‘Employees are now top of the stakeholder wheel’

Ann Francke, chief executive of the Chartered Management Institute, spoke to The Loop this month about how Musk’s takeover went up against modern workforce trends and lost.

The CMI has recently released a report, The Everyone Economy, which found business resilience now depends on utilising all the talent and perspectives of your workforce.

Is Musk’s takeover approach an effective way to cement his control and deliver his corporate objectives?

In a nutshell, no. He’s really damaged the reputation of Twitter and of himself. As an employee, you would think ‘why would I put myself through this kind of treatment to make the richest man in the world even richer?’

But this shows, and this is important, the change in the dynamics of workplaces, with the employee now being at the top of the stakeholder wheel.

How you treat people matters. One of the lasting legacies of the pandemic is that people discovered a new way of working that gave them greater flexibility and autonomy. Many bosses discovered they had to make the wellbeing of their employees more central to their own leadership capabilities and methods. That has stayed with us post-pandemic.

I think the Twitter example codifies that. People want flexibility, they want empathy, they want respect.

And if they don’t get it, they will vote with their feet.

Musk has claimed he doesn’t want to be the ‘boss of anyone’ at Twitter. Is this approach mutually exclusive to his stated corporate objectives for the company, including profitability?

Yes, because Musk can shrink the cost base, but it could also permanently damage the platform and it seems to be heading that way.

Also, locking the employees out of the office as Musk did demonstrates extraordinary mistrust.

I think this is much more an indictment of what is no longer considered acceptable workplace culture. I think Musk’s come in thinking that his modus operandi of slash and burn is going to be fine. But I really don’t think he reckoned with this reaction.

But there are broader lessons. I think the major take-away here is that employee voice is more important. The hard-core command and control autocratic, alpha management style is becoming rarer, and people are less willing to put up with it.

When appointing a new CEO or removing an existing one, which stakeholders are most important to get feedback from about prior performance: Other board directors, executive team, employees, key customers, major shareholders?

The Twitter situation is unique. So, you had a single individual buying the company and effectively taking it private. There was no governance. Whereas in most normal corporate takeovers, there is quite a bit: A new CEO will be extensively vetted by board directors and perhaps investors.

On-boarding a new CEO is not easy, which is why a lot of hires fail. But something that really does matter, and it’s implicit in your question, is getting feedback from a broad variety of stakeholders.

The other thing that matters is, once that person starts, making sure there’s enough interaction between the new CEO and the various stakeholders. Which means other board directors, the executive team, employees, key customers, investors. Oftentimes the mistake that happens is new CEOs come on board and people want to back off and leave them to it and that can be a mistake.

What are some of the pitfalls? Well, for example, if the CEO comes on board and they are an external hire, other members of the executive team or board members could have gone for that position and not been successful. If they are still sat round that board table, it’s highly likely that they may seek to undermine the new CEO. Unless they themselves move on, which happens frequently.

I think spending lots of time relatively early on with both the executive team and the employees at every level of an organisation is important because CEOs have their information highly filtered.

Every time we do a piece of research at CMI, the view from the senior managers about, for example, the inclusiveness of their company or the quality of its leadership is always significantly higher than the view of the middle and junior management.

Would it be useful to have a league table of CEO performance as ranked by each of these stakeholders?

Yes, but it depends on what criteria you’re going to use. The reality is there are league tables of CEOs. For example, Harvard Business Review has produced them.

People all look at slightly different things. Some look at the return of shareholder value over a certain period relative to peer group. Some might look at growth. Some might look at employee engagement. Some might look at performance on environmental, social, and corporate governance factors.

The issue is, how are you going to evaluate it? If you wanted to have a well-rounded league table, you would look at all those things.

A successful CEO in one company can be a disastrous one in another. How can you benchmark what a great CEO should look like in a company-specific context?

One of the things that’s very important is that there is a confluence between how the CEO wishes to lead and what the culture of the company is.

So there must be a positive association and positive correlation. For example, if you are a very hard-driving CEO and you’re going into a company where the employees were used to a lot of autonomy and flexibility, it’s unlikely to go well because there’s a real culture clash. On the other hand, if you are a very empathetic CEO and you’re going into a super hard-core culture, again, there’s likely to be a clash.

So, I do think that it’s important to understand what is the culture of the company? What is the leadership style of the CEO? Do the two complement each other or do they clash?

Now that said, a lot of CEOs come in to change a culture, but that takes time. You don’t try and do it in a week.

Culture comes from how people behave and it takes time to understand that behaviour and how to change it.