WHARTON LEADERSHIP DIGEST 

April, 2001, Volume 5, Number 7

 Contents 

Leadership and Governance:  When Good Founders Pick Bad Boards Developing Leaders:  Wharton Leadership Conference on June 7  
Leadership in the Newsroom:  American Society of Newspaper Editors Leadership and Change at GE:  Global eXchange Services
Wharton Leadership Venture:  Second Expedition to Ecuador 
All About Leading:  The Encyclopedia of Leadership
Leadership Quote:  Family Control of the Chinese Business Firm 

Leadership and Governance Article:  When Good Founders Pick Bad Boards 

Successful entrepreneurs can generate enormous wealth, as seen in Stephen Case at America Online and Bill Gates at Microsoft.  But early successes of some start-ups can inadvertently induce resistance to change that blocks subsequent changes vital for survival. 

Academic researchers Annette Ranft and Hugh O’Neill compared 124 large, publicly traded founder-run companies with a group of companies matched for industry and size but without the founder still in power.  They find systematic differences in the firms’ governance practices, with the founder-CEO companies significantly more likely to 

• have fewer outsiders and fewer independent directors on the board
• combine the positions of board chair and CEO in the same person
• have top executives who hold large blocks of stock in the company.

Founding executives, the authors argue, tend to create boards that are more beholden to top management than the other way around.  That may be fine when a firm is growing, but a weak board may become an albatross when a company is declining.  

The authors suggest that this difference can help explain why Digital Equipment failed to reinvent itself when new computer technologies passed it by, and why Compaq Computer, by contrast, has been able to reinvigorate itself several times over.  The Digital board had been controlled by associates of founder-CEO Kenneth Olsen, say the researchers, while the Compaq board has been dominated by investor Ben Rosen and other outsiders.  When both companies fell into distress, the Digital board stayed with Olsen until it was too late, while the Compaq board swiftly installed new management.  

By way of implication, whether an upstart enterprise or seasoned performer, good boards make for good business. 

Source:  Annette L. Ranft and Hugh M. O’Neill, “Board Composition and High-Flying Founders: Hints of Trouble to Come,” Academy of Management Executive, February, 2001, pp. 126-138. 


Developing leaders:  Wharton Leadership Conference on June 7 

The annual Wharton Leadership Conference, this year focusing on “Developing Leaders,” will be held on June 7, 2001 at the Inn at Penn.  

Speakers include Helen Handfield-Jones (left photo) and Parke Boneysteele of McKinsey’s War for Talent team; officers from the U.S. Army, U.S. Navy, and U.S. Marine Corps; Steve Kerr, vice president for leadership development at GE; Jim Collins, co-author of Built to Last; Dupont CEO Charles Holliday; and Xerox president Anne Mulcahy. 

For information on conference speakers and the conference agenda, see <http://leadership.wharton.upenn.edu/l_change/conferences/conf_060701.shtml> 

To register online for the conference, go to
<http://www-management.wharton.upenn.edu/chr/registration.htm>


Leadership in the Newsroom:  American Society of Newspaper Editors  

The American Society of Newspaper Editors (ASNE) commissioned a study of newspaper leadership across the country in 2000.  Sharon Peters, the author of its survey of more than a thousands journalists and staff members in twenty-one newsrooms, reports that those surveyed gave relatively high marks to their editors in several areas: 

• Celebrating newspaper victories
• Seeking reader input
• Defining newspaper’s priorities
• Balancing bottom line with good journalism

But they gave relatively low marks in several others: 

• Ensuring managers are skilled
• Keeping abreast of employee concerns
• Encouraging open debate
• Providing training for staff and individual deficiencies

When front-line reporters and staff members were asked what leadership qualities they most valued in an editor, they identified:  

• Sound judgment
• Hiring and promoting wisely
• Setting high standards
• Preparing for future challenges

Jennie Buckner, Editor of the Charlotte Observer and Chair of the ASNE’s Leadership Committee that commissioned the study, concluded from the study’s findings: 

“This research found that the quality of newsroom leadership needs to be stronger, especially in areas related to communication an being in touch with employee concerns.  But there’s also plenty that editors are doing right – strengths on which we can build.  And there’s this good news:  Experts tell us leadership can be developed.” 

By John Joseph, Wharton MBA Student, WG ’01 

People development is General Electric’s core competency.  It’s not surprising since the company has pumped out Fortune 500 CEOs for years.  What’s their secret?  Harvey Seegers (left photo),  President and CEO of GE’s Global eXchange Services (GXS), says, “Focus on a few initiatives and focus resources on those initiatives.” 

Seegers’ lessons of leadership have come from his experience as an infantry commander in the South Pacific and ultimately as Aide de Camp to the Commandant of the Marine Corps.  Now he’s learning leadership from the guru, GE chief executive Jack Welch. 

Seegers has been with GE since 1991 and was appointed to his current post in 1996.  GXS manages one of the world’s largest electronic trading communities of more than 100,000 trading partners and conducts business in 58 countries. 

Like all of GE’s 313,000 employees, he’s driven by the numbers.  Seegers believes firmly in the old axiom, “You can manage what you measure.”  To drive success, Seegers believes that leaders should find the twelve most important things that have to get done and put some measurement system around it.  

GE is an operations organization first.  Everything is measured with quantitative metrics.  Several years ago, Jack rolled out Six Sigma and tied people’s compensation to it.  Now it’s e-commerce.  

Last year in Crotonville, the GE leadership development center, Welch charged his top managers with Web-enabling their businesses.  Seegers had three weeks to go back and re-write the business plan to accelerate e-commerce and e-productivity initiatives within GXS.  He had to integrate the Web into his business strategy and cut general and administrative expenses by 20 percent. 

In three years, the company expects to be a virtual sales enterprise.  All of the firm’s processes are going digital.  E-learning is one such initiative.  Streaming video technology and Web-based tools are now used to train people via the Internet.   According to Seegers, the results in his division have been tremendous.  People are happy because they don’t have to fly all over the world for training and spend time away from the office and their family.  E-learning has also been shown to be more effective, because people can take “classes” when they want, and the company saves money on travel expenses. 

Seegers cautions future executives about the human effects of a tumultuous business environment.  It’s tough to get people to change.  But heeding lessons of the Viking strategy of burning their ships once they arrived, Seegers says that leaders must simply discard the old way of doing things to focus the mind and get people to do things in new ways. 

Note:  John Joseph can be reached at <John.Joseph.wg01@wharton.upenn.edu>.


Wharton Leadership VENTURE:  Second Expedition to Ecuador  

Mark Davidson, Patrick Moran, Jill Stitz, Wharton MBA Graduate and Students, WG ’97, 01, and 02  

In March, a group of students from the Wharton School joined Teamworks and Earth Treks on a second mountaineering trip organized around experiential leadership learning while climbing some of the highest peaks in Ecuador. The group learned new climbing skills and explored mountaineering metaphors and business leadership in a dynamic team environment. 

Many of us had never climbed before and those with some experience had never been to these heights. Our first goal, Rucu Pichincha at 15,500 feet, offered a variety of challenges ranging from different fitness and skill levels to asthma, stomach cramps, and fear of heights on the narrow ridgelines.  We reached the “Window of Death,” the most difficult section of the climb just as it started raining, yet all passed through with without incident.  On reaching the summit, later climbing groups were greeted with cheers and high-fives from teams that had preceded them. 

Climbing Pichincha helped build confidence and camaraderie among the group for our subsequent summit attempt of Cotopaxi at 19,350 feet.  To further prepare, we learned basic self-rescue skills for climbing out of crevasses and stopping unanticipated slides.  These important safety skills added to our mental preparation.

In forming rope teams for the Cotopaxi climb, we agreed that pacing was a crucial element, allowing individuals to maintain the necessary endurance to make the climb. We set out at midnight, but just as we reached the glacier we had to make some unexpected adjustments to the teams.  Two members and a guide were forced to turn back for various physical reasons, and though disappointed, they recognized that their health might jeopardize the success of the other team members. 

After climbing for five hours we reached 18,700 feet – just 650 feet and two hours short of the Cotopaxi summit.  Unfortunately, the soft, deep snow created too grave an avalanche risk for the final push, and we were forced to turn back.  As the sun rose during our descent, we could see the awesome crevasses and seracs along the path we had just climbed. 

Naturally there was some disappointment that we did not reach the summit.  However, there was also a tremendous sense of satisfaction in the new skills we had both learned and applied, as well as in how our team had worked together and supported one another throughout both climbs. 

We gathered to assess the lessons of our experience, and the common themes included:  

• Have FUN! – laugh and joke with your teammates since they build stronger bonds and greater trust.
• Communicate with your teammates – support each other, offer encouragement, and be honest about problems that may arise during difficult tasks.
• Acknowledge the size of your goal and segment your work – set intermediate goals and bite off small pieces to build confidence.
• Recognize that different and unknown environments may require flexible approaches other than what you're used to.
• Prepare ahead of time – physical and mental preparation has dramatic benefits for achieving goals.

The lessons we identified might easily have come from a management text, but the climbs brought concepts to life and can easily be applied to the corporate world, as well. 

Note:  Additional information on this Wharton Leadership Venture can be found at <http://leadership.wharton.upenn.edu/l_change/trips/2001_expedition.shtml>.  Mark Davidson can be reached at <mrd47@yahoo.com>, Patrick Moran at <patmikemoran@hotmail.com>, and Jill Stitz at <stitzj@wharton.upenn.edu>.


All About Leading:  The Encyclopedia of Leadership 

Consultants Murray Hiebert and Bruce Klatt have assembled guidelines, worksheets, and tools for addressing specific leadership challenges.  If you are concerned with persuading others or leading change, giving or receiving feedback, coaching others or designing a learning event, the authors have put the barebones essentials in front of you. 

Are you prepared to make a persuasive appeal?  The Encyclopedia of Leadership offers a six-step method, starting by being clear minded about your message and ending with a lucid set of action steps. 

Want to lead change?  The authors have summarized John Kotter’s eight-stage model for promoting change, from establishing a sense or urgency to anchoring the change in the organization’s culture.  

Ready to give feedback to others?  The authors’ recommend a focus on their specific behavior and its consequences. 

Source:  Murray Hiebert and Bruce Klatt, The Encyclopedia of Leadership: A Practical Guide to Popular Leadership Theories and Techniques (New York: McGraw-Hill, 2001).


Leadership Quote:   Family Control of the Chinese Business Firm 

“Western executives looking for the locus of control of a  Chinese family business should look to the head of the family.  Chances are that he or she is making all the important decisions for the business.”