How the CFO enables the board’s success—during COVID-19 and beyond

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-the-cfo-enables-the-boards-success-during-covid-19-and-beyond?cid=other-eml-alt-mip-mck&hlkid=85d408119efe4175b478a0599b8302da&hctky=9502524&hdpid=ed9aa1f2-3c88-4b89-9cd2-61a12e2d602c

How the CFO can guide the board through crises and transformations ...

Two board experts explain how in times of crisis or transformation, the CFO can serve as a rock in the boardroom, a critical arbiter of difficult decisions, and a scout for the future.

Critical business decisions cannot be made unless management teams and boards of directors are on the same page. Transparency, fair and balanced dialogue, and well-structured processes for gaining agreement on strategic plans—these dynamics must be present in every boardroom, in good times and, especially, in bad.

The CFO plays an important role in ensuring that they are.

In crises, such as the global spread of the novel coronavirus, the CFO is best-positioned to provide the most relevant and up-to-date facts and figures, which can help boards find clarity amid chaos. In corporate transformations, the pragmatic, data-focused finance leader is the only one who can prompt the board to actively consider all the short- and long-term consequences of proposed strategy decisions.

Barbara Kux and Rick Haythornthwaite, longtime board directors for multiple global organizations, shared these and other board-related insights with McKinsey senior partner Vivian Hunt in a conversation that spanned two occasions: a gathering of CFOs in London some months ago and, more recently, follow-up phone conversations about the COVID-19 pandemic.

These interviews, which have been condensed and edited here, explained the importance of finance leaders in serving both as scouts for the future and as trusted translators of critical market information.

Shaping the COVID-19 crisis response and recovery

Rick Haythornthwaite: The board’s most important functions in the wake of COVID-19 are threefold: one is making sure that employees are being treated decently and that the company is taking all the precautions it can. Second is obtaining an objective, insightful understanding of the business and trends. And third is anticipating and preparing for recovery. The key in all three areas is having high-quality data to inform the board’s decisions and to share with employees. Of course, getting data from a market in freefall is never easy. This is where you need CFOs to be absolutely on top of their game.

The board needs to know what is really happening to the top line, what short-term measures can be taken to preserve and boost cash, and all the actions you have to take during the early stage of such events to buy time. But the board must also have a handle on long-term issues.1 And now that we’re months into this crisis, people are starting to draw lessons from previous ones and bringing some historical data into board discussions. The CFO can use these data to construct hard-edge scenarios that prompt good conversations in the boardroom.

Barbara Kux: An important difference in the role of CFOs today, as compared with their role during the financial crisis in 2008, is that they need to simultaneously manage both short-term responsiveness and future recovery. The CFO must keep the ship floating through rough waters—safeguarding employees’ health, securing liquidity, monitoring cash flow and payment terms, ensuring the functioning of the supply chain, assessing effects on P&L and the balance sheet, reviewing customers’ and suppliers’ situations, and initiating cost-reduction programs. That is all very challenging indeed. But then the CFO must also serve as the ship’s scout—watching for key trends that are emerging or that have accelerated as a result of COVID-19, such as digitization and changes in consumer behavior.

The balance between opportunity and risk is being altered substantially for most companies. The CEO could be tempted to profit from immediate demands—“let’s make ventilators, let’s make disinfectants.” The CFO’s job, by contrast, is to point out the differences between quick-to-market options and long-term post-COVID-19 options. These post-COVID-19 options can be an important factor in motivating and engaging employees during these challenging times.

It is also important for the CFO to present the board with reports and pre-reads that paint the entire picture in an objective way, including potential scenarios for the future. That is the only way boards and senior management can take thoughtful and well-founded decisions—first for the recovery and then for a sustainable future for all stakeholders. The word “crisis” has two meanings, one being “danger” and the other being “chance.” Today’s CFO must consider both.

The word ‘crisis’ has two meanings, one being ‘danger’ and the other being ‘chance.’ Today’s CFO must consider both.

Shaping the general transformation agenda

Barbara Kux: Outside of crisis periods, studies by INSEAD and McKinsey show, boards spend more than two-thirds of their time on “housekeeping”—financial reporting, compliance, environment, health and safety issues, regulatory issues, and the like. Only about 20 percent is spent on strategy. It is very important for boards to get out of this “compliance cage,” as I call it, and really focus on sustainable value creation. I’m thinking of the board of a leading oil and gas company that did just that. It recognized the importance of sustainable business development early on. The company gained first-mover advantages by diversifying toward a green business, including investing in solar and battery technologies.

At the end of the day, the board is ultimately responsible for the strategy, and the CFO is best-positioned to support strategy discussions. The finance leader can serve as a neutral party among the members of the C-suite, synthesizing their transformation ideas, supplementing them with comprehensive quantitative and qualitative data, and then working with the CEO to bring it all back to the board. This is even more important today to respond to COVID-19–related challenges early on.

Rick Haythornthwaite: The biggest challenge for any CEO, CFO, or other senior leader is to institutionalize new ideas without sucking the life out of them. Each C-suite leader plays a different but important role in this regard. The CFO needs to give transformation initiatives structure and rigor, while the CEO is probably better suited to take on the motivational aspects—for instance, the context for change and definitions of success. The whole team creates the strategy map—the markets and products affected, changes in pricing, the execution plan. But the CFO needs to ensure that the financial and operational underpinnings are there. Even if they are not visible to every single part of the organization, the board can see them through the CFO.

‘Scouting for the future’

Barbara Kux: To serve as an effective scout, the CFO should establish nonfinancial KPIs, like net promoter and employee-engagement scores, that are critical for the future health and performance of the organization. CFOs should review the strategy process to see that risks and opportunities are being well-assessed. And they can raise the political antennae of the board—accessing global think tanks, for instance, to understand what’s going on in Washington, China, and other important regions or in the medical community. The CEO often is not the most long-term–focused person in the organization; we know this because our financial markets are still very much short-term oriented. The board has to be long-term oriented. The CFO, therefore, must maintain a good balance of both. That might mean introducing a lean-transformation program with a focus on short-term results while, at the same time, contributing to the definition and implementation of a sustainable strategy for the company to emerge strong from the COVID-19 pandemic.

Rick Haythornthwaite: Boards need CEOs who can handle multiple truths, who can be expansive in thinking, and who can live comfortably in the future and bring the company along for the ride. The CFO also needs to be a protagonist in the boardroom, but from a different base: you can’t move to the future until you are anchored in the present. The CFO provides that anchor. Having a balance between future and present, between CEO and CFO, is important. The board wants to feel that there is strategic momentum—but also that the company is not just heading off on a journey of delusion.

Daring to dissent

Barbara Kux: It is important for the CEO and CFO to get on well, but their relationship should not be too close. It is better for the CFO to be objective, even if that sometimes leads to constructive conflicts. At times the CEO defaults to presenting only the positive in the boardroom, which makes it harder for the CFO to play back a more objective story. But that is very much the role of CFOs. They need to raise those early warnings. As a board director, I feel better if the CFO sometimes states, “by the way, we are losing market share here.” It takes a great deal of self-assurance for the CFO to come into the boardroom and say something like that. An independent-minded CFO will always be transparent with the board. A good CEO will always strive to establish an open relationship with the CFO. It is important for the board to motivate this constructive behavior from both executives so it can truly understand what is going well or not so well.

An independent-minded CFO will always be transparent with the board. A good CEO will always strive to establish an open relationship with the CFO.

Leading constructive dialogues

Rick Haythornthwaite: The senior-management team should not be delivering full solutions to the board at the outset; there should be a period of questions and discussion. The boardroom should be the place for CFOs and boards to engage in the cut and thrust of examination and exploration, with thoughtful planning and framing of dialogues to ensure that decision making is of the highest possible quality.

I’ll give you an example. CFOs used to be able to put traditional capital cases in front of the board about things like investments in plant and equipment, and there was typically a well-grooved dialogue. The kinds of actions they are talking about have changed, though. Think about companies’ investments in platform technologies, which can involve large sums being paid for targets with very low EBITDA—the idea being that value will ultimately come from the combination of entities rather than from a singular target.

Boards may be unfamiliar with such investment cases, so rather than jumping into quick, instinctive type-one decisions forced by the imposition of inappropriate and probably unnecessary time constraints, they will need an education. The board must take time to understand what, in practice, the acquisition of a platform would look like—how it might be scaled under new ownership, how that scaling would affect the bottom line, any risks involved, and so on. This is fundamentally a type-two decision, requiring time and deliberation. The CFO has an important role to play in making sure that this process happens, that it plays out over several board sessions rather than being squeezed into one meeting, and that conversations are grounded in hard numbers.

In the wake of COVID-19, of course, these dialogues may need to happen virtually; the quality of the conversation will still be good, as people are becoming accustomed to virtual meetings.2 They are fine for certain pro-forma tasks, where the issues are well-understood and processes are well-established. But when you’re trying to bring in new voices and new ideas, that’s when you need to be together in the same room.

Growing into the role of change agent

Barbara Kux: The role of the CFO is so much more expansive than it was even five years ago, including additional responsibility for cyber and digital transformations and for IT initiatives. To get your arms around the role and grow in it, take a step back and look at the company objectively. “What other roles could I play in the company, and how does that overlap with what I am doing now?” “Which initiatives would make the most impact in the company, and how could I realize quick wins in those areas?” Maybe it’s a focus on digital or compliance or export control or political intelligence. The CFO’s professional response to COVID-19 crisis management could be a springboard for future development. Whatever it is, I would identify it and just start. Take any kind of training you can get; read as many business publications as you can. Train yourself in how to deal with activist investors. Step by step, your hat will become bigger.

Rick Haythornthwaite: Whether you are talking about COVID-19 or digital disruption or any other impact on the business, please remember that the board still wants to sleep at night, and when the details are lost, the board will be much less forgiving of CFOs than of CEOs. Don’t forget that part of it. Particularly in this challenging economic environment, it is very important. Chairs and boards? We like to sleep soundly at night.

 

 

 

I’m a nurse in a Covid-19 unit. My hospital’s leaders frighten me more than the virus.

I’m a nurse in a Covid-19 unit. My hospital’s leaders frighten me more than the virus

As a nurse, my hospital's leaders frighten me more than Covid-19 ...

I’ve been a nurse for almost 10 years, working mainly on a hospital’s cardiac floor.

One day I was assigned to a makeshift intensive care unit that had previously been an observation unit for highly stable patients waiting for test results. Many of the patients in this new Covid-19 unit were intubated, with ventilators breathing for them.

When I started the shift, a trained intensive care unit nurse was crying in the supply closet. She was overwhelmed and anxious, hadn’t worked on her familiar unit in weeks, and had been told that her next shift would be an overnight one — and she had no choice in the matter.

Many of us don’t have a choice. We are assigned to work in unfamiliar units, with patients who are outside our expertise, without any training. We’re lost.

Most shifts start with nurses crying. Most shifts end that way too.

“It’s out of our hands,” we hear from hospital administrators.

Nurses who typically work in outpatient clinics are being sent to inpatient floors and assigned to care for patients who are acutely ill. Many haven’t worked at the bedside in decades. The number of patients who have fallen in this unit has risen exponentially in the past two weeks due to lack of training of outpatient nurses.

I wonder if the patients know their nurses are overwhelmed, and that many of them are scared they’ll make a deadly mistake.

“Everyone is out of their comfort zone, just hang in there,” we’re told.

Doctors have been instructed not to enter patients’ rooms unless they must as a way to minimize their exposure to the virus that causes Covid-19 while nurses go from one room to the next, medicating, bathing, turning, and comforting their patients without changing their uncomfortable personal protective equipment, since supplies are limited. This work can take hours. It is not uncommon for nurses to go all day without drinking water or eating because that would mean removing our protective gear.

During one of my shifts, a doctor at my hospital posted several TikToks he made while sitting at the nurses’ station of a busy Covid-19 unit as nurses whispered words of encouragement to patients clinging to life supported by ventilators. Over our words and the hum of the ventilators, I wondered if our patients heard music coming from this doctor’s TikToks.

“We hear your concerns, but there’s nothing we can do,” doesn’t reassure or encourage us.

One day as I worked in the makeshift ICU, one of the hospital’s leaders went floor to floor making an important delivery. She approached our nursing station in her crisp professional attire and fresh disposition, and proudly delivered a supply of makeup-removing wipes. She told us to use the wipes to clean our faces before putting on our N95 masks so we could reuse the masks later, then moved on to the next nurses’ station without asking how our staff was doing or if we needed anything. I wonder if she had noticed the nurse crying in the supply closet.

“That’s above us, we don’t make those decisions,” is passing the buck at its worst.

Excuses from hospital administrators seem to have punctuated every shift for the past six weeks. The praise and applause from hospital leadership only go so far.

I can read in my co-workers’ faces and hear from the stories they tell that the biggest danger we face is not Covid-19. It’s the hospital’s administration.

Leadership is failing us, even as we stand firm in not failing our patients. We care for your loved ones, Covid-19 or not, monitor their vital signs, give them medications, rub lotion on their backs, help them to the bathroom, and brush their hair. We FaceTime their families from our personal phones so they can see their loved ones fighting to live. This is important care that nurses are proud to provide.

The narrative is simple. Nursing, and nurses, are not valued. It’s a shame, and maybe even a deadly shame, that hospital leaders don’t care about nurses like we care for our patients.

 

 

 

Northwell CEO Urging Healthcare Providers to Mobilize for Gun Control

https://www.healthleadersmedia.com/strategy/northwell-ceo-urging-healthcare-providers-mobilize-gun-control

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The prominent executive is pushing beyond a letter he released last week and is now seeking to rally his peers around solving what he sees as a public health crisis.


KEY TAKEAWAYS

‘All of us have allowed this crisis to grow,’ he wrote in a letter published Thursday in The New York Times.

Healthcare CEOs should put pressure on politicians without resorting to ‘blatant partisanship,’ he said.

Northwell Health President and CEO Michael J. Dowling isn’t done pushing fellow leaders of healthcare provider organizations to take political action in the aftermath of deadly mass shootings.

Dowling addressed healthcare CEOs in a call to action published online last week by the Great Neck, New York–based nonprofit health system. Now he’s published a full-page print version of that letter in Thursday’s national edition of The New York Times, while reaching out directly to peers who could join him in a to-be-determined collective action plan to curb gun violence.

“To me, it’s an obligation of people who are in leadership positions to take some action, speak out, and prepare their organizations to address this as a public health issue,” Dowling tells HealthLeaders.

Wading into such a politically charged topic is sure to give some healthcare CEOs pause. Even if they keep their advocacy within all legal and ethical bounds, they could face rising distrust from community members who oppose further restrictions on firearms. But leaders have a responsibility to thread that needle for the sake of community health, Dowling says.

“I do anticipate that there’ll be criticism about this, but then again, if you’re in a leadership role, criticism is what you’ve got to deal with,” he says.

Dowling argues that healthcare leaders have successfully spoken out about other public health crises, such as smoking and drug use. But they have largely failed to respond adequately as gun violence inflicts considerable harm—both physical and emotional—on the communities they serve, he says.

“It is easy to point fingers at members of Congress for their inaction, the vile rhetoric of some politicians who stoke the flames of hatred, the lax laws that provide far-too-easy access to firearms, or the NRA’s intractable opposition to common sense legislation,” Dowling wrote in the print version of his letter. “It is far more difficult to look in the mirror and see what we have or haven’t done. All of us have allowed this crisis to grow. Sadly, as a nation, we have become numb to the bloodshed.”

His letter proposes a four-part agenda for healthcare leaders to tackle together:

  1. Put pressure on elected officials who “fail to support sensible gun legislation.” He urged healthcare CEOs to increase their political activity but avoid “blatant partisanship.” The online version of his letter links to OpenSecrets.org‘s repository of information on campaign contributions from gun rights interest groups to politicians.
  2. Invest in mental health without stigmatizing. Most mass murderers aren’t “psychotic or delusional,” Dowling wrote. Rather, they’re usually just disgruntled people who let their anger erupt into violence, which is why firearms sales to people at risk of harming themselves or others should be prohibited, he wrote.
  3. Increase awareness and training. Individuals shouldn’t be allowed to buy or access certain types of firearms “that serve no other purpose than to inflict mass casualties,” he wrote. Healthcare leaders should support efforts to spot risk factors and better understand so-called “red flag” laws that empower officials to take guns away from people deemed to be a potential threat to themselves or others, he wrote.
  4. Support universal background checks. In the same way that doctors shouldn’t write prescriptions without knowing a patient’s medical history to ensure the drug will do no harm, gun sellers shouldn’t be allowed to complete a transaction without having a background check conducted on the buyer, Dowling wrote, adding that a majority of Americans support this idea.

The letter notes that the U.S. has nearly 40,000 firearms-related deaths each year and that several dozen people have died in mass shootings thus far in 2019, including 31 earlier this month in separate shootings in El Paso, Texas, and Dayton, Ohio.

Corporate Responsibility

The way for-profit companies think about their relationship with the communities in which they operate has been shifting for some time. The most recent evidence of that shift came earlier this week, when the influential Business Roundtable released a revised statement on the principles of corporate governance, responding to criticism over the so-called “primacy of shareholders.”

The 181 CEOs who signed onto the new statement said they would run their business not just for the good of their shareholders but also for the good of customers, employees, suppliers, and communities. There’s some similarity between that updated notion of corporate responsibility and the sort of advocacy work Dowling wants to see from his for-profit and nonprofit peers alike.

Every single organization has a social mission, and large organizations that have sway in a local community have a responsibility to the community’s health, Dowling says.

“A healthy community helps and creates a healthy organization,” he says.

One major factor that may be pushing more CEOs to take a public stance on politically sensitive issues—or at least giving them the cover to do so confidently—is the generational shift in the U.S. workforce. Although most Americans overall say CEOs shouldn’t speak out, younger workers overwhelmingly support such action, as Fortune‘s Alan Murray reported, citing the magazine’s own polling.

Dowling says he has received hundreds of letters, emails, and phone calls from members of Northwell Health’s 70,000-person workforce expressing support in light of his original letter published online last week.

“The feedback has been absolutely universal in support,” he says.

But Which Policies?

Even among healthcare professionals who agree it’s appropriate to speak out on politically charged topics, there’s sharp disagreement over which policies lawmakers should enact and whether those policies would infringe on the public’s Second Amendment rights.

The group Doctors for Responsible Gun Ownership (DRGO) rejects the premise of Dowling’s argument: “Firearms are not a public health issue,” the DRGO website states, arguing that responsible gun ownership has been shown to benefit the public health by preventing violent crime.

Dennis Petrocelli, MD, a psychiatrist in Virginia, wrote a DRGO article that called Virginia’s proposed red flag law “misguided” and perhaps “the single greatest threat to our constitutional freedoms ever introduced in the Commonwealth of Virginia.” His concern is that the government might be able to take guns away without any real evidence of a threat.

While gun rights advocates may see Dowling as merely their latest political foe, Dowling contends that he’s pushing for a cause that can peaceably coexist with the constitutional right to bear arms.

“You can have effective, reasonable legislative action around guns that still protects the essence of what many people believe to be the core of the Second Amendment,” Dowling says. “It’s not an either/or situation.”

Others Speaking Out

Dowling isn’t, of course, the only healthcare leader speaking out about gun violence.

On the same day last week that Northwell Health published Dowling’s online call to action, Ascension published a similar letter from President and CEO Joseph R. Impicciche, JD, MHA, who referred to gun violence in American society as a “burgeoning public health crisis.”

“Silence in the face of such tragedy and wrongdoing falls short of our mission to advocate for a compassionate and just society,” Impicciche wrote, citing the health system’s Catholic commitment to defend human dignity.

The American Medical Association (AMA) and American College of Emergency Physicians (ACEP) each issued statements this month calling for public policy changes in response to these recent shootings, continuing their long-running advocacy work on the topic.

American Hospital Association 2019 Chairman Brian Gragnolati, who is president and CEO of Atlantic Health System in Morristown, New Jersey, said in a statement this month that hospitals and health systems “play a role in the larger conversation and are determined to use our collective voice to prevent more senseless tragedies.”

 

 

 

Leadership Is a Conversation

https://hbr.org/2012/06/leadership-is-a-conversation?utm_source=facebook&utm_campaign=hbr&utm_medium=social&fbclid=IwAR3orD_baTSQuN8MWY9UDETaHdctc0RWC0NfNtBzoU72n-654dRALRabqek

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The command-and-control approach to management has in recent years become less and less viable. Globalization, new technologies, and changes in how companies create value and interact with customers have sharply reduced the efficacy of a purely directive, top-down model of leadership. What will take the place of that model? Part of the answer lies in how leaders manage communication within their organizations—that is, how they handle the flow of information to, from, and among their employees. Traditional corporate communication must give way to a process that is more dynamic and more sophisticated. Most important, that process must be conversational.

We arrived at that conclusion while conducting a recent research project that focused on the state of organizational communication in the 21st century. Over more than two years we interviewed professional communicators as well as top leaders at a variety of organizations—large and small, blue chip and start-up, for-profit and nonprofit, U.S. and international. To date we have spoken with nearly 150 people at more than 100 companies. Both implicitly and explicitly, participants in our research mentioned their efforts to “have a conversation” with their people or their ambition to “advance the conversation” within their companies. Building upon the insights and examples gleaned from this research, we have developed a model of leadership that we call “organizational conversation.”

Smart leaders today, we have found, engage with employees in a way that resembles an ordinary person-to-person conversation more than it does a series of commands from on high. Furthermore, they initiate practices and foster cultural norms that instill a conversational sensibility throughout their organizations. Chief among the benefits of this approach is that it allows a large or growing company to function like a small one. By talking with employees, rather than simply issuing orders, leaders can retain or recapture some of the qualities—operational flexibility, high levels of employee engagement, tight strategic alignment—that enable start-ups to outperform better-established rivals.

Physical proximity between leaders and employees isn’t always feasible. But mental or emotional proximity is essential.

In developing our model, we have identified four elements of organizational conversation that reflect the essential attributes of interpersonal conversation: intimacy, interactivity, inclusion, and intentionality. Leaders who power their organizations through conversation-based practices need not (so to speak) dot all four of these i’s. However, as we’ve discovered in our research, these elements tend to reinforce one another. In the end, they coalesce to form a single integrated process.

Intimacy: Getting Close

Personal conversation flourishes to the degree that the participants stay close to each other, figuratively as well as literally. Organizational conversation, similarly, requires leaders to minimize the distances—institutional, attitudinal, and sometimes spatial—that typically separate them from their employees. Where conversational intimacy prevails, those with decision-making authority seek and earn the trust (and hence the careful attention) of those who work under that authority. They do so by cultivating the art of listening to people at all levels of the organization and by learning to speak with employees directly and authentically. Physical proximity between leaders and employees isn’t always feasible. Nor is it essential. What is essential is mental or emotional proximity. Conversationally adept leaders step down from their corporate perches and then step up to the challenge of communicating personally and transparently with their people.

This intimacy distinguishes organizational conversation from long-standard forms of corporate communication. It shifts the focus from a top-down distribution of information to a bottom-up exchange of ideas. It’s less corporate in tone and more casual. And it’s less about issuing and taking orders than about asking and answering questions.

Conversational intimacy can become manifest in various ways—among them gaining trust, listening well, and getting personal.

Gaining trust.

Where there is no trust, there can be no intimacy. For all practical purposes, the reverse is true as well. No one will dive into a heartfelt exchange of views with someone who seems to have a hidden agenda or a hostile manner, and any discussion that does unfold between two people will be rewarding and substantive only to the extent that each person can take the other at face value.

But trust is hard to achieve. In organizations it has become especially difficult for employees to put trust in their leaders, who will earn it only if they are authentic and straightforward. That may mean addressing topics that feel off-limits, such as sensitive financial data.

Athenahealth, a medical-records technology provider, has gone as far as to treat every last one of its employees as an “insider” under the strict legal meaning of the term. Insiders are defined as employees entrusted with strategic and financial information that could materially affect the company’s business prospects and hence its stock price—a status typically accorded only to top-tier officers. Opening the books to such a degree was a risky move, discouraged by the company’s underwriters and frowned upon by the SEC. But Athenahealth’s leaders wanted employees to become insiders in more than just the regulatory sense; they wanted them to be thoroughly involved in the business.

Listening well.

Leaders who take organizational conversation seriously know when to stop talking and start listening. Few behaviors enhance conversational intimacy as much as attending to what people say. True attentiveness signals respect for people of all ranks and roles, a sense of curiosity, and even a degree of humility.

Duke Energy’s president and CEO, James E. Rogers, instituted a series of what he called “listening sessions” when he was the CEO and chairman of Cinergy (which later merged with Duke). Meeting with groups of 90 to 100 managers in three-hour sessions, he invited participants to raise any pressing issues. Through these discussions he gleaned information that might otherwise have escaped his attention. At one session, for example, he heard from a group of supervisors about a problem related to uneven compensation. “You know how long it would have taken for that to bubble up in the organization?” he asks. Having heard directly from those affected by the problem, he could instruct his HR department to find a solution right away.

Getting personal.

Rogers not only invited people to raise concerns about the company but also solicited feedback on his own performance. He asked employees at one session to grade him on a scale of A to F. The results, recorded anonymously, immediately appeared on a screen for all to see. The grades were generally good, but less than half of employees were willing to give him an A. He took the feedback seriously and began to conduct the exercise regularly. He also began asking open-ended questions about his performance. Somewhat ironically, he found that “internal communication” was the area in which the highest number of participants believed he had room for improvement. Even as Rogers sought to get close to employees by way of organizational conversation, a fifth of his people were urging him to get closer still. True listening involves taking the bad with the good, absorbing criticism even when it is direct and personal—and even when those delivering it work for you.

At Exelon, an energy provider headquartered in Chicago, a deeply personal form of organizational conversation emerged from a project aimed at bringing the company’s corporate values alive for its employees. Values statements typically do little to instill intimacy; they’re generally dismissed as just talk. So Exelon experimented in its communication about diversity, a core value: It used a series of short video clips—no fuss, no pretense, no high production values—of top leaders speaking unscripted, very personally, about what diversity meant to them. They talked about race, sexual orientation, and other issues that rarely go on the table in a corporation. Ian McLean, then an Exelon finance executive, spoke of growing up in Manchester, England, the son of a working-class family, and feeling the sting of class prejudice. Responding to a question about a time when he felt “different,” he described going to work in a bank where most of his colleagues had upper-class backgrounds: “My accent was different….I wasn’t included, I wasn’t invited, and I was made to think I wasn’t quite as smart as they were….I never want anyone else to feel that [way] around me.” Such unadorned stories make a strong impression on employees.

Interactivity: Promoting Dialogue

A personal conversation, by definition, involves an exchange of comments and questions between two or more people. The sound of one person talking is not, obviously, a conversation. The same applies to organizational conversation, in which leaders talk with employees and not just to them. This interactivity makes the conversation open and fluid rather than closed and directive. It entails shunning the simplicity of monologue and embracing the unpredictable vitality of dialogue. The pursuit of interactivity reinforces, and builds upon, intimacy: Efforts to close gaps between employees and their leaders will founder if employees don’t have both the tools and the institutional support they need to speak up and (where appropriate) talk back.

In part, a shift toward greater interactivity reflects a shift in the use of communication channels. For decades, technology made it difficult or impossible to support interaction within organizations of any appreciable size. The media that companies used to achieve scale and efficiency in their communications—print and broadcast, in particular—operated in one direction only. But new channels have disrupted that one-way structure. Social technology gives leaders and their employees the ability to invest an organizational setting with the style and spirit of personal conversation.

Yet interactivity isn’t just a matter of finding and deploying the right technology. Equally if not more important is the need to buttress social media with social thinking. Too often, an organization’s prevailing culture works against any attempt to transform corporate communication into a two-way affair. For many executives and managers, the temptation to treat every medium at their disposal as if it were a megaphone has proved hard to resist. In some companies, however, leaders have fostered a genuinely interactive culture—values, norms, and behaviors that create a welcoming space for dialogue.

To see how interactivity works, consider Cisco Systems. As it happens, Cisco makes and sells various products that fall under the social technology umbrella. In using them internally, its people have explored the benefits of enabling high-quality back-and-forth communication. One such product, TelePresence, simulates an in-person meeting by beaming video feeds between locations. Multiple large screens create a wraparound effect, and specially designed meeting tables (in an ideal configuration) mirror one another so that users feel as if they were seated at the same piece of furniture. In one sense this is a more robust version of a web-based video chat, with none of the delays or hiccups that typically mar online video. More important, it masters the critical issue of visual scale. When Cisco engineers studied remote interactions, they found that if the on-screen image of a person is less than 80% of his or her true size, those who see the image are less engaged in talking with that person. TelePresence participants appear life-size and can look one another in the eye.

TelePresence is a sophisticated technology tool, but what it enables is the recovery of immediate, spontaneous give-and-take. Randy Pond, Cisco’s executive vice president of operations, processes, and systems, thinks this type of interaction offers the benefit of the “whole” conversation—a concept he illustrated for us with an anecdote. Sitting at his desk for a video conference one day, he could see video feeds of several colleagues on his computer screen when he made a comment to the group and a participant “just put his head in his hands”—presumably in dismay, and presumably not considering that Pond could see him. “I said, ‘I can see you,’” Pond told us. “‘If you disagree, tell me.’” Pond was then able to engage with his skeptical colleague to get the “whole story.” A less interactive form of communication might have produced such information eventually—but far less efficiently.

At the crux of Cisco’s communication culture is its CEO, John Chambers, who holds various forums to keep in touch with employees. About every other month, for instance, he leads a “birthday chat,” open to any Cisco employee whose birthday falls in the relevant two-month period. Senior managers aren’t invited, lest their presence keep attendees from speaking openly. Chambers also records a video blog about once a month—a brief, improvisational message delivered by e-mail to all employees. The use of video allows him to speak to his people directly, informally, and without a script; it suggests immediacy and builds trust. And despite the inherently one-way nature of a video blog, Chambers and his team have made it interactive by inviting video messages as well as text comments from employees.

Inclusion: Expanding Employees’ Roles

At its best, personal conversation is an equal-opportunity endeavor. It enables participants to share ownership of the substance of their discussion. As a consequence, they can put their own ideas—and, indeed, their hearts and souls—into the conversational arena. Organizational conversation, by the same token, calls on employees to participate in generating the content that makes up a company’s story. Inclusive leaders, by counting employees among a company’s official or quasi-official communicators, turn those employees into full-fledged conversation partners. In the process, such leaders raise the level of emotional engagement that employees bring to company life in general.

Inclusion adds a critical dimension to the elements of intimacy and interactivity. Whereas intimacy involves the efforts of leaders to get closer to employees, inclusion focuses on the role that employees play in that process. It also extends the practice of interactivity by enabling employees to provide their own ideas—often on official company channels—rather than simply parrying the ideas that others present. It enables them to serve as frontline content providers.

In the standard corporate communication model, top executives and professional communicators monopolize the creation of content and keep a tight rein on what people write or say on official company channels. But when a spirit of inclusion takes hold, engaged employees can adopt important new roles, creating content themselves and acting as brand ambassadors, thought leaders, and storytellers.

Brand ambassadors.

When employees feel passionate about their company’s products and services, they become living representatives of the brand. This can and does happen organically—lots of people love what they do for a living and will talk it up on their own time. But some companies actively promote that kind of behavior. Coca-Cola, for instance, has created a formal ambassadorship program, aimed at encouraging employees to promote the Coke image and product line in speech and in practice. The Coke intranet provides resources such as a tool that connects employees to company-sponsored volunteer activities. The centerpiece of the program is a list of nine ambassadorial behaviors, which include helping the company “win at the point of sale” (by taking it on themselves to tidy store displays in retail outlets, for example), relaying sales leads, and reporting instances in which a retailer has run out of a Coke product.

Thought leaders.

To achieve market leadership in a knowledge-based field, companies may rely on consultants or in-house professionals to draft speeches, articles, white papers, and the like. But often the most innovative thinking occurs deep within an organization, where people develop and test new products and services. Empowering those people to create and promote thought-leadership material can be a smart, quick way to bolster a company’s reputation among key industry players. In recent years Juniper Networks has sponsored initiatives to get potential thought leaders out of their labs and offices and into public venues where industry experts and customers can watch them strut their intellectual stuff. The company’s engineers are working on the next wave of systems silicon and hardware and can offer keen insights into trends. To communicate their perspective to relevant audiences, Juniper dispatches them to national and international technology conferences and arranges for them to meet with customers at company-run briefing centers.

For many executives and managers, the temptation to treat every medium at their disposal as if it were a megaphone has proved hard to resist.

Storytellers.

People are accustomed to hearing corporate communication professionals tell stories about a company, but there’s nothing like hearing a story direct from the front lines. When employees speak from their own experience, unedited, the message comes to life. The computer storage giant EMC actively elicits stories from its people. Leaders look to them for ideas on how to improve business performance and for thoughts about the company itself. The point is to instill the notion that ideas are welcome from all corners. As just one example, in 2009 the company published The Working Mother Experience—a 250-page coffee-table book written by and for EMCers on the topic of being both a successful EMC employee and a parent. The project, initiated at the front lines, was championed by Frank Hauck, then the executive vice president of global marketing and customer quality. It’s not unusual for a big company like EMC to produce such a book as a vanity project, but this was no corporate communication effort; it was a peer-driven endeavor, led by employees. Several dozen EMCers also write blogs, many on public sites, expressing their unfiltered thoughts about life at the company and sharing their ideas about technology.

Of course, inclusion means that executives cede a fair amount of control over how the company is represented to the world. But the fact is that cultural and technological changes have eroded that control anyway. Whether you like it or not, anybody can tarnish (or polish) your company’s reputation right from her cube, merely by e-mailing an internal document to a reporter, a blogger, or even a group of friends—or by posting her thoughts in an online forum. Thus inclusive leaders are making a virtue out of necessity. Scott Huennekens, the CEO of Volcano Corporation, suggests that a looser approach to communication has made organizational life less stifling and more productive than it used to be. The free flow of information creates a freer spirit. Some companies do try to set some basic expectations. Infosys, for instance, acknowledging its lack of control over employees’ participation in social networks, tells employees that they may disagree but asks them not to be disagreeable.

And quite often, leaders have discovered, a system of self-regulation by employees fills the void left by top-down control. Somebody comes out with an outrageous statement, the community responds, and the overall sentiment swings back to the middle.

Intentionality: Pursuing an Agenda

A personal conversation, if it’s truly rich and rewarding, will be open but not aimless; the participants will have some sense of what they hope to achieve. They might seek to entertain each other, or to persuade each other, or to learn from each other. In the absence of such intent, a conversation will either meander or run into a blind alley. Intent confers order and meaning on even the loosest and most digressive forms of chatter. That principle applies to organizational conversation, too. Over time, the many voices that contribute to the process of communication within a company must converge on a single vision of what that communication is for. To put it another way: The conversation that unfolds within a company should reflect a shared agenda that aligns with the company’s strategic objectives.

Intentionality differs from the other three elements of organizational conversation in one key respect. While intimacy, interactivity, and inclusion all serve to open up the flow of information and ideas within a company, intentionality brings a measure of closure to that process: It enables leaders and employees to derive strategically relevant action from the push and pull of discussion and debate.

Conversational intentionality requires leaders to convey strategic principles not just by asserting them but by explaining them—by generating consent rather than commanding assent. In this new model, leaders speak extensively and explicitly with employees about the vision and the logic that underlie executive decision making. As a result, people at every level gain a big-picture view of where their company stands within its competitive environment. In short, they become conversant in matters of organizational strategy.

One way to help employees understand the company’s governing strategy is to let them have a part in creating it. The leadership team at Infosys has taken to including a broad range of employees in the company’s annual strategy-development process. In late 2009, as Infosys leaders began to build an organizational strategy for the 2011 fiscal year, they invited people from every rank and division of the company to join in. In particular, explains Kris Gopalakrishnan, a cofounder and executive cochairman, they asked employees to submit ideas on “the significant transformational trends that we see affecting our customers.” Using those ideas, strategic planners at Infosys came up with a list of 17 trends, ranging from the growth of emerging markets to the increasing emphasis on environmental sustainability. They then created a series of online forums in which employees could suggest how to match each trend with various customer solutions that the company might offer. Technology and social networks enabled bottom-up participation across the company.

In 2008 Kingfisher plc, the world’s third-largest home improvement retailer, began pursuing a new strategy to transform a group of historically discrete business units into “one team,” in part through intentional organizational conversation. To launch the effort, company leaders held a three-day event in Barcelona for retail executives. On the second day everyone participated in a 90-minute session called Share at the Marketplace, which was intended to emulate a classic Mediterranean or Middle Eastern bazaar. One group of participants, called “suppliers,” donned aprons, and each person stood at one of 22 stalls, ready to give a spiel about a business practice developed by people in his or her part of the Kingfisher organization. Essentially they were purveyors of ideas.

Another group—executive committee members—served as facilitators, ambling through the aisles and providing words of encouragement. The third and largest group acted as buyers, moving from one stall to the next, examining the “merchandise,” and occasionally “purchasing” one of the ideas. Using special checkbooks issued for this purpose, buyers could draft up to five checks each to pay for suppliers’ wares. Such transactions had no force beyond the confines of the session, but they conveyed a strong message to the suppliers: What you’re telling me is impressive. The essence of the marketplace was the peer-to-peer sharing of best practices in an informal, messy, and noisy environment. But the idea was also to treat conversation as a means to an end—to use it to achieve strategic alignment across a diverse group of participants. Conversation goes on in every company, whether you recognize it or not. That has always been the case, but today the conversation has the potential to spread well beyond your walls, and it’s largely out of your control. Smart leaders find ways to use conversation—to manage the flow of information in an honest, open fashion. One-way broadcast messaging is a relic, and slick marketing materials have as little effect on employees as they do on customers. But people will listen to communication that is intimate, interactive, inclusive, and intentional.

A version of this article appeared in the June 2012 issue of Harvard Business Review.