April, 2005, Volume 9, Number 7

CONTENTS

Leadership Conference:  Leading with Creativity and Conviction at Wharton on June 9 
How Explorers Build Great Teams:  From Lewis & Clark to Peter Hillary
A New Newsletter:  The Danish Leadership Institute
Leadership in China:  TCL's CEO Dongsheng Li, "We Should Control and Own Our  
   Brands"
Discouragement:  Even Leaders Get the Blues
 

Leadership Conference:  Leading with Creativity and Conviction at Wharton on June 9 

Focusing on creativity and conviction, the Wharton School’s ninth annual leadership conference will be held on June 9 in Philadelphia.  Speakers include CNBC’s Maria Bartiromo, author Marcus Buckingham (The One Thing you Need to Know), explorer Peter Hillary, and Citigroup’s Todd Thomson.  

The conference is described here, and online registration is available here.  
 

How Explorers Build Great Teams:  From Lewis and Clark to Peter Hillary 

By Chris Maxwell 

Thomas Jefferson completed the purchase of over 800,000 square miles of new territory for the United States in 1803 through the Louisiana Purchase, effectively doubling the size of the country.  He immediately set about organizing and funding a team to explore and document the vast new territory.  Jefferson selected his personal secretary, Capt. Meriwether Lewis to head up the expedition, and Lewis chose William Clark, an Army colleague, to serve as co-leader.  Together they recruited a small team of explorers – the Corps of Discovery – and set out west from St. Louis in 1804, in search of a water passage to the Pacific Ocean.  Two hundred years later, Lewis and Clark are widely celebrated for their remarkable discoveries, and for their strategic thinking, ability to motivate and lead a diverse team through formidable challenges, and courage in the face of adversity.  

Lewis preceded his historic journey with an extended visit to Philadelphia in 1803 to gather supplies for the expedition, and to meet with the best physicians and academics of the day.  In November 2004, artifacts from the expedition returned to Philadelphia with the Lewis and Clark National Bicentennial Exhibition at the Academy of Natural Sciences.  To help celebrate Lewis and Clark’s accomplishments, the Academy invited mountaineer and explorer Peter Hillary to discuss what makes expedition teams great.  Hillary, son of Mt. Everest pioneer Sir Edmund Hillary, has twice climbed Mt. Everest, traversed the Himalayas, and forged a new route to the South Pole across Antarctica.   

Critical team attributes, according to Hillary, include a spirit of collaboration, compatible skills, a driving curiosity, and enthusiasm in the face of hardship – all of which characterize what he terms a pioneer-explorer mindset.  Hillary brings the concepts of compatibility and collaboration to life with a brief tale:  late one afternoon, high on an ice face in the Himalayas, and with the light of day rapidly fading, he and his climbing partner realized that they would not reach the wide ledge that they’d seen from far below by nightfall.  Hungry, nerves frayed, and oxygen-starved, they carved out a narrow ice ledge on which to spend the night.  In desperate need of food and drink, but still mindful of the need to collaborate, the partners boiled some water in their pot, and shared a single container of hot soup – after negotiating the exact midline of the contents. 

Peter Hillary was asked, why do modern explorers still go into the wild?  Teams push far into the unknown because success is uncertain, he responded, and it is this uncertainty that serves as a powerful individual motivator and team driver.  According to Hillary, working well outside of one’s comfort zone gives rise to an intensity and focus that pushes one even harder to succeed at challenging tasks.  And after the summit is reached?  Hillary reported the sensation of being both elated at reaching the goal and deflated that it’s over.  To manage this dilemma, he said it is necessary to continually come up with new challenges.   

Will Arbuckle, a university senior who recently climbed Wyoming’s Grand Teton, asked Hillary what the key difference between successful and unsuccessful expeditions was.  Beyond the pioneer-explorer mindset, Hillary replied, it is knowing how to ensure survival.  The key point in exploration is getting down, or back, alive.  In 1995 intuition told Hillary to turn back near the summit on Pakistan’s K2 as a storm approached.  He did, and descended successfully.  Seven other climbers on the mountain continued on up – and died in the storm during their descent.   

Note:  Chris Maxwell is associate director of the Wharton School Undergraduate Leadership Program, and he can be contacted at maxwellc@wharton.upenn.edu.  Books of related interest include Jack Uldrich, Into the Unknown: Leadership Lessons of the Lewis and Clark Expedition.  AMACOM (2004); Peter Hillary and John E. Elder, In the Ghost Country: A Lifetime Lived on the Edge (2003); and Stephen E. Ambrose, Undaunted Courage: Meriwether Lewis, Thomas Jefferson, and the Opening of the American West. (1996).
 

A New Newsletter:  The Danish Leadership Institute 

By Jeremy Hill and Jørgen Thorsell, The Danish Leadership Institute 

The Danish Leadership Institute (DIEU) specializes in leadership andorganizational development with a range of European organizations, and it has launched a new Leadership Newsletter with leadership news and recent research from Europe.  The free electronic publication is aimed at company executives, leadership consultants, and university faculty who are interested in the field of executive development.  

The first two issues of the newsletter include articles ranging from European leadership development and methods for healthier organizations to collaborative leadership and global governance.  One of its recent articles, for instance, reports on a survey of 51 large European organisations based in nine countries.  The survey found that European companies use a variety of criteria to evaluate the effectiveness of their leadership development programs, but compared to large corporations in the U.S., relatively few European firms assess their program’s return on investment.  Two-thirds of the European enterprises report that they had never evaluated their program using that metric.  

Note: The DIEU Leadership Newsletter can be viewed here, and article submissions can be made to Jørgen Thorsell at jt@dieu.com.
 

Leadership in China:  TCL's CEO Dongsheng Li, "We Should Control and Own Our Brands" 

More and more Chinese companies, having won their spurs in their domestic market, are starting to explore new horizons through globalization. In the process, they face strategic and operational challenges centered around one central question: How should they make the leap from being successful Chinese enterprises to becoming excellent global ones?

TCL, the world's largest manufacturer of color televisions, has been grappling with this issue. Following a joint venture with France-based Thomson (which owns the RCA brand), TCL is trying to leverage its manufacturing expertise in China while seeking growth in markets such as Europe and the U.S. Will TCL succeed? In a recent conversation, Dongsheng Li, TCL's CEO, discussed these issues with Wharton's Michael Useem, director of the school's Center for Leadership and Change Management; Jonathan Spector, vice dean of the Aresty Institute for Executive Education at Wharton; Liang Neng, a professor of management and director of the Executive MBA program at China Europe International Business School (CEIBS); and Knowledge@Wharton.  The full interview can be found here.

Useem:  What personal leadership qualities that have served you well in building your company, and how did you learn or acquire them? 

Li: That is a tough question. For leaders like me, we have studied a lot and built our leadership abilities through our work. Entrepreneurs like me have to rely a lot on our experience. We do not acquire our knowledge in school or in some other place before we come to work; we have had to build our leadership abilities on the job.

The first capability that is important for leaders like me is that we must have rich knowledge of our business and industry. We need to have very good mastery of opportunities and then develop the capability of setting a proper strategy for the company. The second capability that is very important is having profound knowledge and understanding of Chinese society and economic development. That is crucial to business success. In the past two decades, China has gone through enormous changes. These have resulted in new opportunities, and it is very important for entrepreneurs to grasp them and take advantage of big trends. Yet another capability I consider important is that leaders must know how to recruit good talent for the company. They should be able to create the right environment to attract talent. This is very important for the company's success.  

Spector:   I am interested in TCL's strategy, given its acquisition of Thomson. Is your vision to create a global brand for TCL, or is it more to win based on creating a powerful manufacturing capability than by creating a global brand? 

Li: Our strategic objective is to become an internationally competitive player in the global consumer electronics business. We hope to achieve this goal through several strategies. In a big market, we should control and own our brands. I believe manufacturing capabilities are very important for TCL now. Compared to some players, TCL is not the leader in brand and technology, so how can we achieve a great market share? Our great advantage lies in production efficiency – the speed and the cost at which we can make products. Our products have a good price-performance ratio, which is a big advantage for our manufacturing capability.  We should make full use of our manufacturing and supply-chain advantage to gain a position in the market and then try to build an international framework for our business as well as our brand. Ultimately we hope we can improve our technology and brand capabilities to become a leader in the electronics industry.  

As far as our strategy for TCL's globalization goes, we have our own special features. We mainly explore new markets by mergers and acquisitions. For now, we think that in the electronics products industry the European and North American markets are very stable and mature, which makes it hard for us to introduce a new brand. In addition to being difficult, the risk may be huge. By going the M&A route, we can acquire an existing company which already has a market position and brand and its own networks. That significantly lowers our cost of pursuing these opportunities.  

Another advantage for us to do M&A is that they allow us to get to our ideal scale in terms of volume. We are already the biggest color TV manufacturer in the world. This brings us a lot of benefits and advantages. A merger with a major international company can also bring about other synergies. For example, it helps improve our R&D and manufacturing capabilities – and sometimes our markets can be complementary.  

Neng Liang:  I have two questions related to restructuring. The first relates to domestic players. We know that TCL succeeded for two major reasons. The first was its strategy of overseas M&A, and the second was that the company was able to restructure itself. So for other SOEs (state-owned enterprises), what advice can you offer? What kind of difficulties do they face in the restructuring process, and how can they tackle them?

The second question is that TCL has successfully attracted several strategic international investors such as Toshiba. How can such investors select Chinese SOE's in which to invest? What kind of opportunities and challenges would the investors face?  

Li: A company can go through many patterns of restructuring. TCL's pattern is just one of them. Our strategy was very useful in TCL's situation, but it is also helpful for the macro environment, i.e., the political and legal environment. Another very important factor is that when we went through restructuring, the timing was right for us.  

For restructuring to work, it is important for it to have two features. First, it should march with the company's development and growth, and second, the plan should be in line with the political and legal environment. These two features are both important and necessary. If a restructuring plan cannot enhance business development, then it is useless, and at the same time, if it is not in line with the legal environment, it will not be accepted by the rest of society.  

Our restructuring plan initially helped us solidify TCL's assets. In incremental terms, it brought about a lot of benefits that were shared by management, employees and shareholders. In our sharing plan, we set quite a high target for returns on assets (ROA) ‑ we wanted to achieve at least 10% ROA or higher before we would share the benefits. This 10% is much higher than the average figure of Chinese enterprises. As for sharing extra benefits, we decided that the major part would be taken by the shareholders and the rest would be shared by managers and employees. When we set up this kind of a sharing plan, we took into account the rest of society and the legal situation…. 

The second question relates to how overseas investors can choose the right company to invest in China. There are several criteria, but the most important one is that they should choose the right management team. There are a lot of critical success factors for a company; the most important one is people. The right management team would have rich and correct understanding about how to operate a business for overseas investors. Another prerequisite for investment is to choose an industry with good potential.  

Knowledge@Wharton: Here are two questions. The first relates to how TCL is developing its management structure and processes to manage a global company. So far the company's management has been extremely entrepreneurial but essentially Chinese. But after becoming the dominant partner in your joint venture with Thomson, how is TCL managing the cultural differences in communications, management expectations from senior managers, as well as line operations in these regions?  

Second, we would like to know what you think about TCL's strategy for turning around the U.S. market. The American market has been in decline for a couple of years now, and it's a competitive market in which no one is profitable except, perhaps, Sony. What is TCL's plan for the U.S.? 

Li: The first part of your question relates to a very big challenge and a headache for us. We are also thinking about how to establish an effective management structure all around the world. We are very clear that although we are the dominant party in the joint venture, we should use the tool of resource integration with all our employees. In this merger with Thomson, management teams from the two companies have taken their jobs with the joint venture. At the headquarters, we have formed an executive committee that is composed of top managers of both companies.  

This committee is mainly responsible for reorganizing, developing and managing the global business. In this joint venture we believe our major markets are China, emerging economies, Europe and the U.S. Accordingly we have set up management teams to operate these four business units. They are looking at functional areas such as manufacturing, sourcing, supply chain management and product R&D – they are working on coordinating the use of global resources. Our objective in making this global allocation is to maximize our synergies and to make the best possible use of our resources. We are now establishing a global information management system and a common legal system, and also a global financial system. We estimate it will take us at least 18 months to complete this integration.  

Our toughest challenge as we go through this integration is how to effectively communicate with other companies, and how to achieve mutual understanding about business values and cultures. To make our communications more effectively, we have done a lot of training, and our senior management has organized a lot of meetings. We believe that by conducting such projects, it will push forward our integration while generating a lot of synergies.  

As for your second question, regarding TCL's strategy about the U.S. market, we think that in recent years the U.S. market has been tough especially for consumer electronics products. But the U.S. is a crucial part of our global operations, and it is important for us to explore this market. In the past, even Thomson was not doing very well in the U.S.; it was making losses, and its market share was shrinking. To deal with this situation, we have established two committees: one for cost containment and the other for value creation. The committee on costs focuses on manufacturing, sourcing and supply-chain management to improve our competitive and financial situation. The value creation committee focuses on new products, planning and development, new markets and opportunities, and new customer resources to increase our sales and marginal contribution. We are also considering some business restructuring and reforms for the U.S. market to improve our efficiency.  

Spector: You mentioned that TCL's strategy for North America or mature markets will be based on M&A and that in the future there will be more acquisitions. This means you will have to be good at integration. What has been the toughest problem in the Thomson acquisition? And how will that make you do the next acquisition and integration differently?  

Li:  At the moment TCL does not have any detailed future plans for future acquisitions. We have already invested a lot of our time, resources and energy in the venture with Thomson. We have learned that there are several key issues we should consider when we go through a merger or make an acquisition. The first is that we should see if the assets of both companies are complementary to one another. That is much more important than just looking at their book value. The second is that we should establish an effective communication mechanism for the management teams of both companies, especially in the initial stages. Sometimes when communication is not effective, it leads to a great loss in opportunities. How can we make communications effective? We should be fully prepared for our projects and do good homework for due diligence. The third issue is that we should keep high the morale and confidence of our people. That is very important. In the first six months, we should have some deliverable results from the merger to increase people's confidence. There also needs to be a clear understanding of the long-term objectives of the merger or the joint venture, and these objectives should be shared by the management and the employees, so they can dedicate themselves to these goals. 
 

Discouragement:  Even Leaders Get the Blues 

By John Baldoni 

His secretary covered for him, rescheduling morning meetings to later in the day.  The unrevealed reason: he had trouble getting out of bed.  No, he wasn’t a heavy drinker recuperating from too much alcohol the night before.  He was a CEO suffering from depression: Tom Johnson, former publisher of the Los Angeles Times and later chief executive of CNN.  Capable, driven, and successful, Johnson is one of many corporate leaders secretly suffering from chronic depression.   

Depression is a significant illness that strikes people from every walk of life, including the very successful.  Long‑time CBS reporter, Mike Wallace, revealed that he had been chronically depressed, as have economist John Kenneth Galbraith, cartoonist Jules Feiffer, and Congressman Patrick Kennedy.   

New studies are showing that chronic depression can be provoked by work conditions, including high stress, long hours, recurrent deadlines, and family absence.  But it can be hard to detect.   “Depression still tends to be the ‘under’ disease,” warned John Greden of the University of Michigan’s Depression Center.  “It’s under diagnosed, it’s under discussed, and it’s under treated.”  Warning signs include malaise, apathy, and failure to experience a full range of emotions.   

Seeing warning signs in others or even themselves, managers can take several steps to mitigate at least some of the sources of depression.  Managers may resist receiving assistance if they perceive its acceptance a sign of personal weakness, and high‑achievers can resist most keenly.  “Executives are taught to be strong and not show weakness,” said Robert Pasick, a clinical psychologist and adjunct faculty member at the University of Michigan business school. But intervention may still be warranted if their depression is resulting in poor decisions or other shortcomings in the workplace.   

Limit work hours   “Stress emerges from demands on your time,” said Pasick, and increasingly “managers are expected to do much more with less.”  He found that his patients often reported that they were now working two or three jobs.  “Due to cutbacks,” Pasick observed, “managers no longer have administrative help and must answer all their own email and phone calls. Essentially they work 24/7.”  

More time with family.  Company leaders often face a continuous flow of vexing problems from contentious parties.  Family time can provide just the opposite, a more predictable environment built upon secure relations.  

Time to reflect. Carving out time for personal reflection can reduce the underlying stress if it helps set priorities and generate creative solutions.   

Note:  John Baldoni is a communications consultant and author whose most recent book is Great Motivation Secrets of Great Leaders (2005); he can be reached at john@johnbaldoni.com.   

Copyright 1996-2005, Wharton Center for Leadership and Change Management
 University of Pennsylvania.