Re: A Safety Case LO2425

John Conover (john@johncon.johncon.com)
Wed, 16 Aug 1995 00:03:53 -0700

Replying to LO2417 --

Andrew Moreno writes:

> Clyde Howell wrote:

>> The president of the company, in the face of much information showing the
>> positive effects of this approach elsewhere, has chosen to stay with the
>> old system.

> Yeah, in my post on Geof's case study, I wrote some stuff with the
> assumption that the president was accountable to the customers. I think
> that assumption is false for a lot of organizations.

It has been my experience that any change of the company's operational
agenda must not only be approved by the BOD, but must actually be a
chartered direction and policy from the BOD. Naturally, this probably does
not hold true for a privately owned "mom & pop shop," but in any public
company, it is usually the case, (unless, for example, the president is
very skillful, and on the board representing minority shareholder rights,
or a majority shareholder, a "bail-out king," kept the negatives, married
into the family, etc.) Otherwise, there are some unfortunate realities of
power and authority since the president can be bounced at a moments
notice-for example, after a conference call of the BOD. (Executive
contracts have such "operational flexibilities," written in.) Generally,
the shareholders are very conservative financial folks, that will only
commit to change as a last resort, when there is nothing, financially, to
loose if the change fails-usually after it is too late, IMHO. It is not a
question of how much money is made, or how many customers are satisfied,
it is avoiding, at all costs, loosing money-in this case, shareholder's
equity, which the BOD is legally chartered to protect. (So are the
corporate officers, for that matter-you are held accountable for any risk
taken, forever.) In point of fact, it is not at all uncommon for someone
to be elected to the BOD with the directive that the service provided will
be specifically for the maintenance of the status quo. ("Dilution of
power" are the buzz words for it-"consensus or alignment of direction on
the BOD" is another.) This situation has been aggravated by the large
amount of corporate stock held by the pension funds (financial
institutions to the max,) in the US-litgations against the BOD or
CEO/President of companies is a legal growth field these days-and a down
market is no excuse. I know of no one on a BOD that does not have
indemnification/insurance to the max, these days.

So the law protects customers, (who hold the president accountable for
integrity of operations, etc.,) and shareholders, (who hold the president
accountable for cost control/minimization and profitability/equity value,)
with the executive management in a conflict of interest-damned if you do,
and damned if you don't scenario. The president will usually, (but not
always,) operate in these scenarios, by presenting to the BOD a list of
alternatives, and side with the BOD's decision, (maybe with some
"politic'ing" behind the scenes,) thus mitigating personal risk. In case
of a litigation, the president may be named, (probably) but will have the
company of the BOD. If the decision is made unilaterally by the president,
(which the president has authority to do, usually,) the president may be
abandoned to fate, (which the BOD has authority to do.)

> The president is usually accountable to the shareholders or possibly the
> board of directors. Since any initiative for change will ultimately affect
> the shareholders or BOD, I think what's needed is a person, possibly an
> outside consultant, who is committed to operating from a set of safety
> based values and can shmooze with the shareholders and BOD and convince
> them to at least consider the effects of the change. The approach will
> need to be customized to the shareholders and BOD's values. IE,
> credentials, track record, etc. Once they consider the effects, maybe they
> can be persuaded to (the shareholders and BOD) accept a set of safety
> based values.

I would tend to agree, but really what you need is a "consensus maker,"
IMHO, that can "operate" within management and the BOD, both. It has been
my experience that the reason that outside folks are called in is that the
BOD has become "fractionalized," or there is a "difference of strategic
direction" between management and the shareholders, as represented by the
BOD. (In other words, things have broken down into personality disputes,
making "alignment" impossible.) Making consensus in this environment is
tough since all parties want your alignment, (usually to "prove" their
POV,) and any alignment you make will, eventually, come back to haunt you.
Most financial institutions that invest in a company will require that the
president/CEO have excellent skills in "consensus making." It will be a
prerequisite. If you look at successful companies, usually, there is a
"consensus maker" that worked behind the scenes to "make things happen."
Pat Hagerty(sp) of Texas Instruments is one that comes to mind, The late
Bob Noyce of Intel is another.

> Of course, I'm writing from a theoretical bases here. To be successful
> requires more skills than I have. One of the important things to note is,
> sometimes it's best not to go in the front door. Sometimes it's necessary
> to find alternate routes which lack the usual obstacles,(in this case
> beliefs and behaviours revolving around maximizing profit or the
> bottom-line.)

> One of the ways to do this is to find out where the Shareholders live,
> what organizations they belong to, which shareholers have the most
> influence on other shareholders, etc. Do this for the BOD also. Then get a
> group together and systematically start shmoozing them in their "leisure
> time" territory. This territory could be rotary club meetings,
> toastmaster's meetings, etc.

I could not agree more. (Of course, it could be argued that you are
joining the "good old boys club," with this approach-and then you might be
part of the problem, and not the solution-this is an institution in
itself, and sometimes these institutions stagnate. And then you will be
hiring an outside consultant ...)

> It seems to me that many consultants work from a, "I only do
> organizational change work when I am paid for it." This means, X hours
> allotted to work, X hours to family life, etc. Maybe I'm wrong, but I
> think that if a person is really committed to changing an organization and
> getting results, it's a full time affair. Being commited usually only
> comes with focus. The interesting thing is that serendipity also kicks in
> when commitment is present.

Particularly with a lot of hard work and positioning, also.

John

-- 

John Conover, 631 Lamont Ct., Campbell, CA., 95008, USA. VOX 408.370.2688, FAX 408.379.9602 john@johncon.com