A Quarterly Newsletter from UAE and Oman Offices

VOL 12, Issue 1 January 2010

Turning Around Failing Organisations

Lessons from the BBC and the New York Police

‘Turnarounds are when leadership matters most … And this is the true test of leadership – whether those being led out of the defeatism of decline gain the confidence that produces victories.’ Rosabeth Moss Kanter: Leadership and the psychology of turnarounds, Harvard Business Review (June 2003)

Gaining confidence, producing victories and overcoming ‘the defeatism of decline are the core tasks of a new Academy leader taking over a failing institution. To address them, a leader needs to know what such defeatism looks like and must understand the mind-sets it creates. Only then can true turnaround begin to take place.

The defeatism of decline

To create a turnaround climate in an organisation, a leader must understand the psychology of failure. People in a failing organisation tend to enter a pattern of negative behaviour that can be hard to reverse. Rosabeth Moss Kanter describes this downward momentum in colourful terms:

‘[In all sectors] I’ve found the same pattern. Organisational pathologies – secrecy, blame, isolation, avoidance, passivity and feelings of helplessness – arise during a difficult time for the organisation and reinforce one another in such a way that it enters a kind of death spiral.’

Reversing the ‘death spiral’ needs deliberate and effective action, based on a thorough understanding of its causes and components.

The anatomy of the death spiral

The death spiral has three prominent features:

  1. Communication breakdown:As poor results emerge, and as they are confirmed into a pattern, a cycle of secrecy and denial begins. Leaders demand results, they focus on tighter control and start to issue commands. The response from managers and professionals is one of cynicism. People distance themselves from the decisions taken, deny their role in it, blame others and start to ‘do the minimum’. Leaders often react to this negative environment by intensifying the effort to control, by becoming secretive over plans, information and decision making. Feelings of disengagement and distrust begin to multiply.
  2. Isolation and turf wars:As the communication gap widens and blame is on the agenda, management teams start to splinter. Managers become isolated, unable, unwilling and tightly cautious in the sharing of information. Those not wishing to be associated with the failure of others either leave or actively promote the exit of colleagues. Cross-team working and joint problem solving decline. Invisible walls grow between people and teams. Senior management meetings in these circumstances either fade away completely or become robbed of meaning. The highest performers can become scornful of their colleagues. Joint action becomes practically impossible at a time when it has never been needed more.
  3. Passivity and helplessness:As the death spiral accelerates, feelings of isolation and fracture deepen. Many managers begin to sense that it is too late: ‘there is nothing I can do’. People become passive, helpless and ask ‘What’s the point?’. The leader and perhaps one or two trusted advisers complain that they ‘have to come up with all the ideas’, a complaint which only deepens the feelings of passivity until finally the organisation crashes into failure. This scenario has been played out many times in real cases. But by understanding the forces driving it, a leader can help an organisation pull out of the spiral before it is too late.

The turnaround leader – the BBC and NYPD

The turnaround leader needs to act upon the three strands of the death spiral that Kanter Moss describes:

  1. repairing the communication breakdown by building dialogue;
  2. ending isolation and passivity by creating collaboration and initiative;
  3. ending the turf wars with truth and reconciliation.

Both Greg Dyke at the BBC and Bill Bratton in the NYPD demonstrated how these three tasks could be accomplished. Their cases are outlined below.

Greg Dyke and the BBC

Greg Dyke took over the BBC in January 2000, having joined the previous year as Director General Designate. When he joined the BBC was a demoralised organisation, outperformed by commercial television and suffering from a deep cycle of failure. Greg Dyke summed up the feeling in his keynote speech at the Business in the Community AGM in December 2003.

‘When I came to the BBC a number of senior people told me that the BBC was a very complex organisation and that it would take me a long time to understand it. It was a centrally controlled, slow-moving, artificially complex and rather Kafkaesque organisation in which staff believed what they achieved they did despite the management, not thanks to it.’
By the time Dyke left, the BBC was an energised organisation, winning back audiences to revitalised programming with a restored pride and respect. When he resigned over Lord Hutton’s report concerning the suicide of Dr Kelly, the staff at the BBC held spontaneous strikes and demonstrations in his support. The BBC had gone from having the lacklustre and inappropriate mission statement of being ‘the best run public sector organisation in Britain’ to being an organisation committed to becoming ‘the most creative organisation in the world’.

Bill Bratton and the New York Police Department

Bill Bratton facing a daunting situation when he was appointed Commissioner of the NYPD in February 1994. Kim and Mauborgue summarise his predicament in their book ‘Blue Ocean Strategy’ (HBS 2005):

‘Murders were at an all-time high. Muggings, Mafia hits, vigilantes, and armed robberies filled the daily headlines. New Yorkers were under siege. But Bratton’s budget had been frozen. With miserable pay, dangerous working conditions, long hours and little hope of advancement in a tenure promotion system, morale among the NYPD’s 36,000 officers was at rock bottom.’

Two years later New York City was the safest large city in the USA. Murders had fallen 50%, theft by 37% and public confidence in the NYPD had soared from 37% to 73%. As one patrolman put it, ‘We would have marched to hell and back for that guy.’ Incidentally, Bratton’s budget was never increased. Dyke and Bratton addressed the cycle of failure in their organisations. They understood and turned around the psychology of failure, by tackling the three strands of the death spiral: communication breakdown, isolation and turf wars, and passivity and lack of initiative.

Building dialogue: Repairing communication breakdown

In a cycle of failure, secrecy and denial lead to distrust, disengagement and denial of the facts. All change has to start by building dialogue. The key to doing this is creating an environment in which the truth is:

  1. visible (i.e. the facts are known);
  2. valued (i.e. things can be talked about).

In failing organisations, each fact tends to carry a burden of blame and consequence, so the facts are hidden, hotly contested and difficult for managers and staff to uncover. Dyke addressed this with decisive actions:

  • The new BBC was restructured to remove a layer of management and bring executives closer to those responsible for programmes and audiences.
  • Programme people were put on the executive committee so they could influence decisions.
  • Meetings became more informal, with less time on reporting numbers and more time to talk.
  • Dyke sent a personal message to all staff every week. This was characterised, as the then Finance Director put it, by a ‘message from the heart’, ‘telling staff the truth’ and ‘telling people what he wanted them to do’.
  • Formal reporting requirements were cut by drastic amounts, reducing status updates from ‘six binders to ten pages’.
  • Dyke introduced referee’s cards that read ‘Cut the Crap’ which he would hold up when ideas were being squashed.

Bratton too emphasised the process of making the reality visible to all. He shocked his management team by bringing them face to face with performance. In the 1990s the New York subway system was so crime ridden that it had earned the name ‘Electric Sewer’. However as only 3% of New York’s major crime happened on the subway, the police ignored it despite public protests. So Bratton made his top and middle ranked people ride the Electric Sewer every day. He then brought officers face to face with disgruntled customers in Town Hall meetings. Within weeks of Bratton’s appointment the subways were a priority, and crime and the fear of crime plummeted. Bratton introduced a transparent and public performance meeting called Compstat. Before his arrival, performance was not visible and precinct commanders rarely met. Bratton initiated a bi-weekly meeting at which each commander was questioned, their performance data projected for all to see.

A performance culture emerged quickly as no-one wanted to be seen as underperforming. The key to the success of this was an agreement between all that the performance measures were fair. What both Dyke and Bratton did, in their very different ways, was to:

  • Make facts and performance visible;
  • Make communication of the facts important;
  • Open up channels of communication;
  • Give permission to talk about real issues.

These actions create a powerful channel to direct the energies, concerns and passions of the organisation.

Ending the war: truth and reconciliation

Building dialogue is a process of exposing the facts, getting to the truth, getting people focused and talking about the truth. But turning around an organisation is also about relationships. In the cycle of failure, people lose respect for each other, for the organisation and for its purpose. Moss Kanter advises that ‘turnaround leaders must move people towards respect’.

Respect means:

  • Getting people to respect each others’ abilities.
  • Creating time in which people can get to know each other again or for the first time.
  • Treating key people in the organisation with respect.

Dyke achieved this with his open and personable style. Some of the actions he took were:

  • Changing the tone of the executive meetings so that everything was discussed openly.
  • Cutting out the practice of everyone lobbying the Director-General privately and having all discussions with the team.
  • Making meetings more sociable, encouraging general chat and conversation in order to make it easier for people to raise issues.
  • Running fun team-building events aimed at getting people to get to know each other as people.

Bratton had a different style but he focused on achieving the same end; building relationships and alliances that would support the strategy. Some of the actions he took were:

  • Identifying 75 ‘King-pins’, natural leaders in the organization who could create a ripple effect by touching and motivating others.
  • Focusing energy, effort and attention on making each one of those 75 people understand the need for change and performance.
  • Identifying one key senior insider as a scout, mentor and guide. Bratton appointed a number two with 27 years’ service in the ranks to feed him inside information on the hurdles, gripes, issues and landmines, and to keep him close to the political game.
  • Engaging the Mayor’s office and the newspapers as allies to support him against the resistance from the New York courts to his strategy of zero-tolerance.

What both Dyke and Bratton did was to:

  • Give high priority to creating important relationships
  • Give time and effort to building up respect for and from others
  • Create opportunities to influence others and to be influenced by them
  • Build respect between people as people

Creating Collaboration and Initiative: Ending Isolation and Passivity

The cycle of failure leaves people in hiding and on guard, passively disengaged. The vital ingredients of collaboration, proactivity and genuine, shared enterprise are lost, and with them any hope of delivering high performance. Sparking collaboration is vital to all organisational performance, but particularly to turnaround situations. The turnaround leader must break down barriers that separate people and rouse people out of their passivity. Greg Dyke understood this need and took urgent and far-reaching action:

  • Within months of his arrival he launched his first major initiative: ‘One BBC: Make it happen’.
  • Executive meetings were increasingly focused on crossdivisional issues and themes.
  • Managers were encouraged to share resources and seek new business opportunities together.
  • He constantly pushed colleagues to challenge ‘Who said we cannot do this’, leading to innovations like a new time slot for BBC News, a successful Scottish soap opera and interactive website feature using all BBC departments.
  • People were given freedom and encouraged to use it. In one famous example a new trainee using funds intended for a training video created a pilot for a hugely successful programme called ‘The Office’.
  • All staff (24,000) were involved in workshops called ‘Just Imagine’. As Dyke pointed out in his speech to the Business in the Community AGM in 2003, this was not to be an impersonal consultation exercise: ‘We make a point of speaking to people in person. We deliberately did not distribute forms or employ consultants to speak to them.’ 700 ideas were implemented as a result of this massive prompt to participation.
  • BBC Wales created a £100,000 fund to support ideas voted by staff themselves. All of this activity created energy for change, a challenge to passivity, a reaching out towards shared endeavour. Bratton engaged everyone in his campaign to make New York safe. He did this not just by creating a broad strategy but by involving everyone in that strategy. To do this he needed to break down the strategy into bite-sized chunks. He framed the challenge in terms that every New York police officer could relate to.

‘… the challenge facing NYPD is to make the streets of New York City safe block by block, precinct by precinct, and borough by borough. For each officer on the street the challenge is to make your beat safe, your block safe – no more.’

The challenge was direct, involving and within the reach of everyone.

Conclusion

What Dyke and Bratton both did was:

  • Create the opportunity for people to make a difference.
  • Challenge everyone to get involved.
  • Demonstrate the tangible links between doing ‘something’ and achieving the ‘big thing’ – i.e. the most creative organisation in the world, the safest city in the USA.
  • Unite people in a search for solutions that help people realise how they can work together.

The examples of these two completely different public organisations show that whether it is public broadcasting or making a city safe, the lessons are the same. The leader who creates communication channels, fosters respect, sparks collaboration and prizes initiative will succeed in rescuing a failing organisation from the defeatism of decline, while building the confidence that leads to success.

(This article, by Mr. Patrick McHale of PKF UK LLP, is available on the PKF UK LLP website. Mr. McHale can be contacted on + 44 20 7065 0255.)