The situation (1997 to 2003)
Joe Corvin ran Oregon Steel Mills, as President and Chief Operating Officer from December 1996 and as President and Chief Executive Officer from January 2000. More than $1 billion in revenue, four operations across the United States and Canada, a public company with a board of directors and everything that comes with one.
A chief executive in that seat has no shortage of advice. He has a leadership team, a board, bankers, lawyers, and whichever consulting firm is currently in the building. What he does not have, and cannot appoint, is one person who knows his operations at the floor level, holds no position inside the company, and will tell him what is actually true before he stands up in front of his directors.
That is the gap. Corvin filled it the same way, with the same person, for years.
What we did
- Started from inside, then stepped out. In Corvin's own words, Andrew worked for the company "originally as a member of my management team and then as an outside advisor for me and other OSM executives." The advisory relationship did not begin with an outsider learning a billion-dollar steel company on the chief executive's time. It began with someone who had already run its operations and then had no stake left to protect in them.
- Traveled with him. Corvin records many cross-country trips. In a multi-site company those hours are where a chief executive actually thinks, and who is in the seat next to him determines what he thinks about.
- Sat in board presentation planning sessions, and in the board meetings themselves. Helping a chief executive decide what his directors need to hear, how the operating reality should be presented, and where the case is weakest, and then being in the room when it is made.
- Designed corporate management programs at his request.
- Worked the whole surface. Corvin describes sophisticated issues across financial, cultural, technological and commercial arenas rather than one functional lane.
The mechanism
Why it worked
Everything here rests on one property, and it is the property a chief executive cannot manufacture inside his own company.
Every person a chief executive talks to internally has an interest. The operations leader has a budget to defend. The finance leader has a forecast to protect. The plant manager has a number he committed to in March. None of them is lying. Each is describing the business as it looks from where he sits and from what he is accountable for, and the chief executive has to reconstruct reality out of a set of partial, interested accounts.
That reconstruction is the actual job, it is exhausting, and it is where chief executives get surprised.
Someone who has run those operations and now holds no position in them can walk the floor, read the same numbers, and say the thing nobody inside the building will say out loud. Not because he is braver. Because he has nothing riding on the answer.
The board half compounds it. A chief executive going in front of his directors is making a case, and a case assembled only from what his organization told him is a case assembled from interested accounts. Building it with someone who knows the operations independently is a different exercise: the weak part gets found in the planning session rather than by a director in the meeting.
A chief executive only has to be surprised in a board meeting once to understand what that is worth.
How the relationship was earned
It started with a decision that could have gone the other way. Profitability had fallen. A capital replacement of an entire mill, $225 million, the original investment in the Pueblo site after its acquisition, was under consideration. The new mill would be orders of magnitude more advanced than the equipment it replaced and would have to make products the company did not currently sell in order to pay for itself. The pressure was to re-engineer the company first, using one of the big three consulting firms, for $3 million.
The proposal was refused. What was done instead was narrower and harder: an analysis of whether the company could actually operate and maintain the new technology, which nobody had asked, because the mill was being justified on what it could produce rather than on whether the organization buying it could run it. Then the training program built against the gap that analysis found, the business processes reworked against products the company had never sold, and direct commissioning and start-up management through the project itself.
The first product produced by the mill was of market quality and was sold through the redesigned business processes. The project was profitable within six months of start-up.
That was the mid-1990s, and it was done from inside the company rather than from outside it. Corvin's letter is explicit about the sequence: management team first, outside advisor afterwards. The work above is what a chief executive does with someone once that person has no position left to protect.
Three million dollars was 1.3 percent of that capital decision, so refusing it was never about cost. A re-engineering engagement answers the question "how should this company work." The question actually in front of them was narrower and far more expensive to get wrong: can this organization run the thing it is about to buy, and can it sell what comes off the end of it. A firm that sells re-engineering answers the question it sells. An operator asks what the capital is about to demand of the organization, and then goes and looks.
That is what a chief executive remembers, and it is why the relationship above lasted as long as it did.
The result
The result is the relationship, and the letter its chief executive wrote.
“His most unique qualification is his ability to understand complex issues at a strategic level and then ensure a practical, efficient plan is developed and executed to achieve the desired goals.”
“He tends to be very objective, is willing to accept absolute accountability and is tenacious in his pursuit of the truth and success.”
“I am confident that you will gain a valuable contributor by placing Andrew on your board.”
What they owned afterward
A chief executive who buys a $3 million re-engineering program owns a binder and a set of recommendations that expire the day the market moves. This one owned a mill that started up profitably, a company that went on to record results, and a relationship he kept using for years and then put in writing as a board recommendation.
That last sentence is the one worth weighing. There is no shortage of advisors who can produce a reference from a client. There are very few a chief executive would put on his board.
Andrew never took the seat. He spent several years advising this board instead, which is the same work without the vote, and for most companies it is the better arrangement.
A director carries a fiduciary duty to the company and a share of every decision. An advisor to the board carries neither, and is therefore free to say what a decision is actually resting on.
Chief executives operating under board pressure tend to learn that difference the hard way, usually about a quarter too late.