“Authentic Leadership Development” for Executives

I am very excited to share with you information about a new leadership course that I will be leading for executives on the HBS campus, along with Dean Nitin Nohria and a terrific faculty. Called “Authentic Leadership Development,” it compresses the popular 12-week MBA course I created in 2005 into five days. It will be held on February 12-18, 2011. Joining us on the faculty will be Professors Rob Kaplan, Joshua Margolis, and Scott Snook.

This course is aimed at rising executives who want to develop their leadership and are prepared to participate openly in discussing their leadership journeys, their crucibles, and the challenges they face. The course will draw on my book, True North, along with exercises drawn from Finding Your True North: A Personal Guide. We will focus on the leader’s inner journey and ways to improve your EQ and self-awareness in order to become a more effective leader. In addition to personal reflection exercises and class sessions, you will be part of a 6-person Leadership Development Group.

Here is the link to the course on the HBS executive education website with all the registration information.

I sincerely hope you will consider coming and recommending it to your colleagues and friends.

How to Handle CEO Pay Before Dodd-Frank Hits

Originally Published in BusinessWeek on September 9, 2010 

With 26 million people unable to find full-time jobs, Americans are outraged by disparities in pay between executives and average workers as real incomes continue to decline. Multimillion-dollar bonuses at American International Group (AIG) and Merrill Lynch (BAC) certainly didn't help. Two consecutive years of declining CEO pay, on the other hand, haven't either.

As a result, politicians are lining up to give shareholders greater control over executive pay. On the surface these changes sound like shareholder democracy, which would be a good thing. But rather than solving problems with executive compensation, they may result in myriad unintended consequences.

Case in point: The Dodd-Frank Wall Street Reform and Consumer Protection Act grants shareholders advisory votes on compensation, allows activist shareholders with only 3 percent ownership to nominate board members, and prohibits voting by retail brokers representing small shareholders. These changes are likely to empower short-term money movers such as hedge funds at the expense of long-term owners—and pressure management to focus on the short term, which is the exact opposite of what's needed.

In another example of good intentions not adequately thought through, The New York Times called on the Securities and Exchange Commission to publish ratios of CEO pay to "typical employees," ignoring variations between industries. What about businesses focused on low-wage emerging markets? What about differences between high-wage software developers and low-wage service companies?

Imposed formulas for executive compensation simply won't work at many companies. And we've seen how powerful the temptation can be for executives to manipulate short-term results to increase their compensation.

The regulations that will spring from Dodd-Frank are still being written. In the meantime, rather than just responding to pressures, boards and CEOs have a shot at restoring the confidence of the public by crafting responsible compensation policies unique to their needs. Doing this now will give U.S. companies an edge in fending off investors who are in it for the quick kill. It will also raise their odds of holding on to the top talent whose pay is the target of all this debate and ire.

Here are six policies that should be rigorously followed, including in bad times when boards are more prone to bend the rules for those in their top ranks:

1. Provide full transparency for compensation policies and actual practices. Principles and pay policies should be consistent over time. Novartis (NVS) has been the forerunner in Europe by making its compensation practices fully transparent.

2. Create policies that reward long-term performance with long-term pay. ExxonMobil (XOM) withholds more than two-thirds of its officers' compensation until they retire or for 10 years, whichever is greater. This focuses executives on long-term results and provides for sound succession.

3. Reward executives for their performance, not the company's stock price. Target (TGT), for example, compensates its executives based on same-store sales performance relative to its peers.

4. Lengthen the time horizon for bonuses. Companies should withhold significant amounts of compensation using restricted stock, with forfeiture for accounting adjustments and leaving the company. In 2009 the top 30 officers of Goldman Sachs (GS) received no cash, getting bonuses in restricted stock with three-to-five-year vesting periods instead.

5. Avoid formulaic approaches. Compensation tied only to short-term metrics leads to long-term problems. Companies should include qualitative performance measures like strategy implementation, research milestones, and leadership development. To make its shift to "leading by values" relevant, IBM (IBM) includes bonus opportunities for furthering its values, especially in global collaboration.

6. Boost equity between workers and executives. People with greater responsibilities should receive greater compensation, but one way to signal that everyone matters is to drop special plans, benefits, and perks for executives. Medtronic (MDT) gives employees a "means to share in the company's success" by enabling them to become shareholders through company-funded employee stock ownership plans.

To rebuild trust and negate the impact of restrictive regulations, corporate boards must develop compensation systems that reward all employees fairly and are applied consistently. This will focus leaders on long-term value creation and give boards a solid footing from which to defend their policies. It might even enlighten policymakers as they figure out how to put Dodd-Frank into practice.

Mindful Leadership: When East Meets West

Originially Posted in Harvard Business School Working Knowledge
September 7, 2010

Asian beliefs, philosophies, and practices are influencing everything from the way we treat the ill to how we make cars. Now, a Harvard Business School professor is looking to the East as a model for developing strong business leaders.

William George, an expert on leadership development, recently teamed with Tibetan Buddhist meditation masterYongey Mingyur Rinpoche to present a conference on "mindful leadership," a secular process to explore the roles of self-awareness and self-compassion in developing strong and effective leaders.

"To our knowledge, this is the first time that a Buddhist Rinpoche and a leadership professor have joined forces to explore this subject and see how Eastern teaching can inform our Western thinking about leadership and vice versa," George says. You can read George's summary of the Mindful Leadership conference on his Web site.

For George, leaders who don't develop self-awareness are subject to becoming seduced by external rewards, such as power, money, and recognition. They also have difficulty acknowledging mistakes, an Achilles' heel that has crippled a number of CEOs who have appeared in the news recently.

We have set up a forum for readers to give their own ideas on this concept and to ask Professor George questions.

Sean Silverthorne: Tell us about the Mindful Leadership conference. What were the goals?

Bill George: The Mindful Leadership conference, which was held in Minneapolis August 13-14, 2010, brought together 400 participants in an exploration of how mindfulness can contribute to sustaining effective leadership. The seminar was co-led by Yongey Mingyur Rinpoche, a leading Buddhist meditation master, and myself.

Its goal was to bring together Western understanding about leadership and Eastern wisdom about the mind, developed from practices that have been used for thousands of years, to contribute to the self-awareness and self-compassion of leaders.

Q: What is mindful leadership, and what are its benefits?

A: Mindfulness is a state of being fully present, aware of oneself and other people, and sensitive to one's reactions to stressful situations. Leaders who are mindful tend to be more effective in understanding and relating to others, and motivating them toward shared goals. Hence, they become more effective in leadership roles.

Q: How does one become mindfully aware?

A: I would not claim to be an expert in this area. Our Mindful Leadership seminar focused on the practice of meditation as one of those ways, with a variety of meditation techniques taught by Rinpoche. This was strictly a secular teaching, not a Buddhist one. In my experience I have observed people become more mindful through prayer, introspective discussions, therapy, and the use of reflective techniques and exercises.

Q: You have said that few leaders lose their jobs because of lack of intelligence, but many do so because of lack of emotional intelligence. Can you talk about this a little more and give some examples.

A: Leaders with low emotional intelligence (EQ) often lack self-awareness and self-compassion, which can lead to a lack of self-regulation. This also makes it very difficult for them to feel compassion and empathy for others. Thus, they struggle to establish sustainable, authentic relationships.

Leaders who do not take time for introspection and reflection may be vulnerable to being seduced by external rewards, such as power, money, and recognition. Or they may feel a need to appear so perfect to others that they cannot admit vulnerabilities and acknowledge mistakes. Some of the recent difficulties of Hewlett-Packard, British Petroleum, CEOs of failed Wall Street firms, and dozens of leaders who failed in the post-Enron era are examples of this.

Q: The two essential aspects of effective leaders, you explain, are self-awareness and self-compassion.

A: An essential aspect of effective leaders is authenticity; that is, being genuine and true to one's beliefs, values, and principles that make up what we call someone's True North.

Authenticity is developed by becoming more self-aware and having compassion for oneself, without which it is very difficult to feel genuine compassion for others. Self-awareness starts with understanding one's life story and the impact of one's crucibles, and reflecting on how these contribute to motivations and behaviors. As people come to accept the less-favored parts of themselves that they do not like or have rejected, as well as learning from failures and negative experiences, they gain compassion for themselves and authenticity in relating to the world around them.

Q: How does the work you are doing in this area align with your concept of "True North"?

A: In our work on True North and in teaching authentic leadership development to students and seasoned leaders, we have learned that the greatest challenge to following one's True North comes when the pressures and seductions are intense. That is when it is most crucial to be self-aware.

This of course is not a new idea. Self-awareness is central to Daniel Goleman's emotional intelligence. It is relatively rare to find people who are fully self-aware. Mindfulness is a logical step in this process of gaining self-awareness that should be combined with experiences in leading through challenging situations and gaining awareness through feedback and group support.

Q: I know you are a strong believer in group support in the development of leaders. Can you talk a bit about how group support differs from mentorship, for example?

A: Mentorship is a one-to-one process with someone who has greater experience and is willing to share from that experience. Group support as practiced in True North Groups consists of a small number of peers (usually five to eight) willing to share themselves and their lives and support each other through both good and difficult times. A key element of these groups is learning to give and receive nonjudgmental feedback in order to recognize blind spots, accept shortcomings, and gain the confidence to address great challenges in their lives.

Q: Do you think business schools should be paying more attention to this subject?

A: Any business school committed to developing leaders needs to offer courses and other experiential opportunities that enable students to develop greater awareness of themselves, their motivations, and their strengths and shortcomings.

This process is most effective when real-world experiences can be reflected upon to deepen self-understanding in a supportive and trusting environment. This is the central tenet of the Authentic Leadership Development (ALD) course at Harvard Business School, which will soon to be offered to leaders as part of the School's Executive Education offerings.

Q: If HBS Working Knowledge readers want to learn more about mindful leadership, which resources would you recommend?

A: Current literature on this subject is limited because the ideas are still in the early stages of development. I highly recommend Jon Kabat-Zinn's book Wherever You Go, There You Are and his CD Guided Mindfulness Meditation, and Yongey Mingyur Rinpoche's books The Joy of Living and Joyful Wisdom. In the ALD course at HBS, we use my book True North and its companion workbook, Finding Your True North: A Personal Guide.

Q: What are you working on next?

A: I am working on a book on peer support groups with Doug Baker that is tentatively titled "True North Groups: The Vital Link." These groups are based on the Leadership Development Groups we use at HBS and the groups Doug and I have participated in for more than 25 years. Many of the ideas we explored in the Mindful Leadership conference will be covered this book.

Coming Home to America - Part II

Kudos to President Obama for taking the initiative to create jobs, especially in the private sector. After declaring the end of the combat operations in Iraq, he made three crucial announcements on Labor Day that will go a long way in creating jobs and putting the domestic economy on the front burner.

In rapid-fire succession on the campaign trail, the President made the following announcements:

  1. New business investment will get a 100 percent tax write-off, beginning September 8, 2010 and running through the end of 2011. This incentive should unleash a great deal of pent-up capital spending. Most importantly, it will result in sustainable private sector jobs.
  2. Research and development tax credits will be increased and made permanent. There have been R&D tax credits in the past, but they have been temporary, and their renewal has always been subject to the whims of Congress. With the President’s proposal, business leaders will feel secure making these long-term investments. The new products and ideas unleashed by this expanded R&D tax credit program will create new jobs and new companies for years to come.
  3. The Obama administration will invest an additional $50 billion in government-funded infrastructure projects, also fueling new jobs.

Most importantly, these three announcements, coming on Labor Day, signal that the President and his closest advisors recognize the depth of the jobs crisis and are prepared to act aggressively to create sustainable private-sector jobs. That’s good news for all Americans.

Thus, it was disappointing to learn that Republicans and certain leading business lobbyists are already challenging this proposal. Their preference is to extend the upper-class tax cuts pushed through by President Bush. Although no business person likes paying taxes, these targeted moves to increase jobs should be applauded by leaders throughout the business community. It’s the most important move the President has made in his 20 months in office – and he deserves full credit for taking the initiative to “invest in America.”

With 26 million Americans unable to find full-time jobs, this isn’t a time to play election-year politics. It is a time when every elected representative should support the President’s initiatives and help get Americans back to work.

Coming Home to America

President Obama’s announcement last night that America’s combat troops in Iraq are coming home is good news indeed. After the tragic loss of 4,400 lives of our most courageous citizens and $1 trillion in spending that could have been used here at home, seven and one-half years of agony from a war that never should have been started is finally coming to an end.

Sadly, our troops are coming home to a country whose economy will not have jobs to offer them. With 27 million Americans unable to find full-time work, these loyal veterans will have to stand in long lines for jobs or shift to the unemployment rolls.

Let the metaphor of our veterans coming home be a message to the 300 million Americans, myself included, who have never been to Iraq. It is time for us to “come home to America.” With the Labor Day holiday approaching, we need to get our citizens back to work.

The strength of our great country is in its free-enterprise democracy that enables anyone with a good idea to start a company or anyone with a modicum of skills and a willingness to work hard to reach the top, even in the largest corporations.

These days, we are not creating jobs for people, nor does the start-up capital exist to enable the Steve Jobs and Bill Gates of the future to get funding to bring their ideas to fruition. Instead, we educate brilliant foreign students and force them to go back to India or China to start their companies, while encouraging our best and brightest Americans to get rich by trading commodities on Wall Street.

With the troops coming home, America needs to come home to its senses and its roots. The time is right to stop nation-building overseas and start nation-building here at home. Let’s stop financing foreign governments with imports and start financing our people with jobs and opportunities – not in government-funded jobs, but in a vibrant private sector that generates profits and personal income, and pays taxes to reduce our mounting national debt.

How can we do this? It won’t be by driving consumers to spend money they don’t have. People without jobs, or afraid of losing their jobs, aren’t in the market for new houses and new automobiles. They have to repay the credit card and mortgage debts that are already weighing them down.

Contrary to what the politicians tell us, there is no “quick fix” to this dilemma. Nor is the economy gradually improving, as we’ve heard from the economists for the past 18 months. By not investing here at home for the past decade – in research and development, in manufacturing, in infrastructure, in education, in new company startups, in small business – we have created long-term structural problems. We must face the reality that long-term problems require long-term solutions.

What are these solutions? How can we rebuild the competitiveness of the U.S. economy by investing in America?

While President Obama is meeting with his economic advisers looking for ideas, here is the comprehensive investment program that is needed to reignite private sector investment and create the millions of jobs that will get Americans off the unemployment rolls and back to work:

  • Provide private-sector investment accelerated tax credits at double the current rate to stimulate factory and building investments,;
  • Double tax credits for increases in research and development and make them permanent to accelerate creativity and innovation,;
  • Offer  hiring credits for small businesses with 50 or fewer employees to jumpstart small business hiring--where 70 percent of the jobs are created—;
  • Offer a capital gains tax holiday for start-up companies the first time they are sold to stimulate new company formation,;
  • Create a government “fund-of-funds” to funnel money into venture capital without picking winners or losers to provide more funding for new companies,;
  • Expand government infrastructure funding for the next three years to rebuild America’s roads, bridges and public buildings,;
  • Offer tax credits for expanding exports to reduce our growing balance of payments deficits,;
  • Announce a comprehensive program of energy development here at home that includes both renewable and non-renewable energy sources to reduce energy imports;
  • Change the Washington rhetoric to encourage corporate profits and provide certainty for investments by suspending additional regulations and ceasing the threats of additional taxes on corporations to get corporate leaders to start investing their $1.8 trillion in cash here at home.

As a nation, we cannot let our current political malaise stand in the way of making America competitive once again. The time to act is . . . now!

What a Difference an Authentic Leader Can Make

It is hard to believe it was only a year ago that General Motors emerged from bankruptcy. How much difference a year has made! GM is now solidly profitable, growing its revenues once again, and retooling its lineup of automobiles. It is on the verge of a public offering that will enable the U.S. government to recoup the investment from its “bailout.”

GM’s fall into bankruptcy was more like a steady decline over fifty years, as its U.S. market share tumbled from 53 percent to a meager 19 percent. In spite of their loyalty to “Buy American,” many GM customers turned to higher quality, better designed vehicles made by GM’s Japanese and European competitors. Most younger buyers never began buying GM cars. A steady stream finance-trained executives – from Roger and Jack Smith to Rick Wagoner – focused on short-term actions to maintain some semblance of quarterly earnings while denying that GM’s autos were no longer competitive.

Every time union negotiations came around, these CEOs gave away the store to the UAW in order to avoid a strike, while the long-term obligations for health care, pensions, paying laid off workers, and work rule inflexibility just kept piling up. The GM board of directors was just as complacent as the management, and kept appointing finance executives without ever addressing the company’s long-term strategic issues.

When the end came in early 2009, President Obama had the courage to finance the company to bring it out of bankruptcy. Even more importantly, he appointed a highly successful board chair in Ed Whitacre, who became CEO four months later. Whitacre gained his reputation as the nation’s most successful telecommunications executive, as the chair and CEO of SBC who saved ATT from its demise. While Republicans moaned that the government was running the company, Whitacre told me that the Obama administration gave him and the new GM board complete freedom to run the company.

Ed Whitacre’s remarkable leadership had monumental impact in rapidly turning around this lumbering giant. His one-year tenure marked a dramatic shift in the old way of doing business at General Motors, as the days of redundant bureaucracy and disjointed innovation quickly ceased.  Whitacre abandoned GM’s moribund committee system that protected executives from being held accountable for results, and made clear, decisive decisions while challenging his troops to move fast – much faster.

Whitacre even put himself on the line by appearing in GM advertisements, heralding the new GM and challenging customers to give GM cars a try while offering them their money back if they weren’t satisfied. He got a break earlier this year when arch-rival Toyota ran into quality problems, but he moved quickly to take advantage of the opportunity, ramping up production rates and sales and marketing efforts. GM still has a long way to go to catch up with Ford, whose highly successful CEO Alan Mulally started retooling Ford’s product lineup four years ago, but GM’s trajectory is solid.

Since turning over the CEO reins to successor Dan Akerson, Whitacre has received some undeserved criticism for stepping down after just one year. But this has been his intention ever since he took on the CEO title. He noted, “It was my plan all along…to help return this company to greatness and I didn’t want to stay a day beyond that.”  He is a man of his word, and he delivered on every promise and commitment he made.

Cheers to Ed Whitacre for a job well done.

Reflections on “Mindful Leadership” Retreat

On August 13-14, 2010 Yongey Mingur Rinpoche and I co-led a two-day retreat in Minneapolis on the subject of “Mindful Leadership.” Over 400 people participated actively in the retreat. To our knowledge, this is the first time that a Buddhist Rinpoche and a leadership professor have joined forces to explore this subject and see how Eastern teaching can inform our Western thinking about leadership, and vice versa.  Rinpoche led several guided meditations over the course of the two days, but this was strictly a secular event, not a Buddhist teaching.

The Mindful Leadership retreat enabled us to explore such complex subjects as the impact of mindfulness on leadership, new neurological research on the impact of meditation on the brain, understanding and framing your crucibles, the role of emotional intelligence and self-awareness in leadership effectiveness, gaining self-compassion, shared awareness through small group support, leading others mindfully, and self-actualization to contribute to a better world.

None of these subjects was easy, nor did we reach definitive conclusions. Our dialogue took the issues to a deeper level that engaged the participants and enabled each of us to gain a deeper understanding of ourselves.

Gaining awareness of oneself – our motivations, our destructive emotions, our crucibles, and our failings – is essential to being an effective leader. Based on my research into leaders, I have found the greatest cause of leadership failures is the lack of emotional intelligence and self-awareness on the part of leaders. I cannot name a single high-level leader who failed due to lack of IQ, but am aware of hundreds of leaders that have been unsuccessful due to their lack of emotional intelligence (EQ). The destruction of organizations caused by their shortcomings is staggering.

Mindfulness – the awareness of one’s mental processes and one’s mind works – offers leaders a path to address these issues in a non-judgmental, non-threatening way. Meditation is the secular process that enables us to develop mindfulness and to approach challenging issues in a calm, thoughtful manner.

Even more exciting are the research indications that meditation can enable us to reshape our brain (much more so that we can do for the IQ). One leading researcher at the seminar explained that measurable impacts have been found even after as short a period as eight weeks of meditating. Of course, people need to have consistent practices in order to sustain and strengthen the impact.

As Rinpoche said, we spend a great deal of time and effort in developing our bodies; shouldn’t we do the same for our minds? Just as we need sound habits for keeping our bodies in shape, we need regular practices to be mindful.

After working with Rinpoche and the Dalai Lama during the course of the past year, I have reached a preliminary conclusion that gaining mindfulness through meditation may be the most effective way to gain self-awareness and to develop self-compassion. Another important aspect is through group support that provides honest feedback, compassionate support, and deeper understanding of oneself. Having practiced meditation and having been part of a support group for thirty-five years, I have personally experienced the highly beneficial impact that they have had on my leadership effectiveness.

Having observed hundreds of leaders under pressure, I have no doubt that self-awareness and self-compassion are the essential aspects of effective leaders, especially when they are under stress and pressure. Leaders who develop and maintain these qualities are better able to lead others mindfully and to empower people to perform at a very high level. With a shared sense of purpose and common values, organizations can then take on very challenging goals and overcome great difficulties and achieve outstanding results on a sustainable basis.

Let’s look at some of the specifics of these two days and what can be learned from them:

Reflections on Day 1

The first day of sessions focused on developing self-awareness through leadership and though meditation. A key part of the Summit was devoted to learning from Rinpoche how to become mindful through meditation. After I outlined the plan for the summit, Rinpoche shared the story of how he first started meditating at nine years old. Suffering from panic attacks, Rinpoche turned to meditation as a method for facing his panic and calming his anxiety rather than letting them dominate his mind and his life. 

Rinpoche noted that everyone has love and compassion within themselves, yet the hardest person we have to lead is ourselves. Through meditation we can become mindful in our leadership, especially when we are facing extreme challenges. He taught the group many different types of meditation: open awareness, breath, sound, object, and emotion. 

Here are some of Rinpoche’s takeaways on meditation:

  • Mindfulness is like space, it is always there.  But the monkey mind, the restless, confused part of our mind that is filled with random thoughts, often takes over our thinking.  Give the monkey mind a job by focusing its restlessness to find greater clarity.   Problems come to the surface during meditation, which is natural.  The key is to use these problems, rather than surrendering to them.
  • Rinpoche suggested that we need to challenge our minds to bring those things that we don’t like about ourselves into our meditation.  By owning them, they don’t own us.
  • Don’t force the mind to focus on one specific thing, but become mindful through awareness of our body and our surroundings.

Self-Awareness and Leadership

In the following session, I challenged the group to think about how they can gain self-awareness through understanding their life stories and their crucibles that will enable them to discover their authentic leadership and develop their emotional intelligence. 

I also recommended Professor Paul Lawrence’s new book, Driven to Lead, which discusses how the mind can be remodeled for leadership. Lawrence has rediscovered Darwin’s theories that are not about the survival of the fittest, but development of the mind’s leadership qualities that can enable more effective decision-making.  Developing a clear mind enables leaders to integrate the drivers of their minds – security, material acquisition, bonding with others, and the search for meaning – into an effective whole.

In the 21st century, leaders need to empower other people to lead rather controlling them through a hierarchy.  Leader must learn to empower those around them to feel that they are a part of something special and to take on leadership challenges.  Leadership no longer means getting people to follow us but rather about serving those around us. 

Becoming a leader is not a straight line process; rather, it is a series of ups and downs. In those down periods it is your values, or your True North, that will enable you to successfully navigate the crisis. 

Destructive Emotions

We closed the first day with a joint session on destructive emotions. Rinpoche and I encouraged the group to face their fears and those things that were dragging them down. We need to recognize that the things we don’t like about ourselves – our negative qualities – are just as much a part of us as are our positive qualities. I shared part of a David Whyte CD where he read his poem, “One Day the Hero Sits Down,” as a way of illustrating the importance of recognizing those things about ourselves that we suppressed long ago. 

Reflections on Day 2

Day one of the Summit prepared us for the work on self-compassion that came on day two. Rinpoche opened with a remarkably effective meditation on compassion. It was composed of four successive parts: compassion for someone you care about; compassion for yourself (which is much more difficult than compassion for others); compassion for those you don’t know; and, most difficult of all, compassion for someone you don’t like or respect.

In my following session, I examined how to gain self-awareness, how to develop compassion for yourself, and the role of shared awareness through group support. We also talked about how support groups work, noting there are five keys to a successful support group: 1) openness, 2) trust, 3) confidentiality, 4) honest feedback, and 5) candor. The group then divided into six-person groups to practice the technique.

I have shared some slides from my discussion on developing a support group.  I encourage you to think through how you can develop a group among your peers that you can turn to in times of crisis. 

Leading Others Mindfully and Self-Actualization: Toward a Better World

In the final afternoon, Rinpoche and I had two dialogues on “leading others mindfully” and “how self-actualization can lead to a better world.” The mindful leadership dialogue focused on how to empower others, and how to give them honest feedback and compassion through effective leadership. In the final dialogue we talked about how we can create greater compassion for the world around us and that through compassion gain greater wisdom. 

I was moved by the turnout this past weekend, not just the numbers but the depth to which people actively engaged in these complex topics and dealt with them on a personal level, not strictly an intellectual plane. For all of them, our hope is that this seminar will result in an acceleration of their journeys to authentic leadership.  

A Perspective on the HP Tragedy: An Authentic Leader Loses His True North

The Mark Hurd situation can only be considered a tragedy for everyone involved.

Hurd is one of the most outstanding leaders in the U.S. In 2005 he took over an ailing technology giant and restored it to greatness in just five years. He refocused HP on its original mission and values and built the company around its strengths – technology, customer service, and managerial discipline. He built a much stronger organization with excellent leadership at all levels, and unified a dysfunctional board of directors.

During a short span, he turned HP into the world’s largest technology company and expanded its revenues to $125 billion and nearly $9 billion in profits.  The markets rewarded his leadership, and HP’s market capitalization has doubled during a period in which the S&P declined in absolute terms. He leaves behind a company that is demonstrably stronger than it was when he took over.

So what happened here? Did the HP board act “in a cowardly manner,” as Oracle CEO Larry Ellison charged in his letter to the New York Times?

No, the HP board acted in a unified manner to address an extremely difficult situation. Most likely, the board was blindsided when it received the letter from Jodie Fisher charging Hurd with sexual harassment. The board did the responsible thing in conducting a thorough investigation that concluded there was no basis for the sexual harassment charges, but that Hurd had violated basic HP employee policies regarding expense reporting and other issues.

Should the board treat Hurd differently from other HP employees that had committed similar indiscretions? Its answer was “no,” that the values and principles of the company had to take precedence over any individual, no matter how well he had performed or how valuable he was to the company. So the board’s unanimous decision was that Hurd had to resign. Reports out of the company indicate that HP’s global employee base was overwhelmingly in support of the board’s decision.

As much as the HP board doesn’t want to go through yet another CEO search, at least this time around it has excellent candidates both within and outside the company. Hurd has built a strong executive team with several excellent successor candidates. If the board chooses to go outside, it will have outstanding applicants lining up to be considered for the top job in Silicon Valley.

The question remains, how did an exceptional leader like Hurd let himself get into this position? We’ll never know how Hurd let himself get into this position, nor is it ours to judge. But his greater error was to dig the hole deeper. This is a classic case of Murphy’s Law of Compound Loss; i.e., when something goes wrong, individuals often compound their problems by trying to cover up the initial problem. For example, President Richard Nixon’s cover-up of the Watergate break-in is what compounded his problems and led to his resignation.

Hurd could have acknowledged his liaison in the first place and wound up with only a reprimand. Instead, he compounded his problem by submitting inappropriate expense accounts. Then, when the HP board initiated its investigation – which it was compelled to do by Fisher’s letter – Hurd made an agreement with her that kept her from cooperating with the board’s investigation. In business, we call this “hush money.” In criminal law the proper term is obstruction of justice. After his resignation was announced, Hurd allowed his close friend, Larry Ellison, to defend him by attacking the HP board.

In spite of his recent actions, I continue to believe Mark Hurd is an authentic leader who lost sight of his True North. No matter how authentic they are, all leaders make mistakes. When this happens, the key is to recognize that you alone are responsible. By having the self-awareness to see how you strayed off course, or by accepting honest feedback from people who know you well and care about you, you can acknowledge your problems and return to the course of your True North.

Hurd is as human as we all are.  He’s facing the music for a personal failure, but this is far from his last chapter.  Mark Hurd is only 53 years old.  He has nearly half his life ahead of him. If he acknowledges where he went wrong, he can come back to lead other organizations and continue to make a positive difference in the world through his leadership.  

It’s Time to Invest in America

Originally posted on the New York Times DealBook Blog on Monday, August 9, 2010

You don’t have to be an economist to recognize America’s economy is in trouble.

Ten years ago, America’s economy was booming. American business was the envy of the world. Stock prices were soaring. Dozens of new companies were created every day. Private sector investments were at an all-time peak. Most importantly, the federal government had generated budget surpluses for three consecutive years.

What happened?

Two successive administrations and the Federal Reserve shifted the focus from investment to stimulating consumer spending with low interest rates, easy money, high leverage, low personal tax rates and increased government spending. The result? The federal deficit will hit $1.4 trillion this year, with cumulative debt reaching $18 trillion by 2015. That’s $60,000 for every American.

Since early 2009, economists have promised economic growth of 3 to 4 percent, saying that job growth — “a lagging indicator” — will surely follow. Eighteen months later, things have not improved. Estimates of growth in the gross domestic product continue to decline, as do durable goods orders. Twenty-six million Americans (16 percent of the work force) cannot find full-time jobs. After its 2009 rebound, stock prices are declining, reflecting growing pessimism.

While the fundamentals are awry for the United States, leading American companies are doing well. Second-quarter corporate earnings consistently exceeded expectations, as companies reported solid productivity gains. Corporate coffers have $1.8 trillion in cash. Yet companies are not investing — at least, not in America.

In talking with dozens of chief executives, I hear pragmatic managers focused on building their businesses and earning fair returns for shareholders, yet extremely concerned about government policy. Here are the real reasons they are not investing in America:

  1. They expect no real domestic growth for the foreseeable future. In contrast, they foresee emerging markets sustaining double-digit growth. As a chief executive at a large consumer products company told me: “Half our revenues already come from Asia; within 10 years it will be 70 percent. Naturally, we are shifting more operations there.”
  2. To compete with local companies, global companies are investing overseas in factories and sales and marketing personnel. Foreign governments like China and Singapore make investments very attractive. One chief executive noted that he chose China for his $62 million factory because local subsidies reduced his investment to only $13 million.
  3. Companies are also moving infrastructure support from the United States to lower-cost areas in Asia. Unable to obtain visas for its Indian employees, a major computer software company moved most of its software operations to India, where well-educated employees enjoy higher standards of living at one-quarter of the cost.
  4. Without domestic growth, there is no need for additional employees. Instead, companies are achieving productivity gains by running lean. Mounting costs of doing business and increased benefit costs have created so much uncertainty that chief executives are reluctant to hire, especially small business owners.
  5. Chief executives feel they have access in Washington, but limited influence. Without any business people in the Obama administration, there are no advocates for sound business policies. A successful commercial banker described how open the president appeared to his concerns, yet the next day — without any consultation — the administration announced a new $50 billion bank tax.

Ask yourself: if you were faced with these conditions, would you be investing in America and hiring more people? Unless the climate in Washington changes dramatically, this no-growth, no-jobs environment will continue indefinitely.

How can the administration reverse this economic malaise?

To get the country growing and Americans back to work, the government must shift course to invest in America. Tax policies and incentives should stimulate private sector companies to invest domestically in research, innovation, manufacturing, infrastructure and exports.

Here are six specific ways to accomplish this shift:

  1. Double the investment tax credit for new tangible assets to encourage investment.
  2. Double tax credits for increases in research and development to stimulate research and innovation.
  3. Introduce a graduated capital gains tax based on length of time assets are held, with rates declining to zero after 10 years.
  4. Offer a capital gains tax holiday the first time companies are sold to encourage investment in start-ups.
  5. Grant special loans and job credits for small businesses, where 70 percent of jobs are created.
  6. Offer export tax credits for the next two years to reinvigorate export growth and rebalance trade.

This set of pro-investment, pro-growth policies would supercharge American investment, rekindle innovation, create millions of sustainable jobs and restore continued economic growth. This would result in increasing tax receipts that would pay back these tax credits many times over.

Most important of all, this would make America competitive once again, focusing on our strengths of entrepreneurship, innovation and creativity.

It’s time to invest in America once again.

Win Wallin: An authentic leader in our midst

Originally Published in the Star-Tribune on August 7, 2010

It is in fashion these days to vilify leaders, from Tony Hayward of BP to Wall Street bankers. When a problem arises, we look for the villain who caused it. Then we search for the perfect leader to guide us out of the wilderness, only to find they have feet of clay.

It's time to recognize that leaders are just as imperfect as the rest of us. Instead we need authentic leaders -- people who own their mistakes and acknowledge their faults. More importantly, we need leaders who always put the interests of their organizations ahead of their self-interests.

Young leaders need role models whose actions provide guidance for their leadership. My role model is Minnesota's Winston Wallin. Now in his mid-80s, Win is former chairman and CEO of Medtronic and my ex-boss.

He's had three distinguished careers -- at Pillsbury, Medtronic and the University of Minnesota. As a board member, Win made major contributions to the success of such important Minnesota corporations as Cargill and Norwest Bank (now Wells Fargo). But his greatest legacy may be the Wallin Education Scholars, a program that's enabling thousands of high school students to attend Minnesota's colleges.

Recently Win and I had a thoughtful discussion in his gazebo. He still combines keen insights and laser-sharp focus on what's most important along with a wicked, self-deprecating sense of humor. No matter how tough things seem to be, Win can lighten up any group with a clever line. As we talked, Win shared his wisdom and perspective about the challenges we faced together at Medtronic, and even more passion for the Wallin Educational Scholars. His commitment to help people is stronger than ever.

After graduating from University of Minnesota, Win joined Pillsbury, where he spent 37 years, rising to president and chief operating officer. The Pillsbury board made a grievous error in not choosing him to succeed Bill Spoor as CEO, one for which the corporation paid dearly. When Spoor's successor failed, Pillsbury fell prey to a hostile takeover by Britain's Grand Metropolitan PLC. After years of malaise under Grand Met and its successor Diageo, Pillsbury was acquired by Minnesota-based General Mills.

Beyond pacemakers

Pillsbury's loss was Medtronic's gain. Win accepted the board's request to become chairman and CEO in 1985. Medtronic was floundering, due in part to a mishandled quality problem. But it didn't take Win long to recognize that Medtronic's entire future was at risk: Medtronic was blocked from entering the nascent implantable defibrillator market by a pioneering patent held by archrival Eli Lilly.

Ironically, Michel Mirowski, inventor of the defibrillator, had worked for Medtronic until the company unceremoniously dismissed him and told him to take his patent with him. Lilly purchased exclusive rights to his design and patent.

Win saw something few others realized: Not only was Medtronic blocked from this essential market but its mainstream pacemaker business was vulnerable. Win's first act was to charge Medtronic pacemaker chief Bobby Griffin with launching a massive R&D effort to get Medtronic into the defibrillator business. In typical Wallin style, he told Griffin, "Spend whatever it takes."

Soon Lilly sued Medtronic to halt its defibrillator research, and a Philadelphia judge ordered the company to "cease and desist" all efforts. At this point most executives would back off. Not Win Wallin.

Undeterred, he shifted the defibrillator project to Medtronic's Dutch research center, beyond the purview of U.S. courts. He then hired former Pillsbury general counsel Ron Lund and told him to get the court's decision overturned at any cost. In 1990, Medtronic won a 6-3 decision from the U.S. Supreme Court.

Win also recognized that the company was too reliant on pacemakers, in part due to several failed attempts at diversification. So he hired Dr. Glen Nelson as vice chairman in 1986, and together they began to diversify Medtronic's business.

Two years later, Win contacted me while I was at Honeywell about joining the company as president and chief operating officer. Initially, I declined because I was immersed in turning around Honeywell's space and aviation business. After we got that business back on track, I called Win. Joining Medtronic in 1989 was the best move of my career.

My first week on the job, Win told me, "Bill, don't worry about the numbers for six months. Get out and learn the business from the top doctors." That sent me on a quest to work with some of the world's finest physicians by gowning up and watching them implant everything from pacemakers to defibrillators and stents.

Win retired from Medtronic in 1991, but he certainly didn't retire from life. In addition to chairing Medtronic's board, he joined five corporate boards where he provided invaluable advice.

Wallin also answered U of M President Nils Hasselmo's request to help the U turn around its struggling health sciences area. At the time the medical school was being challenged by the FDA for selling unapproved transplant drugs. Win dove into his new job and helped get the academic medical center back on track.

In the early 1990s he and his wife, Maxine, formed the Wallin Foundation, setting aside a significant proportion of their gains from Medtronic stock. Together they started a scholarship program at South High School in Minneapolis for talented students from low-income families. Eventually the program was converted to a private operating foundation now known as Wallin Education Partners. More than 3,000 students have benefitted from $26 million in scholarships.

Aspiring young leaders look to high-profile success stories like Apple's Steve Jobs and Facebook creator Mark Zuckerberg. For a model of sustainable success impacting the lives of millions of people, they would do well to look to Win Wallin. They won't find a more authentic leader anywhere.