The apology this week from Newcrest boss Sandeep Biswas for his autocratic style of leadership demonstrates the pitfalls of appointing change agents to fix troubled companies, experts say.
It also underscores the need for directors to know exactly when they need to pay particular attention to culture – and how to go about it.
“There is no question, when I joined Newcrest, it needed a very direct style of management,” says Sandeep Biswas. Bloomberg
For starters, boards have got to do more than rely on messaging from the chief executive if they want to uncover behavioural problems, warns Colin Carter, a former director of Wesfarmers and Lendlease, and a veteran of board performance reviews.
Biswas was asked to be a change agent when he was appointed chief executive of the nation’s biggest gold miner in 2013. Newcrest was in bad shape. The gold price had fallen sharply, making it harder to service debt, regulators were investigating a disclosure scandal, and its most successful mine was reporting huge impairments and losses.
Newcrest needed someone who would take the tough decisions. Biswas did, and thanks to a stronger gold price, oversaw improved profits, lower debt and a resumption of dividends.
“There is no question, when I joined Newcrest, it needed a very direct style of management,” says Biswas of his early years in charge. “Very command and control.”
The lesson for directors of underperforming companies is to recognise the tension between the desire to install a chief executive who will take the tough decisions required to overhaul the business, and the need to keep staff on board, particularly in an era when employees expect leaders to collaborate and consult.
Tough-nut leaders may have been celebrated a few years ago, but not now.
I’ve been on boards where the relationship between the CEO and executives is terrible, but often the board is the last to know.
— Colin Carter
“There can be a cost that comes with brutally shaking the place up,” says a senior board adviser.
The challenge is to find a change agent who will make the hard decisions, but in an inclusive and consultative way.
“If you want well-rounded leaders, the board needs to check on their people plan,” the adviser says.
Those CEOs do exist, he insists, and can be found partly by asking prospective leaders about their plans to gain the trust of staff while they are implementing strategic change.
Knowing when to pay particular attention to culture is not rocket science, experts say. Any significant change at a company should act as a trigger for directors to consider the potential impact of those changes on employees.
“Don’t be blinded by the figures,” says an expert.
The first step is for directors to talk to staff below the CEO level, formally and informally.
Senior executives should be asked to attend board meetings and directors should observe their behaviour in those meetings for any sign that they are covertly seeking permission from the CEO.
Carter says CEOs who try to control the message for the board are one of his biggest warning signs.
“If a CEO doesn’t want their executive team in the boardroom with them, it is sometimes a sign of a control freak,” he says.
“I’ve been on boards where the relationship between the CEO and executives is terrible. But often the board is the last to know because the CEO manages the message upwards so well. It is harder for a CEO to control the full message if other executives are in the room.”
Directors should also have unstructured conversations with senior executives, who could, for example, be invited to board dinners. Visits to work sites and offices can also be part of the mix.
Employee engagement surveys – or rather, the trend in such surveys – should be reviewed, as well as exit interviews.
“[Even] if you have a good feedback system run by an independent organisation, you can still get bullshit, but when you include the exit interviews, if there are questions to be asked, they start to emerge,” Carter says.
The trick with engagement surveys is to keep them simple.
“A lot of those culture surveys end up gathering dust because they are too comprehensive,” says Carter. “You only have to ask four or five questions to discover if there is smoke.
“Questions such as: ‘Does your boss conform to what you believe are the values of this organisation?’ should be revealing.”
Directors should also ask for staff turnover trends. “High turnover in the HR area especially is a red flag,” says an adviser. “It might indicate signs of frustration.”
Another exercise directors should undertake is to talk to peers in the sector and ask what they are hearing about their own company. If there is a problem, there will usually be industry chatter.
Sally Patten edits BOSS, and writes about workplace issues. She was Financial Services of the Financial Review and Personal Finance editor of the AFR, Age and Sydney Morning Herald. She edited business news for The Times of London. Connect with Sally on Twitter. Email Sally at firstname.lastname@example.org
Patrick Durkin is Melbourne bureau chief and BOSS deputy editor. He writes on news, business and leadership. Connect with Patrick on Twitter. Email Patrick at email@example.com