business boxing gloves

Damage From "A Different Direction"

Next time you decide to fire a senior executive or make a significant change in the operation of your organization, avoid stating the reason as “we’ve decided to go in a different direction”. You might think that’s a short, clear-cut and irrefutable explanation for making the change, but it seldom calms the departed and can send a ruinous message to your stakeholders, irrespective of whether the organization is competing in the private, not-for-profit or public sector.

I always like the sports analogies; if you’re a team does that mean a complete overhaul/re-build? Or are you just replacing the head coach because you don’t think he/she is getting enough out of the talent? One might lose season ticket holders, the other might increase sales.

If you’re a not-for-profit society does that mean there’s a void in leadership, or are you changing your programming? Funders will be nervous!

If you’re a consumer goods company, does that mean you’re ditching or dramatically altering the current product line? Maybe a good thing but in the meantime, customers are going elsewhere. In 2011, when then CEO Leo Apotheker of Hewlett Packard announced the company was getting out of PC computers they did terrific damage to their channel partners who thought they were abandoning hardware altogether. It’s taken years to rebuild that trust and business under Meg Whitman. Now they’re at the point where they can split the business units and create more shareholder value.

In executive dismissals, what is said behind closed doors is often covered under a cloak of confidentiality as the result of a non-disclosure agreement tied to a settlement. That of course only serves the purpose for which it is intended if both sides honour the pact. You could prosecute if the deposed executive takes to social media or commits an obvious breech, but you may never know about the over the phone and over the fence conversations that have a way of spreading like an oil spill. You’re taking the high road and you can’t understand the backlash.

Unless the dismissal is “for cause” it seldom changes the fate of the individual to say he/she was let go, but what’s the right “spin” publicly? When Canadian Pacific Railway ousted its CEO a few years ago in a very messy and public battle, it was very clear why .The winning shareholder group was validated as Hunter Harrison, ex of CN, proceeded to take the company to a new level of performance and profitability (some may argue at the expense of other metrics, but that’s another story).

Why not just say it like it is? We needed a change in leadership after this many years (in sports vernacular that’s called the players tuning out the coach). We are looking for more growth and innovation over this next period. We need to generate a greater return for shareholders. Whatever piece of straight talk fits.

From the executive’s perspective, the best professional athletes know when they need a change in scenery and systems to “spark” their game. They also tend to realize when they don’t have what it takes anymore to perform at a peak level and would rather go out on their terms than fight their replacement. Organizations need to be able to make the same call for the same reasons and be very clear about it. It usually ends up being the right approach for all concerned.

Mark Olson
Managing Partner & Principal

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