The CEO Who Led a Turnaround Without Wearing a Helmet

One of the key lessons that Huggy Rao and I learned from studying scaling up excellence is that, to spread new ways of thinking and acting, just talking about the importance of new beliefs and behaviors isn’t enough. You need to live the mindset that you aim to instill in others. This is especially important for senior executives because – since the people they lead watch their every move so closely – if they say they believe in something, but act in ways that clash with such beliefs, people quickly conclude that it is just hot air.

I was reminded of this lesson a couple months back when I heard a story about executive Paul Anderson from one of his former colleagues, Paula Rosput Reynolds (former Chair and CEO of Safeco, now CEO of PreferWest). Paula encouraged me to talk with Paul because he “is the real thing when it comes to global business leadership.”  Paul Anderson has a long and impressive resume, which includes serving as CEO of companies including Pan Energy, Duke Energy, and BHP Limited – which became BHP Billiton under his leadership (now the largest company in Australia, among the world’s largest mining companies, and also a major oil and gas producer).  I spoke with Paul a couple months back about his successful turnaround effort at BHP Limited.  Paul was funny, wickedly smart, and consistently modest as he described the mess that BHP was in when he took charge in 1998. The company had been without a CEO for nine months, the earnings and stock price were in the tank, good people were running for the exits, and multiple projects in recent years had failed.

Paul’s new senior colleagues were skeptical about him, in large part, because they were nearly all Australians and “they did not want an American.” Paul started the process of both winning their trust and trying to figure out what to do with the company by having each of the top 80 people in the company write a two-page document that answered, first: Who are you? What are your responsible for? And then: What issues do you believe are most pressing? What would you do if you were me?  He met with each of these executives for at least an hour to discuss the memos they had written.

To make a long story short, rather than acting rashly, Paul listened to the collective wisdom of his top people, and implemented a turnaround strategy that he believed would enable the company to survive and thrive. The centerpiece was a “charter” he wrote that made clear BHP was a resources company (and would not migrate to becoming a services company as some executives proposed) and that spelled out the company’s values, goals, and paths to success. Paul also made some tough and controversial decisions, such as closing a titanium plant that was losing 10 million dollars a month, and exiting peripheral IT and engineering businesses. It took time to turn around this big and broken company. BHP lost over $2 billion in the 1999 fiscal year (which ended on June 30th). But in 2000, just 18 months after Paul took charge, there were multiple signs that the turnaround was on track. In fact, BHP posted a $1.6 billion profit – the largest in company history. And in 2001, profits jumped to $2.2 billion. (See here for more about the turnaround and Paul’s leadership style and philosophy.)

The part of the story I want to focus on, however, was one thing that still wasn’t going well in 2000. Although most other performance metrics were heading north, Paul was concerned because there was little evidence that safety was improving throughout the company. Progress was stalled even though safety was emphasized in the charter and it was something he asked every senior manager about. In fact, the company-wide injury rate increased slightly between 1999 and 2000.

Keeping people safe was essential to company’s international reputation and its ability to attract skilled employees – and, as Paul insisted, was simply the right thing to do. So he called in his head of safety and started pressuring him to explain why these numbers weren’t on the upswing – why the number of lost days due to accidents and injuries weren’t improving, for example. “He hemmed and hawed,” Paul told me, “but he finally blurted it out: ‘it is your fault.’” Then the head of safety explained how Paul’s personal actions were speaking louder than his words:

  • Everyone knows that you prefer to ride your Harley-Davidson motorcycle without a helmet.
  • The speed limit is 5 miles per hour in the garage. Everyone knows your car, and that you drive far faster.
  • When you visit plants, you don’t follow safety rules such as holding on to the handrail or wearing safety glasses at the right times.
  • When you visit a plant, safety is never first thing you ask executives about – you ask them about cost, reliability, and quality of output. Then you get around to safety.

Paul got the message. He stopped complaining about the laws in Australia that required him to wear a helmet. He drove slower in the parking lot. He started following the safety rules during plant visits. He talked about safety early in his conversations with company leaders, talked about it more often, and did so with more feeling. And more systematic efforts were made to instill a safety culture throughout the organization, most notably a new workshop that started with Paul’s senior team and that was cascaded down and around BHP. As Paul explained:

We brought in a consultant from DuPont who spent a full day with myself and my direct reports. We set a 20% year over year improvement target for Lost Time Injury Frequency Rate (LTIFR) and examined what could be done to achieve it. In the days that followed, each of my direct reports met individually with each of their direct reports to discuss their personal commitment to the safety of everyone under them. That next level then met individually with their direct reports, and so on. The whole process was very personal.

People at BHP got the message. They noticed the changes in Paul, and came to believe that the emphasis on safety wasn’t just hollow talk. And the workshops taught employees new ways to reduce accidents and injuries. Within a year, BHP Limited’s Lost Time Injury Frequency Rate had fallen nearly thirty percent (28.5% to be precise). The company’s safety statistics had improved so much that they were among the very best in the industry.

Our research on scaling suggests that spreading a new mindset doesn’t always happen so quickly. The fact that Paul had a lot of credibility – because the company had improved so dramatically in other ways in the prior 18 months – probably helped speed things along. But his story suggests a few broader lessons that can help any leader at any level who is trying to spread excellence:

The people you lead often know more about your behavior than you do. And they certainly know more about how it affects them. They are watching you more closely than you are watching them. The best leaders – like Paul – find ways to get in tune with what it feels like to work for them.

If your tendency is to shoot the messenger, give up now. When one of your folks has the courage to speak out, to give you bad news and point to your mistakes, how you respond has ripple effects that extend far beyond that conversation. Even if you are usually the most reasonable and understanding leader on the planet, the news of any intemperate reaction will spread and it will color future interactions. And if you are a very senior executive like Paul, your reaction to feedback such as “it is your fault” also sets the tone for how other leaders throughout the company will react when people bring them bad news.

You need to be dogged, consistent, and even downright boring about sending and reinforcing the message. This was a point Paul emphasized several times as the key to changing an organization’s mindset. It is especially true for large companies, but applies to every leader. It might be old news to you, but remember that some people you encounter are hearing your message for the first time – and many are watching to see whether you really meant it. People who hear you say something just once or twice, or act in ways to support it just a few times, tend to conclude that “this too shall pass.” Indeed, one of the main lessons that runs through our work on spreading and sustaining excellence is that leaders and teams that do it well often sound like a broken record. Playing the same phrase over and over signals that “the boss really means it” and helps fill organizations with people who also believe.

Fast scaling starts with slow thinking. Paul’s actions demonstrate that, to scale faster, it helps to take the time at the outset to really think through what you are doing and what you ought to do. Those 80 two-page memos and subsequent conversations at BHP were essential for helping Paul decide the right thing to do, rather than to act rashly and unwisely. In fact, this is one of the main lessons Paul has articulated from the turnaround effort at BHP (and also from his later experience at Duke Energy). When you first take charge of a troubled company, he says, “You have to assess the situation rather than act quickly. Everyone wants you to do something, so the first thing you say, very calmly, is, ‘We’re not going to do anything today.’” Paul’s advice echoes Nobel Prize Winner Daniel Kahneman’s findings about the virtues of “thinking slow” – switching gears from a fast, automatic and mindless mode to a laborious, reasoned, deliberative, and conscious mode of thinking. It’s the best way to advance when “you are in a cognitive minefield”—when you don’t know enough, risks are high, or you are stuck.

Finally, I asked Paul if he had any additional advice for executives who find pockets of excellence in their organizations and want to scale them up. It might sound silly because it is so obvious, he noted, but his advice was to remember to thank people when you find that they are doing the right things. They will remember. And if you never thank them, they will notice that, too, and it will undermine your message. Paul isn’t the first senior executive who has given such advice. The late Robert Townsend, CEO of Avis and author of the classic Up the Organization, described the phrase “thank you” as a “really neglected form of compensation.” And two of our favorite researchers, Wharton’s Adam Grant and Harvard’s Francesca Gino, did a series of studies that confirm the motivational magic of remembering to thank the people that you lead.

Read Original Post from the Harvard Business Review


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