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October 17, 2008
HBS at 100
Given the economic events of the last several weeks, Harvard Business School certainly picked an opportune moment to celebrate its 100th anniversary. Here are some highlights from the past two days:
Business in Society: Bill Gates was interviewed by Professor Jim Cash about the Gates Foundation. This was the most inspirational part of the two day summit. Gates talked about intervention in situations of market failure. He cited the Foundation’s work in Zambia as evidence of a successful model; deaths from malaria have dropped by 63% in three years because all possible interventions (spraying, vector elimination, bed nets) are being used. He noted that vaccines have caused a 90% drop in measles in Africa, but then pointed out the challenge in Northern India and Northern Nigeria where only 35% of the population is vaccinated. He cited statistics indicating that the Rich Poor divide in health care is now not so stark; that many developing countries such as China are making huge strides in public health. He aims to break the cycle of high population growth, poor governance, weak economy, terrible educational system and bad health. He believes the world population can peak at 8 billion if you improve health and economic performance.
Future of Capitalism: Larry Summers, former US Treasury Secretary and former President of Harvard, noted that we have five cycles now impacting markets, including: Deleveraging; Credit Accelerator where weak economy leads to less lending; Keynesian recession where consumers with lower incomes spend less; Liquidation of financial assets; and Panic, with depositors withdrawing funds. He also believes that the growing inequality of income in the US is not sustainable. He said that in the past 30 years, the income of the top 1% of earners has risen by $600 billion while income of bottom 80% has declined by the same amount (top 1% person got $500,000 more per year, bottom 80% person lost $8,000 per year in income). Even the health outcomes of the rich and the poor are significantly diverging.”
His successor, Drew Faust, president of Harvard, referred the dean Wallace Donlin address to alumni, at the 25th anniversary of the school with the country mired in the Great Depression, about the “failure of business leadership to reach beyond narrow self interest to contribute to social structures and the public good.” She went on to relate the parable of the stone cutters, often cited by Peter Drucker. “The first stone cutter says that he is happy to do his work and go home every day with his money. The second stone cutter says that he wants to be the best in the entire county. The third stone cutter says that he is building a cathedral.” “We need to create stone cutters of the third sort, who embrace the broader vision, who recognize that leadership is a means, not an end.”
Leadership: There were two CEO panels that discussed leadership. The first had Jeff Immelt of GE (disclosure – Edelman client), Meg Whitman formerly of eBay, John Doerr of Kleiner Perkins, James Wolfensohn formerly of the World Bank and Anand Mahindra of Mahindra and Mahindra. Immelt said that today’s CEO must be decisive (even if he/she lacked perfect information), transparent (have to show intent behind decisions), self-aware (be willing to accept criticism and to renew yourself). Wolfensohn said that business leaders will have to spend more time with politicians to influence government policy—the two spheres are now even more inextricably linked. Whitman suggested that as a company gets to global scale, it becomes even more important for the CEO to communicate regularly, to “create a culture of willingness to make mistakes, to acknowledge them and fix them quickly.”
One the second panel Jamie Dimon of JP Morgan Chase urged CEOs to operate a truly open environment where criticism of the boss is encouraged. He added that CEOs were often rewarded with excessive compensation for jobs done in a mediocre manner. Jamie Ayala of Ayala suggested that business has an implicit contract with society as a whole. “The trust in companies is inverse of size—the bigger you grow, the harder it is to achieve trust.”
I came away excited by the vision of business working toward a broader social purpose. But I was not convinced of the real commitment of the HBS graduates to work in this new, more complex environment. The notion of free markets operating in the public interest has been challenged, if not overthrown, by events of the past days. If we take money from government, then we must expect consequences, including more regulation, limits on incentive compensation and other constraints. Today, for instance, The New York Times reported AIG has agreed to suspend a $10 million severance package to its COO and save $8 million by canceling conferences. The PR business has a fundamental role to play as a bridge in the next period.
Sorry for the length of this note, but there was a lot to cover. I appreciate your thoughts as always.
Posted by Edelman at October 17, 2008 8:57 AM |
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Comments
Mr. Edelman,
Thanks for taking the time to share this review. It is interesting that you noted that you felt that you were "not convinced of the commitment of the newest crop of HBS graduates to work in this "new, more complex environment." Perhaps as part of their courses they should spend a semester in Detroit working with small businesses struggling to stay afloat, instead of wondering how they can shoehorn themselves into a nice CEO role somewhere.
What you 'weren't witnessing' wasn't a lack of commitment - it was their deer in the headlights reaction to the current state of economic affairs and the realization that their expensive educations have ultimately left them ill prepared to venture into it.
Welcome to the real world, kids.
As an aside: as a longtime GE shareholder my recommendation to Jeff Immelt is that he stay home, demonstrate some leadership and get his own house in order before touting it on some panel of his peers.
Cheers!
Posted by: Franklin James at October 17, 2008 12:31 PM
Richard:
I was delighted to read your comments about the HBS 100th anniversary celebration. What struck me like a wonderful thunderbolt was Dean Light's comment in his introductory remarks in which he outlined four core principles in leadership and his number one was - "judgment, that leads to sound decision-making." Considering that we have used the tag line "it's all about judgment" for the last 23 years, I was gratified that it resonates more than ever today.
Posted by: Noemi Pollack at October 20, 2008 6:37 PM
Dear Mr. Edelman,
As the Taipan of Rothwell-Gornt, Hong Kong's oldest and most distinguished trading house – and a fellow CEO blogger – I should like to congratulate you on this fine weblog.
I was rather interested to read your comments about Jamie Dimon, CEO of JP Morgan Chase. But allow me to point out that his support for “criticism of the boss” would not be easily tolerated in parts of the Far East.
Indeed the Taipan – Cantonese for “supreme leader” – must be revered as a figure of absolute authority especially during turbulent times. There must be no nonsense where matters of business are concerned!
As the Taipan of Edelman, I’m sure you also appreciate this cut-throat(but quite necessary) approach to business.
I remain a keen admirer of your weblog and your business.
Wishing you the best of joss,
Posted by: Quillan Gornt at October 21, 2008 12:01 AM
To amplify on Mr. Dimon's recommendation to CEO's to accept criticism, add questioning and listening to that. Too often leadership is defined as having the answers. It should start with the questions addressed to those engaged with the issues. And those responding shouldn't feel the leadership is listening with a 'red pencil" metaphorically clutched in their fingers.
A very interesting read, thanks!
Barry
Posted by: Barry Collodi at October 22, 2008 1:32 PM
Richard,
Your HBS at 100, speak-up, and the Oct. 22nd Opinion piece, "America's other deficit: leadership" prompted me to write the following letter to the editor, published in the October 29, 2008 edition of the Christian Science Monitor:
LEADERSHIP BUILDS PUBLIC'S TRUST
In regard to the Oct. 22 Opinion piece, "America's other deficit: leadership": The events of the last year demonstrate that no crisis is more contagious than a crisis of distrust. The leadership deficit will shrink and public confidence will be restored only after trust is earned back. Trust is repaired by behaviors, not words. Initiatives are not balanced and policy failures pile up when ideology trumps the pursuit of the common good. The six world-class leaders from among our founders mentioned by the authors – Washington, Jefferson, Hamilton, Madison, Adams, and Franklin – engaged in common sense governing, as opposed to running a perpetual campaign.
Posted by: Hugh Campbell at October 28, 2008 4:48 PM