Dispatch 3: The CEO’s Dilemma: The Cracks Inside Are On The Move

Knowing the Problem is the Problem

Roger, the manager at Granger Mine, had recently entered into an agreement to purchase all the fuel required by the mine from Gatzu’s Shell Oil Bulk Station, the closest of four indigenous communities along the  Granger Valley. This was a key element of a deal to resolve a roadblock by the community, which had shut down the operation for almost a month. He had hoped this would be step one in restoring a relationship that had been quite positive for several years. However, for over a year, the community had been raising serious concerns about the increasing volume of heavy trucks moving through the community, bringing clouds of dust and concerns over safety, especially for the children who had to walk to school on the road every day. The month before, a truck had lost control and careened into the river upstream, releasing what everyone assumed were toxic liquids into the river; dead fish were found floating in recent days, but the manager was not forthcoming as to the nature of the spill. When the dog of an elderly widow was hit by a speeding truck, that was the final straw. The community had had enough. That triggered the roadblock. The manager had given lip service to the community’s concerns but took no effective action. The next time, it would be a kid. That was also the final straw for the manager, who had not made senior management aware of these issues. Roger had been brought in from one of the other properties where he had built a very solid reputation. This deal with the community was not easy to achieve, and he had put his own personal credibility on the line.

When the VP of Purchasing notified all the mine managers that the company had recently finalized a global arrangement to sole source all fuel sources globally from Exxon, Roger saw red lights flashing. He called the VP and explained the situation, starting with the fact that no notice of this impending decision had been given. The VP told him this was part of a high-priority mandate to tighten the company’s supply chains and cut costs. There was no room for special accommodations as that would open the door for other managers to make similar requests for one reason or another. And there was no way he could have cut this deal if he had to have first talked to every mine manager in the company.

Roger didn’t need to be a rocket scientist to figure out he was between a rock and a hard place. Breaking the deal with the community would lead to significant chaos, likely further roadblocks, and push back the wider agenda of restoring this relationship for who knew who long. What might that mean for the future of the mine? Although some contractors and employees were working at the mine, the opposition was growing under the leadership of a strong-willed senior woman, Lucy, who was not to be toyed with– she knew her rights, she and her husband were politically connected, and after three ownership changes at the property over twenty years, any mention of the word “gamechanger” put her on fire.

He spoke with the Operations Vice President to whom he reported. Although he had been informed that negotiations with Exxon were underway, he had not been advised that the decision was imminent. Caught off guard, he was not a man who liked surprises. He had some words of choice for the  VP of Purchasing. But he also knew this mandate had come straight from the Board before the new CEO was hired. He said he needed to think through how best to work through this situation. The conversation ended with, “Try to buy some time with the community!” And as he walked away, Roger hear him muttering-“I wonder how many other fires this damn guy had set off at the other properties”

Roger had no interest in being the guy left with the hot wire in his hands as a result of a short circuit internally. He thought long and hard as to his next step. Not something he would do lightly, but in the circumstances, he concluded his best choice was to go outside his comfort zone, bypass his VP, and take this straight to the CEO. Roger’s instinct was that he would be doing his boss a favour, but he knew he could be cut off the limb if he misjudged the situation.

The CEO, Joe, had only been brought in from the outside and had only been at the helm for less than a year. The word inside was that a key factor in hiring him was his track record of building strong external relationships in his previous positions.. One of the company’s most promising properties had failed to secure development approval due to intense opposition from local communities; this had resulted in a huge write-off that had plunged the share price. Responsibility for that fiasco had fallen on the former CEO. The Board’s mandate was simple – “ do what it takes to manage these minds of risks!”. Meeting the ESG performance standards was included as a key metric in the CEO’s compensation package. The manager knew this might put the CEO in a difficult position,  but he also realized this might be an opportunity to demonstrate that he was proactive and on the ball.

He drafted a Memo to the CEO explaining the situation and the dilemma he faced. This was not Joe’s “ first rodeo” with a situation like this. He needed to find a way to resolve this situation. He did not need another roadblock and work stoppage at this early point in his tenure. He had his hands while getting a handle on the scope of this multinational operation with over twenty producing mines. There were also quiet discussions underway on a possible mine expansion on this property to replace the lost production from the mine that had bit the dust which had thrown a wrench into production targets and financial projections.

He picked up the phone to call Roger for a full, firsthand debriefing of the situation.  His next call would be to the VP of Purchasing to tell him that he should stand down. He would be calling the President of Exxon himself to chat about this situation and what they could do to get this relationship off on a positive note.

The bigger question on his mind was how he could get out ahead of situations like this. He sensed what appeared to be a dilemma was really an opportunity. Establishing the structure and culture where cracks like this, which created problems internally and externally, could not open if he was to meet the Board’s clear mandate to “do what it takes” to manage risks. He recalled reading an interesting piece in a series of posts in Linkedin called “Drilling Up” – it was gaps across business units that had led to that disaster at Jukkan Gorge.  He had seen similar scenarios before, never as big and dramatic. The points made in the article resonated with his own experience -and evoked the image of a crack on the move. He looked back at the series and was struck in particular by this point:

“When we turn to the corporate world, we find complicated organizations with multiple business units and operations. In the absence of a sustainability culture that guides, disciplines, and incentivizes a way of thinking and acting, up and down and across, delivering sustainability outcomes consistently and resiliently is always at risk of short-circuiting, regardless of what “ESG Statement” is posted on a company website. Culture drives organizational alignment and integration. Corporate culture is difficult to measure, but you can grasp it by asking a simple question: “Who owns sustainability?” If the answer is not “everyone,” then there is work to do, no matter what ESG facts and figures are presented.”

This situation at Granger was the perfect opportunity to take this matter straight to the Board of Directors and secure a mandate to begin a process internally and outreach externally. This process would take on board the question “Who owns sustainability,” which opened up many pathways for discussion within and beyond. But most importantly he had to carefully frame this for the Board as essential to managing the context in order to deal with risk and opportunity effectively.

He was expecting the newly hired Senior VP of Sustainability to join the company in a few days. His first mission would be to develop the background and develop a recommendation to the Board. As he sat down to write his Memo welcoming him to the company and outlining what would be the focus of their first meeting, he started with To: Harry VP Sustainability, and then he paused to reflect on the title, and added the word  Engagement. In his mind, he also added External  (internal and external).

Note on the image: The Mid-Atlantic Ridge forms a spectacular underwater mountain range stretching over 16,000 kilometres (10,000 miles) from the tropics. In Iceland, this underwater ridge reaches above sea level, creating a valley that defines the boundary between two continents. This enormous crack snakes its way across the entire expanse of the island, prominently displayed here at Thingvellir National Park.

*This is the third in a series of “dispatches” whose goal will be to provide practical guidance on delivering sustainable performance. Extrapolating from broad themes, I will “drill up” from five decades of experience working as the “man in the middle” of complex challenges involving people and resources, helping resolve differences and building partnerships. My experience has taken me inside organizations and between and among them in diverse sectors: fish and forests, land and water, mines and dams, gas-processing plants and nuclear waste, pipelines and transmission lines, energy, municipal transportation conflicts, and treaty negotiations. In these areas, values, rights, interests, and power collide, engaging different organizational and governing structures and cultures, distinct “publics,” and the public interest.