Ralph Bathurst: Leaders should not always resign in the face of trouble

Sir Ralph Norris (left) and Fletcher Building CFO Bevan McKenzie at a media briefing after Norris stood down from the Fletcher Building board. Photo / Greg Bowker

Opinion

By Dr Ralph Bathurst

The resignation of Sir Ralph Norris as board chair of Fletcher Building in February, after an unprecedented blowout of the budget in the Building and Interiors division, raises interesting questions about the role of leadership in times of crisis.

The announcement that Fletcher Building had lost $1 billion over two years prompted a sharp decline of 13.3 per cent in its share price. The company responded by declaring it would retreat. It would complete the existing projects and no longer bid for large-scale developments, leaving it to off-shore companies to fill the vacuum in this sector of the construction industry.

Norris took the blame and resigned.

Being a nation of sports enthusiasts, we are familiar with the pattern. A team suffers a series of losses, fans become disgruntled, teams begin to fracture, and drastic action is taken.

The coach and captain are the first to be targeted and, hard on the heels of accusations of incompetence, comes the charge that team culture has become dysfunctional and needs radical, and immediate, re-formation.

This sequencing is not surprising; it's what stakeholders expect. However, this practice of giving blame followed by resignations, is nonsensical. It relies on a ritual of scapegoating used by tribal communities of past millennia that is not relevant to us today.

It also draws on old fashioned and outmoded views of leadership that the "buck stops" with the person at the top, and that they are fully and finally responsible for the organisation.

Both these views and beliefs avoid considering the dynamic nature of the business world, and attempt to resolve problems by seeking certainty in complex times.

We need to find forms of leadership that are open and that facilitate the accurate and timely flow of information. This form of leadership recognises that problems are not the problem. Rather, problems are the source of life and energy for organisations.

The facing of formerly unrecognised "wicked" problems calls for leadership; and it was at this crossroads where Fletcher Building failed. It failed because it relied on outmoded leadership practices.

The old view is that the leader ought to have a grasp on all the issues and, with superior insights, be able to guide the enterprise through its troubled waters. The new view is that no one person, or even the senior team and governance board, has sufficient information at their fingertips to be able to make appropriate decisions.

Norris, with his background in financial management, diagnosed the situation as being overly complex, saying that "often a boom is worse than a bust in many respects because it does put a lot of stress on supply of services, sub-trades, product and the like. And as we know, cost increases come when demand exceeds supply".

But Fletcher Building did not need leadership until it was faced with exactly this building boom.

Rather than seeing the boom time as a leadership challenge to be relished and embraced, it panicked. In the face of multiple subcontracting arrangements to meet building targets, the same management practices that had served it well in the past became a millstone, stifling its ability to act freely. Starved of information, the company lost its way.

This situation, however, ought not to signal failure. This is the time for leadership, where a man of Norris' undoubted abilities and experience could bring together teams throughout the company and set them free to explore the problems from all aspects.

Wicked problems call for leadership. But not the strong and decisive kind of the past. It is a leadership that persistently questions everything and everyone throughout the enterprise. It is a kind of leadership that rejects single and simple solutions to complex problems and calls for all members to seek for solutions not yet known, in a spirit of open and curious inquiry.

Problems at a company should not automatically lead to resignation and retreat. Instead, it should be a time for leaders, who know the company best, to lead creative problem-solving by all stakeholders to ensure the organisation survives and, eventually, begins to grow dynamically once more.

• Dr Ralph Bathurst is a senior lecturer with Massey University's school of management.