Nothing can create failure quite like success.
Here’s an all-too-typical scenario: An organization achieves a comfortable lead on the competition. Its media coverage is highly favorable, and shareholders are very satisfied. Believing that everything is and will continue to be great, leaders start reading their own press clippings. Complacency sets in, which undermines the continuous improvement necessary for growth. The inevitable result is mediocrity. In the worse cases, the company completely loses sight of its vision. The most talented people leave first. When panic sets in on how to “fix” things (slashing costs, compromising quality), brokenness soon abounds.
Turning around an organization means more than improving the numbers. Declining sales, slumping profit margins, negative cash flow, and rising debt levels, by themselves, are not the problem. Rather, they are symptoms of a company that has gotten off track. The only way to restore what is now “broken” to become the “best” is with values-based leadership.
I define values-based leadership in terms of “five bests:” best self, best team, best partner, best investment, and best citizen. Cumulatively, these five bests encompass the focus, discipline, and consistency required to generate credibility and achieve a turnaround.
A great example of an iconic organization that was once broken and staged a successful turnaround is Ford Motor Company under the leadership of then-CEO Alan Mulally. When Mulally took over as Ford’s CEO in September 2006, the company was clearly broken: Its stock price had fallen precipitously (the low was $1.01 a share in 2008), its debt was at “junk” status, and 2006 would go down as the worst year in its history with a $12.7 billion loss. It was widely expected that Ford would eventually file for bankruptcy. However, by the time Mulally retired on July 1, 2014, Ford had achieved a turnaround, becoming a “history-making revitalization.”
While much has been written about Ford’s comeback and Mulally’s leadership, I find it especially insightful to look at Ford’s turnaround through the lens of the five bests. In this context, the five bests exemplify values-based leadership in action, both for restoring a broken enterprise—and for building a world-class organization.
A values-based approach begins on a personal level with becoming your “best self.” By continuously engaging in self-reflection (ideally, a daily practice) you gain the self-knowledge and self-awareness to know your values, what you stand for, and what matters most to you. For a leader, this is crucial: If you don’t know yourself, you cannot lead yourself, and if you can’t lead yourself, you cannot possibly lead others.
An example of Mulally as a leader grounded in becoming his “best self” can be found in his words about how to motivate, inspire, and lead others: “Leadership is having a compelling vision, a comprehensive plan, relentless implementation, and talented people working together. People also want meaning. All of us want to know that we are doing great things, that we are touching a lot of people, and that what we are doing is something bigger than ourselves.”
To lead a turnaround, a leader must have a clear understanding of his/her values and priorities, as well as the motivation for taking on such a herculean task. Mulally had clearly proved himself during his 37 years at Boeing, where he led the commercial aircraft division. Having achieved a high degree of success, Mulally arguably had little reason to take on Ford and the risks inherent in such a high-profile turnaround other than the deep belief that orchestrating a culture change at Ford was possible, transforming it from the inside out as a values-based organization.
Lesson one: Whether you are building a values-based organization or turning one around, the process begins on the personal level by becoming your “best self.”
In the midst of brokenness, people do not feel aligned with the organization; there is no sense of team. To address that endemic problem, a profound change in mindset needs to occur, with the belief that “we’re all in this together.”
In a values-based organization, an attitude of “best team” pervades the atmosphere. People who are committed to becoming their best selves join together in best teams that operate with mutual respect, while also challenging each other to bring out the best in each person. Instead of people pursuing their own self-interest, best teams focus on the greater good of the organization. Expectations are created for acceptable behavior: how to treat others, crediting the accomplishments of others, taking responsibility when things go wrong, and giving people specific feedback to help them improve.
The epitome of Mulally’s “best team” approach was his creation of “One Team” to eliminate the silos and turf battles within the automaker, while implementing a simplified leadership structure. The goal was to get people to work together across the company as “One Ford,” which became a kind of mantra repeated in every conversation, meeting, email, and interview. Mulally was even said to carry the words around on a laminated card.
Lesson two: When best teams are put in place, people renew their commitment to their teammates and to the vision and purpose of the organization.
An organization’s brokenness is not confined internally. External relationships with suppliers and customers can become strained or even contentious. Here’s an example of how that happens: After a company slips from its once-comfortable, profitable position, it scrambles to improve its competitiveness by pressuring suppliers for lower prices. The mindset is one of survival of the fittest—there’s no time to worry about anybody else!
However, squeezing a supplier is no way to build a long-term relationship. In a best partnership, every party—customer and supplier—is committed to the success of the other for the ultimate benefit of the end user.
Best partnerships are forged with trust over time. Mark Thierer, chairman and CEO of Catamaran Corporation, a pharmacy benefit manager, observed about best partnerships: “You need to be an expert in the client’s or trading partner’s business, with an intimate understanding of its P&L (profit and loss) statement. That means becoming totally invested in those client relationships.”
No example better demonstrates Mulally’s approach to best partnership than the agreement reached by Ford leadership and the United Auto Workers (UAW) union. The UAW agreed to make certain changes to help improve Ford’s profitability in return for the company’s guarantee to bring production jobs back to the US. Another best partnership example was Mulally’s consolidation of Ford’s purchases among suppliers who were willing to partner with the company and drive down costs in return for a greater share of the business.
When an organization is in the midst of a turnaround there may be reticence or even outright disbelief on the part of some suppliers and customers that the business relationship is changing from purely transactional to partnership. To foster belief, the organization must communicate clearly and with great detail why the situation is different, how things have changed, what is going to be required for the turnaround to be successful, and what the organization is willing to do so that everyone wins.
Lesson three: Best partnership establishes a culture of doing business that is good for the company and its supplier and customers—a true win/win proposition.
All organizations are accountable for how they generate a return, whether a for-profit enterprise is making money from the sale of products and services, or a nonprofit philanthropic organization is investing funds wisely to fulfill its charity mission. In addition (and, I would argue, most important) organizations are accountable for how they utilize and develop their most valued resource: talent. This is the heart of becoming a “best investment.”
When an enterprise is broken (as evidenced, for example, by a share price that is only a fraction of what it once was) it’s difficult to change the perceptions of disappointed and disillusioned investors. There’s no credibility in trying to convince them that somehow “things are going to get better” when there is no viable turnaround plan in place.
Becoming a best investment is predicated on completely open, honest, and straightforward communication, starting with why the organization became broken and how it is going to turn around. This was the tactic Ford took when it needed to raise $23.6 billion to increase the pace and scope of its innovation.
In November 2006, Mullally, who at the time was CEO for only three months, made the pitch personally to the biggest banks in the US. Ten days later, Ford had the money it needed not only to revamp its car designs, but also as a cushion to keep it afloat three years later in the depths of the financial crisis.
Lesson four: Regaining credibility with investors requires a well-articulated, thoughtful explanation to generate confidence in the turnaround plan and re-establish the organization as a best investment.
Having changed the organization’s trajectory from the brokenness of failure to becoming the best, there may be a temptation to declare “game over” and take a rest. Just look at all that has been accomplished: people are committed to becoming their best selves and are joining together to form best teams. The organization is working closely with suppliers and customers to forge best partnerships, and the return generated showcases that it is becoming a best investment.
A crucial part of values-based leadership, however, is also becoming a “best citizen.” This recognizes the responsibility to make a difference in the world. There are many ways to demonstrate best citizenship, such as through a philanthropic foundation or other charitable giving (although, having teetered on bankruptcy, the organization’s coffers might not be overflowing).
Best citizenship can also be demonstrated through social responsibility (for example, job creation in economically depressed areas) or advocating on behalf of others. Here Mulally’s actions provide an example. Although Ford opted not to take any money from the federal government, Mulally testified in Washington on behalf of Ford’s competitors. He did so because he viewed saving GM and Chrysler as the right thing to do, knowing that their demise would hurt the auto industry, the network of suppliers, and Ford itself.
Lesson five: Even in the midst of a turnaround, the organization must broaden its view to see things holistically—from what is good for the company, to the industry, the economy overall, and society as a whole.
Through the five bests, leaders and their organizations can put values-based leadership into action. These same steps to building a world-class enterprise also help restore what has become broken, putting it back on track as a values-based organization.