Background

  • International shipping company 13,000 employees worldwide.
  • Business results below expectations.
  • Performance management system was broken.
  • Customer satisfaction was poor.
  • Few employees taking responsibility for improving operations.
  • Commitment to high quality and high ethical standards was lacking.
  • The Board urged the CEO to engage a consulting team to bring about improved performance across all departments.
  • The consulting team would be charged with installing a formal Total Quality Management system throughout the organization.
  • The major goal would be to bring about beneficial change using TQM to remove the barriers to the organization so that it might realize its full potential.
  • Major problem:  CEO was not a believer in Total Quality initiative.
  • Board was not strong enough to insist on CEO commitment.

My Role

  • New member of the Board of Directors.  I was invited to join the Board by the Board Chair.  We had worked together at one of the Big Four accounting firms early in our careers.  My decision to join the Board was based on friendship with little regard to understanding the challenges the company was facing.  I was to learn that there were many challenges.
  • At the very first Board meeting I voted yes along with the other board members that outside consultants were needed to improve financial performance.
  • Along with two other Board members I agreed to play an active part in understanding the true scope of the problems facing the firm.
  • As a new Board member it gave me the opportunity to meet not only various members of the management team but also key mid level employees.

Results

  • After six months the consulting company reported to the Board that they were making little or no progress installing TQM. As frequently discussed in TQM literature, it’s absolutely necessary that implementation be driven by strong top leadership and commitment.
  • Top management appeared to be undermining the effort.
  • The CEO was challenged by the Board.
  • The CEO informed the Board that he was submitting his resignation and had accepted a new position with a company he was unwilling to divulge.  He further stated that he never wanted to undertake the TQM initiative but didn’t raise his opposition with the Board because he was already interviewing for other opportunities outside the company. This negligent and unethical mindset had clearly undermined the TQM efforts, putting the Company into deep financial distress.
  • The Board accepted his resignation and insisted that he leave the premises that very day.

Actions Taken

  • The Board immediately engaged a search firm to fill the CEO position.  The Board insisted on an in-depth background check as opposed to a cursory reference check conducted by less than senior personnel.
  • A former CEO was called out of retirement and placed on a one year interim consulting contract.
  • The Board asked for and received the resignation of three additional members of the former CEO’s management team.
  • The Board explicitly recognized that weak performance on the Board’s part had abated the negligent and hat unethical behavior by the CEO.

Lessons Learned

  • It doesn’t matter what sort of management system is in place if the person at the top is not fully committed to the values and mission of the firm.
  • A compliant board that does not dig deeply enough into critical issues is risking the entire Company.