Epis 21 - Navigating Cultural Drift: Fixing Leadership and Strategy Before It’s Too Late

It's the Jump Leap Long Term Strategy Podcast, Episode 21. Your company is one which relies on a particular kind of positive culture to succeed. You want to maintain its high quality at all costs, but recent events have put into focus how significant cultural issues can build over a period of time and cause massive damage to stakeholders— employees, shareholders, customers, suppliers, all of them. You wonder, from a strategic point of view, how a bad culture can be allowed to evolve. Aren't there some red flags which signal its arrival, or is it a matter of waiting until the worst happens and then realizing you have a problem. What can you do as a strategist, stakeholder, or staffer to prevent such cultures from emerging? And how could you correct them once you have some evidence? Tune into this episode to hear from me and my special guest Barry Houston as we tackle this wicked problem together. I'm Francis Wade, and welcome to the Jump Leap Long Term Strategy Podcast. And welcome back. As you can see, we're joined on the stage today by our guest, Barry Stuntson. In a minute, I'm going to introduce you to him and we're going to weigh in on the issue at hand. But before I do that, let me address you, our listeners, and our guest today. You may be listening wondering, you know, you've been around the podcast world a bit and this one sounds a bit different. And why is it so different? Well, we don't really have guests that we interview in the sense that here's the book you've written, here are your brilliant ideas, tell us all about them. Instead, we invite our guests on to help us diagnose a difficult problem in real time, I guess, or real time as we're recording it. And what we're doing is we're hoping to share our underlying thinking with you so that you can actually use it to go forward. It's far better than just sharing the outcomes or the conclusions where you have every right to ask, you know, where did that come from? Well, here we're showing you where it came from. It's kind of like we're popping the hood on the car, or we're raising the bonnet to show you the inner workings of our thinking so that you can again understand, oh, that's how they decided to— that this is a course of action. And I— this is the part I like, and this is the part I don't like. So you could weigh in as you listen in. And as we are sharing ideas and experiences back and forth, we're hoping for a little bit of serendipity. Because we're going to spend so much time diagnosing that we're hoping that we kind of almost forget there's an audience and we're just sharing ideas back and forth, trying to find some surprising insights. And when those insights come up, by the way, we'll ring a bell. If we get to the end of the episode and there's no insights, I'll ring a buzzer. It's never happened before, but you never know. But the idea here is that neither of us has the answer. This is a wicked problem which doesn't lend itself to sort of any simple kind of solution. We're hoping to move the needle in the next few minutes in the right direction, but in a way that's kind of unexpected, unplanned, and hopefully some fun. So let's start with a story before I introduce Barry. Irene is the head of strategy in a civil aviation authority. Now, if you don't know what that is, that's— those are folks who control the airspace around countries and cities, and the air traffic controllers, and they make sure that the entire civil aviation structure actually works. Over the years, the company has developed a great work culture, but the arrival of a new CEO has everyone on edge. So she reports to the CEO. He has a background in law enforcement and is used to giving orders which must be followed without question. Recently, he sent her an email and she questioned the premise of a request he was making to shift the focus of their next strategic planning retreat. She pushed back, as she likes to do, and she has always done in the past with prior, a prior CEO. And she received the following response: JUST DO IT, and it was all in caps. She's never received a message like this before, but she shakes her head because she kind of saw this coming. Other staff have also encountered or reported some rough encounters with the new CEO which did not go well, and now everybody's talking about it. I know she'll have her story to tell as well. At the lunch table. The problem is that their organization relies on professionals who are self-motivated, especially in sensitive positions like that of the air traffic controllers. Once they get wind of his style, she believes— and she's, she's kind of worried— that it could reactivate a dormant trade union and create issues in flight safety for the travelers in her country, in her city. Plus numerous other stakeholders will also start to experience problems. So she's begun to be alarmed, but another part of her wants to think that she, maybe she's just exaggerating his influence and the effect his leadership style may have. So she's thinking, ah, I think I'm just being a worrywart. So to clarify things, she wants to know some more. She digs into his background and finds some former direct reports to interview. After two confidentially conversations, she can see that this could be just the beginning. But of what? Barry Houston has had a 47-year airline and aviation career, flying as a long-haul captain. He's founded and served on the board of a number of startups, including a trade union as well as serving at national executive level of the British Airlines Pilot Association. He has global experience including dealing at government levels and marketing very high value equipment. He has successfully led very high value negotiations. In addition, he's a Chartered Management Institute, uh, CMI Master's level and Kotter Change Level qualified, and he's a management consultant. Specializing in change and transformation in addition to aviation. Barry, welcome to the podcast.

Welcome. Thank you, thank you for the welcome, Francis. Um, yeah, she's got a problem, poor Irene.

Um, yeah, what do you think of her situation?

Well, I'm sure it's one that many of our viewers and listeners will, will identify with, won't they? I think it's, it's not unusual, uh, that you have someone with a transactional leadership style Um, so how do we deal with it? What are we going to do to help Irene? What are your thoughts?

That's, that's why we're here. But let's, before we definitively answer the question, as if there is like some answer behind door number one, right? Let's, let's talk about what she's dealing with, because obviously she cares about the, the company and she, she also happens to care about the culture. I've met many strategy people who don't really think about the culture at all. It doesn't really show up on their radar. They see their job as putting together the strategic plan, and once that's done, just kind of monitoring it using the balanced scorecard or some other tool. But they don't have this sensitivity that she has. Most don't. That's just my experience. What's your experience like?

My experience is that culture is the, the lifeblood of the organization. It's the, it's the blood that flows through the organization. It's the DNA of the organization, it's the values of the organization, it's what the organization stands for, how it conducts itself, and it actually drives what an organization produces, doesn't it? You have, if you have, we have a case, don't we, at the moment, where due to cultural drift a very large global player has found itself with significant difficulties that have emerged and evolved over a long period of time, since probably 1997. And that global player has got cultural issues that are impacting right on the shop floor in terms of deliveries and of course product. And in this case, sort of serendipitously, uh, we're talking in the civil aviation context. If you've got safety-critical operation, you absolutely have to nail the culture and ensure that if your business is safety, in this case flight safety, um, you've got that nailed. That's— that sits right as the bedrock of everything. You can't allow Management style is one thing, but management focus and, and strategy that then builds, and that culture starts to evolve around the strategy, you can't allow that to drift so far off from the core values of the organization and the cultural bedrock of it that suddenly the pursuit of shareholder returns short-term shareholder returns and potentially executive remuneration becomes the principal focus when in fact the business of the organization, as in this case with Irene's organization, is safety and flight safety. So in safety-critical organizations, it can become apparent very, very rapidly when— I should say, it can become apparent rapidly it starts— the effects can be very rapid when they emerge.

Um, and so she's watched the— I'll throw in some more juicy bits. So she's watched the Boeing, um, documentary like I have. I watched actually a couple of them. So she's well aware of what's happened with Boeing recently. And, um, given the date of our podcast, she knows she's she knew about the original, original issues that led to the two crashes, but she's also aware of the, the door blowing off the aircraft in mid-flight. So she's, she's up to date on what she's seeing, and she's, she's alarmed because she knows enough to know that, wait, if this can happen to a paragon of virtue, so to speak, in, in an industry, then who are our little civil aviation authority, you know, by comparison. Now we're not— we don't have shareholders and stockholders, so she doesn't belong to a for-profit. But she is concerned because, you know, she's seeing some of the same things start to dip in. Not same in the sense that they're identical, because it's not— in her case, it's not driven by profit. But she sees a style that's entering in, and it's a kind of a don't ask any questions style. And she's thinking that maybe she can nip this in the bud somehow, or maybe her colleagues could, and it wouldn't turn into any kind of huge issue. So she's— her radar is up because she's heard stories, and she has this very pressing story of the Boeing example kind of pressing on her. Pressing on her, on her mind, on her conscience. You want to add anything to that?

Yeah, I think that's a very reasonable position for Irene to have. You take an organization that has been around for a very long time, in this case Boeing. You have the merger of McDonnell Douglas and Boeing in 1997, and I was kind of alluding to it earlier on when we were discussing, because that's right in the forefront of my mind, being a captain and having flown Globally, we take the whole business of being strapped to an airplane very seriously. And those— and the safety of our passengers, our crew, and ourselves sits right up there at the—

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Right, so safety is at the forefront of, of, of all of our thinking. It's, it's, it's our job on the flight deck, but as an organization, an airline, to ensure that our passengers are safe. We rely on the manufacturers to ensure that their product is up to, up to scratch, is dependable, is reliable, and gets us from A to B on an ongoing basis, and that was Boeing's reputation. You paid a premium for buying a Boeing because of the reliability and the history of the, of the organization. Now, um, if you, if you then roll that forward, what then happened in 1997, you had the merger of McDonnell Douglas and Boeing, and the focus of, of the organizations changed it is reported, from the focus on engineering excellence to stockholder returns. Now, in that sort of case, what happens essentially— and I alluded to it earlier— if the core value of the organization is safety and then suddenly you've diverted the culture and the value away from that to something else, looking for stockholder and board remuneration, which is as it's reported in the case of Boeing, what happens is that the culture slowly— it is a very slow thing to change— moves in that direction. Now you find a competitor and an agile competitor like Boeing, like Airbus coming in.

Airbus.

Airbus coming in and with the neo putting the pressure on the 787-8 MAX back in, in 2016-17, there was a push to, to get this to match delivery. And the point is, as, as we've discussed previously, um, Francis, if you are sitting at one end of a production line and you've got a sequence task to put stuff on an airplane and it's being pushed and you're having to swap roles with people, things can go amiss. There are approximately 350,000 to 500,000 bits of, of component on an, on a, an air— a 737. You don't need too many of those out of line, for example, uh, exit door plug bolts, and things can go very dramatically wrong very, very quickly. And if you consider how the implications of that— like, I'll go back to a previous model that came out that had quality control issues, and that was a 787. So that was late into service. It had a pro— it had an overrun because the, the manufacturing had, had— basically Boeing became an assembler and it contracted out, um, to a lot of subcontractors. So then it basically assembled it. So how do you keep the quality control with all of those dispersed subcontractors. So it changed the, the model. The culture changed from engineering essentially to shareholder returns, really taking the, the, the revenues coming from these legacy aircraft like the 737 that had a fantastic track record. And suddenly you get this, this cultural drift, and it, it, it gently moves the organization to another place. And if you consider the, the irony and the paradox here, the paradox is that if you're going for stockholders' returns, notwithstanding 346 people were killed in the Lion Air accident and the Ethiopian Airlines accident, uh, the 737-8 MAX, and the airplane was grounded for nearly 2 years that if you take the original concept of that diversion of culture to shareholder returns, how do you square that with a cost to Boeing reported of about $20 million in costs and fines and about $600— not million, billion— billion in lost orders? And how do you square that with a a market cap capitalization drop of $30 billion after the Alaska Airlines door plug incident. So it's a classic example of what Irene— no wonder Irene's worried, because it's a serious game, isn't it? You're flying people around the skies, or in any safety-critical— I mean, we can apply this to any safety-critical organization or company, that if your job is essentially to provide a safe, consistent, well-produced, quality-controlled product, that actually is your core business. What should then happen is that from a strategic point of view— and Francis, this will gel with you because I know you're a long-term strategist, you think in terms of decades, not years, And when we discussed it first, and we're talking about strategy going out to 3 years, you said, what about 30 years? That's just how long aviation manufacturers and safety-critical organizations, the nuclear industry, the shipping industry, the airline industry in particular, need to plan ahead. They need to be going 25, 30 years. They've got to be looking at safe aviation fuel— not safe aviation fuel, aviation, renewable aviation fuel, right, sustainable aviation fuel. So they've got to be going all out that far to try and anticipate what the zeitgeist is going to be in 30 years' time. So it is— you've got to take the long-term view, and quarterly, quarterly stock market or equity market performance is broadly irrelevant. What is relevant is every quarter you've got to be producing safe— a safe product. Whatever that product may be. And in Irene's case, she's got a genuine concern because strategy can come from the, the top. It needs to permeate through the organization, but if you've got a transactional leader who doesn't actually believe in servant leadership or using the diverse many to help them run the organization, you've now got a very, very myopic picture, and that is dangerous, right?

Right, right. And folks, you may not work for a service, a service-critical organization. I imagine most of our listeners don't, don't happen to. But you know, this is, this can be a serious conversation if you care about long-term shareholder value or anything else that pertains to the benefits that your company has for society. If your company or your organization takes very seriously some kind of mission, then we're talking about threats to that mission which are extremely difficult to pick up once they start to manifest themselves. It's hard for her to project that, oh, we're going to create a crash in the sky. Because I got an email that says, "Just do it." You know, it's hard to draw a line between cause and effect and say, "Oh, that cause, here's the cause and here's the effect." But is she right to be concerned? Well, at the very least, we know she's feeling probably confused and second-guessing kind of herself, and she's worried and she kind of wants to do something about it, but she's not able to. Empowered in her current structure to do something about it. The way, like many people, many, there are many Irenes in many companies who aren't empowered to raise cultural questions like this. They're not raised to say that we have a culture of, and we can't let go of that culture of, but ultimately, you know, we're here, we're here, Barry, right, to try and figure out ways to see and prevent and remedy kind of these early red flags, right? Isn't that why we're on the call?

Yeah, and it's— I think, Francis, that we need to be clear that in any organization— but again, we're talking about safety critical, let's open it up a little bit— in any organization, it's incumbent upon the people who live the culture on a day-to-day basis to start sensing and feeling the red flags, and they should and must speak up.

Um, in my trade union background, uh, and here's the excerpt from our next episode. Your company has just received a master plan for the way you do your business. It's like a huge strategic plan. Now, you could be in the public sector where it covers several organizations including yours. Or you may be in the private sector where the plan describes changes across several business units in a single company which serve distinct customers in separate ways. But in either case, you have a problem. Great set ideas. In fact, it covers all the great ideas in your role in the organization and more. However, as you look at it, you start to think it looks more like a pipe dream than an actual strategy. In other words, it's a plan those who are accountable and responsible cannot implement. Why? Because it's just too much. What, what happened to bring you to this place? Whereas you look at this master plan, you realize and you have a sinking feeling that it's not going to work. And if you like the work we're doing, Feel free to follow us at our website strategyconf.fwconsulting.com or like or leave a comment on one of the popular podcast apps such as Stitcher or iTunes. This is Francis Wade, and I'm signing out from the Jump Leap Long-Term Strategic Planning Podcast. See you later.