|
WHARTON LEADERSHIP DIGEST
June,
2001, Volume 5, Number 9
Contents
Leadership
Conference:
Going from Good to Great
Learning by
Exploring:
Leadership Trek to Mt. Everest
Developing
Leadership:
Anne Mulcahy, President of Xerox Corporation
Financial
Leadership: When Companies Replace
their CFO
Leadership Quote: eBay’s
Margaret Whitman
Leadership
conference: Going from Good to Great
From
Knowledge@Wharton
 James
C. Collins loves to tell the story of Darwin E. Smith, someone most readers have
probably never heard of. As Smith was ending two decades at the helm of
Kimberly-Clark, maker of Kleenex and other personal-use paper products, he was
asked what had driven him, what had he done to make his company so successful
over time.
“I
was just trying to become qualified for the job,” Collins quotes Smith as
saying.
Smith’s
statement is at the heart of Collins’ latest management study, which finds
that leaders of great companies have genuine humility and self-doubt but also
the singular drive to make their companies succeed.
The
author of Built to Last: Successful Habits of Visionary Companies (HarperBusiness,
1994), Collins spoke earlier this month at the fifth annual Wharton Leadership
Conference entitled “Developing Leaders.” He focused his remarks on his new
study, which will be published in the fall as Good to Great (HarperBusiness).
Collins,
a former Stanford Business School professor now based in Boulder, Colo., and his
22-person research staff spent four years trying to determine what made
companies grow from merely good organizations to great ones and what sorts of
leaders were responsible for that transition.
Early
on in the process, he took as a premise that goodness was anathema to greatness.
“Good is the enemy of great and is why so many things don’t become great,”
he said. “We don’t have really great schools because we have good schools.
We don’t have great companies because we have so many good ones. And when we
look back over a life and see if it is a great one, we don’t see many because
it is just so easy to settle for a good one.”
In
Built to Last, he said, he and co-author Jerry I. Porras looked at how to
build an enduring, and great, company from the ground up. The research for Good
to Great was a bit different; Collins sought a standard that would allow him
to look empirically at the question of how a decent company could become a great
one.
He
took as his standard the enduring success of General Electric. Over the last 15
years, GE has beaten the market performance by 2.8-to-1. Other companies may
have done better, but GE has done well consistently and its reputation for
excellence is secure. So Collins and his researchers went to look for Fortune
500 companies that had sustained mediocre performances for 15 years or more but
then experienced significant turnarounds where they outperformed the 2.8-to-1 GE
standard.
Of
the 1,435 companies that appeared on the Fortune 500 listings at any time
between 1965 and 1995, only 11 made the cut. “If there was something in the
genetics of a good executive, it had to be in this group,” said Collins.
“The goal then was to understand what was inside this black box.”
One
of the companies, he said, was a real surprise: Walgreen’s. After 40 years of
underperforming, Walgreen’s turned a huge corner in 1975. If you had invested
in Walgreen’s in 1975, Collins said, you would have beaten Intel by a
two-to-one margin; Coca-Cola by eight-to-one, and the market as a whole by
15-to-1. “If we had found Cisco, then people would say, ‘So what?’” said
Collins. “But a dowdy company like Walgreen’s gives us all the hope that we
can do it too.”
Collins’
research came up with other similarly dowdy companies, including Kimberly-Clark,
Abbott Laboratories and Nucor. Collins said he searched in vain for
similarities, until his researchers convinced him that a certain type of
leadership was the core element in each of the organizations.
Although
he attributes other factors to the companies’ greatness – the culture of
discipline, confronting previous failure and harnessing the proper technology,
for example – the “leadership agnostic” in Collins has come to believe
there is something about a certain type of leader that can drive a good company
to greatness.
He
calls that combination of complex and sometimes contradictory traits of humility
and internal drive ‘Level 5 leadership,’ the top form on his hierarchy of
management personal attributes. Collins said most of the general public, and
even business leaders themselves, would probably not know the names of the 11
CEOs who turned their companies from good to great. Kimberly-Clark’s Smith,
who was never even profiled by the Wall Street Journal in his 20 years of
leadership, was a primary example. Others included Ken Iverson at Nucor, Alan L.
Wurtzel at Circuit City and George Cain at Abbott.
“We
looked at a factor we called the Window and the Mirror,” he said, noting that
Level 5 executives tended to look in the mirror and blame themselves for
mistakes. But when things were good, they would look out the window and either
proclaim how everyone in the company was wonderful or how factors of fortune
caused success. When he asked Circuit City’s Wurtzel about his company’s
success, Wurtzel replied that 80 to 100% of it was that “the wind was at our
backs.” Collins faxed him charts showing how much better his company did than
others in the field. “I told him they all had the same wind,” said Collins.
“‘Gee,’ was his response. ‘We must have been really lucky.’”
Yet
most people don’t appreciate how lucky they are to have Level 5s among them.
“We live in a culture that doesn’t pick Level 5s as subjects of
admiration,” said Collins. “We pay attention to the 4s.” And that’s
unfortunate for the business world, as well as the world at large. It’s
important, Collins added, not to settle just for good leadership, but to strive
in every field for greatness.
Note:
This is abridged from an article by Knowledge@Wharton
at <http://knowledge.wharton.upenn.edu/sign_up.cfm>.
Jim Collins website can be found at <http://www.jimcollins.com/>.
Learning
by Exploring:
Leadership Trek to Mt. Everest
By Edwin Bernbaum
 Innovative,
dynamic leadership – developing a vision, articulating it, and inspiring
others to achieve it – calls for a mastery of metaphor. Mountains and mountain
climbing provide some of our most powerful metaphors for overcoming challenges
and achieving personal and organizational objectives. Expeditions to Mount
Everest, for example, stand out in Western culture as inspiring models of the
initiative and determination needed to reach the highest goals. But climbing a
mountain or succeeding in business can be much more than reaching the top: they
can be ways to forge a team and establish core values that allow an organization
to survive and thrive.
Since 1998, I have been co-leading with Mike Useem an annual leadership seminar
trek to Mount Everest for graduates of Wharton’s MBA and Executive MBA
programs, and for those who have completed an executive program at Wharton. We
have designed these seminars to make full use of the spectacular, cross-cultural
setting of Nepal to explore leadership and team dynamics on historic climbs of
Himalayan peaks, across organizations and cultures, and within the group itself.
Readings, exercises, and seminar discussions are intended to expose participants
to a wide range of leadership styles and issues and help them develop the
flexibility needed to lead in a rapidly changing, multi-cultural world.
The first day on the trail, participants pair up and become acquainted, and on
succeeding days they divide into hiking teams. The teams create names, themes,
slogans, songs, even jokes. One team decided they wanted to go slowly, dubbed
themselves “The Funeral Procession,” and proclaimed the slogan of “Arrive
Alive!” We discuss the implications of this exercise for team building,
branding, and marketing.
Two
members selected as leaders on a rotating basis each day have the responsibility
of keeping the group together, devising additional learning exercises, and
leading seminar discussions at lunch and dinner. An early topic for discussion
compares the leadership of Maurice Herzog on the French expedition that in 1950
made the first ascent of Annapurna, the tenth highest peak in the world, to that
of Arlene Blum who in 1978 led the first woman’s ascent of the mountain. In
one discussion, the trekkers focused on where you best position yourself to lead
– setting an example at the front, as did Herzog, or directing from the middle
and rear, as did Blum.
Other discussions explore leadership styles in Asian cultures. The leader of our
Sherpa staff, Ang Jangbu, who has climbed Mt. Everest, tells us that when
Sherpas elect a village headman or woman, they avoid anyone who aggressively
seeks the office, figuring such candidates are out for their own ends at the
expense of the community. At the conclusion of the trek, many of us cite Jangbu
for his quiet, nearly invisible style of leadership in which, as one of us puts
it, “You never see him doing anything but everything gets done.”
At the Monastery of Tengboche, in full view of Mt. Everest, the Abbot points out
to the group what he looks for in a leader: someone who puts others’ interests
first and has mastered Buddhist philosophy. According to him, the aim of
spiritual leadership is to foster peace of mind. We discuss whether this aim can
be reconciled with Western, material values.
One of our readings, the Bhagavad Gita, proved of immediate use to one
our trekkers. After we discussed this work of Indian philosophy at a lunch
seminar, he realized that his reluctance to assume leadership roles came from
being over-concerned with the consequences of his decisions. When he returned
home, he reported that he began to act more for the sake of the action itself
and was able to move forward in his career.
From
our highest camp at more than 14,000 feet, we set off to climb Chukhung Ri, an
18,000-foot mountain set beneath the two-mile high ice wall of Lhotse and Nuptse
across from the spectacular peak of Ama Dablam. Although the ascent requires no
technical skills or equipment, the thin air with half the oxygen at sea level
makes it a major physical effort. During the fourth annual trek in May, 2001, a
higher proportion of the participants than ever reached the summit. The secret
of their success: pacing. Teams leaders set a slow, steady pace that enabled
everyone to stay together and keep going without anyone burning out –
a valuable lesson for teamwork
and project management.
We leave the Mt. Everest area with a deeper understanding of leadership in its
rich diversity and with a sense of connection with the people and mountains of
one of the most beautiful and dramatic places on earth.
Note: Ed Bernbaum is affiliated with the University of California at Berkeley
and is director of the Sacred Mountains Program of The Mountain Institute. He is
author of The Way to Shambhala: A Search for the Mythical Kingdom Beyond the
Himalayas (1980) and Sacred Mountains of the World (1998).
Ed has been doing research on mountain metaphors of leadership around the
world and presents widely on the topic. Additional
information on the trek is available at http://leadership.wharton.upenn.edu/everest/index.shtml,
and Ed can be contacted bernbaum@socrates.berkeley.edu.
Developing
leadership:
Anne Mulcahy, President of Xerox Corporation
By
John Joseph
 Anne
Mulcahy admits she has the same shortcomings today as she did twenty years ago.
But now instead of trying to close the gap, she focuses on how to make up
for her limitations. Her solution:
“I build teams around me with the capabilities I don’t have.”
Mulcahy, chief operating officer and president of Xerox
Corporation, shared her experiences and thoughts on developing leaders at the
annual Wharton Leadership Conference on June 7th, 2001.
Her keynote speech was peppered with frankness and wisdom drawn from a
successful 25-year career at the firm, which included heading up quality,
communications, human resources, government relations, and most recently,
general market operations.
When asked if there are things she would have done
differently when she was in charge of human resources, she responded with a
resounding “yes.” She says,
“In HR we were often the victim of decisions that forced us to manage with
less and less. I would have been a
stronger champion for investments in people.”
Now, as chief operating officer, she is placing leadership
development atop her agenda. She
utilizes team meetings and retreats with the firm’s up-and-coming managers to
craft strategy and identify talent. Online
tools are provided to the firm’s managers to help them help themselves.
Anne Mulcahy herself had not been a big fan of formalized
leadership training. “I dodged
most of the training we had,” she confesses.
But whatever training she missed, she made up for in learning.
She says that 360-degree feedback, a program she instituted as HR
director, had a great deal to do with her own leadership development.
She also credits her success to mentors who noticed her potential and
served as architects of her career. For
this reason, perhaps, she doesn’t favor formal mentoring programs, and
believes it works best when it’s informal.
“It’s important to have role models,” she says, “but the use of
people’s expertise should be earned.”
As a product of the system, Mulcahy must now apply the
skills she has acquired to help turn around a company that has badly faltered.
Why has she remained with the firm?
“One of the reasons that I’ve stayed is because it’s a values based
company.” Another is culture:
Mulcahy says her company boasts “values diversity it all its forms.
Xerox has a long history of a population that reflects the population of
the communities that we serve.”
Amidst disruptive technology, information overload and
environmental uncertainty, Mulcahy has focused the firm on being a global
player. Her climb up the firm’s
hierarchy and her self-awareness – a trait she admires in others – have
helped her rise to the top, and there, she says, leaders must walk the talk, be
consistent in the decisions they make, see clearly where they are and where they
want to go, and most importantly, empower people to lead themselves.
Note: John
Joseph, who graduated from the Wharton School’s MBA program in 2001, can be
reached at <John.Joseph.wg01@wharton.upenn.edu>.
financial
leadership: When companies replace
their CFO
Shehzad Mian
of the Goizueta Business School studied more than 2,000 company replacements of
their chief financial officers from 1984 to 1997, theorizing that they should
follow predictable patterns deriving from management efforts to optimize
financial performance.
Chief financial offers are responsible for a host of tasks
ranging from financial strategizing and capital raising to annual budgeting and
cost managing. If performed very
poorly, the researcher theorized, the CFO is likely to be dismissed from the
firm; if performed very well, the CFO is likely to be promoted by the firm.
The researcher found that in 35% of the replacements, the
CFO was fired or resigned before retirement.
In 5% of the turnovers, the company promoted the CFO to become president,
chief executive, and/or board chair. And the replacement and promotion patterns are observed to be
consistent with theory:
- Companies
were more likely to force out their CFO and bring in an outside replacement
when their stock and operating measures of performance had languished during
the several prior years.
- When
CFOs left early, 46% of their companies went outside for replacements,
compared with only 31% of the companies that did so when their CFOs retired.
- Companies
with strong performance were substantially more likely to promote their CFO.
- Companies
were several times more likely to replace their CFOs with external
candidates than they were to replace their CEOs with outside candidates.
Source:
Shehzad Mian, “On the Choice and Replacement of Chief Financial
Officers,” Journal of Financial Economics, 2001, Vol. 60, pp. 143-175.
Leadership
quote: eBay’s
Margaret Whitman
Question
from the Associated Press: “Are
there any models you have in business?”
 “Probably
the person who I learned the most from in 20 years was Frank Wells, who was the
president and chief operating officer at Disney. Michael (Eisner) and Frank ran Disney really as a
partnership.
“Michael was sort of Mr Outside, Mr Creative, Mr Vision, and Frank was the guy
who ran the trains on time and was really the back-office process, procedure,
discipline. And was also incredibly ethical. I mean, this guy was above
reproach. I just learned a tremendous amount from him. I learned how to get the
trains to run on time, I learned how to build consensus in an organisation, and
watched Frank be the bedrock that backed up Michael.”
Source:
“eBay CEO on the Past and Future as Surivor of Dotcom Bust,” Economic
Times (India), May 28, 2001.
Copyright © 1996-2001, Wharton Center for Leadership and
Change Management, University of Pennsylvania.
|
