Last week, I considered the requirements of corporate boards in selecting the board chair and in succession planning. This week, I address tough decisions corporate boards make.
When students in my leadership class asked leaders what their toughest decisions were, they usually cited decisions involving people. In fact, except for individuals dismissed for ethical, policy, or legal reasons, if demoting or firing people comes easily, then you aren’t an exemplary leader. Yet, governing board members must make such decisions.
When placed in the situation where a demotion or dismissal of a person is required, do you recall a scene from the movie, The Wizard of Oz? I do!
Toward the end of the movie, accompanied by Scarecrow, Cowardly Lion, Tin Man and her dog, Toto, Dorothy returns victoriously to the Emerald City with the broom of the Wicked Witch of the West, anticipating the Wizard will grant them their wishes. Cowardly Lion wanted courage, Scarecrow wanted a brain, Tinman wanted a heart, and Dorothy wanted to return safely to Kansas with Toto.
When the entourage arrived for its audience with the Wizard, Toto pulled back a curtain, exposing the Wizard as an ordinary man. Seeing this, they realized their hopes and dreams would not be fulfilled. Immediately, Scarecrow said to the Wizard, “You humbug!” Chagrined, the Wizard responded, “Yes, yes, exactly so, I’m a humbug.” Then, Dorothy exclaimed, “Oh! Oh! You’re a very bad man.” To which the Wizard responded, “Oh, no, my dear. I, I’m a very good man. I’m just a very bad wizard.”
It’s very difficult to convey the message someone is being removed from duty without it being taken as a personal criticism, rather than a result of the person’s job performance or an elimination of the job. Separating self from job is very difficult for many people. Too many identify with the titles on their business cards. Being a very good person doesn’t guarantee an individual is a perfect match for the position the person holds. As a result, it’s essential for the leader to convey empathy in the process of removing a person from a particular job. Efforts should be made to find another position for the person; if no such position is available and a separation is required, then assistance in finding another position should be provided. However, from my experience, there’s no way to avoid hard feelings when you demote someone or terminate someone’s employment. For governing boards, if such an action occurs, it’s likely to occur with the CEO being replaced.
Rarely should a removal decision come as a surprise to the person being removed from a position. However, even after multiple counseling and feedback sessions, some will miss the messages delivered to them over extended periods of time and will be stunned; they aren’t like the Wizard of Oz, who knew he was ineffective.
RUSSELL: Early in my tenure on my first board of directors, in a meeting of independent director, I learned that a majority of the board members wanted to remove the chairman, Eugene C. Gwaltney. When I asked how the message of the removal of the chairman would be handled, I was told Gwaltney would be invited into a meeting of independent directors and informed of the action being taken. I said, if I were in his position, I’d want someone to meet with me privately and deliver the message. When no one offered to do so, I volunteered to deliver the message.
On Super Bowl Sunday, January 31, 1993, I traveled to Alexander City, Alabama, where Russell Corporation was headquartered, called Gwaltney, and said I needed to meet with him. In our meeting I told him the board’s decision and said I asked if I could deliver the message privately, not in a meeting of independent directors, because of the respect and affection I had for him. He gave me a big hug and thanked me for doing so. It was a very difficult and emotional time, but I wanted Gwaltney to know I thought he was “a very good man” and I loved him.
We replaced Gwaltney with John C. Adams, who was currently the president and CEO. After a few years, we replaced Adams with Jack Ward, formerly with Sara Lee Corporation. Ward led the effort to move the corporate headquarters from Alexander City to Atlanta. However, he was unable to maintain profitability for the company in the face of rapid movement of manufacturing offshore and/or outsourcing manufacturing.
In the end, the Russell board opted to sell the company to Berkshire Hathaway. Warren Buffett had a strong track record and a reputation for seldom selling businesses he acquired. With the exception of most members of the executive team, a majority of staff members and operating personnel continued to be employed. The Russell operations were placed under the leadership of Fruit of the Loom, a related company acquired by Berkshire Hathaway.
Next Week: Corporate Boards—Part 3
