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Leadership Accountability Fails: When Systems Protect the Top · Roast the Post Podcast

• 0:07
  SPEAKER_01: So this one is kind of interesting.
• 0:10
  SPEAKER_01: It's more about leadership.
• 0:12
  SPEAKER_01: From the AP News.
• 0:13
  SPEAKER_01: The headline is "New Zealand PM survives leadership challenge months before election."
• 0:21
  SPEAKER_01: And some of the background here is Christopher Luxon survived a confidence vote
• 0:25
  SPEAKER_01: among his National Party lawmakers, his second in four months.
• 0:29
  SPEAKER_01: Amid polling declines, coalition infighting, and public gaffes with the election
• 0:34
  SPEAKER_01: set for this coming November seventh.
• 0:38
  SPEAKER_01: And that made me think quite a bit about leadership in organizations.
• 0:43
  SPEAKER_01: If a leader survives repeated internal challenges, but the organization continues to
• 0:49
  SPEAKER_01: underperform, is the problem the leader or
• 0:53
  SPEAKER_01: the system that allows for such instability in the first place?
• 0:56
  SPEAKER_00: Yeah, that's such a great...
• 0:58
  SPEAKER_00: I'm glad you provided that follow-up question
• 1:00
  SPEAKER_00: because I like straight up didn't understand half of what you said.
• 1:03
  SPEAKER_00: It was
• 1:07
  SPEAKER_01: Was it the New Zealand part that you didn't get?
• 1:11
  SPEAKER_00: all of it.
• 1:13
  SPEAKER_00: so you're basically saying like if a if a leader f*cks up over and over again
• 1:18
  SPEAKER_00: and they just get to keep going,
• 1:21
  SPEAKER_01: is it them or is it the system?
• 1:23
  SPEAKER_00: Yeah, and I think like context is important.
• 1:25
  SPEAKER_00: I think it depends on, well, it's the system, first of all.
• 1:29
  SPEAKER_00: but you know, is there a board?
• 1:31
  SPEAKER_00: Who is this leader accountable to?
• 1:37
  SPEAKER_00: but it's absolutely the system and
• 1:42
  SPEAKER_00: I did a Substack note about this not too long ago that the people at the top
• 1:45
  SPEAKER_00: are
• 1:46
  SPEAKER_00: making all these decisions, but it's the other people underneath them who get
• 1:49
  SPEAKER_00: laid off
• 1:50
  SPEAKER_00: and let go and and all of that stuff, and then the leadership team stays.
• 1:54
  SPEAKER_00: And there are so many reasons for that, but I think that the system is obviously
• 1:59
  SPEAKER_00: set up for those people at the top to be more successful.
• 2:03
  SPEAKER_00: and you can explain away a lot of things, like a lot of the reasons why missteps
• 2:09
  SPEAKER_00: happen or people.
• 2:11
  SPEAKER_00: Don't hit targets or whatever, there they can be lagging indicators.
• 2:17
  SPEAKER_00: are we too forgiving to leadership?
• 2:20
  SPEAKER_00: Absolutely.
• 2:21
  SPEAKER_00: I feel like they can get away.
• 2:24
  SPEAKER_00: I can get into a lot of things, but if we're talking about specifically in
• 2:30
  SPEAKER_00: corporations, yeah, there's a lot of forgiveness.
• 2:32
  SPEAKER_00: They are set up to be able to get away with a lot more than
• 2:38
  SPEAKER_00: people lower on the org chart for sure.
• 2:41
  SPEAKER_00: That's kind
• 2:42
  SPEAKER_00: of
• 2:43
  SPEAKER_01: And this... it's such a fascinating thing to look at too, because if you look
• 2:48
  SPEAKER_01: at the
• 2:48
  SPEAKER_01: structure of political parties and you know, fair advanced warning, I am a
• 2:53
  SPEAKER_01: huge nerd
• 2:55
  SPEAKER_01: for... well, I'm a huge nerd in general, but for political power structures and
• 2:58
  SPEAKER_01: systems and political parties.
• 3:00
  SPEAKER_01: I'm a big nerd about how all of that works.
• 3:04
  SPEAKER_01: It's very, very difficult for one person to become the leader of a political party.
• 3:12
  SPEAKER_01: and then the leader of a government.
• 3:14
  SPEAKER_01: Because in democracies, typically you have to secure the nomination to run for that
• 3:20
  SPEAKER_01: party.
• 3:21
  SPEAKER_01: Then you have to convince the electorate that you're going to be the person who is
• 3:25
  SPEAKER_01: going to do right by them, et cetera, et cetera.
• 3:27
  SPEAKER_01: Everything will be better if you're, like, *the* person.
• 3:29
  SPEAKER_01: So you have to convince them to vote for you.
• 3:32
  SPEAKER_01: Then you have to have enough votes to be able to form governments.
• 3:35
  SPEAKER_01: Then you have to navigate all of the internal power structures, the dynamics in the
• 3:39
  SPEAKER_01: party and the government, and you have to fight with the bureaucracy.
• 3:43
  SPEAKER_01: So it's incredibly difficult for one person to go from just being a regular person
• 3:47
  SPEAKER_01: to being the leader of a government.
• 3:52
  SPEAKER_01: and that system is supposed to have kind of checks and balances.
• 3:55
  SPEAKER_01: And in theory, the system should create better leaders, but it doesn't.
• 4:01
  SPEAKER_01: It tends to create leadership and authority.
• 4:05
  SPEAKER_01: amongst people who have the right connections versus the right competencies
• 4:09
  SPEAKER_01: and capabilities.
• 4:11
  SPEAKER_01: And in an organization, in a business, those steps, those checks and balances or
• 4:14
  SPEAKER_01: whatever are much simpler, much shorter.
• 4:16
  SPEAKER_01: It's very... it's a lot easier for someone to go from just being a person to being a
• 4:21
  SPEAKER_01: CEO.
• 4:22
  SPEAKER_01: Like there's a pathway about that.
• 4:25
  SPEAKER_01: But the same kind of problem exists.
• 4:28
  SPEAKER_01: You have CEOs who got there
• 4:29
  SPEAKER_01: because of their connections, not because of their competencies.
• 4:32
  SPEAKER_01: So how do you
• 4:34
  SPEAKER_01: How do you... how do you balance off that problem is a really interesting question.
• 4:39
  SPEAKER_01: How do you guide people into the system due to, or because, of their competency
• 4:45
  SPEAKER_01: versus their connection?
• 4:47
  SPEAKER_01: And how do you create a structure that really searches for competency versus
• 4:51
  SPEAKER_01: connection?
• 4:52
  SPEAKER_01: It's
• 4:52
  SPEAKER_01: a difficult, difficult, difficult thing.
• 4:55
  SPEAKER_01: It's a hard problem to sort out.
• 4:57
  SPEAKER_01: And
• 4:58
  SPEAKER_01: I think this is why we see it not really happening broadly anywhere.
• 5:03
  SPEAKER_01: You know, if there was like a foolproof system to put the best person in charge
• 5:08
  SPEAKER_01: all the time, there'd be huge demand for that.
• 5:10
  SPEAKER_01: You know, you could as a consultant like basically make infinite money going around
• 5:15
  SPEAKER_01: teaching all of the companies and governments how to do that.
• 5:17
  SPEAKER_01: It's not a thing though.
• 5:18
  SPEAKER_01: It's power, power,
• 5:20
  SPEAKER_00: baby, right?
• 5:21
  SPEAKER_00: Like the higher you
• 5:22
  SPEAKER_00: are, the higher up you are, like you said, the more privilege you have, the more
• 5:27
  SPEAKER_00: power you have, the more connections you have.
• 5:31
  SPEAKER_00: I have seen leadership ousted before by boards,
• 5:36
  SPEAKER_00: but usually it's not due to patterns of behaviors.
• 5:41
  SPEAKER_00: It's usually one really bad incident.
• 5:47
  SPEAKER_00: Yeah.
• 5:48
  SPEAKER_00: I worked for... more gossip here.
• 5:53
  SPEAKER_00: I worked for a company where one of the co-founders was the CEO and there
• 6:00
  SPEAKER_00: was an office Christmas party.
• 6:02
  SPEAKER_00: I... this is before I worked there, but it's, like... lore.
• 6:04
  SPEAKER_00: and
• 6:07
  SPEAKER_00: The CEO slash co-founder was making out at the party with his assistant, even
• 6:13
  SPEAKER_00: though he was married and had a family and everything.
• 6:16
  SPEAKER_00: And the
• 6:19
  SPEAKER_00: people knew that he wasn't the best CEO, and they weren't hitting
• 6:22
  SPEAKER_00: their targets and blah blah blah.
• 6:24
  SPEAKER_00: but that didn't matter.
• 6:27
  SPEAKER_00: It was the fact that everyone saw this incident happen and there was nothing more
• 6:32
  SPEAKER_00: they can do to protect this person, right?
• 6:37
  SPEAKER_00: You dug your own grave and we can't help you anymore at this point.
• 6:40
  SPEAKER_00: So even though
• 6:41
  SPEAKER_00: they had power and they had, you know, a proximity to... you know,
• 6:47
  SPEAKER_00: other connections, I guess is the word.
• 6:51
  SPEAKER_00: this was the incident that they couldn't rescue him from.
• 6:55
  SPEAKER_00: And so that's when I've seen
• 6:57
  SPEAKER_00: people in leadership positions ousted, more often than not, is that one
• 7:02
  SPEAKER_00: big, bad thing incident that happened.
• 7:04
  SPEAKER_00: But wouldn't it be funny if companies, every year, the employees got to
• 7:11
  SPEAKER_00: vote on whether or not they still want their CEO.
• 7:15
  SPEAKER_00: It was a survivor type, tribal council situation.
• 7:18
  SPEAKER_00: that would be interesting.
• 7:22
  SPEAKER_01: Yeah.
• 7:22
  SPEAKER_01: Interesting you bring that up.
• 7:24
  SPEAKER_01: A client that I'm working with right now is building a system sort of like that.
• 7:31
  SPEAKER_01: Now, what's different, what's very different about this organization is
• 7:36
  SPEAKER_01: that they are employee-owned.
• 7:38
  SPEAKER_01: They're a cooperative.
• 7:39
  SPEAKER_01: So they're
• 7:40
  SPEAKER_01: not an EOT, they're not a trust that owns the company on behalf of the
• 7:44
  SPEAKER_01: employees.
• 7:46
  SPEAKER_01: It's actually a cooperative.
• 7:47
  SPEAKER_01: So the employees do directly hold equity in the company.
• 7:50
  SPEAKER_01: and they have a... they have a workers' council, which represents labour, and they
• 7:56
  SPEAKER_01: have a
• 7:58
  SPEAKER_01: management council, which is supposed to bring in a broad, kind of diverse range of
• 8:04
  SPEAKER_01: opinions, and expertise to kind of guide the strategic management of the company.
• 8:08
  SPEAKER_01: It's a little bit cumbersome.
• 8:09
  SPEAKER_01: That's one of the things that we're working on with them.
• 8:13
  SPEAKER_01: But what they want to do
• 8:15
  SPEAKER_01: is instead of having a CEO or MD, the managing director, that's named
• 8:22
  SPEAKER_01: permanently, they
• 8:22
  SPEAKER_01: want to start pulling from their senior ranks, someone to lead the company in that
• 8:29
  SPEAKER_01: position
• 8:29
  SPEAKER_01: for a fixed term, for like a three-year term is kind of what they're searching for.
• 8:33
  SPEAKER_01: What they're trying to do.
• 8:35
  SPEAKER_01: So it's a radically different model for leadership than typically you see
• 8:38
  SPEAKER_01: in organizations.
• 8:39
  SPEAKER_01: The only thing that enables it is the direct ownership by employees.
• 8:44
  SPEAKER_01: If this was board-governed, something like that would not work.
• 8:48
  SPEAKER_00: Yeah, this...
• 8:49
  SPEAKER_00: I really like that.
• 8:50
  SPEAKER_00: I think that's fascinating.
• 8:51
  SPEAKER_00: And I also wonder how much time and bandwidth that takes, to have all these
• 8:56
  SPEAKER_00: little committees and things like that.
• 8:59
  SPEAKER_01: Right.
• 8:59
  SPEAKER_00: That takes
• 9:00
  SPEAKER_00: a lot of time.
• 9:02
  SPEAKER_00: I think that's interesting.
• 9:04
  SPEAKER_00: I also think because we mentioned boards...
• 9:09
  SPEAKER_00: I work for a venture a capital firm.
• 9:11
  SPEAKER_00: There are a lot of boards.
• 9:12
  SPEAKER_00: Hi Dan.
• 9:13
  SPEAKER_00: We were talking about you earlier.
• 9:15
  SPEAKER_00: and
• 9:16
  SPEAKER_00: Tan's ears
• 9:16
  SPEAKER_01: were burning.
• 9:18
  SPEAKER_00: And what I notice is that so many people like to put their friends, their pals on
• 9:26
  SPEAKER_00: their boards.
• 9:27
  SPEAKER_00: That's a problem.
• 9:29
  SPEAKER_00: Like they...
• 9:30
  SPEAKER_00: I did, I'm certified in board governance for
• 9:36
  SPEAKER_00: private capital and equity and things like that,
• 9:38
  SPEAKER_00: and so there was a discussion about how valuable it is to have external board
• 9:44
  SPEAKER_00: members, like neutral external board members who don't have any kind of agenda.
• 9:52
  SPEAKER_00: because yeah, you will see that boards are filled with people's buddies and maybe
• 9:56
  SPEAKER_00: even relatives and things like that.
• 9:59
  SPEAKER_00: And again, they're gonna protect the people at the top, and so it's
• 10:05
  SPEAKER_00: It just... it's such a mess.
• 10:08
  SPEAKER_00: But I do like the thing that you were describing, where leadership is a fixed
• 10:12
  SPEAKER_00: term.
• 10:13
  SPEAKER_00: How and like... you kind of maybe earn that right to continue your term after that.
• 10:18
  SPEAKER_00: I think that's really cool.
• 10:20
  SPEAKER_00: I think it's complicated, I think it's interesting.
• 10:23
  SPEAKER_00: Giving me a lot to think about.
• 10:25
  SPEAKER_00: Do you know by any chance, if they have modelled this on something else that
• 10:29
  SPEAKER_00: exists or is this something new that they're putting together?
• 10:32
  SPEAKER_00: Is this a cooperative type thing and I just don't know about it or
• 10:37
  SPEAKER_01: Yeah, the... so their structure is very loosely based on the Mondragon
• 10:42
  SPEAKER_01: Corporation in Basque Country in Spain.
• 10:45
  SPEAKER_01: it's been a cooperative, an employee owned cooperative for sixty, seventy
• 10:51
  SPEAKER_01: years.
• 10:53
  SPEAKER_01: It was formed kind of in... kind of in like the end of World War Two, sort of
• 10:56
  SPEAKER_01: thing.
• 10:56
  SPEAKER_01: So it's very loosely informed by and inspired by that.
• 11:02
  SPEAKER_01: But the the rotating term leadership, as far as I know,
• 11:06
  SPEAKER_01: it's relatively new.
• 11:08
  SPEAKER_01: But it's incredibly smart for resilience and longevity of the
• 11:11
  SPEAKER_01: organization.
• 11:13
  SPEAKER_01: Because what you're doing by putting people in that senior leadership position for
• 11:17
  SPEAKER_01: fixed
• 11:17
  SPEAKER_01: terms is, you're creating expertise and knowledge at that executive level that
• 11:22
  SPEAKER_01: every
• 11:23
  SPEAKER_01: other company that's, you know, board governed or whatever, when they need to
• 11:27
  SPEAKER_01: replace their
• 11:28
  SPEAKER_01: CEO, they almost always need to go externally or have a long term succession plan.
• 11:34
  SPEAKER_01: In place and kind of mentor one person who's going to be the next CEO for a
• 11:38
  SPEAKER_01: significant amount of time.
• 11:40
  SPEAKER_01: Apple's an example of that.
• 11:42
  SPEAKER_01: Apple does succession planning pretty well in the grand scheme of things, but they
• 11:46
  SPEAKER_01: spend
• 11:46
  SPEAKER_01: at least five, six years every time they turn over a CEO, kind of guiding the
• 11:51
  SPEAKER_01: next
• 11:51
  SPEAKER_01: person into the place.
• 11:54
  SPEAKER_01: With something like this, you know, imagine that you have five or six people who
• 11:59
  SPEAKER_01: are sitting in senior leadership positions, and all five or six of them have
• 12:04
  SPEAKER_01: held that CEO or MD role over time.
• 12:07
  SPEAKER_01: And imagine that your current CEO is on a plane and the plane like explodes in the
• 12:11
  SPEAKER_01: middle of the air or whatever.
• 12:13
  SPEAKER_01: You don't have a scramble.
• 12:14
  SPEAKER_01: You can be like, hey bud, come on here and fill the seat for a little bit until we
• 12:18
  SPEAKER_01: figure out our next steps.
• 12:20
  SPEAKER_01: You know, so there's very little like muss and fuss and mess in situations like that.
• 12:25
  SPEAKER_01: Like it's great for organizational resilience, but incredibly difficult to plan
• 12:29
  SPEAKER_01: around.
• 12:30
  SPEAKER_01: Yeah, I feel like it
• 12:31
  SPEAKER_00: would take up a lot of time.
• 12:32
  SPEAKER_00: Really interesting.
• 12:33
  SPEAKER_00: That's...
• 12:34
  SPEAKER_00: I dig it.
• 12:35
  SPEAKER_00: I'm thinking about that a lot right now.