WHARTON LEADERSHIP DIGEST 

May, 2002, Volume 6, Number 8

CONTENTS   

The Power of One:  Leading Quietly 
Wharton Leadership Conference:  Leadership 360^o 
Taking Chances:  More Executive Equity, Greater Decision Risk
Into the Wild:  Leadership Development Ventures
Leadership Workshop:  A One-Day Wilderness Challenge
Pharmaceutical Companies:  The Leadership Ahead, Part 2

The Power of One: Leading Quietly

By Kate Faber, Coordinator, Wharton Leadership Program 

Do leaders need to be superheroes?  The answer, simply put, is no.  

In Leading Quietly, Harvard professor Joseph Badaracco, Jr. shares profiles of exceptional leadership implemented by Everyman.  Rather than set up a hierarchy of lemming to leader or give a single Hercules the credit for a company’s success, Badaracco holds that each day, a million seemingly inconsequential decisions are made by “quiet leaders” who reinforce the company’s strength and efficacy. 

Quiet leaders are individuals who keep perspective on their role within the organization. They consider the macro-level ebbs and flows of a company’s performance.  They consider the organization as a whole -- the people working within and the potential for effective activity. Badaracco’s quiet leaders balance the desire for productivity with a basic trust in humanity --namely, that every person wants to be responsible for his or her role in a community.  This trust runs risks which every manager might not feel comfortable betting on.  Quiet leaders, however, run this risk knowing that, if successful, they have the potential to awaken another quiet leader. 

This book is designed for individuals who want to work by the values which shape their own lives, who are willing to take on onerous tasks, and who want to act with integrity while forwarding, not ending, their careers. 

Based upon extensive experience and research, Badaracco presents eight directives for the quiet leader that run counterintuitive to traditional leadership stereotypes.  Ranging from a realistic understanding of how things work to finding the best way to bend your company’s rules for productivity, these tactics bolster the self-aware leader who is willing to confront, analyze, and work through challenges at work. 

Beyond giving effective case studies for each of his guidelines, Badaracco looks beyond what the quiet leader does to who the quiet leader is.  He writes:   “Something did set them apart, and it was a matter of character rather than tactics.  These men and women relied heavily on three unglamorous virtues: restraint, modesty, and tenacity.  Each of these is a habit of mind and action, and each helps men and women use the tools and tactics of quiet leadership in responsible, effective ways.” 

Suddenly the glamorous sheen of leadership, the individual standing on the top of the heap, has dissipated.  In its place are three rather ordinary virtues -- the virtues easily forgotten as one ticks off courage, passion, self-sacrifice, undying commitment.  How could a leader be formed by anything less than heroic virtue? 

As Badaracco shows us, the virtues of restraint, modesty, and tenacity are accessible to ‘ordinary’ humans.  They can be used every day and in every situation.  The power they imbue in the quiet leader allows for effective, consistent leadership under the most ordinary and extraordinary of situations. 

Quiet leaders serve the company in two ways:  they keep a perspective on the company’s higher goal and they direct their work towards this goal every day.  With integrity, commitment, and a bit of faith, the quiet leader supports the company from the bottom up, creating a stronger foothold for the company to grow and leap from. 

Source:  Joseph L. Badaracco, Jr., Leading Quietly: An Unorthodox Guide to Doing the Right Thing (Harvard Business School Press, 2002).  Kate Faber can be contacted at kfaber@wharton.upenn.edu. 


Wharton Leadership Conference:   Leadership 360^o  

Wharton’s annual leadership conference on June 5 focuses this year on “Leading in All Directions.”  Speakers include Sally W. Stetson, President of the Forum of Executive Women; Warren Bennis, author of On Becoming a Leader, Arthur Sulzberger, Chairman of The New York Times Company, and Benjamin Levy, author of the just published, Remember Every Name Every Time: Corporate America's Memory Master Reveals His Secrets. 

Updated information on the conference can be found here, and online registration is available here. 


Taking Chances:  More Executive Equity, Greater Decision Risk 

Are owner-managers more prone to make risky decisions than professional managers, especially in more turbulent markets?  To find out, researcher Thomas R. Eisenmann studied the cable television industry during the period from 1986 to 1995, focusing on the 201 companies that held at least 30,000 subscribers at any point during that period.   

Eisenmann theorized that owner-managers should be more willing to take risks because their upside is larger than for professional managers, and their downside is lower.  Here’s why:  If the decision works, the owner-manager is likely to see greater expansion of their wealth since their equity holding are typically far larger.  If the decision does not work, the owner-manager is more likely to avoid dismissal since they tend to control the governing board.   

Eisenmann theorized that the risk-taking differences would be more marked in markets with greatest turbulence since the upsides of success and downsides of failure grew larger.   

Turbulence was defined as sharp and unpredictable changes in technology, regulation, and customer demand that had significant impacts on the firms’ long-term performance.  For cable operators, the period from 1986 to 1989 was one of lower turbulence than 1990 to 1996, when regulatory changes became more abrupt and digital and fiber-optic technologies came into service.  Year-by-year turbulence across the entire period was measured by asking a panel of experts to assess it, by tallying the ebb and flow of information about the industry, and by examining the volatility in cable stock prices.  

A risk-taking decision was defined as acquisition of another cable company, and a risk-avoiding decision as exiting from the business altogether.  The researcher found as forecast that professional-managers were less likely than owner-managers to acquire other cable operators and more likely to exit the industry altogether.  Moreover, the greater the turbulence, the greater the gap:  compared to owner-managers, professional-managers became especially risk prone and risk averse at the highest levels of turbulence.  In years of very low turbulence, by contrast, the gap between the two kinds of managers was virtually negligible.  

By implication, if professional managers are to act in turbulent markets as owners and investors would themselves if they were running the show, their governing boards should ensure that they are rewarded for risky but successful decisions – and given some protection against risky but flawed decisions.  Otherwise, risk aversion is their wisest course.   

Source:  “The Effects of CEO Equity Ownership and Firm Diversification on Risk Taking,” Strategic Management Journal, Vol. 23, 2002, pp. 513-534. 


Into the Wild:  Leadership Development Ventures 

A new set of open-air programs -- Wharton Leadership Ventures -- are designed to help managers to improve their capacities to think strategically, communicate effectively, and act decisively. 

These hiking and climbing programs make use of evocative mountain settings and powerful personal experiences to explore leadership and team dynamics.  Drawing on a similar set of leadership ventures developed for Wharton’s students and graduates that have included treks to Mt. Everest, walks of Civil War battlefields, climbs of Ecuadorian volcanoes, and simulations of peacekeeping missions, the first of these new programs will be held in mountains not far from New York City on September 3 to 6.  Future venues are likely to include the California Sierras, European Alps, and Chilean Andes.  

Source: Information on the new Wharton Leadership Ventures can be found here.  


Leadership Workshop:  A One-Day Wilderness Challenge  

By Mark Davidson, Wharton Leadership Ventures, and 
Chris Maxwell, Associate Director, Wharton Undergraduate Leadership Program  

Sweltering humidity, blinding sun, driving rain, lightning strike, and blowing snow in April.  These were among the conditions confronting participants in two recent leadership ventures for Wharton students.    

The one-day ventures were designed to sharpen the concepts of leadership and teamwork by using a challenging and unpredictable outdoor environment that can change as rapidly and unpredictably as any business market.  One venture was designed for Wharton undergraduates, the other MBA students.  Both used the Hawk Mountain Sanctuary in northeastern Pennsylvania as the outdoor venue.  

The undergraduate venture was designed for upper-division students who provide guidance to teams of first-year undergraduates engaged in semester-long community service leadership projects as part of a required course on leadership.  The MBA venture was created for second-year MBA students who work with teams of first-year MBA students engaged in team projects as part of their required course on leadership.   

Participants worked in small teams to assess terrain, consider options, assess risks, and select routes to reach a pre-determined lunch site at a specific time and return by late afternoon.  Intensive mid-day and evening discussions extracted five enduring leadership lessons from the hiking experience:    

Thinking strategically:  Time management is essential to accomplish goals and ensure the safety and well being of your team.  All of the hiking teams had to reach and return from their destination in a timely and secure fashion despite the extreme weather conditions.  But how far can leaders push a team beyond a natural comfort zone when urgent movement is essential because of worsening conditions? 

Deciding expeditiously:  Bigger groups create far greater challenges for decision making.  Our smaller hiking teams reached consensus quickly on route changes necessitated by the weather, while our larger teams debated at length.  What is the optimal size if a team is to make fast and accurate decisions? 

Executing decisively:  Clear direction is critical in times of uncertainty.  When the severe weather struck, team leaders had to repeatedly refashion their way forward.  But can frequent redirection of a team’s course be perceived as indecisiveness? 

Communicating effectively:  Effective coordination among autonomous teams is vital for overall accomplishment.  As the weather worsened, teams pursued divergent and unplanned paths, and radio communication between teams was hampered by the storm, making coordination of movements and advising lost teams difficult. When should extra channels of communication be instituted on the chance that a crisis may eliminate the normal channels?   

Leading extensively:  All team members should be ready and able to take the lead when circumstances dictate.  Teams found themselves having to make decisions on the fly as trail conditions worsened, and many members stepped forward to direct the decision making.  But if everybody is empowered to lead, what is to prevent a team from fragmenting? 

Note: Chris Maxwell can be contacted at maxwellc@wharton.upenn.edu and Mark Davidson at mrd47@yahoo.com. 

Pharmaceutical companies:  The Leadership Ahead, Part 2

By John Joseph, Wharton Center for Leadership and Change   

The Wharton Center for Leadership and Change recently assessed the emergent leadership requirements of the pharmaceutical industry and how major firms can develop that talent.  With support from Heidrick & Struggles International, our interviews revealed that future industry leaders will need a core set of skills that include a mastery of functional disciplines, global perspective, political skills, and the ability to communicate the vision of the company and industry.  

To ensure that promising managers build such skills, drug makers will need to offer an array of  developmental opportunities.  The Center for Creative Leadership has found that the most effective programs blend individual assessment of leadership competencies with challenging on-the-job experiences and confidence-building support, and similar initiatives are needed here. 

Many pharmaceutical companies rotate their high-potential managers through assignments in sales and marketing.  But to flesh-out a full skill set, rising managers need far more than extended sales calls on physicians.  Whether through diverse assignments or action projects, they also require intensive contact with regulatory agencies, patient advocates, and non-profit organizations.  They need hands-on experience with product development, strategic alliances, new acquisitions, and legal affairs.  

International assignments also serve as good developmental ground for high-potential managers.  Direct experience in managing in multiple markets will enhance an appreciation for the strategic implications of price controls, product delays, reimbursement restrictions, promotional limitations, and market demands.  One American executive noted that “Europeans desire to bias the product development, the product label, and the marketing and sales activities towards what is needed to be successful in Europe,” and there is no better way to appreciate such biases than to work in a market with them. 

While developmental positions can take aspiring managers well beyond their already mastered capacities, but in the past little support has been provided to those in stretch assignments.  Several of those interviewed urged that personal coaching be provided to ensure that those so assigned can comfortably take chances and avoid career-damaging mistakes. 

Many of the executives whom we interviewed urged that their firms more aggressively recruit outsiders for the functional expertise that they had so well built within.  Marketing managers have traditionally come up through sales, but the executives argued that they would be better off recruiting from consumer savvy industries such as packaged goods or financial services.  Similarly, it would be good to draw public affairs talent from lobbying firms and think tanks where the roles of regulatory agencies, legislative bodies, and public opinion are more firmly appreciated.  Finally, for managers who are to run the business units that increasingly define drug-company organization, it is good to look outside for those with direct experience in running profit-and-loss centers.  

It is just over 100 years since Felix Hoffman first synthesized acetylsalicylic acid in a chemically pure and stable form, commonly known as Aspirin, and as a result, helped create the world’s first research-based pharmaceutical company.  Long focused on research and sales, drug firms increasingly require managers who not only understand development and marketing, but also can lead in demanding regulatory environments, equity markets, and international settings.  

Note:  This is the second in a two part series by John Joseph, who can be reached at John.Joseph.wg01@wharton.upenn.edu.  The first part can be accessed here. 

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University of Pennsylvania.