Understanding the crisis at News Corporation
By Christopher J Tipler
It is tempting to interpret the meltdown at News Corporation in terms of governance, values, culture and leadership. These are the lenses that we typically look through to try and understand such breakdowns in the management system, and their implications for us. The truth of the matter, however, lies in framing things differently.
As a major, global listed entity News Corporation and all of its subsidiaries would not have been short of governance processes. There is plenty of material on the company’s web site to indicate that these processes were, and are, ‘state-of-the-art’, at least in terms of box ticking and auditing.
Nor is News short of values. Again, there is plenty of this material in the company’s published reports and on its web site. How about this one (in a letter by Rupert Murdoch posted on the web site and dated May 2011):
“Today, hundreds of millions of people around the world trust us for the best quality and choice in news, sports and entertainment.
This public trust is our Company’s most valuable asset: one earned every day through our scrupulous adherence to the principles of integrity and fair dealing…Each of us has the power to influence the way our Company is viewed, simply through the judgments and decisions we each make in the course of an ordinary day.
It’s an important responsibility and I’m honored to share it with you.”
What then of culture? It is an interesting fact that a business can have all the hallmarks of good governance and a commitment to good values and also have a ‘toxic’ culture. I have consulted to banks and telcos that fit this mould, and I suspect you can think of several examples. If this is the explanation at News, we should ask ‘what is it that enabled a toxic culture to come into being and to thrive?’ Absence of good leadership you say.
You might be right but News had, and has, plenty of intelligent, highly trained and experienced people at the top – the sort of people who make it regularly into the columns of management journals. So, why did these people fail in their duty to create an effective, ethical, culture? One likely explanation lies in the persona and role of Rupert Murdoch. Not only is Murdoch a god-like figure at News, he holds the Olympian mantle of both Chairman and Chief Executive. He is Zeus, and apparently Zeus-like in his pursuit of revenues and profits. In the face of such power, and such strength of will, the demi-gods can easily lose their way; lose sight of the essential balance between making money and making it in an acceptable way.
The separation of the roles of Chairman and CEO is made in most companies precisely because of this risk. A balance of power is needed at the top and is represented most importantly in the dynamic relationship between these two roles. Only then can the Board function as an effective governing body. We can confidently conclude that the failure to observe this principle at News has contributed significantly to the company’s malaise, and its current crisis. News shareholders are also entitled to ask why periodic governance audits did not focus relentlessly on this issue. They should have.
Yet, at this point, we do not have the complete answer. Governance does not provide it; Values do not provide it; Leadership does not provide it, and even board structure does not provide it.
I started by saying that, if we want to understand the crisis at News and its potential implications for us, we must frame the issue differently. The answer lies in framing it in terms of capability. Capability is about what we must excel at if we are to be consistently successful. These things (which I call Arenas) should not number more than eight or ten. Identifying them, exploring what each of them means, and then translating them into actions, is the practical way to ensure that values are lived and good processes are observed. Let me give you an example.
News might have concluded that one of its Arenas was: ‘we must excel at gathering sensational news in ways that are both legal and ethical.’ News would then ask ‘what does it mean to do this?’ and this question might elicit six or eight responses, such as ‘it means creating an on-going internal dialogue about the tension between news-worthiness and ethics’. Then News would be able to define the steps needed to put this dialogue in place and keep it vital.
This is the essential lesson of the News meltdown; that if we want to be consistently successful we must match ambition with capability in a very practical way and not get lost in all the noise about governance, values and leadership.
Christopher Tipler is a Melbourne-based management advisor and author of Corpus RIOS – The how and what of business strategy. His web site corpusrios.com contains more material on this and related topics.