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 / Summer 2007 / Issue 47(originally published by Booz & Company)


Why Wait for Trouble?

In other companies, an extreme level of pride can become arrogance. In the early 1990s, as an incoming CEO, I led the turnaround of Corning’s television glass business in North America. Corning had invented color television glass 40 years earlier, alongside RCA. Now the television set business faced tough international competition, and Corning had reduced its exposure by creating a joint venture with Asahi Glass. Employees in the factories were very proud. They didn’t buy the fact that customers were unhappy with Corning’s quality and service. They simply denied that their products were anything but the best. The employees weren’t hearing direct feedback from the customers. “You’re the third CEO in five years,” they said to me. “You’re telling us the customers are going to walk away. We’ve outlasted the last two guys who told us that. Why should we believe you?”

So I shut down the factory for nine days. I brought in customers to speak with all of our employees, from the factory utility workers to the head of manufacturing. I said to the customers, “You’ve got to tell my employees exactly what you told me — that if we think we can get by with poor quality, you will figure out a way to get by without having us as a supplier.” And they did. The employees, whose pride had bordered on arrogance, suddenly turned their chairs around and started listening more attentively to our customers. After that event they started coming together to improve product quality and service. Together, we turned that business around.

Other companies suffer from the opposite extreme of too little self-esteem. The science products division of Corning Incorporated, at the time a 75-year-old business, had been on autopilot for many years. The team had grown accustomed to the notion that Corning wouldn’t give them the resources needed to build the business. One symptom of the self-esteem problem was a collection of garbage cans placed to collect leaking rainwater on the floor where the division staff conducted business. To turn that business around, we had to start by building confidence in our own ability to drive progress.

Another problem is an excess of leadership, which occurs when a leader is too dominant or has been in the job too long. This often manifests itself when a business enters a new phase of its life cycle, requiring a new leader with different capabilities. This was true for me at Quest Diagnostics. I came in as a financial and operations person to turn the business around and make it grow profitably. We had a great run for nine and a half years, and I saw that it was time for somebody else, with different capabilities, to lead the organization. I deliberately chose someone with a scientific background to develop as my successor. This turned out to be a good move, because the business had evolved from a company in need of effective core systems and processes into a company in which success would be determined largely by technology developments.

Companies can also get out of balance with their portfolio of products or services — either too scattered among many offerings or too focused on a few. In any case, by looking for extremes, you can identify the organizational imbalances that harm your company’s ability to function well. If your company is too centralized, with one leader at the helm making all the decisions, sooner or later there will be big problems. But if your company is too decentralized, and decisions are made in Wild West style, without coherence across the company’s business lines or functional boundaries, there’s a good chance that the company will lack focus. More than likely, it too will find itself in a turnaround situation.

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