Leadership – leading their organizations through a crisis

At some point in their careers, most CEOs will lead their organizations through a crisis a downsizing, for instance, or a merger, or an industry wide upheaval wrought by new technology. But few CEOs will face crises disruptive and dramatic as those encountered and overcome by Franco Bernabe. In his six year tenure as CEO of Eni, Italy’s large, energy focused industrial group, Bernabe has transformed the organization from a debt ridden government owned and politically controlled entity into a competitive and profitable publicly traded corporation focused on energy production. He sold off 200 companies, dismissed hundreds of managers, and installed radically new business systems and procedures.

Such changes are not a typical of turn arounds. But at Eni, they occurred under the most daunting circumstances. Several months after Bernabe took power much of Eni’s senior management team was arrested and jailed on corruption charges, and the company’s former chairman committed suicide in prison. During the investigations, one of Eni’s former managers made the claim that even Bernabe himself had taken a huge bribe. The charge turned out to be based on nothing more than a rumor, but it added to the strain on Bernabe as he worked to revive the company. Simply put, Bernabe’s story is not just that of a CEO steering a massive strategic reinvention. It is also one of personal survival of embracing risk, accepting solitude and providing strategic and moral direction where little existed. It is a story of leadership and an unlikely one at that.

When a new government swept into power in Italy in 1992 and appointed Franco Bernabe CEO of Eni, many were shocked. Until then, his nine year career with the company had been behind the scenes, where he worked as a planner and financial controller. From those positions, Bernabe had developed strategic plans for Eni that were not particularly popular with the company’s senior management. In fact, his tireless advocacy for change had prompted the board of directors to demote him once and call for his ouster twice. Yet Bernabe was undeterred, and when he was designated CEO, he made change his top priority. Eni, he announced, would be transformed in short order from a political quagmire into a clean market driven business ready for its first public stock offering.

Resistance was quick and intense. Bernabe was regularly excoriated in the media as a traitor or fool who was destined to bring down Eni, with its 135,000 employees and 335 consolidated companies operating in 84 countries. Opponents argued that Eni should not be run like any other company – its mission was national; to ensure Italy’s access to energy and to provide jobs. Further, many believed Eni was so thoroughly entrenched in politics that any attempt to change the system was a waste of time. The government had always appointed many of Eni’s managers and directed many of Eni’s managers and directed its strategy, they said, and it always would.

Bernabe believed otherwise. Although he was ostensibly part of a three man senior leadership team, he sent a directive to the entire company two days after his appointment. Everyone he announced would now report to him. While the shock waves were still reverberating, he started replacing hundreds of managers with men and women from lower levels within the company. The new managers not only possessed the technical expertise to move Eni into the future according to Bernabe, they also shared his vision of Eni’s becoming a typical commercial enterprise that would be responsive to market needs and share holder demands. The removal of so many managers was unheard of in a government owned entity, but the move was even more extraordinary in light of this fact; it was the first time in 30 years that Eni’s headquarters had involved itself in the business of the operating units.

Bernabe jumped in with both feet. He directed all operating company managers to revise their strategic plans to meet Eni’s restructuring, value-creation and the performance objectives. Bernabe’s deep interest in a disciplined approach to planning met with disbelief and resistance. While beginning to overhaul the company’s strategy Bernabe initiated a campaign to rid Eni of its non-core businesses. Among them was one of the company’s few profitable businesses. Nuovo Pignone, a gas turbine and compressor company, which was eventually sold to General Electric. Again, this was a move that shook Eni, besides its financial health, Nuovo Pignone was well known for its powerful unions. But to the astonishment of many, Bernabe’s team negotiated a settlement with the unions. —

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