May, 1998 Volume 2, Number 8

CONFERENCE: Leadership Capabilities

A one-day conference on June 18, 1998 in Philadelphia will examine the leadership capabilities required for company growth and performance:

• What are the leadership capabilities required?
• How do the capabilities differ among companies facing different markets
  and challenges?
• How are companies developing or recruiting the people they need for
  leadership and change?

Conference speakers include

Peter Cappelli, Wharton School
Elizabeth Chambers, McKinsey & Company
Howard Fischer, Howard Fischer Associates International
Rakesh Khurana, Harvard Business School and MIT
Alexander Kleinman and Derek van Bever, Corporate Leadership Council
Sandra J. Price, Sprint Corporation
Jude Rich, Sibson & Company
Michael Useem, Wharton School
Lawrence A. Weinbach, Unisys Corporation
Calhoun Wick, Wick & Co.

The conference agenda and registration information can be found a <http://leadership.wharton.upenn.edu/leaders/conf98.html> or obtained from Rita Gorman at <gorman@wharton.upenn.edu>.

Employee-Nominated Directors

A few American firms have included one or more union or employee representatives -- Chrysler and United Airlines are among the best known -- but such a boardroom presence remains rare in the U.S. and most other countries. Larry Hunter of the Wharton School interviewed 25 of these employee-nominated board directors in 1989 and 1990 to investigate the impact of their presence on the board.

The convention in American governance is that all directors represent all shareholders, and employee "representatives" thus find themselves buffeted by contradictory demands to voice employee interests and protect investor assets. The divergence becomes especially pronounced when a takeover offer promises a financial windfall for investors but employment disaster for workers.

The convention of directors representing only stockholders contrasts with that prevailing in some European countries. German law, for example, requires "co-determination" in company governance, meaning that half of the directors of large firms (more than 500 employees) formally represent employees.

Drawing on his in-depth interviews, Hunter found that employee representatives in the U.S. board room

• could not effectively advocate employee interests except in extremely unusual circumstances
• improved confidence among rank-and-file employees that their concerns were voiced;
• informed the board and management of grass-roots conditions in the company and industry;
• transmitted information on management compensation to employees and their union representatives;
• and eschewed, as do virtually all outside directors, micro-management of the enterprise.

In a new study sponsored by the Wharton Center for Leadership and Change Management, Professor Hunter and doctoral student David Hess are updating the earlier study. Hunter and Hess are examining what this decade's experience (especially in steel and airlines) reveals about the conditions under which union- and employee-nominated directors can be effective in representing the interests of their constituencies, investors -- or both. They are now surveying a large number of both union-nominated directors and other directors of American companies.

The study may take on contemporary relevance. During the 1980s, when Chrysler nearly entered bankruptcy, its placed the head of the United Auto Workers on its board as part of a deal in which the auto workers accepted a wage cutback. When Chrysler later returned to prosperity, it removed the UAW representative. Now, with its planned merger into the German-based Daimler Chrysler, it will report to a governing board with half the seats held by labor representatives.

Source: Larry W. Hunter, "Can Strategic Participation Be Institutionalized? Union Representation on American Corporate Boards," Industrial and Labor Relations Review, Vol. 51, No. 4, July, 1998, pp. 557-578, forthcoming. To contact Larry Hunter: <hunterl@wharton.upenn.edu>. .

Making Change

For changing the tires while your car is moving, Robert Miles offers advice from a career of management consulting and academic teaching on how "to achieve fundamental transformation without exposing the organization to unacceptable risk." According to his Leading Corporate Transformation, five actions must all be combined to make it happen:

1. Create a compelling vision of the new future
2. Unleash energy to propel the transformation
3. Challenge all the old habits
4. Implement, implement
5. Lead the action

How do you inject energy into an already well run operation, or, in the words of an Ameritech executive, how can you be sure to "run the first four laps as fast as you can," and then still "increase the speed"? Miles identifies several devices: benchmark the firm and its functions against best performers, identify where the industry is going without you, and raise the bar for measuring everything.

In extended case studies of four disparate organizations -- the Southern Company (an electric utility), National Semiconductor, Norrell Corporation (staffing and management services), and the PGA Tour (a golf competition firm) -- Miles finds all of these action at work and more.

Source: Robert H. Miles, Leading Corporate Transformation: Blueprint for Business Renewal (San Francisco: Jossey-Bass, 1997).

The Complete Manager

Sasin, the Graduate Institute of Business Administration of Thailand's Chulalongkorn University, offers its three-week Senior Executive Program in collaboration with the Wharton School and Kellogg School on August 16 - September 6, 1998 at a resort hotel several hours' drive southwest of Bangkok. With faculty from Wharton and Kellogg, the program is offered in English and draws participants from the Asian region. Program topics include accounting, economics, finance, marketing, organizational behavior, and strategic management. For information on the program, contact Patcharaphorn Phantarathorn at <patchara@sasa.sasin.chula.ac.th> and see Sasin's web site for the Senior Executive Program at <http://www.sep.sasin.chula.ac.th/>.

"I enjoy creating things that don't exist anywhere else in the marketplace. In this industry, we are the leader; there are no models. We're creating the next generation of whatever exists. And it's incredibly exhilarating to work on that on a day-to-day basis -- to try to imagine what's possible, what our competitors are going to do, and what our customers want. This is a new industry to conquer, and it's where we all want to be."

Source: Judy Balint, Senior Vice President, E*TRADE, in "Redefining the Commerce World," Leaders magazine, April, May, June, 1998, Vol. 21, No. 2, p. 21.