Executive attitudes toward creating a sound management system regularly surprise me. Those who recognize its value preach this systems perspective with the fervor of true believers. Those who don’t buy into it bide their time until the boss leaves and they can return to what they know is best. The trouble is, what they know is best is rarely as good as the systems approach they abandon.

Motorola, IBM, and AT&T dominated in the late 1980s and early 1990s when their leaders conducted regular, formal assessments of their management systems. As that process waned, so did their fortunes. AT&T formed its Universal Card Services division in 1990 with a management system based on the Baldrige model. In its first 30 months of existence it rocketed to second largest in the U.S. credit card industry, winning the Baldrige Award in 1992.

Thirty months after that it floundered, hobbled by new leadership that deserted the systems approach in favor of “better ideas.” Thirty months after that, in October 1997, AT&T sold the sputtering unit to Citigroup, by which time it had dropped to eighth in the industry.

The tragedy of such stories is not that new leaders bring new agendas. As the ones ultimately accountable for their companies’ success, they must do what they believe will bring that success. The tragedy is that they do not understand that their agendas are more likely to succeed within a sound management system.

To read more about visionary leadership, click on these articles:

• A Leader’s Job
• Seeking Authentic Leaders
• Shrink the Change
• Making Change Happen
• CEOs Look Ahead

This is an early question in the Baldrige Criteria because an organization’s culture determines how it will act. If you have a culture of continuous improvement, you will act daily to improve performance. If you have a culture of quality, you will set quality goals and measure quality performance in all you do. If you have a culture of safety, you will design and refine processes that ensure safety.

A recent article on BP drives this message home. In “BP Pays Lip Service to Culture of Safety,” the International Herald Tribune chronicles a culture that claims to support safety but clearly does not. (Article behind firewall)

According to the article, BP was fined $21 million for numerous violations at its Texas City refinery after an explosion killed 15 workers and injured hundreds more. That happened five years ago. Four years ago, a corroded pipeline in Prudhoe Bay, Alaska, caused BP to shut down oil operations after spilling more than one million liters of oil on Alaska’s North Slope. In the last three years, BP has been cited for 760 “egregious and willful” violations in its refineries by OSHA, according to the Center for Public Integrity.

With that history, the Deepwater Horizon rig disaster is completely understandable. It fits BP’s culture. Based on results, safety is not a priority at BP. It’s not part of BP’s culture. Unless that culture changes, more environmental disasters will litter BP’s future.

With effective leadership, the culture can be changed. The article provides an example. Prior to the current Gulf travesty, the worst oil spill in memory was the Exxon Valdez spill in 1989, which leaked 10.8 million gallons of crude oil into Prince William Sound in Alaska. (The Deepwater Horizon does that much in four days.) Exxon Mobil has not had a serious accident since 1989 because it dramatically changed its culture following the accident. “By every measure,” the article concludes, “Exxon Mobil has by far the best safety record in the industry.”

So it can be done. Not by talking about it and not by making promises, but by designing and implementing processes that put safety first, measuring performance, improving those processes, and holding people accountable for achieving the highest standards.

That is true for every organization: Your culture dictates how you will behave. If your culture says that profit is more important than customer or employee satisfaction, then you will have dissatisfied customers and employees. If your culture says that profit is more important than safety, you will suffer the impact of unsafe operations.

Just look at BP.

To read more about organizational culture, click on these articles:

• BP and Oil Company Irresponsibility
• Seeking Authentic Leaders
• Sustainability: A Business Imperative
• Management’s Five Deadly Diseases
• Why Organizations Fail

Those are incredible statistics and they’ve been written about and talked about for years now but nothing is being done about it. It’s like watching that oil spewing into the Gulf of Mexico and everybody knows it’s bad and it matters to oil people because it looks bad, but eventually we turn our attention to other things and it’s back to business as usual. Nothing will be done about the cause of the oil spill or the causes of excessive executive compensation because the people who control those things stand to gain the most from the status quo. If I was making 400 times the average worker, I’d shut the hell up, too.

Ashkenas also quotes a recent study by compensation expert Graef Crystal, reported in Bloomberg Businessweek, that “there is no relationship whatsoever between CEO compensation and shareholder returns.” OK then, how about a relationship between CEO compensation and shareholder value? Steeerike Two! The creation of shareholder value may not show up for a decade or more but CEOs only stay with their companies an average of seven years. Well, maybe the real reason for these ridiculous amounts is to keep pace with all the other ridiculous amounts being paid to other CEOs? Touch ‘em all, David Calhoun! (It’s baseball season and the Twins are playing well. What can I say?) As Ashkenas writes, “Board-level compensation committees (usually including current or former CEOs from other companies) get input from executive compensation consultants (who survey the pay of other senior executives) and make determinations about what kind of pay package will be required to entice the candidate to sign on.”

My only issue with Ashkenas is his business-talk, wimp-out conclusion that the credibility of a company’s leadership may be compromised if compensation doesn’t correlate with results and that it might be time to rethink some of the assumptions behind senior executive pay.

The only ones who don’t know leadership has been compromised are the leaders. It’s way past time to rethink executive pay. And I’d like to know which assumptions are still valid.

To read more about immoral and excessive executive compensation and what it does to the employees who have to carry these boneheads (okay, that might be a bit strong), click on these articles:

• Seeking Authentic Leaders
• Layoffs and the Failure of Leadership
• Why Organizations Fail

Question: How do you ensure that your chief executive officer is compensated well enough to make your organization world-class?

Answer: We lured him away from GE by paying him $78 million dollars. Best of all, he’s under contract with us through 2011!

I guess being declared the headhunters’ number one draft pick in executive talent by Fortune is even better than being declared pro football’s top pick by Mel Kiper. (“Nielsen’s $78 Million CEO,” Geoff Colvin, Fortune, June 14, 2010)

While Fortune was all giddy about the fortune David Calhoun claimed from Nielsen, the TV ratings company, it spent an entire column questioning the move. Shut! Up! Calhoun had a pretty good gig at GE and he was getting offers from other, bigger companies, but he chose Nielsen. This was in 2006. According to the article, the fair market value of Nielsen’s stock at that time was $10 a share. That’s important because Calhoun was given six million stock options at that price.

What did Nielsen get for its $78 million? By the end of 2009, almost three years after Calhoun took over as CEO, Nielsen figured its shares were worth $11.50. Really? Revenues for 2008 were $4,806 million but Calhoun was able to bump that up to—wait for it—$4,808 million in 2009.

It looks like Nielsen got the short end of this deal.

I’ve railed about excessive executive compensation in other posts because it demonstrates an attitude that leaders are inordinately responsible for their organizations’ success. A leader loses credibility when he tells the common folk how important they are while he’s making a thousand times more than they are. The only one who believes that is true is the leader—and maybe the people who hired him and Fortune magazine. It’s a ridiculous situation.

So the next time your ridiculously overpaid CEO tells you how important your work is, think but don’t say: Shut! Up!

To read more about these “special” people, click on these articles:

• Seeking Authentic Leaders
• Layoffs and the Failure of Leadership
• Why Organizations Fail

Next, we find out that BP has a history of environmental and safety violations and fines. It paid the two largest fines is OSHA history: $87.4 million and $21.3 million. Last month it paid another fine of $3 million for 42 safety violations at a plant in Ohio—four years after paying $2.4 million in fines for the same refinery. In 2007, BP agreed to pay a $50 million fine and plead guilty to a felony violation of the Clean Air Act. The same year, FERC ordered BP to pay a $7 million civil penalty for engaging in anti-competitive practices. For a much longer list of BP recent history of corporate irresponsibility, click here.

The ongoing devastation in the Gulf could have been prevented. Environmental and safety violations can be prevented. Not preventing them is a decision made within a morally corrupt culture that will spare nothing to increase profits.

Last Sunday, McClatchy’s Tom Knudson wrote about how the travesty in the Gulf is a small but visible example of the worldwide damage oil companies are causing:

• At least 200 square miles of ruined habitat in Alberta

• More than 18 billion gallons of toxic wastewater in the rainforests of Ecuador

• More than 2,000 polluted sites in Nigeria

Americans are painfully aware of the oil spill in the Gulf. Nigeria has more than 2,000 official oil spill sites.

It’s time to hold oil companies accountable for their responsibility to the health and well-being of all people. Exxon, Shell, and now, BP, lead the list of oil companies I will not buy from. I realize that all oil companies are complicit in making the environment worse so I have to prioritize, and these seem to be the worst of the worse.

Who makes your list?

The CEOs identified the most important leadership qualities over the next five years as creativity (60%), integrity (52%), and global thinking (35%). American CEOs ranked integrity higher than CEOs in other parts of the world by 65% compared to 29-48%. Nearly double the number of CEOs in China listed global thinking as a top leadership quality compared to European and North American CEOs.

Here at Baldrige.com we have talked quite a bit about the need to get closer to your customers and approaches for doing so. In “Stakeholder Mapping” we looked at a new approach to identifying stakeholders and their requirements and organizing the information for planning and action. In “Be Careful How You Measure Customer Satisfaction,” we exposed some of the weaknesses of traditional measures and offered new alternatives. In “Walk in Your Customer’s Body Armor” we focused on how USAA excels at understanding and meetings its customers’ requirements. And in “9 Ways to Get Closer to Customers,” we listed nine proven approaches for listening to the Voice of the Customer.

People skills can be taught through leadership development programs, which is another area of focus in the Baldrige Criteria. Insight into how your organizations works and what needs to be improved can be gained by conducting Baldrige assessments.

When it comes to intelligence, you’re on your own.

To get a copy of the 2010 IBM CEO Study, watch video discussions of the study’s finding, or participate in a global dialogue, check out the IBM 2010 CEO Study Webcast here.

Aligning. The highest-performing Baldrige organizations excel and alignment and integration. They have found that their missions and visions can only be achieved if everyone is moving toward them. Baldrige Award winners typically use their strategic plans to define this direction and the deployment of those plans and of balanced scorecards to make sure everyone is working on what is most important to the organization.

Empowering. Things are moving too fast to wait for marching orders from your supervisor, who must wait for her manager, who must wait for his director, who must wait for her vice president, who must wait for the president. Baldrige Award winners empower their people to make decisions by training, directing, and recognizing them and by holding them accountable.

Collaborating. We can’t do it alone, and that’s true of individuals or departments or business units or entire organizations. Baldrige Award winners blur the lines between themselves and their customers, suppliers, competitors, and communities, focusing on cooperation and the common good.

As Bill George concludes, “Top-down leaders may achieve near-term results, but only authentic leaders can galvanize the entire organization to sustain long-term performance. We need them to rebuild the trust that has been lost in capitalism.”

To read more about authentic leadership, click on these articles:

• Shrink the Change
• Management’s Five Deadly Diseases
• Making Change Happen
• Co-Creating a Shared Vision
• Why Organizations Fail
• The Best-Performing CEOs in the World