Last week the CEO of the LEGO Group, Jorgen Vig Knudstorp, was elected Danish Manager of the Year 2006 by Ledernes Hovedorganisation,
a Danish management organisation. The prize is awarded to a corporate leader whose performance has been
outstanding during the past year. Albeit fairly unheard of outside the toy industry, Knudstorp has caught the attention of both employees and LEGO fans alike in addition to competitors by pulling off the phenomenal turnaround of the much-loved toy company from the doldrums it faced particularly in 2003.
Someone asked me recently why I thought that LEGO had hurtled into trouble in the first place and also what it is about Knudstorp that has enabled such a phenomenal change to take place and in effect save the company from being sold off altogether. For me there are many reasons for both – but one stark contrast exists today in comparison to those dark days at the turn of the century: the attitude and style of top management at LEGO. Let me explain:
I joined the company in 2001 and at this time the damage was already being done and perpetrated by an individual at the top of the company who had very little understanding for what LEGO stood for and a vicious management style, which seemed driven by politics, personal vendettas and basically a principle which seemed to suggest: if I don’t like the look of you and what you are doing and particularly if you challenge me: you are out! You can of course argue on the merits of such a style, but what it achieved more than anything was spreading fear across the company – into every level, nook and cranny. This fear is was a kind of stifling fog, which meant everyone suddenly stopped speaking their minds for fear of retribution. This meant that suddenly the crucial information was no longer getting up to the top, the dashboard of dials top management were looking at went blank. Reckless driving is what ensued.
By contrast, when Knudstorp took over as CEO in 2004, things began changing dramatically. His humble style and openness, coupled with a desire to communicate face-to-face and via his blog with all layers of the company, began working miracles in gradually dissolving the fog of fear that made it so difficult for top management to see the status of the company, hear whether the engine was creaking or indeed pull up to the petrol station and fill the tank. In my mind, Knudstorp’s management style closely resembles the principles of airman-ship that all pilots are taught: Aviate, Navigate and Communicate. These principles need to all be handled simultaneously and you cannot focus on one at the expense of the others, or you risk crashing the plane, yet in business circles many leaders adopt as their hobby horse one of these principles and neglect the rest. This means organisations limp along, struggle for survival and are gradually abandoned by disillusioned employees who can see the wall coming up sooner than top management. Let’s elaborate:
1) Aviate
Let’s face it, whether you are flying a plane or running a company – it’s tricky stuff. You need to be able to fly the plane in an orderly fashion, keeping tabs at all the information your dials and indicators are telling you, resist sudden movements and above all: keep the plane in the air. Running companies is often similar – business climate can suddenly change, there is a lot of information to keep track of and in financial terms you have to keep the company solvent in terms of working capital and cash flow. Equally, you need to make sure the dials are indeed registering all the information on key financial measures, because without them: flying is nigh on impossible.
2) Navigate
Just keeping the plane in the air is not enough, you need to know your direction and altitude. You have to actively and continuously navigate to work out where you are going and if you are lost, you need to work out what to do to get back on track. Timing is also important: you can’t afford to run out of fuel. For the financial controller, this means having a ‘navigate’ dashboard with the appropriate financial measures that enable the organisation to check that it is implementing its planned strategy – the equivalent of making a safe landing.
3) Communicate
Even if you are flying in an orderly fashion and succeeding with navigating as well, you need to keep both crew, passengers and the watchtower informed what is happening in order to make it to your destination. You need to keep your passengers calm and up-to-date as well as set their expectations, the crew have a set of tasks to perform, which are dependent on what the airline offers in terms of service, but also influenced by timing and flying conditions so they need to anticipate your actions in order to be able to orchestrate their own activities accordingly and lastly, the watchtower needs to know what you are up to so as to be able to give you the benefit of their experience in keeping everyone else from crashing into you.
In the same way, business leaders and financial controllers need reliable lines of communication, so that the organisation has complete situational awareness and what is planned corresponds with what is done and what is measured. Therefore you, as a pilot (CEO) need to be able to do all three things concurrently to be able to keep your company functioning and flying safely, with everyone on-board and on the ground comfortable with what is happening. Knudstorp makes this seem effortless in a way that begs the question: surely this should be a more widespread practise across the board? Moreover, how come it is so easy for rogue pilots (CEOs) to take over and try to fly some crazy stunts and get away with it, leaving companies when the damage is done only to join another one and wreak havoc all over again?
