Fred Crawford, former CEO and senior vice chair, board of directors, AlixPartners, will be speaking at The Boardroom Summit, April 23-25, 2018 in New York City. The event will provide corporate board members with an unparalleled opportunity to share ideas and exchange solutions to today’s greatest board leadership and governance challenges. Click here to register.
Q: What would you say to board members who believe culture is a non-economic, “soft” issue?
A: I’m answering this through the lens of someone who ran a company for 10 years and has been involved in many large corporate transformations. Through that lens, I would say culture is hard to quantify but critical to economic performance. Why do I believe that? The reality is that people at the second, third and fourth levels of the organization are constantly looking for clues as to how to be effective leaders—and not just what we say is important but what is actually important as leaders. And in some cases, actions speak louder than words.
When a culture isn’t functioning well, misalignment occurs among the top executives, which trickles down into the organization and impacts performance because actions aren’t coordinated, so people aren’t moving in the same direction. Furthermore, in the absence of alignment, dissension often exists at the top, which also trickles down into the organization and has people working at cross-purposes.
So, while culture is hard to quantify, as an operator, I can tell you it’s a critical determinant of financial performance.
Q: How can an outside investor tell if a board values talent development?
A: When I look back across my client experiences personally, as well as the firm’s range of experiences, I would say the existence or absence of a succession plan is a leading indicator. For example, a health crisis occurs for an executive, be it a CEO or direct report, and there is a gap. There is no plan in place to address the loss. On the other hand, when you look at some of the world’s best-run companies, you will see a multi-year succession plan taking shape at all key executive positions. In some cases, the succession plan is articulated during a transition. But at other times, you can simply see that it’s a priority by the way executives are being trained for the next level.
Therefore, one way investors can assess talent development would be to analyze the existence of either an explicit succession plan or succession planning activities that tell investors the company is ready.
A second way would be to look at the track record of internal promotion to key positions. If a firm doesn’t value talent development, it likely needs to recruit laterally from outside the organization. Whereas, if you see a stable and internally groomed executive suite, that would be a sign that the organization has built an infrastructure and has a plan for developing and promoting executives.
Q: The crisis at Uber uncovered a flawed tone at the top. In such a situation, how would you advise the board and executive leadership to get the company headed in the right direction?
A: Given what we do as consultants, a fair percentage of our work is with firms that find themselves in difficult circumstances. I’m not an expert on the fallout at Uber, but obviously I’m aware of it.
What I would say is when you’ve got a similar crisis on your hands, the board should consider whether the situation would benefit from the retention of an outside independent adviser that can, with free reign and under sponsorship of the board, investigate the company culture to understand what about it could give rise to that kind of behavior.
Once the adviser has a solid understanding, it can guide the board on putting prophylactic measures in place to contain the damage and help the company move forward.