Question 1. As a leader of an interim assignment with this client, what would you want to do next with the client?
The Interim is a mature senior executive with powerful reputation as a former corporate £500m turnover CEO.
Ignoring whether you would have followed the Interim’s steps and thoughts, and merely observing that it happened this way, what would you do next if you were the Interim or they consulted you as their mentor or boss?
Bill. Age 34. Group Managing Director (MD) leading 1600 employees of a £200m division of a £400m turnover PLC (Public limited Company. ie. a company whose shares are quoted on the stock market). The company was a stockmarket ‘darling’ which had achieved tremendous growth and profit improvement that had taken it from being a small ‘bit player’ to market leadership in a decade. On retirement of the PLC Chief Executive Officer six months ago, Bill was promoted to Group Managing Director of half the business with the 56 year old executive chairman running the other half and supervising Bill for a 2 year ‘probationary’ period that if he was successful, would result in Bill being appointed Chief Executive Officer (CEO) of the whole group with a £500k pa. remuneration package.
In the first meeting with the Interim Bill said :-
‘I need advice how to get rid of my chairman who is sending me crackers. We are hardly on speaking terms. He is a complete ego maniac. He virtually wants to run the company himself and get the credit for its fantastic results. Actually they are due to the CEO who retired 6 months ago but the chairman wants the world to believe its all due to him.
I can never have a productive conversation with him. He always wants “written detail” I tell him we should be talking at strategic level not petty detail but he just keeps going back to the same old conversations about “profit margins and numbers, and ‘wanting notice of meeting topics in advance so he can think about them before we meet! ”
‘I get really cross with him in the board meetings and the executive committee now. I get the executive team on one side before the meetings and tell them to back me up when I disagree with him. I argue and contradict him openly in the hope he will either shut up or resign’
‘Recently I have got so fed up with his negativity that I have stopped telling him what I want to do and have just been getting on with changes without him knowing’
Interim. ‘What type of things have you been doing without his knowledge? Are they matters that the plc board ought to approve?’
‘I suppose the board ought to approve them really but he blocks everything I suggest. Even if it goes to the board and they ask his opinion, he always takes the ‘its too risky’ line and they agree with him. I’ve taken on a new divisional Managing Director without going to the chairman and I’ve just told the executive team to set up a new manufacturing plant so we can launch a new product line’
Interim ‘ How much will that new plant cost?’
‘About £2 million but we’ll get that back from new sales within 2 years. It’s a new product line I have been pushing to do for two years, but the CEO wouldn’t do it either. I’ve been waiting for him to retire to get on with it’
Interim ‘Do you have actual authority from the plc board to spend that much on your own initiative?’
‘No. But it’s petty cash for us out of our normal expenditure of £300 million. It’s the only way to get anything done. By the time they hear about it, I will have the new sales coming in and that will prove the point’
Bill told me of other ambitious plans to change many of the main basic operations of the business, but that he was ‘having to fight very hard to move his Chairman into agreement’. Under questioning, Bill admitted his plans would cost the company circa £20m capital and would radically shift the business focus. Reluctantly he also admitted that if he was wrong, he could undermine the whole success of the business. ‘But all life’s a gamble’ he said shrugging his shoulders, ‘If we don’t adapt we don’t survive. We need to replace our winning lines. We need to change the direction of the business to broaden our base. We can’t ignore threats on the horizon. We need to launch a lot of new products to keep ahead.’
I asked him where he felt there were the threats on the horizon. His reply was vague and unspecific.
‘Well you never know what your competitors are doing until its too late. We are the lead player and they have to try to outsmart us. Sitting on our hands is just asking for trouble’.
I asked him what the trading projections were like for the next three years ahead if he made no changes in the business.
‘We couldn’t fail to make record profits because we have big new long term contracts.’
‘So if you do nothing but run the business efficiently for the next three years, you are guaranteed record profits?’ I asked. ‘But if you make the changes you want, the capital cost of £20m will definitely reduce the profits in the next three years?’
Reluctantly Bill agreed. ‘But we can’t rest on our laurels ‘
‘The next two years are your trial period that will decide if you get the job of CEO. Which do you think is best for you? That profits are at record levels or reduce?’
‘Well record profits would be best for me of course, but that wouldn’t be in the company’s best interests – to ignore future threats and do nothing’
‘Do the board agree with your plans that sacrificing record profits would be in the company’s best interests?’
‘Well no but I never get a full hearing because its clear the chairman does’nt support me’
‘Lets have a look at this from your board’s viewpoint. They have appointed the Chairman as the most senior executive and must have confidence in him. Is that right?
‘Yes but they don’t know how his bloody detailed mind is stopping things getting to the board’
‘So the board have trust in the chairman’s judgement? How long has he been in charge?
‘Who is your boss? The board or the chairman?’
‘If you and your boss disagree about policy and ask the board to decide, whose opinion do you expect the board to take, yours or the chairman’s?’
‘When I’ve tried that, they back him. He never supports me’
‘So, from your board’s viewpoint, they have to decide whether to back their chairman they have trusted for 10 years, or you who they have known for a few months?’
‘Well yes, but he doesn’t want to change anything! And I have a duty to do and say what I think is best for the company not just suck up to the chairman’
‘If you have told your chairman your views and he has rejected them, then you have done your duty to do and say what you think is best for the company haven’t you? And if he tells the board about your ideas and gives his opinion, he has done his duty hasn’t he? And if the board reject them, the board have done their duty haven’t they? But you seem to be saying that if your proposals are still not accepted, you then have a higher duty which is to disobey the plc board or continue to argue to get your own way? To be blunt, isn’t this a bit like you saying to them ‘I don’t care what you think. I’m right and I want my own way?’
Bill smiled ruefully. ‘Some of that may be true but I still think they’re wrong’
‘You’ve fought that battle Bill. Time to accept that your plc board of ten very senior executives with combined 125 years plc experience have made the best decision they can after listening to you with 6 months plc experience. You have had your say and its time now to gracefully get on with delivering what they want not what you want.’
Bill. ‘I see what you say. But I’m not prepared to kowtow to the chairman when I think he is wrong. I’m still going to say and do what I think is right. That’s what I’m paid for’
I realised that at this point Bill was so entrenched in his views that he would not be prepared to accept any contrary ‘advice’.
‘OK. I said. ‘Lets leave that for now and look at the other matters’
These were other topics we discussed. His previous job had been as Managing Director of a division within the group which he had grown from £25m turnover to £100m turnover, taking profits from £1m to £3m pa. He disclosed that he had deliberately built a ‘intellectual; superiority ethos’ in his own division and that the other business divisions had disliked the superior image his team conveyed. His team had believed themselves to be the best in the organisation and considered the other divisions to be inferior – and showed it to them. He believed that creating this type of corporate pride in his division was a healthy thing to do and had helped to contribute to the success they had generated. He wanted to introduce that ethos into the whole plc now. That would mean former competitive divisional colleagues adopting the new ethos or ‘getting out’.
I questioned Bill further to check his logic and the depth of experience he had given to the topics. Was he sure he was right to want to radically change a winning strategy – and that the board was wrong? Also was intellectual superiority really likely to ‘win friends, colleagues and customers’? Or could it be judged as naively arrogant, insensitive and fear based? Did a really secure executive need to risk offending anyone? If strong and assured, would not an executive want to encourage corporate equality and modesty? How long had the Chairman been in the job and what had happened to the business in that period? Had Bill proposed any of his changes to the CEO who had recently retired and if so what had he said?
Reluctantly, Bill agreed that the Chairman, who was age 56, had a superb track record, having previously been Chief Executive of a plc and several other businesses, all of which had been very successful. Bill agreed the company had been incredibly successful with turnover going from £8m to £400m pa in ten years under the chairman’s authority. However Bill claimed the success was more due to the recently retired CEO than to the Chairman. On challenge, Bill agreed, rather shamefacedly, that the CEO had only been in charge for the last 3 years and that the entire strategy for the business had been the Chairman’s brainchild 10 years ago. ‘But he‘s past his sell-by date now’ Bill hastened to add. ‘He’s not up to date with the new challenges the business is facing’. Bill eventually acknowledged that the CEO had also disagreed with Bill’s proposed changes. ‘He told me they were hair brained. But he was just holding his job down until he retired. He didn’t want anything reducing profits before he went’
In further discussion, Bill’s could not produce any convincing evidence (to me) that justified the extreme risk his strategy was proposing; viz, to spend £20m capital, reduce next year’s £20m annual profit to £14m, cut the shareholder’s dividend after 9 successive increases, and change the whole basis of operation and product range to meet an undetermined theoretical future threat.
At this point as Interim what do you think about the situation and what would you do next?