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Grilled on the Hill: 3 Lessons from CEOs in the Hot Seat

Posted by Peter Thies on Sep 30, 2016 10:27:13 AM
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Grilled on the Hill: 3 Lessons from CEOs on the Hot SeatThe public grilling of CEOs on Capitol Hill that intensified last week came with the usual 24/7 media coverage. Media hosts and their guests evaluated the grilled CEOs on their performance in the hot seat. Opinionated pundits from all corners jumped on the bandwagon about heinous business practices and CEO greed. Consumer advocates, corporate governance experts, Washington insiders, business news stations and a growing cast of experts will no doubt continue to opine on what the CEOs did wrong.

I will not add to the grilling or apologize for the CEOs. Instead, I want to focus on what CEOs can learn from the high profile Capitol Hill Grillings of 2016: John Stumpf at Wells Fargo, Heather Bresch at Mylan, Michael Horn at Volkswagen of America, and Martin Shkreli at Turing Pharmaceuticals.


To help CEOs extract lessons from these cases, let’s look at the three fundamental questions behind the probes and attacks they faced: 1) What did the CEO know? 2) Did the CEO believe their company was doing something wrong? and 3) What did they do about it, as CEO, to take accountability?

To help CEOs reflect on these questions, I draw heavily on the advice from 75 CEOs we interviewed about various aspects of the CEO role in our research report entitled “Expect the Unexpected.”

Lesson #1: Stay Connected to Your Employees. The 1st question (What did the CEO know?) is essentially a test of how connected the CEO is to what’s happening in the organization. The vast majority of the CEOs in our study accept that in the top job, they are essentially “alone in a crowd” and must actively break the centrifugal force of isolation brought about by handlers, well-meaning assistants, and Chiefs of Staff who manage access to the CEO:

“You wonder if you are ever in a genuine conversation—unpolished, unvarnished, no agenda, an open honest conversation.”

The CEOs we interviewed cited several methods for breaking the isolation, including the discipline of seeking out several sources of information, not relying on any one source alone. They intentionally identify people who are truly “in the know” about employees’ perspectives and attitudes, and they regularly ask for unfiltered input from those people. 

They also invite unvarnished and impromptu feedback by proactively walking the halls, going to the cafeteria for informal lunches, spontaneously visiting different parts of the company without a formal invite, etc. They know you learn a lot by productively “getting lost,” walking around the company and just talking with people.

Lesson #2: Be Mindful of Unintended Consequences. The 2nd question (Did they think the company was doing something wrong?) is trickier. The pursuit of value creation to shareholders and the constant pressure to be more profitable, and/or grow, are accepted features of capitalism.

But how CEOs and their companies pursue those objectives is at the heart of the outcries from the congressional panelists. The CEOs in our study are mindful of the power and implications of their decisions, especially those deeds that can be misconstrued:

“The organization follows your lead…strategically, culturally…you set the direction and tone.”

In the case of John Stumpf at Wells Fargo, the drive for growth by establishing aggressive cross-sell targets in an attempt to deepen customer relationships led to unethical practices that went unchecked.

One of the many failings here is that Stumpf allowed the forest to get lost in the trees—employees lost sight of a higher purpose for increasing value to customers through more offerings. They chased a metric of “8 is great” accounts per customer, ignoring the unintended consequences.

Other CEOs would be wise to look at the potential implications of their policies and directives, particularly those that drive variable compensation. “You get what you reward” remains true. Make sure you know the behavior you are reinforcing with your policies. Then double check.

Lesson #3. Check the BS Meter. The 3rd question (What did they do about it?) speaks to the CEO’s ability to make tough decisions during difficult times. The CEOs in our study cited “the weight of conscience” in the role:

“Know the tough decisions were made in the best interest of the company. Make peace with your decisions.”

Our interviewees understand that in the CEO role, you are not only the leader of the organization but its conscience, too. The challenge is to be honest with yourself about what is really happening in your company—listen to your conscience, and act accordingly. 

What happens or doesn’t happen to the CEO and key executives after a setback sends enormous signals about top leadership’s commitment to the company’s well-being. The CEOs in our study advise others to listen with an open mind to people with contrarian perspectives, communicate frequently, transparently and broadly about what is known and not known—what tough decisions can be made now and what more needs to be known before other actions are taken.

In the light of a crisis or scandal, audiences pass the CEO’s words through an important filter: the BS test. Overly scripted, vague messages that obfuscate and shift blame are rarely received well.

Finally, our study interviewees would advise other CEOs to make difficult decisions quickly—many regretted waiting too long on exiting a problem employee or deferring an important decision until they were forced into action.


There is obviously no shortage of questions for CEOs to reflect on in the wake of the Capitol Hill grillings. We think they would benefit from pausing to answer the kinds of questions above. In theory it shouldn’t take a scandal or external investigation to start this self-inquiry. The naturalist Aldo Leopold is quoted as saying, “Ethical behavior is doing the right thing when no one else is watching—even when doing the wrong thing is legal.” This is good proactive advice, consistent with the tone and tenor of the advice from the 75 CEOs in our study.

 

Download our CEO study Exchanges16 - Expect the Unexpected

Topics: Advising CEOs