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Collaboration necessary for positive change

Minnesotans have long recognized the value of individual freedom and the merits of initiative and creativity. Yet we live by the collective -- our schools, our security, our environment, our parks and lakes, our safety. We know we cannot thrive without it, either nationally or locally. But many people resent its intrusion into their lives and its claim on their earnings.

The political parties in recent years have sharply divided: to the left -- in support of the collective, largely through government actions and laws -- and to the right -- in support of the rights and freedoms of individuals. Those of us in the middle are in "no man's land," trapped in the crossfire between left and right and between increasingly strident voices in politics and in the media.

Most people desire both individual freedom and the support of the collective, even if they don't articulate it that way.

There is a better way that offers the promise of enhancing individual initiatives while providing "common" benefits for all citizens. I call it "community-building through collaboration and creativity."

Last October, Indiana University Prof. Elinor Ostrom became the first woman to win the Nobel Prize in economic sciences. The Nobel Committee cited her breakthrough research in the management of common resources like forests, fisheries and oil fields.

Commonly pooled resources

In her book "Governing the Commons," Ostrom outlines a thoughtful approach that she labels "commonly pooled resources." Her work stands in sharp contrast to several Nobel laureate economists of the past decade who have argued that people only operate in their self-interest.

 

Originally Posted in The Star Tribune on May 16, 2010

Harvard Business School Welcomes New Dean - Nitin Nohria

Harvard President Drew Faust’s announcement that Nitin Nohria will become Dean of Harvard Business School is indeed welcome news. President Faust has made a visionary choice in Nohria. He is a transformative leader who has the depth and insight to understand the role of business education in developing global business leaders who recognize that their responsibilities transcend immediate requirements for short-term results.

Nohria is a scholar, a leader, and a remarkable human being who represents the best of Harvard Business School. He has mentored more faculty members, myself included, than anyone can count. His research has centered on critical questions such as what drives human motivation and what shapes leaders and sustained  achievement. 

Nitin and I have taught together for seven years, first in the new required course, Leadership and Corporate Accountability, then in the Seminar for New CEOs, and most recently in the new elective course, Authentic Leadership Development. During our years as colleagues, Professor Nohria has consistently taught students and fellow faculty members the principles and practice of authentic leadership.

American business is emerging from a crisis of leadership.  After a lost decade in which many leaders focused on maximizing short-term shareholder value, the American economy needs to refocus on reestablishing the trust in business as a sector that contributes to the well-being of society.  Nohria will lead the new generation of leadership at the helm of Harvard Business School during a period in which the business world cries out for authentic leaders focused on creating long-term sustainable value. 

Nohria’s remarks upon the announcement are characteristic of his leadership: “With business education at an inflection point, we must strive to equip future leaders with the competence and character to address emerging global business and social challenges.”  He is focused on what matters most: developing authentic leaders who can empower thousands of others to lead.  The world needs innovative leaders who can master the complexities of the global economy. 

Congratulations to Nitin, and the faculty, administration, and classes of future leaders at Harvard Business School who will join with him in transforming business education and leadership to create a better society.

The New 21st Century Leaders

Harvard Business Review is hosting a six-week long blog series on how leadership will look in the future.  They've brought together many different perspectives and conversations on the topic of leadership and posted them on their site.  These conversations will help shape the upcoming Leadership Colloquium, “Imagining the Future of Leadership,” that will be hosted by Nitin Nohria, Rakesh Kharana, and Scott Snook at Harvard Business School in June 11-12.  This symposium is a great opportunity to bring together a broad range of ideas on leadership.

My contribution to the conversation looks at New 21st Century Leaders.  Some of these thoughts and conversations steamed from my March Wall Street Journal - "The New Leaders: Collaborative, Not Commanding."

For the full article: 

Harvard Business Review - The New 21st Century Leaders

How Ed Whitacre Is Rebuilding General Motors

It’s no secret I have been critical of General Motors management, right up to its bankruptcy filing a year ago. For decades, GM management focused on short-term profits, while it was steadily losing market share – from 53 percent of the U.S. market all the way down to 19 percent. Along the way it was unable to keep pace with international competitors or shifting customer demand and concessions in work rules, health care and pensions to its union that caused the firm to fail when the market collapsed in the fall of 2008.

All that changed rapidly when the Obama administration appointed Ed Whitacre as its chair in July 2009. Whitacre, the highly successful ex-CEO of ATT, took over as CEO as well last fall and immediately started transforming GM into a modern auto company that could compete in both the U.S. and world markets.

He went out on a limb and promised GM would return to profitability within two years and repay its debts to the United States government within seven years.  At the time GM was still in the red, while Ford was thriving and Toyota was outpacing both in worldwide production and sales.  Furthermore, American consumers were distrustful of General Motors quality and angry that their tax dollars had been used to keep the company on life support.

When Toyota encountered its quality problems earlier this year, Whitacre moved in high gear to capture the available market share. Now he has taken action to fulfill his promises. Not only has General Motors repaid its loan with interest from the United States government, it has continued to improve customer service.  Currently, GM is projecting ambitious global growth in 2010 and 2011. In the coming months, the company plans to initiate a public sale of stock, allowing the automaker to regain its independence from the U.S. government.

How did this turnaround happen so rapidly?  How did Whitacre restore a bankrupt giant, repay billions to the government, and make bold growth projections for the future?

Whitacre made the tough internal decisions. He shed unprofitable brands like Saturn, Hummer, Saab, and Pontiac, eliminated layers of management, abandoned the company’s fossil-like committee structure, reduced excess global inventory, and closed 1,350 underperforming dealerships.  Those were not popular decisions internally or with GM’s bloated dealer structure.  But they were necessary steps to shed its losses and transition away from the finance-driven “analysis paralysis” that dominated its management for four decades.

He became the face of the company with the public.  With public speeches, press interviews, and even starring in company ads, Whitacre put himself on the line with the American public.  Americans wanted a real leader at the helm of GM, and Whitacre was willing to be that person. 

He regained trust in the company.  By backing up his public promises – and offering himself up as the new face of GM, Whitacre lent personality and warmth to a brand that had become a concrete monolith of stagnation.  At risk to his impressive professional career, Whitacre put his reputation on the line. He fought for new customers by making promises about GM’s autos and trucks and their quality, even offering a “money back guarantee.”  If nothing else, Americans respect a confident, trustworthy leader who is trying to restore respect for a tattered institutional brand.

He’s not done yet.  Whitacre is not one who rests when a preliminary goal is met.  In his recent television spot and speeches, it’s clear that he and GM management are focused on improving GM’s product lineup while fulfilling its promises to its customers.

At a time when so many leaders have failed, Americans are pleased to rally around a corporate comeback story built on trust and quality assurance. With Ed Whitacre still at the helm, it’s a comeback story that could keep going for years to come.

Learning about the Nature of Compassion from the Dalai Lama

Penny and I just returned from Zurich where we spent a remarkable three days with His Holiness the Dalai Lama. We were there as part of the Mind and Life Institute meeting of economists, scientists, contemplatives, and concerned citizens trying to make the world a better place.  The subject was a first-ever dialogue on "Compassion and Altruism in Economic Systems."

The first day we heard some impressive new research that refutes what the classical economists have been telling us for three decades, which is that people only operate in their self-interest. Quite to the contrary, new economic research demonstrates conclusively that most people express empathy and compassion for others, even when they incur a considerable cost. Furthermore, new findings in neuroscience using fMRI technology indicate that actual changes take place in the brain when people express compassion and empathy and that this tends to reduce their destructive emotions.

On the second day we witnessed some remarkable practical applications, from micro-finance, to educating illiterate women, to powering small villages using only solar power. Very inspiring.

On the third day I was given the opportunity to engage the Dalai Lama in a discussion about compassionate authentic leadership and the essential role that leaders must play in bringing a much stronger sense of compassion and altruism to organizations and the economy as a whole. After 15 minutes, I asked him how we could develop more leaders who were both compassionate and authentic and could sustain successful outcomes over an extended period of time.

He stated clearly that people are not born angry or hostile, but develop that way because of their inability to address their destructive emotions that exist due to difficulties they have faced in their lives. To overcome these negative feelings and be genuinely compassionate, leaders need to have a set of practices that they do routinely.  Meditation is the obvious candidate, as I have experienced in my own life, but yoga, tai chi, physical exercise, massage, and other forms of relaxation therapy can achieve the same result.

The notion of contagion - that is, people drawing from the emotional state of others - that we heard about on the first day is relevant here as well. As leaders exude compassion and empathy in leading others, they cause other people to do the same, creating organizations that are more compassionate overall and able to sustain effective results.

The key to doing so is having a common sense of purpose, or mission, and practicing what the Dalai Lama terms "secular ethics." In using this phrase, he makes it clear that he is not talking about the Buddhist religion, but rather the practices that enable leaders to act in a manner consistent with their values, even under extreme pressure.

For all the challenges we face in the world, I believe there is much that non-Buddhists can learn from Buddhist practices that will enable us to lead more effectively and develop compassionate organizations that can sustain high levels of performance.

Guest Post - Compromise Until It Hurts

“A good compromise leaves everyone slightly unhappy.”

Today’s leaders ought to frame that phrase and hang it on their office walls.  Regardless of their chosen arena – be it business, religion, the military, politics – etc., every leader should do a gut check, and ask “When is the last time I actually compromised?” I don’t mean in terms of compromised principles – those ought to never waver.  I’m referring to those moments when you placed the long-term good of two parties ahead of the short-term good of one.  When you actually gave up something – and really hurt because of it – with the hope that it would yield something better, later. When you lost, to gain. 

No one wants to give up something important today for something uncertain tomorrow.  No one wants to bring harm – financial, military, political, or social – to themselves or the potential tens of thousands of people they represent.  This is true especially when that decision depends on putting trust in a rival or unknown party. 

But a genuine compromise forces us to do so.  Compromise leaves leaders vulnerable in their temporary defenselessness.  And for the leaders of today – or any day – that is a position we’re taught to avoid, particularly in our capitalist culture where confidence can sometimes be as important substance to closing a deal.  And yet we’re in the financial position we face today in great part because of our leadership’s inability to enact real compromise.

Leaders on Wall Street failed to strike arrangements with boards and shareholders on reasonable long-term growth projections, leaving them pursuing untenable gains and inflating the economic bubble.  Leaders on Capitol Hill have often failed to relinquish ideology on healthcare, climate change, and financial reform in the interests of progress for the constituents they serve, leaving them (and us) with arguably the most partisan political system in American history. 

We’re living in a highly volatile time made worse by dire economic straits, and we’re growing increasingly unable to take the time to understand each other, and concede personal interests for the greater interests of the whole.  The media is more segmented than at any time in a generation.  The stratification of social classes is increasing.  We, as a nation, are increasingly polarized. To right the ship, we need leaders who can rediscover the true nature of compromise.

I’m no idealist.  I know how the world works – I’ve lived too long, and done too much in the business world, not to.  And it’s with that knowledge I can say that our ability to move the progress needle rests on our leaders’ collective ability to think, “what can I give up to move forward?”

Then, that leader should give a little more.  Pragmatism isn’t always elegant.  But it works.

Lead To The Final Whistle

30 seasons as a head coach.  867 wins.  12 ACC conference championships.  76 NCAA tournament victories.  11 previous Final Four appearances.  3 national championships.  2 Olympic gold medals. 

A Naismith Basketball Hall of Fame Coach – and a best-selling author, speaker, and Fortune 500 pitchman – Duke’s Mike Krzyzewski (aka “Coach K”) is one of the most distinguished leaders in collegiate athletic history.  An average athlete who displayed leadership prowess at an early age as a player and coach under the equally legendary Bobby Knight, Coach K’s name is synonymous with success.  Now in the twilight of his career – or what the throngs of Duke-haters hope is the twilight of his career - the most recognizable man in college basketball will patrol the sidelines tonight, competing for a potential fourth national championship. 

And he’ll do so against a man who just last week was mistaken by NCAA security guards for one of his own players.

3 seasons as head coach.  89 wins.  3 Horizon conference regular season championships. 6 NCAA tournament victories.  0 previous Final Fours.  0 national championships.  1 gold watch (no medals). 

Brad Stevens, head coach of Butler University, assumes the role of “David” to K’s “Goliath” in tonight’s matchup.  Leading a squad of unknown athletes from an previously unheralded university, Brad Stevens’ enthusiasm, youth, and fearlessness will be put on display against Mike Krzyzewski’s experience, discipline, and fire.  A passionate young coach – one who is already tying records for “most wins in a coach’s first three seasons” – Stevens' name is becoming synonymous with “underdog.” He joined the Butler staff as a volunteer in 2001-02 (the same year as Coach K’s last championship), having quit a career at Eli Lilly to pursue his passion as a coach and leader of college athletes.  And after years of gutting it out as an unpaid, and then low-paid, assistant coach, he assumed the head coaching mantle at Butler in 2007. 

In many ways, Stevens’ rise as a leader of young athletes mirrors that of Mike Krzyzewski.  Both are former athletes, having played basketball for four years at DePauw and West Point, respectively.  Both have found a calling in mentoring and leading the next generation of leaders and athletes.  Both have a firm commitment to the concept of the “student athlete” (with graduation rates reflective of that mindset).  Both have a profound appreciation for the “team” (at several points throughout the season, Coach K has said explicitly that his players are not particularly talented, rather they are particularly cohesive.)  Both have a phenomenal support staff of former players and top assistant coaches, on whom they have relied heavily throughout the course of the tournament.  Both are family men and enjoy a balanced and successful life off the court as well as on.

Both exceeded expectations this season.  Both have an undeniable passion for competition. 

Both are winners.  And both hate, hate to lose.

Which is why tonight’s matchup is so compelling.  It’s more than two terrific basketball teams grinding it out on national television.  It’s more than CBS’s “One Shining Moment.” It’s about two hard court leaders going head to head, two coaches occupying different stages in their careers but who find themselves equals on the national stage.  It’s about two men who have spent years hand-picking their athletes, building up, breaking down, and reconstructing strategies, and who have somehow managed to mold their admittedly un-athletic individuals into two distinct, winning teams

No doubt, tonight’s commentators will make much of the “David v. Goliath” parallels.  Big v. small.  Perennial Powerhouse v. Surprising Newcomer.

But what I’m most excited by is the leadership we’ll see on display tonight.  The strategies playing out across the game.  The inspirational huddles.  The crisis-time adjustments.  And the finality of the competition – when the final whistle blows, there will be one winner, one loser.  As one who’s been on both sides of that coin, I look forward to see these two class acts respond with grace, respect, pride, and compassion.

When true leaders collide, you get true, unadulterated competition.  That is not something which comes about every day.  Tonight, it does – I recommend we all tune in for a lesson in leadership.

A step-by-step plan for Pope Benedict XVI

Originally Posted on Washington Post's On Leadership Blog

Q: Pope Benedict XVI's efforts to deal with the Church's sex scandal raises this question: Can a leader hold managers to account on an issue where his own past performance is in question?

Pope Benedict XVI is facing the greatest crisis of his long career. It's not just his leadership of the Vatican that is on the line, but the reputation of the entire Roman Catholic Church. If the Pope fails to face the reality that problems of pedophilia by priests have brought on the church, many Catholics may lose faith that their church leaders practice the same high moral standards that they preach. This situation is ironic for a Pope whose hallmark has been enforcing moral and sexual standards for one billion of the faithful. Does he have any choice but to require his priests to do the same?

Why is it so hard for the Vatican and especially this Pope to face reality? Is it denial? A cover-up? A double standard? Or simply a desire to protect its own leaders?

First of all, doing so means acknowledging that the church in not dealing as harshly with sexual deviants as civil law and basic morality would require. To suggest that these problems are limited to very few priests or a distant problem corrected long ago only accentuates public denial of the depth of these problems and widespread knowledge of them throughout the church hierarchy.

While addressing a crisis of this magnitude is painful, it must start with the Pope admitting mistakes the Vatican has made, including his own. Next, the Pope needs to deal as aggressively with past defenders as would be expected in a court of law. Then, he needs to install a compliance system that will prevent future occurrences and ensure the early identification of offenders. Finally, Pope Benedict XVI needs to make the Vatican itself much more transparent in order to prevent covering up problems in the future.

These steps, which are similar to what would be expected in government, public corporations, or other religious denominations, are required to protect children who believe in their church. Their protection is far more important than preventing wayward priests from being held to high moral standards.

Now the Hard Work Must Begin . . .

The politicians chatter Sunday night during the historic House vote on access to health insurance gave the impression that reform was done. Speaker Pelosi called it an extension of the Declaration of Independence, declaring, “health care is a right,” not a responsibility. Republican Boehner all but claimed it marked the end of free enterprise.

Wrong on all counts.

Passing this bill is a momentous step in granting health case insurance to 32 million Americans who lack access, something we can finally take pride in. But it certainly doesn’t end the urgent need for health care reform. Rather, this is the end of the beginning. Now the hard work must begin in earnest. 

The bill addresses only one of four essential elements of health care.  Left unaddressed are cost, quality and lifestyles.  Unless we focus on all four, we will continue to have a dysfunctional system with unaffordable costs.

The bill does virtually nothing to constrain health care costs. It is “paid for” with tax increases that take effect this year and projected cuts in Medicare reimbursement, while delaying most benefits until 2014. If we don’t get health care costs under control before then, the CBO projected deficit reductions will turn into a trillion dollar increase the following decade.

Even the current round of Medicare cuts – over 20% for many physicians and hospitals – is unsustainable, as politicians plan to reverse them retroactively. If they don’t, many physicians and hospitals will refuse to take Medicare patients, just as the Baby Boomers enter the Medicare system. Last month Mayo Clinic in Scottsdale announced it could not afford to accept Medicare patients. Longer term, this could push the U.S. toward the British system of splitting into private and public systems.

Nor does this bill constrain insurance premiums. Wellpoint’s 38 percent rate hikes in California are going into effect, in spite of jawboning by HHS Secretary Kathryn Sebelius. Expect other insurers to follow. Can you think of any other product or service that could pull off price increases of this magnitude?

To bring health care costs under control and sustain access for all Americans, three things are urgently needed:

 

  1. Realigning incentives for individuals and health care professionals
  2. Improving quality of medicine
  3. Taking responsibility for healthy lifestyles

 

Incentives. The incentives in the current system are perverse. There are no rewards for people who stay well, and no penalties for leading unhealthy lifestyles or overusing the system.  Nor are there incentives for doctors and hospitals to keep people healthy and to prevent disease. Studies have shown that those who do so find themselves losing income.

As a result, primary care physicians are forced to pack more office visits into already crowded schedules, while spending less time with each patient. Specialists are incentivized to do more procedures, even when lower cost alternatives are available.  Hospitals are forced to conduct more tests and get people out of the hospital before they are ready.

We need to realign these incentives by rewarding people for healthy lifestyles and taking more cost-effective approaches to their health. Hospitals and physicians should be rewarded for keeping people well, by paying for outcomes and managing groups of patients with similar disease states, as well as for prevention and wellness.

Quality. Experts like Donald Berwick, MD of Institute for Health Improvement and Charles Denham, MD of Texas Medical Institute of Technology have identified ten quality issues whose correction could save tens of billions each. Managing chronic disease, which accounts for 75 percent of health care costs, in a systematic manner instead of as a series of acute events, could improve outcomes and quality of life for millions of people, while dramatically lowering the cost of care. Yet there is no national push to get either of these things done.

Lifestyles. It is estimated that lifestyle issues like unhealthy diets, smoking, alcohol, lack of physical exercise, and unmanaged stress account for more than half of all health care costs. Addressing these issues requires a national movement for wellness and prevention, modeled after the highly successful anti-smoking campaign, something virtually ignored in the current legislation.  To motivate people to take responsibility for their health and live healthy lives, there also must be rewards for those who do and penalties for those who don’t. Many successful ideas have been demonstrated locally through consumer-driven health plans and the integrated health movement. Now those must be taken to scale nationally.

This is a complex set of priorities to realize in an already-stressed system. It is too complex to leave in the hands of politicians who lack deep knowledge of health care and are swayed by lobbyists. For these reasons it is likely that solutions will be demonstrated in local communities and then taken to scale nationally. This is a long, arduous process. But unless we being immediately, the U.S. health care system will make our country less competitive and less healthy.

Now is the time for health care leaders locally and nationally to step up to these challenges and to lead the movement of the U.S. to healthy lifestyles and an effective health care system. Let’s get on with the hard work.

The New Leaders: Collaborative, Not Commanding

Originally posted in the Wall Street Journal on March 19, 2010

A revolution is reshaping America's best-led companies. Authentic leaders focused on customers are replacing the old guard of hierarchical leaders who concentrated on serving short-term shareholders. The old "command-and-control" style is being replaced with an empowering, collaborative style.

During the last half of the 20th century, business leadership became an elite profession, dominated by leaders who ruled their enterprises top down. Influenced by two World Wars and the Depression, organizational hierarchies were structured like military models.

Their leaders used multi-layered structures to establish control through rules and processes. People climbed hierarchies in search of power, status, money and perquisites. As stock holding periods dropped from eight years to six months, hierarchical leaders focused on generating short-term results, often to the exclusion of long- term growth.

In the past decade it all blew up, from the ethical scandals exposed by Enron and WorldCom to the Wall Street meltdown. As a result, people lost trust in business leaders to build sustainable institutions instead of serving themselves and short-term shareholders.

In my 1960s class at Harvard Business School our professor cited the Department of Defense and Catholic Church as the most iconic organizations. Business followed their lead, as General Electric, General Motors, AT&T and Sears became their role models.

By century's end, the latter three were in long-term decline, while GE was revolutionized by Jack Welch. Hundreds of other organizations like KodakMotorola and Westinghouse followed similar patterns of self-destruction. The hierarchical model simply wasn't working.

In retrospect, it seems obvious people weren't responding to "top down" leadership. Why not?

  • The craftsman-apprentice model has been replaced by learning organizations, filled with workers with greater knowledge than their bosses.
  • Young people are unwilling to spend ten years waiting for their chance to lead; instead, they want opportunities now, or they move on.
  • People are looking for more than money, as few are willing to spend their lives in unfulfilling jobs, just for the compensation. Rather, they seek genuine satisfaction and meaning from their work.

To lead in this new century, we need authentic leaders who align people around mission and values, empower leaders at all levels, focus on serving customers, and collaborate throughout the organization, in order to achieve superior performance.

Aligning: The leader's most difficult task is to align people around the organization's mission and shared values. Gaining alignment takes regular engagement with employees at all levels. It is especially difficult in far-flung global organizations where local employees may be more loyal to native cultures than their employers, especially regarding business practices and customer relationships.

Global organizations thought they could solve this problem with rulebooks, training programs and compliance systems, and were shocked when people deviated. Aligned employees committed to the mission and values, and want to be part of something greater than themselves, form an enduring organization that is resilient through crises.

Empowering: Hierarchical leaders exert power over others and delegate limited amounts. These days that isn't leadership at all. Authentic leaders recognize they need leaders at all levels, especially on the front lines, where people must lead effectively without direct reports.

The leader's job is to empower people at all levels to step up and lead. Empowered leaders need sophisticated accountability systems with closed-loop management to ensure commitments are met.

Serving: Leaders' first obligation is not to their shareholders, but rather to their customers. Any organization that does not provide its customers with superior value relative to competitors will find itself going out of business. Employees are much more motivated to provide customers with superior products and services than to increase stock prices.

Collaborating: The challenging problems businesses face these days are too complex to be solved by individuals or single organizations. Collaboration—within the organization and with customers, suppliers, and even competitors—is required to achieve lasting solutions. Leaders must foster this collaborative spirit by eliminating internal politics and parochialism and focusing on cooperation internally to be competitive externally.

The ultimate measure of 21st century leaders is superior results. In today's business world, organizations filled with aligned, empowered and collaborative employees focused on serving customers will outperform a hierarchical organization every time. Top-down leaders may achieve near-term results, but only authentic leaders can galvanize the entire organization to sustain long-term performance.

Examples abound of organizations – Procter & GambleIBMNovartis, Cisco, Genentech, IntelGeneral MillsPepsiCo and Avon Products, to name a few – demonstrating that 21st century leadership creates lasting shareholder value. Authentic leaders like IBM's Sam Palmisano, Cisco's John Chambers, PepsiCo's Indra Nooyi, General Mills' Ken Powell and Avon's Andrea Jungare the new role models for modern corporations.

We need them to rebuild the trust that has been lost and to validate that capitalism is still the best economic system.