Mutiny on the good ship Boral

A staff mutiny has seen Boral CEO Mark Selway pushed out by the company’s board.

He came into the company with a track record of successfully turning around British engineering company Weir Group between 2001 and 2008. Even then, he was known for having a particular managerial style. During his years in the car industry, he became an adherent of a Toyota-developed management philosophy called Lean, which focuses on cutting all costs that do not go towards improving the product for the end customer.

In a brief, blunt statement to the market yesterday, the building materials company’s chairman Bob Every said the company had achieved much since Selway’s appointment. It has restructured, closing non-performing businesses, focused on lean manufacturing processes and emphasised its sales, marketing and investment. Nevertheless, Selway would go.

“While operational improvements throughout [Selway’s] tenure have been excellent, the board has decided that the stewardship of the company going forward requires a chief executive with a leadership style suited to harmonising the changes that have occurred over the last two years,” Every said.

He denied the board had sacked Selway, saying his leaving was a mutual decision about what was best for the company.

Management performance is usually measured by financial ratios or, if a company is in trouble, by the persuasiveness of the CEOs turnaround strategy. The extraordinary thing in Selway’s case is that performance came second to style – he was simply deemed too difficult to work with.

Investors are reportedly shocked by the move. Unlike many recent high-profile CEOs who have lost their post due to shareholders concern about lacklustre performance, it was agitation from within that undid Selway.

Boral needs a CEO who is inclusive, will engage with staff and empower them, Every told the Australian Financial Review yesterday. He said the new CEO will need to “empower our people” and “give them the opportunity to grow”. Another report quotes Every saying after “two years of tension and hands-on leadership, we need somebody who can let the people pick up the ball if you like and run with it”.

Staff complaints about Selway’s micromanagement are illustrative. They say he insisted they clean their desks each night, and relayed stories of his fiery temper, according to reports.

It is not clear how these concerns came to the attention of the Boral board. Few staff members would directly approach a company’s board to raise such concerns, and few boards are so interested in the shop floor. Presumably other executives at Boral had raised their concerns with the company’s board.

Ross Batstone, formerly divisional managing director of Boral Building Products, has been appointed acting CEO while Boral looks for Selway’s replacement.

Recent years have seen a growing movement in studies of management that emphasises flat company structures, collaborative leadership and a stress on the importance of employee engagement and qualities such as respect and trust.

Stephen J. Sauer, an assistant professor of organisational studies at Clarkson University, has conducted research on what styles of management are most effective. He found for rookie managers, a commanding managerial style can command respect in the short-term. But over time, managers need to let go.

“The leaders who were viewed as the most confident and effective – and whose teams performed the best – were the high-status participative leaders. That finding is in line with everything we’ve heard for decades about collaborative management. As long as a leader is viewed as experienced and knowledgeable, team members prefer and perform better under a participative style. High-status leaders who give orders are viewed as less confident and less effective, and the performance of their teams suffers,” he wrote.

This is now filtering through to the corporate world.

An IBM survey of 1,700 CEOs from around the world, released today, found companies that emphasise openness between employees and leaders are 30% more likely to be successful. Such openness usually took the form of finding better ways to engage in order to more effectively communicate change programs.

“CEOs are changing the nature of work and leadership by adding a powerful dose of openness, transparency and employee empowerment to the command and control ethos that has dominated modern enterprise for more than a century,” the survey finds.

Despite the wealth of evidence on the desirability of collegial management, it’s hard to believe employee preferences for an agreeable manager could cost a CEO his job after only two years. At Boral, that’s exactly what’s happened.

Commanding manages beware.