Analysis on The CEO’s Private Investigation, a Harvard Business Review Case Study.
A Harvard Business Review case study titled The CEO’s Private Investigation presented a dilemma, in which Cheryl, the incoming CEO of an aeronautical firm is faced with the real possibility that the late CEO had engaged in high level corruption to secure orders for the firm’s planes. The problem is two-fold, in that if an investigation was started, shareholders may take flight while investigators may swarm around the company like sharks. Also, an existing member of the senior management team is openly hostile to Cheryl and any noise of investigation may end up destroying her.
On the other side of the fence, a lack of investigation could be a time-bomb waiting to blow, and with the Sarbanes-Oxley Act, Cheryl needs to certify financial statements as being accurate and true. If there was corruption in the past, Cheryl may be forced to take responsibility for letting such an issue slip through her fingers.
The case invited people to submit their comments for publication on the website, asking whether Cheryl should start an internal investigation. My comments are posted below.
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Case Study Anaysis
Cheryl would first need to weigh the risks of investigating her firm. She needs to realize that, as a newcomer, she has little political capital. There is already resistance to a probe and that such resistance is only compounded when carried out by an outsider.
In order to mitigate the risks, she needs to first understand why she has been brought in by the board, as opposed to bringing in Hank Bodine. If Cheryl had heard about rumours of corruption even while she was at Boeing, was it possible that the board knew more than they directly admitted? She needs to discover whether or not that the board intended her to also investigate these rumours, and see whether she has their support whether or not corruption is uncovered. From here, she is able to start building her mandate for investigation.
Cheryl has unfortunately, shot herself in the foot by speaking with Bodine about her intentions. He is obviously hostile towards her entry into the company, and is well positioned to resist a probe and spread rumours down the grape vine.
If the investigation cannot be kept discreet, then she would be in a better position to counter and dispel rumours by promoting open communication throughout the organization on the issue. Of course, the risk of ending up on the front page of the Wall Street Journal is always present, but like the 1982 Tylenol cyanide case, the company can also cooperate fully with all parties and generate good will and consumer confidence. It all depends on how they manage the crisis.
If it must be kept discreet, then she also will run the risk of water cooler talk spreading. However, this approach may also be beneficial as rumours are unsubstantiated, and can be brushed off as simply untrue. Or, act as if it does not even dignify a response.
Her next move in contacting a familiar law-firm to seek advice, and perhaps run a probe is a good next step, especially given their familiarity of such investigations.
As to whether an investigation would be best for the company, there are several ways to look at it. If corruption has been going on within the firm, it is only a matter of time until it is uncovered given that rumours have been swirling about, even outside the organization. Since the company is under Cheryl’s watch, she is responsible for what goes on regardless of whether it started during or before her tenure. For example, she understands that she could be held legally liable if she signs financial statements she had suspicions about. For her personally, and for the long-term viability of the company, it would be good to hold an investigation.
She will need a carefully thought-out exit plan if she decides to press ahead. She needs to consider both cases in which corruption is discovered, and where no evidence is uncovered, and how to respond appropriately. It is quite possible, given the macho culture that is readily displayed in her predecessor’s office, that her head will be on the line if there is no corruption, which is why it is so important to understand how far the board will support her. Likewise, if it is discovered, then there will need to be a set of rapid response plans to prevent it from happening again, and to minimize the damage done.