Post Carillion: Thinking About Radical Change?

Investigations into large-scale corporate failure cite cultures as the root cause. Carillion's "rotten culture" is no exception.

Its demise raises questions about the culture of its board and the Construction Sector as a whole. Can the Sector change of its own accord or is regulation required? - for example.

Judging by comments on media platforms, the Carillion story understandably evokes much anger. Embarrassment too. Construction professionals have known about unhelpful working practices for a long time. It's changing them that often proves difficult.

Perhaps with the Grenfell Inquiry still to report and a difficult-to-shed reputation for delays, overspends and quality, this is a watershed moment.

If you’ve begun or are considering another way of creating valued assets and trusted services that cost less whilst also improve providers' margins, I advocate being radical will help you achieve that relatively swiftly.

By radical I don't mean reckless. I mean going right to the source of the problem from the outset, to the deep-seated mindsets - often grounded in visceral, difficult experiences - which hold an existing culture in place and prevent it from changing.

By swift I mean not doing culture change ‘to’ people but ‘with’ them, as they co-create an uplifting, collaborative, can-do ‘vibe’ that underpins “the way we do things around here.”

Getting there means revisiting the assumptions behind how we’ve conventionally thought about developing leaders and senior teams. Filling people's glasses with knowledge and skills needs revisiting if we are to avert the recidivism problem - learners incrementally improving only to revert back to what they did before when pressures mount and circumstances change.

Three conditions are necessary to overcome this and to enable a more permanent transformation to occur.

First, we need to feel the heat and recognise the limits of the way we currently do things. Second, we have to be open to having our long-established thinking challenged. Third, we realise for ourselves that the way we’re showing up to different problems may seem like the only one available to us, but isn’t.

It’s the third condition - inner realisation - that matters most.

A realisation is not the same as being told what to think or how to do something by someone else. Instead we notice how our personal, routine habits of thinking, crafted over many years, inhibit us in some situations. As these mindsets dissolve new insights appear that make it easier to approach the very same challenges that get in our way from a more helpful perspective.

Some teams already 'get' this. They have the commitment and capacity to listen well, converse about anything, disagree healthily, and resolve the right problems. Often described as ‘high-performing’ their culture is one in which people feel safe, vulnerability is considered a sign of strength and purpose is crystal clear.

Building cultures like this isn’t rocket science. They evolve naturally when people aren’t caught up in inhibiting mindsets. Teams continually work out their own way to deliver mutual benefits to a project’s supply chain, advisers, project managers, clients and investors alike: come what may.

It seems to me, in the wake of Carillion, we need more of them.

If you broadly agree I thought a more in depth discussion may help. Read on to discover why changing the culture in a senior executive or project team can seem like a struggle, but needn't...   

The Culture At Carillion

Hindsight is a wonderful thing.

When official inquiries look back at corporate failures such as Enron, the Mid Staffs NHS Trust, BHS and the bail out of banks in 2007-8, they usually conclude cultures of “fear,” or “blame” or “indifference” are the root cause.

The BEIS Select Committee’s Inquiry into the demise of Carillion is no exception. It doesn’t pull its punches either. Because the “collapse was sudden from a publicly stated position of strength” and the Company “was a major strategic supplier to the UK public sector” it concluded “Carillion was no ordinary company, and this was no ordinary collapse.”

In July 2017 external consultants appointed to undertake a strategic review, quickly identified “a ‘lack of accountability […] professionalisation and expertise’, an ‘inward looking culture’ and a ‘culture of non-compliance.’"  

A month later minutes of a board discussion identified “A culture of ‘making the numbers’ (hitting targets at all costs) and ‘wilful blindness’ among long-serving staff as to what was occurring in the business. The board concluded that the culture of the organisation required ‘radical change.’”

Some seven months before Carillion became insolvent in January 2018, the culture problem had got the board’s attention. But this was far too late.

The Committee’s report asserted “Corporate culture does not emerge overnight. The chronic lack of accountability and professionalism now evident in Carillion’s governance were failures years in the making. The Board was either negligently ignorant of the rotten culture at Carillion or complicit in it.”

Tough words that provoke searching questions.

With the Grenfell Tower Inquiry under way, and a reputation for project delays and budget overruns that’s hard to shed - despite exemplar programmes that have, or are circumventing these problems, such as London 2012, Honda, Surrey County Council’s Road Maintenance Programme, Manchester Metrolink, Team 2100 on the Thames Estuary, and elsewhere – questions about the culture of the Construction Sector are likely to persist.

These will include how much regulation is required and to what extent the Sector can change its own culture. The answers will affect individual businesses and teams alike, when bidding for, delivering and handing over projects.

Depending on how you think about it, this could all blow over and we return to business as usual, or we could be at a watershed moment.

What Is Culture?

It’s one of those words that can mean different things to different people. Anything from being a soft and fluffy nice-to-have if time allows, to something that’s integral to everything teams do.

I find a useful way of making the literature on culture easy to grasp is to view it is an overall vibe or feeling about “the way things are done around here.” The “things” being working practices.

Try this on for yourself. When you next walk into a team’s meeting in which problems need to be resolved and decisions made, notice the overall feeling in the room. It’s your quick guide to whether that team is on track to continuously achieve what’s needed or not.

You pick the vibe up from the tone in people’s voices, the look on their faces, the way they move around, the level of eye contact, the quality of listening, the extent to which mobile devices distract attention etc. Over time cultures become embodied.

The vibe generated by practices such as late payments for work done, disputes over retention, pricing tenders below cost, high volumes of contested claims, transferring risk wherever possible, cutting corners and doing whatever else is needed to survive and make money in a traditionally ‘low margin’ sector, doesn’t feel great for most.  

Though people put up with this, few want it.

Construction professionals I talk to are sometimes embarrassed by the Sector’s reputation and the bad publicity it attracts. They’d prefer the vibe inspired rather than deflated.

Getting to that point is helped by first asking some pertinent questions. For example, what makes us blind to cultures, what holds them in place and what are the necessary conditions needed to change them radically and at relatively high speed.   

Let’s look at each of these in turn.

Culture Blindness

Problematic cultures are easy to spot in hindsight: when the evidence of failure is littered around for independent eyes to interrogate. They’re less easy to name, let alone pinpoint the root cause and put right when you’re in the midst of them though.

In the full-on drumbeat of each day, with deadlines to meet, penalties to pay if they’re missed, clients needing to see progress, new tenders to prepare, contracts to sign, and a to-do list as long as your arm, there’s little time to reflect and cultivate hindsight. The deeper, first order questions - such as what are the principles guiding a particular practice, what impact is it having, and is there another way – typically don’t get a look in.

We tend to just get on with it, we keep calm and carry on so to speak. That’s how we survive. With little mental bandwidth to take on complex problems, we look for easy answers and simple rules of thumb to guide us.  

Carillion for example had a very simple policy of paying shareholders a rising dividend year on year - come what may - even when net debt was rising. I don’t know what the actual logic for this was, but suspect it was along the lines of using dividends to demonstrate the Company’s overall strategy was working and thereby keeping investors’ confidence and the share price up.

It can be argued that this shareholder wealth maximisation logic worked for many years. It's easy to follow. It avoids the complexity of meeting multiple stakeholders’ demands. It formed the basis of a narrative that depicted a strong leadership, providing clear direction, backed by an effective operating model and the determination to see it through. The rising dividends provided concrete evidence to back this up, should anyone have doubted the main plot.

Yet in the run up to and after the insolvency, when set against pension fund deficits, unpaid creditors, and the failure to accurately assess profit margins on projects and turn them into cash, that story changed rapidly. It became a tragedy based on hubris, not a bold adventure based on strength.    

The ‘blindness’ mentioned in the Committee’s report – wilful or otherwise – occurs when the cultures we work in become to us what water is to fish: we typically don’t notice what we’re immersed in. We get lost in our own story and don’t see any alternative (or if we do, dismiss it swiftly.)

Given you can’t change something you’re unaware of, it’s easy to see why the status quo prevails and cultures don’t change.

What Holds A Culture In Place?

Whilst blindness is part of the problem, it’s not the whole story.

We’re not totally unaware or blind to the culture we’re in because we pick up its heavy vibe. It normally hits us as we get out of bed to go to work each day, or when we attend yet another meeting of the kind we wish we didn’t have to.  

What we tend not to do is examine it in more detail. Perhaps because it's seen as weak, or sounds too therapeutic and not business-like, or there simply isn’t time, questions like why do I feel frustrated, and am I alone or is this shared by others, simply don’t get explored.

Suppose they were. Suppose we did examine this negative vibe a bit further. I suggest we might discover other, more deep-seated reasons why the status quo stays intact.

Imagine, over some considerable time you’ve been…

• A relatively small supplier aggrieved at being on the receiving end of “difficult” clients who don’t pay what’s due, dispute every claim and withhold retention monies for far too long, or
• An investor who has continually felt frustrated by waste, high cost and lack of innovation, or
• A professional adviser who feels unfairly stereotyped as an uncommitted, clock-watching subject matter expert rather than a trusted partner,

…you could be forgiven for thinking “This is just the way things are here, always have been, always will be.”

In other words your sense of inertia will be grounded in difficult, visceral experiences. If challenged about why you hold that view you’ll have plenty of evidence to support it. You might even go back one or more generations to lessons passed down about how best to survive and win in this industry.

Attempts to change your mind and forge a new path may be hard to hear when in this busy-surviving frame of mind. For example, reports from Sir Michael Latham (Constructing the Team, 1994), Sir John Egan (Rethinking Construction, 1998), Mark Farmer (Modernise or Die: Time to Decide The Industry’s Future, 2016), or initiatives like Project 13 from the Institute of Civil Engineers - full of exemplar case studies that highlight successful deployment of new working practices - are unlikely to cut it for you. They seem distant from the day to day reality you live in, which has built up over many years.

Similarly when the case for a new approach is made by those around you. It can easily land as disruptive, risky, and full of upside that seems fanciful when set against what you’ve seen, heard and felt throughout your career.

Any one of us can get caught in a mindset like this.

Deep down, our personal, routine habits of thinking make seeing situations from a different perspective elusive. When business life really does seem as though it’s:

• A zero sum game, where for every winner there must be loser, in which…
• ...stereotypes such as the ‘lazy tradesman’ or ‘difficult client’ or ‘consultant who charges to tell you the time’ are everywhere and…
• ...the maxim of Murphy’s Law - that whatever can go wrong will - appears to be the way the world works..,

…we understandably behave in ways consistent with these habits. We guard and protect our self-interest.  

The problem is survival-based mindsets like these are often hidden. They only get uncovered in insightful, reflective dialogue. Hidden doesn’t mean absent though. They operate in the back of our mind, guiding how we feel and show up to others in a range of different situations, whether we're aware of them or not.

Now I know some readers will by now be thinking “Wait a minute…some situations are win / lose and some people are just like their stereotype etc.”

I agree. Survival-like thinking can be useful when we’re genuinely under threat.

Sir Winston Churchill famously said to parliamentary colleagues who were advocating what he saw as the appeasement of Hitler, “You cannot negotiate with a tiger when your head is in its mouth.” In existential crises the wise move can be to stand up to would-be aggressors.

The less-wise move however is to believe that’s the only stance to take in all situations. That’s when survival mindsets inhibit. They close down our sense of what else is possible and our capacity to adapt. Fear naturally creates silo or bunker mentalities, we hunker down, making change and progress either non existent or very slow.

In this scenario, just as with partial blindness, the existing culture remains intact. It does so because it’s understandably founded on strongly-held beliefs, which are grounded in real-life experiences, that habitually guide how we think when getting things done, without us being fully aware of it. That’s how a mindset works.

The Necessary Conditions For Radical Change

Intuitively we all know we can change our mind at any time. We have to be open to this possibility in the first place though. It’s not possible otherwise.

If we’re partially blind to culture, and not always fully aware of hidden mindsets that keep it in place, how else do we become open to changing our mind?

Noticing these three conditions helps:

1. We feel the heat. When challenged by a complex issue that persistently produces problems, our routine thinking disrupts and disorients us. We discover the way we make sense of the world doesn’t work as it once did. We feel consistently frustrated by situations and seem to always be facing dilemmas – choosing between two seemingly unattractive alternatives. Fed up, we don't ignore or put this emotion on one side, we give it our attention. An example of feeling the heat could be frustration over wasted time and effort that hampers producing better margins in a traditional low margin sector, which is steeped in a culture of adversary.
2. A collision of perspectives. We want to expose ourselves to people with different worldviews, opinions, backgrounds, and training. On issues we care about this both challenges our existing sense-making and increases the number of perspectives through which to view the challenges before us. Staying with our example, we might seek out opinions about what drives value for all stakeholders, shareholders included, that offer up different ways of coming at profitability and wealth creation. 
3. Realisations. We see that the mindset we’ve been living in, and the reality this has created for us, isn’t the only one that exists, even though it very much seems that way. We start to see not just how we are making sense of the world around us but how others are too. This becomes integral to how we think. It widens our perspective and makes finding new, previously inconceivable answers to the challenges before us possible.

Significant events in our business and personal lives prompt these conditions to arise. That’s when we can become more open than we might otherwise be: especially to the third and most critical condition, realisations.

For example if you’ve ever taken a new, high-profile role, and what feels like the whole world is watching your every move with career-limiting consequences if you fail, recognising what got you here may not necessarily get you to the next level, becomes front of mind. Similarly, the fusion of different people drawn together from different disciplines and organisations – say on a project or following a merger - puts the way we normally think in the spotlight. Major life events such as a physical health scare, a downturn in mental health, the birth of a child or the loss of a loved one can make us wonder about another way to be in the world.

A fundamental change of mind, or realisation, often follows.

A Cautionary Note

I’m not talking about a fleeting idea here, one that comes and goes. Nor am I advocating that conventional approaches to people development always produce realisations.

The way we have traditionally thought about developing leaders and teams has been akin to seeing them as an empty glass, which once filled will make them better at what they do. It’s essentially a doctor-patient model in which experts profile personalities, teach skills and coach people in the use of methods, tools and techniques. The model requires leaders - or ‘patients’ - to adapt what they do by applying mental models that are based on what has worked elsewhere; in a context other than the one they’re in.

This has its place. Expert-led knowledge transfer – or ‘treatments’ - are designed to increase competence and junior people need this for example. Additionally we can all incrementally improve our approach by learning from others' ideas. And we’re often grateful for the opportunity to do so. Well-run learning events, or a great book, get evaluated as ‘really useful.’

Is what’s learnt sufficient though? That’s the critical question.

Conventional development sometimes suffers ‘the recidivism problem’: people change back as new pressures mount or circumstances alter. Incremental improvements can prove short-lived because learning about learning doesn’t embed itself in the culture.

For senior people the issue is less about filling their glass and more about making it bigger. In a more complex and uncertain world, the challenge is to help them make sense of what’s happening around them in more agile ways. Knee-jerk responses get replaced by pauses for thought, asking radically different questions, conversing more deeply, experimenting with a new approach, adjusting and adapting as needed. And this occurs of their own volition.

Making glasses or minds bigger involves leaders and teams transforming their relationship with their thoughts and learning how to make sense of their own and colleagues' experience. It opens the way for new learning now and in the longer term. It helps people create space in which their own personal, inhibiting mindsets dissolve and make way for new insights to appear.

Realisations Are Transformational

All three conditions above are necessary for a mindset – and by extension a culture - to transform. For instance if you just feel the heat and learn of different worldviews other than your own, without a realisation, nothing much is likely to alter because all you’ve done is taken some new ideas on board.

You know when a realisation happens. Life starts to make more sense to you. It’s a profound change; one that lasts because it serves you well in many aspects of life.  

You will have experienced them before. Your capacity to do so is in-built; it’s how your mind’s designed. A realisation occurs from the inside-out and feels so liberating it compels you to act. Simple examples include:

• Suddenly giving up a habit of a lifetime – smoking say or over eating – and taking up a new one, exercising for instance.
• Living each day as though it’s your last in a lighter, more carefree manner after a health scare.
• At work you may realise how the way you think about pressure determines your experience of it, so you don't let it drag you down so much.
• Similarly, when getting done that which seems difficult, tuning in to others’ views and letting a new solution emerge, makes more sense than staying locked on to one idea, usually your own. (Seeing the ‘we’ not just the ‘me’ as it’s sometimes called.)  

If we think of radical to mean ‘going to the root or origin,’ rather than something reckless or rebellious, this shines more light on the transformational quality of realisations. They don’t arise primarily because you are told to think a particular way, or are taught how to do something, they come from a shift in your perspective on life. To be technical for a moment, new neural pathways open up.

Of course this doesn’t mean the challenges before you change, they remain the same. What’s transformed is your perception of them. Put another way you move from an inhibiting, survival-like mindset to an enabling one. You're free to approach the same problems from a new angle.

Realisations That Accelerate Culture Change

When boards, executive and senior project teams see how this in-built realisation mechanism works – or “the human operating system” as I sometimes call it - their vibe (or culture) alters swiftly for two main reasons.

First, individuals notice when they’re caught up on one train thought that isn’t serving them well and don't dwell there.

As they ‘feel the heat’ they do so knowing this is how everyone’s mind operates from time to time. Being caught up is only a matter of competence, personality, upbringing, social status, position in a hierarchy, intentional awkwardness, impostor syndrome, class, gender, genes, memes or any other factor you care to add in, if we think it so. Once we understand the influence we have over how we make sense of what’s before us, we don’t stay caught up for long.

When team colleagues share the same understanding of ‘the operating system,’ they too don’t waste time going down blind alleys figuring out from thousands of different possible reasons why things aren’t working as they hoped. Instead they gather the relevant data, talk openly about what they’re thinking, and share how this creates feelings that affect behaviour. In other words they get to the nub of issues that concern them swiftly.

It’s the pooling of this collective sense making that builds confidence in the fact new answers will emerge. Teams avoid bottling stuff up, overthinking issues and going round in circles believing only the leader has the right answer. Life feels lighter, people step up to the leadership plate.

What once may have inhibited or seemed like a taboo topic, now appears as a vital part of the picture they want to explore fully before making key decisions.

Does this mean disagreements evaporate?

Of course not, it just means they needn’t be divisive.

Teams prone to survival mindsets such as stereotyping, or the zero sum game mentioned above, ‘realise’ the limitations of these. From here it’s a small hop to acknowledging the vast majority of colleagues come to work to do a good job. It’s also inevitable that they will disagree, because what ‘good’ looks like in different situations will differ.

We physically can’t think the same way as someone else no matter how much we’d like that or assume it's the case. Understanding this opens teams up to creating their own way of disagreeing healthily. By this I mean they trust each other to treat differences as a stimulus to curiosity, which lets innovative, new answers emerge. By way of contrast they see ego-based thinking that only fuels division as wasteful and the source of delay, additional cost and feuds.

The net effect on a team’s vibe is it feels a safe one. Team members aren’t looking over their shoulder wondering if they’ll be sacked for making a mistake, or ridiculed for saying the wrong thing. Being vulnerable - by speaking up on even the most contentious or potentially problematic topics, or saying you don't know - is viewed as a good thing not a sign of weakness. (If you think about it, vulnerability is the best test of courage we have: by being the former you may gain the latter.)

In short a team’s culture transforms from being one grounded in a surviving mindset to a thriving one.

The second driver that speeds up culture change is a team’s purpose becomes more meaningful.  To test this extrapolate from your own experience: when you feel safe and being vulnerable doesn't scare you, your capacity to relate to others and get things done soars.

That’s what purpose at a sector, organisational, team and personal level rests on. People depend on you for what you do because it helps them achieve things they otherwise couldn’t. You get the joy of helping them get what they want and vice versa. The mutual benefits that flow from cooperation become more apparent and strengthen the reasons why you do what you do: your purpose.  

Take a typical construction project as an example:

• The investor benefits from delivering socially valuable outcomes (more journeys made, economic activity, people educated, housed etc.) for less investment.
• Clients want to deliver those outcomes as efficiently as possible through the way they operate the assets or infrastructure under construction.
• Project managers benefit from creating an innovative climate in which ‘one team’ works to solve problems and manage risks during the design, construction and handover phases.
• Advisers want early involvement in the team so their expertise adds more value to the project as a whole from the outset.
• Suppliers benefit from investing in developing what they do and getting a good return on their R&D via a steady, predictable programme of work and cash flow.

When the purpose is to enable all parties to benefit from the project, practices like late payments, or high cost claims only make sense when you’re in survival mode. They make less sense if you’ve realised a more helpful mindset is to break through practices that get in the way of this purpose and prevent people thriving.

This brings other questions on the table for closer scrutiny.

• How can contracts become a document of last resort, rather than a working one, in which it’s clear where responsibility for risks lie whilst at the same time obligates parties to collectively resolve them?
• Why would the need for so many competitive tenders exist if you could be sure your integrated team is committed to collaborating on best value and taking out waste and unnecessary cost from the start?
• What if disputed, high cost claims vanished because teams had the incentive of sharing whatever contingency budget is not used up?

And so on.

When the vibe is good, questions like these not only get asked, they get resolved too. Teams create new practices that work and they feel proud of.

All that’s in their way are mindsets that are understandably locked into the status quo, and what's gone before, because in all innocence their owners haven’t ‘realised for themselves’ there’s another way. Once they do humans' natural, collaborative qualities flourish.

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Would Carillion still be around if it radically changed ‘its vibe’ in the boardroom and elsewhere across the business? Could the needs of suppliers, staff and pensioners have featured more prominently at key moments when (say) the dividend decision was reached, or negotiations with the pension regulator on deficits were happening? Would a more systematic and less misleading method of valuing projects and the margins they were generating have emerged? Could board members hell bent on one particular course of action have been suitably challenged and welcomed this?

Who knows? Those moments have passed.

But as we’ve seen, the possibility that any of these could have happened doesn’t arise unless the mindsets that shape the culture, and the way work gets done, transform first.

That’s what makes the difference between radical transformation, small incremental change or staying mired in the status quo. Ironically, as Carillion's purpose statement suggested, it's also where 'making tomorrow a better place' could begin.

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Roger is a Co-Founder of The Mindset Difference, a London-based company whose purpose is to make transformation easier for senior executive and project teams.