Forster N. - Maximum performance (2005)(en)

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and Jerry Porras, in their pioneering book, Built to Last: Successful Habits of Visionary Companies (1996). Collins and Porras had one objective in this study: to identify the characteristics of the most consistently successful and profitable companies of the 20th century. After a lengthy and rigorous investigation, they identified just 18 companies: Federal Express, Boeing, Citicorp, Ford, General Electric, Hewlett Packard, IBM, Johnson & Johnson, Marriot, Merck, Motorola, 3m, Nordstrom, Philip Morris, Procter and Gamble, Sony, Wal Mart and Disney. They also identified 17 comparison companies, who were good, but not the very best. The visionary companies they identified had all attained extraordinary long-term performance: an investment of one dollar in visionary company stock on 1 January 1926 and reinvestment of all dividends would have grown to $6536 in 1990 – over 15 times the general market rate (Collins and Porras, 1996: 4).

Collins and Porras also looked at the issue of leadership and its impact on the performance of these high-performing companies. They came up with results that ran counter to many common-sense assumptions about organizational leadership. First, in the combined 1700 years that these companies had existed, only four CEOs had been recruited from outside the companies. Almost every single leader of these companies had been home-grown, challenging the widespread belief that organizations have to bring in outsiders with fresh ideas to improve a company’s performance or to initiate significant changes. The second finding concerned the distinct lack of charismatic leadership in these companies:

A high profile charismatic style is absolutely not required to successfully shape a visionary company. Indeed, we found that the most successful chief executives in the history of the visionary companies did not have the personality traits of the archetypal high-profile, charismatic visionary leader [ ] In short, we found no evidence to support the hypothesis that great (charismatic) leadership is the distinguishing variable during the critical, formative stages of the visionary companies. Thus, as our study progressed we had to reject the great leader theory: it simply did not adequately explain the differences between the visionary and comparison companies.

(Collins and Porras, 1996: 7–8 and 32)

Similar results were found in Collins’ follow-up book, Good to Great (2001). The objective of this study was to examine the shared characteristics of US companies who had made the transition from being merely good to being truly great companies during the 1990s. Of the 11 companies he identified, not one had been led by a charismatic leader during their transitional phases. Ten of 11 CEOs were recruited internally. These CEOs were characterized by low public profiles, self-effac- ing modesty and humility and often attributed their failures to themselves and their successes to good fortune or their employees. All

had high standards of integrity. They were all committed, body and soul, to their companies, not to personal self-aggrandizement. They were also courageous and had to make very difficult business decisions at critical junctures in order to transfer resources from poorly performing areas to the business areas that ultimately made these companies great. In summary, Collins and Porras’s work reveals four counterintuitive facts about very successful companies and their CEOs.

1The most successful companies of the 20th century were rarely led by charismatic leaders, and in the combined 1700 years they had been in existence, just four CEOs were external recruits.

2Eleven US companies that made the transition from ‘good to great’ during the 1980s and 1990s did not require the presence of heroic charismatic leaders to achieve this.

3With one exception the leaders of the good-to-great companies were promoted from within the companies, they were not external appointees.

4Collectively, they were underpaid in comparison to general levels of executive pay and remuneration in their industry/business sectors.

In fact, overpaid charismatic leaders can actually be a major liability to companies. One well-known example of this was the Hollywood director Michael Cimino. In 1978, he had enjoyed great success with the Vietnam War movie, The Deer Hunter, and was hailed at the time as a charismatic genius, if a bit of a loose cannon. United Artists engaged Cimino to direct Heaven’s Gate, where he proved to be an uncooperative and tantrum-prone brat, according to accounts at the time. Although costs escalated out of control, UA’s executive still retained their faith in his ‘charismatic genius’. The film eventually flopped and had to be withdrawn from distribution at a cost of $US44 million (now equivalent to more than $US100 million). The result of this débâcle was that the entire executive and the chairman of UA were sacked soon afterwards and the company was eventually taken over by MGM. Other examples where this kind of leader has caused considerable problems in recent times include Kozlowski at Tyco, Lay at Enron, Ebbers at Worldcom and Winnick at Global Crossing. All of these were regarded as archetypal, domineering and charismatic leaders, who did generate short-term shareholder results, but also bullied their boards and senior managers into meek docility. The results in these companies were egomaniacal corporate strategies, extravagant personal rewards and, ultimately, the demise of these businesses (The Economist, 2002a). We will return to look at these in Chapter 12.

Another example of the ephemeral nature of charisma is that of one of the longest serving British prime ministers in history, Margaret

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Thatcher. While she was perceived as a tough, flinty-eyed and energetic political operator during the early part of her parliamentary career, she was not perceived as being either charismatic or a particularly effective communicator when she became leader of the Conservative Party in 1975. At the time, many of the old-guard members of her first cabinet, who had been supporters of her predecessor, Ted Heath, believed that she wouldn’t last beyond the next general election. Very few political commentators thought she could ever become prime minister. However, she found herself at the crest of an economic, political and social revolution in Britain. The postwar political consensus had collapsed, Keynesian macroeconomic interventionist economics were in disarray, inflation and interest rates were spiralling out of control and old-style militant unions, in every major industrial sector, had brought the country to its knees through a series of lengthy and damaging strikes.

The time was ripe for a change driven in large measure by the influence of the intellectual thinking of libertarian thinkers such as Hayek, Nozeck and Friedman and the ‘New Right’. The Labour Party was kicked out of office and the Conservatives were elected, with a slim majority, in 1979, under the slogan ‘Labour isn’t Working’. However, unemployment continued to rise inexorably and the British economy remained firmly trapped in the worst recession since the early 1930s. Damaging industrial disputes continued to cripple the country and race riots broke out in several inner-city areas. By 1981, most political commentators believed that Labour would be re-elected at the forthcoming General Election.

Luckily for the Conservatives, two unrelated but significant events then took place. First, the military dictatorship in Argentina decided to invade the Falkland Islands in April 1982. After quickly recapturing the islands on 14 June, Thatcher’s personal approval ratings went through the roof on a wave of national patriotic fervour. Second, the Labour Party had continued to drift to the hard left and was still dominated by militant trade unions. This prompted a breakaway group of 27 right-wing Labour MPs to form a new centre party, the Social Democrats, effectively splitting the Labour Party’s traditional vote. A little later, in 1985, a botched IRA attempt to assassinate Thatcher at the party’s conference in Brighton, and her ‘No negotiation with terrorists’ policy, further enhanced her popularity. The Conservatives were returned to office in two landslide victories at the General Elections of 1983 and 1987.

The Conservative Party’s spin doctors started to create a cult of personality around ‘The Iron Lady’. Under their influence, and with the tacit

support of new media entrepreneurs like Rupert Murdoch, the tabloid press began routinely to describe her as, ‘The new Elizabeth the First’ and ‘The new Boadicea’. From the early 1980s, Thatcher had also been receiving extensive coaching in public speaking, vocal skills, image, and hair and dress styling. In a very short period of time, she ‘became’ a charismatic leader with a radical new vision for Britain. Thatcher certainly did transform Britain during the 1980s, and many other countries have followed her example of labour market and trade union reform, financial deregulation and the privatization of state assets. Her energy, drive and commitment to her political beliefs prompted her acerbic press secretary, Bernard Ingram, to later describe her as ‘the only man in the cabinet’.

However, within a relatively short period of time she was kicked out of office by a party that no longer wanted her, stripped of her power and ‘charisma’, in 1990. She had become distanced from her party and was felled by a flaw of many leaders, her propensity to divide people into ‘in-groups’ (her chosen coterie of personal political advisers in an increasingly presidential prime ministership) and ‘out-groups’ (her cabinet and the rest of the Conservative Party). She had come to believe that she was infallible and, as a consequence, forgot the simple and age-old lesson that leaders can only retain power as long as they have the support of their followers. Her stubborn views about British sovereignty and deep suspicions about the economic and political union of Europe divided the party, leading to the resignation of two of her senior ministers (Nigel Lawson and Geoffrey Howe). One of her former ministers, Michael Heseltine, then challenged her for the leadership position. When she failed to get the required majority from the first ballot, she resigned from office.

Since that time, she has become an increasingly irrelevant and often resented presence in the Conservative Party. Her protégé, John Major, who took over from her in 1990, ended up detesting Thatcher and her anti-Europe supporters, whom he once described as ‘bastards’. The party’s next leader, William Hague, was so overwhelmed by Thatcher’s continuing presence that the Labour Party made great mileage out of campaign posters in 2000 that featured her hair and eyes superimposed on his head, with the message, ‘Be afraid. Be very afraid’. The Labour Party was returned with huge majorities in 1997 in 2001 and attributed some of this success to another poster campaign it ran in 2000–2001, ‘The Mummy Returns’, featuring Thatcher, who was by now a deeply unpopular figure in the country. Within the space of a few years, Thatcher had risen rapidly to become a visionary, charismatic heroine and then steadily declined to become regarded as a slightly barking and embarrassing has-been. In 2002, in the ultimate

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humiliation, she was banned from speaking in the main auditorium at the Conservative Party’s Annual Conference in Bournemouth.

What practical insights can be drawn from these examples? The first is that, while charisma may be useful to leader/managers, all the available evidence shows that it is not an essential prerequisite for effective leadership; nor, as we will see in Chapter 6, is a heroic, male style of leadership. Second, it is much closer to the truth to suggest that, once an effective leader comes to possess the requisite qualities and characteristics that they need to be successful, they may then be perceived to be charismatic. Third, leaders who come to believe that they are charismatic and infallible can become a major liability to their companies or political parties, particularly when the dominant leader leaves and there are no systems in place, or suitable successors, to fill the large command-and-control void they have left behind. In a nutshell, while charisma is not a requirement for effective and successful leadership, transformational abilities are essential for all leaders of organizations.

The vision thing

Where there is no vision, the people perish. (Proverbs, 29: 18)

Vision without action is a daydream. Action without vision is a nightmare. (Old Japanese proverb)

That’s all very well in practice – but how does it work in theory? (Attributed to Groucho Marx, American comedian, 1933)

While charisma is not a requirement for leadership, one skill that certainly is important for present-day organizational leaders is the ability to envision the future. At the beginning of this chapter we saw that leaders are often required to take people on journeys to the future and, consequently, they have to be able to get their followers to question existing realities and embrace new ones. Without a vision, or some sense of direction about the future, a leader cannot move an organization forward or mobilize its employees. The ability to do this has been described as something that often sets true leaders apart from the crowd: a unique ability to spot new business opportunities and new markets, like hounds sniffing out truffles in the woods. The ability to articulate a vision for the future has also been described as a magical or sixth sense that only a few people can hope to develop. However, this is yet another common-sense myth about leadership. As we will see, in Chapters 8 and 9, almost anyone can become better at envisioning the future, if they are willing to work at acquiring the ability to do this.

Vision has been defined as ‘an apparition of a prophetic, revelational or supernatural nature presented to the mind in a state of heightened spiritual or emotional awareness, a distinct or vivid mental image or concept, insight or foresight, an ability to plan or formulate policy in a far sighted way’ (OED website, 2003). It has also been described more succinctly as ‘a realistic, credible and attractive future for an organization’ (Nanus, 1992: 8) and ’an ideal and unique view of the future’ (Kouzes and Posner, 1997: 95). Essentially, a vision is a new way of looking at both present circumstances and future possibilities. It can originate from a number of sources, including lateral and creative thinking, the ability to future-cast and scenario-map (to imagine ‘What if . . .’), from an organization’s employees, or some combination of all of these (abilities which we return to in Chapters 8–11). Visionary leaders can also bring together already existing bodies of knowledge and turn these into something new. One example of this process in action can be found in Richard Branson’s company, Virgin. In the 1960s, he made his first big breakthrough by combining an already existing record-selling business with mail order delivery, and made full use of the new marketing techniques that emerged in the late 1960s.

Visionaries also have to possess great self-belief. A story that has often been told to illustrate this concerns the 17th-century English architect, Sir Christopher Wren. After the Great Fire of London in 1666, he was appointed by Charles II to oversee the rebuilding of parts of the city that had been ravaged by the fire. The financial backers of one of his building projects believed that the main span that Wren had put on the architectural plans was too wide, and they told him that he would need to put in additional columns to support this. After some heated discussions, and knowing that other contracts were riding on his decision, Wren acquiesced and put in the additional columns as instructed. However, quite deliberately, he left a small gap between the columns and the span. This could not be seen from ground level. To this day, the span has not sagged an inch, and the columns have supported nothing more than Wren’s conviction that he was right – for more than 300 years.

The power of visions is that they can act as ‘paradigm busters’, moving people forward from the present to the future. Radical visions can also be a threat to the status quo and to common-sense ways of thinking. As we’ve already seen, managers are usually concerned with short-term, practical problem solving and decision making, and may not spend much time theorizing about how the world might be in the future. Leaders, however, have to be concerned about new ideas, long-term thinking and challenging the status quo, because they understand that

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change is not possible without the ability to theorize about alternatives to the situation that currently exists. In fact, they recognize that everything we create that is new or different has to be driven by a theory of some kind. As the psychologist Kurt Lewin once observed, ‘There is nothing so practical to a manager as a good theory.’ We may call this ability ‘common sense’, but if we look up the definition of this phrase, it means ‘an individual view or notion’, and ‘a scheme of ideas or statements held to explain a group of facts, phenomena or general laws’ (OED website, 2004). In other words, common sense is itself a set of theories about how the world works, based on experience. However, while many leader/managers make decisions every day on the basis of common sense and experience, this can be dangerous.

To illustrate the dangers of relying on common sense, what innovations are being described here?

For decades, the rich and powerful opposed the introduction of these changes and innovations. Economists opposed their introduction because they were seen as being either uneconomic or an attack on business profitability. Many intellectuals resisted their introduction. They were pushed through over a period of about 100 years, in spite of sustained opposition, by determined and visionary civil servants and politicians across Europe during the 19th and 20th centuries.

Can you name the company that created the first personal computer, word processing software and many other new computing technologies in the 1970s, and yet failed to develop and market them, because they did not believe that people would buy personal computers?

The answers to these two questions can be found in note 4. Here are some other examples of the dangers of relying on common sense in the past:

•1876: Sir William Preece, Chief Engineer of the British Post Office, said, ‘The Americans have need of the telephone – but we do not. We have plenty of office boys.’

•1895: Lord Kelvin, the British peer and scientist, maintained that ‘Heavier than air flying machines are impossible.’

•1899: Charles Duell, the Director of the US Patent Office, believed that ‘Everything that can be invented has been invented.’

•1927: Henry Warner, the co-founder of Warner Brothers, asked ‘Who the hell wants to hear actors talk?’

•1932: Albert Einstein said ‘There is not the slightest indication that nuclear energy will ever be obtainable.’

•1943: Thomas Watson, the CEO of IBM, said ‘I think there is a world market for maybe five computers.’

•1960s: ‘We are confident that Japanese companies pose no threat to us’ (any large company of your choice in the USA and Europe in the 1960s and early 1970s).

•1962: ‘We don’t like their sound, and anyway guitar music is on the way out’ (a spokesman for the recording company Decca, having made what turned out to be the most expensive blunder in the history of 20th-century popular music by not signing a young British guitar group called The Beatles). Similar mistakes were made by the record companies that turned down The Police and U2 in the late 1970s.

•1970: Margaret Thatcher said, ‘There will never be a female Prime Minister in my lifetime.’

•1977: Ken Olsen, founder of the Digital Equipment Corporation, could see ‘no reason why anyone would want a computer in their home’. DEC was later taken over by Compaq, which in turn was absorbed by Hewlett-Packard in 2002.

•1977: the IBM Annual Report stated, ‘We believe that there is no consumer market for personal computers.’

Other examples of common sense that have stymied progress and change in organizations include the traditional knee-jerk reaction of most men on every single occasion that a woman has tried to gain access to male-dominated professions and organizations over the last 100 years (see Chapter 6 for several examples of this). In a similar vein, for most of the 20th century, men believed that women did not have the ‘right stuff’ to become CEOs of companies, and did not have the same entrepreneurial instincts and abilities as men. There are now more than 100 women who head major international businesses. In the USA alone, there are eight million self-employed women, who between them employ more people than the Fortune 500 companies combined. Women will own more than half of all small businesses in the USA by 2005 (Gollan, 1997). Last, but not least, would you have invested some of your hard-earned cash back in the late 1970s in the company featured in Figure 1.1 (p. 38)?

With the benefit of hindsight we all would have, because an investment of about $US1000 in this company in 1980 would have been worth about $US65 000 by early 2000.5 Examples like this, and the history of companies that create new commercial and business paradigms, show us that it is the ability to use uncommon sense and theorize about alternative futures that differentiates truly great business leaders from run- of-the-mill leaders. In this context it’s worth recalling these sayings: ‘Yesterday’s heresy is today’s orthodoxy and tomorrow’s history’, the words of the German philosopher and scientist Arthur Schoppenhauer, ‘New ideas and thoughts always go through three stages. First they are ridiculed. Next, they are violently opposed. Finally, they are accepted as self-evident common sense’, and George Bernard Shaw’s observation, ‘The greatest truths always start out as blasphemies.’

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Figure 1.1 Would you invest in this company?

Common sense is not a simple thing. Instead, it is an immense society of hard-earned, practical ideas – of multitudes of life-learned rules and exceptions, dispositions and tendencies, balances and checks.

(Marvin Minsky, The Society of Mind, 1985)

Common sense is little more than the deposits of prejudice laid down in the mind before the age of twenty-one.

(Albert Einstein, 1930)

Exercise 1.2

Try to create a compelling vision (or a new direction or a set of objectives) that will challenge the common-sense assumptions of the people who work in your team, department or organization. What is the end goal of this vision? What are the principal components of this vision? Can these be encapsulated in simple, motivational rallying cries? How can this vision be realized and operationalized in the future?

Did you find this to be an easy or difficult exercise? If you found it hard to articulate a vision for the future, don’t worry. This is one of the most complex and advanced abilities that organizational leaders have to acquire and develop. Later on, in Chapter 8, there will be another opportunity to try this exercise in the context of managing change. In Chapter 9, there are several creative and lateral thinking exercises that

will enhance your ability to envision and scenario-map the future. In these chapters, we will also look at some real-life visions that have transformed organizations and the world of business over the last 25 years.

The dark side of leadership

Up to this point, we’ve focused on the qualities, attributes, characteristics and skills of what can be broadly described as ‘good leaders’: men and women who add value to the organizations they lead, and have a positive effect on the people they work with. In doing this, we’ve identified several components of the leadership/management jigsaw puzzle. However, there is of course a dark side to leadership, and most people will encounter not only incompetent leaders during their careers, but also individuals in positions of power who enjoy undermining, bullying or intimidating their staff. Bullying can range from sexual harassment to more subtle behaviours, such as imposing unrealistic deadlines and unpaid overtime on employees, or constant criticism and sarcasm. An example of this kind of leader is Jonathan Shier, who was dismissed from the Australian Broadcasting Corporation in December 2001. Soon after his appointment in 1999, Shier was given the nickname ‘Satan’ by his employees and was described by his staff as, ‘insulting’, ‘arrogant’ and ‘a bully’ (Bachelard, 2001). People who behave in this manner have been described as having ‘toxic’ personalities, and their toxicity can have a damaging effect on the health, wellbeing and performance of those people who are unfortunate enough to encounter them.

How can we spot potential bullies and toxic personalities? According to psychologists, they will exhibit most of the following traits: impatience, arrogance, perfectionism, defensiveness, rigidity, bluntness and a large capacity for holding grudges. People who are tyrants and bullies in adulthood became little tyrants and bullies during their formative years. While a detailed discussion of exactly how this happens is beyond the scope of this book, many childhood bullies do evolve into cunning and manipulative adults. They are likely to have high IQs, but use this entirely for their own ends and their own selfaggrandizement. They have little empathy with other people and any decisions they make are driven by one consideration, ‘What’s in this for me?’ They will use an autocratic management style with their subordinates, but behave compliantly towards their superiors. They will often lack a sense of humour, and take themselves and their own opinions very seriously. They may also be what psychologists have called ‘Type A’ personalities, who are very prone to occupational stress