Why Did The CEO Flinch?

When an outsider is named the Chief Executive Officer of a Fortune 500 corporation, the eyes and ears of employees, customers, shareholders, suppliers, board members, industry followers and other stakeholders are hyper-focused. Everyone is anxious to learn more about this person and their character. Verbal statements and non-verbal cues are paid attention to and interpreted. Both the new CEO’s words and actions receive careful attention as all the stakeholders assess if the “walk” matches the “talk”.

Imagine if you were hired as the new CEO of a publicly-traded medical device company that has deep regulatory, product, financial and legal woes. Central to your problems has been the integration of a company acquired by your firm four years ago. This acquisition has been heralded by many as one of the worst acquisitions in corporate history. The acquisition cost your company more than $27 billion, continues to cost $300 million in annual interest costs and has torpedoed the market capitalization of your company. Today, your company’s market cap is under $11 billion — $16 billion less than what was paid for the standalone acquisition four short years ago. In fairness to you, these problems and headaches were inherited and not the result of your decisions. However, as the new CEO, they are now your problems. You are now accountable and own these problems.

As the new CEO, at some point in year 1 you’ll be on center stage at the annual shareholder meeting. Annual shareholder meetings are typically highly-structured, highly-scripted affairs with tight agendas that are both short and relatively uneventful. But given the state of affairs at your company, this annual meeting might be more challenging. There will probably be attendees who throw some tough questions your way. You could be put on the spot. It could be uncomfortable for you. You will probably be asked to discuss matters you’d rather not address. And you know the print media will be there, too. But as uncomfortable as it might be, as the new CEO it’s critical for you to be visible, transparent and to demonstrate your personal leadership and accountability.

Unfortunately, Boston Scientific failed to allow the media to attend the company’s annual shareholder meeting on May 11. New CEO Ray Elliott flinched by closing the meeting. This is an unheard of action for large publicly-traded companies. Even companies in proxy fights (such as Biogen IDEC and Carl Icahn in 2009) allow the media to attend the annual shareholders meeting. And when asked why the meeting was closed to the media, the chief spokesperson for the company failed to respond to the request. So we can now only speculate why Boston Scientific closed the meeting.

What’s the result of not opening up the annual meeting to the media? More negative perceptions. Fear that Elliott is hiding problems. More mistrust. More fuel to the fire. As if more fuel is needed after the negative spiral in the price of the company’s stock, its continued losses, FDA problems, the $1.7 billion payment for patent infringement to competitor Johnson and Johnson, etc, etc.

Today’s CEOs need to be visible and be seen as trustworthy by their shareholders and other key stakeholders. And trust can’t be created without transparency. So by failing to allow the media to attend the event, Elliott created more skepticism toward Boston Scientific, at a time when shareholders desperately need some reassurance the truck is out of the ditch (or at least will soon be out of the ditch). Furthermore, he role-modeled to other leaders and employees within the company that it’s OK to not be transparent – not the best lesson to teach in a firm beset by FDA and legal problems.

Bill George, retired Chief Executive Officer of Medtronic, a competitor of Boston Scientific, is at the top of the list of high performing CEOs in the medtech, healthcare and life sciences segments. During his tenure as CEO of Medtronic, the company grew on average 35% a year, increasing their market capitalization from $1 billion to $60 billion. And Medtronic is consistently recognized as a premier company for developing leaders, a best company to work for, most admired and many other similar honors. George put Medtronic on a sustainable path. George is now a professor at Harvard Business School and a best-selling author. In his most recent book, 7 Lessons for Leading in Crisis, George offers straight talk and clear guidance – lessons Boston Scientific could benefit from learning.

One of the steps for winning George shares is “Creating Your Company’s Image as the Industry Leader.” That’s a step that should be followed by Elliott: to re-create Boston Scientific’s image as an industry leader. Becoming an industry leader means putting Boston Scientific on a path of predictable performance and being seen as trustworthy by its stakeholders. Of course, this starts with Elliott’s personal leadership and a willingness to be candid and transparent with his stakeholders. Last week’s actions didn’t demonstrate personal leadership, candor or transparency, in my view.

In closing, I’m reminded of a quote from former Supreme Court Justice Louis Brandeis. Brandeis said, “Sunshine is the best disinfectant.” That quote is over 80 years old. It still seems relevant today – especially for the CEOs of publicly-traded companies. Let the sun shine, Ray!

Are You The Rotting Fish?

Everyone knows that a leader’s first job is to define reality. Yet, the direct reports of many leaders will tell you there are often undiscussables, tough issues, that are taboo to discuss in the presence of the leader. These undiscussables are what I refer to as rotting fish. Everyone knows the rotting fish lurks, but it’s not being addressed for fear of upsetting the leader.

What happens to a rotting fish when it isn’t addressed quickly? It gets stinkier and nastier. What happens when we don’t address the toughest issues at work? They rarely get better by delaying or ignoring them.

If you are a leader, are there rotting fish hanging around? What do you do if you sense a rotting fish in your presence? The leader has to be the one to come clean on rotting fish and ask the question at meetings, particularly at the end of the meetings, “Are there any rotting fish we’re not discussing? What are we missing?” Raising the rotting fish often requires us to check our “gut” to sense something that feels wrong or amiss.

When someone on your team has the courage to raise a rotting fish, don’t blame. Discuss the issue with the individual and the team. What do we know as fact? What are we assuming about the matter? Have candid, open dialogue as necessary. Talk straight. Deal with the problem. Recognize that ignoring the rotting fish makes people cynical and disengaged. Raising and discussing the rotting fish is your only course if you seek to build a motivated, high-performing team.

If you don’t raise the rotting fish, guess what? You are the rotting fish.

Management’s Conspiracy Of Silence

Today’s article in Canada’s Financial Post is an interview of me by Allison Graham, following my presentation at the Human Resources Professional Association’s National Conference in Toronto, on The Dirtiest Little Secret in Business: The Absence of Supportive Candor. To read the article, click here. For a copy of my presentation slides, click here.

Committing Candor?

With the news last week The Pentagon has requested General Stanley McChrystal, the US commander in Afghanistan, to delay submitting his request for additional troops, it sure appears that Yogi Berra’s famous quote “it’s like déjà vu all over again” is again occurring in Washington.

Remember the tension between Army Chief of Staff Eric Shinseki and then Defense Secretary Donald Rumsfeld in 2003? General Shinseki told the Senate Armed Services Committee that “…somewhere in the order of several hundred thousand troops would be needed to stabilize postwar Iraq.” In a public rebuke to General Shinseki, Secretary Rumsfeld and his deputy, Paul Wolfowitz, called General Shinseki’s estimate “far off the mark” and “hard to believe” that more troops would be required for postwar Iraq.

When General Shinseki stood firm with his estimate, his retirement was accelerated. Ex-President Bill Clinton observed that General Eric Shinseki spoke frankly; making a statement that Secretary Rumsfeld didn’t want to hear. President Clinton said General Shinseki “committed candor.”

As we now painfully know, too few troops were committed to Iraq in 2003, requiring a 2006 troop surge to turn events in that country.

Today, President Barack Obama faces doubts from the American public about the war in Afghanistan. President Obama’s ratings are also slipping regarding his handling of foreign policy of late. The White House reportedly wishes to conduct a broader review of the Afghanistan war. With the focus on the healthcare reform debate, Iran and the economy, are Defense Secretary Robert Gates and President Obama squashing candor by delaying General McChrystal’s request for additional troops?

I’m not certain more troops in Afghanistan is the answer, but I do know that failing to allow the commanding officer to make his case on such a critical matter is harmful. General McChrystal’s request should be soon heard; reviewed critically and ultimately decided upon directly and timely. Let’s not discourage candor and prevent the very mistake made six years ago.

On this important topic, it’s worth remembering the quote of Supreme Court Justice Louis Brandeis, “Sunshine is the best disinfectant.” Candor is sunshine. Candor cleanses, dissipates the shadows, casts out the darkness and enables people to see.

Let’s make sure we commit candor. Are there places in your world that need this form of sunshine?