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WHARTON
LEADERSHIP DIGEST
June,
2000, Volume 4, Number 9
Contents
Leadership
Development Program: Communication and Leadership at
Northrop Grumman Corporation
Leadership Profile:
Vanguard’s Jack Bogle on Building An Enterprise
Leadership Research:
Trust Matters for Competitive Advantage
Leadership in E-Commerce: What Does it Take to Lead an E-Commerce
Venture?
Leadership Book:
Wharton on Emerging Technologies
Leadership Quote:
William Kelvie, EVP and
CIO, Fannie Mae
Leadership
Development Program: Communication and Leadership at Northrop Grumman
By
Tom Quirk, Manager of Executive and Employee Communications,
Northrop Grumman Corporation
Tom
Quirk
James G. Roche
“If you not getting smarter, you’re just getting older.”
Accepting these words as both personal motto and organizational
imperative, Dr. James G. Roche, president of Northrop Grumman’s
Electronic Sensors and Systems, has created a far-reaching and innovative
leadership development program for his $3 billion sector, known as ES3.
Current and potential leaders study the Civil and Revolutionary
wars, read Shakespearean plays, and take courses taught by company
vice-presidents and tailored specifically to their industry needs.
Visiting
Civil War and Revolutionary War battle sites and assuming the roles of the
key participants, managers and staff study decision making under severe
stress. They also evaluate
the often catastrophic impact of those decisions on the subordinates
required to implement them. Bad
business decisions may not destroy lives, but they can destroy
livelihoods.
Much
the same purpose is served by managers using the Bard’s plays as
business case studies to explore issues in ethics, risk, and leadership. From Gettysburg’s Robert E. Lee to Shakespeare’s Henry V,
the disciplines may change but the lessons and their relevance to 21st
century business concerns are strikingly similar.
The
latest ES3 leadership program exposes the sector’s top 70
managers to seminars and hand-on training in “best practices” in
communication. The Executive
Communications Forum is a year long, multi-module program built on the
premise that excellence in
communications directly contributes to leadership and success in business.
These
leadership programs are targeted not just for top management but also for
those not yet in executive
roles, and they are part of a long-standing commitment to identify and
accelerate the personal growth of high potential candidates for leadership
positions. A central element here is the obligation of each of the
sector’s top 250 executives to select and mentor an employee with
executive potential who does not report to them.
Electronic
Sensors and Systems also annually identifies ten of the best and brightest
non-managerial employees in the organization to join the Chowder Society,
a select group that receives special mentoring from the sector’s top
executive team. It meets
quarterly with James Roche and his executive team to share ideas and
challenge the status quo, and one member is
chosen to serve as the president’s personal assistant, providing
exposure to issues that might otherwise take years to come by.
Pickett’s
Charge. Henry V’s St.
Crispin’s Day speech. Mentoring
and teaching. Learning and
leading. Success and winning: All
are part of leadership development program at Northrop Grumman’s
Electronic Sensors and Systems.
Note:
Tom Quirk can be contacted at thomas_g_quirk@mail.northgrum.com.
Additional information on Northrop Grumman’s leadership programs
is available from donna_m_szuba@mail.northgrum.com.
Leadership
profile:
Vanguard’s
Jack Bogle on Building An Enterprise
John C. Bogle is founder and former chief executive of Vanguard Group, and
author of Common
Sense on Mutual Funds: New Imperatives for the Intelligent Investor
(Wiley: 1999) and John Bogle on Investing: The First 50
Years (McGraw-Hill, September, 2000).
He spoke on leadership to students in Wharton’s Executive MBA
Program on June 2:
Leadership
has been defined as the one “who guides” or is “in charge of
others” or “has influence or power.
The leader has also been defined as “the foremost animal,”
leadership as “the blank strip at the beginning of a tape.”
For
me, it is having a vision and being able to attract and excite others to
share it. It’s a positive,
even virtuous quality. It is
not based on leading by reason of power, or fear, or financial incentives.
Am
I a natural leader? No,
never. I was just a
determined, responsible, realistic kid who was given, for whatever reason,
a rare opportunity to change the way Americans invest.
Out of this came a too rare thing:
Not just a simple company but a company that stood for something.
Here are ten ideas that I used to build it:
1.
Never
lose sight of the ultimate goal, and focus energy on short-term
perspectives. In our case, it
was providing investors with the greatest participation in the market’s
return possible, through indexing. The
fox knows many things, the hedgehog knows one great thing.
2.
Set
a personal example with visible, memorable symbols or behavior. Walk the walk. Be
who you are, for you “can’t fool all the people all the time.”
In our case, our nautical theme drills that message home, time
after time after time.
3.
Instill
optimism and self-confidence, but stay grounded in reality.
Our message makes it easy: 98%
of the market’s return is “guaranteed.”
But don’t forget about idealism:
People want to work (and invest) somewhere with “higher
values.” When I get
depressed, all I need to do is visit the “Bogleheads” on the Vanguard
Diehards section of the Morningstar website.
4.
Take
care of yourself: Maintain
your stamina and let go of guilt (I’ve never had any!).
Sometimes you must “fake it.”
Energy summons you, or you it.
5.
Reinforce
the team message constantly: “We
are one – we live or die together.”
6.
Minimize
status differences and insist on mutual respect.
Treat everyone equally, from the highest to the humblest.
I always told everyone that if I ever caught them demeaning someone
who reports to them I would “make you do his or her job for a day…if
you can!”
7.
Master
conflict. Deal with anger in
small doses, engage dissidents, and avoid needless power struggles.
This is easy when you have a small, young company and an eager
crew, but not so easy as you grow.
8.
Find
something to celebrate and something to laugh about.
Since our beginning, we celebrated various asset milestones:
$3 billion in assets, then $4 billion, then $5 billion.
We’ve had to space the milestone celebrations as we’ve grown to
over $550 billion.
9.
Be
willing to take the big risk. At
Vanguard, they came rapid fire in the early years.
In 1975, it was “the Vanguard Experiment,” in 1976, it was the
first index mutual fund (“Bogle’s folly”), in 1977 it was our
decision to stop selling our funds with sales loads.
10.
Never
give up: There’s always another move.
Find an opportunity. I
was recently profiled on CNN’s Pinnacle, and at the end I quoted an
elderly Churchill’s remarks to a class of young, eager students:
“Never give up. Never, never, never, never, never."
A
word about power: It can
corrupt. It can cause you to
manipulate people and try to control the organization.
Instead, use it to instill your ideas and values, foster
intellectualism, and exchange human values.
James
Norris [a Vanguard manager] wrote of me when he was a student in your
Executive MBA program, “While
it is revealing to consider someone like Jack Bogle for insights into what
constitutes a leader, your search for understanding, for some kind of
leadership formula, is apt to end in frustration.
It is like studying Michelangelo or Shakespeare:
you can imitate, emulate, and simulate, but there is simply no
connect-the-dots formula to Michelangelo’s David, or Shakespeare’s
Hamlet. I suppose, when all is said and done, it really comes down to
this: People are leaders
because they choose to lead.”
And
so, for each of you, leadership is a matter of choice and determination.
Leadership
Research:
Trust Matters for Competitive Advantage
Can a
company’s top talent constitute a sustainable competitive advantage?
Four business school scholars – James H. Davis, F. David
Schoorman, Roger C. Mayer, and Hwee Hoon Tan –
find evidence from the restaurant industry that it can.
The researchers
gathered data from a chain of nine restaurants, each of which operated as
a profit center. They
theorized that top talent would constitute a competitive advantage if it
is scarce and cannot be readily imitated, and they forecast that a
defining quality is an executive’s capacity to engender trust.
When employees have confidence in their top manager, the
researchers predicted, employees are likely to work more effectively and
quit less often, making their operations more profitable.
That is precisely what the researchers found.
The
investigators asked more than 370 restaurant employees to report the
extent to which they trusted the general manager, and also the degree to
which they had confidence in the manager’s ability, integrity, and
respect for employees. The
researchers then examined the downstream impact on restaurant performance
net of other factors, and they found that restaurants where employees
trusted their managers achieved high levels of sales and profitability
during the following quarter – and that trusted managers were indeed
those with strong reputations for ability, integrity and employee respect.
By implication,
the trusted general manager may use that confidence to competitive
advantage, and it may be a sustainable advantage if other general managers
fail to acquire it because of their own flawed decisions, unprincipled
behavior, or employee disrespect.
Source:
James H. Davis, F. David Schoorman, Roger C. Mayer, and Hwee Hoon,
“The Trusted General Manager and Business Unit Performance: Empirical
Evidence of a Competitive Advantage,” Strategic Management Journal
21, 2000, pp. 563-576.
Leadership
in E-Commerce:
What Does it Take to Lead an E-Commerce Venture?
By Mukul
Pandya, Editor, Knowledge@Wharton (http://knowledge.wharton.upenn.edu/)
 Rick
Berry, CEO of ICGCommerce.com,
often feels he is “driving a Ferrari with a cinderblock on the
accelerator.” Ask him why, and he will explain that his colleagues and
he are slogging around the clock to build an Internet-based procurement
business – which should take a decade – and trying to do it in six
months. The reason Berry is racing like crazy is simple.
"E-procurement is a $10 trillion market worldwide, nearly 30% to 40%
of which is not bid – and that is our untapped opportunity," he
explains. To grab a chunk of that market before the competition moves in,
ICGCommerce.com has set a blistering pace since its launch last October.
It already has 350 employees and offices in London and Toronto. Little
wonder Berry feels he is speeding down a highway. "You go as fast as
you can," he says. "Just don't crash."
Berry
is hardly alone. As more and more companies try to seize opportunities in
today's volatile Internet environment, they are forced to move at great
speed down uncertain – often
experimental – paths.
This poses enormous leadership challenges for dot-com companies as well as
traditional bricks-and-mortar businesses trying to develop e-commerce
initiatives. What exactly does it take to lead an e-business effectively
in today's fast-changing, technology-driven world? Are traditional
leadership skills enough? Or do CEOs and other top executives need to
cultivate new capabilities in order to move as fast as possible without
crashing?
Answers
to these questions and more were discussed at a session on
"Transformational Leadership for eCommerce Initiatives" at a
meeting of the Wharton Forum on
Electronic Commerce on June 1. Moderated by Michael
Useem, director of the Wharton Center for Leadership
and Change Management, the session involved presentations by Berry, William
Kelvie, chief information officer of Fannie
Mae, and two MBA students, John Joseph and Kelly Jo Larson.
"Leadership is especially important when the future is
uncertain," says Useem, who conducted an informal straw poll before
the session. He asked: If you were a venture capitalist looking at
investing in an enterprise, how much weight would you place on the
business model, and how much on the talent of the management team? The
response: 50-50. "To succeed in e-commerce, the business model is
key, but talent is key as well," says Useem.
 Talent
must take specific forms to provide effective leadership in e-commerce
ventures. According to Berry, the most important quality such leaders must
possess is the ability to build a team. Paradoxically, the humility –
some might call it egolessness – that is needed to manage a team must go hand-in-hand with the drive and
confidence that stems from a strong ego. Leaders of e-commerce ventures
must have the ability to attract teams of talented risk-takers. "You
have to find people who are willing to put some skin in the game,"
Berry says. "At ICGCommerce we attracted people who left millions of
dollars on the table to join us, and so all of us had a stake in the
company."
Dot-coms
typically have a very direct communications style, Berry explains, and
leaders must equip themselves to deal with that. In traditional companies,
criticism of a colleague's or subordinate's actions often takes what Berry
calls an "Oreo cookie" approach – you
first say something positive, then slip in your criticism coupled with a
suggested change, and end by saying something positive again. The
fast-paced e-commerce world, however, simply doesn't permit the luxury of
such a leisurely approach. "You communicate directly, and you must
build a team that can cope with that," he says.
The
speed at which everyone works in an e-commerce venture also means little
time is available to train anyone. "Your team members must come with
a set of skills and deliver," says Berry. "You need people with
lots of experience who know how things are done, and go out and do
them." A corollary, he adds, is that team members must have
confidence bordering on arrogance. In addition, they must have enormous
amounts of energy and stamina – because the environment often requires 18-hour days and weekends that
blur into the work week.
Leaders
of e-commerce ventures must strive to create a specific type of work
culture, Berry notes. This culture is high-energy and result-oriented. It
doesn't allow time for studies or leisurely thought-processes. It fosters
decision making based on incomplete information. "We have an
aggressive culture," Berry says. "We always ask ourselves, 'So
what?' And we have a culture that is highly solution-oriented. If you have
a problem, you've got to come up with at least three solutions."
While
the work culture must emphasize hard work, it must also be fun.
"People love to win," he adds. Among other things, the work
culture must be athletic and competitive. It must be driven by people who
hate to lose, who will fight every battle to the end, and who will be
prepared to die for the cause." They must also be driven by a sense
of urgency. "There's a time window within which we can do something,
and it is closing," says Berry.
Another
crucial capability of Internet leaders, Berry notes, is that they must be
constantly upbeat and uplifting. "It is like being on stage all day
long," he says. "Your work has to be a constant euphoric
event." ICGCommerce uses a method to sustain the euphoria. Everybody
in the company regularly gets an e-mail about "Five Great Things that
Happened Today."
Other
panelists agreed with Berry. Fannie Mae's Kelvie points out that leaders
of e-commerce ventures must be visionary – in
addition to being as tenacious as Shetland sheepdogs. He adds that a vital
aspect of leadership in e-commerce ventures involves the ability to
attract and retain talented staff. "I used to draw upon talent in
other companies, and now I'm getting raided," he says. "I live
every day with the war for talent."
Joseph
and Larson, who have been working with Useem on a website
about leadership in the Internet age, based their presentations on
interview with leaders of e-commerce companies as well as those in
traditional companies. Quoting David Perry, founder of Chemdex, a B2B site
for the life sciences industry, Joseph says that leadership often entails
developing a virtuous circle of "raising money, so you can hire good
people, so you can make and sell good products, so you can raise more
money." He adds that other leaders of e-commerce ventures emphasized
the importance of nurturing a strong culture, which begins with hiring the
right kind of people – who
are enthusiastic, passionate, and share the organization's values.
Larson
points out that the speed at which the Internet world moves has often made
it difficult for traditional companies to compete effectively with dot-com
companies. The reason is that leaders of dot-coms often do things
"that are probably correct – or
correct directionally – but
may also turn out to be wrong." This requires a mindset in which the
organization views failure as the tuition for success. Traditional
bricks-and-mortar companies, however, are not built to tolerate failure.
"You need leaders who are willing to be taught as they lead,"
she says.
LEADERSHIP
BOOK: Wharton
on Emerging Technologies
 George Day,
professor of marketing at the Wharton School, and Paul Schoemaker,
research director of Wharton’s Emerging Technologies Management Research
Program, asked 26 researchers working in diverse areas to assemble what we
know about managing emerging technologies, those science-based innovations
that have the potential for creating a new industry or transforming a
current one. Examples range
from digital photography and portable computers to high-definition TV and
the Internet.
Drawing on the
success of Palm Computing and 3Com in turning a new technology into a
block- buster product – and defeating many well-funded competitors –
Day and Schoemaker extract several management lessons:
1) Treat your
knowledge and human assets as more critical than your financial resources.
2) Appreciate
in detail how customers are likely to use the new technology.
3) Experiment
with the technology and modify it quickly from early experience.
4) Target a
market niche to secure a footing before going for a major market.
5) Transcend
the trap of the outmoded mindset.
Drawing on a
range of examples and analyses in the book’s 18 chapters, the editors
find a host of paradoxes that managers must surmount if they are to bring
new technologies swiftly and effectively to market:
o
A vigorous commitment to the new technology is essential, but so
too is keeping your options open.
o
Innovating requires the act of pioneering, but pioneering heightens
the risk of failing.
o
Successful strategies build on existing strengths, but their
implementation can require separation from the organizational foundation
that is the source of the strength.
o
Competition is brutal – but winning requires openness to
collaboration with the competitors as well.
Source: George S. Day and Paul J. H. Schoemaker, with Robert E.
Gunther, eds. Wharton on Managing Emerging Technologies, George Day
and Paul Schoemaker, Editors. New
York: Wiley, 2000. The
Wharton Emerging Technologies Research Program can be found at <http://emertech.wharton.upenn.edu/emertech/index.html>.
LEADERSHIP
QUOTE: William Kelvie,
EVP and CIO, Fannie Mae
Q: How
important is integrity in the recipe for leadership?
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