Episode #387: The Leadership Equation

I remember reading once about a President reflecting on the cost controls he had instituted inside his organisation. The industry had emerged from a recession and even though the economy and the company had recovered, he had forgotten to ease the strict controls he had instituted to protect the company. Covid-19 has forced many of us to institute strict controls in order to survive the business disruption caused by the virus. When should we release some of those stringent controls?

This is a tricky subject at any time, but it becomes more pungent when you are coming out of a long tunnel. As Winston Churchill once remarked ,“If you are going through hell, keep going”. Very clever and witty, but when we have come out the other side of Covid-19 hell exactly at what point do we need to ease off the vice like pressure we have been applying to expenses and investment?

In any business there is always tension around a couple of staples. Control and innovation can be in contradiction. Compliance, regulations, controls are there to protect the business. Systems have to work at scale, regardless of who is employed in the business. There has to be consistency and production sequences need to work to make deadlines or to ensure the required quality. When I worked in retail banking, there were so many regulations and audits, regarding what we were doing. Every process had to be documented and followed according to the letter of the specified designation.

People didn’t get into trouble for varying from the procedures. It was hiding the variation that proved to be career ending. They were too scared to admit they had not followed the procedures and so tried to hide the fact away. Unfortunately, that doesn’t work and at some point it all comes rolling out and rolls right over the top of the individual and they are summarily fired for hiding the offence.

On the other hand, we want people to be innovative. We know the danger of groupthink and also of being left behind by more creative rivals. Staff witnessing the career ending variances from the established tried and true methods, are not much induced to try new stuff. How do we get innovation, when we have the system tied down so tight there is no room for mistakes?

There has to be a different mentality around mistakes. Japan is a mistake free zone. There have been decades of bosses very publicly screaming abuse at staff for screwing up. This curtailed people’s interest in doing anything new or better. The boss has to now take the lead here. The staff need to be told clearly what can’t be played around with for compliance or regulatory purposes, but also what is up for grabs. Mistakes can be said to be tolerated but if the talk isn’t matched by the walk, the experiment in a “hundred flowers” blooming, dies on the spot.

Sounds easy, but just where is the line? How big a mistake are you personally, as the boss, prepared to tolerate? When Lee Iacocca called in one of his marketing executives at Chrysler following a major failure on a new model launch, that executive was expecting to be fired. To his amazement Iacocca said, “Fire you! We just spent million educating you”. Can you be like that?

We set the temperature for innovation, by how much we celebrate the learnings from failures. We might not be as big minded about losing millions like Lee baby was, but still there will be opportunities to demonstrate that we never fail, because we always learn. We are going to come out of Covid-19 in 2021, so although we can’t set a specific date to loosen the controls, we still need to set a date to remind ourselves that we need to reevaluate where we are in the business cycle. Now is also the time to look for innovations which can be implemented, once the cash flow has been stabilised. Plan now and pour in the investment when the time is right, rather than waiting for the cash to be there first and then start the planning.

We need systems and rules to protect the company and we need innovation to take the company forward. It cannot be “either”, it has to be “and”. Striking that balance has no road map and is difficult to get right, but if we can be directionally right and at the right scale, then we are going to be on the right track.