Leading High Performance

by Murray Eldridge

good coaching is not about great leadership.

Anyone with a normal degree of self-esteem wants to feel they are good at what they do, whether in sport, hobbies, home or work.

For the purposes of clarity the definition I use is as follows: leadership is the ability to envisage a future, set a direction towards that future and enable people to follow that direction of their own free will.

FOLLOWERS PAY FOR THE MISTAKES OF THEIR LEADERS

Why is it that, more often than not, the ramifications of failing to achieve good performance are visited upon the followers, not the leaders? And why is it that some companies do achieve the holy grail: superior performance derived through people who seem to have fun whilst doing it?

The problem is that so few leaders are real ‘leaders’ in the true sense of what that really means. Often they will have been good managers who have been promoted over time. Sometimes they have been around so long that it is just deemed to be ‘their turn’. There are some who have progressed by being a ‘safe pair of hands’ – certainly not the strongest endorsement for future stellar performance! More frequently, people succeed by being very good at corporate politics.

Roger Martin in Fixing the Game addresses superbly all of these elements and more.

Gary Winnick, who in 1997 was the founder and chairman of start-up telecommunications company Global Crossing, sold over $700m worth of shares in advance of his company going into Chapter 11 bankruptcy protection in 2002 where it subsequently lost over 95% of its value. He was later given an honorary doctorate by his alma mater and still plays a large part in US corporate life as chairman of Pacific Capital Group.

In 2008 Fred Goodwin, Chief Executive Officer (CEO) of the Royal Bank of Scotland (RBS) and one-time close ally of the then UK Prime Minister, struck a rather cosy deal with the UK government that saw him depart the bankrupted institution he presided over with a pension deal worth £693,000 per year for life, starting at the age of 50 – an age he had conveniently already reached. This deal was reputedly valued at £16.9m and considerably more than his contractual pay and bonus severance package would have been. The resulting furore around the scandal later saw this severance package reduced to a mere £2.7m tax-free lump sum and a £342,000 per annum pension. A year later he was back in employment as an adviser to a prestigious engineering and architect firm. Meanwhile, RBS has made 36,000 people redundant since the UK government bailout in 2008.

Similar to Goodwin, Tony Hayward, CEO of BP, walked away with enhanced and early pension rights in a deal said to be worth over £10m. Anyone who will recall his handling of the BP oil spill in the Gulf of Mexico must wonder how much you get for mediocre performance in such large, listed organisations if this is what appalling performance can achieve. Within 12 months of his ignominious exit from BP he had been installed on the board of TNK-BP and became a director of a Rothschild-backed energy acquisition vehicle looking to spend up to £8bn. This could see him on the board of another quoted company in short order.

Other examples are easy to find. Robert Nardelli, CEO of Home Depot between 2000 and 2007, departed with a severance package reportedly in excess of $200m. Share price performance during his tenure was a negative 4%. Henry McKinnell, CEO of Pfizer between 2001 and 2006, managed to reduce the share price of Pfizer by almost 40%. For this stellar performance he exited with just under $200m. From the sub-prime debacle, Richard Syron, CEO of Freddie Mac between 2003 and 2008, allegedly ignored internal warnings on the credit risk Freddie Mac was exposed to. Together with Fannie Mae almost $150bn was required from the US government as a bailout, on top of the $78bn they lost of their own money. Syron exited with a reputed $3.8m.