by Mitch Wienick, President/CEO

The scandal at Pennsylvania State University which recently erupted in the public arena will continue to unfold over months and years. As the investigation progresses, it is highly likely that reputations will be tarnished, careers damaged or destroyed, the credibility of the institution diminished and the once unblemished image of the athletics program shattered. Worst of all, the victims, the abused children and their families, will have their day in court but whatever justice they secure will never make things right.

This pattern has played itself out many times recently in both the non-profit and for-profit arenas – shocking revelations, prosecutorial or government action, denials by the accused coupled with the initial public relations defense of key participants, internal and external investigations followed by judicial or regulatory procedures, the accumulation of evidence, a finding of guilt (or, in rare instances, innocence), and punishments and penalties meted out.

What is often lost in the screaming headlines and newscasts is the relative insulation of nameless and faceless people that constitute a Board of Trustees, as at Penn State, or the Board of Directors, as at Hewlett-Packard. Rarely does the public fully understand how the governance model failed. But a careful analysis of Penn State and Hewlett Packard more recently or Tyco, Enron, Parmalat, Adelphia, United Way, Ahold, and Worldcom in the last decade, along with similar less visible scandals, help illuminate a pattern of behaviors the lead to this type of  governance failure at the Board level. Experts have identified the following problems as being prominently associated with such failures:

- Failure to deal with a culture of greed within the top management ranks (this is rarely a factor in the non-profit world but often a key factor in corporate scandals; however, in the case of Penn State, the large financial and reputational contribution of the football program to the university strongly suggests this may well have been a key factor). 

- Management dominance of key committees coupled with minimal exercise of board member diligence (this seemed to be the case at Penn State where Joe Paterno could be classified as “management” with immunity from board member diligence, again because of the financial and reputational success of the football program).

- The Board creating a culture of accommodation, ceding significant governance, policy, and strategy authority to Management (this was clearly a major factor in the Worldcom, Adelphia, and Tyco scandals).

- Officers of the company having misgivings regarding decisions or actions by other senior executives and making little or no attempt to curb, stop, or challenge conduct that they deemed questionable or inappropriate (while the facts are still emerging, this would seem to characterize the behavior of Assistant Coach Mike McQueary, Joe Paterno, and Graham Spanier and the Board of Trustees itself).

- Senior executives having unfettered discretion to commit an organization to significant actions or obligations with little or no Board discussion or oversight (Enron, Adelphia, and Parmalat were rife with this type of Board abdication).

- A Board committee takes an action without informing the full Board of the action (this has happened at Hewlett-Packard with some Board members actually electronically monitoring the conversations of other Board members without the full Board knowing).

- The full Board adopts the recommendations of a Board committee without meaningful consideration and discussion (this is a common thread among all of these scandals).

- A lack of transparency between Senior Management and the Board coupled with a culture and internal processes that discourage or implicitly forbid scrutiny and detailed questioning (as recently revealed in the Wall Street Journal, Joe Paterno’s reported resistance to recommended disciplinary actions made by Penn State’s Office of Judicial Affairs in connection with football player misconduct, if true, is a prime example of resisting scrutiny and questioning, and creating a high risk environment and a double standard, in this case football players versus other students).

- Outside professional service providers that didn’t exercise the professional skepticism inherent in their responsibilities (this was rampant at Enron and Worldcom, especially as practiced by their outside auditors).

- Inside and outside counsel not believing it was their responsibility to remind Board members of their fiduciary obligations to become adequately informed concerning the organization’s business and operations (at Tyco inside counsel was an enabler of the fraud and clearly not reminding an all too compliant board of its fiduciary responsibilities, a topic to which I return to below).

- Professional Advisor malpractice where an advisor, such as an investment bank, participates in actions that come perilously close to commercial bribery whereby an insider garners significant favors or sizable financial kickbacks and the investment bank secures more M&A and/or underwriting business (this behavior appears to have been rampant at Tyco given its dizzying number of acquisitions under former CEO Dennis Kozlowski).

- The Board permitting Senior Management to push to extremes in conjuring up highly unconventional and flawed concepts in areas that directly affect financial results or compensation (this was clearly identified at Enron and Worldcom).

- The absence of regular, robust assessment process of committee structure, the CEO, and Peer Review by the Board (unfortunately this is quite common among most Boards, whether their organizations are tainted by scandal or not. It’s the rare organization that does all of this, and does it well, on a regular basis).

Board members typically have a fiduciary obligation to their organizations which can be defined as being legally, morally, and ethically bound to protect the interests of others. The “interests” are normally but not exclusively financial (e.g., “maximizing the value of shareholders”) and property right interests. I would suggest, given what has recently started to unfold at Penn State, and what we’ve seen play out countless times in corporations, that a broadened definition of fiduciary obligation include a moral system that holds people accountable for managerial misconduct. Said another way, requiring Boards to officially move to a more expansive view of their roles, beyond narrow economic interests, is essential for strong and effective organizational governance.

Beyond that, clearly identifying members of the Board of Trustees of non-profits and publicizing in easily accessible ways, on what committees they serve, the duration of their terms, how and why they were selected, and what direct interests they may have in the organizations they are serving should shed light on responsibility and accountability that for many organizations now seem to be hidden in the shadows of organizational governance.

Published in Training Magazine | Mon, 08/22/2011 - 00:00

By Tammy A. Beil, Executive Vice President and Chief Marketing Officer, Kelleher Associates

“Know thyself.” For professionals in job transition, blending this ancient Greek aphorism with a well-known marketing concept—the “Four P’s” of product, positioning, price and place—yields essential self-examination lessons. The key involves identifying, and then applying, these critical elements of the marketing mix.

The first challenge stems from many job seekers not realizing they must be relentless in marketing and viewing themselves as the product. Some may know the elements of the marketing mix intellectually, but not recognize this is the time to apply these principles. For others, the notion of marketing themselves for a position may be an exercise they haven’t engaged in for 20-plus years—if at all. And yet, 84 percent of employees surveyed by a large outplacement firm said they were planning to look for a job in 2011.

A second hurdle involves the altered approach to job hunting. In today’s competitive marketplace, you must be able to compellingly articulate what you can do for the prospective employer and how you will achieve tangible results. Previously, a candidate sought a company with an open position, attempting to align his/her experience and expertise. This process was based chiefly on referencing your past performance and communicating, “Here is what I have done in the past and what I can do for you as my new employer.”

How can you break out of this mindset? Regardless of your specialty or functional expertise, you must think of yourself as both the product and the product manager to successfully secure your next career position. Every product manager has a promotion plan—and you, too, should develop a strategic and tactical “go-to-market” plan. Begin with thorough, detailed research examining your target market and the companies with which you will seek employment. Commit to networking and connecting; join associations, advisory boards, and actively participate. Then, look to the Four P’s and apply this marketing tetrad to yourself—with some reframing, of course.

The Mindset of Boards and the CEO

I recently read a number of articles having to do with Board governance and CEO evaluations that resonated, and I thought it would be useful to synthesize some of the concepts, which also have applicability to other C level executives.

The governance experts at McKinsey and the Financial Times Agenda magazine, which focuses on board and governance issues, essentially pose the question why, despite all the corporate governance reforms of the past two decades, many boards failed the test of the financial crisis of 2007 2008?  The after effects of this failure are very much with us today, penetrated by the issuance of still more intrusive regulation contributing to an aversion to business investment and risk taking, which leads to weak economic growth and persistently high rates of unemployment.

There are these authoritative sources contending that it isn’t regulation, or governance reforms, or even highly qualified board members that really matter.  Instead, it’s the right mindset and the right human dynamics – a collaborative CEO and directors who think like owners and preserve and protect their authority that creates the constructive tension between independent directors and management.  The absence or weakness in these dynamics are also problematic for executives who are not directors, but report to them, because it inhibits a positive and productive relationship with their boards. 

Boards that operate to their potential are remarkably similar.  They are characterized by constant but constructive tension leavened by mutual esteem between management and independent directors.  In assessing the human dynamics of an effective and efficient board, there are four factors that emerge as useful benchmarks.

1. Do directors think and act like owners?  Companies genuinely benefit from directors with an ownership mindset (and requiring ownership in the company at a meaningful level certainly helps to achieve this) where they have a passion for the company, think long term and for the benefit of all stakeholder groups, and take personal responsibility for its success.  Contrast this mindset with that of an outside director who is a passive participant and doesn’t view the role as one of constructively challenging management.  When searching for directors, they should be looking for energy and engagement, an independent cast of mind, and someone who is action oriented.

Definition of OUTPLACEMENT according to Merriam-Webster:
-- the process of easing unwanted or unneeded executives out of a company by providing company-paid assistance in finding them new jobs

Sponsoring companies often fail to recognize the value-added differences in the type and quality of the career management services they provide to their senior executives upon separation.  Indeed, these services are often labeled “outplacement services” by large, national firms.  With our emphasis on the individual and his/her unique needs, Kelleher Associates provides true “career management services”.  Opportunities at senior levels are less frequently available (e.g., virtually all companies have only one CEO or COO role).  Thus, each opportunity must be given more in-depth and informed analysis, and is more complex when negotiating the terms and conditions of employment.  This is the qualitative difference between mass production “outplacement” offered by others, and our individualized “career management” model.

Written by Mitch Wienick, President/CEO, Kelleher Associates, LLC

Somewhere between 1-3% of our clients will cycle back to us within 12-18 months after starting a new position.  While this is a very low repeat rate, it’s humiliating and frustrating to those few clients who experience it.  When someone is in a career transition mode, he or she is often emotionally and/or financially vulnerable, and this state of vulnerability can color judgments, especially about future career opportunities.  As a result, as career consultants, we play a pivotal role in challenging a client’s thinking about job offers and opportunities.  Noted below are some of the key “dos” and “don’ts” we’ve helped clients work through over the years:

Do recognize that cultural and personality fit are as important as business fit, and sometimes more so.

Upwards of 80% of executive derailments involve so called “soft issues” relative to fit rather than the “hard” business issues.  So, the probabilities are 4 to 1 that a derailment will be rooted in a soft issue.  Regrettably, most executives don’t pay enough attention to this when considering a new position.  We have become strong believers in an executive’s ability to “read” the individual and team styles, the organizational culture, and board dynamics of target companies.  We systematically coach and train clients on the need to do so, and how to do it.  Frankly, more than a few executives (ego driven “captains of industry”) ignore this key aspect or do it poorly without some overt third party insight and coaching.