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Blog > Category: Leadership
Last Tuesday I gave a webinar on “Leading a Global Enterprise” for HBS alums. You may be interested in reviewing the slides I used. Also, please consider attending our new course, “Leading a Global Enterprise,” for global executives next July 28 - August 2, 2013. It’s a one-week compact course that will help you become a much better global executive.
From: McKinsey Quarterly, February 2013
Board governance is frequently discussed and often misunderstood. In this article, I offer an insider’s perspective on the topic. Over the years, I have had the privilege of serving on ten corporate boards, as well as being chairman and CEO of Medtronic, chairman only, and CEO only. I have also observed dozens of boards from outside the boardroom and engaged in numerous confidential conversations with members of these boards about the challenges they faced and how they handled them.
What I have learned from these experiences is that one’s perspective about a board’s governance is strongly influenced by the seat one holds—independent director, chair and CEO, CEO only, or chair only. That’s why it is essential to look at corporate governance through the eyes of each of these positions.
In surveying governance through the lens of different roles, I hope to address a problem in the prevailing dialogue: many of the governance experts exerting power over boards through shareholder proposals, media articles, and legislative actions have never participated in an executive session of a major board. It’s no surprise, therefore, that their proposals deal almost entirely with formal board processes and “check the box” criteria that generally have little to do with the substance of how boards operate.
I worry, in fact, that many of these proposals could weaken the performance of boards by burdening them with an excessive amount of ministerial details. That would be a shame, because corporate boards have made progress since the scandals of recent years, with a new generation of CEOs sharing with boards more openly, listening to them more closely, and working to achieve a healthier balance of power with independent directors.
Role 1: The independent director
The combination of new governance regulations and rising expectations makes serving as an independent director much more important—and difficult—than it was in years past. The greatest challenge these directors face is to stay fully informed about the companies on whose boards they serve.
Information asymmetry is often at the root of this challenge. When directors are truly independent of the companies they serve, they generally lack the wealth of knowledge about the industry or business that their senior-executive counterparts have. Moreover, independent directors typically have limited engagement with the company and its board, meeting perhaps six to eight times a year. Consequently, management has far more information than independent directors can ever absorb. I recall this challenge well: of the nine boards I served on as an independent director—across a range of industries—I had industry-specific knowledge in exactly none of them.
In one instance, I recall asking why a company wanted to implement an aggressive stock-buyback program when it might be better to preserve cash to take advantage of opportunities or to use as a cushion if cash flow turned negative. My question was not well received. The CFO argued that the company had always been able to raise cash when it was needed and had never passed up an opportunity for lack of cash. A fellow director told me that I simply didn’t understand the industry and that stock buybacks were routine. So I backed off.
However, a year later the company became so concerned about volatility in financial markets that it suspended all stock buybacks and began an aggressive program of increasing its liquidity. That was a good thing, because the following year the markets completely shut down when the credit and liquidity crunch occurred. Had the firm not had a large cash reserve, it might have wound up insolvent, like many of its competitors.
Whether or not my questions a year earlier helped nudge management in this direction, I strongly believe that independent directors can provide leadership and contribute to the companies they serve in ways that go beyond meeting the basic legal requirements and fiduciary responsibilities inherent in board service. In addition to asking tough questions, three opportunities stand out.
Be an advocate for sound governance
Independent directors should be advocates—and enforcers—of sound governance principles. This is especially important in challenging times or when the company is in crisis. Too many directors accept board governance as it is, without suggesting the kinds of process improvements that would make a difference; some directors even resist them.
Yet process matters hugely in the boardroom, and not just to make sure a company abides by governance rules. Process steps help to keep board members engaged and able to fulfill their responsibilities and, more important, establish the proper balance of power between management and the board.
Perhaps the most useful aspect of the governance rules passed a decade ago in the United States is the requirement that independent directors meet in executive session without the CEO present. These sessions give directors the opportunity to share concerns about the company and to ask for improved governance steps or additional reviews. They are also a time to discuss privately any concerns that directors have about management and to ensure that directors are fully informed. Finally, the sessions are useful in building chemistry among the independent directors.
Good chemistry is important. The director of a major European company shared with me his frustration when he challenged its CEO and the direction in which the chief executive was moving the company, but received no support—just silence—from his fellow directors. Later, when the board went into executive session without the CEO in the room, the directors around the table unanimously agreed with this director, saying that the CEO was not providing the right leadership or taking the company in a sound direction.
Nearly all independent directors say that selecting the right leadership for a firm is their most important role. Yet in my experience, the time spent on succession is far too limited and the discussion not nearly candid enough. All too often, board members settle for a “hit by a bus” contingency plan. Such plans are crucial, of course, even if just for an interim period. Yet oftentimes the person ultimately identified to lead is just the most obvious interim leader, not the best long-term successor.
To better prepare for succession, boards should have multiple discussions each year to identify the company’s next generation of leaders. They need to create ways to get to know these candidates personally and observe them in crises and under pressure. The board should also create a series of assignments to prepare prospective CEOs and other senior-executive candidates.
If succession isn’t taken seriously, directors may find that when the time comes, they do not have confidence in the internal candidates. Faced with this situation, directors may react—or overreact—by immediately initiating an external search, which bears substantial risks of its own. Outside hires may look good on paper and have been successful elsewhere, but it is not uncommon to find they do not understand the company’s culture and values and do not take the time to identify the people who make the organization run successfully.
The board should instead conduct detailed leadership-succession-planning sessions to review candidates and their progression, ensuring that they have the necessary experiences to get them ready for the top jobs. In these reviews, the age of the potential top leaders matters. They should not be so close in age to the CEO that they would be unable to have a sufficiently long tenure as CEO prior to reaching mandatory retirement, nor can they be so young that there simply isn’t time for them to have the experiences they need for such a major task. Thus, the process of identifying candidates for top roles must start early—typically, with leaders who are barely 30 years old.
On one board on which I served, the long-time CEO, who was doing an excellent job, steadfastly resisted the board’s insistence that he develop potential successors. Frustrated by his inaction, the compensation committee (of which I was not a member) voted to provide him with a special bonus for grooming a prospective successor. He then reluctantly initiated an external search for a chief operating officer.
However, before any candidates were identified, he set up an off-site meeting with the independent directors to recommend that the external search be canceled because “it was causing too much disruption.” Instead, he proposed to the board that he would develop some much younger candidates who not only were several years away from being viable successors but also, in some cases, seemed unlikely ever to make effective CEOs.
That was enough for me. I decided to resign rather than remain part of what I viewed as a charade. The CEO stayed for many more years, eventually stepping down after two decades in the job. Even then, he continued to occupy his CEO office at company headquarters. His successor, who was quite junior to him in age, found that managers routinely took problems and opportunities to the old CEO, thereby undermining the new CEO’s authority.
Leading in crisis
The real test of a board of directors comes when the company is in crisis. Independent directors, in particular, are counted upon to step up to their responsibilities in difficult times. Their accumulated wisdom and judgment are crucial to make sound decisions under the pressure of time and media attention.
The overarching lesson I have distilled from the crises I’ve experienced (among them, the termination or resignation of CEOs, external financial crises such as the 2008 financial-market meltdown, major governmental action against the firm, and an unexpected takeover attempt) is that board members need to understand and trust each other. Only when they can have candid conversations will they ultimately reach a consensus that has positive and far-reaching implications for the company. Trust becomes even more important when meetings are conducted by telephone, which is often the case in crises.
The bottom line for independent directors is that their responsibilities and obligations are so great these days that they cannot serve on a board and expect to preside while fulfilling only the minimum requirements. Rather, independent directors must be fully engaged, do their best to learn the business, and stay connected between meetings. Otherwise, they won’t be prepared to lead when a crisis hits. For many independent directors, this will mean not serving on as many boards as they did in the past—a change that’s appropriate given the time it takes to be an effective board member.
Role 2: CEO with nonexecutive chair
In 1991, I became CEO of Medtronic, two years after joining the company as president and chief operating officer. My predecessor, who had just turned 65, continued as chair of the board. I was quite satisfied with this arrangement. His wealth of experience and wisdom were valuable to me as CEO, and he had the board’s full confidence. He was also more than willing to take on difficult assignments at my request regarding delicate government and legal issues.
This dual structure—the standard model in Europe—is preferred by most governance experts and some regulators. The split clearly distinguishes the role of management (to lead the company) from that of the board chair (to take responsibility for the board and governance).
Yet as obvious as the structure seems in principle, I have seen no evidence or research to demonstrate that split roles create superior performance or even provide greater stability at the top. Anecdotally, the opposite is often the case.
In practice, the model’s effectiveness depends on the relationship between the two individuals in these roles. If they are not squarely in agreement about the direction, leadership, and strategy of the company, an unhealthy separation may emerge within the board, and between management and the board. The result can be a lack of clear direction for the company—a state of affairs that leads to malaise or confusion within the employee ranks and, ultimately, to dissatisfied customers and shareholders. In the worst case, the two leaders engage in a power struggle that paralyzes both management and the board, thus preventing the company from making important decisions and responding quickly to changing conditions.
As much as I initially supported the separation of roles when I became CEO, over time the arrangement became more difficult. For example, some board members seemed confused about whom they should look to for strategic direction, especially in the case of acquisitions. In addition, the chair felt he should be “the eyes and ears of the board” in the company. Over time, this led to some confusion within management about his role. The board was also somewhat confused about whether I reported to him or to the board as a whole, an issue that was never fully clarified. Quite naturally, I felt that I reported to the board as a whole and that my responsibility and authority to lead the company depended on those relationships.
Tension also developed because board members seemed hesitant to give me direct feedback or to talk openly about their concerns. When I became board chair as well as CEO, this tension evaporated quickly, and I found myself spending far less time on board governance. In part, this happened because communication lines opened up and were more direct. By contrast, when the roles had been separate, I found I had to spend more time than I had expected involved in board governance and in responding to issues raised by the board.
Role 3: The dual mandate
North American CEOs strongly prefer the dual mandate of being board chair and CEO, as it puts them squarely in charge and avoids the likelihood of conflicts or power struggles within the boardroom. The downside of this model is that in the past it often encouraged complacency by boards and discouraged them from getting deeply involved in issues until it was too late.
In practical terms, a leader is most effective in dual-mandate roles when he or she starts by keeping independent directors well informed through a combination of telephone updates, monthly progress reports, and candid comments in executive sessions with the independent directors about the real-time issues facing the company. The leader must be responsive to the independent directors’ concerns and either take action on them or put them on the board agenda for discussion by the full board.
Such a leader also must learn to perform a delicate balancing act: facilitating open discussions on the board while at the same time representing management’s position to it. If this individual argues his or her case too strenuously, he or she may shut down thoughtful comments from the independent directors. On the other hand, if the individual acts solely as a facilitator of these discussions, the directors won’t get the full benefit of management’s thinking and rationale.
Having served on several boards with a single leader in the combined roles of chair and CEO, I have learned that a board is most effective when the leader clearly understands the difference between these two roles and bends over backward to respect the board’s independence. This independence extends to the directors’ need to have open discussions without the CEO present, to ensure that important issues are addressed privately.
Similarly, when I had this dual role, I did whatever I could to open up meaningful discussions within the board, especially by drawing out the opinions of its quieter members. This was particularly challenging when the board was discussing important strategic issues or acquisitions and needed the benefit of my judgments and insights. I had to learn to withhold my opinions until others had the opportunity to offer theirs and then work them into the context of my conclusions. Frequently, this meant delaying decisions until the board had time to digest the ideas or management could undertake additional analyses.
One of the benefits the board and I had was an active, capable lead director with whom I could work closely. He did a superb job in guiding the issues of the independent directors and in keeping me fully informed of any concerns and issues the board might have. When it came time to select my successor, he developed a sound process that we both agreed upon and led the board through it.
The rise of the role of lead director, elected by the independent directors, is contributing to a better separation of governance from management. To make the position work effectively, it is essential that this role have a separate job description that is publicly available and respected by the chair and CEO. The most effective lead directors view themselves as “first among equals” and can coordinate the opinions of all directors and facilitate open discussion among them.
Role 4: Non-CEO chair
The role played by a non-CEO board chair will depend heavily on the experience that person brings to the position. If this individual was the previous CEO—a common situation—he or she will bring a wealth of experience, a keen knowledge of the other directors, some strong opinions about what the company needs, and oftentimes a legacy to nourish or at least maintain. Therein lies the difficulty: no matter how hard old CEOs try to restrain themselves, they may have a tendency to overshadow or, worse, override new CEOs.
This problem is exacerbated by independent directors who still rely heavily on the ex-CEO’s opinions and may trust his or her recommendations more than they do those of the current CEO. Still, when former CEOs can restrain themselves, recognize that it is time to let go, and do everything they can to support their successors, they can be very effective in the role of board chair.
In my case at Medtronic, I was committed to a seamless transition with my successor and to ensuring his success and the company’s. Also, the board and I had agreed upon a timetable of just one year for me to serve as chair, so I was clearly in a transitional mode. I was still in my 50s and looking forward to turning my attention to other interests.
Nevertheless, it didn’t take long before I faced a board-level challenge. It came at an off-site board meeting just a month after the CEO transition. For 15 years, dating back to my predecessor’s tenure, Medtronic had pursued publicly announced goals of 15 percent per annum growth in both revenues and profits, compounded over any five-year period. These aggressive goals provided discipline within the company and a consistent benchmark for shareholders. We had been successful in exceeding these goals, but not without risks and challenges.
At a board meeting, however, one of the independent directors argued forcefully that given the company’s larger size, it would be impossible to continue to achieve such high rates of growth. Although I was tempted to jump into the discussion and defend the importance of the goals, I held my fire. My successor held firm, and the company stayed the course.
Many people make a strong case that a former CEO is not the right person to serve as board chair and that he or she should leave the board immediately. An alternate choice could be one of the existing directors, provided there is a well-qualified candidate available. An equally good choice is to appoint someone who has served as chair, CEO, or both at another company. In some countries, the board chair may be an independent attorney or financial expert, but this approach risks ending up with a candidate who has insufficient knowledge of the company, its business, and what it takes to lead it. Regardless of who holds the position, it must have a well-defined job description to keep accountability strong. A nonexecutive chair should be formally evaluated at least annually by fellow board members. Finally, the position should have a defined term of office, after which a new nonexecutive chair is elected or the existing chair is formally reelected.
The diversity of perspectives that board members bring to the role can be a considerable strength for the companies they serve. How can organizations make the most of it? Here are three suggestions.
- The board should acknowledge that no single structure works in all cases. Boards must be pragmatic enough to adapt to the individuals involved rather than put a rigid structure in place.
- All parties, but especially CEOs, should acknowledge different points of view and work to minimize the conflicts that inevitably arise from them. This requires high-level listening skills, the ability to see situations from the other person’s perspective, and the wisdom to understand the basis for the different points of view.
- All directors, but especially CEOs, can benefit from holding different positions, either within the company or on other companies’ boards. Nominating committees should seek out prospective board members with diverse experiences. Boards should also encourage CEOs to serve on at least one outside board to give them the experience of being an independent director and seeing firsthand the challenges outside directors face.
If these basic guidelines are followed, I believe that board governance will improve markedly. As a result, companies will have a steady hand in the boardroom to sustain their achievements through successive generations of leadership and board membership.
Here is my interview with Bob Vanourek on how to achieve Triple Crown Leadership through ethics & values combined with high performance and leaders at all levels: http://bit.ly/RHwKLf
Full Text Here:
Bill George was the COO, then CEO and Chairman, of Medtronic from 1989 through 2002, the years when annual revenue increased an average 18% and earnings increased 22%. A host of innovative products were introduced during this time, and the price-to-earnings ratio of Medtronic’s stock went from 11 to 45. But the Medtronic story goes beyond growth and earnings, demonstrating how to build an excellent, ethical, and enduring company.
George is the author of Authentic Leadership, True North (co-authored with Peter Sims),Finding Your True North, and Seven Lessons for Leading in a Crisis. He currently teaches at the Harvard Business School.
Here are edited excerpts of our interview with him for Triple Crown Leadership.
How would you describe Medtronic’s leadership approach?
George: The company was very mission-focused and values-centered. Our employees were focused on patients, thanks to the annual holiday program, which highlighted Medtronic patients, and the mission-medallion ceremonies that all new employees went through in their first six months.
[Authors’ Note: Medtronic’s bronze medallion bears the words “toward full life” and is intended to remind employees to honor the company's mission: “You are here not to make money for yourself or the company, but to restore people to full life.”]
But what the company lacked was closed-loop management and good discipline. They operated with excuses, alibis, and reasons for non-performance. Products that would normally take 24 months to come to market took 48. We changed that to a 16- to 18-month cycle, which put Medtronic way ahead of its competitors and changed the whole game. But that required disciplined, close-loop management.
The same was true with budgetary controls. People felt that they could overspend budgets. As one senior executive said to me, “I’d rather ask for forgiveness than permission,” and he hired 80 people that weren’t authorized during the middle of a hiring freeze. People could stop the founder, who actually had no managerial responsibility, tell him about a program, and he’d say, “Go for it!” The next thing you know, they’d spent a million dollars on it.
I talked a great deal about empowerment with accountability.
How else did you approach leadership at Medtronic?
George: I embraced the mission and values and talked about them all the time. I believed in being very close to the customer. The organization was very inward looking. So, I started going out to major medical centers and spending a great deal of time with doctors. I said to all of the engineers, “You need to get into medical centers too.”
We also de-layered the company, taking out two to three layers of management. We said, “You don’t need six or eight direct reports; you need twelve to twenty.” That put management much closer to customers and to the action.
How would you describe Medtronic’s culture?
George: The culture was very caring, people-oriented, values-centered, and mission-driven. But the culture was soft. The board used to call it a country club. If there were non-performers, the organization would say, “This person is very loyal.”
The company did not have the leadership skills at the top, that had to be totally rebuilt with new hires as well as picking some people who seemed to have potential and giving them a shot. There were no general managers, so we took some functional heads and made them general managers. Most of them made it; some did not.
It sounds like you were guiding the culture in a new direction?
George: A completely new direction. It was a little jarring to people. We had to grow up. We had to grow from a mid-size company to a large company. I had to get the leadership team on board for this, and pick out those who were on board, and others had to step aside.
A good example was the head of worldwide business, who had the capacity to look the other way when there were ethical deviations. To my knowledge, he never actually conducted any ethical deviations, but he looked the other way. He accepted that as normal.
In the old days, no one wanted to ask what the overseas distributors did. Their independence was a shield for unethical behavior, as long as they signed a statement indicating they would be ethical.
A former general counsel of Medtronic said, “Don’t ask too much about what the distributors do.” I learned certain Korean distributors were providing prostitutes for physicians after they had implanted their pacemakers. I asked the head of international to send a letter that day terminating all four distributors. Everyone said, “You won’t have anyone in Korea.” I said, “We’ll start over. We don’t tolerate unethical behavior.”
What other changes did you make when you came in?
George: We had major quality problems, so I put in our own internal focus on quality, made that the driving force of closed-loop quality measurement and getting the actual quality results up in the eyes of the customer.
Human Resources was supporting many of the poor performers. They thought loyalty was more important than performance, that management was too tough and that we needed managers who were people oriented. Sometimes, people give the impression of being people-oriented. They say all the right words, and people love to work with them, but they never get results. So, I changed the Human Resources leadership.
We had a series of ethical crises internationally because leaders accepted that this was the way that business was done. We had to fire a lot of managers and send others over to hold the fort. We put in performance-management systems, did not tolerate unethical behavior, and weeded out the poor performers.
What role did the board take in creating this new culture?
George: One of the reasons the board hired me was to put in closed-loop management. I was the first executive hired from the outside. I had free rein to run the business, and I quickly reorganized it into strategic business units and away from the worldwide functional organization. The board was extremely supportive.
Did you consider Medtronic to be a high-performance organization?
George: It was not a high performance organization early on, but from about 1994, yes. I would define a high-performance organization as one that can sustain its growth by excelling in the areas where it considers itself the best. Medtronic was the best innovator and the best provider of customer services. Those were the two areas where it excelled. Business Week once called Medtronic an “innovation machine.”
Medtronic then got lots of awards as the most ethical company, most innovative company, most admired company in the industry, and one of Fortune’s most admired, year after year.
What did you look for in your leaders?
George: The most important thing was to be passionate about the mission, to believe in and execute the values of the company, and to translate those into actual results. People who really got it from a mission standpoint, who were committed to and would practice the values every day, and would translate that into results for patients. Those are the best leaders.
How important is a healthy personal core in leaders?
George: Extremely important. Long before I joined, the company had a meditation room, which was symbolic of the fact that people needed to be reflective. I spent a lot of time encouraging people to think about how their personal values aligned with the company’s values, and how their personal mission of leadership aligned with the company’s mission. If they couldn’t do that, it was best that they leave. Some people saw the world strictly as numbers. They didn’t get what was at the other end of those numbers.
Our cafeteria served only healthy foods. We put major fitness centers in every one of our facilities. We put one in our new headquarters, and within six months, we had to double the size because it was being used so heavily. As a result, Medtronic’s healthcare costs were less than half of the national average.
I used to leave meetings regularly at 5:30 and go coach soccer. People would say, “Where are you going?” I’d say, “I’m going to coach my son’s soccer game.” That sent a message.
Did you change the mission, values, or vision of the company?
George: Our mission and values were well established. The vision did change in 1990, and I changed it again in 2000 because I think that visions should change every ten years. In 1990, we established a ten-year vision for Medtronic to become the world’s leading medical technology company. Then in 2000 it changed to “creating lifelong solutions for people with chronic disease.”
We created a series of task teams to look at different aspects of what the world would look like in the year 2010, including the technology, marketplace, and disease states. The head of strategic planning led the teams. It took about nine months. We had an executive-level committee team that reviewed the ideas and came up with the new vision after reviewing what the various teams had to say.
We brought a lot of new people in, and the key was making sure that the newcomers got fully inculcated into the culture. First, we interviewed for it. Second, we got them involved in their own mission medallion ceremonies, so they “got it.”
Do you think that leadership has a hard edge and a soft edge?
George: I don’t like the words “hard” and “soft” because I think that the hardest job any leader has is to align the people around the company’s mission and values. It’s really hard work. In a global organization, it’s extremely hard. But I think that one must do both, and that’s a fact in closed-loop management that you have to expect people to deliver. What good is a mission or a value if there’s no performance?
You have to have leadership to do both. The top person can’t be the soft side, and then have someone else, the number two person, lean the hard way. You’ve got to do both yourself. I don’t think it’s too much to ask from your leadership team. If you want to be a leader in Medtronic, you’ve got to do both. You’ve got to embrace the mission and values, and you have to perform, or you can’t work here.
Was leadership at Medtronic concentrated or disbursed?
George: I believe leadership is everyone’s job. The top leader’s job is to get others to lead. I think that leadership should be distributed widely throughout the organization, and the compensation system, such as bonuses and stock options, should be aligned with that distributed notion. People repeatedly said, “Don’t give me all those stock options. Let’s spread them around to my people.” It became a very normal kind of thing, so we very broadly spread the compensation system in our company. At our 50th anniversary in 1999, everyone got 100 shares of the stock.
Did you ever struggle to bite your tongue to keep from dominating a meeting?
George: All the time. I got pretty good at that. I wanted to get my opinions out, and I wanted you to take me on. I don’t want you to bother with authority. So that was hard, yes. I tend to be very direct, and I assume that you’re strong enough to take me on. Not everyone is. Some people still have deference to power. It took a while for people to realize that it wasn’t just a hard edge that I had.
What was it like leading at Medtronic?
George: You have a team of people around you that are really trying to make a difference, and you hit barriers, and the team really comes together, taking on really tough problems, working together in the trenches to get it done. People who have more expertise step up. People are willing to give everything they’ve got and be honest and open about problems they have, and they call on support from others.
Any other thoughts on leadership?
George: You can’t drive high performance today from the top. You have to empower people to perform. Just having processes and disciplines will not be sustainable. It may get results for a short time, it may pull you out of some difficulties, but it will not be able to sustain success. The reason is that people in organizations today are not going to work in a large, bureaucratic, command-and-control organization. The key is giving young people an opportunity to step up and lead, giving them chances to show what they can do. People in organizations are looking for more than money. I think that the economists in the nineties got it wrong by saying that it’s all about maximizing shareholder value, and that the stock price is the single point to measure everything by. That’s nonsense.
The reality is that when you operate with marginal values, and you have a marginal strategy, and you’re a heroic figure in the eyes of the media, you’re probably going to destroy the organization.
There is too much focus on the short term. The short-term focus has blown up. Academics will say there’s no difference between the long-term and short-term because you use present-value analysis. That meant projecting the value of an instrument ten or twenty years out, as many of those failed financial institutions did. They didn’t really know. Everything was on short-term, fee-based income, and this whole instant gratification, instant bonuses, just destroyed so many institutions.
How would you describe great leadership?
George: Great leadership involves a vision of what can be, the courage to take it on, and the ability to bring people together and align them around that vision and mission. It takes the capacity to practice those values–your values and the organization’s values–every day. It needs discipline at that practice. You can’t say one thing and do another. Great leaders know how to empower other people to step up and lead. They don’t exert power over other leaders. That’s an old-fashioned notion. They know how to empower other people at all levels to step up and lead.
Ever since the financial crisis of 2008, I have sensed from many leaders that they want to do a better job of leading in accordance with their personal values. The crisis exposed the fallacies of measuring success in monetary terms and left many leaders with a deep feeling of unease that they were being pulled away from what I call their True North.
As markets rose and bonus pools grew, it was all too easy to celebrate the rising tide of wealth without examining the process that created it. Too many leaders placed self-interest ahead of their organizations' interests, and ended up disappointing the customers, employees, and shareholders who had trusted them. I often advise emerging leaders, "You know you're in trouble when you start to judge your self-worth by your net worth." Nevertheless, many leaders get caught up in this game without realizing it.
This happened to me in 1988, when I was an executive vice president at Honeywell, en route to the top. By external standards I was highly successful, but inside I was deeply unhappy. I had begun to focus too much on impressing other people and positioning myself to become CEO. I was caught up with external measures of success instead of looking inward to measure my success as a human and a leader. I was losing my way.
My colleague, Harvard Professor Clayton Christensen, addressed this topic in his HBR article, How Will You Measure Your Life? Clay observed that few people, if any, intend at the outset of their career to behave dishonestly and hurt others. Early on, even Bernie Madoff and Enron's Jeff Skilling planned to live honest lives. But then, Christensen says, they started making exceptions to the rules "just this once."
At Harvard Business School, we are challenging students to think hard about their definition of success and what's important in their lives. Instead of viewing success as reaching a certain position or achieving a certain net worth, we encourage these future leaders to see success as making a positive difference in the lives of their colleagues, their organizations, their families, and society as a whole. The course that I created in 2005, Authentic Leadership Development (ALD), has become one of the most popular elective MBA courses, thanks to my HBS colleagues who are currently teaching it. It enables second-year MBAs to ground their careers in their beliefs, values, and principles, following the authentic leadership process described in my 2007 book, True North. More recently, ALD has become a very popular course for executives of global companies.
With all the near-term pressures in today's society, especially in business, it is very difficult to find the right equilibrium between achieving our long-term goals and short-term financial metrics. As you take on greater leadership responsibilities, the key is to stay grounded and authentic, face new challenges with humility, and balance professional success with more important but less easily quantified measures of personal success. That is much easier said than done.
The practice of mindful leadership gives you tools to measure and manage your life as you're living it. It teaches you to pay attention to the present moment, recognizing your feelings and emotions and keeping them under control, especially when faced with highly stressful situations. When you are mindful, you're aware of your presence and the ways you impact other people. You're able to both observe and participate in each moment, while recognizing the implications of your actions for the longer term. And that prevents you from slipping into a life that pulls you away from your values.
I don't use the word "practice" lightly. In order to gain awareness and clarity about the present moment, you must be able to quiet your mind. That is tremendously difficult and takes a lifetime of practice. In 2012, I had the privilege of presenting my ideas on authentic leadership to his Holiness the Dalai Lama. When I asked him what it took to become an authentic leader, he replied, "You must have practices that you engage in every day."
My most important introspective practice is mediation, something I try to do for twenty minutes twice a day. In 1975 I went with my wife Penny to a Transcendental Meditation (TM) Workshop. Although I never adopted the spiritual portion of TM, the physical practice became an integral part of my daily routine. Meditation has been a godsend for me. As an active leader who has held highly stressful roles since my mid-twenties, I was diagnosed with high blood pressure in my early thirties. When I started meditating, I was able to stay calmer and more focused in my leadership, without losing the "edge" that I believed had made me successful. Meditation enabled me to cast off the many trivial worries that once possessed me and gain clarity about what was really important. I gradually became more self-aware and more sensitive to the impact I was having on others. Just as important, my blood pressure returned to normal and stayed there.
In recent years, medical studies have found evidence of meditation's many benefits, including protecting against health problems from high blood pressure and arthritis to infertility, reducing stress, improving attention and sensory processing; and physically altering parts of the brain associated with learning and memory, emotional regulation, and perspective-taking — critical cognitive skills for leaders attempting to maintain their equilibrium under constant pressure.
While many CEOs and companies are embracing meditation, it may not be for everyone. The important thing is to have a set time each day to pull back from the intense pressures of leadership to reflect on what is happening. In addition to meditation, I know leaders who take time for daily journaling, prayer, and reflecting while walking, hiking or jogging. I also find it extremely helpful to share the day's events with Penny and seek her counsel.
Regardless of the daily introspective practice you choose, the pursuit of mindful leadership will help you achieve clarity about what is important to you and a deeper understanding of the world around you. Mindfulness will help you clear away the trivia and needless worries about unimportant things, nurture passion for your work and compassion for others, and develop the ability to empower the people in your organization.
By Julia Hanna for Harvard Business School Working Knowledge
What skills do today's executives need to develop to become effective global leaders of tomorrow? And how do corporations teach these skills to their own leaders?
"The shift from a country centric corporation to one that is more global in its outlook will have a radical impact on leadership development," says Professor of Management Practice William George, the former chairman and chief executive officer of Medtronic.
George developed and taught for many years the popular second-year MBA course Authentic Leadership Development (ALD), which he has compressed into a five-day Executive Education program at Harvard Business School.
"The most successful leaders will not necessarily be those with the highest IQ," he says. "Of course, they will need to be intelligent. But they'll also need to have a high level of cultural and emotional intelligence."
According to George, additional characteristics of a successful global leader include:
- An intellectual understanding of the global business context—in other words, an ability to comprehend just how complex it can be to do business around the world.
- The capacity to simultaneously develop a global and local perspective. "This is much easier said than done," George says. "And it's almost impossible to achieve without a great deal of experience living in different parts of the world."
- Being able to overcome the dominant thinking at headquarters. "Leadership has to lean in favor of nondominant thinking," says George. "That requires a tremendous amount of intercultural empathy and a passion for diversity in life experiences." In other words: "An insatiable need to learn about other cultures."
- A knack for cross-boundary partnering. "You need to feel comfortable engaging a team in India and giving them as much power as a team in Germany or the United States. There's a certain level of executive leadership maturity involved in having the respect and capacity to pull the best out of each area of the corporation."
- A self-awareness and self-assurance when it comes to one's values and sense of purpose. At the same time, however, "you need to be flexible in learning from and empowering others."
- The ability to develop networks that are internal and external to the organization. "It's a process of shifting from vertical management to horizontal collaboration. One's title and role are far less important than the capacity to get things done."
How should one cultivate these qualities? One of George's first recommendations for would-be global leaders is to live in a country where the language spoken is different from that in one's home country.
"When my wife and I lived in Japan we had a two-year-old child, which meant we had to dive in and learn very quickly," he recalls. "Doing this gives you a heightened sensitivity to cultural differences, and how those differences are tied up in language."
After 60 or so hours of Japanese language instruction, George could more or less carry on a conversation, and did so with a retired chairman of Mitsubishi—who gently informed him that he was speaking "female Japanese."
"These are great learning experiences," he says. "The first weekend after I had moved to Belgium, I asked someone how I should explore and get to know the place. I was told to go get lost, which is great advice. It's about really engaging in the culture and learning to be vulnerable."
Accepting one's vulnerabilities is a primary objective of ALD, which requires participants to work together in six-person groups.
"It's more than a knowledge transfer from HBS to individuals; it's also an exchange between people and a process of understanding who I am, what I desire, what is my purpose, and what are my values," says George, who notes that this year the number of participants who can enroll in ALD has doubled to 240 people.
Also coming next July is The Global Enterprise Leader, a course developed with Professor Krishna Palepu that will extend ALD's objectives to include cultivating a greater capacity for cultural intelligence. "It's not so much about understanding geopolitics," George says. "The characteristics that I've cited above are far more important."
Aligning employees across a diversity of geographies and experiences is easier said than done, George concedes, although he does highlight a few standouts, including Coca-Cola (which has had five non-American CEOs), Nestlé, Unilever, Siemens, IBM, and Novartis, among others.
"Ultimately, a global organization is measured by how well the diversity of its leadership reflects the diversity of its customer base and how well that leadership can leverage the skills of teams working around the world," he says, adding that Medtronic's CEO is Omar Ishrak, a native of Bangladesh who was educated in London and has worked in the United States for nearly 20 years.
"We're looking to companies to create a global cadre of people who are comfortable operating anywhere in the world," George concludes. "That's where we're heading."
From The Customer Blog by Maz Iqbal: http://thecustomerblog.co.uk/tag/bill-george/
Leadership matters. Whilst there are many ways of grappling with leadership, I value the ontological lens and in particular the ontological model of leadership that has been developed and is being taught by Werner Erhard et al. In this post I continue the conversation on being a leader (and leadership) that I started in the last post.
Warning: authenticity is not an easy conversation
Today, I wish to grapple with authenticity. To grapple with and get authenticity one needs to grapple with human existence (being and doing). And in particular one needs to suspend one’s existing listening (how one thinks of, relates to) of authenticity. Furthermore, it takes courage as the conversation of authenticity/inauthenticity unconceals that which we are committed to keeping hidden. If you are not up for this today then I suggest that you go and do something else. If you are up for the conversation then let’s begin.
What constitutes authenticity in this ontological model of leadership?
At a superficial level being authentic is being genuine, being real -”the real thing”. Dive into this, grapple with this, and you are likely to find yourself grappling with the question “How does a human being determine when he/she is being genuine, being real?” Put differently, “Genuine/real with regards to what exactly?” Think of it this way, determining whether this iPad before me is a genuine Apple iPad is a different realm of enquiry to determining if I/you are being genuine/real/authentic in the way that I/you show up in the world. Yet we need to ring-fence it if we are to grapple with it.
In the ontological model of leadership, Werner Erhard et al are clear on what constitutes authenticity. They define authenticity as:
“being and acting consistent with who you hold yourself out to be for others, and who you hold yourself out to be for yourself”.
Notice that central to this definition is ‘who you hold yourself out to be’: not your personality, not your thoughts, not your feelings, not social convention…… How to make sense of ‘who you hold yourself to be’? Think of it as a declaration that you make, a stand that you take on yourself, a commitment to a set of values and/or specific future.
Authenticity is central to leadership and being a leader
How to position the importance of authenticity to leadership? Perhaps it is best to share the words of Bill George, former CEO of Medtronic, Harvard Business School Professor of Leadership, and best-selling author:
“After years of studying leaders and their traits, I believe that leadership begins and ends with authenticity.”
Werner Erhard et al write:
“Being a leader requires that you are absolutely authentic, and true authenticity begins with being authentic about your inauthenticities, and almost no one does this.”
Did you get that? The access to authenticity is being authentic (confronting the truth) about where/how you are being inauthentic (not being/acting in accordance with ‘who you hold yourself out to be’). Yet, almost no one does this. Do you remember how the business world reacted to Domino’s Pizza decision to come out in 2010 and tell the truth about their pizzas? Surprise, bafflement, astonishment: What, you are going to own up to the fact that your pizzas taste like cardboard!
Inauthenticity is ubiquitous
Inauthenticity is the default setting and state of human existence. You, I and just about everyone is being inauthentic – at the very least in some ways, at certain times, with certain people and in certain situations. To date I have distinguished two kinds of inauthenticity.
First, there is the kind where I, you, sacrifice our personality, character, spirit, stand in response to external pressures: the pressure to appear to be a certain kind of person, the pressure to adopt a particular mode of living, the pressure to ignore one’s own moral and aesthetic objections in order to have a more comfortable existence. If you take the time to reflect and are willing to be open to that which shows up then you will see where and how often you have trodden this path. Else read Sartre’s novels – they provide a great access to the inauthentic mode of being/living.
The second kind of inauthenticity is of the kind which is normally hidden from us. This kind of inauthenticity lies in the realm of what we don’t know that we don’t know: we do not have access to our real reasons for being the way that we are being, acting the way that we are acting, and we ignore crucial facts about own lives (and the world we find ourselves in) in order to avoid facing up to and confronting uncomfortable truths. Spend some time in the counselling room and you will see this vividly: you cannot help seeing how the human being is blind to certain aspects of him/herself. Or just watch the TV series “The Office”.
Heart of the matter: we refuse to confront our inauthenticities
Imagine that you are driving a car and you find that you have a flat tyre. Having a flat tyre is not an issue provided you are willing to acknowledge and confront the fact that you are driving a car with a flat tyre. Acknowledging and confronting the fact creates an opening for you to take effective action: to replace or repair the flat tyre. It is the same with inauthenticity: inauthenticity is not an issue if you and I are willing to confront where/how we are being inauthentic.
Yet inauthenticity is an issue. It is an issue because you and I are not willing to confront our inauthenticities. Here is what Werner Erhard et al have to say on the matter:
“..because we avoid at all costs confronting our inauthenticities, we are consistently inauthentic about being inauthentic – not only with others, but with ourselves as well.”
If you find this assertion hard to stomach then allow me to share with you the conclusion that Harvard Professor Chris Argyris came to after spending 40 years studying human beings and organisations:
“Put simply, people consistently act inconsistently, unaware of the contradiction between their espoused theory and their theory-in-use, between the way they think they are acting, and they way they really act.”
Want to be a leader? Generate the courage to be authentic about your inauthenticities
By now it should be clear that being authentic is absolutely essential to being a leader and the exercise of leadership. It should also be clear that the default setting of human existence is inauthenticity and as such inauthenticity is ubiquitous. So one critical challenge of being a leader is to life oneself up from this fallen state of inauthenticity. This is how Werner Erhard et al put it:
“If you cannot find the courage to be authentic about your inauthenticities, you can forget about being a leader……..The actionable access to authenticity is being authentic about your inauthenticities..”
As a pragmatic course of action it means that you must:
Be willing (and proactive) in discovering and confronting your inauthenticities – where in our lives you are not being and/or acting consistent with who you hold yourself out to be for others AND who you hold yourself out to be for yourself; AND
Tell the truth (to yourself and the appropriate people) about where you are not being genuine, real, authentic – the appropriate people tend to be the one’s that you are most likely to resist telling the truth to.
If you are willing to take this on then take a look at these areas
By virtue of human there are certain domains of life that suck us towards/into a state of being inauthentic. So if you are up for being a leader (or simply up for a life of freedom, self-esteem, courage and peace of mind) then take a look at the following:
Most of us are driven to look good and avoid looking bad. Werner Erhard et al put it this way “.. most of us have a pathetic need for looking good, and almost none of us is willing to confront just how much we care about looking good..” Look, how many of us are afraid to ask a question or voice our opinion for the fear of looking stupid, the only one who does not get it? I say the reason so many of us insist on being right (rather than admit we are/were wrong) is to look good and avoid looking bad. Where are you sacrificing your authenticity simply to look good and avoid looking bad? If you do the work you will find a gold mine of inauthenticity here; it would not be going to far to say that wanting to look good and avoid looking bad runs us!
Every single one of us wants to be admired (to be recognised as a person of worth/significance/importance/high status), and yet almost none of us is willing to be with and confront how desperately we want to be admired. And how readily we will give up our authentic voice, our stand, in a situation where we perceive that being straightforward, honest, genuine threatens us with a loss of admiration.
In many situations, many of us want to be seen as being loyal members of the group even when we are not. How many of us are playing at being loyal simply to avoid the consequences (loss of admiration, looking bad, being made out to be wrong, being punished) of being perceived as being not loyal, not a team player. Have you noticed how easily you will sacrifice ‘who you hold yourself out to be’ for the sake of fitting in, being admired and rewarded? This is how you get ‘groupthink’ and the ‘Bay of Pigs’ fiasco and many others like it in organisations.
The good news if you are up for being a leader
So far this post might just show up in your listening as ‘bad news’ and leave you deflated/resigned/cynical. So I want to share another quote from Werner Erhard et al:
“We are all guilty of being small in these ways – it comes with being human. Great leaders are noteworthy in having come to grips with these foibles of being human – not eliminating them, but being the masters of these weaknesses when they are leading.”
If you wish to get a taste of authenticity/inauthenticity (and its importance to the human condition) then I recommend reading Book VI:The Russian Monk, Chapter 1:The Elder Zosima and His Visitors, Section (d) The Mysterious Stranger, from Fydor Dostoevsky’s masterpiece: The Brothers Karamazov. If you have the hardback edition by Pevear and Volokhonsky then the page number is 301.
In the next post in this series I will take a look at the third foundational strand of the ontological leadership model: being committed to something bigger than oneself.
For those of you who have made it this far, I thank you for putting into this conversation that which it takes to be in this conversation. I am grateful that you exist and that I have the privilege of being in this conversation with you. I look forward to listening to your perspective, your experience on authenticity.
Posted by Warren Bennis on September 4, 2012 for Bloomberg Businessweek
Last Saturday morning, Aug. 26, I called my old friend Bill George for two reasons, mainly to wish him a happy birthday on his 70th—I was two weeks early—and to discuss an unlikely article in that morning’s Financial Times, “The Mind Business.” It reported that some of the “west’s biggest companies are embracing eastern spirituality as a path to bigger profits.” Among them, General Mills (GIS), Google (GOOG), First Direct, Target (TGT), Aetna (AET), plus many Silicon Valley firms such as Facebook (FB), Twitter, and LinkedIn (LNKD) that share ideas on yoga, meditation, and mindfulness, a popular form of Buddhist practice, which advocates feel helps them stay “grounded,” even calm, in our hyper-manic digital age.
In the FT piece, Bill makes the business case for meditation, which he’s been practicing, along with his longtime spouse and partner, Penny, since 1974: “William George, a Goldman Sachs (GS) board member [also, I have to add, ExxonMobil (XOM)] and a former chief executive of healthcare giant Medtronic (MDT) … is one of the main advocates for bringing meditation into corporate life. … ‘If you’re fully present on the job, you will be more effective as a leader; you will make better decisions and you will work better with other people. … I tend to live a busy life. This keeps me focused on what’s important.’”
(Have you met anyone recently who isn’t rushed? I bought a ticket last month to hear a speaker discuss his book, Rushed, and, yeah, I was too rushed to make it.)
But meditation is only a skip and a hop in the arc of Bill’s career trajectory, which isn’t close to peaking. After his undergraduate degree at Georgia Tech, he did go for an MBA and went on to work for prominent global companies on three continents, resigning from Medtronic when he was 58, which nowadays I would call “early adulthood.” I decided to ask him a question the other morning I always wanted to but shied away from, why he “retired so young.” He responded with a Minnesota-nice but defiant, “I didn’t retire, Warren,” softening his voice when he came to my name. “I vowed never to remain more than 10 years as a CEO or top gun in any organization. Ten years is plenty, more than enough time to make your mark in any organization.”
Bill went on to say some extremely wise things about a topic rarely discussed openly (or, at best, at six degrees of elusiveness) about the stages of a management career, especially about the retirement phase. Bill has never given much thought to retirement, “the very last thing execs should think about. Anyway, I’m going to live to a hundred! I’ve talked to too many retirees who go to Florida to play golf and despite their parched and faux words, such as ‘I’ve been a success at retirement,’ or ‘saved a lot in state taxes,’ they just look tired more than retired.”
I don’t want to make light of the issue. None of us is immortal. And who’s going to tell you that you’ve lost your marbles or “your touch.” A young friend of mine, meaning to be respectful and gentle, told me a few months ago, lowering his head to avoid eye contact, “Well, I’ll say this about you: You may not be at the top of your game but you’re still at the top of your field.” I retorted acidly, absent respect or kindness, ‘Thank you, DoctorJones, for damning me with faint praise.” Emphasis mine. He’s a psychiatrist, of course.
Retirement is a difficult issue and doesn’t have a positive connotation, perhaps especially so in our culture. My American Heritage Dictionary heartily confirms this. It states, “Despite the upbeat books written about retiring and the fact that it is a well-earned time of relaxation from the daily business of work, many people do not find it a particularly pleasant prospect.”
I’ll have more to say about this in some future blog but want to end on a positive note, using young Bill George as an example, one that today’s MBA students would do well to consider as they ponder the long arc of their own careers. He responded to my question about why he retired so young this way: “I had to go out in the wilderness again to renew, reinvent myself. Had to engage in spiritual projects in a way, which for me, meant learning how to impart whatever I’ve learned to others. So I’ve been teaching for the last dozen or so years. At Harvard, I’ve introduced a course pretty much based on two books I wrote since my Medtronic days, Authentic Leadership and True North. Chances are that I’ll be looking for a new shore one of these days.”
I think of Bill George as a protean leader, based on the Greek myth of the early sea god Proteus, “an old man of the sea,” as he was called, “with flexibility, versatility and adaptability.” Bill George in no way is “old,” whatever that means today. He’s still swimming upstream, probably at this minute, in Vail, Colo., in water that, sitting here in sunny Santa Monica, chills me to the bone.
In this recent interview with the Rotman School of Business in Toronto, I talk about the importance of leaders following their True North in order to avoid being derailed, including your compass for the journey and making the transition from "I" to "We." To read the article, click here.
The Financial Times carried an outstanding article over the weekend on Mindful Leadership that features General Mills (ranked #1 for developing leaders by multiple surveys), Target, Aetna, & Google along with my inputs. I have meditated for 38 years & can attest to its benefits for my leadership. I also have spent time with all four companies and can attest to the authenticity of their leadership and the quality of their leadership development initiatives. Read More