WHARTON LEADERSHIP DIGEST 

March, 2003, Volume 7, Number 6

CONTENTS      

Leading with Integrity:  Wharton Leadership Conference on June 4, 2003 
2003 Governance:  No Perfect ‘State of Play’
Leadership in Action:  Carly Fiorina of Hewlett-Packard
The Leadership of Teams:  J. Richard Hackman’s Leading Teams
Leadership Development:  Running the Maze


LEADING WITH INTEGRITY:  Wharton Leadership Conference on June 4, 2003   

Bill George, former Chair and CEO of Medtronic and author of the forthcoming Authentic Leadership (excerpts appear in the February issue of the Wharton Leadership Digest at http://leadership.wharton.upenn.edu/digest/02-03.shtml) will serve as the final speaker at the annual Wharton Leadership Conference – this year focused on “Leading with Integrity” – in Huntsman Hall from 7:30 am to 5:30 pm on June 4, 2003:    

7:30 – 8:00 a.m.  Continental Breakfast and Welcome:  Peter Cappelli, Director, Wharton Center for Human Resources, and Michael Useem, Director, Wharton Center for Leadership and Change Management.  

8:00 – 9:00  John F. Brennan, Chair and CEO of the Vanguard Group.

9:00 – 9:45  Geoffrey Colvin, Editorial Director of Fortune magazine and Producer and Anchor of Wall $treet Week with Fortune. 

9:45 – 10:00  Break 

10:00 – 11:00  James Cook, Training Projects Coordinator for the U.S. Forest Service at the National Interagency Fire Center; Larry Sutton, Training Unit Leader for the U.S. Bureau of Land Management at the National Interagency Fire Center; and Michael Useem, Professor of Management and Director of the Center for Leadership and Change Management at the Wharton School.  

11:00 – 11:45 Thomas Donaldson, Professor of Legal Studies at the Wharton School and co-author of Ties that Bind: A Social Contract Approach to Business Ethics.  

11:45 – 12:30 Sherron Watkins, former Vice President of Enron Corporation and co-author of Power Failure: The Inside Story  of How Enron’s Culture of Arrogance and Greed Led to the Biggest Bankruptcy in American History.  

12:30 – 2:00 Lunch – Speaker Edward Breen, Chair and CEO of Tyco International   

2:00 – 3:00 Judith Rodin, President of the University of Pennsylvania, and Clifford Stanley, Executive Vice President of the University of Pennsylvania.  

3:00 – 3:15 Break  

3:15 – 4:15 Patricia Russo, Chair and CEO, Lucent Technologies  

4:15 – 5:15 William George, former Chair and CEO of Medtronic 

5:15 Reception 

Additional information on the conference can be found at http://leadership.wharton.upenn.edu/l_change/conferences/conf_060403.shtml 

And online registration is available at
http://www-management.wharton.upenn.edu/chr/registration.htm


2003 Governance:  No Perfect ‘State of Play’ 

By James Kristie, Editor, Directors & Boards 

The U.S. corporate governance system is not broken. Contrary to popular perception and commentary from those who should know better – exemplified by “How To Fix a Broken System,” a Wall Street Journal corporate governance-themed special supplement of Feb. 24, 2003 – the governance system we have in this country is in probably the soundest shape it has ever been in.  

Granted, the system has weaknesses, which were mightily exposed over the past year. What is lost in the wailing over the current crisis of confidence in boards is that governance is subject to a process of continuous improvement. As with any business process -- strategic planning, budgeting, recruitment, leadership succession, M&A -- governance in theory and practice is always being refined, and will never achieve a state of perfect play. 

In my quarter of a century as a business journalist and close observer of boards at work, I have seen the governance system face prior episodes of unprecedented challenge: 

• In the mid-1970s, in the wake of the shocking bankruptcy of the Penn Central railroad and the headline-making financial scandal of that era, the widespread undisclosed payments of bribes to foreign agents by the cream of American companies, cries of “Where was the board?” were heard throughout the land. Boards responded by tightening up their audit supervision and opening up their membership to a higher percentage of outside directors.     

• In the mid-1980s, M&A-instigated rulings such as Smith v. Van Gorkom began to flow from the Delaware courts that shocked the boardrooms of corporate America. The rulings forced directors to reexamine their role and their relationship to management in approving major transactions. The market for D&O liability insurance virtually dried up, and cries of “Why be a director?” were everywhere. Boards responded by formalizing their processes for oversight and decision-making. 

• In the deep-recession days of the early 1990s, governance was jolted by another shock to the system when American companies seemed adrift, managed by CEOs incapable of guiding their companies into an age of global and technological competitiveness. Institutional investors rattled the boardroom walls, and directors responded with new courage in evaluating their CEOs and a new commitment to the succession-planning process. 

The current crisis will offer further opportunities for continuous improvement. We will likely see some unprecedented sharing of board leadership, more rigorous processes for financial oversight, and perhaps another wave of board diversity.  

These improvements and others will build on a solid foundation of governance that has been molded over many years by the many past problems having been met and resolved through enlightened board leadership. Let’s not despair. We will come out of this current crisis with an even sounder system of corporate governance. It still won’t be perfect, but that’s not to be expected of a system that is continually revitalized through process improvements.   

Note:  James Kristie has been editor for 20 years of Directors & Boards, a quarterly journal of leadership, governance, finance, legal, and strategic issues.  Founded in 1976, the journal’s primary readership includes public-company directors, chairmen, CEOs, senior management and board advisers.  He can be contacted at James.Kristie@verizon.net, and information on Directors & Boards is available at http://www.directorsandboards.com.


Leadership in Action:  Carly Fiorina of Hewlett-Packard  

By Adrienne M. Bigley, Wharton MBA Student 

Using the same straight-talking, focused, and humorous approach that she exhibited as she was thrust into the media spotlight to defend the merger with Compaq, Hewlett-Packard chief executive Carly Fiorina recently shared her philosophy of leadership with an audience of Wharton students. 

Fiorina described leadership as a combination of passion and ability. In the late 1990s, the HP Board faced some startling truths: HP’s innovative capabilities were in decline and needed operational discipline, the printing business was slowing, earnings were down, targets were missed, and the firm was in danger of missing fundamental shifts in technology. 

Even more, the firm’s culture was ailing. It was losing its will to lead. The highly-touted HP Way had turned into an excuse for inaction rather than an impetus for growth and change. The HP Way is a statement of the firm’s core values. It was adopted in 1957 and has been a cornerstone of HP’s culture ever since.  Over time the HP Way had come to mean different things to different people. Founder David Packard identified this as a dangerous problem. By the time Fiorina took the helm at HP in July 1999, the HP Way had become a shield against change, conflict and new ideas, slowing the firm rather than moving it ahead. The firm was behaving in a way far from the intent of the original HP Way and its spirit of invention. 

To make a broad, deep, sustainable change successful, Fiorina said you must “shock the patient enough to get movement but not too much to bring on a cardiac arrest.”  While it is too early to celebrate success, Fiorina is confident that they are back on track. She went back to the founding of the firm but added a further core value for the 21st century:  the need for speed and agility. 

Fiorina and other senior managers work within a four-pronged leadership framework to manage and to affect change: 

1. Strategy. For Fiorina, strategy is about making choices. At HP she made two critical choices: to lead in technological innovation and to keep the portfolio of brands and companies together. Given the projection that customers would demand greater depth and breadth from their technology provider, these two critical choices made the merger with Compaq the best way to meet customer needs. 

2. Process/Structure. HP was a company of disparate tribes with an inefficient and confusing structure, teeming with redundant services. Fiorina pared down the 100 sub-brands of HP and rejuvenated the parent brand back to prominence. She also consolidated an unwieldy 86 product lines into just 16 to improve customer relations and operational efficiency. 

3. Metrics/Rewards. In the old HP, 75 percent of the employees scored “exceeded expectation” performance ratings while the company missed targets nine quarters in a row. There was clearly a disconnect in the execution of pay for performance scheme. Fiorina repeated the mantra “what gets measured is what gets done” many times during her address. In HP today, this guiding principle is applied to performance evaluations for employees and for the merger integration process.  For example, to encourage innovation, HP tracks the number of patents in progress (it is producing an average of five per day). 

4. Culture/Behavior. Beyond new measurement systems, HP is looking to its leadership development and training programs to help instill behavioral and cultural change. In the past, HP only focused on training specialists. Now, they are focused on developing broad management capabilities and are devoting more time to leadership development and succession planning. 

Fiorina also spoke clearly about her personal management philosophy, and she offered the following advice: 

o  You cannot manage by headlines. You cannot manage by earnings. You cannot manage the short-term stock price. You have to manage the company for the long term and short-term. 

o  Always question conventional wisdom – it is frequently wrong.  You must manage by your own knowledge, capabilities and context.  You must have courage even when it seems the whole world is against you. 

o  Get in touch with your own internal compass – it can help you in the most difficult times when you must make decisions alone. This compass helps you to know when you are right and are doing the right things for the right reasons. 

o  Leadership is not about a title, job level or number of subordinates. Leadership is about having impact. 

o  There is no substitute for hard work. It will outweigh brilliance over time. 

o  Nothing happens without the team. You’re not leading if no one follows. Build teams, give them respect and earn theirs in turn. 

o  Find your passion. Love what you do! 

Fiorina, an undergraduate philosophy major, closed with her favorite quote from Sun Tsu:

The good leader is he who men revere 
The evil leader is he who men despise
The great leader is he who men say “we did it ourselves” 

Time will tell if HP’s customers and employees will say “we did it ourselves.” 

Note:  Adrienne Bigley can be reached at abigley@wharton.upenn.edu.


The Leadership of Teams:  J. Richard Hackman’s Leading Teams 

By Kate Faber, Coordinator, Wharton Leadership Center   

Watching an orchestra weave through a symphony.  Witnessing a basketball squad sweating to victory.  Receiving a dinner prepared by a four-star kitchen staff.   We’ve all seen the value and product of a great team at work.  So how do these teams come together?  What makes these teams so rare?  Is it the conductor, the coach, or the chef?  Is it fate, circumstance, or timing. 

In his new book, Leading Teams: Setting the Stage for Great Performances, J. Richard Hackman identifies a set of conditions that create high performance teams.  Fostering these conditions should, Hackman asserts, generate a effective team, with success defined by three criteria:  The team 1) creates a product appealing to clients, 2) builds its capability over time, and 3) and its members enjoy a meaningful and satisfying experience. 

Successful teams are built around strongly held core values, Hackman suggests, and they also have 1) a compelling direction for their work, and 2) an enabling structure that facilitates teamwork, 3) a supportive organizational context, and 4) expert coaching in teamwork.   

What fosters a good team?  “Real work teams in organizations have four features,” Hackman finds:  “a team task, clear boundaries, clearly specified authority to manage their own work processes, and membership stability over some reasonable period of time.”

Why does a team need a compelling direction?  “Effective team self-management is impossible,” argues Hackman, “unless someone in authority sets the direction for the team’s work.” 

Why does team structure matter?  We’ve all sat in meetings and wondered exactly why we were there.  The group seems too large or too small, the experience base too broad or too narrow, and the expertise too focused or too diffuse.  A careful structuring of teams around the number, mix, and experience of their members allows the teams to draw out the best from all. 

How does an organization support teams?  Great teams function best when they are supported on many levels:  Consistent feedback and rewards for positive behavior, provision of appropriate information tools, and access to education and training as new skills are required.  When team members know that their work is recognized and appreciated by the organization, they become inspired to achieve their best. 

Why does a team need expert coaching?  Teams need to build on their successes and failures, and expert coaches greatly facilitate the learning process. 

Hackman attributes a team’s success to both its members and its environment.  Once the members are ready and conditions are right, effective teams should become the norm within an organization, not the oddity. 

Note:  Kate Faber can be reached at kfaber@wharton.upenn.edu.  The book:  J. Richard Hackman, Leading Teams: Setting the Stage for Great Performances (Boston: Harvard Business School Press, 2002).


Leadership Development:  Running the Maze 

By Captain Kevin Basik, Chief, Foundational Leadership Programs, and Major Linda Dinndorf, Director, Leadership Development Programs U.S. Air Force Academy 

The Department of Behavioral Sciences and Leadership at the U.S. Air Force Academy works to combine concepts of psychology and sociology with leadership development and motivation.  One such framework emerged from an academy class in which cadets trained and motivated rats to perform remarkable activities.  The resultant “R.A.T.S.” model identified four factors that motivate small furry rodents, and parallels are evident with what also motivates large two-legged mammals. 

Relationships.  Before placing a rat in a maze and expecting performance, we have learned that significant time needs to be invested holding, feeding, and building a bond with the rat.  When it comes time to perform, it becomes quickly apparent which students have skipped this critical relational step.  Considering that the primary reason why people quit their jobs is because of a poor relationship with their supervisor, we can see the common thread.  This does not necessarily mean that you should coddle your new employees and feed them alfalfa pellets, but it is important to acknowledge that an environment of trust and emotional safety is something we all value.  People will go above and beyond for the sake of that relationship.  

Ability.  Being aware of the inherent strengths and talents of employees and understanding their limits can prevent failure and frustration.  Both animals and humans experience learned helplessness when punished for something perceived to be out of their control or beyond their ability.  By contrast, rats love to climb ropes and demonstrate their balance.  If one can “build in” activities that capitalize on people’s known abilities, motivation is no longer a problem, since people love to do what they do well and are inspired by an opportunity to “show off.”  

Targeted Rewards.   Rats love food pellets.  But it becomes harder to motivate a rat with food when its stomach is full.  The effectiveness of a reward lies in its perceived value.  Is it appropriate?  Does it satisfy something they are “hungry” for?  Once a person’s basic survival needs are met, higher-order needs are where the values lie.  A related issue has to do with the most commonly sought human food pellets: recognition and praise.  Reinforcing a certain behavior with rats requires that the rats understand the link between their behavior and reward.  Otherwise, the rats are unclear on what led to the reward.  With people, giving praise and recognition should also include a specific identification of the behavior that warrants praise.  “You’re doing a great job” is less motivating and less likely to improve performance than, “I appreciate your willingness to stay until the job is done,” or “I want you to know that we’ve all noticed how focused you’ve been on making sure this project comes in on time.”  Rewards must be valued and targeted towards the appropriate behavior. 

Support.  One of the easiest ways to punish a rat is to pick it up and let its legs dangle.  Having nothing underneath them for stability and safety is an unsettling and frightening experience, and they hate it.  In the same respect, a leader who is perceived as unsupportive by his or her people should not be surprised by the subordinates’ reluctance to do whatever seemed to leave them dangling in the past.  People feel isolated, exposed, and vulnerable.  Support is the currency of leadership, and the fastest way to go bankrupt is to build an unsupportive environment.  

The behavior of those little furry creatures serves to remind us of the simple principles that should be operative in our own rat race.  Remembering how rats behave in a maze is one graphic way of bringing those principles home. 

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