Interview with Mike Critelli
Former CEO and Chairman, Pitney Bowes
Leaders Speak Series
PB, a leading provider of customer communication technologies, was one of the eleven companies identified by Jim Collins as “great” in Good to Great based on its financial performance. PB has also been a perennial award winner in many categories, from one of the top 200 companies for U.S. patents issued every year to a wide array of awards in leadership, technology, diversity, health, environment, and more.
Here are excerpts from our interview with him for Triple Crown Leadership, our roadmap for building an excellent, ethical, and enduring organization.
What were some of the leadership challenges you faced at PB?
Critelli: The company was highly decentralized, and I tried to move to a more company-centric focus in which employees would identify more with the company as a whole. The company was also heavily inwardly focused, reacting to external events. I took the company through a transition to being more outwardly focused toward customers, influencing and shaping regulations, and toward more partnerships and alliances.
We were predominately a U.S.-based company–international, but not global. We globalized the company in markets served where we sourced and manufactured products, and where we sourced the talent. We went from having direct operations in twelve countries to direct operations in thirty countries.
We also had a reliance on services, like equipment leasing, that were heavily dependent on tax and accounting rules, which can change with a stroke of a pen. We decoupled the company from those businesses completely.
The company was hierarchical and top-down. So, we pushed authority down to the local level. That trend was to some degree reversed or stalled by the dictates of Sarbanes-Oxley, which tended to drive more controls back to the center.
We significantly restructured and downsized, dismantling the U.S. manufacturing of many mailing products without major employee dissatisfaction because of the caring way in which we approached things. We reduced from fifteen U.S. call centers to four, all without a blip in customer service or employee satisfaction.
It was like changing the tires on a moving car.
Just getting it done and having the vehicle
keep going is a major accomplishment.
What was your personal leadership approach?
Critelli: In the beginning, I was very comfortable blowing up existing systems, processes, and schedules. I had to a strike a balance because I had a style of wanting to move quickly and to drive people to do things beyond what they thought they could do. I realized that only a small percentage of the population could function that way. I had to learn how to bring people along.
I looked at the population over time as being in three groups. For probably 20%, no matter how fast I moved, they wanted to move faster. Twenty percent was going to dig their heels in and fight change. Ultimately, we had to get them out of the organization.
But the key to success was going to be the middle 60 percent, and I had to figure out a variety of strategies to manage and balance the speed at which the top 20 percent and I wanted to move vis-a-vis that 60 percent.
I did a lot of skip-level meetings. My predecessor either worked directly with the executive staff, or he would meet with certain frontline employees. He loved to do town hall meetings, which has a tradition at our company for almost seventy years, so you get feedback from the frontline employees. I kept those things.
The group that always felt left out was midlevel and frontline management. I had about seventy-five meetings a year with people in that group. There were certain people whom I would meet with four times a year. I visited facilities to go department by department, meeting with the managers and talking to employees. I felt that one of the critical levels of culture change was how our mid and frontline managers embraced it. The people that had the most influence are the civil service managers. I built a lot of loyalty in that group.
How would you describe Pitney Bowes’ culture during this time?
Critelli: In the beginning, it was inward looking, narrow in its perspective on market opportunity, very hierarchical with people looking at the top people to make decisions in a paternalistic fashion. We changed those things during my tenure.
How did you change that culture?
Critelli: I learned to use events opportunistically. The events of 9/11 were pivotal because we had too many of our human resources and our physical assets concentrated in Connecticut. We really didn’t have business continuity and emergency preparedness plans. We looked at our supply chain and the risks of air flight concentration. So, I used dramatic events as opportunities.
The other way in which I effected culture change was through acquisitions, because I was intent on acquiring more entrepreneurial companies and talent. They injected an element of aggressiveness and more of an entrepreneurial approach to business into the bigger company. I nurtured those individuals as much as I could to keep them in the company, and they did influence the company in a big way.
One of the communications tools I put into place during 9/11 was a weekly broadcast message called Power Talk, a four-minute long message, which I delivered every week to employees about some of the changes that we were trying to make and to bring them along. People liked the idea of getting regular broadcast voicemails, so we institutionalized it.
Was the board involved in this culture evolution?
Critelli: There were committees of the board that were more involved than others, like the Corporate Responsibility Committee and the Finance Committee. The full board got an organization review every year on talent and leadership. We implemented employee satisfaction surveys, and we reviewed those results with the full board. We implemented board member one-on-ones with senior management without me present. So, the board got unfiltered feedback about what was happening inside the company.
The board was supportive of the moves, and we talked about those issues at the board meetings and the annual board retreats.
How did you approach ethical issues and breakdowns?
Critelli: Integrity issues occasionally will be a problem due to bad apples, but very often they are the result of giving people either excessive benefits for cutting corners, or giving people financial targets that they cannot meet honestly.
There was a lot of pressure from investors and analysts to articulate targets. I refused to do that. I said we’re going to have achievable targets, and we did a very good job setting stretch targets that were not excessive.
We had only two earnings misses during my tenure. One was 9/11-driven, so only one was truly a result of operations. It was a relatively small earnings miss, but I think the bigger message that we sent people was we weren’t going to just do whatever we had to do to make the numbers when the numbers couldn’t be achieved through good customer care.
The head of sales and marketing came to me and said he could have put programs in to get to the numbers, but they would have been wrong for the customer. I, not only told him he had done the right thing, but I publicly commended him for doing that. It hurt the stock price, but one of the things that I learned was the stock will recover, but your reputation and credibility are very fragile and can’t recover.
I felt really good about the tone we set on ethics, where a lot of other companies over-promised and under-delivered. The real test of whether you have a zero tolerance policy is if someone who is high performing violates ethics rules. What you do in that situation determines whether you truly have a zero tolerance policy.
One of the things that I learned was the stock will recover,
but your reputation and credibility are very fragile and can’t recover.
We sent some very high performers out the door, who walked right into our competitor’s offices, who delivered a lot of pain to us in the short term by selling against us. They took a lot of customers away, but in the end we sent a message that nobody in the company is above the rules.
The real test of whether you have a zero tolerance policy
is if someone who is high performing violates ethics rules.
Was leadership at PB distributed or concentrated?
Critelli: There were many decisions that I consciously did not make. There was clearly a preference to get the CEO to make decisions. We had this long tradition of town hall meetings. It’s very tempting, when the CEO is in front of employees asking questions from the floor, for the CEO to appear decisive and executive-like, to make a decision on the spot. Employees feel good that somebody’s in charge. There’s pain out there. The CEO makes a decision that relieves pain immediately.
There are some situations where you seize that opportunity, and there are others where it is too complicated to make the decision on the spot. My multiple predecessors achieved a lot of frontline employee loyalty by making decisions on the spot and having the inadvertent effect of disempowering people between them and the frontline employee.
Generally, you can make a better decision than they can in the short term, but there are two issues here. One is what course of action will produce a better decision, and the other is what will build organizational capability. Building organizational capability requires you to bite your tongue sometimes. That’s hard to do. It’s not an ego thing. Even though I can make a better decision, in the long run that could hurt the organization. So, it was very difficult for me to pull back from some of those decisions.
Distributed or plural leadership can happen, but it can only happen after the CEO has a huge amount of credibility and can put that leadership infrastructure into place.
There are occasions like the 9/11 crisis, the anthrax attacks, and the dot-com bubble in which employees are looking to the CEO to provide decisive and visible evidence of what the company’s going to do. Employees are smart, and they understand that there are times when their manager cannot really make the decisions that are going to determine the fate of the company.
During the 9/11 crisis, I set up shop in the boardroom and was extremely visible for several weeks. I did the same during anthrax. I was giving frequent briefings to employees. There was no substitute for me in that crisis environment.
For the rest of the time in the day-to-day functioning of the business, people see the face of the company through the lines of all the other management that they interact with. You have to empower that management.
What else should we know about the leadership dynamic at Pitney Bowes during your tenure?
Critelli: If you have a deeply embedded cultural attribute that you’re trying to change, sometimes you can’t attack it directly or visibly. You have to undermine it through a lot of little actions that are not visible.
Things like how you tweak the compensation system, where you spend your time, and what kinds of things are visible to executive assistants, who tell the rest of the world, but are not visible to everybody else.
So, you always have to operate on the basis of which things you do visibly and which things you do through what I would call either stealth or viral marketing.
I didn’t change the food served in our cafeteria by eliminating the junk food or eliminating choice. I eliminated company reimbursement for breakfast meetings inside the operation. I put a cap on what we reimbursed for dinner meetings, which caused people to eat in the headquarters more rather than in outside restaurants. I changed the merchandising of food so that the healthy food was cheaper. I changed the portions. I changed the packaging. I played a very hands-on role in this stuff because I knew what kind of results I wanted to achieve.
We put behavioral health counselors and nutritionists in the clinics who did a lot of outreach to people. None of this was the subject of any program. It was just done.
There are three types of change levers. There’s the highly visible stuff. There’s the stealth stuff. And there’s the viral marketing stuff, where you tell one person, and they spread the word. I think one of the characteristics of leaders who aspire to high performance is knowing when to use which of those approaches.
I tried all of them. Often, you find that when you do the high-visibility, big program and it doesn’t work, then you come back and do the stealth stuff to get to the same objective, but without engendering a lot of resistance.
Any other thoughts on leadership?
Critelli: I don’t think there’s a perfect leader. Leadership in many respects is situational. I start with the assumption that there isn’t one superstar way of doing things. Nobody has a corner on wisdom. If you look at General Electric, Jack Welch looked like he walked on water during his tenure. He did a lot of great things, but now we know from subsequent events that GE shareholders would have been far better off if he hadn’t grown the financial services business. In hindsight, he wasn’t as smart as he first appeared. It doesn’t say that he wasn’t a very good leader. It means every one of us, as you look back in time, finds that there are mistakes we’ve made. There are reasonable decisions that blew up in our face.
I start with the assumption that there isn’t one wise path that I just have to discover. It’s messier, much less clear. Leadership has to be adaptive.
Bob and Gregg Vanourek are authors of the new book, Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (McGraw-Hill, 2012), based on interviews with 61 organizations in 11 countries.