BP: Lessons in Leadership

On 19th June, CBS news reported that with oil still gushing into the Gulf of Mexico, 61 days since the Deepwater Horizon explosion and the death of 11 workers; Tony Hayward, the (current) CEO of BP was seen relaxing, sailing his yacht in a race around the Isle of Wight (off the south coast of England).

This is just a few days since Mr Hayward sat in front of a US congressional committee, on 17th June, where he was questioned for over five hours. Now assuming that Mr Hayward had been advised by his legal team to give one of two obligatory answers, firstly “we await the results of the investigations before rendering conclusions” and secondly, “I was not involved in the decision making process” - one has to wonder why he bothered turning up to an event that was going to make him and BP look lacklustre at best and incompetent and uncaring at worst? What was even more questionable was when asked when the investigation would be completed, Mr Hayward didn’t have an answer.

Congresswoman Betty Sutton from Ohio probably stated it best when she told Mr Hayward that his lack of answers showed a real detachment and disconnect with the situation – which Mr Hayward denied (and then went sailing two days later).

Now, there are a lot of opinions as to what is really going on and who’s to blame; and this is to be expected when one doesn’t have all the facts – but what is clear and undeniable is that this is both a human tragedy and an environmental disaster.

So where is the leadership? Can you imagine Mr Hayward’s reaction if, at a time of crisis, a director or manager of his, flippantly, told him; ‘oh, sorry boss I don’t know, I wasn’t involved in the decision making process’ or ‘I’ll render conclusions when I get results from an investigation I’m running with no dates or deadlines’. This would be tantamount to incompetence, with serious personal ramifications.

The press talk about PR disasters and BP ‘bashing’, but Mr Hayward is the CEO of a global organisation and shouldn’t have to be advised what is and isn’t good PR for himself and the organisation – if that is the case, BP should seriously look at their recruitment and succession planning policies for executive appointments. In any organisation, and especially at a time of crisis, the CEO must be seen to be leading from the front - that, surely, is what they get paid million dollar packages to do?

These issues revolve around the core principles of corporate governance (including social responsibility and business ethics), risk assessment and leadership. During his grilling in front of the congressional committee Mr Hayward stated that since he became CEO, ‘he had made safe and reliable operations his first priority – making significant changes to procedures.’ Which begs the question, what was BP’s top priority before Hayward became CEO? The true test of any organisations leadership and corporate culture is how they handle a crisis and BP, in this instance, are falling well short of setting the right example, since the image that Mr Hayward and BP are creating is that they are either oblivious to public opinion or don’t really care.

It’s been two months since the Deepwater Horizon tragedy, on 20th April, and what we need to see is visible and effective leadership. When it comes to organisations that impact the environment we are all, in some way, investors and shareholders in their future, (since their actions can significantly impact our future on this planet) – hence, the world has a right to demand answers and to see effective leadership 60 days after the event.

The 2010 World Cup: What Can Business Learn?

With the FIFA World Cup starting last Friday, 11th June, we conducted a small survey of 100 young adults between the ages of 16 and 18 and asked them two questions; (1) who is your favourite football player?; and (2) who is your favourite business leader? 97 were able to tell us their favourite football player and only 5 their favourite business leader, (which included their dad and Colonel Sanders).

What was particularly interesting was that all 100 were happy to discuss football, talking about teams, players and showed real excitement about the World Cup. When we discussed business and leadership, it was as if they were being starved of oxygen (you know the look) and either, their eyes glazed over or their mouths hung open, or both – there was little, to no, interest.

It shouldn’t be surprising that so many youngsters don't have any business ambition, when there are so few role models from business for them to be inspired by. Where are the inspirational leaders and why aren’t they being branded effectively to inspire the youth of today to take an interest in business.

Even forgetting the leadership aspect, where are the younger generation being inspired by business at any level – where is the branding, the attraction, the inspiration.

Football creates an interest in children at such a young age, where many aspire to compete at the highest level and some just enjoy the team involvement and the occasional successes. They become ‘fans’ at a young age, supporting their side and idolising their favourite players, being inspired by what they say and do - (the good and the bad).

Is there any similarity in business? Well, yes, there should be. Isn’t the ‘fan’ the potential customer, investor and/or employee of the future, someone who is inspired by an organisation, their products and services, at a young age; interested in what they do; and inspired by their leaders. Isn’t this the kind of branding a company wants to develop with the youth of today – creating a pool of potential ‘fans’ and ‘players’ for the future?

Organisations need to re-engage with the youth of today to inspire them; showing them that there are interesting careers and phenomenal people in business that have stimulating and interesting careers comparable with any football star. Also with the business career that you love, you don’t have to retire around 35, because you’re too old.

Pele, possibly the best football player of all time, reminds us all that “success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing or learning to do.”

So let the inspirational leaders of today put the passion back into business and reignite the ambition of our youth and actively build a better business community that attracts back the ‘fans’ and creates the ‘players’ of tomorrow.

Putting the 'Good' back into Corporate Governance

Corporate governance has lost a lot of its credibility with the seemingly constant flow of corporate scandals from around the world especially when, for many years, these same organisations were revered and admired by many and their executives appeared on the front pages of the Wall Street Journal, Fortune and Forbes magazines, (to name a few), as the champions of industry.

In fact, as Indrarini Laksmana mentions in a 2008 article “the rise of recent corporate scandals has focused considerable public attention on the role of boards of directors in corporate governance. McKinsey & Company's global investor opinion surveys (2000 and 2002), for example, report that institutional investors perceive board practices to be at least as important as financial performance when evaluating companies for investment”, (p.1147).

Even though these scandals are in the minority and though they create negativity and uncertainty around the real benefits of corporate governance, we must be grateful that they have been uncovered in the first place. So it doesn’t mean that corporate governance is failing, in fact the opposite – as the main purpose of corporate governance is to oversee and bring corporate boards to account, through whatever means necessary.

So maybe there is a light at the end of the tunnel, as the media take on a more informal oversight role, giving greater attention and focus to identifying corporate fraud and other scandals – some of which have been going on for years.

Enron is a good case in point, as Kathleen Brickey (2008) explains “the Enron fiasco came close to being one of the ‘biggest failures in financial journalism.’ One of the most perplexing questions is why the financial press was asleep at the switch when Enron collapsed. Why was the news so late? How could the seventh largest company in the United States melt down in a mere 24 days with so little forewarning? And how could the Houston Chronicle - whose headquarters were only a stone's throw from Enron's - come so close to missing the biggest business story of the year? There were clues to be found. In a March 2001 Fortune article Bethany McLean raised what, in retrospect, should have been a provocative question: How does Enron make money?” (p.626).

Having been shaken up, the business community and media are much more vigilant now in respect of finding and eradicating poor corporate governance and are less sensitive to emotive topics like, potential fraud; executive pay and/or bonuses; unusual shareholder dealings or transactions; or irregular operational decisions; that as Ragothaman and Gollakota (2009) explain may “result in an overall destruction of the inherent value of an organisation”.

One way organisations can improve their governance is to appoint quality independent non-executive directors, who bring experience, knowledge and/or networks to the board. In doing so they also bring a form of impartiality and vigilance, where they can oversee key governance issues that may, in some instances, be slightly contradictory to the executive board, especially when they are pressurised with short-term operational or shareholder needs.

The benefits of good governance has been well researched and documented - hence one should be suspicious of any organisation that doesn’t want to embrace these basic principles of governance and oversight. Ragothaman and Gollakota (2009) completed a study as part of their research and concluded that “like many other governance studies, this study indicates that ‘good’ boards result in better firm performance as measured by ROA and market value of common equity. This suggests that good boards focus on the needs of shareholders and the efficiency with which a firm is managed,” (p.317).

So isn’t it time that you put the ‘good’ back into your corporate governance practices?

References.

Brickey, K. F. (2008). From Boardroom to Courtroom to Newsroom: The Media and the Corporate Governance Scandals. Journal of Corporation Law, Vol. 33, Issue 3, p625-663.

Laksmana, I. (2008). Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices. Contemporary Accounting Research, Vol. 25, Issue 4, p1147-1182.

Ragothaman, S. and Gollakota, K. (2009). The Effect of Firm Characteristics on Corporate Governance: An Empirical Study in the United States. International Journal of Management, Vol. 26, Issue 2, p309-319.

Finding the 'Real Value' Behind the Simple Job Description

Peter Grant (1997) found that “many employees complain that their job descriptions do not accurately reflect the expectations management has of them. In a study, 200 non-managerial employees, both permanent and temporary, were surveyed in 60 different organisations. 85% of them said that their job descriptions were quite deficient as a tool for helping them learn what they were supposed to do for the organisation. Most said their job descriptions were incomplete, vague, or both. About 70% said that key elements of their jobs were left out of their job descriptions,” (p.9)

The job description is extremely valuable to all organisations, regardless of size and maturity, but only if developed and implemented correctly. The job description links directly to the corporate strategy, through the training and development of the human resource, performance management, performance appraisals, succession planning and impacts directly on the future growth of the organisation.

A job description goes way beyond a simple list of tasks and should always include;

1. A clear description of the primary objective of the job function.

2. A list of the key accountabilities of the job function; where these must be clear and unambiguous.

3. The key indicators that the incumbent will use to measure how successfully they are performing their job and how effectively they are managing their areas of accountability - where their key indicators are directly linked to the strategic objectives of the organisation.

When developed correctly each employee, at all levels, will clearly own and understand the impact they have on the overall strategic goals of the organisation, through their key accountabilities and key indicators.

An effective job description will always be supported by a person specification, which clearly identifies the core skills and experience that is required to perform the job function at a satisfactory level. The skills and experience can be managerial, behavioural and technical, and will highlight the ‘minimum’ qualifications (both formal and informal) and specific practical experience required. Thus the person specification not only aids the recruitment function, but links to career development and succession planning.

Job descriptions are developed from the top down, starting with the Board of Directors and rolled down through the organisation. This simple task, if done well, will often highlight immediate development needs throughout the organisation, even at the Executive level, where the incumbent does not have some of the specific skills required for their current job. Rather than seeing this as a ‘threat’ it should be seen as an ‘opportunity’ to make sure all your people, at all levels, have the skills needed to complete their functions efficiently – guaranteeing in the process an immediate improvement in organisational performance and growth.

On a point of caution, there is often a temptation when reviewing job descriptions, to look at what the person, in the job, does now – and justifying it – rather than looking at what the ‘job’ should entail and how this might change in the short-term. You then develop job descriptions and person specifications around what you want from the job, rather than what you have in the person.

As can be seen, developed correctly, the ‘humble’ job description, supported by a well thought out person specification, directly impacts key elements of organisational performance, including;

Corporate Strategy
Performance Management
Appraisals
Career Development
Succession Planning
Recruitment
Training and Development
Organisational Development

Mike Marino (2005) suggests that “job descriptions are an integral part of staff management, yet tend to be glossed over, probably because many managers simply don’t have an accurate understanding of their importance and uses,” (p.26). So it might be worth finding those job descriptions you have somewhere, blowing off the dust, and viewing them in a new light. A well developed job description will have an immediate impact on organisational development.

References

Grant, P.C. (1997). Job Descriptions: What’s Missing. Industrial Management, Vol. 39, Issue 6, p.9-13.

Marino, M. (2005). Understanding the importance of job descriptions: How to put them in writing. Public Relations Tactics, Vol. 12, Issue 2, p.26.

(This topic was requested by Bobbi Cochius at Global Warming Pty Ltd)