is Professor of Management Science and Engineering in the Stanford Engineering School, where he is co-director of the Center for Work, Technology, and Organization, cofounder of the Stanford Technology Ventures Program, and a cofounder and active member of the new “d.school.” His next book, with Huggy Rao, is Scaling Up Excellence: Getting To More Without Settling For Less.
Paul Anderson has a long and impressive resume, which includes serving as CEO of companies including Pan Energy, Duke Energy, and BHP Limited – which became BHP Billiton under his leadership (now the largest company in Australia, among the world's largest mining companies, and also a major oil and gas producer). I spoke with Paul a couple months back about his successful turnaround effort at BHP Limited. Paul was funny, wickedly smart, and consistently modest as he described the mess that BHP was in when he took charge in 1998. The company had been without a CEO for nine months, the earnings and stock price were in the tank, good people were running for the exits, and multiple projects in recent years had failed.
Paul's new senior colleagues were skeptical about him, in large part, because they were nearly all Australians and "they did not want an American." Paul started the process of both winning their trust and trying to figure out what to do with the company by having each of the top 80 people in the company write a two-page document that answered, first: Who are you? What are your responsible for? And then: What issues do you believe are most pressing? What would you do if you were me? He met with each of these executives for at least an hour to discuss the memos they had written.
To make a long story short, rather than acting rashly, Paul listened to the collective wisdom of his top people, and implemented a turnaround strategy that he believed would enable the company to survive and thrive. The centerpiece was a "charter" he wrote that made clear BHP was a resources company (and would not migrate to becoming a services company as some executives proposed) and that spelled out the company's values, goals, and paths to success. Paul also made some tough and controversial decisions, such as closing a titanium plant that was losing 10 million dollars a month, and exiting peripheral IT and engineering businesses. It took time to turn around this big and broken company. BHP lost over $2 billion in the 1999 fiscal year (which ended on June 30th). But in 2000, just 18 months after Paul took charge, there were multiple signs that the turnaround was on track. In fact, BHP posted a $1.6 billion profit – the largest in company history. And in 2001, profits jumped to $2.2 billion. (See here for more about the turnaround and Paul's leadership style and philosophy.)
The part of the story I want to focus on, however, was one thing that still wasn't going well in 2000. Although most other performance metrics were heading north, Paul was concerned because there was little evidence that safety was improving throughout the company. Progress was stalled even though safety was emphasized in the charter and it was something he asked every senior manager about. In fact, the company-wide injury rate increased slightly between 1999 and 2000.
Keeping people safe was essential to company's international reputation and its ability to attract skilled employees – and, as Paul insisted, was simply the right thing to do. So he called in his head of safety and started pressuring him to explain why these numbers weren't on the upswing – why the number of lost days due to accidents and injuries weren't improving, for example. "He hemmed and hawed," Paul told me, "but he finally blurted it out: 'it is your fault.'" Then the head of safety explained how Paul's personal actions were speaking louder than his words:
- Everyone knows that you prefer to ride your Harley-Davidson motorcycle without a helmet.
- The speed limit is 5 miles per hour in the garage. Everyone knows your car, and that you drive far faster.
- When you visit plants, you don't follow safety rules such as holding on to the handrail or wearing safety glasses at the right times.
- When you visit a plant, safety is never first thing you ask executives about – you ask them about cost, reliability, and quality of output. Then you get around to safety.
We brought in a consultant from DuPont who spent a full day with myself and my direct reports. We set a 20% year over year improvement target for Lost Time Injury Frequency Rate (LTIFR) and examined what could be done to achieve it. In the days that followed, each of my direct reports met individually with each of their direct reports to discuss their personal commitment to the safety of everyone under them. That next level then met individually with their direct reports, and so on. The whole process was very personal.
People at BHP got the message. They noticed the changes in Paul, and came to believe that the emphasis on safety wasn't just hollow talk. And the workshops taught employees new ways to reduce accidents and injuries. Within a year, BHP Limited's Lost Time Injury Frequency Rate had fallen nearly thirty percent (28.5% to be precise). The company's safety statistics had improved so much that they were among the very best in the industry.
The people you lead often know more about your behavior than you do.
If your tendency is to shoot the messenger, give up now.
You need to be dogged, consistent, and even downright boring about sending and reinforcing the message.
Fast scaling starts with slow thinking.
Finally, I asked Paul if he had any additional advice for executives who find pockets of excellence in their organizations and want to scale them up. It might sound silly because it is so obvious, he noted, but his advice was to remember to thank people when you find that they are doing the right things. They will remember. And if you never thank them, they will notice that, too, and it will undermine your message.