Fred Engelfried

Fred Engelfried
Fred Engelfried is Director/Chair of North Coast Holdings, Inc. and its subsidiary Lewis Tree Service, Inc. He has been a member of the board of directors of Lewis for over 20 years, and for 10 years prior to that worked with the company intermittently in various consulting capacities. He also is President of Market Sense Inc., a participative management firm that has served more than 100 regional clients over 35 years.

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Handling Destructive Conflict

Perhaps because of my own insecurities at the time, I began my adult life thinking that the term "criticism" had negative connotations. I later learned, and willingly accepted, that there can be positive criticism as well. The opposite was true as I embraced the concept of "healthy conflict," concluding that an open exchange of divergent ideas almost always led to better decision making. And then came the wakeup call: my introduction to destructive conflict and its ability to tear an organization apart if left unchecked. No organization is immune; we’re all entitled to our share of rogues. It is not a behavior that is always visible and, if it were, we likely would have avoided hiring any person where a background check pointed in that direction. When it does surface, most of us are caught off guard, lacking an abundance of experience and skills to deal with it; as executives, we still own the outcome. Failure to confront or tolerating and/or enabling is equivalent to trait approval and when that happens, the enterprise’s value system quickly erodes. A vivid case study from my personal experience: A very successful third generation, high technology manufacturing company was an exciting place to work. The CEO was dynamic, technically savvy and a charismatic leader. Many of the middle management team had joined the company fresh out of college and had no thoughts of looking for greener pastures. The CEO’s wife, well educated (and an officer/shareholder) decided she wanted to join the ride. An office was set aside for her and she started a pattern of working four to six hours a day, usually four days a week. I was retained about a year after this journey began. Though my purpose was to evaluate and then improve the company’s selling process it was impossible for me to ignore the destructive conflict that had been ‘birthed’ with the arrival of the CEO’s wife. She had a senior title, a big office, perceived authority, limited knowledge of the business and no responsibility. She spent her days destructively communicating to individuals in management. “How could you possibly have…?” “Why didn’t you…?” “Wasn’t it obvious to you…?” “Don’t you realize…?” “Do you know how much this will cost us...?” And so on. Her behavior could hardly be viewed as healthy conflict. It was brutal—and the CEO/husband turned his head. Management people withdrew, unwilling to show initiative anymore, and some reached out to me hoping for my help in an exit strategy. My assessment of the selling process had cast a wider net, exposing additional areas for improvement and I sat with the CEO strongly suggesting he do some “customer-focused restructuring.” He willingly agreed, especially with my proposal that his wife be given specific responsibility for three functional areas; oddly, she was enthusiastic about the new assignment as well. She quit in less than four months after the change. Being held accountable was not as fulfilling as wreaking the havoc provoked by her destructive conflict. Candidly, the solution was opportunistic—but it worked. A few more remedies to consider, all of which are likely to have their share of confrontation: • Peer review: This is not about strength in numbers but rather shared perceptions. In my experience, I have found that some individuals simply were unwilling to accept my feedback alone. • A traditional 360 followed by a candid discussion as to a willingness to change. • Counseling and/or professional coaching: when I have used this option it was always with the condition that the counselor or coach could “pull the plug.” If their assessment was that the employee had no sincere interest in changing, then: • Outplacement or termination. Some of us are elected to boards and expected to do the right thing; others of us are hired as executives to do the same. Failing to confront destructive conflict emboldens others to act the same while demotivating many more. Far more than once in my career words similar to these have been whispered to me: “We were hoping you would do something about that.” Lesson learned.

Don’t Kill the Messenger. (Really.)

No secret here: how executives present themselves and the way they react determines the response from those with whom they interact. Almost instinctively, they can inspire enthusiasm and pride or trigger a sense of urgency. But when they provoke an unwarranted sense of guilt or blame by unchecked emotional responses, they fail themselves and weaken their enterprise. I’ve faced this with a few of the clients I’ve served and, I’ve faced it myself. Kill the messenger! Think of it; when we’re confronted with unexpected negative results, if undisciplined, our vocal reaction reflects our concern. We bristle and then we drill—"How could this happen," "Didn’t anyone see this coming?" "Why didn’t someone tell me sooner?" The "messenger" may bear some of the responsibility but not all and likely doesn’t have answers to our open ended questions. But he or she has the "honor" of experiencing our first reaction. Left unchecked, such negative patterns of response have consequences. Cup half full: Most folks I’ve met along the way know to tell the truth but some had to adapt to their environment by parsing it out instead of serving it up on a platter. Cup half empty: I’ve also known a few who "dripped" the truth in the interest of their own self-preservation. In both cases, the enterprise suffered. A few examples: • A CEO had an unchecked reaction to bad news; it ranged between bellowing and anger. He didn’t understand why he was always the "last one to find out." The explanation for that was easy: his team had withdrawn, preferring not to be targets and their initiative had been snuffed in the process. I temporarily filled in as "messenger," acting as a mirror for the CEO. Eventually, he got it, and while there were still flash points from time to time, his team no longer withdrew. • The CFO of a five-state multi-plant manufacturing company reviewed preliminary financial statements with the CEO before doing the same with the management team. The company was not performing well and the meetings with the CEO became very painful. Results were consistently worse than expected and the CEO’s emotional reactions effectively "shamed" the CFO who in turn, began ‘dripping’ the results, forcing the ops team into the line of fire. • Not an exclusive club for CEOs. A VP of sales with a major ego believed he alone was carrying the enterprise and could not take "no" from his sales team.  Repeatedly he would reject their reports that the company was not price competitive and opportunities had been lost. The sales team began to "drip" information, e.g., "the customer has delayed their decision, they said they’ll order next quarter," etc. The pipeline drained and the VP was exited. When our own behavior patterns provoke avoidance and cause others to filter the information we require, everyone loses. I’ve learned to laugh at small crises and try to teach others to do the same.  Where possible, I also try to elevate perceptions of problems (beyond the personal) to inspire more comprehensive solutions. Yet to this day, there is a 50/50 chance that when confronted with game changing negative news, my first response will be to emote. Fortunately, my second response will always be, "Sorry, this isn’t about you—let’s start again from the beginning.’ One of the greatest rewards of leadership are the "high 5s" we get to share for extraordinary accomplishments. Least rewarding is when we are surprised by negatives of significant consequence. Our reaction in those moments can easily influence future communications from our "messengers." In this case…it’s all about us! Lesson learned.

From Arrogance to Servant Leadership

Arrogance can be a dangerous trait. It can blind one to unintended consequences and put many at risk. And it’s not a characteristic reserved only for individuals; organizations are fully capable of behaving arrogantly, as well. Pushback and failures can serve as wake-up calls; seeing our reflections through the eyes of others can do the same. Not all of us feel obliged to reshape our leadership style when confronted with such circumstances, but for those of us that do, the journey is humbling. My arrogance began as a shield for insecurity and wasn’t tested until I was president of a manufacturing company. In that role, I visited a potential midwestern-based supplier, a subsidiary of a Fortune 500, at their invitation. At the time, our company was in great shape and we had a longterm contract with our major customer. I had little interest in visiting this supplier—and it showed. On the plant tour I was critical of the operations; in the conference room, I insinuated that our hosts may be copying some of our IP; and at dinner, I was caustic. Finally, in the middle of the meal, the president of our host stood up, threw his napkin on the table, said “I can’t take this any more,” and walked out. The next morning, with little conversation, our hosts drove us to the airport. I had been railroaded out of town and I owned the result. I was humbled. Here’s another example of arrogance in action: A client of mine had manufactured a family of parts for a Fortune 500 company since the parts were first designed. The client always performed—excellent quality and on-time delivery.  Periodically, but not annually, the client would raise prices modestly to help cover increases in material and labor costs not regained through efficiencies. The time came when the customer said they would not accept a price increase and in fact demanded a reduction of 7% the first year and 2% per year after that.  With respect, my client declined and the customer insisted they send in a team of engineers to show my client how the cost reductions could be accomplished. With quiet confidence, my client declined the offer and the customer moved to another supplier.  Six months later, the customer returned, accepted the last price increase offered and shifted the business back. And another: The president of a major northeast distributor had made the decision to sell his business. He retained a well-known ‘banker’ to assist in that process. We had done most of the preparation, including writing the offering memorandum, leaving the banker to use his connections to find prospective buyers and ultimately run the “auction” process. While a senior executive of the bank had sold us on his team’s merger and acquisition skills, a relatively new employee was assigned to manage our process. The first potential buyer visited and, after a facilities tour, we sat together in the president’s office, he behind his desk and the potential buyer, the junior banker and me on the other side. Three of us were fully engaged in Q&A and initial negotiations; the overconfident junior banker was not. He sat off to the side reading a financial paper and never engaged at all. Once the buyer left, we told the banker his services were no longer required. Just one more: In negotiating with a team of businessmen from the Far East, an executive failed to rein in his arrogant behavior. His stride, his disregard for detail, his lack of respect in listening, and the abruptness of his responses quickly alienated him; he was tolerated solely for business purposes. Once a draft contract was reached, bound by a non-disclosure agreement already in place, all present reaffirmed there would be no public disclosure of the arrangement without the other party’s consent. It took less than 12 hours after departing for the executive to issue a press release without consent. I had remained behind and was called to a special meeting with the businessmen to “explain.” They were respectful to me but not about him. We concluded our meeting on good terms and they gifted me with a translation of one of their more descriptive expressions: “Once a stone, always a stone.” The path from arrogance to servant leadership has many obstacles, the biggest one being oneself. The arrogant corporation that had demanded price reductions changed for my client’s sake, but went on to alienate much of its critical supply base. The junior banker was able to rein in his overconfidence and the “stone” remained a “stone.” For me, the embarrassment and shame I felt when called out for my behavior served as a mirror into which I’ve looked many times since. I came to realize arrogance was a shield, not a leadership trait. Not all complete the journey to servant leadership. For me, it is a path worth following and I travel it every day. Lesson learned.

The Perils Of Turning A Blind Eye

Perhaps one of these scenarios will resonate with you. Family controlled While still in high school, the founder’s son decided to pursue a career dramatically different from the family business and he did just that, first acquiring the academic credentials and then entering the job market some 400 miles from home.  The work was fulfilling but the compensation was not and with one child and another on the way, the son soon returned ‘home’ to work in his father’s business. The first few years were a learning experience,  Gradually overcome by his inspiration that he should be running the business, the son pressed hard, first for an executive title, then for his father’s BMW in exchange for his own Toyota and ultimately, for his father’s office.  The father’s love masked what was happening. Eventually, several key executives left, one to work for a competitor, profits became losses and the business was sold for half the value it commanded ten years’ prior.   Closely controlled A chief operating officer had run the closely controlled business for more than 18 years.  He was essentially the de facto president, and even though there was a named CEO, he performed those duties as well.  He had a record of continuous growth and profitability. Over time, the company’s handful of shareholders yielded all control to the COO, essentially disconnecting from the business having been ‘sold’ by his record of results. And then…the business was disrupted by a dynamic change in market conditions.  A regimented management style that worked so well in the past no longer got the same results.  Even so, the COO kept doing it harder! The disconnected shareholders were not able to contribute and, too late, stopped trusting that ‘it will come back.’  New management with new skills was brought in but the clock had run out. The business was sold in distress. Public company A flamboyant president of a manufacturing subsidiary produced modest growth in revenues year after year and profits that grew disproportionately faster.  The performance was personally worth it; his defined bonus plan payout became more lucrative with each year that passed. He was happy, senior management was happy and the shareholder reports frequently featured the subsidiary’s strength. To some not connected to the subsidiary, something didn’t seem right.  Their focus turned to inventory. It had tripled over the course of three years but revenues had not done the same.  A subsequent special audit showed it had been grossly overpriced to mask manufacturing losses and that the subsidiary’s controller, at the president’s direction, had supported the practice.  Both were fired and the parent company took a $1millon+ write-off.  Family controlled A son, well-educated and well trained in the family business was appointed president as his father moved towards retirement.  The son’s vision was to expand the enterprise well beyond its regional footprint and he began doing so through multiple, capital intensive initiatives.  From the sidelines the father had concerns but when he raised them, his son pushed back and the father would retreat. It took just over two years for the vise to close.  The business became cash constrained and couldn’t support its expanded operations; its lender lost confidence in the son, capped the credit line and then pushed the company into work out.  The father came back in, did what he could to right the ship and rebuild the lender’s confidence but both failed at both initiatives. Chapter 11 followed ending with a discounted asset sale. Closely controlled An executive was known to be curt, impolite, and even rude to some of the women in the organization and worse, he was also known to be inappropriately amorous to others in both word and action.  His reputation was well known in the ‘office’ but not by his supervisor (the president), a personal friend. Eventually a woman who was a target of his amorous approach shared her concerns with another executive. By doing so the matter was brought to the board of directors which in turn then confronted the president.  The latter agreed to ‘talk to him.’ Months passed and another incident was reported – again from the president…’I’ll talk to him.’  This time the board wanted confirmation and when they didn’t get it, they acted on their own. The offending executive was encouraged to seek other employment and sometime thereafter, for other reasons, the president was relieved of duty. Public company A division prided itself as having the best and brightest game changers in the industry to serve its blue chip customers.  These highly skilled individuals always solved the customer’s problem, were highly paid to do so and generated an enviable gross margin on almost every job they undertook. The problem was…they only did this about 40% of the time; the under absorption of their cost more than offset the margin they generated resulting in big losses. This dilemma was obvious to the board of directors and meeting after meeting they prodded the CEO to remedy the problem, either by generating more revenue with the same staff or reducing the staff.  New customers didn’t come easy; the selling cycle was long and worse, the CEO seemed to have an affinity for each of his highly skilled game changers. He effectively refused to act and in time the board was forced to; the division was folded as was the CEO. Bad optics. Turn a blind eye. Suffer the consequences. Lesson learned.
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