The May/Hammond U-turn is a lesson for all CEO/CFO relationships

“Budget U-turn raises doubt over competence for Brexit challenge” is the front page headline in today’s Financial Times. The FT doesn’t have a reputation for melodrama, so its reference to competence is worthy of our attention.

We need our Prime Minister and Chancellor to behave competently not only in the Brexit negotiations but also because we need them to be in sync generally, like in any CFO/CEO relationship.

In leadership terms, there were three reasons for the U-turn chaos, and these can easily occur in CFO/CEO relationships. They are also avoidable.

First, Mrs May and Mr Hammond did not have a shared purpose in respect of their budget. If they did, they would have together faced down their critics. They would have owned up in advance to breaking an election pledge on the basis that Brexit has changed the game and they would have “toughed it out”.

But the concern about their relationship is not the error – anyone can make a mistake – but it’s the manner of it. Mrs May has not understood that leadership is about convincing us that her vision is good for us.

In business and politics sometimes you have to ask for forgiveness, not for permission. We would have forgiven her for breaking an election pledge if she’d asked for our forgiveness in the context of a clear vision for the future. But she didn’t.

Consequently, she and her Chancellor were at cross purposes. His objective was to balance the budget, and hers wasn’t clear, save that we know what it’s not: it’s not Mr Cameron’s purpose. The problem with that position is that it was Mr Cameron’s manifesto that got her elected and one which, inconveniently for her, explicitly excluded tax hikes.

Second, if a CEO and CFO lack a shared purpose, it follows that their strategy cannot be right. Mr Hammond’s strategy was to pay for the social care problem by increasing taxation.

Mrs May’s strategy is to do whatever she feels is the right thing to do as she sees it irrespective of whatever has happened before, or whatever anyone else thinks. This is a common strategy amongst political and business leaders. It’s not always wrong and works in time of war, but we’re not at war.

An example of this strategy from my mother country was Prime Minister Eamonn De Valera who famously, or infamously in my view, said: “When I know what the Irish want I will look into my own heart.”

We all know CEOs who behave like this, and they can make life very difficult for everyone, especially, their CFOs. Their approach is not a strategy because a strategy demands conscious behaviour and this is unconscious behaviour. If it were conscious, they wouldn’t do it.

Third, the U-turn exposes the lack of clarity regarding their respective roles. It is very common for CEOs and CFOs not to adhere to their role definitions and with dire consequences.

The primary role of a CEO is to create an environment in which others can do their best work. This role includes “having the back” of the CFO, whose role is to “own the numbers”. To Mr Hammond’s credit, he did try to own the numbers, but his CEO didn’t have his back. His days are now numbered, and so are hers, but for different reasons.

#CEOs should not copy Mrs May if micromanagement means micromanagement; she and they might reread #Chilcot and trust more…

Prime Minister May is, allegedly, a micromanager. According to press reports, she alone makes critical decisions, fails to communicate current government policy to the embarrassment of officials, and controls conversations between her ministers and the Press. If true, this behaviour should concern us for three reasons.

First, it’s dangerous. It creates grave risk if she makes the wrong call. Second, it creates an environment in which her team can’t thrive, the opposite of what good leaders should do. Third, it gives a bad example to other leaders, especially CEOs some of whom are looking for every excuse to justify their meddling with their directors.

The risk argument alone should be an incentive for her to consider changing her behaviour. If not convinced then she should reread the Chilcot Report into the decision on invading Iraq which explicitly criticised the “sofa-style” decision-making that led to that decision. I wrote a blog after the publication of the report, aimed at CEOs entitled: Business leaders should heed #Chilcot criticism of “sofa” style decision-making – the dangers of which are self-evident.

Concerning morale, the first responsibility of any leader is to create an environment in which the people who work for and with them can thrive and do their best work. Work satisfaction is impossible if they are not trusted to do the jobs they are paid to do. They justifiably feel controlled and stifled. But to be fair to Mrs May and micromanaging CEOs their intention is not, I suspect, to control others. That’s the collateral damage of an inability to trust. Control is not the primary motivator.

I’ve worked with many CEOs and other leaders, all micromanagers to a greater or lesser degree. But if they could tell the truth, they would say that they are exhausted by their own micromanaging. It eats up their time and saps their energy. But they feel powerless to change, not least because some of their micromanaging behaviour helped them to climb the greasy pole.

But the problem with leadership is that it’s impossible to lead without trusting the people you lead. So how do you learn to trust? Well, a good start would be to acknowledge why you don’t trust people in the first place. Experts tell us that our distrust starts in our formative years. If we were not trusted or allowed to fail as children, it’s unlikely that we will find it easy to trust anyone in adult life.

But if Mrs May, micromanaging CEOs and other leaders were to meddle just ten times less out of every hundred actions, that would be just 10% less micromanaging. That’s small change, I know. But I also know that the impact of small changes is huge. I have case study evidence that small changes in micromanaging behaviour lead to happier and more efficient teams, yielding more time for leaders to focus on leadership and, crucially, to give them time to dig deeper to find their hidden potential. Hidden because they weren’t leading.

Finally, the issue of giving bad example is important. Mrs May is a role model whether she likes it or not. So are CEOs and other leaders. Their underlings watch and copy them. But they too struggle with trust. If you are the top of the tree your distrust is across or down. But if you are a follower you won’t trust upwards if your boss doesn’t trust you. The result is that both leader and follower needs are not met, risks increase and everyone misses their targets.

The trigger for incentivising behavioural change is a belief that you might get your needs met. But if you want your needs met, the first step is to tell someone what you need. However, if you don’t have a track record of being able to negotiate your needs productively, you are unlikely to risk the vulnerability required to ask. This is a vicious circle.

Do we know what Mrs May needs? Has she told anyone? She has told us about actions. Not feelings or needs. When she says “Brexit means Brexit” she means that the vote will be implemented. But she doesn’t say how she feels about making that happen and what she needs to execute it. She must be feeling afraid that she won’t get what she needs if she trusts people. She may be right. She may be wrong. But we all need her to succeed.

So the first step for her and CEOs is to articulate what they need and ask, not force, compliance. They may be pleasantly surprised that if they allow themselves to be vulnerable by risking the clear articulation of requirements that someone might meet them. Vulnerability sends a signal of trust. The greatest leaders show vulnerability. In doing so they may, as one of my former bosses was fond of saying wryly, be in grave danger of success.

Ciaran Fenton

September 2016

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♯PrimeMinisterMay & CEOs: Three Essential Steps to a successful ♯First100Days

THERESA-MAY-NO-10

Step 1 Articulate a credible purpose in which you believe

Mrs. May did this yesterday, partly. She said that her objective is to create a society based on social justice. The problem is that I don’t believe her. Not that I don’t believe she believes in what he is saying but that it’s not a credible objective. She is as unlikely to achieve social justice as Mr. Cameron achieved his Big Society – whatever that was – because we all know that social justice is a woolly unachievable aspiration.

We also know that her own track record in the pursuit of social justice is mixed. What has she achieved under this heading? She may have done lots, but I don’t know about it. Indeed she is known to be tough on migrants. As a migrant myself, I find that at odds with an assertion about caring about social justice. I’m also wary of the phrase “giving us more power” over our lives. That’s’ code, in my mind, for abrogating responsibility.

It also sits uncomfortably with the fact that her new home is located in the Borough of Westminster. In some of its wards, 78% of children live in poverty (Government Indices of Multiple Deprivation). It has the third highest rate of child poverty in London and nationally (SNA Report 2014). It is one of the worst boroughs for ethic minority groups in terms of health & wellbeing (Runnymeade Report 2016). This is all on her doorstep. She has been working in that borough as Home Secretary for six years. Maybe she doesn’t know about it. But if I were setting out my stall as The Social Justice PM I would know about my starting point.

So, if you are a CEO or a function leader starting your First 100 Days make sure that your objective is as credible as it is clear. Had Mrs. May said that her objective is a 10% increase in social justice measured across seven headings then I would have been impressed. But she didn’t.

Step 2 Understand that strategy is a simple word meaning “how”

Strategy, one of the most misused words in the English language, means “how” you achieve your objective. Michael O’Leary’s strategy was to annoy customers so much that they expected nothing more than a safe flight. He succeeded. Pure genius, as the Guinness people love to say. On this analysis Mrs. May was notably silent on the issue of how, precisely, she is going to achieve social justice. If she has one and didn’t tell us, then I worry why. If she hasn’t, then I just worry.

So, I strongly advise you never to articulate an objective without declaring a credible strategy to achieve it. There’s that “c-word” again. Credibility. It’s important. But I have sympathy with leaders who have difficulties formulating their strategy. This is acceptable provided you admit that your current strategy is to find strategy. What isn’t advisable is to have no articulated strategy. She hasn’t.

Step 3 Outline a plan to implement your strategy, and stick to it

Whilst plans are lists of actions to be taken by people to deadlines, they also reflect decisions on agreed behaviour. The most important behaviour Mrs. May has to illustrate in her first hundred days is her ability to create an environment in which her team can thrive in the implementation of the strategy to achieve the credible objective. This includes her behaviour in making appointments.

Already, on Day 1, she has illustrated that she doesn’t yet fully understand the importance of this step in the appointment of Mr. Johnson as Foreign Secretary. We know she doesn’t trust him. So she must be setting him up for a fall, as he will. That may cause mirth but it will be very serious for us all. Mr. Davis’ appointment as Head of Brexit is also worrying. She should do that job. But how can she? She voted Remain. But maybe she didn’t mean that. If so, she’s not credible and her first hundred days will end in tears.

Ciaran

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