A leader who isn’t a good listener isn’t a good leader, says Margot Murphy Moore, SF ’07. President and chief strategy officer of Standard Homeopathic Company, Moore says she kicks off every turnaround situation with a listening tour, sitting down with each of the key players one by one and giving them the airtime they need to talk about the strengths and weaknesses of the company and the culture.
The aggregate value of these conversations is a big picture that reveals the operational issues, the cultural and political issues, and the strategic issues that are challenging the organization. “In my experience, when you sit down with stakeholders individually, you find they often have greater insight than you expect into complex challenges and innovative solutions. The issue often is not a lack of awareness about the source of a problem but multiple failures to act on that awareness. The goal is to find out what systems, perceptions, or individuals are preventing action.”
MIT Sloan Professor Emeritus Arnoldo Hax knows what makes an organization work, and he knows how to turn it around when it doesn’t. Hax has been a major player in transforming companies—even the government of Chile. Generations of his students, scores of colleagues, and loyal readers of his seminal books on business strategy consider him a sort of enterprise whisperer.
So when MIT Sloan alumnus Richard “Skip” LeFauve took the helm of Saturn as CEO, he asked Hax, his former professor, to consult on strategy. “Skip looked at the corrosive relationship between the unions and management at GM, the financial losses, and the disgruntled workers and said, ‘We can’t run Saturn that way.’”
General Motors, says Hax, “was a huge organization, the largest in the country, but the company was beginning to go off the rails. The catalyst was the entrance into the market by Japanese carmakers. Toyota and Honda were creating cars that were affordable, dependable, attractive, and fuel-efficient. And those vehicles appealed to an enormous segment of the American market.”
GM’s solution was to develop the Saturn, the first compact car to be introduced into the American market. The Saturn operation was a kind of skunkworks for GM, a sub-brand with its own management and its own management style—a completely out-of-the-box and un-GM style.
Global expansion is a core goal of many major corporations, but some are beginning to rewrite the multinational rules of the road. With 300 locations around the world, General Electric (GE) is one such pathfinder, recently rethinking which functions should be regionalized and which should remain local.
Global Operations Executive Leader, Oleg Bodiul, SF ’13 took on the vast transformation role as part of a GE leadership team tasked with creating a global shared-services organization that would centralize many of the company’s key functions, including accounting, finance, and commercial operations.
Among the top 100 firms in the world, GE is a digital-industrial player providing software-defined machines and solutions for markets ranging from aviation, power generation, and oil and gas to renewables, healthcare, and financial services. “Historically, functions like accounting and order management were performed in hundreds of locations around the globe. The objective was to centralize, where possible, into a few locations to leverage scale and deliver better outcomes for our customers, employees, and shareholders.”
“No smart business strategist would start a business in the small diesel engine marketplace,” says Tana Utley, SF ’07. But that’s exactly the project she was charged with turning around at Caterpillar, Inc. recently. Utley is vice president with responsibility for the large power systems division at Caterpillar, one of the world’s leading engine manufacturers.
What’s so bad about small diesel engines? The list is long. Small diesel engines are being made all over the world and the competition is stiff as companies in emerging markets try to gain a toehold by keeping their prices at rock bottom. “It’s almost impossible for us to sell our equipment at prices that low,” Utley says. “On top of that, there’s an overcapacity of small diesel engines in the global marketplace, bringing the market price even lower.” Getting out of the business was not an option, however. Caterpillar needs those small engines; they power a variety of the company’s machines, generator sets, and some external applications.Continue reading
Thad Allen, SF ’89, is known as something of a superhero when it comes to turning around major disasters. Barack Obama chose Allen, the former Commandant of the Coast Guard, to serve as the National Incident Commander for the coordinated response to the Deepwater Horizon oil spill in the Gulf of Mexico. As successful as he was in mitigating that disaster, Allen, who is now a senior executive at Booz Allen Hamilton, is perhaps best known for turning around another national crisis—Hurricane Katrina.
Days after the storm barreled into New Orleans in the late summer of 2005, Michael Brown, President George Bush’s FEMA head, was finding the situation increasingly unmanageable. Secretary of Homeland Security Michael Chertoff tapped Allen, then chief of staff of the U.S. Coast Guard, to turn the disintegrating situation around.
“The hurricane made landfall on the 29th of August. I dispatched on the 5th of September,” Allen remembers. “What I found was a complete breakdown of law and order. Chaos in the Superdome. Press reports were showing the same human remains on street corners day after day. We were dealing with the equivalent of a weapon of mass effect—but the terrorist was nature. New Orleans, in effect, lost continuity of government.”
The first step in any turnaround, Allen says, is to correctly identify the problem. “One of the things that crippled the government’s initial response was that the leaders in charge did not get the problem right. We were dealing with the loss of civil institutions and the lack of local government capacity—not a hurricane. You must understand the challenge before you can even begin to turn a situation around.”
Return on investment. It’s not just an economic measure. Ray Leach, SF ’02, CEO of JumpStart in Cleveland, Ohio, believes that social ROI is every bit as important—and as impactful as economic ROI in improving the quality of life of a region. A national thought leader at the intersections of public, private, and philanthropic partnerships, Leach strives to accelerate job creation and increase economic outcomes in neighborhoods, regions, and countries. Co-founder of four tech startups, he was also a founding member of the U.S. Commerce Department’s National Advisory Council on Innovation and Entrepreneurship (NACIE).
Leach founded JumpStart to work in tandem with government efforts to boost quality of life in Northeast Ohio through entrepreneurship. His diverse team of investors, marketing professionals, mentors, and advisors offers expertise to the founders of new or growing startups. CoverMyMeds, one of JumpStart’s portfolio companies, was just acquired for $1B+. With JumpStart’s nurturing, the company grew from three people to more than 500 in eight years.
Leach believes that to promote entrepreneurship, governments and nonprofits like JumpStart must first create an environment in which entrepreneurial ventures can thrive. JumpStart provides mentorship, education, and introductions to investors—but Leach says that to be truly effective, he and his team needed to get creative. “We have begun to focus on a broad variety of problems that prevent the community from thriving. We realized, for example, that a lot of startups and established companies need employees, but those companies often are located in industrial parks in the suburbs. The unskilled labor they would like to hire resides in urban centers. We need to find out how to bring the workers and the jobs together. In other words, we’re not just looking at job creation, but reducing unemployment.”
How does a company build and keep consumer trust—and more important, win it back when that trust has been compromised? Thanks to viral video, the world has seen United Airlines “involuntarily deboard” a passenger, to use the airline’s term, and drag that passenger kicking and screaming from a legitimately purchased airline seat. The result? In the days following the incident, customers cut up United credit cards, shares in United Airlines stock slipped by 4%, and the company’s market value plummeted by $1 billion.
How can a company like United that has lost consumer trust gain it back? MIT Sloan Professor John Hauser says that it’s not enough to tell consumers that they can and should trust a company. “It’s critical to actually prove, again and again, that a company and its products can indeed be trusted – and customers must be provided with tangible, observable proof that a company has changed its ways.”
Four years ago, Hauser, MIT Sloan professor and former dean Glen Urban, and Gui Liberali of the Erasmus School of Economics in Rotterdam published a study on trust-based marketing called “Competitive information, trust, brand consideration and sales: Two field experiments.” The team tracked four marketing strategies by an American automaker with an ailing brand. The company had suffered from decades of negative publicity over the quality of its products and was working on several fronts to correct public perceptions.
Is it possible for a company to shed some of the key trappings of traditional bureaucracy and still be competitive in the marketplace? Catherine J. Turco, an associate professor of work and organization studies at MIT Sloan, went undercover for ten months at a fast-growing social media marketing company to find the answer.
In her illuminating new book The Conversational Firm: Rethinking Bureaucracy in the Age of Social Media, Turco takes an in-depth look at a young enterprise called TechCo, a pseudonym she uses to protect the identity of company and employees. She finds that TechCo has developed a deeply engaged workforce by promoting open company-wide dialogue. That sense of freedom, she notes, has contributed to a culture that is invested, innovative, and adaptable to change. She calls this new style of company “the conversational firm.”
One of the principal tools of the conversational firm, Turco reports, is social media. TechCo provides its employees—who are primarily millennials—with social media vehicles so that they can offer input into major business issues. Because millennials relate to the world through social media, she says, it only makes sense that they would feel comfortable relying on apps to register ideas and opinions in the workplace.
In The Conversational Firm, Turco leverages her interviews with 76 employees, her attendance at hundreds of company meetings, and insights from cultural and economic sociology, organizational theory, economics, technology studies, and anthropology, to portray a company that has found a way to be open without relinquishing control.
You’re a founder of a new enterprise and one of your top priorities is social and environmental responsibility. Your management team, however, can’t think of anything but the balance sheet. By year’s end, your bottom line is healthy, but you don’t feel your new enterprise has contributed much to society.
It’s a common dilemma that comes down to a core disconnect that many founders don’t think to look for when pulling together their C-suites. But compatibility surrounding worldview, ethical issues, and dedication to social responsibility can be as important to the success of a business as professional qualifications.
Gustavo Mamão, SF ’11, founder of the Brazilian startup Flourish, which guides entrepreneurs in the creation of mission-driven organizations, has always focused on businesses that demonstrate how a company dedicated to a better world can also be profitable. But it’s an ethic, he says, that the whole management team must get behind. “The extent to which a business embraces sustainability and environmental goals is something that should be decided among founders and investors in the earliest days of the enterprise.”
Will the calm, cool, and collected applicant turn out to be a better employee than the person who exhibits stress? Traditionally, companies have tended to think so. In fact, many industries conduct stress tests with current and prospective employees to see how they perform under pressure. Those who remain calm during the simulations are commonly seen as the best fit for stressful on-the-job situations.
MIT Sloan professors Juan Pablo Vielma and Tauhid Zaman and graduate student Carter Mundell beg to differ with the conventional wisdom. By measuring galvanic skin response (GSR) over the course of an increasingly difficult exam, the three researchers came to the conclusion that those who perform best under duress actually exhibit some degree of stress when the stakes are lower.
Lie detector technology predicts success
GSR, which is used in polygraph tests, measures changes in skin resistance owing to sweat—a relatively easy way to measure stress, as the body’s sweat glands are connected to the central nervous system. In their paper “Predicting Performance Under Stressful Conditions Using Galvanic Skin Response” Vielma, Zaman and Mundell note that, in the past, the study of stress has focused on understanding it as opposed to predicting it. “Everyone else was looking at, ‘Why are you stressed now?’ We stumbled on whether they would be stressed in 10 minutes.”