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How to Pick a Good Fight Strong leaders create the kind of conflict that can spark creativity and innovation. by Saj-nicole A. Joni and Damon Beyer

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Strong leaders create the kind of conflict that can spark creativity and innovation. | by Saj-nicole A. Joni and Damon Beyer

How to Pick a

Good Fight

WHEN DICK FULD took over at Lehman Brothers in 1994, he inherited a contentious culture. Traders and investment bank- ers would not share ideas and competed for business, putting their own interests above the firm’s in nearly every instance. In Fuld’s own words, published in [email protected] in 2007,

“The early Lehman Brothers was a great example of how not to do it. It was all about me. My job. My people. Pay me.” But by the mid-1990s, the financial services industry had shifted to- ward an integrated sales model, and such blatant disregard for teamwork didn’t fly any longer. Fuld made unity and collabora- tion priorities at the firm, nudging them along with employee incentives. By the time of its collapse, in 2008, Lehman report- edly had one of the strongest cultures of teamwork and loyalty on Wall Street. As Fortune had noted in April 2006: “Fuld has incongruously turned Lehman into one of Wall Street’s most harmonious firms.”

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How to Pick a Good Fight

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The effort to eliminate discord at the firm had backfired. Lehman’s board of directors and manage- ment team became too agreeable – and too loyal, content to follow even when they knew better. In 2007 and 2008, numerous signals indicated that the firm was heading into a crisis, but insiders who paid attention to them were afraid to point out the elephant in the room. It turned out that loyalty meant loyalty to Fuld, according to accounts from former employees. That loyalty led Lehman execu- tives to an almost willful blindness. Nobody wanted to disrupt the peace.

The problem is that a peaceful, harmonious work- place can be the worst possible thing for a business, according to consultancy eePulse, which conducts in-depth surveys that measure employee engage- ment. Complacency, in fact, is the single greatest predictor of poor company performance. The sec- ond greatest? An environment in which employees are overwhelmed. In the first case, employees are reluctant to rock the boat. In the second, the level of employee satisfaction is low and the amount of

dysfunctional fighting is high. In both situations, low energy levels and fear of political fallout curb action that might address any looming crisis. At Lehman, many alums told us, raising difficult questions could kill your career.

Most leadership experts ar- gue that the best way to manage change is to create alignment, but our research indicates that for large-scale change or innovation initiatives, a healthy dose of dis- sent is usually just as important. Within an acceptable range of competition and tension, science shows, dissent will fire up more of an individual’s brain, stimulat- ing more pathways and engaging more creative centers. In short, more of what makes people unique, innovative, and passion- ate is available for use.

Many successful companies are known for their stressful work en- vironments. Microsoft, in its early days, had one of the most conten- tious, high-strung, and fast-paced corporate cultures in the United States. Bill Gates and Steve Ballmer were famous for yelling

at people. Food distributor Sysco, an unusually suc- cessful company built on roll-ups and acquisitions, dismisses district managers who don’t meet annual productivity targets – a pretty tough standard for an operating company with thin margins. Market leaders Goldman Sachs and McKinsey are notori- ously competitive, hard-driving places to work. Not places you’d go if you were looking for polite and equal regard for all voices.

We’ve seen this phenomenon play out over and over in our work advising CEOs and senior execu- tives. (Full disclosure: We have done consulting work for some of the companies described in this article.) So it’s time to stop candy-coating what’s taught to executives and their direct reports. It’s time to stop pretending that conflict-free teamwork is the be-all and end-all of organizational life. It’s time to own up to the truth that the right balance of alignment and competition is what pushes indi- viduals and groups to do their best. It’s time to push employees into the right fights.

Let’s be clear – alignment is important. But the purpose of alignment is not harmonious agreement. It is to sustain an organization’s ability to fight for what really matters, and to pull everyone together again once the fight is resolved.

Which Fights Should You Take On? Not all kinds of conflict promote a successful cor- porate environment. We have all seen organiza- tions that were poisonously political. We have all watched otherwise rational people go to extreme lengths to sabotage their colleagues or to retaliate against fellow employees who offended them in some way. And we have all seen people fight dirty when they believed that straight shooting wouldn’t get the job done. Those kinds of fights are purely destructive – and are not what we recommend. Conflict is healthful only when people’s energies are pointed in the right direction and when carried out in a productive way.

Not all issues merit a fight. We’ve identified three principles that will help you choose the right battles:

Make it material. Before starting a fight, be sure that the stakes are high enough to motivate em- ployees. Fight only over issues with game-changing potential. No matter how conflict averse they may be, most people are willing to fight for things they truly believe in. A fight is material if it creates last- ing value, leads to a noticeable and sustainable im- provement, and addresses a complex challenge that has no easy answers.

» A peaceful, harmonious work- place can be the worst thing possible for a business. Research shows that the biggest predictor of poor company performance is complacency. Conflict can shake things up and boost your staff’s energy and creativity.

» Not everything is worth fighting over, however. Before girding for a battle, make sure it involves an is- sue that affects the future and has game-changing potential. And if your fight has a noble purpose – if it’s about, say, improving the lives of customers – that’s even better.

» It’s also critical to make the fight fair. Opponents should have an equal shot at winning.

» Leaders should structure fights through the formal organization but allow contestants to use in- formal connections. Good leaders also will help the losing parties turn their pain into opportunities for development.

IN BRIEF IDEA

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In the mid-1990s, Charlie Feld, a former CIO at Frito-Lay who formed an IT consultancy, got into a material fight for his first major client. It was a railroad then known as Burlington Northern (BN), which became Burlington Northern Santa Fe after a 1995 merger. When Feld visited BN, he was shocked at the state of its scheduling systems. In his words:

“I used to be able to tell you where every bag of Doritos was in the country, and BN lost locomotives. How is that possible? They’re big, smelly, and they sit on a track with only a limited number of places where they can go.”

One of the key problems was that BN was run- ning trains using processes and systems designed for hauling coal and grain. It didn’t make much dif- ference to the coal or the corn whether the train showed up on Monday or a week from Monday. But it made a difference to then-chairman and CEO Jerry Grinstein, who had a big vision for the company.

Grinstein wanted to expand its intermodal busi- ness and compete with truckers to transport inter- national cargo containers from U.S. ports. Knowing that the U.S. economy would increasingly rely on imports, Grinstein planned to turn BN into a gate- way for Asia. If you’re picking up containers from shipyards and delivering them to factories, you have to be able to commit to a schedule. You have to know where every train is at all times and where every train will be in the coming weeks and months. For clients moving coal and grain, an unpredictable schedule was offset by the cost advantages of ship- ping by rail, but the weakness of BN’s systems was a major drawback with intermodal shippers. The fight was material because the status quo was a bar- rier to growth.

Feld had to declare war on the existing systems. One of his first steps was to reorganize the com- pany’s siloed systems into one centralized opera- tion. IT professionals who’d been responsible for designing routing systems identified with their silos, however, and revolted against the idea. But if they couldn’t or wouldn’t get with the program, they

were out of a job: Feld replaced more than 80% of BN’s top IT managers in his first 90 days.

The next big battle for Feld and Grinstein was persuading the company’s conservative board to approve an investment of more than $100 million in an 18-month overhaul of the company’s technology infrastructure – a staggering sum for BN, double its usual annual IT budget. They also fought to bring in a high-powered team of outside IT professionals, who had very little railroad experience, to map out and build effective scheduling systems.

We can state confidently that it was a right fight. At the company today, GPS trackers on rail cars al- low dispatchers to keep tabs on trains’ locations, di- rection, and speed. After fueling significant growth for a decade, BNSF’s intermodal business is large and profitable and continues to gain share from truckers in everything from UPS Christmas ship- ments to cars off Toyota’s Asian assembly lines. And the railroad has fundamentally repositioned itself against its closest competitor, Union Pacific Rail- road. Though their stocks were at nearly identical points in 1994, BNSF’s stock price has almost tripled and is currently 40% higher than Union Pacific’s.

Focus on the future. Forget the past and power struggles that are history, and don’t bother appor- tioning blame. Leaders in viable, vibrant organiza- tions spend most of their time and energy looking at the road ahead, not in the rearview mirror.

That’s easier said than done. Our research shows that senior leadership teams around the globe typi- cally devote 85% of their time to the wrong fight. They examine their past numbers, try to figure out what went wrong or dissect what went well, and assign blame or recognition – but they spend virtu- ally no time talking about the future. They waste energy, brainpower, and resources that they could instead be investing in future returns. If business leaders could redirect the conversation so that peo- ple spent even half their time talking about the fu- ture, companies could see incredible improvements in performance.

A good future-facing fight has three qualities: It speaks to what is possible, it’s compelling, and it involves uncertainty.

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How to Pick a Good Fight

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The most common mistake leaders make is go- ing from the “we missed our numbers this quar- ter” past to the “so we’re going to cut our costs to make up margins” present without stopping to set a clear context for a worthwhile future. Such an approach often sends performance into a death spiral. Though it’s OK for executives to engage in a moderate fight about short-term results, they should do so only in the context of a plan for long- term success.

A good future-facing fight has three qualities. It speaks to what is possible, shifting the debate away from what happened to what could happen. It is compelling, focusing people so intently on real, achievable benefits that they are willing to work through any associated costs and controversies. And it involves uncertainty, because if things are certain, there’s no need to fight.

When Rolf Classon first became a CEO, at a com- pany in the health care industry, he quickly found himself in a major future-facing fight, a royal battle that would significantly affect the future of an ap- proximately $40 billion business. At the time, the company was considering a sizable acquisition in a sector where it already had a small presence. The deal had been vetted and set into motion by the former CEO and his leadership team. If completed, it would create a new entity capable of dominating the sector. But in Classon’s first few weeks on the job, a member of his senior team privately confided that he was unsure it was the right move, and it was keeping him up at night.

Classon realized that his colleague’s honesty had taken a lot of courage, so he decided to take another look at the proposed acquisition, though opening the inquiry would be tricky. How could he make it clear he was looking for a genuine answer, not just a ratification of existing opinion? How could he avoid alienating the executives who had cham- pioned the deal? After conferring with a few other executives and finding that some also had private doubts, Classon knew he had to act.

His board supported him, and over several long weeks the executive team conducted a loud and heated debate. The division head who would have integrated the acquisition was furious; he’d been working on the deal for a long time, and it meant a great deal to his career. Classon took pains to make sure the division head had not only a voice in the fight but also access to the board, essentially giving him permission to go around the usual hierarchy. Classon also actively solicited many opinions and refrained from taking a side before it was time to

come to closure; he made it a point to be a scrupu- lously fair referee.

In the end the company decided not to pursue the deal, despite the likelihood of positive financial results, because the move wasn’t a great fit with the firm’s strategic objectives. But the fight had been fair. Classon kept his team focused on future possi- bilities, instead of allowing them to fixate on all the work that had gone into preparing for the acquisi- tion. He asked the division head who would have overseen the acquisition to take over another major division – an assignment that made it clear that Classon valued and respected him and that stop- ping the deal was not a vote of no confidence.

The fight was compelling because it helped the leadership team improve its shared understanding of the firm’s strategic direction. And it was certainly conducted in the context of real and consequential uncertainty. Classon was new to the CEO role, didn’t know the territory intimately, and had only weeks to research and make a decision about something vital to the organization. What enabled his success was his genuine curiosity, his commitment to open and dissonant dialogue, and his focus on building strategic intent into sustainable reality. This fight paid off handsomely. Within the next two years, a much more strategic opportunity appeared. Had the company acted on the first one, it would not have had the cash or bandwidth to do the deal that ultimately repositioned it for healthy long-term growth.

Pursue a noble purpose. Make your fight about improving the lives of customers, for example, or changing the world for the better. The right fight connects people with a sense of purpose that goes

ASSESSMENT TOOL

WHEN TO PICK A FIGHT How do you know when an issue is worthy of a

fight? With your team, state the issue as specifically

as you can and then ask a series of questions, struc-

tured around our “right fight” principles. If an issue

passes each stage of the test, it merits a right fight.

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hbr.org | December 2009 | Harvard Business Review 7

1 MAKE IT MATERIAL

2 FOCUS ON THE FUTURE

3 PURSUE A NOBLE PURPOSE

VALUE Does the fight involve something that has the potential to… >> save 15% or more of your resources or time for a year?

>> allow you to charge at least 10% more than you now do?

>> grow your sales or share of customers faster than the market?

If you answered yes at least once, the fight passes the value test. But if not, you should ei- ther restate the battle in bolder terms or address the issue with traditional alignment tools like quarterly plans.

COMPLEXITY Can you resolve the issue by… >> relying on routine processes and common skills?

>> calling in an expert to solve it for you?

>> holding different people or parts of your organization ac- countable for separate pieces of the problem?

If you responded yes at least once, the issue probably isn’t that complex and doesn’t jus- tify the stress of a right fight.

However, the fight will pass the complexity test if you answer one of the following questions affirmatively:

Does resolving the issue require… >> careful balancing of multiple perspectives?

>> different people to lead the process at different times?

>> mutual accountability for the answer?

If the issue passes the value test but not the complexity test, try to settle it in a routine fashion.

CHANGE Will the solution require… >> the organization to work in a fundamentally different way?

>> a new way to integrate big-picture perspectives with specialized local knowledge?

>> new real-time information flow between different parts of the organization?

If you answered yes at least once, the change warrants a right fight. If your answers were all neg

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