(HOST) As the governor and legislature square off on budget and policy issues, commentator Bill Schubart imagines how their struggle might be judged in a corporate boardroom 10 years from now.
(SCHUBART) Ten years ago, Vermont’s largest employer with revenues in the low billions was having severe difficulties balancing its budget. The imbalance was in the tens of millions of dollars and the board was deadlocked in its debates about whether to retain the many products and services offered by the enterprise and simply raise prices, or whether to simply reduce the number of its service offerings, focusing on those services the market was willing to pay for.
Sadly, little or no strategic planning had been done nor had it collected actual market data other than anecdotal enthusiasm for its products and services. The problem had reached a crisis point and came to a head when board members and the Chief Executive began blaming one another. The leader was single-minded in his own plan to reduce costs by across-the-board lay-offs, as his experience was more administrative than market-based, so he had trouble understanding the market implications of simply lowering service standards. The crisis was made worse by the fact that when the stockholders last ratified the leader’s hiring, he had enlisted like-minded friends and allies to manage the complex component divisions of the enterprise.
It wasn’t a lack of market enthusiasm for its goods and services that ignited the crisis, but rather customers’ inability to pay for the annual escalation in prices. In most markets, competition would have alleviated the problem and reduced the decision-making impasse to a bankruptcy, but it was, in fact, a monopoly provider in its markets.
The crisis resolved itself in a stockholder rebellion and the leader was replaced with an experienced manager focused more on value to shareholders than her own tenure. The raging debate between board and the Chief Executive about whether to cut costs or raise prices ended abruptly. The new leader declared her responsibility to the shareholders to both enhance services and lower prices. The markets were stunned and doubtful.
The new leader initiated a comprehensive initiative to develop a shared vision and to collect and use marketplace metrics to better focus the enterprises service development strategy. Many division heads who had done "less with more" were replaced with managers with a track record for process efficiency and performance accountability. Every manager’s performance was reviewed annually and compensation was based on doing more with less.
The new Chief Executives job was made more difficult in every way by the leadership decisions she made. She insisted on openness and transparency in all operations. She enlisted the brightest and the best managers she could find even when they did not agree with her, insisting that it was the prerogative of leadership to manage the diversity of ideas and opinions. She listened thoughtfully to those with whom she disagreed and was known occasionally to change her own mind.
And over time, the shareholders, markets and board began to see the benefits of this riskier leadership style. Debate increased, but so did the pool of innovative solutions. The balance sheet stabilized and shareholder satisfaction began again to grow. Now in 2019, Vermont is again a paragon of good leadership and management.