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WHARTON
LEADERSHIP DIGEST
February,
2004,
Volume 8, Number 5
CONTENTS
 In
December 2003 Boeing faced a leadership crisis. Phil Condit, the
62-year-old chairman and CEO, stepped down after a scandal in which
Michael Sears, the company's former CFO, was accused of offering a job to
a Pentagon official who was then head of procurement for the air force.
These problems, which caused Boeing to lose credibility with the
U.S.
department
of Defense, a major customer, came at a time when the company was already
under severe competitive pressure from
Europe
's
Airbus in the commercial aviation industry. To make matters worse,
Boeing
was also losing money in its
satellite and space businesses.
To
help resolve the crisis, the board of directors called upon Harry
Stonecipher, Boeing's former chief operating officer, to come out of
retirement to take on the job of CEO. In addition, Lew Platt, former CEO
of Hewlett Packard and Kendall Jackson Wine Estates, who had been a Boeing
board member, became the company's non-executive chairman. In a
conversation with Michael
Useem, director of Wharton's Center
for Leadership and Change Management, Platt discusses how he and
Stonecipher are trying to ensure that Boeing's steep nose-dive doesn't
turn into a crash landing.
Platt
will be one of the presenters at the Wharton
West Leadership Conference in San Francisco on March 23. The
conference focuses on how great leadership can be applied and developed in
an era of uncertainty and change.
What
follows in an except from the full interview compiled by Knowledge@Wharton
editor Mukul Pandya, and it can be found on Knowledge@Wharton.
Useem:
On Dec. 1,
2003, Boeing went through a leadership change in which Phil Condit
resigned as CEO, you became non-executive chairman and Harry Stonecipher
was named the CEO. Could you speak about the factors that led to the
leadership change?
Platt:
You probably
know from reading the press that there were a number of incidents that
contributed to that change. The most troubling incidents centered around
standards of business conduct. On a couple of occasions, we had material
from competitors that we should not have had, and that situation was not
dealt with properly. This was followed by a disclosure that our CFO Mike
Sears had entered into improper discussions with a former government
employee [Darleen Druyun] --
who was at that time the head of procurement for the air force -- and had
discussed employment opportunities at Boeing with her before she recused
herself. This was an obvious violation of standards of business conduct;
as a matter of fact, it was a felony offense as far as she was concerned.
Phil
was never implicated in any of these incidents, but there was a general
overall loss of confidence in Boeing among employees and certainly among
our customers -- particularly among our very important government
customers. As we were working through these issues, Phil said to the board
that he would be willing to step down if we felt that that would help
clear the decks, get some of this behind us, and lead to restoration of
confidence more quickly. That's what led up to the leadership change.
Useem:
Let me ask a
related question. The events involving Mike Sears and Darleen Druyun were,
in a sense, one level removed from the board. But thinking about the
lessons for governance, could the board have done anything before these
incidents that could have averted the problem?
Platt:
Probably this
might sound self-serving because I'm a board member, but I think it would
have been very difficult for the board to see these things. But since
these incidents have taken place, and even before we uncovered the Sears-Druyun
issue, we decided that we would have our own independent look at a number
of things that were going on at the company: The handling of sensitive
data, the overall ethics tone in the company, record keeping, and all
those things. We [the board] hired an outside firm to come in and do a
thorough audit of the entire company. The audit turned up a number of
things, most of which did not point to the board's lack of vigilance, but
to the overall ethics tone of the company, which was not where it should
be. The audit also uncovered a lot of record-keeping issues. There were
many, many, many of these; even where we had done the right thing, it was
hard to prove that we had because the record-keeping was so sloppy.
We
have extended this outside audit to all our procurement practices,
especially those that surround government procurements. That part of the
study will be wrapped up this month. It will be reported publicly and
copies of our report will be given to people in the government who are
working on investigations. We are trying to cooperate with them by showing
that we will share all the data that we have with them.
At
the end of the day, other than the fact that we could have somehow
detected an overall lax tone within the company, it would have been very
difficult for the board to understand the details about having documents
from competitors or the details about the hiring of Darleen Druyun by Mike
Sears.
Useem:
You have a
division of responsibilities between yourself as non-executive chair and
Harry Stonecipher as CEO. Could you speak to the division of labor between
the two of you and what each of you is doing to restore confidence and
credibility at Boeing?
Platt:
As you know,
Harry and I have both been board members. Harry was the former chief
operating officer of the company, so he knows the internal operations of
the company very well, and that is what he remains focused on. He focuses
on getting performance within the company tuned up. I have taken on the
role of overseeing all the board activities, which helps him because it
takes that load away from him.
It's
not easy to chair the board of a company these days. There's a lot going
on because of new SEC regulations and new NYSE regulations,
Sarbanes-Oxley, and so on -- and I am dealing with all that. I set up the
board agenda and run the board meetings. In addition, I have told Harry
that I am available to do whatever he would like me to do that could help,
such as visiting customers. I have gone to Washington and spoken to
several of our government customers. I have told them what we are doing
inside the company to restore confidence. I have also spoken to employee
groups.
So
Harry focuses on performance and on restoring the reputation of the
company, and I focus on the board. We are operating as a team to get a lot
of work done quickly. We haven't drawn up charts or anything; he gives me
a call and says, hey, can you cover this for me, or could you go and see
so-and-so? Sometimes there may be a customer visit coming up that he
cannot attend, and he might ask me to cover that for him. That is how we
work together.
Useem:
One of the
great debates in corporate governance at the moment is whether to have a
non-executive chair. Can you speak about how you plan to manage a
relationship that is unusual in American business? Do you see this as an
enduring arrangement, or is it in effect something to get Boeing through
the crisis and then return the chair's position to the CEO?
Platt:
Let me take
the second of the questions first. When we made the announcement in
December, we signaled very carefully to the world that this is a structure
that we have chosen at this point in time. We wanted to be very clear with
everyone that we do not necessarily believe that we will have a separate
chair and CEO going forward. But certainly as long as Harry and I continue
in these roles -- and that, by the way, is indeterminate; we've said
probably at least a couple of years -- we will continue to have those jobs
divided. I do not personally believe that one must divide the job of the
CEO and chairman in order to have good governance. I just don't believe
that. But it is a convenient way to get a lot of work done in a short
period of time. He and I have a great relationship, and we know how to
stay out of each other's way. It's two hands on deck instead of one, but
that is not meant to signal that it will be that way forever.
Useem:
Harry
Stonecipher, aged 67, is one of several executives in Corporate America
who has been called back to service after retirement. This has happened in
another half dozen companies in the past year or two -- with Larry
Bossidy, famously, at Honeywell, for example. Harry Stonecipher is the
former vice chair of Boeing. Why did the board decide to invite him back
to become CEO? Why did it not go to the next tier to bring in a younger
executive from the ranks below?
Platt:
There's a
simple answer. We just did not feel that there was anyone in the next
level below Phil who was ready to take on this job at this point in time.
Therefore we either needed to go outside and find someone or choose
someone who was familiar with the business and involved with it, and Harry
was a natural choice. The bottom line is that we really don't have anyone
at the next level who could have taken on what is a really difficult job
right now. These are not even normal times at the company....
Useem:
Before you
became chair of Boeing, you ran Hewlett Packard and then Kendall Jackson
Wine Estates. How does leading Boeing differ from leading HP and Kendall
Jackson?
Platt:
Honestly,
it's not that much different. Leadership is leadership. It is interesting
that when I went to Kendall Jackson from Hewlett Packard, I found that
most of what I had learned and used to lead HP was very useful at Kendall
Jackson. Now I can say exactly the same thing as far as Boeing is
concerned. It's about setting clear objectives, motivating people,
recognizing and rewarding people. Frankly, it doesn't make much difference
what business you are in; these fundamentals are the same.
Useem:
What made you
step up to the hot seat at Boeing?
Platt:
My wife has
asked me the same question (laughs). Well, I was on the board, and I was
playing the role of lead director, though we did not have an official lead
director. So I was in the thick of things. Then the call came, and I love
this company, I really want to see it restored to its former glory and the
luster it has always had, so when I was asked [to be non-executive chair]
I said, 'Sure, I'll serve.' It wasn’t something I had planned on doing,
but it needs to be done, and I guess I am the right person to be working
with Harry at this point, so why not?
Leadership Conferences:
Leading in an Era of Uncertainty and Change
The
annual Wharton Leadership Conferences in Philadelphia and San Francisco
are focused this year on "Leading
in an Era of Uncertainty and Change."
What qualities and capacities will rising managers require if they
are to succeed in an era of increasing market turbulence, investor
impatience, and public cynicism? How can current leaders identify
and nurture the right talent in their ranks that of necessity will bring a
distinctive approach to the challenges ahead? How can great
leadership best be developed and applied in an era of uncertainty and
change -- whether in the private, public, or non-profit sectors.
The San
Francisco conference is scheduled for March 23, 2004: Confirmed
presenters include Charles Elachi, Director of the Jet Propulsion
Laboratory; Lewis Platt, Chairman of Boeing and former CEO of
Hewlett-Packard; David Pottruck, CEO of Charles Schwab; Jeffrey R. Rodek,
CEO of Hyperion; and Sherron Watkins, former VP of Enron.
The Philadelphia
conference is scheduled for June 2, 2004: Confirmed
conference presenters include John A. Byrne, Editor-in-Chief, Fast
Company; Douglas Conant, CEO of Campbell Soup; Jay S. Fishman, CEO of
The St. Paul Companies; Admiral Harold Gehman, Chair of the Columbia
Accident Investigation Board; Jamie Gorelick, National Commission on
Terrorist Attacks Upon the U.S.; Marilyn Carlson Nelson, CEO of Carlson
Companies.
The program is offered in English at a resort
hotel southwest of Bangkok, and it draws participants from the Asian
region, including Australia, Indonesia, Malaysia, Myanmar, New Zealand,
Singapore, Thailand, and Vietnam. Wharton
and Kellogg faculty provide instruction in accounting, economics, finance,
leadership, marketing, organizational behavior, and strategic management.
For information on the
Senior Executive Program, contact Sasin's Head of Executive
Education, Patcharaphorn Phantarathorn at patchara@sasin.chula.ac.th,
or see the program website with online registration here.
Governance
Conference:
Effective Boards and Responsible Investors
 The
Centre for Corporate Governance Research at Birmingham Business School in
the U.K. is sponsoring its second international conference on corporate
governance on June 29, 2004. It
is focused on "Effective Boards and Responsible Investors."
Keynote speakers include Colin Melvin from Hermes Investment
Management, Professor Stijn Claessens from the University of Amsterdam,
Professor Bernard Taylor from Henley Management College, John Rogers from
the UK Society of Investment Professionals, and Steve Davis from Davis
Global Investors. Sir Adrian
Cadbury will be attending the event as the External Advisor to the Centre.
Papers are invited on issues relating to any field of corporate
governance. Information on
the conference is available here.
Leadership
is decisiveness: The Annual U.S. Naval Academy Leadership Conference
Chris
Maxwell, Associate Director, Undergraduate Leadership Program, Wharton
School
 While
management theorists have long focused on a diverse set of leadership
qualities, the 2004 U.S. Naval Academy Leadership Conference cut to the
chase: leadership is all
about mission, decisiveness, and team.
Conference speaker Col.
John Ripley, a retired Marine Corps officer and distinguished recipient of
the Navy Cross, said leaders set the example and inspire others to carry
on with the mission -- especially during the chaos of combat.
Speaking from experience on the battlefield, Ripley argued that
when leadership is most needed, you're likely to be tired, short of
resources, and in the worst of circumstances.
How must an officer lead in the worst of times?
According to Ripley, by acting decisively.
Harking back to an intense jungle fight, and facing overwhelming
odds, Ripley recalled the words of a fellow marine:
"Do something, lieutenant!"
Conference participant
Kate Ali interpreted Ripley's words in the business context as a bias for
action in leadership. At
times it may be necessary to sacrifice the "best" choice for a
strategy that will allow a mission to be completed expeditiously.
Attendee Nicole Verrochi saw Ripley's admonition in a Chinese
proverb she has on her wall: "Many
a false step is made by standing still."
Responding to a question
on moral values in battle from participant Meredith Theis, Ripley noted
that officers have a responsibility to raise difficult questions with
their superiors, all the while maintaining focus on their mission and
team. Presenter Terry Paulson
offered up the business perspective, telling participants of the CEO who
kept a one-page list of her values and repeatedly re-read the list
whenever making decisions. A
focus on mission, decisiveness, and the team is a critical challenge for
leaders, on or off the battlefield.
 Note:
The annual U.S. Naval Academy Leadership Conference brings
undergraduate students from the military service academies together with
undergraduates from universities to discuss current issues of leadership.
Chris Maxwell can be reached at maxwellc@wharton.upenn.edu.
Conference Participants Anh-Thi
Hoang, Kelly Cortichiato, and Ugur Yetkin
Learning
to Lead:
Reflections on the Creation of a Fashion Show
 By
Arifa Khan, Wharton MBA Student
When
it comes to acquiring leadership skills, there is no substitute to going
out there and doing something real, no matter how insignificant.
When I obtained admission to the Wharton School's MBA program, the
only thing I promised myself was to take a lot of risks. And learn from them I did.
The
Wharton Culture Club organized the first annual Wharton Fashion Show this
past November to celebrate the diverse international cultural heritage,
couture, and traditions of the school and the University of Pennsylvania.
As president of the Culture Club, the experience of conceptualizing
and bringing to life a large-scale event for the first time was fulfilling
but not altogether frictionless. Here
are several lessons.
 Leaders
must establish powerful personal credibility:
Credibility helps mobilize others for a cause, and it also reduces
transaction costs since others have confidence in the leader.
Having
launched the venture and wanting it to succeed, I and the seven other
members of our executive committee worked to let everyone see that it was
nothing less than an obsession for us.
We had to persuade all 100 participants involved in the show as
performers, designers, and volunteers that our commitment was total.
The lesson that I drew was that a good cause does not automatically
attract its followers, but rather it requires tremendous commitment of the
leaders to enlist the support of others.
Their support will come only when they are convinced that our
leadership of the cause comes with no personal agendas, and that we will
not let the venture fail. By
way of illustration: When we
did not have access to sufficient funds to cover our very substantial
up-front expenses, I placed them all on my personal credit card.
After that, everybody knew I was committed!
Leaders
must learn to respect themselves and must have confidence in their
abilities: There are huge
uncertainties involved in undertaking anything for the first time.
Since many people have joined the cause because of the leader's
championing of it, they are often more skeptical about the likelihood of
success. If the leader lets a
sense of her or his own uncertainty appear even momentarily, the game is
lost. A leader may even have
to downplay the real magnitude of setbacks to maintain optimism and faith
that the team can reach its goals.
As
we had no precedents for this first annual event, we grossly
under-estimated the time and resources required of us.
As the fashion show drew nearer, we realized that we were nowhere
near our targeted sponsorships for designer costumes or event funding.
Our executive committee began to see the show as an
overly-ambitious project now doomed to fail.
My credibility was in doubt, and I received suggestions that we
postpone the date. But
getting even this far had been arduous, and I believed that any further
changes in schedule would have further sapped our team's morale.
I therefore drew up a contingency plan to go ahead with the event
even if we failed to secure external sponsorships.
We recruited a pool of local designers ready to display their
dresses, pared down our initial budget, and convinced ourselves that we
could organize the event based on these local designers and expected
ticket sales alone. Once the
sponsorship team was relieved of intense pressure to secure more backing,
it then successfully secured the backing of great designer labels.
We simply did not allow ourselves the option to back out!
Leaders
must maintain macro focus while acknowledging the micro-perspective of
team members: When the
leader is dealing with a large team, it is not feasible for her or him to
give complete attention to all issues and all members.
As a consequence, some members become unhappy with the amount of
attention that their issues receive from the leader.
Sometimes, there may even be mis-interpretations of the leader's
intent.
When
Murphy's law was at its zenith and everyone had a reason to complain --
the rehearsals were not on schedule, the music had not been fully composed
-- one team member responsible for ticket sales became very
demoralized because of the conflict within her team.
While this became a significant problem, I had to stay focused on
the broader agenda and assume that the team would work out the problem –
and it did.
It is opportunities to
take risks, think beyond oneself, and shape a collective endeavor –
precisely what we experienced in mounting this first fashion show for our
business school – that helped us appreciate what leadership really
requires.
Note:
Arifa Khan can be reached at anh@wharton.upenn.edu,
and information on the Wharton Fashion Show can be found here.
Photos of the show are available here.
Leading the Way:
Three Ways of Doing So
By
Jim Pawlak, Editor,
Biz Books
 Leading
the Way – Three Truths From the Top Companies for Leaders by Robert
Gandossy and Marc Effron, John Wiley & Sons.
The
three truths are: 1. The CEO
and board must provide leadership and inspiration.
2. There is a maniacal focus on identifying and developing
high-potential employees. 3.
A company has to have the right leadership practices, done right.
The authors arrived at these truths by studying information
developed by their firm, Hewitt Associates, through its global consulting
assignments. Whether the
company is large or small, their message to senior management is simple,
direct and profound: "Walk the talk."
Truths
1 and 3 are intertwined – Hewitt research shows that most CEOs spend
less than 15 percent of their time on developing leaders. Executives at top companies spend at least twice that,
because they understand that you leverage individual and company
productivity by having as many "helping hands" as possible.
Companies
that spend little time developing leaders can't develop a culture of
"right leadership practices, done right."
As
for the board's involvement with leadership issues, if the CEO is a
B-player, you can safely bet that the board will be populated with
B-players.
Developing
high-potential into high-kinetic employees -- if a company has management
retention problems, leadership issues surrounding people-development are
the root cause: B-player leadership sees A-players as threats, not assets
to be developed. A-players
learn what they can and leave.
Top
companies provide top talent with challenging assignments that take them
out of their comfort zones. This
develops managers who have a multitude of experiences over time, not
managers with one year of experience 10 times.
A-players in top companies understand the concept of a corporate
latticework, not a corporate ladder.
They know that learning isn't always reaching for the next rung. Lateral assignments are developmental, too.
They fully understand they must achieve results to maintain their
A-player status.
Note:
For information on direct distribution of Jim Pawlak's Biz
Books reviews, he can be reached at bizbooks@hotmail.com.
Copyright 1996-2004, Wharton Center for Leadership and Change Management
University of Pennsylvania.
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