Steering the ship: corporate escapism vs sustained value

Posted: 4th October 2017

Steering the ship: corporate escapism vs sustained value

A recently published article in Dialogue by Joseph DiVanna, Møller Senior Associate and Møller By-Fellow of Churchill College asks if you are a management escape artist and explains how and why you should keep your hands on the wheel.

Are you a management escape artist? Joseph DiVanna explains how and why you should keep your hands on the wheel.

By Kirsten Levermore, 28 September 2017

How often are we as senior executives caught in the profits-this-quarter trap? Our majority shareholders typically get our attention and our bonuses are often tied to performance metrics that reflect the philosophy of shareholders: returns at all costs. Is this merely a form of modern-day corporate escapism? One could argue that our responsibility as enablers of long-term corporate sustainability is thwarted if we have to make compromises that are short-term in focus. Can the short-term productively reflect the long-term goals?

Senior executives are also faced with the “I-am-almost retired” syndrome. The conditions that exist when realizing that one is just a few years from retirement lead to decisions which may be essential to the long-term viability of the organization being postponed or transferred. In extreme cases, some senior executives opt to ignore these types of decisions hoping that the organization might fix itself during the course of normal business. And this behaviour is not exclusive to those nearing retirement; it can regularly be seen creeping slowly into one’s personal management style based on the type of organizational culture.

These people are escape artists: they escape making the hard decisions by deflecting them to another time or to other people.

Leaders lead

The cure for management escapism is called ‘leadership’.

If one takes a step back from the process of decision making and looks at the context in which decisions are made, a pattern emerges. In many cases, our avoidance of the decision is due to the fact it is a reactive decision. A condition or event has occurred; a decision to course correct is needed; this decision is counter to the status quo – or more precisely – to the plan we are currently executing. That reactive leadership appears disassociated from the strategy or plan, making the senior executive seem not fully in control of the organization.

Proactive leadership is easier said than done. Academics and scholars often extol the virtues of proactive leadership but are rarely on the front line of decision making where pressure to meet the expectations of multiple stakeholders is often overwhelming. The first step to curing this condition is to recognize that you have the disease, admitting that, like many others, you have a problem.

The diagnosis checklist

Finding out if you are trapped in corporate escapism is not difficult. Ask yourself the following questions:

  • Do you come out of meetings wondering what the meeting was about?
  • Are you invited to meetings because the team needs your approval, or have you been invited for your input?
  • Have you ever entered a crowded company elevator and asked yourself what these people do?
  • When you are in meeting listening to the topic, have you ever thought “haven’t we already covered this topic in a previous meeting?”
  • If you are still reading this article, you are more than likely infected with the reactive management illness, which is the main cause for corporate escapism. How then do you turn reactive leadership into proactive?

Proactive leaders realize that periodically there are situations that are beyond their scope of control. In some cases these situations are the result of externalities of the market, changes in regulation, market interventions as a result of political agendas, or simply sudden changes in consumers’ attitudes. Beyond management control does not mean beyond the abilities of your management team to fashion solutions. The key for you as a leader is to engage your senior management team in proactive thinking, scenario planning and developing a keen sense of how to execute options as events unfold. Leaders have a strategic plan. Proactive leaders assemble their senior management team regularly (at least quarterly) and ask a simple question: “what has changed in the world during the past three monthly that will impact our plan during the next six months, one year, two years?”

Reactive leadership teams allow circumstances to dictate how they will proceed. Proactive leaders anticipate multiple versions of the future and take corrective actions.

One way of thinking of this is if you are on a ship travelling east, from New York to Lisbon. You know your course will be 065° true bearing (east-northeast). However, as you cross the Atlantic, the Gulf Stream current is dragging the ship northward and at the same time there might be a wind pushing the ship westward. The ship’s engine is still running fine. Passengers are fed and in good spirits. Operationally, all is well as we drift further and further off course. As a result of these external factors you (the CEO/captain) must execute course corrections to maintain the heading. Experienced sailors can assess these factors and “tack” the ship, using the forces of nature to increase the ship’s speed and maintain the course. Tacking does not happen in a straight line – it is a series of zig-zag manoeuvres to overcome the external forces. With each move, anticipate the direction and speed of the wind and currents and maintain an easterly direction toward Lisbon. As the ship gets closer to the destination the movements become more and more refined. Management teams engaged in proactive leadership engage externalities in the same way by making a series of decisions to move the organization forward.

Assessing the business environment and making course corrections is the key. In essence, it is simply a series of decisions that anticipate trends and events without throwing the strategy out altogether, or changing the entire implementation plan. But there is a catch. Not all decisions work. What if we make the wrong decision in a corporate culture that looks to blame someone and punish the guilty? Can we reward failure? In many management teams’ fear of failure equals organizational paralysis. It is like letting the wind steer the ship and the current set the course. What separates dynamic companies from companies caught in a slow decline is a combination of two important tools at their disposal: having a proactive agenda for growth, and retaining senior managers that have moved from transactional leadership to transformative leaders.

Transactional vs transformative leadership

Transactional leaders strive for the status quo, keeping the ship afloat; they keep the engines running and the passengers fed. Their focus is operations, constantly reminding the organization to reduce costs. How to know if your organization is transactional focused? Listen for these key phrases: “we need a 5% across the board cost reduction”, “don’t replace people, our staff just needs to work harder”, “this hasn’t worked, let’s bin the initiative”.

What transactional management fails to realize is that you cannot save your way to prosperity, and you have to learn from lessons. No matter how hard you focus, you will never drop your cost to zero, you will never have 100% success in all new initiatives. The cycle of continual generic cost reduction and fear of failure becomes a self-fulfilling prophecy; it sends two clear messages to the organization: people (our greatest asset) will be cut loose at the first sign of trouble, and costs are not examined in the context of business processes – so, management don’t understanding the complexities of the business. Transactional management teams use compensation systems and set key performance indicators to optimize the costs of facilitating the transactions of the day-to-day business by exchanging rewards for efficient performance.

Transformational leaders, on the other hand, look beyond day-to-day activities, questioning the status quo, asking: “is this the best way to do these things?”, “can we apply our products in new ways?”, “is this delivering the highest quality – or highest value – to the customers?”, and “can other types of customers use our products in ways we haven’t imagined yet?” Transformation management asks a lot of questions, gets few answers, because the aim is to encourage the organization to think. Proactive leaders want the organization to think about the external and internal setting, not just the activities contained within their business processes; they want people to look at the externalities and think about how these trends or events will change what we do, what we make, and how we add value to customers. Transformational leaders outsource innovation, new ways of thinking, questioning to the status quo and the establishment of key performance indicators to the people who are at the coal face of the business: their employees.

The best laid plans…

For any leadership style to be effective, communications is the key. In ineffective leadership styles, those which are reactive and prone to escapism, communications are often also reactive, transactional, convoluted and hard to tie back in to the corporate strategy. Staff see through it, they realise it’s inconsistent, often contradictory. Creating a strategic vision for the organization is not describing some imaginary state of the organization in 5 years; it is the process of providing clarity in what the organization will become. Many people throughout the organization will participate in the process of strategy creation and setting the vision for the organization. Transformational leaders take each component and seek clarity (finer course corrections) and communicate these changes to all stakeholders always referring back to the corporate strategy. This continual feedback loop between the management team and the operational side of the business will transform the organization, it will make it effective and resilient, able to sustain itself through thick and thin.

Joseph DiVanna is an Møller Associate,  Møller By-Fellow of Churchill College, University of Cambridge, a member of the DukeCE educator network, and author of Strategic Thinking in Tactical Times