Further leadership lessons: the Carillion aftermath

We’ve talked before about the collapse of construction giant Carillion and what it can teach us about corporate leadership in the modern world.

Of course, there are intricacies and nuances that make every situation unique, but there are many broad lessons to be learnt from Carillion and others who have gone before. And learn we must, because the impact of such dramatic business disasters spreads far beyond those in the immediate aftermath.

So, what behaviours must we avoid to stop such scenarios happening again:

 

Short-termism at the top
The leaders at Carillion were more concerned with reckless short-termism that suited their own immediate financial gains, rather than focusing on the creation of long-term value for shareholders, customers, employees and communications.

Successful leadership means looking at the long-term game. They need to create and sustain value through sound financial management, deep and long-lasting customer relationships, and an engaging culture for employees – a combination that takes hard work and strategic planning but delivers strong business performance.

 

Poor leadership commitment
Bad leadership behaviours sat at the root of the Carillion collapse. The recent Select Committee report suggests that the firm’s leaders were primarily driven by personal greed and not by a commitment to delivering for stakeholders.

Organisations need to take a long, hard look at potentially damaging behaviours at the top, and use leadership assessment tools that can highlight potential de-railing behaviours amongst individual executives and across leadership teams. It’s tough to admit there may be problems, but far better to identify and solve them early and avoid eventual disaster.

 

Lack of governance
Where were the checks and balances on Carillion, both internally and externally? It seems from where we stand that neither the board, nor non-executives, nor external auditors, nor regulators, nor other external bodies were capable of either spotting or correcting the course the firm was taking.

Governance is crucial for every business, large or small. Without it, small issues can quickly spiral out of control and, as we’ve seen here, can have calamitous consequences.

 

Misaligned communications
If your external communications contradict those happening internally, something is wrong. While Carillion was reporting a rosy financial picture to the outside world, internally its finances and operational structure was becoming increasingly untenable.

 

The lack of openness and honesty in the firm’s communications meant the collapse came as a huge shock to both internal and external stakeholders, giving no-one time to plan for what was an inevitable outcome.

While the story at Carillion is far from over and we’re likely to see more details unfold over the coming weeks, we can certainly use our growing knowledge about what happened to get our own back yard in order. Taking decisive leadership action in the short term can drive long-term success – something every stakeholder should be invested in.

 

By Dr Andy Brown
CEO & ENGAGE Leadership Practice Head