A legacy can be a value system, moral compass or set of principles on how to lead one’s life that can inspire others. It is one of the most important things we can leave for the next generation.
The lesson taught by Uber: Not all founders can take their company to the next level
Article originally published in the Philadelphia Business Journal on September 16, 2019
Visionaries have changed how we do our jobs and interact with each other. Think about the world before personal computers, cell phones, email, texting, apps, the internet, Instagram, Twitter and Facebook.
One such visionary is Travis Kalanick, co-founder and former CEO of Uber. He transformed the taxicab/ride-hailing transportation business by challenging paradigms through the use of information technology and hiring individuals who use their own vehicles to transport people who traditionally used taxis or other forms of transportation.
An entrepreneur with a great idea and the drive to start a new business is not necessarily the individual with the skills, values and temperament to run and grow the company over the long term.
I wrote an article on the downfall of Kalanick in June 2017. This is an update of that article.
Kalanick had been criticized for Uber’s unethical practices in evading municipal ride-share regulations, accusations of technology theft by Google and his disregard for the financial condition and treatment of Uber drivers who were the backbone of his business model. Kalanick was also criticized for his poor tone at the top and fraternity-like culture that ignored sexual harassment complaints from female employees, causing many to leave the company.
The culture within Uber was certainly not one that would be tolerated by public company investors. Any ethical misstep by the CEO or hint of a scandal has an immediate adverse impact on the company’s stock price.
His drive to win at nearly all costs by pushing ethical and legal boundaries to the limit damaged the company’s reputation and adversely affected its market share.
In February 2017, Uber’s board hired former U.S. Attorney General Eric Holder and his law firm to investigate and make recommendations on how to fix the culture within the company. After the report was issued in June 2017, questions were raised whether Kalanick was the right CEO to oversee the cultural changes that were needed within the then-private company.
In a recent article in Vanity Fair, columnist Mike Isaac chronicles the February 2017 meeting during which the senior leadership team at Uber forced Kalanick to hear the brutal facts of reality, “that he was poisoning the company’s brand.” Isaac writes, “Uber didn’t have an image problem. Uber had a Travis problem.”
It is rare for a CEO who is so identified with a toxic tone at the top and culture to successfully implement change, so it was only a matter of time before it became apparent that Kalanick had to go.
Kalanick stepped down as CEO of Uber on June 18, 2017 but remained on the board. The New York Times reported on June 21, 2017 that Kalanick had been presented a letter from five major investors demanding that he resign. Why didn’t the board of Uber demand his resignation? That’s their job.
Yahoo Finance reported that former eBay and PayPal executive Stephanie Tilenius commented, “Travis’ management style and poor choices are now a case study for every startup that sexual harassment and bad ethics will never be tolerated, regardless of how successful or fast a company grows.”
Trip.com CEO Travis Katz, in the same article, commented, “There has always been a sense that in Silicon Valley, growth is the only thing that matters. Kalanick’s resignation sends a message that we have entered a new era, where growth, without a fundamental sense of decency, is simply not good enough.”
A fundamental sense of decency is always required for the long-term success of any enterprise. Not only is it the right thing to do, but the public demands it.
The board hired Dara Khosrowshahi as the new CEO of Uber. Khosrowshahi, the former CEO of travel group Expedia, is an experienced business leader who is changing the culture at the company. Uber went public on May 10, 2019. It is hard to imagine a successful IPO if Kalanick had remained as the CEO.
The boards of startup companies usually consist of colleagues of the CEO, investors or other stakeholders and, as a result, may not in a practical sense be independent. Nevertheless, the board has the responsibility to ensure the CEO espouses the right tone at the top and nurtures the right culture. It took too long for the board of Uber to launch the outside investigation by Eric Holder.
Boards also have the responsibility to know when it is time to transition the leadership to an individual with the background and experience needed to take the company to the next level, even though that might be a difficult decision for them to make and for the founding CEO to hear. In Uber’s case, it was outside investors who demanded that Kalanick resign. However, it was really the board’s job to do so.
A lesson for all boards: Not all founders will have the skills to take the company to the next level. If the founder CEO isn’t cutting it regarding tone, ethics and culture, make a change before change is forced upon you by the company’s investors.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, adviser and nationally syndicated columnist on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.
360-degree input: The most effective way of assessing employee effectiveness
Article originally published in the American City Business Journals on September 4, 2019
As CEO, how do you determine whether the individuals who report to you are
effective with the people they deal with? Have you ever been concerned about the
people reporting to your direct reports? Some individuals manage up very well, but
their peers and subordinates may find them untrustworthy or very difficult to work
with.
A major responsibility of every boss is to assess the performance of the individuals
who report to them and provide feedback on strengths and areas for improvement.
This includes boards providing feedback to CEOs.
A more complete picture of an employee’s performance
The best way to understand how a direct report performs is to obtain 360-degree
input from the people they deal with. A 360-degree anonymous input process can
provide a more complete picture of an employee’s performance. Information is
collected by interviewing the employee’s direct reports and peers to get a sense of
their effectiveness and how well the employee works with others in the organization.
Interviews can be conducted by the individual’s boss or by an outside firm,
depending on the culture of the company.
In my role as a coach and counselor, I am periodically told of leaders within
organizations who are ineffective at what they do, lack the trust of those they deal
with or are tyrants. Those who deal with these people question why the ineffective
individuals remain in their roles or aren’t given feedback to improve. They ask, why
don’t their bosses know about how poorly they are viewed by the organization and if
they know, why don’t they do anything about it?
I often hear frustration from those who I coach and counsel about their bosses who
are terrible leaders. Because that individual’s boss may not be aware of how
ineffective these direct reports are, I would add an additional feature to the 360-
degree interview process.
Ask how effective their leaders are in their roles
360-degree interviewees should be asked if they would like to share anything about
the effectiveness of any of the direct reports of the individual under review. This
would help alleviate frustration because there would be a way to make their views
known about the ineffectiveness of that direct report.
In a perfect world, this should not be necessary. In the real world, it only indicates
the degree to which tyrants and those who do not engender trust are tolerated. The
employee hotline to the audit committee of the board is a way to report a tyrant if
senior management takes no action. In some cases, it’s the CEO who is a tyrant or
does not engender trust of the organization. If the CEO is not coached to improve
their style, it reflects poorly on the board. When the company starts losing good
employees to competitors, perhaps the board will take action.
From personal experience, 360 degree feedback was the most valuable performance feedback
My personal experience working for a tyrant was prior to the introduction of
whistleblower hotlines and the 360-degree input process. I was promoted to be the
tyrant’s peer, and then promoted to be his boss. He continued to create an atmosphere
of fear and intimidation, so I fired him. While working for the tyrant, I was very
close to leaving the company. Had I left, the company would have been deprived of a
future CEO.
As chief operating officer of PQ Corporation, I introduced the practice of 360-degree
assessments to the organization. When I became CEO, I asked my board to conduct
annual 360-degree assessments of me. It was the most valuable performance
feedback I have received during my business career.
What to do if the process is politicalized?
There are those who believe that the results of the 360-degree input process should
only be shared with the employee as a developmental tool. Even if an outside firm
conducts the interviews, I believe the boss should also receive the report to
understand how the employee is interacting with their direct reports and their peers.
The 360-degree process can be politicalized, and feedback could be tainted.
Inconsistent, one-off politicalized comments can be readily identified and screened
out.
Be sure to provide performance feedback periodically to your employees. Done
properly, it is the best way to help your employees grow, develop and improve their
leadership effectiveness.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in chemical
engineering and an MBA degree from Drexel University. He is also an alumnus of
the Advanced Management Program at the Harvard Business School. He can be
reached at Stan@SilvermanLeadership.com.
Philadelphia’s leadership needs to adopt a culture of continuous improvement
Article originally published in the Philadelphia Business Journal on August 19, 2019
The Philadelphia Inquirer published an article on August 12 by columnist Pranshu
Verma headlined, “Each night, Philly jails release scores of inmates without
returning their IDs, cash or phones.” Verma shows the statistics that in the year
ending April 15, 2018, 16,800 inmates – 73% of the total released from the six
Philadelphia prisons, were during the hours that the prison cashier’s office was
closed, delaying inmate’s access to their personal possessions.
Identification, cash and cell phones are critical enablers to these released inmates
to allow them to successfully reenter the community. Verma’s article quotes Tom
Innes, director of prison services for the Defender Association of Philadelphia,
saying, “You’re almost begging them to get into some kind of trouble.” Ann Jacobs,
the director of the Prisoner Reentry Institute at the John Jay College of Criminal
Justice said, “This is a humanitarian disaster. You’re screaming to them they don’t
matter, you don’t care, and you just expect to have them come back anyway.” According to Shawn Hawes of the Philadelphia Department of Prisons,
“We cannot legally hold anyone beyond a court-ordered release.”
The obvious solution is to keep the cashier’s office open 24 hours a day as is done at
Rikers Island prison in New York City.
So, why has no one who works within the Philadelphia prison system suggested this
intuitively obvious solution? Why does it take a newspaper article to effect change?
After the Inquirer article was published, the bureau of prisons announced that it
would extend the hours of the cashier’s office until 7 pm. This would only make a
negligible improvement.
Companies would not remain in business very long if its leadership and employees
didn’t exercise common sense and good critical judgment and embrace continuous
improvement. Why is this so rare within segments of the public sector? In many
cases, it just is not part of their mind-set or organizational culture. Public sector
organizations face no competition, so earning a return on investment or survival of
the organization is not a driving force.
Many public employees go to work each day with the mentality to do the best job
they can do. Unfortunately, in too many cases, public sector managers and
employees are not held accountable for continuous improvement.
Philadelphia’s leadership needs to use the example of the prison system failing the
needs of released inmates to initiate a change in mentality. The incentive to
continuously improve and establish a culture where management welcomes
improvement initiatives should be driven by an innate personal desire to do so, and
the personal satisfaction one receives from making life better for Philadelphia’s
citizens.
Anything less, the taxpayers of Philadelphia and those receiving services from the
city get short-changed.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in
chemical engineering and an MBA degree from Drexel University. He is also an
alumnus of the Advanced Management Program at the Harvard Business School.
He can be reached at Stan@SilvermanLeadership.com. Follow Silverman on
LinkedIn here and on Twitter, @StanSilverman.
CEOs need to be open to novel solutions
Article originally published in the Philadelphia Business Journal on July 29, 2019
How many of us have been challenged to accomplish an objective where the path to
success was not clear? How many of us found a way to get it done? This is a challenge
that we face many times during our careers.
In August 2015, I wrote an article headlined, “AT&T’s lesson in leadership: How
to break paradigms.” Given the importance of breaking paradigms, this is an
update of that article.
In the 2001 film “Pearl Harbor,” soon after the U.S. declares war on Japan following the
attack on Pearl Harbor, President Franklin Roosevelt orders the Joint Chiefs of Staff to
strike back by bombing Tokyo. These military leaders offer reasons why it can’t be
done—the U.S. long range bombers don’t have the necessary range from the nearest U.S.
base on Midway Island and Russia won’t let the U.S. launch from Russian territory.
Roosevelt says to them, “Do not tell me it can’t be done.”
What Roosevelt did was challenge the existing paradigms of his military leaders.
Paradigms are an established and accepted set of beliefs. Roosevelt wanted them to be
innovative and think out of the box. It took the assistant chief of staff for anti-submarine
warfare to do so, an individual you would not necessarily expect to come up with a
solution to this challenge. He proposed that B-25 bombers carrying extra fuel be launched
off an aircraft carrier that would sail within aircraft striking range of Tokyo. After the
planes launched, the carrier would turn back, and after the bombing run, the planes would
fly to China and land there.
This bombing mission over Tokyo is enshrined in history as the Doolittle Raid, named
for Army Air Corps Lieutenant Colonel James Doolittle. Even though the mission did
little damage to Japan’s military capability, it provided a needed boost to American
morale, and at the same time showed the Japanese that they were within the reach of
American bombers.
When “something can’t be done,” there is usually a creative path forward that can
achieve the result desired, or a similar result that might serve the purpose originally
intended.
Your corporate culture must encourage out-of-the-box thinking and risk-taking for this
process to take place. Collaboration among people from different technical disciplines
and operating units are sometimes needed to find the path forward, as when the assistant
chief of staff for anti-submarine warfare came up with the idea of how to bomb Tokyo.
Rebuilding the phone system
As manager of operations planning early in my career at PQ Corporation, one of the most
impactful lessons I learned was the imperative of breaking paradigms.
Our CEO, Paul Staley, asked Russell Ackoff, then professor of management at the
Wharton School of the University of Pennsylvania, to talk with the senior leadership team
at PQ about applying his idealized design approach to our manufacturing technologies to
break our paradigms. As a mid-level manager, I was very fortunate to be included in
these sessions.
Ackoff described a meeting that he attended in 1951, consisting of engineers and
scientists at Bell Labs, a division of the phone company AT&T, in which the facilitator
abruptly announced to the meeting participants that the phone system in the U.S. was just
destroyed. How would they not only rebuild the system, but reimagine and improve it?
The only criteria that they needed to meet were that the new phone system design had to
be technically feasible and operationally viable. The facilitator was asking the meeting
participants to break their paradigms and think out of the box.
In the process of establishing the specifications of the new phone system, the participants
realized that given the expected growth of phone usage, continued use of the rotary dial
phone system in use at the time was not practical. Touch-tone dialing cut 12 seconds off
the time it took to dial a phone number and required much less investment than the
capital-intensive mechanical rotary dial system.
At that moment in history, the touch-tone dial system became the technology of choice
for the future phone system. Little did the participants know the significant impact that a
reimagined phone system based on touch-tone dialing would have on our lives in the
future.
The ideal plant concept
A number of years later as president of PQ’s Industrial Chemicals Group at a meeting
with our plant managers, I posed a similar question to the one that was posed at Bell
Labs. I told the group that our Augusta, Georgia manufacturing plant, built many years
ago, was just destroyed. How would they reimagine, redesign and build the plant to fulfill
the product needs of the plant’s customers? The only criteria were that the redesign
needed to be technically feasible and operationally viable.
We identified new manufacturing approaches we wanted to include in the new plant
design. We subsequently estimated the cost to build and operate the plant and found it
would be significantly less using these new technologies.
Our approach to reimagine this plant was called our ideal plant concept, similar to what
Ackoff called his idealized design. Whenever capital additions were made to our plants,
we considered the risks involved in adopting new technology, and whether we needed to
de-risk the decision by applying and testing out the new technology before putting it into
commercial practice.
Of course, what is the latest state of the art today will be surpassed by new innovations
tomorrow. In addition, this approach fit with our commitment to the continuous
improvement of our manufacturing plants, as well as other aspects of our business
operations.
Leaders, create a culture focused on breaking paradigms. This is a way to differentiate
and create a sustainable advantage over your competitors. And remember, when you hear
from employees that something can’t be done, respond with, “Don’t tell me it can’t be
done. Find a way to do it.”
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in
chemical engineering and an MBA degree from Drexel University. He is also an
alumnus of the Advanced Management Program at the Harvard Business School.
He can be reached at Stan@SilvermanLeadership.com. Follow Silverman on
LinkedIn here and on Twitter, @StanSilverman.
We Should All Practice the Human Side of Leadership
Article originally published in the Philadelphia Business Journal on February 4, 2019
I recently had the privilege of speaking about the human side of leadership at a fireside chat event sponsored by the Union League of Philadelphia. My fireside chat partner was Karin Copeland, CEO of Create X Change and former executive director of the Arts and Business Council of Philadelphia.
I described the human side of leadership as a set of beliefs and practices that bring out the best in leaders and their employees, a company’s most important asset. These beliefs and practices help the company achieve a competitive advantage over the long term.
Where do these beliefs and practices come from? Some are discovered through the practice of the art of leadership. Others are intuitive and instinctive.
So, how does one practice the human side of leadership?
Set the right tone at the top and nurture the right culture
Tone at the top is set by the CEO and the senior leadership team, and reflects the ethical climate of the organization, while culture reflects how employees within the organization deal with each other, customers and other stakeholders. As the leader of your business, ensure that you set the right tone and culture. They become the behavioral norms of your employees.
Both tone and culture determine whether employees will trust their leaders and their fellow employees. Trust is built on honesty, ethics and integrity. Without trust, you can’t build a high-performance team. Without trust, you suffer high employee turnover and lose the talent you need to achieve success.
What are the elements of tone and culture?
- Treat all employees with respect.
- Act ethically and with integrity in all that you do.
- Never lie. It undermines trust with everyone you deal with.
- Understand that you are measured not just on financial results, but also on customer experience and company reputation.
- Don’t micromanage – set expectations, empower and hold direct reports accountable for results.
- Set goals with your direct reports’ participation so they have ownership in them and in what they do at the company.
- Don’t permit a tyrant to abuse the people reporting to them.
- Protect whistleblowers and fire those who try to retaliate against them.
- Adopt employee-friendly policies.
- Listen to the people in your organization. They can teach you the best lessons.
Recognize that emotional intelligence is a key leadership trait
In a 2004 Harvard Business Review article, “Leading by feel,” University of New Hampshire psychologist John D. Mayer wrote, “Emotional intelligence is the ability to accurately perceive your own and others’ emotions; to understand the signals that emotions send about relationships; and to manage your own and others’ emotions.”
Based on my experience interacting with others, the following six EQ behavioral rues will contribute to your leadership effectiveness.
- Recognize how other people perceive you.
- Don’t communicate with others in a way that puts them on the defensive.
- When a direct report shares an idea or proposes a new initiative, listen.
- Take the blame if it’s your fault. Give credit where credit is due.
- Avoid being an imperial leader. Don’t threaten others to achieve your goals.
- Don’t self-aggrandize.
Communicate empathy
One of the most important skills of any leader is to know when and how to communicate empathy. Former Michigan State University Interim President John Engler and former MSU president Lou Anna Simon, who he replaced, both demonstrated that they lack empathy. They made insensitive remarks about the sexual abuse victims of Dr. Lawrence G. Nassar, physician to athletes at MSU and national team doctor for USA Gymnastics, who was sentenced up to 175 years in prison for sexually abusing young women.
A Jan. 11 Detroit News article quotes Engler, speaking about those sexual abuse victims who were not personally in the news, as saying, “In some ways they have been able to deal with this better than the ones who’ve been in the spotlight who are still enjoying that moment at times, you know, the awards and recognition.”
“Enjoying that moment … the awards and recognition?” Did Engler not understand how inappropriate and insensitive that sounds?
On Jan. 16, Engler resigned his position as interim president of MSU effective Jan. 23, after losing the support of the MSU board. In his resignation letter, Engler did not acknowledge the comments that led to his loss of MSU trustee support. He blamed politics as the reason.
In the face of growing criticism from many of the students, faculty and staff at Michigan State on how Simon handled the accusations against Nassar, and after losing the confidence of a number of MSU board members, Simon resigned her position as long-time president of the university on Jan. 24, 2018.
In her resignation letter, Simon wrote, “As tragedies are politicized, blame is inevitable. As president, it is only natural that I am the focus of this anger.”
“Politicized,” Dr. Simon? I am not sure how the abuse of so many young women can be politicized.
It is evident that neither Engler nor Simon knew how to communicate empathy.
Allow employees to violate the rules when it is in the best interest of the company to do so
I learned this as a sales manager for my company early in my career. I ordered a recall of contaminated product without the authority to do so. My boss was traveling and unreachable. Due to the rising cost each day the recall was delayed, I ordered the recall.
I was celebrated, not terminated for my decision. I was taught how to make employees feel trusted, empowered and valued by their boss. Hire people with common sense and good critical judgment so they know when to violate the rules.
What do the above four leadership practices have in common? To me, they help define the human side of leadership. As a leader, whenever I have a doubt about how to deal with a situation, it’s hard to go wrong if I follow the simple adage, “Lead like you like to be led.” Good advice for all leaders.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com. Follow Silverman on LinkedIn and on Twitter, @StanSilverman.
How Continuous Improvement Can Help You Achieve Preferred Provider Status
Article originally published in the American City Business Journals on January 8, 2019
One of the most important objectives that a company can adopt is to achieve preferred provider status for products and services to its market — the company that customers and clients preferentially go to first before going to the competition.
This is the Holy Grail of any company.
In August 2014, I wrote an article headlined, “A culture of continuous improvement is no management fad … In fact, it could be the Holy Grail.” However, I no longer consider it to be the Holy Grail. It’s an enabler — it helps companies to be a lower-cost provider of products or services, which builds competitive advantage and enables a company to achieve preferred-provider status —the Holy Grail of any firm.
Given the importance of continuous improvement to building competitive advantage, I would like to offer an update to the August 2014 article on continuous improvement.
Over the years, many corporate initiatives have been proposed by consultants such as Six Sigma, Baldrige Quality Award and Kaizen. Many of these initiatives are not sustainable without significant time and effort by management. Today, some are rarely practiced.
At PQ Corporation, we found that the one initiative that generated results and was sustainable over time was the culture of continuous quality improvement, or CQI.
How was CQI different than other improvement initiatives? It was the way in which we implemented it.
We had employees get directly involved in the effort. Instinctively, most employees realize that continuous improvement is needed to grow the company and build competitive advantage. To not continually improve means that you fall behind. No other initiative has this innate imperative.
Even though CQI at PQ was led by the CEO and other senior leaders, it was driven by the employees at every level within the company. The senior leadership of the company was charged with creating an environment where employees developed a sense of ownership in that part of the business in which they work.
This cultural change put power and responsibility into the hands of employees, not managers, to initiate and drive improvement projects. Each of the production unit teams within our manufacturing plants was given $50,000 to spend on projects chosen by the team to improve their manufacturing processes.
Creation of a CQI culture required training of all managers to be coaches and counselors to their staff, empowering them to develop and implement their own improvement ideas. Training was needed to help employees analyze data to determine the root cause of issues, so proper solutions could be identified.
By adopting CQI, my company saved millions of dollars from ideas generated and implemented by our employees.
By relying on our employees to identify and execute these projects, it brought out the creativity in our people, encouraged them to be more proactive, and showed them in a tangible way that they mattered to the success of the company. This helped us be more competitive, and provided funds to reinvest in and grow our business.
There is nothing like having employees throughout the organization, hourly and non-hourly alike, develop and execute their improvement projects so they could develop a sense of ownership in what they do.
So, if you are looking for a way to build competitive advantage to help achieve the Holy Grail — becoming the preferred provider of products or services to the market — adopt a culture of continuous improvement. Companies that do not continually improve will be left behind. Those that do will win the competitive race in the long run.
Stan Silverman is founder and CEO of Silverman Leadership, and is the former CEO of PQ Corporation. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.
A Challenge Culture Is an Imperative for All Organizations
Article originally published in the Philadelphia Business Journal on December 18, 2018
How many times have you sat in a meeting in which not one of the attendees challenged the prevailing opinion about the issue being discussed?
What is it about an organizational culture that prevents at least one lone-wolf independent thinker from expressing a counter opinion? Does the leader voice a negative reaction to a counter-opinion, rather than encourage the attendees to speak their minds?
Former chairman and CEO of Dunkin Brands Group Nigel Travis was in Philadelphia recently to speak about the importance of establishing a challenge culture within organizations in which input from employees is welcomed. He was interviewed by thought leader and event host Karin Copeland about his recent book, “The Challenge Culture,” in which Travis shares the importance of leaders nurturing this type of culture.
Copeland asked Travis, “What is a challenge culture, and why is it so important in every organization?” Travis responded, “It’s a culture in which direct reports can challenge their bosses … and colleagues can challenge each other.”
Travis said, “A challenge culture is … [one in which] people have a say, where people understand what’s going on. The results are great business solutions and total buy-in, because people feel involved [and respected].”
A challenge culture is needed to ensure that the brutal facts of reality are recognized to arrive at the best course of action, and to create a sense of ownership in that course of action by those involved in its execution.
Of course, that culture needs to focus on attacking business issues and not people, so that challenging others doesn’t destroy working relationships. Respecting civil discourse is a key determinant for success in a challenge culture.
Working in a challenge culture requires individuals with the self-confidence to hear criticism of their ideas and not take it personally, and to have the ability to challenge others.
Leaders must listen to their experts, and not dismiss their input. Not doing so is at their peril. In August 2015, I wrote an article headlined, “How an independent thinker unearths brutal facts of reality,” in which I described how NASA ignored the Thiokol engineers who warned against the launch of the space shuttle Challenger due to cold weather conditions that could result in the failure of the shuttle’s solid rocket booster O-rings.
Challenger was launched on Jan. 28, 1986, and the O-rings failed 73 seconds after launch, resulting in the tragic loss of the lives of five astronauts and the shuttle.
That article also described the culture within the Rogers Commission (named for its chairman Willian P. Rogers), established to investigate the reasons for the Challenger disaster. The following contains excerpts of that August 2015 article.
The Commission found that NASA, concerned about their inability to meet an unrealistic launch schedule that might jeopardize their Congressional funding, did not face the brutal facts of their reality – launching in cold weather conditions would expose the Challenger to an unacceptably high level of O-ring failure risk.
Physicist Richard Feynman was the lone-wolf on the Rogers Commission. Feynman clearly saw that two issues within NASA were lack of communication and an understanding of risk. Through his own work independent of the Commission, Feynman learned that NASA management felt that the likelihood of shuttle failure was one in 100,000, compared with NASA engineers, who felt that the likelihood of failure was one in 100.
Feynman was the lone-wolf on the Commission, wanting to probe an organizational culture in which there was such a large disconnect between management and their technical experts.
Feynman was at odds with Rogers on many issues during the investigation, and when Feynman learned that the final Commission report would not focus on the issues he felt were key to the loss of the shuttle, he decided to write a minority report. If it wasn’t for Feynman, these issues within NASA might not have been identified and addressed, perhaps leading to future shuttle disasters.
So, how do organizations ensure that the brutal facts of their reality get addressed? It takes the leadership of the CEO to nurture an environment that values a challenge culture as advocated by Nigel Travis.
In the words of renowned Brazilian novelist, Paulo Coelho, “If you want to be successful, you must respect one rule: Never lie to yourself.” Leaders, remember this when one of the independent thinkers on your staff reminds you to face the brutal facts of your reality.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com. Follow Silverman on LinkedIn here and on Twitter, @StanSilverman.
Tone at the Top & Culture Are Mission-Critical to All Organizations
Article originally published in the Philadelphia Business Journal on August 7, 2018
The success of all organizations depends on how well their mission-critical systems operate. Technopedia defines mission-critical systems as those “essential to the survival of a business or organization, [such as sales, operations, cash management]. When a mission-critical system fails or is interrupted, business operations are significantly impacted.”
Tone at the top and culture are also mission-critical. To realize their importance, one only needs to look at the failure of tone at the top and organizational culture that resulted in scandals at Wells Fargo, Volkswagen, Uber and Theranos to name a few, to see the damage done to these businesses, their customers, employees and the reputations of their leaders.
Tone at the top is set by the CEO and the senior leadership team and reflects the ethical climate of the organization, while culture reflects how employees within the organization deal with each other, customers and other stakeholders. As the leader of your business, ensure that you set the right tone and culture. They become the behavioral norms of your employees.
Both tone and culture determine whether employees will trust their leaders and their fellow employees. Trust is built on honesty, ethics and integrity. Without trust, you can’t build a high-performance team. Without trust, you suffer high employee turnover and loose the talent you need to achieve business success.
Employees should be focused on growing the business and exceeding the expectations of their customers, and not worry about being undermined by their boss or a fellow employee.
If tone and culture are so important, why do employees of some organizations report that the tone and culture are poor, a sentiment periodically expressed to me?
One of the responsibilities of the board of directors of every company is to monitor the tone of the CEO, as well as the culture they nurture within the organization.
In an article in the July 2018 issue of the Journal of Accountancy, Sabine Vollmer wrote, “Boards that prioritize corporate culture, watch for red flags and set clear expectations will encourage ethical behavior throughout the company.”
Vollmer said, “Research over the past 20 years has continued to underscore that integrity drives performance. Corporate culture and tone at the top are considered key drivers of ethical behavior, but boards of directors often devote little time to the topic.”
So, how can a board determine whether the tone and culture are right within an organization? The reports coming into the employee hotline are a good indication. Employee hotlines, mandated for all public companies, are usually monitored by the audit committee of the board. All organizations should have hotlines. What the audit committee does with the information reported through the hotline determines how serious the company is about tone and culture.
In the case of Wells Fargo, employees used the bank’s confidential ethics hotline to report a toxic culture and fraudulent, unethical activity within the community banking division, led by Vice President Carrie Tolstedt. As many as 3.5 million bogus customer accounts were opened over five years to meet very aggressive growth goals.
In a Jan. 17, 2017 CNN Money article headlined, “Wells Fargo admits to signs of worker retaliation,” columnist Matt Eagan wrote about the employees who trusted that their reports of fraudulent activity to the confidential ethics hotline would be investigated. A few of these employees faced retaliation and were terminated.
After an investigation of the ethics hot line terminations, Tim Sloan, who replaced John Stumpf as the CEO of Wells Fargo, said, “Anything more than zero is too large.”
Did Stumpf, the Wells Fargo CEO at the time, know that these employees were terminated? This is a very serious failure of tone at the top and culture.
In an April 10, 2017 Wall Street Journal article headlined, “Wells Fargo Slams Former Bosses’ High-Pressure Sales Tactics,” columnist Emily Miller wrote that the independent report commissioned by the Wells Fargo board “portrayed … [Stumpf] as a tone-deaf leader who protected an irresponsible lieutenant [Tolstedt] and worked for board members who didn’t keep the pair in check.” Glazer wrote that “Ms. Tolstedt … was singled out 142 times in the report for setting the tone in the troubled retail-banking unit.”
The resulting financial and reputational damage to Wells Fargo were in the billions of dollars. It is apparent that the board did not consider tone and culture mission-critical to the company.
All boards need to put a process in place to insure they are aware of the tone and culture set by the CEO and treat it as mission-critical. CEOs need to know that their performance, in part, will be assessed on their tone at the top and the organizational culture they nurture.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.
Lessons Learned from the Philadelphia Starbucks Incident
Article originally published in the Philadelphia Business Journal on May 7, 2018
On May 2, the City of Philadelphia announced that it had reached a settlement with the two African-American men, Donte Robinson and Rashon Nelson, who were arrested on April 12 at a Starbucks in the up-scale Philadelphia neighborhood of Rittenhouse Square.
Within minutes after their arrival, Robinson and Nelson were asked if they would like to make a purchase. When they indicated that they were waiting for a colleague, the café manager called the police who arrested them for refusing to leave.
Under the terms of the settlement, Robinson and Nelson will each receive one dollar from the City. Their attorney has waived his fee. The City also committed to a $200,000 program to introduce Philadelphia high school students to careers in entrepreneurship.
Starbucks has also reached a settlement with Robinson and Nelson, the financial terms of which have not been disclosed. Both parties agreed to work together to address the issue of unconscious racial bias. Starbucks also offered to pay for Robinson and Nelson to obtain online degrees through the Starbucks College Achievement Plan at Arizona State University.
The arrest of these two individuals caused an uproar and accusations of bias and discrimination against black customers. In a public statement, Starbucks CEO Kevin Johnson described the incident as a “disheartening situation … that led to a reprehensible outcome.”
Quoting from the Starbucks Value Statement, “With our partners, our coffee and our customers at our core, we live these values … creating a culture of warmth and belonging, where everyone is welcome.”
This is Starbucks’ business model. It is not unusual for people to wait before making a purchase until their friends or colleagues arrive.
So, what are the lessons learned from this incident?
Practices are just as important as policies, and must be applied in a consistent manner
Starbucks has a no loitering policy, as indicated by a photo of a “No Loitering” sign in one of its cafés, published in Heffx. When should that policy be invoked, and are all people treated in the same manner?
Given Starbucks’ mission statement and business model, improved training is needed so employees understand when the presence of an individual within a café becomes loitering and when calling the police is justified. As a result of this incident, this is especially important moving forward.
Always work to defuse situations, rather than inflame them
Philadelphia police commissioner Richard Ross apologized for the arrests of Robinson and Nelson, stating, “While … [it] is apparently a well-known fact with Starbucks customers, not everyone is aware that people spend long hours in Starbucks and aren’t necessarily expected to make a purchase.”
In many situations, the police exercise discretion in how they handle incidents and defuse situations. Perhaps in this case, had they probed for additional information from the café manager and patrons, they would have learned that it is not a regular practice to ask individuals to leave within minutes after arriving, and the entire incident could have been avoided.
The CEO needs to be front and center in these types of situations
Credit goes to Starbucks CEO Kevin Johnson for promptly responding to this public relations crisis by traveling to Philadelphia to apologize to Robinson and Nelson, and engaging in dialogue with city leaders on how to move forward. He certainly limited the reputational damage to the company by doing so. A lesson for all CEOs.
This incident could have been avoided had everyone involved exercised common sense and good critical judgment. This should be a major criterion for hiring anyone to a position where lack of these traits can lead to significant adverse legal and reputational issues for any organization.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.
You Are Competing Against Apple (And May Not Even Know It!)
Whether you are in a consumer business or B2B, the quality of your customer service experience with your company is key to generating loyalty and referrals. Many businesses believe that they are good at customer service, but that level of good may not be good enough.
To many customers, their expectation of good service is based on the best service they have received from anywhere. For example, if they have an iphone, they have Apple’s level of customer service in mind as a standard when they deal with you, too. Therefore, even if you are in a totally unrelated industry to Apple’s, customers’ expectations are high because they are not just based on your company’s service quality or even on your industry standards, they are comparing your service with a global expectation of the best experience they received anywhere. Relative to Apple, this means that they want easy access to your “geniuses”, a relatively quick fix or at least quick attention to the issue, and a smiling personality to handle everything.
Achieving this, may be less difficult than it sounds. It starts with refocusing your perspective away from your own standard to the broader one. Explore service you receive from every company and take note of especially outstanding experiences.
Ultimately great customer service starts with leadership setting the tone at the top. Leadership must set an example of quality and not waver from setting a high bar. Leadership then must support their customer service initiative by training everyone in techniques and expectations, as well as giving people authority to solve problems for peak customer satisfaction, reminding them that they are competing against Apple every day.
How To Grow Philadelphia’s Economy By Revitalizing Manufacturing
Article originally published in Philly Biz in the September 2015 issue.
At one time, Philadelphia was the world leader in manufacturing. Since World War II, that dominance has diminished to the point where today, manufacturing makes up only about five percent of the region’s economy. According to a Brookings Institute study that ranks the 300 largest metropolitan areas by GDP per capita and job growth, the Philadelphia Metropolitan Area ranks 250th out of 300 and is one of 60 in that group that has been experiencing negative growth.
The Philadelphia economy of today is largely based on sectors such as education, healthcare and government, the so-called “eds, meds and feds” triumvirate. In recent years, these sectors have experienced flat or slow growth and face limited growth potential in the immediate future. Therefore, the questions must be asked: Can revitalizing a fourth sector, manufacturing, grow the region’s economy? What would it take to stimulate the growth of manufacturing in Philadelphia?
The answer to the first question is obviously “yes”; revitalizing the manufacturing sector would grow the economy because at five percent, this sector is still significant and offers the potential to become the economic engine that drives growth in other sectors. For example, growth in manufacturing would also grow jobs, real estate values, tax revenues to regional governments and many other benefits.
The answer to the second question about what it would take to revitalize manufacturing, is a bit more complex. To revitalize manufacturing requires focus, priority and commitment from a number of diverse groups. They will need to take a “long view” and weigh the potential benefits they can bring to their individual groups, to the region at large and to future generations. We believe that all groups will reap significant benefits from revitalizing manufacturing.
A key reason for making a manufacturing revitalization argument is that Philadelphia already has at hand many assets which can support the revitalization of manufacturing. These assets just need to be focused on achieving the goal of revitalization.
The Philadelphia region is located in the middle of the northeast market of the U.S. and is within a few hundred miles of about 50 million people, nearly 20% of the U.S. population. Philadelphia is a port city with access to U.S. and world markets. The city has a highly developed rail and highway system for moving raw materials and finished goods. The close proximity of Marcellus Shale natural gas and other energy resources gives Philadelphia additional unique features compared to other regions. The city also has an above average educated population and features the second highest number of institutions of higher education in the nation. Access to capital is also an advantage in that some of the largest financial institutions in the world are located within 100 miles of Philadelphia. In many respects, revitalization of manufacturing is the “low hanging fruit” of options available which can put our region on a growth track.
With Philadelphia’s unique advantages, what needs to happen to grow manufacturing? It is interesting to note that benchmarking those American cities that are most successful in growing their manufacturing sectors may not actually be that instructive, in that much of their growth comes from the auto industry growing in or relocating to those regions. Instead, we recommend looking within our region at some of the successful or potentially successful manufacturers and/or categories that are currently performing well here. These include larger manufacturers, such as those involved in energy production, as well as some of the smaller manufacturing industries, such as craft brewing, medical device manufacturing and others. How can make them even more successful and also stimulate the growth of additional manufacturing this area?
Ultimately, we believe stimulating growth in manufacturing is a leadership issue. The catalyst is the point when leadership concerns itself both in generating today’s results while also leaving a lasting legacy of accomplishment. To achieve this, our diverse group of leaders will need to cultivate a leadership culture such that their diversity of skills and experience will blend together behind this singular initiative. A leadership culture is an environment where leaders feel empowered and individually responsible for their activities, while also working together for the success of a larger goal or vision.
Such diverse segments as finance, unions, media, energy, government and others must decide to be committed to revitalizing growth in manufacturing as a top priority and then work within each of their areas to make it happen.
To accomplish this, leaders will need to redirect their outlook. Instead of competing to get a bigger share of the pie, leaders must work together to make the pie larger. These diverse groups must create synergies that will enable the Philadelphia region to compete and win in the world.
Ultimately, leadership must view revitalizing manufacturing as a legacy initiative. What kind of an economy and community will they grow for the future resulting from their actions today? Our region’s leadership has the power to own this opportunity and to nurture the revitalization of manufacturing to build a stronger economic base that will enhance the lives of our generations to come.
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Stan Silverman is a writer, speaker and advisor on effective leadership. He is the Leadership Catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com
Leo Levinson is CEO of GroupLevinson Public Relations. He is a writer, speaker and marketing and brand strategist. Follow: @leoadman, Connect: Leo@grouplevinson.com Website: GroupLevinson.com