A TRIP We Should All Take

At first glance, money management giant Mellon Bank Corp. (now the Bank of New York Mellon (BK)), the British alternative rock band Radiohead, and my company, LRN, would appear to have little in common. But we've all been on a TRIP. (TRIP is an acronym to articulate how Trust enables Risk, which propels Innovation and ultimately leads to Progress.) Mellon charted a course to right itself in the wake of the 1987 stock market crash; Radiohead ushered in a new revenue model in a time of declining record sales; and my own organization is on a transformational journey that involves a substantial restructuring of our business.

After a humble start in 1869 in Pittsburgh, Mellon Bank became a powerful and prosperous industry leader in wealth management for millions of investors. But by 1987, it was facing its first loss in nearly 120 years. The bank's stock price slipped, and Frank Cahouet was brought in as the new CEO.

Cahouet knew he had to make big changes quickly to save the ailing bank. His strategy was clear enough: publicly create a "bad" subsidiary bank to take on and sell Mellon's "toxic" assets, allowing the rest of the institution to rebuild and move forward. But it was his approach that really paid dividends: He relied on trust—in the form of an insistence on complete transparency—to help the bank truly rebound.

A Push for Transparency

Cahouet made sure that no one was kept in the dark about the restructuring. The management team held extensive meetings with staff to explain exactly what it was doing and why, every step of the way. And Cahouet gave his word to employees who transferred to the new bank that they would have jobs with Mellon after the assets were liquidated.

The push for transparency extended to all employees and spread throughout the organization, according to the bank's former general counsel, Michael Bleier, now a partner in the law firm of Reed Smith. "[Cahouet] even told me once that if I ever saw him doing something wrong… to take it to the board of directors," Bleier recalls.

Several years ago, the popular band Radiohead self-released its seventh studio album, In Rainbows, online, breaking with the traditional practice of releasing its music on CD and through a major record label. In an even bolder move, Radiohead let its fans decide how much to pay for a digital copy of the album.

A Difficult Decision

Some people heralded the move as a publicity stunt. However, in the end, it was Radiohead who had the last laugh, witnessing the transformational power of trust. According to recent media reports, Radiohead has generated more revenue from this one album than it has from all of its previous albums.

TRIP is also a journey that my own company, LRN, has been on. The decision to write about a particular aspect of this TRIP has not been an easy one. In fact, in spite of regularly writing about the need to transform from 20th century modes of leadership—from command-and-control, divide-and-conquer, "my way or the highway" to modes that are more relevant and effective in a more transparent and connected world—I paused at the thought of sharing intimate details about the goings-on at my own company. Perhaps it is a founder's instinct to keep things "within the family." After all, I am the CEO of a private company with no requirements to disclose information.

However, I hope that by sharing this story and by openly talking about how we are seeking to extend trust as a strategy, others might find the strength to do the same. Together, we can use trust as the engine to get our economy back on track.

Realigning Resources

Today, LRN is in the midst of a restructuring, and we are putting our faith in TRIP like never before. Unlike the Mellon example, our restructuring is not a result of an economic hardship or deviation in our business strategy or principles. In fact, we are in an enviable position: LRN pioneered the field of online ethics and compliance education and has since educated tens of millions of employees around the world on how to "do the right thing," and we continue to help leaders inspire principled performance in business.

However, we have been asking ourselves an important question: Companies have been educating their employees and leaders on ethics and compliance for the past 20 years, but have we gotten more compliance and ethics? I think it is fair to say, and that our client partners would agree, that the answer is, not always. Like Radiohead, we believe we need to change the game. We need to help companies move beyond motivating performance out of people to inspiring principled performance in people.

And so, after extensive analysis and reflection, last month we made the difficult decision—and we believe the right one—to realign resources within our organization to better help the companies we work with achieve these goals. A major aspect of the restructuring involves the involuntary departure of a large number of our valued colleagues from our global workforce of more than 400 people (an even larger number of new colleagues in other areas are being brought in.)

Treating Colleagues with Respect

Too often, companies bring the level of sensitivity to a layoff they would bring to pulling off a Band-Aid: Do it, get it done quickly, try to forget the pain, and move on. We know in the real-world it doesn't work that way.

For us, it hasn't been about getting it done, but rather how we are going about it. We are guided by our values as expressed by a set of principles: ensuring generosity, empathy, dignity, and transparency and treating our colleagues, whether they are leaving or staying with us, with the respect they deserve.

We are trying to engage in a real and meaningful dialogue with colleagues, regardless of their future with the organization. We are talking often and openly and trying to thoughtfully explain our decisions and actions. Departing colleagues are not being asked to pack a box or being escorted out. Instead, they are leaving after thoughtful intervals, and with utmost respect and gratitude for their service to the company. They are also receiving enhanced severance and benefits packages regardless of tenure and without a traditional, legal severance agreement.

Staying in Touch

I have reached out personally to each departing colleague in hopes of offering assistance, and will continue to stay in touch with each of them to offer perspective, give references, and provide job-seeking assistance. We are doing others things to stay connected, like building an online alumni community for those colleagues who want to stay in touch.

As for those people who are staying, we are holding weekly calls with the entire staff and town hall meetings to discuss and detail our path forward. It is important that we move forward with people who are truly enlisted in that path. In this regard, we are encouraging any of our colleagues who are not aligned with us to step forward, allowing them to transition by mutual agreement and with the promise of being treated with the utmost respect and even offering two months of additional salary.

Our TRIP has only just begun. We know we haven't yet gotten it exactly right or that our job is complete. There are people who have their misgivings and people who may feel that we could do more. Many of our departing colleagues are still with us and their engagement and the engagement of those who remain is critical to our success. We recently asked our employees—both those who are staying and those who are departing—for their feedback on our decision and in how we went about communicating it. An internal survey has indicated that 85% of all employees understand the rationale for our restructuring and 83% agree we have been handling the restructuring in the spirit of our values.

Promise to Share Milestones

I'm telling you this because I believe, in many ways, the conditions sparked by the economic crisis provide a valuable opportunity for companies to adapt to the dynamics of 21st century business by going on a TRIP. A key to using the TRIP formula to your advantage is to understand that trust, at its very essence, involves risk but also enables risk taking. We know that, in business and in life, risk is proportional to return. That is, the more risk we take, the more we can accomplish. In a trust-filled environment, we are able to act more boldly; we experiment more and we feel more confident that even if we fail, we will learn something valuable.

All great innovations involve someone taking a risk—be it their capital, energy and, most important, failure. We cannot innovate without believing we can succeed. And we can't do so without having the confidence that others will be there to help us and that we will not be punished if we fail. And what happens if you innovate? You create Progress, the last letter in TRIP. We work each day for the satisfaction of achieving great things, helping the team, and making other people's lives better. In this way, progress is closely related to the pursuit of significance, which I've written about before. We go on a TRIP because we want to accomplish great things, to solve real problems and to create lasting value.

I look forward to periodically sharing the milestones on our TRIP, and it is my hope by doing so, it might inspire others to do the same.

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