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Answer & Explanation:This CEO Used to Have an Office.docx
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This CEO Used to Have an Office
Bob Flexon, chief executive of Dynegy Inc., occupies a 64-square-foot cubicle, identical to the
ones used by the 235 colleagues who surround him at its Houston headquarters. Hourly
employees sometimes stop by his desk to chat. It’s a long way from the expansive office suite,
$15,000 marble desk and Oriental rugs that Mr. Flexon inherited when he arrived at Dynegy in
July 2011, four months before the power producer filed for bankruptcy. Under his command,
Dynegy shifted its headquarters last May to a single, open floor in a different building. The
move, which saved $5 million a year, is the most visible symbol of Mr. Flexon’s attempts to
overhaul the company’s culture. He aims to transform a business previously focused on day-today survival into an agile operator poised for growth. Among other changes, he made frequent
visits to the company’s power plants, banned employees from checking email and phones
during meetings and restored annual performance reviews. “The idea was to instill a winning
spirit,” Mr. Flexon says. Though Dynegy emerged from bankruptcy last October, its cultural
restructuring remains a work in progress. Increasingly, leaders of troubled businesses try to fix
the company’s culture along with its bottom line. Since the financial crisis struck in 2008, CEOs
have sought to improve collaboration and decision making, recognizing that a strong culture is
“a critical component of their long-term success,” says Nick Neuhausel, a partner at consulting
firm Senn Delaney, which advised Dynegy. “The right culture change can—without question—
improve results,” says John Kotter, co-author of the book “Corporate Culture and Performance”
and head of research at consulting firm Kotter International. But putting a sick business on a
healthier strategic path while changing its culture “is much more difficult than most executives
realize,” he cautions. At British bank Barclays PLC, whose misconduct has cost it billions of
pounds, CEO Antony Jenkins recently said he was “shred-ding” a self-serving and aggressive
culture—by abolishing commissions on financial-product sales, among other things. He said,
however, that results would take time. The bank’s top management team disintegrated last
summer after it admitted trying to rig interest rates. One of the highest-profile attempts at
cultural renewal is under way at Internet company Yahoo Inc., where new CEO Marissa Mayer
has upgraded workers’ mobile devices, introduced free food at company cafeterias and
abolished work-from-home arrangements. Chief executives don’t always succeed in reshaping
corporate culture. Randy Michaels ran Tribune Co. for less than a year during the media
company’s bankruptcy. Under his leadership, executives shook up Tribune in ways that often
clashed with its traditionally staid management. Mr. Michaels quit in October 2010. A
spokeswoman for Mr. Michaels quit in October 2010. A spokeswoman for Mr. Michaels said
Tuesday that he was unavailable for comment. Mr. Flexon joined the debt-burdened Dynegy
after investors rejected two buyout offers, prompting senior officers and the board to jump
ship. Demoralized employees wondered “what will go wrong next,” says Julius Cox, vice
president of human resources. “It was hard for staffers to focus and be engaged.” Many bosses
were equally downbeat. In a May survey by Senn Delaney, Dynegy executives and middle
managers scored low on questions such as whether they felt valued, proud to work there or
committed to the company’s future. In June, the company’s 37 highest-ranking executives
participated in a two-day offsite meeting led by Senn Delaney, which included trust-building
exercises. In one drill, a pair of managers spent one minute expressing appreciation for each
other’s work, then spent the next giving constructive criticism. More than a few executives
rolled their eyes. Some appeared “skeptical about this cultural change ‘mumbo jumbo,’” says
Kevin Howell, then chief operating officer, who remains a Dynegy adviser. Others initially
resisted swap-ping their private offices for cubicles. Management soon drafted a new purpose
statement (“Energizing You, Powering our Communities”) and put more emphasis on certain
core values, such as safety, accountability and agility. Dynegy estimates it will have spent
$425,000 by year-end to train 300 managers in culture change. Mr. Flexon unveiled the cultural
drill, a pair of managers spent one minute expressing appreciation for each other’s work, then
spent the next giving constructive criticism. More than a few executives rolled their eyes. Some
appeared “skeptical about this cultural change ‘mumbo jumbo,’” says Kevin Howell, then chief
operating officer, who remains a Dynegy adviser. Others initially resisted swap-ping their
private offices for cubicles. Management soon drafted a new purpose statement (“Energizing
You, Powering our Communities”) and put more emphasis on certain core values, such as
safety, accountability and agility. Dynegy estimates it will have spent $425,000 by year-end to
train 300 managers in culture change. Mr. Flexon unveiled the cultural overhaul two days after
the company emerged from bankruptcy court. The CEO and management-team members
visited the company’s 11 plants to discuss the changes with rank-and-file workers. Then,
executives tried to carry out their pledges. Employees got performance reviews for the first
time in two years, with bosses judging their subordinates in part on whether they embraced the
core values. Jesse Strausser, an operations technician at a power plant near Reading, Pa., says
the company now evaluates him partly on his involvement in devising company-wide costsaving measures. Meanwhile, 15 specially trained “culture champions” are attempting to
reinforce the message. At meetings, one such champion, Chief Administrative Officer Carolyn J.
Burke, says she sometimes chastens a colleague for tapping on his BlackBerry by declaring,
“Hey Joe, be here now.” Mr. Flexon has mounted a “Be Here Now” plaque underneath his
monitor as a reminder to avoid checking email during calls. Several hourly workers say the top
brass heeds their suggestions faster than previous management did. “What I have to say
counts,” says Mike Kelley, a site safety coordinator for a Dynegy power plant in Minooka, Ill.
During a plant-safety conference last year, Mr. Kelley persuaded Mr. Flexon that the facility
badly needed an intercom. The intercom is being installed. Morale is up, Mr. Kelley says, adding
that plant workers “know that safety is taken seriously.” Employee turnover also has dropped—
to 5.8% last year from nearly 8% in 2011, according to Mr. Cox, the human-resources executive.
“People are cautiously starting to believe that we can win again,” Mr. Flexon says. Culture
changes aside, Dynegy isn’t out of danger. It is scheduled to report year-end earnings Thurs-day
after racking up losses of $1.19 billion for the first nine months of 2012, compared with a year-
earlier loss of $324 million. Dynegy investors count on senior management to deliver results,
Mr. Flexon says. But “our ongoing focus on culture is what will make the difference,” he adds.
Questions
1. How would you describe Bob Flexon’s personal leadership style?
2. What sources of power does Flexon possess?
3. What leader behaviors does he appear to engage in?
4. In what ways is Flexon engaging in transformational leadership at Dynegy? Be specific.
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