Of Impossible Situations and Architecting Corporate Strategy & Culture

By Daniel Forrester, CEO

A few weeks ago, United Airlines issued its “United Flight 3441 Review and Action Report.” Eleven pages long, it came in direct response to the viral incident of a man dragged from a plane when he refused to give up his seat for a United flight crew member. United’s intention in releasing the report was to communicate “concrete and meaningful actions that will avoid putting our customers, employees, and partners into impossible situations.”

First, good for United for owning the many mistakes made—including their CEO’s initial response. While I’m not proud of what the United Team did that day, I am glad to see the company owning up to their mistakes rather than brushing them under the carpet. We don’t pause enough in America to celebrate that companies here operate under a level of customer- driven transparency that forces corporate reflection and ensures moments of public accountability when even small mistakes are made.

As I read the report, I was struck by the sheer laundry list of actions and policy changes United is making to how employees interact with customers in such situations. United will, for example, “reduce its amount of overbooking (on flights),” which had helped create the context for this situation. While the list is long, it is also lacking and may not address the root of the problem.

When we work with clients to change culture and ensure it enables rather than consumes corporate strategy, we ask critical questions, including:

  • How could the values of your firm help your strategy or undermine it?
  • What policies and practices tie directly to living your values? How many are there? Can you demonstrate how they are documented and enforced?
  • How do the “three legs of the stool” (Performance Evaluation, Rewards Systems, and Decision Rights) reinforce your culture and your values? How do the three legs cascade from the C-Suite to your frontline employees?

United’s after-action report answers none of these questions fully. Instead, the report makes a single broad statement about United’s values. It states that, in the wake of the incident, United is dedicated to living its “values of making decisions with empathy, respecting every voice, and delivering what you expect and deserve.” This would be a laudable statement if proof were given for how United would make this happen. Instead, United never explains what their strategy is or how its stated value of “empathy” will drive behaviors in its thousands of employees.

The fact is you can’t simply say employees will or should be empathetic—you must design an organizational architecture to bring empathy to life. To ensure that a value can help change a culture, leaders must consider how stated values show up in employee decision rights, rewards systems, and performance evaluation practices. This timeless framework, designed by economists at the University of Rochester in the 1970’s, has been cited by leaders around the world as the dominant framework that enables change to happen and businesses to perform.

Leaders must also ensure that the three legs are viewed in balance to achieve the outcomes you seek. I hear many CEOs talk about compensation and rewards tied to objectives, and I know they will only ever get feeble outcomes because they’ve failed to balance all three legs. For United’s statements about empathy and customer service to be meaningful, the company must tie empathy and its other values systematically to the three legs of the stool.

In the report, United did write of their intention to increase empowerment by allowing local teams and frontline employees the decision rights they need to avert the impossible. But this is only one leg of the stool. The report makes no mention of the role that compensation and rewards play in driving frontline managers’ behavior. Do they have a bonus system? Is it tied to empathy or EBITDA (earnings before interest, tax, depreciation, and amortization)? Based on the recent incident, I would guess any bonuses that managers earn have much more to with filling the airplane than showing empathy. United also makes no mention of its performance evaluation systems or how they will re-engineer existing practices to more immediately measure and provide managers with feedback against the value of empathy and corporate goals.

Because these two legs were completely missing from the report, I fear United has not made real effort to change its culture and that incidents like the one we witnessed this spring will be repeated.

Despite what skeptics often say, corporate culture is not an ephemeral or squishy thing. Culture is real, now, and incredibly human—it must be tied to the three legs of the stool and embedded into policy and practice to ensure the behaviors you need to carry your strategy are real and lived. Ignore your culture or fail to consider the three legs and you risk an incident like what we’ve seen recently with Fox News, Uber, Volkswagen, Wells Fargo, Theranos, and so many others. In contrast to United’s report, the one released by Wells Fargo makes a point to acknowledge and address its cultural issues and all three legs of the stool, which gives me hope they will recover from the public outrage over the behaviors of their Community Banking division.

Every CEO in this country should read both the United and Wells Fargo Reports, pause for a moment of reflection, and then get to a whiteboard to ponder the implications for your firm.

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