CHAPTER 11
STEP #8: FERRET OUT SKEPTICS AND NONBELIEVERS EARLY
If you asked me when I joined what I intended to do, or what I was going to do, I would have said I absolutely have no intention of changing out my senior team.
—FRANçOIS LOCOH-DONOU, CEO, F5 NETWORKS
Of all the steps in successfully renovating your culture, this is the hardest one.
Intuitively, most understand the necessity. To be successful, make sure naysayers, skeptics, blockers, nonbelievers, doubters, and pessimists are out of the way. Make way for the proponents, advocates, supporters, executers, achievers—that’s how a culture change will get done. As Jim Collins famously wrote in Good to Great, focus on “First Who, Then What.” Get the right people on the bus before figuring out where to drive the bus.
That sounds like solid advice, but it’s not the way real life usually works.
In any company, there are people who appear to be the right people, but they secretly thwart the best-laid plans. We encounter people like this all the time, those saboteurs that sometimes openly—but many times discreetly—derail internal initiatives. There are many reasons for their behaviors. Often, they feel threatened. Their power base is being eroded, their authority usurped, their scope diminished. Other times, it’s purely ego-driven; maybe the idea wasn’t theirs and they need it to be. Sometimes they just intellectually disagree or disagree on principle with the new direction but may or may not be candid about their disagreement.
In my career, I’ve encountered dozens of these people, maybe more. It can be very frustrating. The hardest ones to deal with for me were always those who practiced the art of “the sun always shines up.” They were fantastic corporate citizens to my face. Saying all the right things. In alignment with our vision. Promising to carry out the strategy the right way. But in reality, they were an absolute typhoon to other people lower in the organization. Berating people, subjugating the purpose/vision/mission of the company, seeking control at the expense of others and at the expense of the corporate good. This personality type exists at various levels in most organizations. The key is to move those people away from their ability to do damage as quickly as possible, which often means removing them from the organization.
Successful CEOs ferret those sentiments out early and make the necessary adjustments. And that starts at the top. Almost 40 percent of organizations that have had a successful culture renovation replaced senior leaders who were not willing, or able, to embrace and model the desired culture. They needed to reassign these executives to other positions or encourage them to pursue other opportunities. This is absolutely critical. Thirty-eight percent of organizations told us that their companies tolerated the behavior of leaders who resisted the change and their opposition was a primary inhibitor to success.
Legion of Superheroes
Satya Nadella certainly has made changes at Microsoft, replacing almost all key executives since taking the company’s CEO title from Steve Ballmer in 2014. Just a few years in, only Amy Hood, chief financial officer, Kurt DelBene, EVP of corporate strategy (after a brief hiatus that bridged the Ballmer-to-Nadella transition), and Brad Smith, president, remain from the previous regime’s leadership team. In Hit Refresh, Nadella talked about the changes and about the people that he needed to transition out:
They were all talented people, but the senior leadership team needed to become a cohesive team that shared a common worldview. For anything monumental to happen—great software, innovative hardware, or even a sustainable institution—there needs to be one great mind or a set of agreeing minds. I don’t mean yes-men and yes-women. Debate and argument are essential. Improving upon other’s ideas is crucial. I wanted people to speak up. “Oh, here’s a customer segmentation study I’ve done.” Or, “Here’s a pricing approach that contradicts that idea.” It’s great to have a good old-fashioned college debate. But there also has to be high-quality agreement. We need a senior leadership team (SLT) that would lean into each other’s problems, promote dialogue, and be effective. We needed everyone to view the SLT as his or her first team, not just another meeting they attended. We needed to be aligned on mission, strategy, and culture. I like to think of the SLT as a sort of Legion of Superheroes, with each leader coming to the table with a unique superpower to contribute for the common good.
While Nadella did not go as far to say that the previous SLT had been somewhat dysfunctional, with few of the top executives putting the common good first, that was the implication of his remarks to some insiders. There were probably a few too many yes-men and -women as well.
So, changes needed to be made. Upon becoming CEO, Nadella was very purposeful in creating an SLT that he thought would propel his vision for the future culture of Microsoft. Nadella was also transparent on what he expected from the SLT: an all-in commitment to change the culture of the company. Shortly after his appointment, in a memo to all that announced some initial changes, he wrote:
One of my consistent themes has been a point I made in my original mail—we all need to do our best work, have broad impact and find real meaning in the work we do. Coming together as teams fuels this on a day-to-day basis. And having the Senior Leadership Team (SLT) set both pace and example means a lot to me. I have discussed this point in various forms with the SLT and have asked for their “all in” commitment as we embark on the next chapter for the company. We need to drive clarity, alignment and intensity across all our work.1
With that e-mail he announced that Skype executive Tony Bates, who had been a candidate for Microsoft CEO, was leaving along with Tami Reller, the executive vice president of marketing. That began a series of departures including Windows chief Terry Myerson, Nokia leader Stephen Elop (also once a CEO candidate), business solutions executive Kirill Tatarinov, HR chief Lisa Brummel, and eventually artificial intelligence and research head Harry Shum, among others.
With all those departures, it would be easy to assume that the amount of experience and institutional knowledge walking out the door would create a significant gap. But that wasn’t the case. Eight of the fourteen people Satya brought on to the SLT had been at the company for at least two decades. Change at the top doesn’t mean an organization needs to suffer from a lack of internal expertise if it has ready successors on the bench, as Nadella clearly thought the company had.
There was one role, however, that Nadella paid very careful attention to as he thought about renovating the culture: the position of chief people officer.
THE POWER OF THE CHIEF PEOPLE OFFICER
When he became CEO, Nadella inherited a very experienced HR chief in Lisa Brummel, who had been at Microsoft since 1989. Brummel didn’t start out in HR. She held a variety of roles in management and marketing in several divisions, including Microsoft’s hardware, consumer, and productivity business, before she was plucked to run HR by Ballmer in 2005 when the company was at a recognized low.
Brummel’s years at the HR helm were sometimes criticized because of the stack-ranking policy she oversaw, a process she defended by saying it “seemed to be right for the time” when the program was phased out.2 And she was likely correct. There may have been times when it was right; the employee base fluctuated significantly during her tenure. Under Brummel the workforce more than doubled, from 61,000 employees to 128,000, but there were also tough times. She oversaw two large-scale layoffs, the first because of the 2008 recession, and the second due to the failed acquisition of Nokia’s handset business.
Nadella clearly understood the impact an effective chief people officer can have when changing a culture and, like Ballmer, went outside the world of HR to find Brummel’s successor.
Kathleen Hogan was not the most obvious choice for this role. She had been successfully running Microsoft Services, the largest single Microsoft organization with more than 21,000 employees worldwide. Prior to joining Microsoft in 2003, Hogan was a partner at McKinsey & Co. and previously had been a development manager at Oracle. She earned her bachelor’s degree in applied mathematics and economics, magna cum laude, from Harvard and an MBA from Stanford.
“Kathleen is an accomplished, well-respected and well-rounded leader who obsesses over our customers and is motivated by people’s passion for how technology can change the world,” Nadella said in the press release announcing her appointment. “She is the right person to continue pushing our cultural transformation forward, and she will ensure Microsoft remains the best, most inclusive place to work.”
“When Satya first approached me about leading HR,” Hogan recalled, “I remember coming in and asking, ‘What’s my scorecard?’ . . . and Satya said, ‘The one thing I want you to do is help me transform the culture.’ So even back then, he was crystal clear that that was really going to be important . . . the culture that I want to be eternal. Our strategy is going to evolve, but that’s [culture] going to be really important to us.”3
Nadella has often referred to Hogan as his partner in Microsoft’s culture journey, and it’s clear he is one of her biggest fans. Having the right people leader can make or break a culture renovation, something Nadella seemed to understand from the start. Equally, Hogan has consistently made it clear that having the right CEO and a senior team that is supportive of a culture change is critical to success.
“The first—and most important step—is to engage the CEO and the senior leadership team,” Hogan said “Our appointment of Satya Nadella as CEO was a significant milestone for the company, and his role in culture change has been instrumental. Having a CEO and senior leaders who champion and embody culture change helps set the tone and provides a path for employees to follow.”4
But Hogan was also clear that her HR team has had a great deal to do with the successful renovation.
“It has been significant. From envisioning to coaching, defining, guiding, and leading change management,” Hogan recalled. “We worked alongside our company leaders with dedicated resources. All the while, we have kept both customers’ and employees’ best interests top of mind and evolved as we listened and learned. It has been incredibly gratifying work for HR to partner with the business, and while it hasn’t always been easy, we’ve found that the insights from the HR teams have been invaluable and have helped ensure our efforts remain authentic to how the change is manifesting itself internally and externally. It’s an ongoing effort, and we continue to learn and evolve as we go.”5
Hogan had enough experience at Microsoft to recognize that building on the company’s storied past was going to be the best way to renovate Microsoft under Nadella.
“I don’t necessarily look at it as ‘old’ Microsoft vs. ‘new’ Microsoft. We have such a rich history, and it’s really about building on and honoring where we’ve been as we move into the next phase for our company. Ultimately, for us the primary shift includes embracing a growth mindset. As we’ve translated that into our company norms, we’re moving from a place where employees felt a need to be the single source of knowledge, to a culture of collaboration where employees find more value in working together to best leverage diverse knowledge. This has also included the evolution of our performance system, which today places a premium on collaboration and contributing to the success of others. We’re also moving towards a mindset that embraces risk and failure. A shared understanding that risk, failure, and experimentation are the ways to learn and innovate and that not every idea may work every time.”
With their collective internal experience, understanding who could best represent a renovated culture was likely very intuitive for Hogan and Nadella. In general, CEOs who are promoted from within probably have a better idea of who the skeptics and nonbelievers are and what leadership changes need to be made. CEOs coming in from the outside don’t necessarily have that luxury.
Not the Intention
François Locoh-Donou was one of those CEOs coming in from the outside. When he left his former company and took over as CEO at F5 in January 2017, he inherited a leadership team of nine people. It wasn’t immediately obvious which of these leaders might not be right for the future of the company.
“Eight of nine of the executives that were there when I arrived have since left the company,” said Locoh-Donou to me when I specifically asked about the changes he made. “So, we ended up doing pretty much a wholesale replacement of the executive team. This was not my plan. If you asked me when I joined what I intended to do, or what I was going to do, I would have said I absolutely have no intention of changing out my senior team.”
That is often not the intent of the new CEO coming in. While many understand they will need to evaluate the team for future fit, few would project they would remove the majority. This was certainly Locoh-Donou’s thinking.
“Of the leadership team that was in place when I arrived, when I looked at each of their competencies in their domain, they were very competent. People don’t make it to the top executive role if they aren’t competent and don’t have the ability to deliver results. They had built F5 as we know it. But I can think of a few of that original group where the person was competent, but they weren’t really in favor of the change in culture we wanted to build, and therefore we made the decision to part ways. As CEO, you have to make a lot of decisions early on, decisions that likely delay gratification. But the earlier you make those decisions, the sooner the gratification will come. My advice to anyone trying to change culture is first, make the hard decision—take a hard look at your team and make sure you have a leadership team that represents the culture you want and will energize the future culture.
“Those were the decisions I made early on. And yes, it was delayed gratification and results. But, in the end, it was worth it and is now paying huge dividends.”
Like Nadella, Locoh-Donou relied on his head of HR to help guide the culture change.
“A critical element to changing our culture is that Ana White joined the team as our chief HR officer early on. It turned out to be a masterstroke to make the decision to bring Ana on as CHRO because Ana helped me through some of those pretty tough decisions regarding my team, and what we’d need to truly renovate our culture. We wanted a leadership team that first would model the right behaviors—and that starts with me. It involves humility, being generous, and having each other’s back. The new leaders we brought in were chosen to operate as a team and work with each other, versus previous siloed behavior. And once your leadership team is operating in unison and working for the good of the company rather than only being concerned about their particular group, that’s very, very contagious throughout the organization. So, the choices that we made were sometimes very tough but, in the end, we have a leadership team today that I think is quite extraordinary, and that has made a huge difference.
“The role of HR has been so critical in this process, particularly Ana. I have learned that Ana is a very, very generous and courageous person. And as a result, she does a lot of things that are never on the job description. This ranges from constantly encouraging every one of her team members and cheering them on, and frankly encouraging and cheering on me as her boss,” Locoh-Donou admits. “Ana is probably the first person that will be on call at midnight, or on an early Friday e-mail, sometimes helping retain someone who is thinking of leaving that we don’t want to leave. The talent side is so critical. She has phenomenal energy in recruiting top talent, and just trying to help people out in the organization. One example that stays with me: we had to lay off a few people, and one of our employees, a young man that was being let go, was trying to find a new job in F5 but was having trouble. Ana had a full weekend of kid activities, but she offered to this guy to come to her son’s lacrosse game so that she could walk around the field with him to weigh his options.
“I cannot stress enough the impact that Ana has had by her individual, personal actions, which, by the way, is also contagious because she makes everyone around her, including me, better and want to do more and to be as generous as her. So, I think we were lucky to have an exceptional leader in HR. But the bigger part of it is how Ana and her leadership team—she’s retained and recruited a great team—how they translate their ideas and creativity into programs that have made a difference. Whether it’s codifying and clarifying our BeF5 leadership principles, redefining performance management, calibrating our leaders, planning successions, and being more disciplined on talent management practices, as well as diversity and inclusion. This is not the old personnel department that will help you with performance reviews. They are a source of new energy in the company. Of creativity. Of new ways of doing things. All of these things have contributed to moving forward with cultural changes across the organization that make us a better company.”
As Locoh-Donou gushed about the impact White has made on the company while she listened, I could sense her blushing at the compliments.
“Wow. That was awesome to hear, François,” she chuckled. “Thank you so much. But I have to say, despite all the praise, François has been the beacon of the culture change. He exudes it every single day. When renovating, obviously you want to keep what’s amazing about the culture, but it’s so important to really ensure that all leaders, from the CEO’s directs on down, exemplify that change. Because if they don’t, it becomes a bit of a joke and mere words on a PowerPoint, versus things that people can look at and see that their leaders care about and are doing.”
Strategic HR
Culture change happens more seamlessly when a CEO and CHRO are in lockstep, as clearly Microsoft’s and F5’s teams were when changing their cultures. Today, more CEOs than at any point in history realize the importance of the CHRO, not only for the health of the culture, but for bottom-line business impact.
David Brandon, chairman of Domino’s, has seen the impact a good CHRO can make on an organization many times.
“First and foremost, if the HR lead in the company doesn’t report directly to the CEO, he or she should find another company to work for. To the extent the HR function is delegated—for example, HR reports into the chief administrative officer, or CFO, or the general counsel—then HR is not viewed as a priority to the CEO. In my opinion, that in and of itself sets the stage for a problem.”
“The HR leader must be involved in virtually every discussion that takes place around the leadership team table as it relates to the strategy and operations of the company,” Brandon continued. “Strategies don’t get executed without the human capital in place to make them happen. If the HR leader is not deeply engaged in the planning process every step of the way, then that HR function is being left out on an island, separated from the ongoing strategy planning and the day-to-day operations of the business. And that, in my opinion, is a recipe for disaster.”
“Boards seek a sense of the strengths and weaknesses of the culture . . . what issues are percolating,” said Jamie Gorelick, a board member at Amazon and VeriSign. “Board members want to know what the leadership of the company can do to foster a stronger culture—to address shortcomings and underscore strengths. Providing a real outlet for people is the most important way to affect your culture. Employees know the community in which they operate. So, I think the single most important thing that an HR executive can do is make sure that information is flowing freely, that within the chain of command it is welcomed, that there are avenues outside the chain of command that are robust and real, and that there is zero fear that someone who raises an issue or makes a suggestion will suffer any untoward consequence.”
Gorelick highlights a dichotomy that exists in most companies, particularly large public organizations: while the CHRO reports to the CEO, he or she has to address the board frequently on fiduciary and governance matters that may not put senior management in the best light. In particular, the CHRO discusses and advises on executive compensation issues regarding the CEO and other executives with the board. In essence, the CHRO is in the precarious position of influencing what the compensation package should be for his or her boss, a phenomenon that plays out almost nowhere else in an organization.
While the compensation relationship is unique to the CHRO and the board, the same level of corporate responsibility does apply to a couple of other roles on the senior team, which Irene Chang Britt, a board member at Dunkin’ Brands, Brighthouse Financial, and Tailored Brands, pointed out.
“CHROs should be able to tuck away their own personal interest, their interest in protecting their boss, their status as an employee and be able to rise above that,” she advised. “I expect the same of great CFOs and general counsels as well. I think that triumvirate has to be dispassionate about their own standing as well as the standing of their boss. In the matters of HR, finance, and legal, sometimes the best course for the company is different than what their direct boss will want. And as a board member, I expect those three leaders to rise above the demands of them being an employee of the company.”
It’s not unusual for the best companies in the world to have an industry-acknowledged top HR executive in the C-suite. And increasingly, many high-performance organizations showcase the CEO-CHRO relationship—something that rarely was done in the past. I’m always heartened to see a senior team where it’s the CHRO who is widely considered internally as the right-hand person, or at least one of the top three inner circle members.
“Wise CEOs know they must draw from a wide variety of resources to help them lead their companies toward a bright future,” said WD-40’s Ridge. “Powerful influence comes from all around: books and boards of directors, other leaders we meet at conferences, consultants on occasion, the talent from throughout our entire organization of individual contributors and our inner circle of C’s—financial, marketing, public affairs, all those ‘chiefs’ who promise delivery of the highest-level advice.
“But there is one C who stands apart from the rest. The chief HR officer. CEOs who are blessed with a CHRO whom they can trust utterly, and with whom respect is a freely flowing, two-way dynamic, have the advantage of working with a true partner in the service of a shared vision. Often that vision is one that only the two of them can fully comprehend. And, as a team of two, they move the company forward toward an ineffable, people-driven reality that the numbers professionals will be able to quantify only later. It’s a sparkling loyal partnership and a creative chemistry that I wish for every CEO and for every CHRO to experience in their careers. If they could only find each other.”
CHROs are critical partners these days in crises as well. The first several months of the COVID-19 pandemic proved that. Many CHROs found themselves directing key aspects of the corporation’s strategy, under conditions for which there was little to no scenario planning. The organizational agility of companies was tested during this time like no other time in history, and CEOs came to appreciate the CHROs that stayed calm, decisive, and agile.
In fact, The Economist wrote that “when the financial crisis rocked the business world in 2007–09, boardrooms turned to corporate finance chiefs. A good CFO could save a company; a bad one might bury it. The covid-19 pandemic presents a different challenge—and highlights the role of another corporate function, often unfairly dismissed as soft. Never before have more firms needed a hard-headed HR boss.”6
In January 2020, as the word “coronavirus” entered the lexicon, Diane Gherson, CHRO of IBM at the time, thought the biggest challenge she would face would be how to protect employees as they attended industry trade shows and conferences. “My chief medical officer and I reviewed the precautions from the experts about how to screen people who were going to these events and why there needed to be a no-handshake policy,” she said. “It all feels very quaint now, and so long ago.”7
As the virus spread worldwide, it was clear that business as they knew it would need to be altered. Gherson led the team that quickly created a work-from-home transition for IBM’s 350,000 employees. Eventually, about 95 percent of IBM’s employees were working remotely, which was not a simple endeavor. Hundreds of complex data centers had to be operated from a distance, and leaders were ramped up quickly to understand how to manage remotely in this new reality.
Like many CHROs, Gherson was equally front and center in planning for an eventual return to the workplace. Gherson strategized with the CEO and other senior leaders on questions they never contemplated before: Who comes into the buildings? Do we require masks? How many people are allowed in an elevator at one time? How does the company configure floor plans to keep people far enough apart from each other so they feel safe?
“We’re in 175 countries, and we have a lot of buildings, so this isn’t an easy thing to do,” said Gherson.8
The early days of the pandemic elevated the CHRO as a central strategist during the worst crisis most companies ever faced. Not only were they having daily sessions with the CEO and other senior leaders; they were also counted on to keep anxious and worried employees informed about policies and resources—medical and financial—to help them stay healthy, calm, and productive.
The pandemic also provided a lens, of sorts, on leadership. I heard from several CHROs on this issue, and many were a little surprised by leaders’ actions. Some of the best leaders remained calm, engendered trust, communicated often and effectively, and were creative when faced with situations they had never encountered or even contemplated. Others less so. “This pandemic has taught me everything I need to know about some leaders in my company,” one CHRO confessed to me via video chat one day, just a few months after COVID-19 hit worldwide. “I don’t need to do any leadership assessments; it’s pretty clear who is going to help and who is going to be a roadblock.”
It’s Not Just the Leaders
While the right leadership is critical to culture renovation, and blockers at the leadership level are important to remove, culture change efforts can get thwarted at other levels in the company as well. It’s not uncommon to have certain departments, an acquired company, or even geographies as opponents to culture change. These can sometimes stop change efforts in their tracks unless they are dealt with swiftly and decisively.
“It’s important to always keep in mind, it is not just the leaders,” cautions Babson’s Rob Cross. “Work we have done in a bunch of scenarios shows that when you put just one de-energizer on a team the overall ratings drop dramatically. Or if you put an energizer on a de-energized team their results drop threefold. Clearly, the leader is a part of this. But it is also the day-to-day experiences built into the interactions that most significantly shape the person’s perception. This can be huge when trying to change a culture.”
In his highly acclaimed book The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t, Stanford professor Bob Sutton wrote about the importance of not tolerating de-energizers in the culture, no matter how brilliant they are. The book was based on a popular essay Sutton wrote for the Harvard Business Review. Ironically, Harvard Business School Press wouldn’t publish the book because Sutton insisted on having the word “asshole” in the title,9 so he got it published elsewhere. The book sold over 115,000 copies anyway and won the Quill Award for best business book in 2007.
Sutton offers two simple tests for deciding if someone fits the bill:
Test One: After talking to the alleged asshole, does the “target” feel oppressed, humiliated, de-energized, or belittled by the person? In particular, does the target feel worse about him- or herself?
Test Two: Does the alleged asshole aim his or her venom at people who are less powerful rather than at those people who are more powerful?
In the book, Sutton identifies the following “dirty dozen” techniques that assholes use:
• Personal insults
• Invading one’s “personal territory”
• Uninvited physical contact
• Threats and intimidation, both verbal and nonverbal
• “Sarcastic jokes” and “teasing” used as insult delivery systems
• Withering e-mail flames
• Status slaps intended to humiliate their victims
• Public shaming or “status degradation” rituals
• Rude interruptions
• Two-faced attacks
• Dirty looks
• Treating people as if they are invisible
Sutton acknowledges that almost everyone is guilty of some of these traits at some point in time, but a certified asshole displays a persistent pattern and usually has a history of episodes that end with multiple people feeling belittled, disrespected, and de-energized. Psychologists separate states (fleeting feelings, thoughts, and actions) from traits (enduring personality characteristics) by looking for consistency across places and times.10
It’s the consistently de-energizing people that ultimately slow down or take down cultures. Ferret them out as early in the renovation as possible.