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Originally Posted on Washington Post's On Leadership Blog
Q: Pope Benedict XVI's efforts to deal with the Church's sex scandal raises this question: Can a leader hold managers to account on an issue where his own past performance is in question?
Pope Benedict XVI is facing the greatest crisis of his long career. It's not just his leadership of the Vatican that is on the line, but the reputation of the entire Roman Catholic Church. If the Pope fails to face the reality that problems of pedophilia by priests have brought on the church, many Catholics may lose faith that their church leaders practice the same high moral standards that they preach. This situation is ironic for a Pope whose hallmark has been enforcing moral and sexual standards for one billion of the faithful. Does he have any choice but to require his priests to do the same?
Why is it so hard for the Vatican and especially this Pope to face reality? Is it denial? A cover-up? A double standard? Or simply a desire to protect its own leaders?
First of all, doing so means acknowledging that the church in not dealing as harshly with sexual deviants as civil law and basic morality would require. To suggest that these problems are limited to very few priests or a distant problem corrected long ago only accentuates public denial of the depth of these problems and widespread knowledge of them throughout the church hierarchy.
While addressing a crisis of this magnitude is painful, it must start with the Pope admitting mistakes the Vatican has made, including his own. Next, the Pope needs to deal as aggressively with past defenders as would be expected in a court of law. Then, he needs to install a compliance system that will prevent future occurrences and ensure the early identification of offenders. Finally, Pope Benedict XVI needs to make the Vatican itself much more transparent in order to prevent covering up problems in the future.
These steps, which are similar to what would be expected in government, public corporations, or other religious denominations, are required to protect children who believe in their church. Their protection is far more important than preventing wayward priests from being held to high moral standards.
The politicians chatter Sunday night during the historic House vote on access to health insurance gave the impression that reform was done. Speaker Pelosi called it an extension of the Declaration of Independence, declaring, “health care is a right,” not a responsibility. Republican Boehner all but claimed it marked the end of free enterprise.
Wrong on all counts.
Passing this bill is a momentous step in granting health case insurance to 32 million Americans who lack access, something we can finally take pride in. But it certainly doesn’t end the urgent need for health care reform. Rather, this is the end of the beginning. Now the hard work must begin in earnest.
The bill addresses only one of four essential elements of health care. Left unaddressed are cost, quality and lifestyles. Unless we focus on all four, we will continue to have a dysfunctional system with unaffordable costs.
The bill does virtually nothing to constrain health care costs. It is “paid for” with tax increases that take effect this year and projected cuts in Medicare reimbursement, while delaying most benefits until 2014. If we don’t get health care costs under control before then, the CBO projected deficit reductions will turn into a trillion dollar increase the following decade.
Even the current round of Medicare cuts – over 20% for many physicians and hospitals – is unsustainable, as politicians plan to reverse them retroactively. If they don’t, many physicians and hospitals will refuse to take Medicare patients, just as the Baby Boomers enter the Medicare system. Last month Mayo Clinic in Scottsdale announced it could not afford to accept Medicare patients. Longer term, this could push the U.S. toward the British system of splitting into private and public systems.
Nor does this bill constrain insurance premiums. Wellpoint’s 38 percent rate hikes in California are going into effect, in spite of jawboning by HHS Secretary Kathryn Sebelius. Expect other insurers to follow. Can you think of any other product or service that could pull off price increases of this magnitude?
To bring health care costs under control and sustain access for all Americans, three things are urgently needed:
- Realigning incentives for individuals and health care professionals
- Improving quality of medicine
- Taking responsibility for healthy lifestyles
Incentives. The incentives in the current system are perverse. There are no rewards for people who stay well, and no penalties for leading unhealthy lifestyles or overusing the system. Nor are there incentives for doctors and hospitals to keep people healthy and to prevent disease. Studies have shown that those who do so find themselves losing income.
As a result, primary care physicians are forced to pack more office visits into already crowded schedules, while spending less time with each patient. Specialists are incentivized to do more procedures, even when lower cost alternatives are available. Hospitals are forced to conduct more tests and get people out of the hospital before they are ready.
We need to realign these incentives by rewarding people for healthy lifestyles and taking more cost-effective approaches to their health. Hospitals and physicians should be rewarded for keeping people well, by paying for outcomes and managing groups of patients with similar disease states, as well as for prevention and wellness.
Quality. Experts like Donald Berwick, MD of Institute for Health Improvement and Charles Denham, MD of Texas Medical Institute of Technology have identified ten quality issues whose correction could save tens of billions each. Managing chronic disease, which accounts for 75 percent of health care costs, in a systematic manner instead of as a series of acute events, could improve outcomes and quality of life for millions of people, while dramatically lowering the cost of care. Yet there is no national push to get either of these things done.
Lifestyles. It is estimated that lifestyle issues like unhealthy diets, smoking, alcohol, lack of physical exercise, and unmanaged stress account for more than half of all health care costs. Addressing these issues requires a national movement for wellness and prevention, modeled after the highly successful anti-smoking campaign, something virtually ignored in the current legislation. To motivate people to take responsibility for their health and live healthy lives, there also must be rewards for those who do and penalties for those who don’t. Many successful ideas have been demonstrated locally through consumer-driven health plans and the integrated health movement. Now those must be taken to scale nationally.
This is a complex set of priorities to realize in an already-stressed system. It is too complex to leave in the hands of politicians who lack deep knowledge of health care and are swayed by lobbyists. For these reasons it is likely that solutions will be demonstrated in local communities and then taken to scale nationally. This is a long, arduous process. But unless we being immediately, the U.S. health care system will make our country less competitive and less healthy.
Now is the time for health care leaders locally and nationally to step up to these challenges and to lead the movement of the U.S. to healthy lifestyles and an effective health care system. Let’s get on with the hard work.
Originally posted in the Wall Street Journal on March 19, 2010
A revolution is reshaping America's best-led companies. Authentic leaders focused on customers are replacing the old guard of hierarchical leaders who concentrated on serving short-term shareholders. The old "command-and-control" style is being replaced with an empowering, collaborative style.
During the last half of the 20th century, business leadership became an elite profession, dominated by leaders who ruled their enterprises top down. Influenced by two World Wars and the Depression, organizational hierarchies were structured like military models.
Their leaders used multi-layered structures to establish control through rules and processes. People climbed hierarchies in search of power, status, money and perquisites. As stock holding periods dropped from eight years to six months, hierarchical leaders focused on generating short-term results, often to the exclusion of long- term growth.
In the past decade it all blew up, from the ethical scandals exposed by Enron and WorldCom to the Wall Street meltdown. As a result, people lost trust in business leaders to build sustainable institutions instead of serving themselves and short-term shareholders.
In my 1960s class at Harvard Business School our professor cited the Department of Defense and Catholic Church as the most iconic organizations. Business followed their lead, as General Electric, General Motors, AT&T and Sears became their role models.
By century's end, the latter three were in long-term decline, while GE was revolutionized by Jack Welch. Hundreds of other organizations like Kodak, Motorola and Westinghouse followed similar patterns of self-destruction. The hierarchical model simply wasn't working.
In retrospect, it seems obvious people weren't responding to "top down" leadership. Why not?
- The craftsman-apprentice model has been replaced by learning organizations, filled with workers with greater knowledge than their bosses.
- Young people are unwilling to spend ten years waiting for their chance to lead; instead, they want opportunities now, or they move on.
- People are looking for more than money, as few are willing to spend their lives in unfulfilling jobs, just for the compensation. Rather, they seek genuine satisfaction and meaning from their work.
To lead in this new century, we need authentic leaders who align people around mission and values, empower leaders at all levels, focus on serving customers, and collaborate throughout the organization, in order to achieve superior performance.
Aligning: The leader's most difficult task is to align people around the organization's mission and shared values. Gaining alignment takes regular engagement with employees at all levels. It is especially difficult in far-flung global organizations where local employees may be more loyal to native cultures than their employers, especially regarding business practices and customer relationships.
Global organizations thought they could solve this problem with rulebooks, training programs and compliance systems, and were shocked when people deviated. Aligned employees committed to the mission and values, and want to be part of something greater than themselves, form an enduring organization that is resilient through crises.
Empowering: Hierarchical leaders exert power over others and delegate limited amounts. These days that isn't leadership at all. Authentic leaders recognize they need leaders at all levels, especially on the front lines, where people must lead effectively without direct reports.
The leader's job is to empower people at all levels to step up and lead. Empowered leaders need sophisticated accountability systems with closed-loop management to ensure commitments are met.
Serving: Leaders' first obligation is not to their shareholders, but rather to their customers. Any organization that does not provide its customers with superior value relative to competitors will find itself going out of business. Employees are much more motivated to provide customers with superior products and services than to increase stock prices.
Collaborating: The challenging problems businesses face these days are too complex to be solved by individuals or single organizations. Collaboration—within the organization and with customers, suppliers, and even competitors—is required to achieve lasting solutions. Leaders must foster this collaborative spirit by eliminating internal politics and parochialism and focusing on cooperation internally to be competitive externally.
The ultimate measure of 21st century leaders is superior results. In today's business world, organizations filled with aligned, empowered and collaborative employees focused on serving customers will outperform a hierarchical organization every time. Top-down leaders may achieve near-term results, but only authentic leaders can galvanize the entire organization to sustain long-term performance.
Examples abound of organizations – Procter & Gamble, IBM, Novartis, Cisco, Genentech, Intel, General Mills, PepsiCo and Avon Products, to name a few – demonstrating that 21st century leadership creates lasting shareholder value. Authentic leaders like IBM's Sam Palmisano, Cisco's John Chambers, PepsiCo's Indra Nooyi, General Mills' Ken Powell and Avon's Andrea Jungare the new role models for modern corporations.
We need them to rebuild the trust that has been lost and to validate that capitalism is still the best economic system.
I own an iPhone and a Blackberry, and I use both constantly. Read articles. Set meetings. Watch videos. Send and receive emails. Check my Twitter feed. Find the best lunch spot in a new city. Chat with my friends and colleagues.
As one who's start-up small business thrives on social media - particularly, constant communication with my team, my clients, and my potential clients - I cannot imagine maintaining my current level of productivity or efficiency without my smart phones. As such, I would imagine other business leaders share a similar perspective, particularly as mobile devices become increasingly intuitive and practical.
For those leaders still on the fence, however, here are 8 reasons why I think mobility is critical for leadership:
- Every bad product review left unattended or complaint unresolved is an open wound for your company. Imagine the impact on a customer if you, the CEO, responds to his or her complaint, and actually fixes it. Imagine the ripples in the pond when word spreads of your customer-centricity. Little bad, and great good, can happen from genuine attempts at real-time problem-solving – and mobile web technology enables it more quickly.
- A definitive trend of the 21st century media has been an increase in velocity. You cannot ignore the pace of change – the speed of news cycles, the acceleration of your own company’s operations, and the ferocity of your competitors. Allowing yourself to be disconnected is to make way for others to sprint ahead.
- Crises – big (Toyota) and small (Google Buzz’s privacy hiccup) – do not wait for normal 9 to 5 business hours. As Bill George has so often noted, the first and most difficult step in resolving a crisis is facing the reality of your situation, beginning with yourself. Advanced mobile technology allows you to gather data, conference with your executive team, observe customer complaints, and mobilize around a response with the constraints of boardroom sitdowns. Akio Toyoda failed for a number of reasons, but his sluggish response was one of the most glaring.
- Your employees live in the mobile web. Ask Zappos’ Tony Hsieh or Google’s Eric Schmidt – each can attest to the inherent cultural benefits of open, active, mobile communication across social networks with employees.
- Your competitors live in the mobile web. And they are taking your customers.
- Your family and friends live online. Mobile technology offers much needed opportunities to connect with your spouse, children, friends and extended family to get a fresh perspective whenever you want or need to. No leader is successful without an active support network. Today’s mobile technology ensures you always have one.
- Your Web 2.0 culture-conscious customers expect you to be accessible by mobile, just as they expect your company employees to be. Mobile facilitates an even simpler and accommodating evolution in customer-interaction, and will allow you to monitor that evolution in real time.
- Mobile usage increased by 110% in the U.S. in 2009, and 148% percent worldwide as measured by growth in pageviews (see: January Quantcast report). Do you really want to have zero frame of reference as to the mobile lifestyle? That’s a dangerous concession. Get started now – if you’re new, there is a steep learning curve.
As my team, my family, and my friends often remind me, there’s always the “Power” button to set the necessary boundaries. Set them and stick to them, but actively engage in the meantime.
In my experience, you’ll be a better informed, more genuine, and more effective leader for it.
Posted Mar 9, 2010 by Bill George |
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Fortune magazine’s cover story this week (March 22, 2010) features none other than Maura Sullivan, U.S. Marine Corps Captain, my former student at Harvard Business School and a George Leadership Fellow during her third year at Harvard.
Rather than leading its highly anticipated “World’s Most Admired Companies” issue with Apple Computer, which captured the #1 spot for the third year in a row, Fortune features Sullivan and other former young military officers entering the work place as “the new face of business leadership.”
In the past six years I have had many recent vets in my leadership classes at Harvard. They often turn out to be among the best leaders in the class and have the greatest impact in sharing their stories with classmates.
The irony here is that these military vets have not had any experience in business. This is in sharp contrast to their business school peers who have an average of four years experience before going to business school. How, then, can they be so effective in the early years of their business careers?
When you talk to them outside the classroom, as I do frequently, the answer becomes apparent. Typically, from age 22-26 they are leading 100-150 people through the most severe crises one can imagine in Iraq and Afghanistan where your life and the lives of your people is on the line every day. Meanwhile, most pre-MBA students qualify for business school admission by working in staff roles in financial services or consulting rather than plunging into line management.
The conclusion I reach from working directly with hundreds of MBAs, includes dozens of former military officers is that actual leadership experience, especially in crisis situations, is better preparation for business than business experience in staff, consultative, or analytical roles.
Sullivan’s story is especially relevant here. As a twenty-two-year-old 2nd Lieutenant in the Marine Corps, she was shipped to Okinawa, Japan in 2002. There she was given immediate responsibility for training 23 Marines and created a comprehensive training plan for over 350 personnel.
As a 1st Lieutenant in 2004, Sullivan was sent to Fallujah at the height of the Iraq War. There she supervised 738 logistical support missions in hostile territory under exceedingly stressful conditions. For her efforts she was awarded the Navy Achievement Medal for “outstanding performance in combat zone.”
Promoted to Captain and deployed to Camp LeJeune, North Carolina, Sullivan planned and supervised one of the largest internal reorganizations in Marine Corps history. Through this process she reallocated eight battalions, 8,000 personnel, and $300M budget from functional organizations to a task-organized structure. Her efforts enabled rapid deployment of these personnel to combat operations, for which she was awarded the Navy Commendation Medal.
Sullivan’s experience is hardly unique, as I know many other junior military officers with analogous experiences. How many young business people get this kind of business experience by the time they are twenty-six?
Corporations could put them in line roles in manufacturing, retail store management, sales, or logistics, all of which would provide the experience of managing significant numbers of people with clear measurements. In my judgment, this would be far preferable to the growing tradition of putting high potential young people through training programs or analytical roles where power point charts rather than business results become their outputs.
Bottom line: business has a lot it can learn from the military’s approach to developing leaders.
Posted Mar 6, 2010 by Bill George |
Filed in:
Originally posted in Star Tribune
At a University of Minnesota leadership seminar last week I posed this question: "Rather than waiting for Washington to devise the ideal national system, what should Minnesota's leaders do to transform the state's health care?"
The Humphrey Policy Fellows in attendance concluded that the national debate was neglecting the most important issue, which they framed this way: "Each of us should take responsibility for our own health, supported by our health care team, composed of physicians, nurses, health care and wellness professionals."
This notion, as self-evident as it sounds, would represent a profound shift from the current philosophy, which assumes the health care system is responsible for curing disease and healing us.
Even if the current federal legislation eventually passes, it will only address one aspect of health care: expanding access to insurance.
Every American should have health insurance, regardless of their age or health status. But access is only one element of the complex health care equation.
Virtually overlooked at the federal level are three equally important aspects of health care: cost, quality and personal responsibility. Without addressing these essential areas, the health care crisis cannot be resolved.
One lesson from the federal effort is that health care at the national level is too complex to yield to a single comprehensive solution. America's health care needs are too diverse geographically to devise a "one-size-fits-all" formula. Instead of waiting for Washington, Minnesota's health care leaders should seize the initiative and move forward with the optimal health system for Minnesotans.
State is national model
If you have a serious health problem, there is no better place to get well than Minnesota. Our state is a model for the nation in health care efficiency, quality, cost-effectiveness and integrated care. Yet we, too, face a deepening health care crisis.
Before offering suggestions for transforming Minnesota health care, let me share what I have learned in the last 20 years of examining health care systems throughout the United States and comparing them to countries around the globe:
•There is no organized health care system in this country. Instead, we have very fragmented and expensive sick care.
•Incentives in the reimbursement system drive higher usage, more procedures and tests and lack a focus on wellness and prevention.
•Ever since the discovery of antibiotics to cure infectious disease, we have searched for cures to chronic diseases. The breakthroughs in medicine in recent decades -- and there have been enormous advances -- have helped us get well and extended our lives, but haven't eradicated chronic diseases. Cancer research, for example, has produced treatments that help millions of people. But there is still no universal cure for cancer.
•Unhealthy lifestyles account for more than half of the cost of health care. We label our problems as diabetes, alcoholism, heart disease, cancer and back and joint disease. Yet in over half the cases these diseases emanate from a lack of focus on wellness and prevention.
Living a healthy life starts with the responsibility each person has to focus on wellness and disease prevention. Rather than waiting until we get sick, we need a diverse team of health care providers to educate and assist us in staying healthy.
Personal responsibility
When we get sick, we are responsible for getting and staying well, with the full support of our health care team. They can help us on the road to recovery, but we still have the responsibility to take the necessary steps to avoid recurrence. For many people this represents a major shift in outlook.
How do we make this happen in Minnesota?
First, we need a public awareness and education campaign to encourage healthful lifestyles, modeled after the successful anti-smoking campaigns. This campaign should be led by public health experts and funded through public-private partnerships that include state funds.
Second, we need to recognize that primary care and specialty care have very different purposes and organize accordingly. The purpose of primary care is wellness and prevention and treatment of acute disease. These days people should not depend on a single physician to provide care. Instead, they need a team of people to get well and stay well.
Primary care needs to move away from costly one-to-one care by physicians. Primary care teams should be led by physicians, who oversee teams of nurses, nutritionists, health and fitness coaches, stress-reduction experts and complementary practitioners. Their goal is to keep people well, prevent illness and treat acute disease. Primary care should be compensated for helping people stay well, not just for procedures and tests.
Lack of access to health care remains a serious problem driving up health care costs. To address it, we should expand our community health centers, where everyone can access teams of wellness, prevention and primary care practitioners. Much of this care can be provided in groups of people, rather than in individual sessions. Payment for these services would be based on ability to pay, with state government supplements for those who could not afford these services.
Specialty care
People who develop serious diseases need teams of specialists who are expert in that disease. Specialty care should focus on the coordinated management of chronic disease, instead of treating it as a series of acute events. The specialists should be paid for managing people based on outcomes, not just for doing surgery or procedures.
The rapidly rising costs of chronic disease, which accounts for 75 percent of health care costs, could be dramatically reduced if patients enrolled in chronic-disease management programs. Through these programs specialty teams would help patients develop personalized health plans, based on integrative medicine principles. These include the mind-body connection, physical exercise, healthful eating and stress management skills. These principles are key to both quality of life and preventing disease from recurring.
To cover the staggering cost of chronic disease, all Minnesotans should have the opportunity to purchase catastrophic care insurance, using statewide health insurance exchanges. Catastrophic coverage should be based on low-premium, high-deductible plans that kick in when individuals incur expenses beyond a pre-determined dollar amount, based on their income level. Paperwork can be dramatically reduced with fully electronic billing systems. Medtronic pioneered these plans a decade ago with great success in terms of wellness and cost.
Every legal resident of the state should be eligible for these plans, regardless of preexisting conditions or employment status. For individuals, the costs of catastrophic coverage would be deductible from state taxes, with tax credits applied to those who lack adequate income to afford the premiums. To help pay for this coverage, the tax-free portion of employer-based plans would be limited to $10,000 for individuals and $18,000 for families, with any excess treated as ordinary income for state income taxes. Initially, catastrophic coverage should be voluntary, with a firm future date set in which coverage becomes mandatory, just like it is for automobile insurance.
Minnesota has long been the national leader in health care. From the University of Minnesota to the Mayo Clinic, leading hospitals in the Allina, Fairview and other hospital systems, pioneering nonprofit insurance and health maintenance organizations like Health Partners, the Blues, and Medica, and the medical technology industry, we have many of the finest health organizations in the world.
Minnesota is uniquely positioned to create the optimal health care system that serves all Minnesotans by shifting from disease care to wellness and prevention and integrated care for the sick.
Originally Posted on Harvard Business School Working Knowledge
Toyota's tragic automobile recalls offer a historic opportunity for Ford's CEO Alan Mulally and General Motors' new CEO Ed Whitacre. After years of decline, they can reestablish the preeminence of American-made autos if they are wise at leading through this crisis.
In the past month Toyota has recalled almost 9 million vehicles—more than the entire number it sold the past three years. The irony is that Toyota gained significant market share in the past decade at the expense of its American competitors by offering superior quality vehicles. Now quality has become Toyota's Achilles' heel.
"This [process] will take enormous effort, ingenuity, and discipline along with massive investments."
No doubt Toyota will regain some of its lost market share in the short term, to the extent the automaker's production systems can respond by increasing production rates without incurring problems of their own. The bigger question is, will Ford and GM be able to capitalize on this opportunity for the long term?
I was with Whitacre when he initially learned that Toyota was suspending sales of 57 percent of its autos sold in the United States. He responded immediately by directing his executives to ramp-up production as quickly as possible.
While Whitacre and Mulally maximize current sales, taking advantage of this opportunity in the near term is not a long-term strategy. All too often, both GM and Ford have squandered similar opportunities by simply raising prices and profits, as they did during the three-year import quotas in the mid-1980s. They must recognize that no matter how wounded Toyota is in the short term by its quality problems, this company is a very tough and able competitor that will move quickly to revamp its quality and its product offerings.
On the march
GM and Ford need to move aggressively to secure their market share gains by investing windfall profits to make their auto lineups more competitive for the next decade. That means introducing new designs that offer attractive features, improved fuel efficiency, and better customer value along with superior quality. This will take enormous effort, ingenuity, and discipline along with massive investments.
In this regard, Ford has the jump on GM. When Mulally was hired from Boeing in 2006, Ford was in trouble. The company was stretched thin with too many product lines spanning too many countries and appealing to too few consumers. Mulally's first act was to borrow $23.5 billion by mortgaging the entire company to give Ford the runway necessary to retool its aging lineup.
Mulally moved fast, trimming unpopular lines, cutting management layers, and insisting on an R&D overhaul that hurt short-term profits. Having weathered the 2008 crisis without U.S. government support, Ford has $23 billion in cash in the bank and a lineup of eco-friendly automobiles to which U.S. consumers are gravitating.
GM only emerged from bankruptcy last July, when Whitacre was installed by the Obama administration as its new board chair. Since that time, he has acted decisively, removing Fritz Henderson as CEO and assuming the mantle himself. Whitacre quickly reorganized the company from top to bottom, cut out layers of middle management, initiated new product development programs, and revamped GM's international sales and marketing. He also put himself on the firing line, publicly taking ownership for GM's turnaround and appearing in a series of advertisements challenging consumers to compare GM autos with its competitors.
Glimmers of Ford's and GM's potential shone brightly at the Detroit Auto Show last month. Mulally showcased his new model range. Car experts and reviewers alike agreed the new models revitalized Ford. Whitacre also unveiled a new line of cars, admittedly trailing Ford, particularly in hybrids. He boldly predicted GM would be profitable in 2010 and would pay off its government loans.
January sales for Ford and GM jumped 24 percent and nearly 14 percent, respectively, year over year, in spite of high unemployment and low consumer confidence.
Chrysler falls further
In contrast, look at Chrysler and its new CEO, Sergio Marchionne. He ambitiously projected that Chrysler would become profitable in 2010 on an 18 percent increase in sales. Instead, Chrysler sales dropped 8 percent in January. Marchionne has not been aggressive in revamping Chrysler vehicles, repositioning the company's brand, or reorganizing its beleaguered management. As a result, it is falling further behind and missing this golden opportunity.
The last and perhaps most important lesson for leaders going through a crisis is that they cannot just play defense by cutting costs and waiting for the crisis to pass. They have to go on offense simultaneously by transforming their organizations and investing heavily in revamping their products and their marketing to focus on winning now.
That's precisely what Mulally and Whitacre are doing. They may not be automobile industry veterans, but they are highly competitive leaders, skilled at winning in the marketplace. The American automobile industry is a lot stronger today because of their decisive, visionary leadership.
