Three diseases that are killing companies
I have spent over three decades in the field of risk and security, ranging from the army, corporate world and the government. Over the years, I have been asked to assess the biggest risks facing organisations and enterprises. Those asking me these questions often hope to hear answers like terrorism, cyber-crime, mob violence, supply chain disruptions, political volatility, climate change and similar risks, but much of these are tactical or operational issues at best. The real risk does not lie in these triggers which affect all organisations in the environment. Instead it lies in the inability of the organisation to retain its agility, resilience and vitality in the face of those threats.
Successful organisations, like humans, have a birth, a growth phase, a maturity period and eventually; a terminal decline. Business strategists have traditionally focused on external disruptions as the principle reason for collapse of organisations, but that is a smaller part of the story. The real reason most organisations fall ‘sick’ and ‘die’ are these three killer diseases.
As organisations grow, they become clunky, cumbersome and bureaucratic. They become arthritic. Most leaders can correlate with this loss of agility when they compare their authority say seven to ten years ago, with the power they exercise now. As the award-winning journalist Moises Naim points out, the dynamics of power is shifting from the West to the East, from Presidential Palaces to public squares and from large corporates to nimble start-ups.
Power is also reducing.
Those who wield power today are less powerful than their predecessors, more constrained in exercising that power and much more likely to lose it faster than ever before. It takes more time to close a strategic hire, procure goods worth 100 crores or disburse 100 crores than it used to – a decade ago. Diffusion of decision making, focus on compliance and fear of failure is exacerbating the friction. And this is happening despite huge investments on ERPs, technology platforms and supply chain solutions. Large organisations know what they need to do, they have the resources to do it, but don’t seem to be able to execute in time. Just like an arthritic person.
The second killer disease is Coronary Hardening. A decade ago, a junior employee could approach his leader in the corridors and express a personal angst. For instance, he could explain that he had received transfer orders to a remote location, but he had just brought his mother from the village to undergo a cataract operation a few weeks ago, and if his transfer was deferred for a few months he would be able to relocate in a settled manner. That leader could look into the eyes of the subordinate, assess it to be a genuine case and defer the transfer on the spot. Today that request would most probably arrive in a series of chain emails and by the time it reaches the leader, there would be recommendations of HR advising against setting a precedence and line managers quoting standard operating procedures (SOPs) regarding transfers etc. Leaders are being driven towards a bias for compliance to SOPs.
But the real job of a leader is to deviate from SOPs. A leader must have the insight to appreciate situations that are not catered for in SOPs and take decisions that depart from previous norms. Yes, it comes with a risk of failure but that is why leaders are compensated exponentially more than the rank and file. So, while organisations may be getting smart, they are losing heart!
The last killer is Alzheimer. Organisations are losing their tribal memories. So called ‘core values’ pasted on boards and walls are meaningless to most employees and usually recited from rote. The history, rituals and heritage of those values are long lost while translating them into pithy, insipid statements rather than engaging stories. Motherhood statements like ‘good corporate governance’ or ‘customer first’ don’t serve the purpose of a guiding north star. Instead, they become a poster which no one looks at.
And nothing kills entrepreneurship more than taking the story out of the saga and corporatizing it into three or four core values which means different things to different people – and usually nothing to most. Similarly, the tribal knowledge of the organisation rests inside the heads of people embedded in organisational stories and sagas – not in lifeless knowledge management systems. In this craze to acquire learning management systems and best practices from the environment, most organisations are forgetting what made them successful in the first place. Cultures are built by stories not statistics. Inspiration comes from legends – not Lynda and employees don’t turn to Knowledge Management Systems when they are faced with moral dilemmas. Instead they seek wisdom from organisational folklore.
The cure to these diseases is not a quick fix surgery, though many ailing organisations try to do exactly that, changing CEOs, implementing expensive platforms / ERPs, acquiring new businesses or getting rid of some. But these three diseases are more akin to lifestyle and age-related ailments and hence need to be addressed with three holistic solutions.
Leading without Authority (Leading millennials)
The era of authoritarian leadership is ending. The future of leadership is more like a gardener who creates a thriving environment and thus enables the plants to grow to their full potential. Future leadership cannot be based on positional authority. Instead it has to emanate from influencing and enabling. The millennial workforce will ‘follow’ only if they believe that followership is a learning opportunity or adding value to them in other ways. This means that leaders will have to rely on non-authoritative tools to lead. These include mentoring, teaching, facilitating and in many cases, learning from those they lead.
Ironically most strategic leaders know this already – except that they don’t know, that they know it! For instance, most leaders with teenage children proudly boast that their children are very ‘independent’ and ‘know their minds and what they want’. They recognise the difference between their own and their children’s upbringing and how they need to treat their children more as ‘friends’ and less as kids. And yet the very same leaders will insist on practicing an authoritative style of leadership on the same millennials – at their workplaces. They need to realise that a workforce which doesn’t listen to their own parents, are unlikely to respond to authority from bosses.
The Story Telling Leader (Creating a intermeshed organisation)
The primary job of a strategic leader – is to create a shared reality. A singular narrative which all members of the organisation believe in from the bottom of their hearts. Stories build that shared reality. Here is a quick example of the power of a story to set the guiding star of an organisation. One of the core values of the Mahindra group is ‘Good corporate citizenship’. Now this term is sufficiently broad to become a catchall phrase but fails to express the essence behind that ethos. An urban legend does!
So the folklore goes something like this. In 2002, Mahindra launched the Scorpio (Its first SUV built for an international market) which was a raging success. Scorpio’s compact modern design appealed to customers who were used to the staid models from two other manufacturers dominating the urban SUV market. However, a feedback from potential customers was that they preferred to have the spare wheel mounted in the rear of the vehicle, akin to large SUVs like Landrover. Now from an engineering perspective, mounting the spare wheel under the chassis was a much safer option as it lowered the center of gravity of the vehicle. Mahindra’s engineers same up with an imaginative solution. They kept the spare wheel under the chassis, but added a round wheel-shaped box behind the SUV so that it would look the way customers wanted, without compromising safety. In addition, that box could be used as extra storage space.
Though Mr Keshub Mahindra (Chairman emeritus) had retired from day to day operations, this design was sent to him for his advice as it involved a design change to the vehicle. And the patriarch of the organisation vetoed the concept. Most of the junior leaders, including me were confused by this decision because the design was ingenious. It met with the customer’s ask, without compromising safety. But Mr Mahindra taught us a lesson that only a doyen of his stature could. He told the engineers that he vetoed the design because Mahindra will never stand for ‘something on the outside, and something else on the inside’. He said that if it looked like a spare wheel box, then it must have a spare wheel inside it. That is the Mahindra promise. What you see is what you get!
This story, carried forward by several generations of Mahindra employees, perhaps embellished along the way, probably instilled the core value of responsible citizenship more than any amount of sloganeering could. The power of story telling is that two decades later, the story still resonates with anyone who’s heard it. And as with all great stories, it is immediately ‘owned’ by anyone who hears it and propagated by them.
The Vulnerable Leader (Creating an environment of psychological safety)
“The Marshmallow Tower” is a powerful experiment to demonstrate the impact of team dynamics on an organisation. This experiment requires a group to build the tallest possible “tower” in about 15 minutes using twenty spaghetti sticks, some duct tape with a marshmallow on the top. This experiment has been conducted thousands of times across different age groups, demographics, geographies and vocations ranging from kindergarten students, MBA students, CXOs, architects, engineers etc.
Ironically the group which usually performs the worst is MBA students and the one that always builds the tallest tower are the kindergarten kids! This stunning outcome is attributed to an aspect of team dynamics called ‘status management’. Here is how it works.
Most groups when faced with a task, spend time discussing the problem and trying to come up with solutions. They typically do that by assigning roles to individuals or sub-teams and evaluating the pros and cons of different approaches. There is time spent in planning before actual work begins. But most of this ‘planning’ time is actually being spent in ‘status management’, that is – members of the group jockey for position and test the response to their ideas before venturing them. They seek tacit approval from the powerful members of the group before voicing their opinions. Kindergarten kids on the other hand, don’t give a damn about managing status within the group – instead they are focused on the task of building the tower and will jostle, try out new things, freely offer advice, make many mistakes, but end up building the tallest tower.
Building creative teams requires developing an environment of psychological safety. This is counter intuitive to most leaders who themselves have been trained in an authoritative style of leadership – which often relies on critique more than encouragement. Authoritative leaders believe ignorance is a sign of weakness and will avoid asking their subordinates or peers when they don’t know. Vulnerable Leaders on the other hand, display their vulnerability to encourage an environment where it is safe to say ‘I don’t know’ or to offer a contrarian or an outlandish viewpoint.
Ironically, large organisations face far more danger from these three internal dangers than external ones. It has been seen time after time that organisations shrug off external attacks, pick up the pieces and more often than not, emerge stronger after the assault.
The Iranian nuclear reactors were up and running within weeks of the Stuxnet virus attack. American companies ranging from defence to entertainment are routinely hacked by overseas adversaries who steal their IPR, yet those companies tackle them in their stride and progress.
Companies in the twin towers, the city of New York and the US took the 9/11 punch and moved on. Similarly, Taj, Oberoi, and hundreds of companies in Mumbai and India withstood 26/11 and emerged stronger. Not a single sizeable company ‘shut down’ because of the largest terror attack on the Indian soil.
And yet these large organisations constantly succumb to the infamous troika of fear, uncertainty and doubt (or FUD as its known in the security industry) and look to treat the diseases with investments on technology & security platforms or new management frameworks. However, in a VUCA world there is no way that external catalysts can be prevented or controlled. The only sustainable De-Risking strategy is to create an environment of high resilience and innovation, championed by storytelling leaders who know how to lead without authority!