terms and a trusting relationship. And yet they treated us as if we were a one off. Either they didn’t understand their own business or the business itself was less important than an exit from it. If exit was their target then my suspicion was that their customer offering would be just enough to get them by. After I left the building I found out that both content and customer service were  spartan. Churn  (customers leaving the service) was worryingly high. Because the focus was on exit,  I guessed attention to staff relationships, let alone staff development and quality of life, would be scant. Hence, their rudeness to my associates. All was confirmed later:   staff  skills, morale and loyalty were abysmal as were organisational and structural development. This was a company that existed for no other reason than to enrich a small group of people through its sale. It was hollow inside. Without doing anything more than observing behaviour in a meeting and making a few discreet enquiries later on, I discovered that this company a) was not worth very much as a going concern and b)  could not afford to hold out ‘for the right price’ for  long before  its losses and hollowness became very public.

Neither the behaviours of the media executives and the grumpy store cashiers, nor the impact they provoked were intentional – or even understood – by the company. But they were a logical (arguably, an inevitable) consequence of  the strategic focus: the organization’s view of the world.

All organizations betray their true focus by their behaviours.

The problem is compounded by the fact  is that these behaviours normally happen over a period of time within a very specific environment: a perfect setting for the boiling frog syndrome. The water is heated up  so gradually and gently that the frog fails to realise he is boiling.

Some institutions do try and check for the problem obliquely; most often by a ‘values’ exercise. A set of corporate values and standards of behaviour are identified or retrieved and staff are reminded (in workshops, pamphlets, posters and so on) of  the aspirations, priorities and acceptable behaviours. They are usually fruitless because the behaviour and values to support the institutional strategy are not those the company espouses.

If the investment bank’s values  speak of behaving with respect and integrity towards each and every client but its strategy focuses on maximising short term return from those clients, then ‘respect’ and ‘integrity’ will make a swift exit.

In legal terms, a corporation is a persona; it behaves, has authority and takes responsibility much like an individual. If  an individual’s behaviour contradicts his espoused values, profession, role or even image, we  may consider that person to be untrustworthy or even ill.

So it is with organizations.

Institutions – in my view – need to embark regularly on a  process that reviews the alignment of their strategic focus with their behaviours.

The TOTAL STRATEGY: the starting point is to develop, understand and clearly model the  strategy in very pragmatic terms; not just financially but the Total Strategy,  in terms of their organisation,offering, resources and stakeholders (what are we offering, with what, to and with whom, to what end?).

MODEL THE IMPACT:  develop and model a range of scenarios of  the possible impact of the Total Strategy on all internal and external stakeholders. ( If my strategic focus is to offer cheapest airfares on the market, what impact could that have on my staff training and therefore my quality of service?)

STRATEGY BALANCE:  Review what is a ‘must have’ in addition to your original strategic focus: I want to be the lowest cost provider with excellent customer service and reliable suppliers. So how ‘low cost’ am I prepared to be?

BENCHMARK AND MANAGE:  the competences,  skills, behaviours, values, structures, processes,  resources and risks that align with that balanced strategy.

CHECK THE SYMPTOMS: check your organizational behaviours regularly with your stakeholders; risking more and more discomfort as you go along. If  you don’t risk discomfort, the chances are you’re playing  it safe with your questions and your target group -and you then risk being very miserable indeed when you start boiling.

If you would like some help in identifying whether your organization’s behaviours threaten your strategy – or if you’d like to discuss the Total Strategy Programme, please contact me at stephen@stephenbarden.org

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