UK: HELLER ON MANAGEMENT - SLIPPING UP EN ROUTE TO THE TOP.

UK: HELLER ON MANAGEMENT - SLIPPING UP EN ROUTE TO THE TOP. - A 'blame culture' inhibits venture - and is undesirable, says Robert Heller. But the gap between a blame-free approach and one that neither analyses error nor inflicts penalties is dangerously

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Last Updated: 31 Aug 2010

A 'blame culture' inhibits venture - and is undesirable, says Robert Heller. But the gap between a blame-free approach and one that neither analyses error nor inflicts penalties is dangerously narrow.

Should managements rejoice or mourn over Niall Fitzgerald's promotion to the Unilever summit? He is labelled as the man who gave you Power - the off-colour detergent that handed the arch-enemy, Procter & Gamble, a sublime opportunity to savage its rival and gain market share.

Unilever's denials and contorted efforts to defend the doomed product merely compounded the original error. That was to ignore well-known risks that the Power formula might damage the wash. The fiasco - for which the price is still being paid in massive marketing spend - was Unilever's equivalent of the New Coke disaster, perhaps the grandest error in the history of fast-moving consumer boobs.

The parallels go further. The authors of Coke's debacle, which saw the new formula spurned by the market, forcing the return of the old, were neither disgraced nor dismissed. Since Roberto C Goizueta and Don Keogh were already the top twain, they couldn't, like Fitzgerald, be promoted. But the board awarded the duo handsome bonuses for their initiative - despite its flop.

That sounds more like the resignation-proof ethos of Majorite ministers than the supposedly unforgiving climate of big, brutal business. The pattern recalls an early experience of Daniel Burke, later Johnson & Johnson's CEO. Having argued vigorously for a new product function, he was handed the job. His first effort struck out - and he was summoned before General Robert Wood Johnson.

Burke expected instant execution. 'Are you the young man who lost us all that money?' demanded the boss. Burke confessed. Johnson promptly congratulated him, said that the company would never progress unless people risked failure, and urged Burke to carry on the good work. Johnson thus practised some wise preaching: to wit, that mistakes made in the cause of progress are no mistake.

IBM founder Tom Watson thought likewise: 'That's where success lies - on the far side of failure.' Unilever and Coke pursued remarkably similar strategies in their respective failures. Locked in interminable vendettas with Pepsi and P&G, both seized on technological advance to vault - they hoped - clear of the competition. The lofty ambitions not only gave birth to the plan but the desire obliterated any counter-arguments.

This is the Arnhem complex. Confronted with photographs of Panzers in the drop-zone, the manager, like Monty's paratroop commanders, ignores them or asserts that they aren't real tanks, and even if they are, they haven't any fuel. Once Power had gathered momentum, nothing could stop it - except, alas, the external enemy. Like Arnhem or New Coke, this wasn't risk-taking. If the tanks could fight, if one new formula harmed clothing, or the other dismayed drinkers, failure was sure. But in favouring the culprits the boardroom overlords presumably felt that they had learnt that particular lesson: like Burke at J&J, they were allowed an error, however gargantuan, in the cause of progress.

Coke's progress under Goizueta has actually been magnificent. Since he took the reins in 1981, its market value has soared by $59 billion. Much of this reflects the phenomenal inflation of corporate equities in this period. But nobody has surpassed the record of Coke and its chief steward - and, if Fitzgerald can do half so well by Unilever's investors, they will be deeply satisfied.

The expectation is that, like Goizueta at Coke, the Irishman will force through major change, encouraging the enterprising spirit that, in the case of Power, went several bridges too far. It's none too soon - the enemy, P&G, started much earlier in this now widespread movement to replace authoritarian hierarchy with self-managing, team-working brotherhood and sisterhood.

In most cases the crusade has been neither easy nor altogether successful. The key to create ease and success, though, may lie in Fitzgerald's own elevation, allowing people to take initiatives without fear of failure or its consequences. Large companies readily develop a highly inhibiting 'blame culture' in which whenever anything goes wrong the establishment seeks scapegoats.

How people are recognised and reprimanded, just as much as how they are rewarded, deeply affects their performance. Fitzgerald was apparently elevated, not only despite the Power mugging, but because of it - above all, for his robust reaction to defeat. That very fact should, in theory, act as the antidote to the blame culture which punishes a failure not only to discourage the perpetrator but 'pour encourager les autres'.

This approach discourages venture and encourages groupthink where no one dares oppose the prevailing policy. Teamwork demands shared responsibility but it also demands individual contributions. It fails if team members shelter behind the consensus. That path leads straight to Power and New Coke, where corporate danger rested in a consensus that was too readily reached.

The blame-free culture which rightly encourages venture at the price of possible failure runs one major risk: that of creating a management that neither admits nor analyses error. Managers should indeed rejoice with Fitzgerald - with that single, but vital, reservation.

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