Leadership Development
March 2005
ON PURPOSE"When a man does not know what harbor he is making for, no wind is the right wind."
- Seneca
"Men, like nails, lose their usefulness when they lose direction and begin to bend."
- Walter Savage Landor
"Great minds have purposes, others have wishes."
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by John Maxwell
In 2001, EMI Group's Virgin Records label signed pop diva Mariah Carey to one of the biggest recording contracts ever—an estimated $80 million for five albums, plus a $21-million signing bonus.
But when Carey's first album for Virgin Records—the soundtrack to the movie Glitter—flopped, the already struggling company decided to pay her $28 million to end her contract. Since Carey was allowed to keep her signing bonus, EMI essentially paid her $49 million for the soundtrack to a box-office bomb.
Talk about a bad business decision. I'm guessing the EMI executives who signed Carey are still kicking themselves over that one.
The decisions that you and I make may never approach that magnitude—at least not from a financial standpoint. But there's no doubt that our level of success in life is directly affected by the quality of the decisions that we make.
We make dozens of decisions each day. Some of these choices—what to eat for breakfast, what to wear to work, what kind of car to drive, etc.—have little bearing on anyone else. Many others, however, have an unequivocal impact on the people around us, from our spouses, friends and children to our employees, clients and coworkers.
It can be tempting to make such decisions solely on the basis of economics, ease, convenience or public opinion. But if you want to be an effective leader, you don't make decisions because they're easy. You don't make decisions because they're cheap. You don't make decisions because they're popular.
You make decisions because they're right.
So how do you know if you are making a right decision? Here are five guidelines:
1. Seek out wise counsel.
Getting advice from others is a good idea, but don't solicit it from just anyone. Be wise about who you select to be your counselors. Seek out people who have proven track records when it comes to making good, solid decisions.
2. Look for patterns in the guidance that you are given.
I have found that when I seek counsel from wise people, certain patterns or principles often recur. By the time three or four people have told me the same thing, I start saying, "Okay, I think I can buy into that."
3. Ask yourself, "Does this decision match my gifts and my abilities?"
If the answer is no, there's no reason to continue this process.
4. Ask yourself, "Does this decision give me peace?"
You know how you feel when peace is missing. Pay attention to those feelings. And never forget this powerful bit of wisdom: When in doubt, don't.
5. Look for the downside.
Throw away your rose-colored glasses and force yourself to play the devil's advocate. Ask yourself, "If this turns out badly, can I live with it?"
These guidelines—as well as other parameters that you establish for yourself—can be a tremendous help when you are making daily leadership decisions. They're also valuable when you're contemplating deeper choices that pertain to your values and what you want from your life.
Along those lines, I want to close this column by sharing a few decisions I've made that have had a profound effect on my usefulness and fulfillment, both as a leader and as a person.
I decided:
1. To continue to grow personally throughout my life.
For me, growth is happiness. Out of my growth I live, and out of my growth I give. So here's my question for you: Are you learning or doing anything right now that is stretching you out of your comfort zone?
2. To give and serve on the front end.
I'm not going to wait until I get something out of a relationship. I'm not going to wait until I find out what's in it for me. I'm just going to give on the front end—no strings attached. I can assure you that many of the blessings my wife and I have today are a direct result of this decision.
3. To exhibit a great attitude regardless of the situation.
Life can be hard; there's no getting around it. But it's not what life brings to us that determines our success or failure; it's how we respond to it. We often don't have a choice about what happens to us, but we can chose to remain positive, no matter what's going on.
As you evaluate the choices you've made in your life and career, perhaps you also can identify those that enhanced your satisfaction and productivity. But if the bad decisions—the ones that still cause you to kick yourself years later—seem to outnumber the good, today is a new day. And, armed with the guidelines I've given you, the first decision you can make today is the decision to make right decisions from now on
Peter Drucker On Leadership
11.19.04, 6:00 AM ET
NEW YORK - Peter F. Drucker was born 95 years ago today--can it be possible?--in Vienna. The universally known writer, thinker and lecturer now is nearly deaf and doesn't get around like he used to. He stopped giving media interviews about a year ago. But in late October, Drucker granted an exception to Forbes.com at the urging of Dr. Rick Warren, the founder and head of the Christian evangelical
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| Peter F. Drucker at his home in |
The Drucker-Warren relationship may surprise many readers, but it goes back two decades, to when the young minister came to Drucker for advice. Under Drucker's tutelage,
Warren and I met at Drucker's surprisingly spartan home in
What Needs to Be Done
Successful leaders don't start out asking, "What do I want to do?" They ask, "What needs to be done?" Then they ask, "Of those things that would make a difference, which are right for me?" They don't tackle things they aren't good at. They make sure other necessities get done, but not by them. Successful leaders make sure that they succeed! They are not afraid of strength in others. Andrew Carnegie wanted to put on his gravestone, "Here lies a man who knew how to put into his service more able men than he was himself."
Check Your Performance
Effective leaders check their performance. They write down, "What do I hope to achieve if I take on this assignment?" They put away their goals for six months and then come back and check their performance against goals. This way, they find out what they do well and what they do poorly. They also find out whether they picked the truly important things to do. I've seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things. They are magnificent at getting the unimportant things done. They have an impressive record of achievement on trivial matters.
Mission
Leaders communicate in the sense that people around them know what they are trying to do. They are purpose driven--yes, mission driven. They know how to establish a mission. And another thing, they know how to say no. The pressure on leaders to do 984 different things is unbearable, so the effective ones learn how to say no and stick with it. They don't suffocate themselves as a result. Too many leaders try to do a little bit of 25 things and get nothing done. They are very popular because they always say yes. But they get nothing done.
Creative Abandonment
A critical question for leaders is, "When do you stop pouring resources into things that have achieved their purpose?" The most dangerous traps for a leader are those near-successes where everybody says that if you just give it another big push it will go over the top. One tries it once. One tries it twice. One tries it a third time. But, by then it should be obvious this will be very hard to do. So, I always advise my friend Rick Warren, "Don't tell me what you're doing, Rick. Tell me what you stopped doing."
The Rise of the Modern Multinational
The modern multinational corporation was invented in 1859. Siemens invented it because the English Siemens company had grown faster than the German parent. Before the Second World War, IBM was a small maker, not of computers, but of adding machines. They had one branch in
21st Century Organizations
Let me give you one example. This happens to be a consulting firm headquartered in
How To Lead a 21st Century Organization
Don't travel so much. Organize your travel. It is important that you see people and that you are seen by people maybe once or twice a year. Otherwise, don't travel. Make them come to see you. Use technology--it is cheaper than traveling. I don't know anybody who can work while traveling. Do you? The second thing to say is make sure that your subsidiaries and foreign offices take up the responsibility to keep you informed. So, ask them twice a year, "What activities do you need to report to me?" Also ask them, "What about my activity and my plans do you need to know from me?" The second question is just as important.
Prisoner of Your Own Organization
When you are the chief executive, you're the prisoner of your organization. The moment you're in the office, everybody comes to you and wants something, and it is useless to lock the door. They'll break in. So, you have to get outside the office. But still, that isn't traveling. That's being at home or having a secret office elsewhere. When you're alone, in your secret office, ask the question, "What needs to be done?" Develop your priorities and don't have more than two. I don't know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That's it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it's futile, make the list again. Don't go back to priority three. At that point, it's obsolete.
How Organizations Fall Down
Make sure the people with whom you work understand your priorities. Where organizations fall down is when they have to guess at what the boss is working at, and they invariably guess wrong. So the CEO needs to say, "This is what I am focusing on." Then the CEO needs to ask of his associates, "What are you focusing on?" Ask your associates, "You put this on top of your priority list--why?" The reason may be the right one, but it may also be that this associate of yours is a salesman who persuades you that his priorities are correct when they are not. So, make sure that you understand your associates' priorities and make sure that after you have that conversation, you sit down and drop them a two-page note--"This is what I think we discussed. This is what I think we decided. This is what I think you committed yourself to within what time frame." Finally, ask them, "What do you expect from me as you seek to achieve your goals?"
The Transition from Entrepreneur to Large Company CEO
Again, let's start out discussing what not to do. Don't try to be somebody else. By now you have your style. This is how you get things done. Don't take on things you don't believe in and that you yourself are not good at. Learn to say no. Effective leaders match the objective needs of their company with the subjective competencies. As a result, they get an enormous amount of things done fast.
How Capable Leaders Blow It
One of the ablest men I've worked with, and this is a long time back, was
The Danger Of Charisma
You know, I was the first one to talk about leadership 50 years ago, but there is too much talk, too much emphasis on it today and not enough on effectiveness. The only thing you can say about a leader is that a leader is somebody who has followers. The most charismatic leaders of the last century were called Hitler, Stalin, Mao and Mussolini. They were mis-leaders! Charismatic leadership by itself certainly is greatly overstated. Look, one of the most effective American presidents of the last 100 years was Harry Truman. He didn't have an ounce of charisma. Truman was as bland as a dead mackerel. Everybody who worked for him worshiped him because he was absolutely trustworthy. If Truman said no, it was no, and if he said yes, it was yes. And he didn't say no to one person and yes to the next one on the same issue. The other effective president of the last 100 years was Ronald Reagan. His great strength was not charisma, as is commonly thought, but that he knew exactly what he could do and what he could not do.
How To Reinvigorate People
Within organizations there are people who, typically in their 40s, hit a midlife crisis when they realize that they won't make it to the top or discover that they are not yet first-rate. This happens to engineers and accountants and technicians. The worst midlife crisis is that of physicians, as you know. They all have a severe midlife crisis. Basically, their work becomes awfully boring. Just imagine seeing nothing for 30 years but people with a skin rash. They have a midlife crisis, and that's when they take to the bottle. How do you save these people? Give them a parallel challenge. Without that, they'll soon take to drinking or to sleeping around. In a coeducational college, they sleep around and drink. The two things are not incompatible, alas! Encourage people facing a midlife crisis to apply their skills in the non-profit sector.
Character Development
We have talked a lot about executive development. We have been mostly talking about developing people's strength and giving them experiences. Character is not developed that way. That is developed inside and not outside. I think churches and synagogues and the 12-step recovery programs are the main development agents of character today.
Was Built To Last Built To Last?
It's one of the most influential business books of our era, and it helped turn coauthor Jim Collins into a management rock star. But how well have the companies it lionized and the principles it espoused stood the test of time?
It's been a decade since Jim Collins and Jerry Porras wrote Built to Last , a book that took the management world by storm. But some of its companies haven't held up as well as its sales.
Doug Ducey, the CEO of Cold Stone Creamery, will never forget the first time he read Built to Last: Successful Habits of Visionary Companies , the management book by Jim Collins and Jerry Porras that is one of the best-selling business books ever. Or the first time he listened to it, anyway.
"I was driving to
As Ducey built Cold Stone from a regional ice-cream company into a national brand, he embraced many of the book's principles, such as having a Big Hairy Audacious Goal, or BHAG, a long-term vision that is supposed to be so daring in its scope as to seem impossible. Although Collins says that goal should be something that takes decades, Ducey chose a shorter-term one in August of 1999, when there were just 74 Cold Stone stores. He vowed to have 1,000 profitable stores by the end of this year, and he's going to make it. "I've seen dramatic, positive change in the right direction applying these principles," he says.
Such near-fanatical responses to a book by two little-known guys from Stanford, one of whom (Collins) doesn't even have a PhD, have made Built to Last one of the very few business books that achieve the dual honor of being both a publisher's dream and a management classic. Now celebrating the 10-year anniversary of its unheralded publication in 1994, BTL has sold 3.5 million copies worldwide, been translated into 16 languages, gone through more than 70 printings, and spent nearly five solid years on the Business Week best-seller list. The momentum continues even today: HarperBusiness, its publisher, is putting out a new hardcover edition in January 2005. Along with Collins's later solo effort, Good to Great: Why Some Companies Make the Leap . . . and Others Don't , BTL has turned Collins, a rock-climbing 46-year-old, into the Bill Clinton of the business world, a guy who gets stopped on the street and begged for advice (or an autograph) and who is a riveting speaker, pulling $55,000 per session. "It never occurred to me that things would be this successful," says Collins. "It never occurred to me."
And now enough time has passed to merit a reassessment of one of the most influential business books of our time. Are BTL 's principles still relevant in an era of massive consolidation and global outsourcing? Did the visionary companies celebrated in its pages turn out to be the corporate equivalents of the Rolling Stones or of the 1980s one-hit-wonder group A-Ha? Given that the book is still winning the hearts and minds of people such as Cold Stone's Ducey, we decided to take a close look at its key ideas and the track records of the companies it singled out as visionary.
What we found was that while the companies in BTL were indeed built to last, they haven't all been built to emulate. As for the principles, many of them still hold up today, partly because some of them are so broad as to appear applicable to virtually everyone. "It's so slippery, it's like grabbing a frog," says Richard D'Aveni, professor of strategic management at
Ten years on, almost half of the visionary companies on the list have slipped dramatically in performance and reputation, and their vision currently seems more blurred than clairvoyant. Consider the fates of Motorola, Ford, Sony, Walt Disney, Boeing, Nordstrom, and Merck. Each has struggled in recent years, and all have faced serious questions about their leadership and strategy. Odds are, none of them today would meet BTL 's criteria for visionary companies, which required that they be the premier player in their industry and be widely admired by people in the know.
Relying on reams of historical research and survey responses from 165 CEOs on which companies they considered to be the most visionary, Collins and Porras selected a basketful of companies. Besides the stragglers, the list included American Express, Citicorp (now Citigroup), General Electric, Hewlett-Packard, IBM, Johnson & Johnson, Marriott, Philip Morris (now Altria), Procter & Gamble, 3M, and Wal-Mart -- all of which had far outperformed the general market for decades. Then they tried to distill the essential principles that made them visionary and set them apart from other, simply average companies. To set up a contrast, the authors also used a group of comparison companies in the same industries -- outfits with equally long histories but less-stellar performances.
The authors discovered that the visionary companies did certain things very differently from their duller rivals, things that in large part were more about the internal than the external and had little to do with technology or number-crunching. Among these were having "cultlike cultures"; adhering to an ideology that went beyond the simple pursuit of profits; relying on homegrown management; focusing on creating a lasting organization -- called "clock building," as opposed to "time telling"; and having the ability to see things not as either-or propositions (the "genius of the 'and,' " in the authors' words, as opposed to the "tyranny of the 'or' "). "A visionary company," they wrote, "doesn't simply balance between preserving a tightly held core ideology and stimulating vigorous change and movement; it does both to the extreme."
With those kinds of wide-ranging statements, it's not surprising that BTL still resonates with many readers today. Its ideas were clearly laid out, easily understood, and presented with entertaining examples and solid data -- a rare thing in a deforestation's worth of poorly written and largely unsubstantiated business books. Following the principles in BTL didn't require infusions of capital or Nobel Prize-level science. Rather, the authors suggested, exceptional performance was achievable by virtually anyone with a little common sense and whose heart and soul was in the right place.
It didn't turn out that way for the seven companies that have faltered since the list first came out. While the S&P 500 Index has risen 132% in the 10 years ending August 31, Motorola is down 2% from its 1994 price; Sony has risen just 20% in a decade that worshipped technology companies; and Disney has been in a long slump, dogged by the 1996 acquisition of Capital Cities/ABC (a deal Collins lauded in 1995 as "another big Disney gulp") and questions about CEO Michael Eisner's leadership. It has only recently showed some improvement.
The authors argue that these laggards are the exceptions that prove their original rules. To hear Porras tell it, for example, the seeds of Boeing's decline were planted in 1997 when it merged with McDonnell Douglas -- the laggard "comparison company" in the original BTL study. Boeing, he says, adopted its acquisition's conservative culture and abandoned its own bold approach of setting such BHAGs as building the 747. In December 2002, for instance, Boeing walked away from a BHAG when it scrapped a plan to develop a high-speed jet called the Sonic Cruiser. "I think Boeing is in a much longer-term difficulty because it has drifted away from the things that made it great," Porras says. But industry watchers say the company's travails have little to do with whether or not it's making big, bold bets. Rather, Boeing has seen its once dominant position in the aircraft industry supplanted by the more aggressive efforts of Airbus, and its reputation for integrity eroded by an ethics scandal that led to the resignation of its CEO, Phil Condit, last year.
But let's give credit where credit is due. For all of the companies that have fallen on relatively tough times, most, if not all of Collins and Porras's picks do actually seem, well, built to last. Today, every one of the 18 companies cited is still in business, still a household name, still producing lightbulbs or computers or cigarettes or services or experiences. And while Collins and Porras eschew the idea of measuring total shareholder return -- saying that if that was their goal, they'd have picked a different group -- it turns out that they're pretty darn good stock pickers.
Taken as a whole, the basketful of companies had a total shareholder return of 206% between August 1994 and August 2004, compared with 132% for the S&P over the same period. Citigroup alone has returned a breathtaking 848%. The nine companies in the comparison group that still trade today (some were sold to other companies and some went bust) returned just 32% on average. The original group included such doozies as Howard Johnson, Ames Department Stores, and Zenith Electronics -- but also Pfizer and Texas Instruments, which have walloped the "visionary" companies they were matched against.
It's not just stock performance that makes the cream of BTL 's crop -- the likes of Citi, AmEx, Wal-Mart, J&J, and GE -- stand out. These companies have taken leadership roles in their industries, offering innovative products while consistently outsmarting their rivals. Certainly, Wal-Mart and GE can be said to dominate their industries. And much of their success seems to resonate with ideas presented in BTL . According to Bob Corcoran, GE's chief learning officer, the company's dominance comes in part from a commitment to a set of operating mechanisms first invented in the 1950s -- a clear example of BTL 's exhortation to "preserve the core." "The core, the principles, the rigor, the discipline, the system, is all there," Corcoran says. "And that system fundamentally created Jack Welch and Jeff Immelt."
The same is true of Wal-Mart, as Collins himself wrote in this magazine in June 2003: "The company's culture is as strong as ever. . . . If Wal-Mart were to maintain its average growth rate from the past 10 years, it would become the world's first $1 trillion company within a decade." But in a cruel twist of the book's logic, Wal-Mart may actually have too much of a good thing. As a result of its vision-driven zeal for offering customers the lowest prices, Wal-Mart has been blamed for a whole range of perceived transgressions -- from killing mom-and-pop stores to suppressing unions to shipping jobs to China. "I think they have made mistakes, even when they're trying to follow good values," Porras says.
"Gurus always grimace when a company goes from good to great to goofus."
Still, the fact remains that at least 7 of BTL 's original 18 companies have stumbled (8 if you're cynical about HP) -- scarcely better than the results you'd get by flipping a coin. And that raises the infernal question that dogs the critical analysis of any business book: Have companies struggled because they ignored the principles in the book or because they followed them? "Gurus always grimace when one of the exemplary companies goes from good to great to goofus," says Darrell Rigby, a partner at Bain & Co. and an expert on management trends. "Was that because management stopped apply-ing the principles? Or because business conditions changed?"
BTL 's authors, naturally, claim the former. "They're even more true today," says Collins of the book's ideas. "And they're more needed today than ever." The authors also say the book's validity doesn't depend on its list of visionary companies. Collins goes so far as to say that to focus on the companies at all shows a lack of understanding of the book. "BTL is not about these companies," Collins says, his voice rising. "For the most part, my experience has been that people haven't gotten hung up on the list of companies. At least intelligent, practicing leaders haven't gotten hung up on it." It is the principles, he says, that are critical, while the companies are simply a conduit for those ideas. If they had conducted the CEO survey at a different time, they very well could have had different companies. Simple as that.
Please don't mention that little point to the publisher, HarperBusiness, which is still including all of those company stories in the next edition, or to the companies, all of which wear their BTL association like a Silver Star, no matter what their recent results. Virtually every company on the list, when asked what made it a BTL company today, trotted out a laundry list of decisions, new products, and value statements as proof of its worthiness to belong to this elite club. A Marriott spokesperson cited the company's Core Values and Culture Council as an example of its adherence to the BTL principles. P&G sent a document citing each of the big ideas in the book with a variety of examples from its own experience. Under the heading "preserve the core/ stimulate progress," it included virtually every decision that CEO A.G. Lafley has made, from getting rid of Crisco and Jif to reaching out to external innovation partners.
Which brings up a deeper, more fundamental question about not only BTL but about any business book that becomes so widely adopted: If it's that easy to claim to have put in place these principles, do they actually have any meaning? (Fast Company , to be sure, celebrates many such books.) "Theee e most important part of the book is chapter four!" Collins declares today, stretching his words for unmistakable emphasis. "Preserve the core! And! Stimulate progress! To be built to last, you have to be built for change!" It would be hard to find anyone in the business world to disagree with that statement. And that can be a problem.
BTL 's success has come as much from its context as its content. The same was true of the first real business blockbuster, In Search of Excellence: Lessons From America's Best-Known Companies , by Tom Peters and Robert Waterman Jr. Published in 1982, at a time when corporate America had been shocked out of its complacency by the rise of Japan Inc., In Search reminded readers that American companies such as HP and McDonald's still did some things right. BTL appeared just a year after Michael Hammer and James Champy's Reengineering the Corporation: A Manifesto for Business Revolution became an instant hit with its hard-core message of rethinking a company's processes (widely interpreted as getting rid of human beings).
BTL offered a message of hope and good feeling in an era when horizons seemed limitless: If you could unite your company around a system of core values that everyone actually believed in and goals that were wildly ambitious, you could have great success. "There are three critical success factors [with a business book]," says D'Aveni. "One, tell people what they want to hear and give them hope. Two, make it a Rorschach test, and three, keep it so simple that it really doesn't examine the truth of the world in enough depth so people get a false sense of clarity." BTL , he says, possesses all three.
For every management theory, there is an opposite one that makes as much sense.
Yet if the business-book world is filled with slippery frogs, BTL ends up looking like a relative prince, providing more hard evidence, in the form of historical research and good storytelling, than 99% of the books out there. Here, then, is the downside of writing a book chock-full of real examples: You set yourself up for criticism, because there's actually something there to criticize. It's difficult to do that with many other business best-sellers, such as Spencer Johnson's Who Moved My Cheese? : Certainly no one would bother trying to prove that the mouse was stupid or that the cheese was overripe.
In the end, though, there's this one big rub about management books -- even the best- selling ones and even the ones with plenty of data attached. The world they seek to describe is so complex, so tumultuous, often so random as to defy predictability and even rationality. "If Collins is to be faulted," says James O'Toole, research professor at the Center for Effective Organizations at USC's Marshall School of Business, "it is that he ignores Aristotle's advice not to try to scientifically measure those things that don't lend themselves to quantification." And all the jumble and chaos mean, says Bain's Rigby, that for every management theory, there is an equal and opposite theory that makes just as much sense. "Stick to your knitting, or don't put all your eggs in one basket," he says. "Better to be safe than sorry, but nothing ventured, nothing gained." Perhaps BTL readers would do well to follow the title of chapter seven: Try a Lot of Stuff and Keep What Works. Now there's some business advice worth taking.
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