Franco Bernabe, Newly Appointed CEO

¶ … Franco Bernabe, newly appointed CEO of Eni in Italy, find himself in the midst of a scandal, and what did he do to extract himself from the mess? What was the problem, how could this crisis have been avoided, and what is the plan for a fresh start?

Bernabe discovered, quite early in his capacity as CEO of Eni -- Italy's largest industrial group that is energy-related -- that his immediate goal of getting the company out of "the political quagmire" and into a respected, market-driven business was to be thwarted. What were the most serious problems that Bernabe faced? How did he manage to move the company forward given that many of his senior managers were arrested and tossed in prison on charges of corruption -- and he was himself implicated, though falsely, of taking a bribe? These questions cry out for answers, given that Eni was a sprawling conglomerate of 335 consolidated companies operating in 84 different countries.

When Bernabe was appointed CEO in 1992, he had been a financial controller and planner, and he had irked top management with his "tireless advocacy for change" (Hill, et al., 1998, p. 172). Not only that, the media in Italy painted Bernabe as a "traitor or fool who was destined to bring down Eni" -- and Bernabe gave the press more fodder for their attacks by replacing "hundreds of managers" (presumably political appointees) with women and men from lower levels of the huge company (Hill,174). The talent that was brought up to replace existing managers had far more technical expertise than their predecessors, and Bernabe went about restructuring the company in the face of criticism and disbelief.

Bernabe had the vision to see the scandal -- which was a huge blow and a public relations disaster -- as an "opportunity to re-create a more transparent, productive, and competing company" (Hill, 176). Bernabe was shocked at his own naivete when the top 20 executives in the company were arrested. He had suspected foul play, but didn't know anything for sure; "I was like a parent who did not realize his child was taking drugs… 'How could I not have realized?'" (Hill, 175).

Once he came to fully realize what a disaster he was being asked to clean up (the title of the purge of the corrupt executives was "Clean Hands") he rolled up his sleeves and went to work to straighten out a colossal corporate nightmare.

The new CEO's offense came first from within. Bernabe says he has an "inner compass" that directs and guides him in his ethics. He says the inner compass is pointed "toward humanity and justice" (Hill, 177). It is important to bring that inner compass into the light in order to fully understand what motivates Bernabe to tackle such an enormously important issue for Italy. Yes, he was highly intelligent, but more than that he had a background in humanitarian activities.

He worked as a volunteer at an old folks' facility, where he witnessed terrible suffering and loneliness among the patients. He also saw injustice, and it made a big impression on him, a man who later at Eni witnessed hard-working honest employees having their "professional pride stolen by a corrupt minority" (Hill, 178).

In his interview with the Harvard Business Review, Bernabe said that he recognized the Eni was more than a big corporate entity, that in fact the people of Italy felt an ownership toward Eni. But the problem was "Everyone wanted a say, everyone had connections…people spent most of their time interpreting the missives of politicians"; and moreover, the politicians would issue directives (documents) many inches thick that employees scarcely understood. "We had no unique position in the world market" nor did Eni have any "unified strategy" -- hence, that had to change, and Bernabe was the man to do it. When he was ambushed with false accusations, "It was really war," he said (Hill, 181).

Bernabe didn't really use defensive tactics; he didn't "react," but rather he put his plan in place and pushed ahead, leaving those behind that wanted to continue the old way. His hard work at documenting the steps that Eni would need to take to reach a point of competitive engagement in a deregulated business environment. He kept his calm, and his chain of accountability included bringing in fresh talent that he could "count on in a real battle"; he created a "completely new set of rules, processes, and procedures" plus a new code or practice. Part of the accountability chain was accomplished by reviewing every process, rewriting every manuals and creating new ones -- and because Eni had never sold things, only purchased things, a whole process for selling assets had to be put in place.

His philosophy was he had to make all the important decisions alone. "It can be very dangerous to listen too much to others or depend on them," he said (Hill, 193). And besides the inner compass, which was basically his conscience, he also had a sense of "strategic direction" even while the whole company was collapsing around him. People began to follow him simply because he was "determined"; whether they agreed with his objectives or his style, they saw he was focused like a laser on how to turn Eni around and they followed his leadership.

Backgrounder

When a huge, multinational government-run corporation has too little oversight, and too many executives are corrupt, and profits are being leached away by people acting in criminal fashion, a strong leader is needed. Before anything else can be done, before the government entity can be taken public and cleaned of its tawdry image, a strong leader with the confidence of the public and the government legislators needs to be brought in.

Once he is in place, a thorough audit must be taken in order to determine where the fiscal problems are so they can be audited and attacked with good management. Shedding a unwieldy conglomeration of excess baggage is not an overnight task, especially when the government runs it. Key to getting a leg up on a massive challenge like this -- even if the existing leadership of the corporation isn't behind you, and some in fact are being tossed in prison due to corruption -- requires brainpower, strategic insights, patience, knowledge of what has gone on and what needs to change, and the ability to communicate your vision.

Any crisis of this nature can be avoided if a strong, competent and honest leader has been put in place. But when the roof caves in on the company's credibility, heads must roll, and new talent has to be put in place and trained thoroughly to show the public that changes are in progress. I would have urged the public to support taking Eni public long before the corruption scandal hit. But since the politicians ruled the roost, called the shots, and the company was unwieldy and spread out across the globe, the crisis did come to fruition. With a strong trusted leader in place, the crisis must be brought out in the open. There can be no secret back-room deals to excuse anyone that should be held accountable.