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April 18, 2007
Two (and a Half) Different Prescriptions
I heard two very distinct views on how to run a company last week. George David, CEO of United Technologies, and Bill George, former CEO of Medtronic, are lauded as outstanding leaders with amazing records of performance in stock price appreciation and customer satisfaction. Their quite different prescriptions for managers reminded me of the validity of the Harvard Business School case method, where there is no right answer to a problem, simply a logical strategy supported by facts and implemented with elegance.
Mr. David eloquently described his guiding principle at UT as, “How to do it better.” He indicated that he runs the company from the center, with passion and strong input to his units. He has pushed his Otis Elevator unit to reengineer the dynamics of elevator propulsion so that there is generation of energy on the way down, thereby enabling a drop in total energy use of 75%. He has embraced the Japanese principles of productivity, moving from sequential to simultaneous work processes, creating a uniform flow instead of high and low periods of output, thereby increasing physical volume productivity by 5-7% a year. He has focused on reducing missed work days from employee accidents by ten times in ten years, from 3% of total days to .3%. Meanwhile, the UT Foundation has given 21,000 employees the opportunity to pursue higher education, while giving working hour credit for those volunteering for local charities. “I want our young MBAs to stop thinking about financial ratios and to consider the physical reality of production. You cannot just repackage; you need to create underlying goodness in the business,” Mr. David said.
Mr. George, whose new book North Star, is now available in bookstores, talks about CEOs as authentic leaders, statesmen who must “serve all of our stakeholders.” He argues that employees today want input to the company strategy; “we have outgrown the apprentice system. They also want to find meaning in their work.” He suggests that the best leaders will engage with their people, will create a shared purpose and alignment on values. “You should not govern by rules; you should trust but verify that everyone is staying on board.” He cited a recent Harvard Business School study of 125 CEOs, which identified work-life balance, self awareness and honest feedback from subordinates and practicing your values in moments of greatest pressure as key success factors in leadership. His world view is that bottom-up works best.
My own experience as CEO is somewhere in between. I began a decade ago as a business school trained George David disciple, determined to push product development in communications(we were first to use the Web in crisis management for Odwalla in food contamination case in 1997) and to instill an aggressive spirit in our team including mandatory cold calls on prospective clients. I still cringe when I think of my use of a clip at an Edelman Leadership meeting from the movie, “Glory” in which Matthew Broderick, a newly minted general of a Union Army corps, is teaching his green recruits how to shoot a musket, shouting, “Do it. Faster. Again.” I remember the puzzled looks in the audience, as if I had totally lost them (and I had!) I made frequent changes in our corporate strategy, from diversification around a PR core (PR centric concept) to investments in a CSR company (a bit early—now right time!).
What I have learned is that credibility is earned by listening, by innovating, by making the right (and consistent) calls on strategy and by leading from the front. You must share the same pleasure and pain as your colleagues. The best ideas need to be mulled, vetted with your senior executive team and tested before full implementation. You need to emphasize quality and client service, while instituting training and development that builds employee skills and enhances career opportunities because it all comes down to people. It has been an interesting decade as CEO. I am certainly older and wiser; the company is better off for it. I would appreciate your views on this topic.
Posted by Edelman at April 18, 2007 11:21 AM |
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Comments
Any one who has any amount of grey hair has seen vast changes in how leadership and strategy have been defined and redefined over the years. We have moved from a centralized, top-down approach to a more decentralized, horizontal approach. The debate--hopefuly--is no longer about whether leadership comes from the top. The top no longer has greater knowledge than the rest of the organization. Network engineers often used to say that the Internet was moving information from the core to the edges of the network. While this was "network speak", it was valid as well for corporations.
In the age of digital media, intelligence has moved from the top down and out to the edges of the corporation. Employees, customers and others have access to vast amount of information about the company. So, the debate becomes whether or not to lead from the center or the bottom (although it is difficult these days to determine where the bottom is or if there even is a bottom).
The fact that you have evolved and recognize the things you did wrong is a sign of leadership. There are too many so-called leaders who either never recognize that they were wrong, or can only admit wrong by blaming other for leading them astray.
The interesting thing about both CEOs is that have both recognized that financial measures are insufficient evidence of organizational success. It is far better to focus on employees and customers. Success with these two stakeholders will lead to financial success. Focus on financial success will not necessarily enhance employee or customer relationships.
Posted by: Elliot Schreiber at April 20, 2007 1:21 PM