A few years ago I read a book called American Icon by Bryce G. Hoffman. It is about Ford Motor Company during the automotive industry's slump around the 2008 timeframe. On the brink of bankruptcy, the big three American automotive manufacturers were offered a bailout by the federal government to avoid putting millions of people out of jobs. General Motors and Chrysler both jumped at the opportunity, and even asked for more later on. Ford, on the other hand, decided to save itself. Bill Ford, then CEO and Chairman of Ford, graciously stepped down and hired Alan Mullaly as CEO to bring Ford Motor Company back to its feet. It's a fascinating story and an interesting look into how these corporations work from the inside. I highly recommend it.
One story from the book that stood out to me, and is still on my mind, is the recounting of Mullaly's first meetings with Ford's department heads. Despite operations obviously not going well, despite the company spiraling toward bankruptcy, every department head reported green in their presentations. They twisted facts, fudged numbers, deflected blame, pointed fingers, and ultimately lied to avoid reporting how bad things truly were for the company. In the past they had been berated, shamed, and threatened for reporting bad news. The company had been cutthroat, with little compassion for mistakes or underperformance. The department heads had learned that upper management cared more about looking good than they did actually fixing the root cause of the problems.
Mullaly instantly recognized this as a major downfall for the company. How could he get an accurate picture of what's going on inside the company if his department heads are too afraid to be honest? Mullaly spoke to one of the heads he had built some rapport with and convinced him to lay out all of the bad news at the next meeting. He obliged, and at the next meeting, this head was the only one to show red on his presentation. The room went cold, breathing stopped, and everyone waited for him to be ripped a new one. Mullaly simply smiled, and with stoic appreciation, thanked the head for his honesty. Furthermore, Mullaly asked the head what he needed to fix the problems, and solicited the help and support of other department heads to get things moving efficiently again. The head left the meeting feeling supported rather than berated. It set a new tone among the company leadership.
At the next meeting, most of the other department heads were still skeptical, but a few dared to show some yellow and even one or two reds. Mullaly treated them with exactly the same stoic respect and appreciation, and coordinated collaboration with other departments to attack the problems' root causes rather than each other. Finally at one of the next meetings, every department head revealed their hands, and every presentation was full of yellow and red. Some of the department heads had even began to collaborate on their own, without requiring the CEO to force them to work together. Now that the culture had changed and they were no longer afraid to be honest, the business's core issues could be addressed.
As leaders, it is important that our people feel safe bringing us the truth, especially when it is bad news. If people are afraid to be honest, it becomes impossible for us to gain a complete and accurate understanding of a situation. Should there still be consequences? Of course, but we should be appreciative of the truth first, and then ensure the consequences are fair and just. We should be supportive while the person or people deal with the consequences, and perhaps most importantly, we should help them to understand why what happened was wrong or why the issue needs to be fixed. Punishment doesn't encourage positive change, but support and guidance do.
