Primum non nocere
The whole issue of executive compensation is getting explosive again, fueled by the healthcare fight in the US.
The last round of executive compensation debate and media coverage focused on financial sector executives, essentially concentrating on the astronomical dollar amounts of their salaries. The story seemed to have lost its legs after the White House appointed a “Pay Czar” and the economy sprouted “green shoots.”
I’m not suggesting the highest paid hedge fund manager making $3.7 billion, and the next two managers taking home close to $3 billion each in 2007, does not look like excessive compensation. But, let’s face it – it’s not easy to imagine victims behind those mega numbers. That may change with Sick for Profit, a new campaign launched by Brave New Films’ Director Robert Greenwald last month.
What makes this new strategy more effective for the advocates of government-funded, single-payer healthcare insurance is the old, but valid PR adage: images unite, issues divide. Mr. Greenwald made a powerful, six-minute video juxtaposing images of the victims and salaries of CEOs in the health insurance industry. The video’s correlation between executive compensation based on profit and denial of claims for sick and dying patients is inescapable.
One patient was repeatedly denied payment for drugs she needed to stay alive, according to a quote from the video in the Huffington Post. “I tried to explain to them that if I do not have this, I will die. And the only response she gave me was, ‘OK.’”
Stephen J. Hemsley of UnitedHealth is one of the CEOs featured prominently in the video. He made $13.2 million in 2007, only 0.356% compared to the top-earning hedge fund manager in the same year. (Yes, that’s one third of a percent.) However, Mr. Hemsley did well with total value of unexercised stock options worth $744,232,068, according to the Sick for Profit website.
Gut-wrenching scenes of sick people, including babies, side by side with salaries paid to health insurance CEOs has made the mini-documentary a hit on YouTube, with more than 142,000 views. The Sick for Profit website got 15,419 visitors on August 10th alone.
The video and the campaign made me think of Peter Drucker’s chapter called Not Knowingly to Do Harm, in his book Management, Tasks, Responsibilities, Practices. “The first responsibility of a professional was spelled out clearly, twenty-five hundred years ago, in the Hippocratic oath of the Greek physician: Primum non nocere – ‘Above all, not knowingly to do harm,’” wrote the great management guru of functioning capitalism. This applies to any professional, including managers.
Mr. Drucker brings up another issue related to not knowingly to do harm. He cautioned about American managers’ proclivity for violating the rule with respect to:
- Executive Compensation
- Use of benefit plans to impose “golden fetters” on people in the company’s employ
- Their profit rhetoric
The chapter ends with a warning that “…as the physicians found out long ago, it is not an easy rule to live up to. Its very modesty and self-constraint make it the right rule for the ethics that managers need, the ethics of responsibility.”
Communicating corporate culture
Improving corporate culture is one of those holy grails that management on every level talks about, hoping to influence how employees interact with each other and customers. I’m sure many of you lived through mergers and acquisitions and were told how these would produce far better results than either company could achieve on its own. (Yes, the word “synergy” is used a lot.) But based on statistics collected over decades, mergers have experienced dismal failure rates, even worse than marriages.
Corporate culture is often cited as a chief culprit in failed acquisitions. A book by Timothy J. Galpin and Mark Herndon, The Complete Guide to Mergers and Acquisitions: Process Tools to Support M&A Integration at Every Level, described a study of 190 CEOs, CFOs and other top executives with experience in global acquisitions (Watson Wyatt Worldwide 1998a). They found that “cultural incompatibility is consistently rated as the greatest barrier to successful integration but that research on cultural factors is the kind least likely to be conducted as an aspect of due diligence.”
Whether you are going through a merger or not, corporate culture is more than critical to your company’s health. “The thing I have learned at IBM is that culture is everything,” said Louis V. Gerstner Jr., former CEO of IBM. Managing corporate culture well and consistently should come before all else, including, for example, managing your brand. A dysfunctional corporate culture cannot create a trustworthy brand, even if you have a great branding agency. And there is another fallacy some companies pursue, often with a vengeance: the quixotic quest to change culture.
“Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you’ve got,” said Peter Drucker. And working with what you got means communicating positive attributes of your culture, and highlighting characteristics that made particular individuals or groups in your organization successful. By creating personal narratives you make your stories real because they stick in people’s minds far longer than artificial, non-personal examples. These narratives can also show instances of corrective actions, when you feel that certain behaviours are inconsistent with the kind of corporate culture you want to maintain.
I have found there is something very personal about communicating corporate culture. You should give serious consideration to using social media to initiate a conversation with your employees and other stakeholders. By having a dialogue about your organizational values, morals and manners, you may find that communicating corporate culture is not about power projected from the executive office. It’s all about influence. (Please see my last post about the difference between power and influence.)
And if you’re still not convinced that communicating the right corporate culture matters, here’s one last piece of proof to consider. John Kotter and James Heskett of Harvard Business School made an interesting observation about the correlation between an organization’s culture and its performance: “We found that firms with cultures that emphasized all the key managerial constituencies (customers, stockholders, and employees) and leadership from managers at all levels outperformed firms that did not have those cultural traits by a huge margin.”
Undercover Boss
Undercover Boss is the first in a series of documentaries about CEOs who want to know what their employees really think about them and their company. In the first segment, a beard and workers’ protective suit allows Stephen Martin, the 43-year-old CEO of the Clugston Group, to live on the front lines for ten days. It was produced by Channel 4 in the UK, a commercially funded public broadcaster.
I found out about the series through a great article by Stefan Stern in Financial Times. Mr. Stern describes a key dilemma faced by many chief executives: “Employee attitude surveys, brown bag lunches, focus groups, informal chats: managers try quite hard to find out what their staff are thinking. But the results are mixed at best. What are your staff thinking? Admit it – you don’t really know.”
You can add town hall meetings where questions are often planted and staging is more reminiscent of a rock-star spectacle than a genuine dialogue. And let’s not forget emails from the CEO. The readership of those decreases as you move down the organization. Yes, the rate of opening the email may be 96 percent but that statistic is as meaningless as the number of hits on your website. Remember when MBWA (Management By Walking Around) was all the rage? Nice, but they often look like a royal family walkabout. A walkabout also happens to be a purported Australian aboriginal ritual of manhood. You may argue that all of these attempts at a dialogue are better than nothing and I would have agreed with you three years ago. Today, they remind me more of a definition of insanity – doing the same stuff over and over, expecting different results.
Mr. Martin, the undercover boss, learned a few interesting things. According to Personneltoday.com, “Martin said he was able to get an ‘unfiltered view’ of how his staff saw the company and the issues they were concerned about, identifying real problems with communication and skills.” And it gets better, or worse, if you’re doing executive communications for Mr. Martin. One of the biggest problems he identified was “his regular e-mail communication and notices to staff about developments within the business were not getting through to many of those working on the construction sites.”
“I thought I was getting my message out there about what we were doing, but it became clear that workers on site were not getting that message because we were not talking to them in a format or language they wanted,” Mr. Martin said.
According to Personneltoday.com, Martin is trying to overcome these problems by setting up teams consisting of labourers, supervisors and managers who meet frequently to discuss developments in the workplace.
The solution, by mixing different layers of organization, is bound to improve the exchange of ideas. But it’s tough. Mr. Martin and other CEOs are trying to overcome barriers to communications erected by a command-and-control management and communications structure we’ve had for 150 years, originally patterned on the old Prussian army. The attempt may get rid of some of the filters that exist between each layer, but will not provide that “unfiltered view” acquired by going undercover. Mr. Martin may also want to consider adding another tool – social media. This would be a more interactive and personal way to communicate with his organization compared to traditional broadcast tools like email.
Channel 4 will broadcast Undercover Boss in two weeks. CBS is planning to broadcast “the new reality series” later this year.
Something about teams… (next time you write a speech)
Now, I apologize for the rant, but do you ever question the use of “team(s)” in business? Let me explain. Have you ever played (yes, participation is important for the argument) in a team sport? That’s where your “team” has a meaning. Take volleyball as an example. You regularly rotate from position to position throughout the game, so each player has the same opportunity to contribute equally in a team effort. In fact, this is how my Mac dictionary defines teams: “a group of players forming one side in a competitive game or sport.” The dictionary definition suggests an egalitarian meaning, as in all players are equal or equally important.
In the business world, just take a look at any organization chart and it’s rather obvious that every team has a leader and some team members are clearly not as important as others. In fact, most organizational charts look like dog packs. In a functioning organization, there is a leading dog, then there’s a 2IC, followed by dogs to form a perfect pack. An org chart for a volleyball team would have one level. That’s nowhere near what some companies call “a flat organization.” There are no flat organizations.
When I was searching for my company name, I recalled a conversation I had with a CEO I worked for. We were coming back from a conference where he met other CEOs. After the meeting, I commented on how similar those CEOs were, to which he said, “Sure, we’re all alpha dogs.” Meaning: we’re all pack leaders. Or, as Cesar Millan, the great management guru says, there are leaders and there are followers. (I’m kidding about Cesar, but somebody should tell him to write a management book.)
There is another thing that bothers me about “leaders” who overuse the “we-are-a-team” mantra. More often than not, they use it to justify their inability to say: “I’m responsible for this the mess we’re in.” Dick Fuld, CEO of now bankrupted Lehman Brothers and voted by Portfolio.com as the worst CEO, had this endorsement by Fortune in 2006: “Fuld’s modus operandi has been to bind his employees’ fates together—to turn the culture from one of sibling rivalry to cooperation and teamwork.”
I think we should move away from this “team” business and focus on leadership. Funny enough, when you look at the dictionary definitions, this is what it says: “the ORIGIN Old English tēam [team of draft animals,] of Germanic origin about ’team;’ related to German Zaum ‘bridle,’ also to teem 1 and tow 1, from an Indo-European root shared by Latin ducere ‘to lead.’” In other words, it’s all about leadership. Can we agree on that?
Five reminders for CEO speeches in the recession
I wondered what it must be like these days writing speeches for CEOs of the recently bailed-out banks. So I dug up a few and they look like something written by a large committee and edited by many, many lawyers. You could tell when a corporate committee gets creative – speeches get full of BFOs. If your mind wonders if there is anything obscene in the acronym, looking at the middle letter, it’s not. It just means Blinding Flashes of the Obvious. Some of these speeches are so careful not to offend anybody or touch anything of substance, they define boring.
At the same time, there are a few things to absolutely avoid in your next CEO speech:
#1 It’s not over until it’s over
Unless your CEO’s name is Nouriel Roubini, don’t say the recession is over just because some guy lost his stash of Ritalin, went on TV, and said the recession was over. Quote the optimists and the pessimists rather than try to make your CEO sound like he or she won the Nobel Prize in economics last year. Nobody knows and everybody is guessing, big time.
#2 Recession hurts
Please don’t say: “recession is a blessing.” If you think nobody would ever say that, just google it. I couldn’t believe it when I was reading this statement either. You can say that you made a “pretty good return” from the market crash if you are George Soros, have all the money in the world, or don’t care what people think about you. If you want to make your CEO in touch with the real world, quote the unemployment numbers or, if your company is doing well, just say how many number of jobs you’ve saved compared to others in your industry.
#3 Doing more with less
Doing more with less begs a question: have you been doing less with more before the market crash? Avoid such trite statements because they are meaningless. Offer concrete examples of true creativity that will help your company weather the storm.
#4 Quick fixes
It’s often tempting to come up with one decisive move that will make all the difference. I found a blog post that asked if social media would lead us out of the recession. Now, maximizing social media tools is absolutely essential for any business, especially now. But there is no single solution that will turn this economy around. It’s going to take a concentrated effort by many, using diverse tools to get us out of this mess. Forget quick fixes, there are none.
#5 Don’t try to get funny… about anything to do with the recession
Please don’t let your CEO say: “Some of my best friends are bankers.” Saying “Some of my best friends are Canadian bankers” is a lot better. With unemployment numbers hitting double digits, there is nothing funny about this recession. Just be extraordinary careful and judicious with anything that tries to be funny these days.
As always, if you have any other ideas for speeches dealing with the recession, please let me know.
