If there were a reality TV show called Extreme Leadership Development, Mercer CEO Michele Burns would be its star. Burns came to her current job by way of Delta Airlines during and after 9/11, and Mirant, an energy company she led out of Chapter 11.
Not long after she took charge at Mercer, the great recession of 2009 hammered the global consulting firm. But, as Burns reveals in this interview, distributing leadership and sharpening the capability of those leaders to take quick action - lessons she had learned under fire - blunted the impact of the global economic crisis on Mercer's business.
Q| Before coming to Mercer, you experienced some dramatic situations in other companies that required exceptional leadership - a power company that had gone bankrupt and an airline struggling to recover after 9/11. What kind of leadership lessons did you learn in those situations, and how do they figure into your views of leadership and leadership development today?
A| My first perspective on leadership came from my 18 years at Arthur Andersen. The company wasn't in any kind of crisis while I was there, but from a leadership perspective, the experience was relevant. Andersen had 2,000 partners, and all of them were expected to be leaders. That's important because when leadership is distributed to that extent, better opportunities exist to grow more leaders and to have them develop deeper and broader leadership competencies.
I joined Delta with that frame of reference - leadership dispersed among many as opposed to centralized among a few. By contrast, airlines in general, and Delta in particular, tend to centralize leadership authority among a few individuals at the very top of the organization. As a result, leadership competencies tend to be concentrated among those same individuals.
One of the primary reasons Delta was successful in negotiating through the 9/11 crisis and positioning the company to survive and thrive was its ability to disperse leadership and engage a broad group of leaders.
Let me give you a few examples. Post - 9/11, I was running all of finance and technology, which comprised about 3,000 people. From a leadership perspective, there would have been no way to drive those groups effectively after 9/11 if we had not worked as a team during the year and a half immediately preceding that event. During that early period, people developed their leadership abilities by assuming additional responsibilities.
Certainly, no one was ready for 9/11, but I'm proud to say that my team was ready to lead. Within hours of the events of 9/11, our technology people decided to quadruple our investment in kiosks because we anticipated business model changes: the need to be leaner and for transactions to take place before security clearance that used to occur beyond security clearance, for example.
Q| How did you anticipate change? Was this driven by your leadership team or at a higher level in the organization?
A| These initiatives and the driving force behind them came from the leadership team. We knew, for instance, that we'd be deploying airport employees in different ways because we needed to improve efficiency and customer engagement. We moved from 100 to 400 kiosks in a matter of hours after 9/11, for example, because we anticipated that customers would need a boarding pass to get through security. Almost right away, as you might recall, the federal government stipulated that only passengers could go through security, and that required official passenger documentation.
Senior leadership did not dictate this decision. Rather, we determined, "We have to do this." And we had both the authority and the confidence in our leadership skills to know that it was the right decision.
I share this example because it is an exemplar of effective leadership. You must prepare your team. You must be willing to share leadership responsibility. And for that to occur, you must share information, which means engaging a broad group of individuals in robust conversations about strategy so that when a crisis comes, they are ready to lead.
What's more, you must also be willing to share information beyond the immediate circle of senior leadership. Following 9/11, Delta was fighting for its life and finding its way through the consolidation wars. Any business or operational change we attempted to initiate was difficult because middle managers didn't understand the reasons underlying these efforts. As leaders, we determined that we had to communicate more extensively not just the vision, but the rationale for the vision. To lead a successful change management effort, we had to become more transparent.
At Mirant, other leadership lessons emerged. Mirant, an independent power producer with plants scattered across the United States, the Philippines, and the Caribbean, had filed for Chapter 11 bankruptcy the year before I arrived.
Leading that company through the challenges associated with Chapter 11 bankruptcy taught me that leadership is about transparency, truth-telling, sharing both the good and the bad, and continuing to set aspirational goals in the face of all obstacles. I also learned to balance the need to be transparent with the realities of leadership - it's important to be honest but not to share all troubles with all employees. If you're a leader, your job is to bear some of the pain so that others can focus on the work at hand.
Q| At Delta, where you wanted to create a very different culture of sharing and transparency, how did you handle the transition?
A| At Delta, I was responsible for the finance and technology organizations, which are important groups in any business, but particularly for airlines. When I arrived, I discovered that neither of these groups had been led to view themselves as critical to the business strategy. Rather, they saw themselves as the executers of the business strategy.
The first thing I did was to get to know the people who surrounded me. What were they like as people? What did they want to do? Were they willing to stand up in front of their people and tell the story of why we could be different?
To change the culture of the finance organization, we first engaged the middle level and above in understanding our goals. We weren't just looking at the past and making sure we were buttoned up and in order. We were focusing on what we would do to make a difference in the future.
It's actually easier to undertake this type of culture change in times of crisis. You can say, "We've been talking for 18 months about doing a better job of managing our tax return filings, and somehow we still file September 15th. Guess what? This year, we've got to file in February." In that situation, the tax team stood up and made it happen. We filed on February 2nd. Delta had never in its history filed before September 15th.
In those moments of leadership, you ask, "What is the end game and why are we doing this? What is the goal?" I prefer to look ahead while also focusing on results. Even so, I don't linger on current results long before asking, "Okay, what are we going to do next?" That ability to not get mired in the moment is another key leadership competency.
At Mirant, the entire senior management team participated in outreach and communication. We shared many small successes and took a lot of criticism. We let people at all levels of the organization express their frustration and also made sure that they were recognized for achieving their goals.
Q| How did leadership lessons you learned at other organizations in crisis help you lead Mercer during the recession?
A| From the Delta experience, and to some degree from Mirant, I brought with me the urgency to act and the value of contingency planning. Both were immediately useful in helping to negotiate Mercer through the great recession.
First, the urgency to act. If 80 percent know the direction in which you want to go, then go. Eighty percent certainty now is better than 100 percent certainty two months from now. Because it's not capital intensive - there are no debt payments to cover, no major capital outlays to undertake, no plants to refit, and no jet airplanes to buy - this industry has been somewhat insulated from the need to respond quickly to market developments. In my estimation, some of our peer companies were ill-prepared to react when the recession hit because of that very fact.
Second, the value of contingency planning. I think we did that incredibly well here at Mercer, and our results would be different had we not done it and done it quickly. Why? In the third quarter of 2008, we experienced the highest growth rate we had seen in years. It was a high water mark. Other companies were already seeing a decline in business. In September 2008, Lehman Brothers filed for Chapter 11 bankruptcy. It turns out we were a lagging indicator.
In the fourth quarter of 2008, the top line fell sharply. Some of that decline was self-inflicted, but clearly, some was due to the market seizing up. Surprisingly, the first and second quarters of 2009 were bad but not terrible. Our healthcare benefits and retirement businesses both grew slightly. It is true that our project-based businesses were suffering, but business as a whole was not so bad. We were getting these conflicting messages about what was going on in the business and what the future might hold.
As a result, we didn't have a clear enough perspective as to how to react or how long the recession would last to commit to drastic actions, but we sure could plan for them. Across our businesses, we looked at, "What would you do if..." What would you do if your revenue was off by 1 percent? What if it was off by 10 percent? Nobody wants to engage in this type of exercise, especially when parts of the business are showing signs of life, but we undertook contingency planning for two or three alternatives.
This approach paid dividends in spades. It meant that all of the businesses were ready. When they hit a trigger, they knew what to do.
Q| How did you assess whether your leaders had the skills to act with urgency and conduct contingency planning? And if the skills were absent, what was the remediation path?
A| I support that approach. If I had to choose between competency development and experience, I'd choose the latter, because you can master a competency and not know how to apply it. Ideally, it's when the two work together that the magic happens.
That moment at Delta after 9/11 sold me on the value of contingency planning, but I couldn't have experienced that moment if that particular group of leaders had not possessed the right competencies - technical and execution.
We reviewed two or three scenarios. To the controller I said, "You have to get $1 billion of savings out of the business. Go figure it out." To the treasurer I said, "I need $1 billion of funding." And to the head of supply chain, I said, "I need $1 billion less in aircraft orders." I knew they had the technical competency and the leadership competency to execute. Also, importantly, I knew that they could execute - that they were leaders who would not just talk about something but would get others to carry it out.
Q| In the foreword to the Mercer book, Creating Value Through People: Discussions with Talent Leaders, you used the phrase "talent innovation" and wrote, "Talent innovation lies at the point where strategy and execution meet." Can you expand on that and give us an example?
A| In firms such as Mercer, with highly capable professional services people, strategy is something employees really engage in. In many ways, execution is more difficult in such an organization.
A talent innovator is someone who, for individual and team success, can cross the bridge from strategy to execution. The talent innovator can conceive of the strategy, lead a team to a strategy, and take that team across the bridge into execution, all while keeping the process alive with a vibrancy of purpose. The talent innovator is the individual who can do both and build teams that can do both.
By contrast, it's really dangerous if the top of the organization owns the strategy and everyone else is told to go execute. If you're really going to lead, you have to be able to do both those things, do them well, and then bring people along with you across that chasm.
Q| Where do you see the learning function's role in this?
A| Learning is embedded in everyday life, and by extension, it's embedded in everything that HR touches. Learning plays the role of enabling, getting leaders ready, and preparing people to do technical work. Learning plays a key role in leadership because you have to impart the competencies and the reasons to learn those competencies in order to create the next generation of leadership. Learning plays a key role in strategy because if you're changing direction strategically, you have to rely on the functional ability to execute change and to prepare the organization to change continuously, whether it's required today or tomorrow.
Above all, learning is critical because it's so central to retention. We all enjoy feeling that we're worth the investment associated with learning, and any engagement survey you look at points to the desire on the part of every level of employee to learn and grow.
From my experience, learning is a marriage between the HR function and the business. What I will say next will make it obvious that I started my life as an accountant, but I think the functional aspect, the people, and the touch points should reside in or somehow be related to the overall HR function. Why do I say that? Because while I can embed learning in a department or a business, without HR oversight, the checks and balances essential to learningare absent.
For learning to become enmeshed in a culture, the business owner must believe in it, must understand the value in it enough to take people offline to participate in the learning process, and must embed the learning steps in their own processes.
Q| In some of these challenges you've faced, where you had to take significant costs out of the organization, how has that affected the learning function?
A| When things get really tough, learning is going to suffer to some degree, and some of that is acceptable. If you build it right, and it's done year-in, year-out, then people understand when some degree of austerity is required.
I would never say that you've got to preserve all learning hours no matter what, because that's not fair. Taking that position won't earn the respect of the organization, but to annihilate learning completely isn't right either.
We have experienced firsthand the effects of a lack of commitment to learning. In 2005, overnight Mercer flipped from a 50-year legacy of being a geography-driven business to being a line-of-business - driven enterprise. The people leading those geographies had never been responsible for a P&L. Suddenly they were responsible for it, and the boat rocked.
In 2007 and 2008, although our top line was doing well, we needed to refine how we managed ourselves. Those weren't crisis years financially, but there was a lot of heat on the organization because Mercer hadn't generated what it had promised in 2006, and the first part of 2007 was very volatile.
At that time, we could easily have said that we're just going to do the bare minimum in learning because we had to stabilize the boat. We had to get the bottom line to settle down. One quick way to do that is to eliminate functional costs. Instead, we did something quite different. In 2007 and into 2008, we spent significant dollars to create leadership development programs. We found that one reason the boat kept rocking was that I couldn't reach more than five people at a time, and I couldn't get any kind of viral conversation going because we didn't have a common lexicon.
Before I arrived in late 2006, Mercer had built some great leadership development programs such as how to work with your supervisor, how to move from being a "green bean" to the next level up, and how to use e-learning, all centered on helping you negotiate your career from year zero to year 10. But year 10 and above had been completely neglected, so the top 1,000 people in the organization were getting no leadership development at all.
I could see why I couldn't get a message across because everyone was speaking a different language, depending on what part of the organization had raised them. Rather than cut our learning spending, we invested heavily in building and delivering leadership development programs.
Bottom line: It's perfectly appropriate for learning to take its share of the pain when you have to take costs out - if you have invested in it consistently when the time comes to make cuts. At the same time, you can't cut learning completely. You have got to keep a baseline. Likewise, don't be afraid to overinvest in learning if you need it in the moment. There are times when you will have to invest in learning, even at the worst of times, because it will make the difference between success or failure.
Q| Coming out of the recession, can you anticipate any kind of event, crisis, or action that companies ought to be looking for in terms of their human capital?
A| My first thought is about physical safety. From a human capital perspective in a large global company, you have to be prepared to deal with a crisis. We live in a world in which we must be concerned about unrest and terrorism, and that presents a totally new human capital challenge. How do you keep a global business focused when some of the places where you operate are in a state of severe unrest?
Physical safety is critical for all businesses, wherever they are. Does that put another responsibility at the feet of the employer and the HR organization? I would say yes. We have a responsibility because it is going to disrupt our business if our people are harmed, and we have a responsibility because it's simply the right thing to do.
My second thought is the more obvious one. As the recession wanes, we hope that the demand for talent will increase, but I don't think that demand will be general. To be prepared, you should know where the demand for talent will surface and from what quarters the attack on your talent may come. You had better have your game plan for when this thing turns.
In the last 10 years, employers in the most developed countries have walked away from their responsibilities to employees in the area of benefits. I wonder if the years ahead will bring some reversal of that trend. To the extent that you need talent, and that talent has just survived an incredibly disturbing time, might they not be looking to the employer for a bit more security, not less?
For those groups and subsets of employees who will be in high demand as the recession ends, the answer is not going to be one size fits all. I don't have the answers, but we are doing a great deal of research now to tease that out for our clients as well as for ourselves. t+d