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Disconnect

Summer 2012

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The company you think you're running is not the company for which your people work.

By James Krohe Jr.

James Krohe Jr. is a writer and editor based in San Rafael, Calif. His most recent article was “How Much Do You Know?”, in the Summer 2011 issue.

Every traveler knows the feeling. You’re in an unfamiliar country, alone. You have a general mastery of the national language, but the locals speak a dialect that is mostly unfamiliar to you. You can never be certain whether they are discussing each other’s new hairdo or sneering at your suit. The customs, too, are not what you are used to, and while everyone is polite to you in the bazaar, you can never be sure it’s just because they want to sell you something, or earn a big tip.

Many a senior executive of one of our corporate mini-states is an uncertain traveler when he’s on the job. Learning how a big company works from internal reports is like learning about an unfamiliar country from guidebooks. The information is seldom wrong, but it is almost always insufficient. To run a large, complex firm, everything about it has to be simplified to the point where one person can understand it, and anything that simple is, paradoxically, confusing, because it conveys only part of the reality it presumes to describe. It’s like judging life in France by its GDP.

"Bosses and workers do not merely occupy different strata of their firms—they seem to work for different firms."

“CEOs typically are not exposed to, and so have no idea of, the underlying complexity of their organization,” insists Michel Meijs, a Dutch specialist in corporate communications at a large financial institution who has studied corporate-identity issues. “They see only the tip of the iceberg themselves and get information that is filtered by others and consequently selectively perceived, retained, and reproduced by themselves, again mostly unconsciously.”

An up-from-the-mailroom exec acquires the knowledge of a native, but there are fewer of those these days. Booz & Co.’s most recent survey of CEO turnover at big firms found that many new hires are outsiders, and that they are being given less time than ever—less than six and a half years on average—to learn their way around. Most of today’s peripatetic senior executives are doomed to be resident tourists.

The View From the Balcony

Ask the guests of the posh hotels what kind of town, say, Buenos Aires is, and ask a bus driver the same question, and you will learn that Buenos Aires is two very different cities. “While I don’t want to say CEOs are disconnected, they often do have a different perspective than the rank and file,” says Chris Woolard, employee-loyalty expert for Walker Information Inc., the Indianapolis-based customer strategy consulting firm. “We do a topical survey six times a year here in Indiana, and we almost always see differences in perceptions between CEOs and rank and file.”

In 2011, Walker surveyed Indiana business leaders and their staffs to measure employee loyalty. Forty percent of staff met Walker’s criteria of the “truly loyal” employee, while the responses of 29 percent were interpreted as unloyal. Walker also asked the CEOs to answer its loyalty questions the way they thought their respective employees would answer them. The CEOs, like other senior leaders and VPs, thought their staffs were far more committed to the firm than they actually were, estimating that 74 percent were truly loyal and only 4 percent unloyal. 

A recent survey conducted for international business-culture consultant LRN by the Boston Research Group asked more than five thousand American employees (most of them in large companies) to describe which sort of governance system was in use where they work. At one extreme was the “self-governing” company that rewards performance based on values rather than merely on financial results. (The study found that only 3 percent of the sampled companies are self-governing.) At the other extreme was governance based on “blind obedience” or top-down, command-and-control management, which was the way things were done in 43 percent of the firms sampled.

LRN found what it called “a marked disconnect between C-suite executives and the employees they lead.” Worldwide, CEOs observe their companies as self-governing three times as often as the overall workforce: 10 percent versus 3 percent. (The surveyors note that U.S.-based CEOs were significantly more likely than their C-suite counterparts from other nations to entertain sunny attitudes about the workforce at odds with employees’ views; for every one employee who thought the company was values-driven, eight CEOs did.) More than a quarter of bosses believed that their company inspires employees; only 4 percent of the employees themselves agreed.

It hardly matters which of these divergent views is more accurate. What does matter is that bosses and workers do not merely occupy different strata of their firms—they seem to work for different firms.

The executive who steps outside the C-suite into this unfamiliar territory needs someone to show him what he can’t see himself. Subordinate staff can be as untrustworthy as the guide one hires on the boat dock. Probably the ideal guide is a friend who lives there. They know the area, of course, but their value lies mainly in your being able to trust them to tell the truth about the place.

Such friends are hard to come by for the newcomers to the C-suite. Many a wise company head acquired plenty of practical knowledge about their firm when they worked their way up the ladder. Unfortunately, most of today’s peripatetic senior executives start at the bottom of the top, having been trained either as generalists or as specialists in such arts as finance.

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The Conference Board Review is the quarterly magazine of The Conference Board, the world's preeminent business membership and research organization. Founded in 1976, TCB Review is a magazine of ideas and opinion that raises tough questions about leading-edge issues at the intersection of business and society.