WHARTON LEADERSHIP DIGEST 

February, 2002, Volume 6, Number 5

CONTENTS   

Leading in All Directions:  Wharton’s Annual Leadership Conference on June 5
Leading the Action:  Decision-Making in the Real World
No Slowdown in Leadership:  Leading When the Market is Down 
Ethical Leadership: Its Everybody’s Business And It Starts at the Top

Leading in All Directions:  Wharton’s Annual Leadership Conference on June 5 

The Wharton School’s Center for Human Resources and Center for Leadership and Change Management invite you to their sixth annual conference on leadership, with a focus this year on Leading in All Directions, to be held at the Inn at Penn on June 5, 2002. 

Lateral leadership – leveraging your partners’ strengths instead of directing subordinates’ actions – is required for achieving results when managers have no authority to guarantee them.  Upward leadership – taking charge when you’re not formally in charge – is essential as well.  For these distinct forms of leadership to work well, they’ll require inward self-assurance and personal self-confidence.  
 

Leadership, then, should be viewed as a four-pronged capacity – downward, outward, upward, and inward.  But building that capacity is a challenge, and the sixth annual Wharton Leadership Conference is devoted to exchanging ideas on how leadership for all directions and a supporting culture can best be developed. 

Our intensive one-day program includes Warren Bennis, author of On Becoming a Leader, Organizing Genius, and other books on leadership; Marcus Buckingham, co-author of First, Break All the Rules and Now, Discover Your Strengths; Deborah M. Fretz, Senior Vice President for Sunoco; Rodrigo Jordan and Chris Warner, mountaineers who have summitted Mt. Everest; Douglas K. Smith, co-author of The Wisdom of Teams; Scott Snook, director of West Point’s Center for Leadership and Organizations Research; Sally W. Stetson, President of the Forum of Executive Women; Arthur Sulzberger, Jr., publisher of the New York Times and chairman of The New York Times Company, and Nancy Straus Sundheim, Senior Vice President for Unisys Corporation.

Warren Bennis, Marcus Buckingham, Deborah M. Fretz, and Rodrigo Jordan

Douglas K. Smith, Scott Snook, Sally W. Stetson, and Arthur Sulzberger, Jr.

Nancy Straus Sundheim and Chris Warner

The deadline for conference registration is May 31, 2002 (“early bird” registration by March 29 comes with a discount). You can register online at by clicking here, and continually updated information on the conference is available here.  


Leading the Action:  Decision-Making in the Real World  

By J. Edward Russo, Professor of Marketing and Behavioral Science, Johnson Graduate School of Management, Cornell University

 and

Paul J. H. Schoemaker, Chairman of Decision Strategies International and Research Director of the Mack Center for Technological Innovation, Wharton School, University of Pennsylvania

Whether you work in business, government, professional services, education, or the not-for-profit sector, high speed rules decision-making as well as everything else. “In a world that moves at Web speed, time cannot be sacrificed for better quality, lower cost, or even better decisions,” observed John Roth when serving as president and CEO of Canada’s Nortel Networks. 

Whatever their role and organization, most professionals have to make a decision “now” –  followed by another decision “now,” followed by yet another. And more is at stake than ever before. 

Why Decision-Making Is Increasingly Challenging 

• Information overload. You have an avalanche of information at your fingertips, but much of it is conflicting and of uncertain reliability. 

• A galloping rate of change. You must make intelligent decisions about moving targets. What’s fact today may be fiction tomorrow. 

• Rising uncertainty. The predict-plan-execute days are gone. Discontinuities are the norm. 

• Few historical precedents. With little experience as a guide, you must decide correctly within new organizational models (such as virtual organizations) and about new technologies or electronic commerce. 

• More-frequent decisions. Standard operating procedures have been replaced by decisions tailored for individual customers, suppliers, partners, products, and cases. 

• More-important decisions. In today’s flatter organizations, many are making decisions that could affect the well-being of the entire enterprise. Such decisions were once made only at the top. 

• Conflicting goals. You must deliver short-term but also experiment and prepare for long-term, which is, of course, just the many short-terms yet to come. 

• More opportunities for miscommunication. Cross-functional and multinational teams are becoming the norm, and function-bound or ethnocentric views of the right answer can quickly derail a decent solution. 

• Fewer opportunities to correct mistakes. In a fast-paced world you have less time to correct mistakes and reestablish credibility. 

• Higher stakes. In our winner-take-all society fewer people will be big winners. If you’re not one of them, you may find yourself pushed to the sidelines   

Becoming an Expert Decision-Maker

Becoming a skilled decision-maker is no more complex than becoming a skilled athlete. The process can be taught, and it can be learned. Researchers in decision-making have discovered that, like untrained swimmers who lift their heads too far out of the water, untrained decision-makers make characteristic errors. They frequently define their problems in ways that cause them to overlook their best options, for instance. Or they fail to collect key facts because they have too much confidence in their own judgments. 

Much time is wasted in meetings and deliberations because people focus on the wrong issues, ask the wrong questions, don’t examine the data critically, or don’t know what they want. They muddle their way through the decision, with wrong turns and backtracking, rather than utilizing a bold and confident process that would lead to timely, successful results. As one manager we know asked in exasperation, “Why do we never have enough time to do it right the first time, but we somehow can find time to redo it three or four times?” 

Indeed, a good decision-making process will save time in the long run, since you’ll make the right decision the first time. When you consider the waste in time and effort your wrong decision produces, not to mention the blot on your reputation and the personal friction it may cause, a quick decision may not be that quick after all.

A Good Decision-Making Process 

Would you tell me, please, which way I ought to go from here? asked Alice. That depends a good deal on where you want to get to, said the Cat. I don’t much care, said Alice. Then it doesn’t matter which way you go, said the Cat.  –  Lewis Carroll, from Alice’s Adventures in Wonderland

Unlike Alice, most of us do care where we get to, so it does matter which way we go. We need a coherent road map to save us from ending up in the kind of topsy-turvy world that Lewis Carroll created.

Dividing the decision-making process into four stages can provide that map. These four stages provide the backbone of any decision process, and consciously or not, every decision-maker goes through them:

1.  Framing. Framing determines the viewpoint from which decision-makers look at the issue and sets parameters for which aspects of the situation they consider important. It determines in a preliminary way the criteria that would cause them to prefer one option over another. 

2.  Gathering intelligence. Intelligence gatherers must seek the knowable facts and options and produce reasonable evaluations of “unknowables” to enable decision-making in the face of uncertainty. They should avoid such pitfalls as overconfidence in their current beliefs and the tendency to seek information that confirms their biases.

3.  Coming to conclusions. Sound framing and good intelligence don’t guarantee a wise decision. People cannot consistently make good decisions using seat-of-the-pants judgment alone, even with excellent data in front of them. A systematic approach –  particularly in group settings –  leads to more accurate choices, and it usually does so far more efficiently than hours spent in unorganized thinking.

4.  Learning from experience. Only by systematically learning from the results of past decisions can decision-makers continually improve their skills. Further, if learning begins when a decision is first implemented, early refinements to the decision or implementation plan can be made that could mean the difference between success and failure.

In real life, of course, the process is not as linear – or as distinct – as our four stages suggest. Indeed, information discovered in the intelligence-gathering stage may inspire you to go back and reframe your issue. Moreover, a complex problem (the relocation of your business, for instance) may entail a series of smaller decisions, each of which may involve several framing decisions, several intelligence-gathering efforts, and several coming-to-conclusions steps. 

In spite of the complexity, it helps to think about each of the activities of a decision separately. You can’t guard against the characteristic errors of each stage unless you recognize which part of the decision you’re working on. Fortunately, avoiding the errors is easy once you can recognize the stages and know their common traps. 

Our four-stage process is a framework, not a set of rigid rules. Follow the paths we suggest only as far as you feel the decision at hand requires. Use them flexibly. Be aware, however, that every good decision-maker must go through the first three stages. If you skimp on a stage crucial to the issue you face, you’ll pay the price. You can manage the stages now or watch them run over you later. 

Note: This article is drawn from J. Edward Russ and Paul J. H. Schoemaker, Winning Decisions: Getting It Right the First Time (New York: Currency Doubleday/Random House, 2002).  Jay Russo can be reached at jer9@cornell.edu, and Paul Schoemaker at schoemak@wharton.upenn.edu.


No slowdown in Leadership:  Leading When the Market is Down

By Brian Lehman, Wharton MBA Student (WG ‘02) 

During arguably the worst labor market since 1991, investment banks worldwide have layed-off employees by the thousands.  This contraction is challenging managers of investment banks to try and maintain high levels of productivity when morale is low.  

Adam Frieman, Managing Director and Group Head of Equity Risk Management at UBS Warburg, is a Wall Street veteran of nearly twenty years.  He heads a group of some 35 bankers that provides equity derivative structured solutions to a broad array of private, corporate, and institutional clients in the United States, Latin America, and Canada.  In an interview this past December, he described how he was managing employee motivation and compensation at a time when year-end bonuses were slated to be significantly lower than in prior years.   

Question:  What do you believe are the most important traits in leadership? 

Frieman:  Taking responsibility, making quick decisions based on incomplete information, and leading by example rather than by direction. The best managers are those who do all of the above well. 

Question:  It is often said that you learn most about leadership when you make mistakes.  Do you agree?  

Frieman:  I don’t agree.  If managers are not learning every day on the job, they are missing easy opportunities to refine their management skills.  It shouldn’t require a mistake to learn lessons.  Particularly in an investment bank, if managers are stagnant, then they’ll soon be replaced.  Certainly one learns from one’s mistakes, but no more so than working every day on the job, listening to your colleagues, and asking advice.  

Question:  Do you think leadership is born or developed over time? 

Frieman:  I believe that the traits and capacities to be a leader are born.  Experience and ability are learned.  Not everyone can be a leader, because not everyone has the skill to be an effective leader in this day and age.  Today’s manager is far different from 20 years ago.  Then, a manager was autocratic.  Today, you must be a dynamic player/coach. Having said that, I believe you can learn this over time. 

Question:  How exactly did you learn to become a leader? 

Frieman:  I believe that a person should act like a dry sponge – absorb the best and worst practices in everyone.  You take in good, and leave out the bad.  Over the years, I have tried to be keenly observant of others in all aspects of business, noting the reactions between managers and their staff.  I’d like to say that I have gained a certain ability to “size up” people and situations. I gained this through experience – I couldn’t do this 10-20 years ago. Or even 6-7 years ago. 

Question:  How do you build leadership in others? 

Frieman:  Leading by example, giving more responsibility to others, providing positive and creative feedback.  Also, as a leader, you shouldn’t be afraid to develop other leaders around you for fear of being replaced by them.  The best managers have the best people working with them. 

Question:  What’s the most challenging part of managing people, particularly in this current economic environment? 

Frieman:  Motivating staff in a difficult year.  The reality is that nobody gets paid what they’d like during these times.  The challenge for employees is to remain excited about doing their job.  To address this, managers must lead by example.  While I am no less disappointed than they are, I view the business as a long term opportunity.  If I were to slack off in my focus, I’d lose credibility when my performance is below both their and my own expectations. This actually drives me to work harder and do better, and as a result I still come to work at 6:30 in the morning and use e-mail late into the night.  To be clear, some employees aren’t affected by your efforts, and they will probably have problems motivating themselves in tough times like these.  

Question:  How has top management at UBS Warburg responded to September 11th? 

Frieman:  UBS Warburg focused immediately on the welfare of its employees.  Then the company made tremendous efforts to deal with family management – allowing for employees to take time away from work if necessary.  The company rallied around affected families, and increased security to a significant degree to make employees feel safe.  Life was definitely not normal:  mail policies became more strict, we had more frequent fire drills, we allowed employees to forgo flying if they felt uncomfortable, and we enforced a travel advisory which stopped flights for employees altogether for a period.  Senior management at UBS Warburg was very proactive in grief counseling and sensitive to the many issues something like this brings about.    

Question:  What makes managing people within an investment bank unique to other managing staff in general? 

Frieman:  With many industries, a small percentage of management has non-salary based incentives, such as hefty employee stock options and sizeable bonuses. On Wall Street, however, a much larger percentage of employees typically have upside potential via an end-of-year bonus.  This fact changes the way we manage the team, especially between the months of December and February when most employees can’t help but focus on the notification and receipt of their bonus.  While this cycle is easier to handle in a good year, employees become inured to it over time and learn to keep the distractions to a minimum. 

Note: Brian Lehman can be reached at brlehman@wharton.upenn.edu. 


Ethical Leadership: Its Everybody’s Business And It Starts at the Top 

By John Joseph, Wharton Center for Leadership and Change 

No one knows yet what really happened inside Enron, America’s seventh largest company.  Or what role chairman Kenneth Lay, chief executive Jeffrey Skilling, or Andersen partner David Duncan actually played in its demise.  Did they ignore the probability of adverse consequences of their actions?  Focus solely on short-term success?  Hope the public wouldn’t find out?   

The problems at the vortex of the Enron meltdown highlight the need for leaders who are – as  company executive and observer Chester Barnard suggested over sixty years ago – both a moral person and a moral leader. They must act consistently themselves, and they must encourage an ethical dialogue and consensus among all employees. 

Alan Richter, President of QED Consulting and a frequent ethics trainer, notes that “leaders clearly set the ethical tone for the organization.”  By way of example, when Salomon chief executive John Gutfreund failed to censure renegade bond trader Paul Mozer after he improperly bid on U.S. Treasury bonds in 1991, the CEO may have indirectly suggested to other employees that it was acceptable to skirt the law as long as you were not caught.  

In order to develop a climate in which ethical conduct is fostered, executive should be aware of the forces than can undermine the right climate, such as unrelenting performance demands and misaligned compensation systems.  Top management must then infuse the organization with ethical principles to guide the actions of employees in the face of these conflicting pressures.  Employees draw their cues from perceptions of their firm’s culture, and if “they see their company behaving like Enron,” says Richter, “they are more likely themselves to act in an unethical manner.”   

Many companies now train all employees with case studies featuring ethical dilemma’s common to their industry.  Some firms have also created an ethics officer responsible for overseeing the firm’s code of ethics and its adherence.  For such steps to work, however, companies must be clear about the underlying value system and code of conduct.  “If employees don’t know what the organization stands for,” observes Richter, it is sure to result in “confusion and paralysis.” 

Johnson & Johnson’s corporate credo – overseen by top management but mastered by all – steered the company successfully through its Tylenol crisis in 1982 and continues to serve as a compass by which the organization guides itself today.  The J&J recovery – and contrasting Enron demise – are reminders that ethics is everyone’s responsibility, and that it starts at the top. 

Copyright © 1996-2002, Wharton Center for Leadership and Change Management, 
University of Pennsylvania.