David Jones; A failure of leadership?

Today I was interviewed on the topic of changing organisational culture by the Lateline program on the ABC. Given the news of the last few weeks it was obvious the topic was going to be related to the events at David Jones that culminated in the resignation/sacking of their CEO.

At this stage, having completed the interview but not having seen the result of editing I am still contemplating the questions Andrew posed and my answers.

The early thrust of Andrew’s questions was about the impact of poor behaviour by a CEO and by inference a poor culture on an organisation. The proper answer to that battery of questions is threefold.

Cultural context

Poor behaviour and poor culture have to be defined within the context of the goal/aim/vision/mission of the organisation. If the organisation was Playboy, then perhaps part of the mission of the organisation could be to live the life they describe and promote in their publication.

An organisation such as the Catholic Church, however, might have piety, openness, truthfulness and respect for all human beings from all walks of life closer to the behaviours they would seek.

These two organisations may (I say may because I suspect the Playboy organisation may need to be a bit more hard-headed commercially to survive, but it serves my purpose of illustration) be at opposite ends of the spectrum when it comes to the desired culture to be successful.

A pious culture in Playboy is counterintuitive to success as much as an exploitative, fun loving, loose morals culture should be to the Catholic Church.

The impact of what can now be defined as inappropriate behaviour by the leaders of the organisation can be discussed.

Primary cultural impact

The immediate impact of inappropriate behaviour by its leaders is the questioning of the veracity of the organisation’s stated desired behaviours and values by those in the organisation that put some store in such things. Given that behaviours and values are one part of attracting and retaining talent, it is likely that new, talented recruits are a high proportion of those asking the questions, albeit to themselves.

Secondary cultural impact

The longer term impact is that a proportion of people will follow the behaviour rather than the stated desired behaviours and values of the organisation. If we take the David Jones case, it is not just the sexual harassment that the board should be looking for as being systemic in their organisation, but the sheer arrogance of position that goes with sexual harassment as a behaviour. David Jones may well not have an explicit problem with harassment, but it is likely that arrogant behaviour runs through the organisation.

The board may see no problem with arrogance because it fits their aim of differentiation from their competitors not only by their brand portfolio and property portfolio but also by the flair and action orientation of their employees. That determination is the responsibility of the board, not the commentariat, including me.

Tertiary cultural impacts

When the inappropriate behaviour is seen to be tolerated by the board and other senior managers, other tertiary effects occur. Productivity may fall as individuals in the organisation spend time discussing and spreading rumours about the inappropriate behaviour and lose focus on what was the goal of the organisation. The leader, rather than the goal, becomes the focus.

Another significant tertiary and unpredictable effect which may spread through the organisation is a disbelief in the stated desired culture of the organisation. Some people will think if the stated culture regarding sexual harassment is one thing and the tolerated behaviour of the leader is another, then why should I have to fit in with any other stated cultural norms. This observed incongruence between what is said by leaders, and what leaders do, acts as a cancer to the culture of an organisation.

The second battery of questions was regarding what went wrong at David Jones.

What may have gone wrong?

Outsiders like me will never know but there are some pointers as to what they got right and where weaknesses may have been.

Whilst not being privy to David Jones strategy deliberations makes commentary about their strategy risky, there are some observations about David Jones strategy document of 2003 which are probably noteworthy.

The strategy document from 2003 does have elements of cultural change contained in it. They are all, however, aimed at becoming more professional managers of cost and product lines. The only other element of how we will manage people in the document is aimed squarely at accountability for results. It is an upbeat transparent treatise on what has gone wrong at David Jones and what needs to be done to get it right and have sustainable profit growth.

The 2009 report spends a large number of pages on corporate governance. There is a section of the report which deals with the winning of awards for their corporate governance approach. So we know corporate governance is important to the board.

There is a code of ethics and conduct, repeated in part here:

8.2 The David Jones Code of Ethics and Conduct: The Code applies to all Directors, employees and contractors.

8.3 Compliance with the Code David Jones is committed to promoting and maintaining a culture of honest, ethical and law abiding behaviour. To fulfil this commitment, David Jones has processes in place to ensure that:

  • violations of the Code are detected and reported; and
  • appropriate action is taken in response to any such violations.

David Jones encourages Directors and employees to report promptly, in good faith, any violations or suspected violations of this Code. All employees have access to a confidential ethics hotline, which they are encouraged to use and may do so on an anonymous basis. All reports are investigated promptly, confidentially and fairly without recrimination against the person reporting an incident.

A section of the report (page 23) dealing with risk management states that David Jones will:

  • treat all employees in a fair and professional manner, ensuring the workplace is free from harassment, discrimination and bullying.

So the policy was there, the risk was acknowledged by the board and the means of dealing with issues like sexual harassment before they become an intolerable problem for the people being harassed and the subject of national media frenzy were in place.

So what went wrong? The ‘values’ and stated culture were published and the mechanics for preventing issues such as sexual harassment escalating out of control were available.

If we can believe the media, several senior managers allegedly knew of the behaviour of the CEO and one or more dismissed the warning signs by rationalising it something like, ‘Just tell Mark no and he will back off’. Here, I believe, is the crux of the matter. Tolerance of sustained behaviours in an organisation which go against the stated values and desired culture of the organisation will always end in pain. It is even more likely to be so when it is a senior leader who is displaying the behaviours.

In the David Jones case the clarity of thought, single-mindedness of strategy and consequential greatly improved results delivered by the CEO may have swayed those in senior leadership positions who knew better to stay quiet about the alleged behaviour. We won’t know.

Leaders must be congruent in what they say and do

The lesson for us on the outside is that as leaders, we have to be congruent in everything we do. It is difficult, but it is the price we pay for being leaders. Those we lead also rightly expect it of us. In the David Jones case there was one, and probably more, failure in being congruent with what they said they stood for and the culture they wanted. That is, in my view, a failure of leadership.

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