Archive for July 2008


The Virtues of Horse Trading

July 26th, 2008 — 8:38am

A few weeks ago, I was teaching executives – ranging in titles from Directors to VPs – at a blue chip company that is routinely considered one of the best run in the US. While discussing interactions among structure, processes, culture and skill, I introduced the idea of networks.

Like many other huge companies, this one has many fairly independent business units (that is, an internal network) unified by little more than a brand name, a culture and a financial superstructure. As in other such companies, the executives believed that the financial superstructure impeded collaboration among business units. As such, they felt powerless to exploit the full extent of their corporate capabilities.

A senior leader came to talk about leadership and the attendees brought up the collaboration challenge. The leader began telling of a recent product creation/launch effort that she had led. Missing a key technology, she had found the capability necessary to create it in another business unit. Her peer there said that the pressures of his own goals and resource constraints would not allow him to help her. So, for the duration of her needs, she transferred an equivalent number (and quality!) of people over to the other BU and paid for both sets of employees out of her budget. Her subsequent successful product launch gave the company clear market presence.

Quite possibly, some of my program’s participants would have felt better if the head of the BU that had the needed skills had acted out of belief in “the greater good.” Yet, there is no escaping the fact that a great win-win – there, I’ve used that overused and little believed term! – emerged here not out of altruism or any great principle, but out of enlightened self-interest. The speaker won because she got her resources and created a market leading product; waiting for altruistic behavior would have killed the launch. The other BU’s head won because he reduced his costs and possibly gained an IOU chit for the future while still retaining the capacity to meet his goals. Finally the individual employees won too, for they ended up being exposed to new challenges in their fields of expertise and just as important, were able to create new contacts that they could draw upon in the months and years ahead.

To me, her behavior is a quintessential example of what I call Operational Leadership: faced with a challenge you are passionate about, instead of simply talking, can you get something done? She did not simply extol the importance of collaboration and bemoan its lack in the company’s internal network. Instead, she figured out a way of assuring collaboration and showed her peers, bosses and direct reports how to make it happen.

What do you think about the story and my takeaway? Do you agree or disagree? How what are the upsides and the limits to such behavior? Do you have stories to tell either supporting or challenging this notion?

Comment » | Leadership, Organizational structure

He’s Not Perfect

July 15th, 2008 — 7:48pm

In the last few days, several news articles have detailed the problems at the US auto companies. One quoted a financial analyst speculating that Chrysler would have to either sell parts of its business or declare bankruptcy. Others reported that GM was facing a liquidity problem (i.e, “We have no cash we need to run this company.”). Some articles also focused on Toyota. They noted that like its American competitors, it too had failed to predict the quick rise in oil prices and the consequent impact on the demand for its biggest, heaviest vehicle, the Tundra.

Though I can appreciate that the media might be under pressure to present a “balanced” view, the situations of the US auto companies and that of Toyota are simply not comparable. The US companies are reeling; for long I have posited that they must change how they manage, not simply reduce their costs, in order to thrive. In contrast , while Toyota stumbled, it quickly announced that it would move the production of the Prius from Japan to the US to replace the planned Tundra production.

The articles reminded of a scene from one of the best movies ever made, Lawrence of Arabia. Lawrence had tricked the Beduoin leader Auda abu Tayi into helping him conquer Akaba, by promising him that a (non-existent) chest of gold lay in that town. After achieving victory, Lawrence promised Auda that he would bring back from Cairo gold from the British coffers. In the Middle East of that era, someone who delivered victory in war had to be respected, not disparaged. So, Auda expressed his frustration to Prince Faisal, “He lied. He is not perfect.”

The hallmark of a great company is not whether it guesses the future correctly, but how quickly it recognizes its error and how effortlessly it adapts. Toyota is not perfect; I can live with that – and so can its employees, partners and shareholders. In contrast, sadly, employees, partners, communities and shareholders will pay dearly for the inability of the US auto industry to adapt to their changing environment.

Comment » | Company Performance

The Prototype Boss of the 21st Century?

July 5th, 2008 — 4:17pm

A recent Financial Times article about Neville Idsell, Coca Cola’s retiring CEO (“Final encore for a man of the people”) struck a chord because of the contrast it posed with a prior Coke CEO, Douglas Ivestor.

Ivestor became CEO in late 1997 after Roberto Goizuetta sudden death. Michael Watkins wrote a HBS case (The Coca Cola Company (A): The Rise and Fall of M. Douglas Ivestor) about the succession. Wall Street was so certain of his credentials that it almost ignored the beloved Goizeutta’s passing. Ivestor was a financial genius, and as the following quotes from the (meticulously footnoted) case show, a ruthless competitor and hard driving operator:
_ “… play by the rule of McDonald’s founder Ray Kroc, ‘What do you do when your competitor is drowning? Get a live hose and stick it in his mouth.’”
_ “The highly disciplined organizations are the most creative. If you can create high discipline, in effect you’ve created security and safety…. It’s follow-up. It’s returning phone calls. … We operate with a rigid control system. It is an enabler, not a restrictor.”

Yet, 18 months into his tenure, Ivestor stepped down. The man whom Fortune magazine had called the “prototype boss for the 21st century” could not solve the huge problems that had their roots in policies initiated – with Ivestor’s active participation – during Goizuetta’s reign.

In mid-2004, Coke’ Board lured Neville Idsell, a former Coke executive, out of retirement after Ivestor’s successor, Douglas Daft also failed to make headway. Four years later, he is leaving Coke in much better shape. Idsell succeeded not by charting a new path, but by changing how Coke operated. The FT article quotes him saying, “My major was sociology; I am a qualified social worker. I do think it is all about people.” Early in his tenure, he appointed a top executive to focus on internally on Coke’s people and a team to focus on building better relations with Coke’s bottlers. He brought in 150 top executives into a powwow on what ailed Coke and listened to them. He passed over his protégée and anointed a successor whom he called “ambassadorial” and “… one of the world’s great best networkers …”

Idsell, rather than Ivestor, deserves to be called the “prototype boss for the 21st century” – and he is not alone. Two years ago, the Idsells of the world would have stood no chance; today, they are in demand. For example, John Thain replaced Stan O’Neil at Merrill and Jeffrey Kindler replaced Henry McKinnell at Pfizer.

This new breed of executive will not get a free ride on performance. Charles Prince brought a softer edge to Citigroup, but was forced out for failing to resolve Citi’s mounting problems. Interestingly, Citi’s Board did not rush to get back a Sandy Weil look-alike, but sought out an executive with an even bigger reputation for collaborative management: Vikram Pandit.

These CEO choices don’t mean that Boards of Directors are going soft in the head. My money is on the idea that they are belatedly coming to the understanding that the “It’s my way or the highway” style of management preferred by the Ivestors and O’Neils and McKinnells doesn’t work in a networked world.

Let’s build a list of this new breed of CEOs and collectively keep tabs on how they work and how they fare.

2 comments » | Leadership

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