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Home , Carol Bartz, David Filo, Marjorie Scardino, Philip Yeo

t n e l a t n o s g n i f e i r b e t u t i t s n i y r r e f / n r o k e h t

Chief executive officer Gary Burnison Chief marketing officer Michael Distefano

Editor-in-chief Joel Kurtzman Publisher Laurance Allen managing editor, online Derek Fromson creative Director Joannah Ralston Zappos circulation director Peter Pearsall Races Ahead pg.16 facts & figures editor Stephanie Mitchell marketing coordinator Stacy Levyn

How Yahoo Changed Board of Advisors Sergio Averbach Sakie Fukushima John Keller Stephen Bruyant-Langer Joe Griesedieck Robert McNabb the Guard pg.22 Cheryl Buxton Robert Hallagan Alice Punch Dennis Carey Lan Kang Gary Reidy

& Ana Dutra p i h s r e d a e l Singapore Bets contributing editors Chris Bergonzi Victoria Griffith Deborah J. Jacobs Big on Talent pg.30 Lawrence M. Fisher Paul Hemp Glenn Rifkin Europe’s

New Workplace Gurus pg.42 Keeping Boards 2 e u s s i Informed pg.62 The Korn/Ferry International Briefings on Talent and Leadership is published quarterly by the Korn/Ferry Institute. The Korn/Ferry Institute was founded to serve as a premier global voice on a range of talent management and leadership issues. The Institute commissions, originates and publishes groundbreaking research utilizing Korn/ Ferry’s unparalleled expertise in executive recruitment and talent development combined with its preeminent behavioral research library. The Institute is dedicated to improving the state of global human capital for businesses of all sizes around the world.

Chief executive officer Gary Burnison Chief marketing officer Michael Distefano

& Ana Dutra p i h s r e d a e l Singapore Bets contributing editors Chris Bergonzi Victoria Griffith Deborah J. Jacobs Big on Talent pg.30 Lawrence M. Fisher Paul Hemp Glenn Rifkin Europe’s

Q2. 2010 Requests for additional copies should be sent directly to: Briefings Magazine Q2.2010 Science An Interview With PO Box 327 $19.95 us Daniel Vasella, M.D. , Chairman and Derry, NH 03038-0327 $19.95 cnd Printer logos tk Circulation customer service phone: 603-965-2232 Chief Executive, Novartis (align at bottom of box) €13.60 eur pg.48 This is a Skype number with worldwide service. £12.50 uk ¥1,770 jpy For reprints, contact Laurance Allen at 508-888-0050 20.50 chf 73.50 aed Printed in the USA ¥136.40 cny o e c e h t m o r f 2 Institute’sVasella, Briefingson Talent &LeadershipisDaniel What’s in storeforusinthenewdecade?Morefrothybub- year as“twenty-twenty,” not“two thousandandtwenty”; Desktop computers? Network television?) to years and now it’s moreinlinewitheveryleader’sdream irrevocably andtotallyplugged-in i-this andi-thataregame-changers. ing from decades (Anyone remember the telegram? Encyclo- will continue to accelerate and will do so dramatically. nimble-fingered 17-year-olddaughter?) “Googlized” gadgets, texts too much in a month for my overly addiction. (Are 2,540 books onaKindle.Likecometfallingfromthesky, thatgad- pedias? The thrice-a-day pedias? officeTheThe mailfax runs? machine? bles? Another Champagne Decade? The continued obliteration to months. And that changes speed everything. of change The tion-ravenous children. largest pharmaceuticalfirm.In hisinterview, Vasellasaid decade isgivenaname,myguessitwillbecalledthede- darker sidewith9/11inNewYorkand26/11Mumbai. get hasnowlostitsluster, outmodedbymysmartphone chairman and chief executive of Novartis, executiveof chairman andchief the world’sthird- innovation, foronlytheinnovatorswillsurvive. cade of come fromanunusualsource everything will be consigned to obsolescence. If thecoming everything willbeconsignedtoobsolescence.If emerged. And,regrettably, mankind’s wewereremindedof since Icannowsurf,textandtalkonmylatestdevice.am simultaneously your clock, your source of newsandyes, yoursourceof your simultaneously yourclock, sonal technological toy. It’s about product generations shrink- smartphone sorb, comprehendandcommunicateforetellsthefuture.The of conspicuous spending? The answertothesequestionsmay conspicuousspending?The of Q 0 1 0 2 . 2 A fewmonthsago, Ibeganreadingnewspapersand What doImeanbythat?thatthewaytheyab- What Now, therushtoward2020. Bytheway, Iwouldsaythat Because change and innovation are so prevalent, almost Because changeandinnovationaresoprevalent, But, But, what’s going on is really not about the latest per- One innovator featured in this issue of theKorn/Ferry One innovatorfeaturedinthis issueof

— an oxymoron a half generationago—isnow anoxymoronahalf Prognostications. Resolutions. tion. Yes,tion. it’s thenewmillennium,andwith anewdecade,thesecondof titans. The emergingmarketsfinally titans. The all which turned out not to be lost, hadit which turnedoutnottobelost, ally see into the future? The last decade, Remember Y2K? Why can’t peoplere- Why Y2K? Remember — it comemind-numbingandnever-to-be-realizedpredictions, just Twitter, Tiger, tragedy, triumphand like tenyearsago. — mykids. — thankstomyinforma- — perfectvision. Among companiesinthosecircumstances,“somenumberof Tony Hsieh,the colorful,36-year-oldentrepreneurbehind Tiger! you think, but to help you decide what to think about. Read buttohelpyoudecidewhatthinkabout. you think, reveals thatHsieh’s formulaforweb-enabled successrelies respondents, indicatesthatitisthecompaniesarevery Bower explained.“Therestofthemjustscramble.” rybriefings.com. Ouraimwiththisissueisnotjusttomake form Singaporeintoabiotechsuperpower. Bybringingto- will bepeople will be more dependent upon the fruits of mind than of labor. mindthanof will bemoredependentuponthefruitsof who hasdrawnscientistsfromallovertheworldtotrans- not ontechnicalbreakthroughsbutserviceinnovations. about whichheis“scientifically optimistic.” scienceandhumanity willbeamarriageof Vasella seesit, as want to.Year Onward,tothenewdecadeandreal of be a strategy in the traditional sense, it is a strategy now, inthetraditionalsense,itisastrategy be astrategy at Wow! mightnot delivering pos’ 10 corporatevalues.Whereas throughservice” Zap- intothefirstof phrase “Deliver‘Wow!’ Philip articleprofilesYeo, atirelessSingaporean plored. The humancapitalisfurtherex- meetingtheneedsof portance of boards. HarvardProfessorJosephL.Bower,oneofthecase the most important variable in the new decade of innovation the mostimportantvariableinnewdecadeof than ever.InthisissueofBriefings,wepresentacasestudy RacesAhead” innovation.“Zappos thedecadeof the dawnof turned aroundandprofessionalizedAutodesk,amakerof trol thathavedoneagoodjobofmanagingforsuccession. thought. Itscontentisalsoavailableathttp://www.kornfer-thought. them reallydoinvestintalentandtheprocessofsuccession,” the reasonmancannotsee future?Becausehewouldn’t quickly, asthisthinkingtoowillbecomeobsolete.Bythe way, Zappos,Web-based shoeretailer, aninnovative, hasmadethe gether Nobel Prize winners, chairedprofessors andtheirlab- cles howanold-linetechnologycompany called “HowYahooChangedtheGuard.”Thisarticlechroni- software, knewtheleadersatYahoofromSiliconValley strong, thathavehadsteadyprofitsandareundercon- oratory teams,Yeo hasmadeawagerthatthe comingdecade old thisyear Then, theinevitableprocrastina- Then, In “SingaporeBetsBigonTalent,”theim- thethemeof I hope you enjoy this issue of Briefingsandfinditfoodfor I hopeyouenjoythisissueof Because peoplematter,successionismoreimportant People make a difference, even on the World Wide Web. Wide World People makeadifference,evenonthe

— Gary Burnison,chiefexecutive, Korn/FerryInternational — — hiredCarolBartzasitsnewCEO.Bartz,who theirneeds, future, desiresandwants. The s n I y r r e F / n r o K e h T — Yahoo is15years t T I u t e Robert Risko c o n t e n t s 8

2Letter from the CEO Leadership

16 zappos races ahead Latest Thinking On the Web, service matters 6 public policy enters the boardroom more than ever. BY glenn rifkin Looking for a new breed of director. B 8 ringing social media to the c-suite Succession Reaching out means joining in with new tools. 22 how yahoo changed the guard Viewpoint A case study. BY lawrence m. fisher 14 followers and leaders In a leadership economy, someone still has to take orders. BY stephen joel trachtenberg Talent 30 singapore bets big on talent Competitiveness depends on having the best people. BY deborah l. jacobs 2 4 europe’s new workplace gurus Thought leaders as gifted tacticians. BY adrian wooldridge 22

6 48

Downtime Governance

47 Wit and wisdom from the front lines. 8 5 giving boards their voice Directors need to communicate their own way. Interview BY karen kane 2 6 keeping boards informed 48 people-centric science How to fix the boardroom information problem. Daniel Vasella, M.D., chairman and chief executive, BY lew mccreary Novartis, discusses science and the future. BY joel kurtzman In Review Dateline 2020: The Decade Ahead 8 6 “reflections on character and LEADERSHIP” 56 What people are saying about the next ten years. 72 “think again” 6 7 “your next move”

Parting Thoughts

80 watch and learn When reality and assumptions collide, which wins? BY joel kurtzman

58 g n i k n i h t t s e t a L L 6 enters the boardroom o o r d r a o b e h t s r e t n y e c i l o p c i l b u p t s e t a 0 1 0 2 . 2 Q here. It’s coming. isn’t Change must increasinglyincludedirectorswithstrongbackgroundsingovernmentpolicymaking. ternational’s theBoard&CEOServicesPractice,corporateboards EasternRegionandmemberof policies. Tosays NelsKorn/FerryIn- functionwellinthatenvironment, Olson,managingdirectorof corporate boardsincreasinglywillfindthemselvesgrapplingwithgovernmentlaws, regulationsand

public sectorinvolvementinprivateenterprise. navigate today’sheightenedgovernmentscrutinyandincreased A newbreedofdirectorisneededtohelpboardssuccessfully restrictions onexecutivecompensationand major share of theparticipatingbanksand major shareof motive andenergy. Similarly, mostEuropean forward proposalsin2008 regardingna- Prime MinisterGordonBrown,who, aspart and initiativesrelatedtohuman rights. nations have followed the example of British nations havefollowedtheexampleof not only of the banking andfinancesectors, Congresshave administration andmuchof also soughttoestablishaseparateboard a corporateplantoreducetotalgreenhouse boards that take the innovative step of bring- boards thattaketheinnovative stepof but of suchindustriesashealthcare,auto- but of policies toprotectaccesstheInternetand posed requiring management to institute tional health care reform and adoption of tional healthcarereformandadoptionof tions. A review of proxy statements offers holders alsoproposedhealthcare reform gas emissionsfromcompanyproductsand committee onhumanrights;Boeing share- examples: General Motors shareholdersput sisted upon government ownership of a sisted upongovernmentownershipof stemming fromthefinancialcrisis, avariety shareholder dividendpolicies. signaled their intention to increase oversight of hiscountry’sfinancialrescueplan,in- of operations; Microsoftshareholderspro- of policyissuesalreadyconfrontcorpora- of Aside fromtheanticipatedoversight Given thesepressures, saysOlson, Since taking office a year ago, the Obama The globalfinancialcrisishascreatedagame-changingscenarioinwhich The

The Travelers.The risk managementcapabilityandadeeper Ronald Reagan.“Obviously, it’s notzero.” mer governmentlegislatorsandadministra- Public PolicyEnterstheBoardroom.” pa- The ing indirectorswhoaresavvyaboutpublic ing, ConocoPhillips, Mack-CaliRealtyand is verymuchstillevolving. ness decisionsandsocialpolicy willrequire toPresident staff of and theformerchief influentialplayers.variety of analysis ina2009 Korn/FerryInstitutepa- Government AffairsPractice,presentedhis policy willberewardedwithanenhanced business andgovernment be aninvaluableassetinbothshapingthe per includescorroboratinginsightsfroma per, “A NewDirectorEmergesas Breedof that formerlegislatorsandadministrators tors likeDubersteinintheboardroomwill discussion,” saysKennethM.Duberstein, debate andmanagingitsoutcomes. Duber- understanding of thedynamicbetween understanding of chairman and CEO of The DubersteinGroup The chairman andCEOof exactly the kind of consensus-buildingstyle exactly thekindof sion andregulationisappropriateunder stein currently serves on the boards of Boe- stein currentlyservesontheboardsof “The whole question of howmuchintru- wholequestionof “The As thatdiscussionunfolds, havingfor- Managing theinterplaybetween busi- Olson, whoalsoheadsKorn/Ferry’s s n I y r r e F / n r o K e h T — adynamicthat T I T u t e Alison Seiffer ADVERTISING IS ALIVE AND WELL… ONLINE

can bring to the table. “The politics of gover- tional background, however, nance have entered the boardroom,” says there is a learning curve. “A John Castellani, president of the Business director who has never been Roundtable. “Understanding regulations and embedded in a business will not yet management of the proxy process, as well as have a developed business instinct,” having the ability to withstand the heat of notes Constance Horner, former politics, are skills boards can really use.” assistant to President George H.W. Olson reports that board selectors had Bush, who is now lead director at seemingly begun to recognize this new lead- Pfizer, as well as a director of Prudential Fi- In a potentially watershed ership mandate even before the recent finan- nancial and Ingersoll Rand. Non-traditional moment, advertisers spent more online than on television cial upheaval. An internal analysis of Korn/ directors will need to become more conver- in the first half of 2009. Ferry’s Global Board Services (GBS) proprie- sant with finance and accounting practices, Source: Interactive Advertising Bureau tary database containing research on more as well as gain a better understanding of line and PricewaterhouseCoopers, 2009 than 20,000 executives reveals that over the operations, something they do not encounter last decade the number of directors with prior in the public sector where their work is less government experience sitting on Fortune bottom-line oriented. In addition, they will 1000 boards increased by nearly 16% — in- need to make decisions in a new environment. cluding people like former Missouri Con- Horner notes that in government work you gressman Richard Gephardt (who sits on sev- have an advantage in that generally you eral boards, including that of US Steel and know your opponents: “They’ve come to talk Ford), former Clinton White House chief of with you. They speak to you through the staff Erskine Bowles (Morgan Stanley) and news media or political allies. In the private the former chair of Clinton’s National Eco- sector, though, that’s not the case.” nomic Council, Laura D’Andrea Tyson (Mor- To that point, Business Roundtable’s gan Stanley, AT&T and Eastman Kodak). Castellani notes that corporations are ad Given the current environment, says dressing learning curve issues with a variety Olson, nominating committees will no of efforts to improve the business literacy of doubt continue to find it useful to broaden non-traditional directors because they recog- their searches to include such individuals. nize the value of the perspective such direc- And that’s not only because their under- tors bring to the table. “What’s happened has standing of legislative and regulatory pro- intensified the scrutiny on boards,” says Cas- cesses may be exactly what corporations tellani. “If there is anything we’ve learned need to map today’s effective strategies, but it’s that boards need to be more diligent and also because they offer a relatively untapped more skeptical on risk management issues.” pool of talent in an increasingly constrained The only way to accomplish that, Olson’s environment. While traditional director work suggests, is for the composition of candidates, such as former C-suite occupants, those boards to reflect the broad nature and bring the necessary broad background to the complexity of the problems they now face. director’s job, they are difficult to recruit because board membership is time consuming and, since the passage of the Sarbanes-Oxley legislation, many boards now restrict the number of directorships their CEO may hold or prohibit such service altogether. The pool of director candidates with legal, accounting and other credentials is further limited because more stringent conflict-of-interest policies prevent directors from serving if they are employed by professional services firms that do business with the company.

Top: Hal Mayforth. Bottom: Alison Seiffer Top: With any director from a non-tradi- B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 7 g n i k n i h t t s e t a L L 8 e t i u s - c e h t o t g n i g n i r b t s e t a TRY FUNEMPLOYED! TRY UNEMPLOYED? 0 1 0 2 . 2 Q tive enterprises. tive innova- for communication of non qua sine the considered now are media social not, or Ready networks, fosterprofessionalrelationships, shareideasandsolveproblems. get theirmessageoutanddrawideasin.Executivesarebeginningtousethesetoolsexpand ness-oriented LinkedIntoengagemoredeeplywithcustomers, buildtheirbrandsandgenerally YouTube (videosharing),Facebookandthemorebusi- and social-networkingsharingsiteslike Companiesareusingblogs, microblogs (microsharingtechnologieslikeTwitter)

tools soonerratherthanlater. the anecdotalconsensusseemstobethatyoushouldadopt their executivesareusingsocialmediaandtowhateffect,but There arefewlarge-scalestudiesabouthowenterprisesand ‘I wantablog.’ Today, theysay, ‘IwantaFace- years ago, clientswouldcometomeandsay, marketing, sales, customerservice,pub- media hasbeenattheenterpriselevel,in mulgated in the age of shortadoptioncycles mulgated intheageof its froth, much of itistrue its froth,muchof answer has always been the same: Why? Sel- Why? answer hasalwaysbeenthesame: nesses flocktothehotnewtrendor and shorterattentionspans. And,despite book page,’or‘IwantaTwitteraccount.’ My technologies canactuallybeusefulisoften howthese tentially true.Butthequestionof dom cantheyanswerthatquestion.” deur,” Falls, saysJason socialmediastrate- lic relationsandinternalcommunications. utives inarushnottobeleftbehind. gist and principal of Social Media LLC. “Two SocialMediaLLC.“Two gist andprincipalof comes tosocialmediaandtechnology, busi- conveniently beggedbycompaniesandexec- shiny new object with delusions of gran- shiny newobjectwithdelusionsof a i d e m l a i c o s “Too manytimes, especiallywhenit “Too At leastthat’s thenarrativebeingpro- So far, social mostbusinessusageof Tuesday atthepool;funemploymentrocks!” The economicmeltdownhasproduced anewsubsetofthepopulation— the “funemployed”—definedby Urban Dictionaryas“apersonwhotakes advantage ofbeingoutajobto havethetimeoftheirlife.Ispentallday — oratleastpo- Although manyearlyadoptershavebeen firms, manylarger, moreestablishedcompa- Twitter’s trafficwasstillupnearly600%for Twitter’s meteoricrisereached23.5million right behindthem. ing to Web analyticscompanyCompete.com, ing to nies newer,Web-based morenimbleand and howtheyshouldbemoreconnected and Lexblog.Butmanymorearebeginning also tendtobefromcompaniesindigenous and towhom. pos.com, Digg,PitchEngine,Buzzillions.com to experimentoratleastwonderwhether to thesocialmedialandscape,suchasZap- the year. AlsoinOctober, Facebook usage lines, Cisco and Whole Foods lines,Whole Ciscoand users in October 2009 and has leveled off users inOctober2009 andhasleveledoff cial mediaasanindividualleadershiptool cial mediausagecontinuestogrow. Accord- senior executives who sing the praises of so- senior executiveswhosingthepraisesof since, promptingsomenegativebuzz.But Source:LATimes,2009 At this point, most of theprincipalsand mostof At thispoint, From apurelystatisticalperspective,so- — like Intel, H&R Block, SouthwestAir- likeIntel,H&RBlock, s n I y r r e F / n r o K e h T — havebeen — T I T

u t e Hal Mayforth r B Carl Wiens i “technology trigger,” whenproof-of-concept “slope asthetechnology enlightenment,” of e 0.72% to 84.6 million.Inwhatmightrepre- to84.6 0.72% Twitter havetippedoverthepeak andwill Finally, a“plateau productivity”isreached of report, despite evidence of growing exper- despiteevidenceof report, ing Technologies.” At55pages, themostre- into the“troughdisillusionment” of follows, imentation andbroaderadoption,“social was up3.5%to129millionvisitors, LinkedIn and mediainteresttriggersignificantpub- throughfivephases.nology Itbeginswitha across industriesonthetechnologiesand a broadlybasedbutcase-drivenperspective and Flickr(photosharing). a reportitcallsits“HypeCycleforEmerg- and advisoryfirmthatannuallyproduces are beingused,especiallywithintheenter- as implementationsincreasinglyfailtode- also begintogetpublicattention.Adecline are moreclearlydefined. and criteriaforassessingproviderviability as mainstreamadoptionstartstotakeoff One studythatcomesclosetofilling bill isfromGartner, research thetechnology prise andmostespeciallywiththeC-suite. ple studiesdoneabouthowsocialmedia perience conspicuoussuccess, butfailures president and one of the authors of the2009 theauthorsof president andoneof becomes betterunderstoodandsecond- part because of channel pollution part becauseof typical progression of anemergingtech- typical progressionof trends thatITmanagersshouldconsiderin- the beneficial effects of havingexponential the beneficialeffects third-generation productsbegintoappear. terprise users.” thereport says, This, isin licity, andleadsnexttothe“peak inflated of liver andcompaniesinthespacebeginto usage wasdownslightlyforbothMySpace up 3.29% to 15.5 million and YouTube up to15.5millionand up 3.29% cluding intheirportfolios. cent report(releasedinJuly2009) provides expectations,” whensomeearlyadoptersex- sent the beginnings of a bit of consolidation, abitof sent thebeginningsof shake out. There followsaslowriseupthe There shake out. soon experiencedisillusionment amongen- software andmicrobloggingsitessuchas I F n e l a T n o s g n According to Jackie Fenn,Gartnervice According toJackie There havebeenfew,There any, if large-sam- Gartner’s HypeCyclecharacterizesthe t & L h s r e d a e — thatis, i p 0 1 0 2 . 2 Q 9 10 g n i k n i h t t s e t a L L t s e t a b 0 1 0 2 . 2 Q oomers

Source: Wells Fargo&CompanyFifthAnnual Retirement FitnessSurvey, 2009 they havesavedanaverageofonly $300,000. While American50-somethingsneed $800,000forretirement, denial ? As we see it, andGartnerseemstoagree,so- As weseeit, year, microbloggingwillbeastandardfea- random diary. Otherscanfollow yournarra- consciousness or streamof result isakindof members. ing the hype and disillusionment part of the ing thehypeanddisillusionmentpartof into mainstreamenterprise was originallydesignedforcollaboration and wikis as an enabler of new kinds of fast, fast, newkindsof and wikisasanenablerof at Traction Software,acompanythataddsse - and obviousvalue.” as theleadingappwhereenterprisesseereal among mobile work groups of fewerthan10 among mobileworkgroupsof noise andnonsensethathastobefiltered nal president of salesandbusinessdevelopment president of through aperiodwherethereismorespecu- tive, if you’ve agreed to it, whichcauseseach agreed toit, you’ve tive, if ture in 80% of thesocialsoftwareplatforms ture in80%of document managementtoenterprisesocial lation thanreality. therealitysettlesin, Then use cases emerge and real money is spent. use casesemergeandrealmoneyisspent. curity, threadeddiscussion,moderationand vice Frank, cycle asanegative,”saysJordan cial softwareplatformsarefindingtheirway celled outbytheexponentialincreasein conversations aretosomedegreebeingcan- easy-to-assimilate exchanges. software. “Many if notalltechnologiesgo software. “Manyif side suchotherchannelsase-mail,blogging some adoptersfalloff,andthentheserious on theirTwitterhomepage.Oryoucanfol- toshowup yourmessagesor“Tweets” of out. This istobeexpectedfromatoolthat This out. on themarketandisearningitsplacealong- single message microblogging ingeneralcurrentlyseem to begeneratingthemostcuriosityin limit of 140characterstocommunicatea limit of — a Twitteruser, forexample,youhavea ticularly. conceptisnotcomplex.As The enterprise contextandintheC-suitepar- “You havetobecarefulwheninterpret- “You Of allthesesocialmedia,Twitterand Of Still, thereportpredictsthatinone as many times a day as you wish. The asmanytimesadayyouwish.The — fromthebrighttoba- — withthewiki “relying on the hundreds of Twitterengines “relying onthehundredsof Like all other forms of “socialLike allotherformsof media” dating Web site. risk liesinafailuretoengageand beingleft may get you thousands of followersbutnot may getyouthousandsof more rivuletsfeedthestreamthatshowsup mute inadebatewhichyour voicemust munication toolwithstrengthsandlimita- formation wheresmalltalkcanleadtovalue. for thosewhoknowhowtouseit.” Professionals areusingitmostoftentopost is also being used as an advance scout of sorts, what’s happeningintheirindustries. Twitter ex- of areas their in questions answer and viewed and updated on the Web,viewed andupdatedonthe through ness and your goals. That said,Gartnerana- ness andyourgoals. That not shareitwithotherswhocanbenefit?” conversationshelppeople,pro- ware. “These CompendiumBlog- CEOof Chris Baggott, actions withcustomersandprospects,” says vide informationandsolveproblems.You pertise, attempting to establish credibility, be heard.” back tocavewalls, Twitterissimplyacom- pulling audiencestoone’s blogorcompany the rightfollowers. Twitterwillworkonly theirTweetsandallowkeyword tent of texting. Allthesecommunicationscanbe to C-suiteexecutives:“Adopt socialmedia tions thatmayornotbeusefultoyou, tions everydayinyoure-mails, inyourinter- have already invested in that content, sowhy have alreadyinvestedinthatcontent, desktop apps, andonmobiledevices. low them. The morepeopleyoufollow,low them.The the depending on your temperament, yourbusi- depending onyourtemperament, lyst JeffreyMannoffersthefollowingadvice users tonetworkandfindfollowers. Itwill gest like-mindedpeoplebasedonthecon- come to be viewed as a source of insidein- come tobeviewedasasourceof coherent manner.You canalsodirectmes- sometimes seems, Twitterhasincreasingly Tweets.searches of asoneuserwarns, But, sage others in what is essentially a form of sage othersinwhatisessentiallyaformof sooner ratherthanlater, because thegreatest solve aproblemorsimplykeepupwith search formatchesinothers’profiles, sug- on yourhomepageandnotalwaysinavery “You arealreadyhavingtheseconversa- “You As fragmentedandhieroglyphicasit Twitter alsoofferstoolsthathelpits The answertothat questionispersonal. The s n I y r r e F / n r o K e h T T I T u t e Hal Mayforth Credit 2. stages: passes through All

It is violently opposed. 3 truth 3.

as being self-evident. It is 1.

It is accepted — ArthurSchopenhauer ridiculed. 14 t n i o p w e i v “Where doyouseeyourselfinfiveyears?” “Ask hadthejobawhile” any orsomevariant, meafterI’ve horse atshortodds. so highandfastisassureathingbackinglame posed tobealeader, ignoresthefactthatmovingup take, premisedonthenotionthateveryoneissup- job andbereadyforavicepresidency.” give-and- The havemyboss’s requisiteresponseis, boss’s “I’ll That is onlyoneanswertheinterviewerwaitingtohear. It isaterriblequestionbecauseeveryoneknowsthere There is an alternative answer along the lines of, “I see myself isanalternativeansweralongthelinesof,“Iseemyself There Not everyonecan lead,andnoteveryonewantstolead.Teach- ing leadershipinbusinessschoolsisasabsurdteaching ing forwardtodoingitforyearscome.” thismaybe But, work isinferiortocommandingtroops, isinferiortoleading, interviewers puttojobapplicantsorthoselookingforapromotion. the applicanthasnofireinbellyandcouldactuallybe has mastered. It is assumed that having command of one’shas mastered.Itisassumedthathavingcommandof having masteredthenewjob, happytobedoingitandlook- connoisseurship inmuseumschools:weneedtolearnmany content doingsomethingheorsheenjoys, understandsand even thoughthisoutlookperpetuatesthePeterPrinciple. even worsethanasimple“Idon’t know”becauseitsuggests of whichissuretoendtheapplicant’sof prospectsonthespot. s r e w o l l o f 0 1 0 2 . 2 Q The maniaforhiringleadershastwoobviousdefects. The The honestanswertothequestionis, “Idon’tThe know”or,

n a Source: RTIInternational, 2009. agreeing) andtheweakestsupport comingfromGermany(33percentagreeing). the strongestsupportcomingfrom India(85percentofsmokersandnon-smokers The majorityofsmokersworldwide supportsmokingbansintheworkplace,with b utt

out d ! s r e d a e l LeBron James’ jobisnotcurrentlyavailable.So,LeBron James’ asweall It is a matter of character and of thatelusivethingwecalltal- characterandof It isamatterof The phenomenon canbedescribedinacorollarytothePe The maxim makesthepoint:“Inahierarchy, everyemployee is doing terrific work and showing no signs of slacking off slackingoff is doingterrificworkandshowingnosignsof is MoseswithoutthetrailingIsraelites? aleader Second,if and recruitmentfirms.follower- wefailtomakeavirtueof If Butitdoesrequireacon- value isnotparticularlydifficult. fol- is one no leading, is everyone if leaders. aspiring First, necessarily matchtheirtalents. LaurenceJ. Peter’sfamous ployee’s whiletostaywithanemployerisgetapromotion. job openingsforleaders, uswillspendsomeorallof mostof be incharge,apersonwilldeclinetoleaderorfailtrying. Employees may also have a subjective view of their owntal- Employees mayalsohaveasubjectiveviewof tors likefacultyinbusinessandotherprofessionalschools tendency, mirroringthatfor employersinaccommodating incompetence.”to risehislevelof explanationforthis The ter Principle:“Inahierarchy, everyemployeetendstoaspire incompetence.”tends torisehislevelof the run-of-the-mill, is not a commodity and cannot be taught. the run-of-the-mill,isnotacommodityandcannotbetaught. things tobecomeleadersorconnoisseurs, buttheabilityto know, theneedforfollowersandscarcityof becauseof lowing and,clearly, noworkisactuallygettingdone:where direct anorganization,likethetastetodiscerngreatartfrom certed effort on the part of employers,certed effortonthepartof employeesandmedia- ents andentitlements. Andthemediators ers bypromotingthemintopositionsthatoftendonot And,evenwiththerightcharacter,ent. without thedesireto such aspirations, isthattheonlywaytomakeitworthanem- ship, rewardingtopperform- wewillcontinuethepracticeof or emphasizesfollowership. Establishingfollowershipasa our workinglivesasfollowers.Yet, nooneseriouslyteaches or leaving,theNo. 1positionisnotopen:basketball-great isastandardquestion There are two other defects in the practice of hiringonly aretwootherdefectsinthepracticeof There Employees alsoplayapartinperpetuatingthispattern. by StephenJoelTrachtenberg s n I y r r e F / n r o K e h T — theteachersand

- T I T u t e Hal Mayforth by StephenJoelTrachtenberg

r B Victor Juhasz i e rive believingtheyarecutouttobeCEOsorSupremeCourt recruiters followership is likely to be stigmatized as a loser, and a course in hopes of gettingatopjob.in hopesof course,noonelikestoturn Of is inanyeventunnecessary. Itwouldbemoreusefulforfac- is somethingtheyhavetheabilitytoremedywithlittleeffort are manydisciplineswithintheirfieldsthattheynotes again. If the students do not realize it, thenthefacultyshould thestudentsdonotrealizeit, again. If and atminimalornocost. point outtheirstrengthsandweaknessestothem. pecially goodatorthattheywillneverwanttodealwith justices. financeandmar- afterexposuretothebasicsof But, they needtosayso, tobetruetheindividual,corporate keting or of tortsandcontracts,keting orof theymayrealizethatthere dean or corporate counsel but not a president in their client, dean orcorporatecounselbutnotapresidentintheirclient, down business. However, therecruitersseeafirst-class if ulties to manage their students’ ambitions. This mayseeman ulties tomanagetheirstudents’ambitions. This general counselmayhavesignedupwitharecruitmentfirm sional schoolsarebyandlargeambitious. Studentsmayar- odd idea,butconsideritsimplications. Studentsinprofes- I F n e l a T n o s g n First, theschools.First, Anystudentenrollinginacourse Next, therecruiters. Auniversitydeanoracorporate — have not been vocal about the problem. Yet havenotbeenvocalabouttheproblem. this t & L h s r e d a e i p - require direct, dailyleadershipfromhimorherbecausethe require direct, recruiters must then offer their own assessment. If wewere If recruiters mustthenoffertheirownassessment. istic. My conclusions are based on experience. Those who Myconclusionsarebasedonexperience.Those istic. and delusionaboutwhatwedeserve,wouldeasily all rationalandnotgiventoself-deception,jealousy, envy wanting torisehigherandfeelingtheydeservedoso. The when young and theymustpointoutthatthereisadistinctionbetween but itisapracticewecouldalldowelltofollow. pires tothehighestplace,itisnodishonorhimhaltat the second,”andaddthatitisnodishonortoaspire train andrecruitworkersprofitfromtheirworkhavean top personisnotlikelytosayawordthestaff. to beingasow’sear, butonecanstilladmittonotbeinga though it is difficult. Theymustaskthejob-seekershowthey though itisdifficult. tors withthestudents, theyneed tobestraightforwardeven question thisapproach,IwouldquoteCicero, amanas- “If honestly seethemselvesandwhytheywanttorisehigher, leadership positions.Wewouldalsounderstandthatleader- Stephen JoelTrachtenberg ispresidentemeritusanduniversityprofessor good followers; the middle manager has staff memberswho good followers;themiddlemanagerhasstaff evaluate ourselvesdispassionately:noonewantstoadmit employer, themselvesandtheirprofession.Liketheinstruc- second placeanyway. Hierarchicalpsychesmaybejolted, ship is an essential quality of peoplenowherenearthetop,ship isanessentialqualityof of We wouldunderstandthereareonlysomanytop silk purse. in Washington, D.C. obligation tohelpthemcometermswithreality. they If of publicserviceattheGeorgeWashington Universityandchairmanof the EducationSpecialtyPracticeatKorn/Ferry International.Heisbased Nothing Iamsaying aboutfollowershipisnaïveorideal- — makepeacewithbeingfollowers.Wewould 0 1 0 2 . 2 Q — and 15 16

ZAPPOS 0 1 0 2 . 2 Q leadership with severalSkecherssalesexecutivesandaftera the hotelwhereSkecherscrew wasstaying.Upin long night of barhopping thegroupmadeitswayto long nightof seen on the room service menu. But it was 3 a.m., and suggested orderingapepperoni pizza,whichshehad one of theexecutive’sone of suites, thegroup amemberof Leadership secretsfromtheWeb T RAC Hsieh andhisZapposcolleagueswentout AHEAD fellow Zapposexecutiveswereattend- tionships. Afterthemeetingsended, the 36-year-old CEO of ony Hsieh,the36-year-oldCEOof ing aSkecherssalesconferencein A couple of yearsago,A coupleof heandsome pany’s vauntedcustomerservice. luminates the essence of thecom- luminates theessenceof Zappos.com, the popular online shoe seller, likestoshareastorythatil- Santa Monica,Calif.Zapposhas established cordialrelation- mon inbuildingbusinessrela- ships with a number of hip ships withanumberof shoe companieslikeSkech- ers, andsocializingwith vendors isnotuncom- ES by Glenn Rifkin Glenn by “So I dared her to call the Zappos toll-free number. We When When the Zappos call-center rep answered, the hungry minutes, shecamebackonthelinewithnames room servicenolongerdeliveredhotfood. for its vast array of shoes, and now for an ever-expand - were astounded.Hsiehwaspleasedbuthardlysur- ing productlinethatincludesclothing, housewares, all thoughtitwouldbeprettyfunnyandagoodtest a perfect illustration of the Zappos culture at work. theZapposcultureatwork. a perfectillustrationof prised. What transpiredwasnotananomaly What prised. tioning theZapposexecutivessittingnexttoher. The tomer service.Injust10 yearssinceitsfounding, that hasbecometheposterchildfor21st-centurycus- Zappos rep replied, “Please holdon.”Zappos repreplied,“Please Andwithintwo Zappos onspeakerphone,asthegrouplistenedin. Zappos has attracted a legion of loyalshoppers,Zappos hasattractedalegionof first Skechers manager explained her plight without men- electronics and more. In the competitive and crowded open and would deliver pizza. The Skecherspeople open andwoulddeliverpizza.The fivepizzaplacesinSantaMonicathatwere still of of ourcustomerservice.”of youngwoman dialed The “She wasprettydisappointed,”Hsiehrecounted. Zappos isa$1billiononlineretailpowerhouse s n I y r r e F / n r o K e h T — itwas T I T u t e Lew Robertson/Getty Images Photo tk

Internet retailing sector, Zappos has won wide admi- tomer calls for that matter. Instead, every call is per- ration, more for how it does business than for what it ceived as a way to make a positive emotional connec- sells. In July 2009, Zappos received the ultimate acco- tion with a customer, whether it means delivering a lade when it was acquired by an effusive Jeff Bezos desired pair of shoes overnight or finding a pizza and Amazon.com. parlor in the middle of the night. Hsieh (pronounced shay) always gets an appre- The goal is simple: Wow customers with the ciative laugh and more than a few gasps when he tells kind of service that will not just fill a need but make the pizza anecdote to audiences. He points out that them return again and again. Instead of being boxed the response by the Zappos rep, who was based in the in by restrictive rules of engagement, employees are company’s call center in Henderson, Nev., was appro- mandated to help a customer in just about any way priate, despite the bizarre nature of the call. The com- possible. This means taking as long as necessary to pany has no formal process or scripted procedure to complete a call, chatting socially and making every

Photo: Michael Sipe. People photos courtesy of Zappos. Photo: Michael Sipe. People handle such off-the-wall queries, or any of its cus- attempt to resolve a customer’s problem. Given that B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 17 75 percent of Zappos’s75 percentof salesaretorepeatcus- you instilltheideathatourbrandshouldbe Fortune magazine’sWork Forandis 100 BestCompaniesto mirers swellexponentiallyeachyear. Magazinecoverstories, murn, a Bay Area entrepreneur, Zappos began as strictly an on- fully that the company has achieved the kind of much-de- fully thatthecompanyhasachievedkindof fawning blogsandevenaHarvardBusinessSchoolcasestudy ways anopportunitytobuildthebrandre- with every possible scenario of everypossible with everypossiblescenarioof worry abouthowyouaregoingtocomeup among FastCompany’s50MostInnovativeCompanies. phone is not to drive sales but to build our brand. If shehad phone isnottodrivesalesbutbuildourbrand.If build ourbrand.” pizza, but I can e-mail you a picture of apizza’pizza, butIcane-mailyouapictureof be soundbusiness. than adecade,Zapposhasgrownfromstart-upbasedin tional wisdom from the outset. Founded in 1999 by Nick Swin- than before the call, it will take care of itself.”than beforethecall,itwilltakecareof tomers, theinnovativeapproach isprovingto have kept the spotlight bright. Zappos has been named one of Zapposhasbeennamedoneof have keptthespotlightbright. things.have saidalotof ‘Ican’t sendyouareal line shoestore.Hsiehcameaboardtwomonthslaterasan San Francisco apartment to a retail force whose legions of ad- San Franciscoapartmenttoaretailforcewhoselegionsof gardless of whethersomethingisbeingsold gardless of customer service call, because you can’t. But if customer servicecall,becauseyoucan’t.Butif company and you get the culture right, most company andyougetthecultureright, ees understand the long-term vision of the ees understandthelong-termvisionof sired buzzthatallentrepreneurialendeavorscrave.Inless said, ‘Sorry, wedon’t dothat’andhungup, thatdoesn’t help thetele- pointof oursales.some minoritypercentageof The stronger inacustomer’smindafterthecall or not. Ourphonelinesactuallyrepresent or not. pointisthereal- The or somethinglikethat. own,” Hsieh explained. “You don’t needto own,” Hsiehexplained.“You justhappensnaturallyonits theotherstuff of “The story illustrates that if theemploy- storyillustratesthatif “The In fact, Zapposhasbuiltitsbrandsoquicklyandsuccess- In fact, The representative,Hsiehsaid,“couldThe Of course,thisisacompanythathassnubbedconven- investor andbecamesoimmersedintheconcept that he quickly became CEO. Having made his own fortune by sellinghiscompanyLinkEx- change for$265milliontoMicrosoftin 1998 atage25,thesoft-spokenHar- vard computer-sciencegradwas looking forthenextnewthing. were devotedtobuilding The firstfouryears The the shoebusiness, an unlikely product line fortheIn- ternet. People ternet. WOW again. againand them return butmake fillaneed notjust that will service kindof withthe customers simple: The goalis I’ve beeninthousands,” Perfor- headof saidMaryMurcott, I’ve years fromnowaZapposairlineorhotelchain.Cus- man resources that has put Zappos on the map. When it man resourcesthathasputZapposonthemap.When faction business, offeringsuchexceptionalcustomerservice facing employees. Anditistheinnovativeapproachtoitshu- successisbuiltalmostentirelyonfinding, foundation of is outnearthelunaticfringe. is acourseonwhatmakespeoplehappy. companyhasits The ing flowerstoacustomerwho haslostalovedone. innovative waystomakepersonal, emotionalconnectionsto was intheentertainmentbusiness. Howcouldhekeepcus- not onlywouldthatallowustoexpandbeyondsellingshoes very bestcustomerserviceandexperience,”Hsiehsaid.“So ness.” classesofferedtoallemployees Amongawidearrayof are posted on YouTube. Call-centerrepsarechallenged tofind are postedon just abouthavingthebestcustomerservice.” tomers have asked us to start an airline or run the I.R.S. It’s tomers haveaskedustostartanairlineorruntheI.R.S. that wordwouldspreadandshoppersflocktothesite. tomers, stuckinametaltube40,000 feetabove theearth, training andretaininghighlymotivated,talentedcustomer- happy andamusedforhoursatatime?Zapposwouldnolon- ger beintheshoebusiness, itwouldbeinthecustomersatis- comes tocorporateculturesandworkenvironments, Zappos customers, whetherchattingaboutafamilyweddingorsend - e-commerce. Forexample,Iwouldn’t ruleoutin20 or30 online butlongterm,wewouldn’t necessarilybelimitedto own television production staff tomakewacky videosthat own televisionproductionstaff “We decidedtobuildtheZapposbrandbeabout “We “The Zappos call center is unlike any other I’ve seenand Zapposcallcenter isunlikeanyotherI’ve “The As greatcustomer-centriccompaniesdemonstrate,the A corecompanyvalueis“create funandalittleweird- In a$42billionindustry, shoesturnedouttobea But Swinmurn and Hsieh figured that if theyof- But SwinmurnandHsiehfiguredthatif recalled. JustasRichardBransonhaddonewhenhe founded Virgin AtlanticAirways,founded Hsiehsawbeyond Nord- Mossler,a Fred entrepreneur,and fellow When people fect fitforsearch-enginemarketing. shoesonlineand fered thebiggestselectionof were around50percentandtheconceptwasaper- alized hewasn’t inthetransportationbusiness;he added freedeliveryandreturn,peoplewouldshop. be whenwegrowup?Dowanttoaboutshoes by 2003, heenvisionedabettervalueproposition. tise, sincetheshoeshadtheirownbrands. Margins Therewasnoneedtoadver- terrific onlineoffering. like totryonshoes, toseehow theylookandfeel. conventional businesswisdom.Bransonquicklyre- clicked onashoebrand,Zappos.com cameup. strom veteran, Hsieh steadily built the business. But or somethingbiggerandmoremeaningful?’ “We sat around and asked: ‘What dowewantto sataroundandasked:‘What “We Along with Alfred Lin, a Harvard classmate and s n I y r r e F / n r o K e h T ” Hsieh T I T u t e People photo courtesy of Zappos. T r B Michael Sipe i e Welcome totheMonkeyHouse (known as Lucille) grows amid the general chaos of employ- (known asLucille)growsamidthegeneralchaosof mance Transformation, acustomer-experiencecon- force believesinthemissionwith religious zeal. Though why they are in business and what it takes to invest in,isspurredbythatpassionandit ing atthetop, anditpermeates the in adistributioncenterKentucky), Zapposisalooselycon not servicepolicies.” AsTonyand empathetic. Hsiehsays, cul- whom to hire to what technology to whom tohirewhattechnology welcome to Zappos employees. “I’ve seen a lot of companies, seenalotof welcome toZapposemployees. “I’ve and thefreneticatmospherequicklybeginstomakesense. nies waittobeguidedthroughtheoffice.Itisfunandweird, are thereforthetaking.Andtourgroupsfromothercompa- shelvesand and recommendedtoemployeesfillanumberof vator and a giant 15-pound ball made of discarded name tags nearly $1billioninadealthatwillmakeZapposwholly and I’ve never seen a culture like Zappos. That cultureandthe neverseenaculturelikeZappos. That and I’ve business engine.Everydecision,from policies andproceduresdrivesthe theculture,start- built intotheDNAof ture drivesservice.Itstartswiththeculture, understand the corporatevaluestheyallhave.They keep acustomer. It’s aboutbeingauthentic taining control of thecompany.taining controlof there Valley start-up,Vegas are aSilicontheLas earmarks of young,preternaturallyupbeat work tomers aregood.The has putZapposinrarefiedair. half of the company’s 1,300 employeeswork(theothers thecompany’s1,300 of half disorganized, but it is not. What holdsittogetheris What disorganized, butitisnot. zon.com, wassoimpressedwithZapposthathe decided tobuythecompany. Amazonwoundupspending lobby, a skeleton pirate sits on a shoeshine station near the ele- Zappos mission,corporatestrategy, Zappos brandarehugeassetsthatIvalueverymuch.” company, Bezossaidinavideo andZapposisdefinitelythat,” ees comingandgoing.BooksthatHsiehothershaveread sulting firminDallas. “From the outside,itappears structed meritocracydrivenby asinglemantra:happycus- sory explosion. The smell of fresh popcorn wafts through the owned subsidiary, withHsiehandhismanagementteamre- I F son, a Las Vegas suburb.son, aLas Itisacombinationfrathouseand fantasy camp, butrealbusinessisunderway.Walking through the main entrance, a visitor is greeted with a sen- n e l a T n o s g n its headquarters in a nondescript office park in Hender- he bestwaytoappreciatetheZapposcultureisvisit “I getallweak-kneedwhenIseeacustomer-obsessed Inside itsthreebuildingsinHenderson,whereabout This passionforthecustomeris This Bezos, Ama thefounderandCEOof t & L h s r e d a e - i p

- At onestop, alltheemployeesriseupfromtheirseatsand Vik. HeisZappos’s full-timein-houselifecoach.Inhisoffice Vik. Lube Shop. HsiehandhistopexecutivessitinMonkeyRow, a Hula-Hoops that sit by her desk. If there is an explanation, merchandising, callcenter, vendorrelationships HR, functional workgroups workers involvedwithothergreat brandslikeHarley-David is athroneandcrown.Everyvisitor, photographedastride an employeebasethathasmade apassionateandemotional wonders howanybodygetsanyworkdoneatall. will provokeabarbecueorsmallfestival,suchasBaldBlue are rung.Anditistheraredaythatsomefestiveeventisn’t and Tattooed Day,Week oraZolidayparty. Spirit Searchfor none is provided. ployee “talking whileeatingmarshmallows” contests. One ployee. The only private office belongs to David Vik, aformer Vik, onlyprivateofficebelongstoDavid ployee. The jungle-like aisle of desksandtrees,jungle-like aisleof accessibletoanyem- the larger Zappos culture. What drivesthe Zapposengineis What the largerZapposculture. the throne,leaveswithasouvenirPolaroidphotograph. ticular discipline,liketheBenefitsBodyShopandHR ther a transient newcomer to Las Vegas orarefugeefromthe ther atransientnewcomertoLas location givesZapposadistinctiveflavor. Yes, nearlyevery- under wayeitherinsideoroutsidethebuilding.Anyexcuse up arrowthatreads:“StairwaytoHeaven.” the Atthetopof Zappos on YouTube and watch in-house productions of em- YouTube andwatchin-houseproductions of Zappos on commitment tothecompany’s missionandculture.Like chiropractor andearlyinvestor, whogoesbythenameDr. cafeteria offersfreefood.Typically, theZapposemployeeisei- each grouphascreatedafancifulpersonalityarounditspar- employee who immediately challenges the guests to try the snap digital photographs of thevisitors.snap digitalphotographsof Atanother, cowbells stairs, at the reception desk, is Heaven Thomas, ayoung isHeavenThomas, stairs, atthereceptiondesk, one iswearingT-shirts, flip-flops andcargoshorts, andthe Moving throughtheoffices, visitorsencountervarious Tour groupsreceivegoofygreetingsineachdepartment. But the mayhem is just a carefully considered piece of But themayhemisjustacarefully consideredpieceof gaming andhospitalityindustries. a smalllobbyandfindshand-printedsignan cated from San Francisco to Las Vegas in2004, cated fromSanFranciscotoLas ple seemtogenuinelylovetheirjobs. It didn’t takelongforZappos, whichrelo- to earnareputationasthecoolplace disgruntled Zappos employee. These peo- disgruntled Zapposemployee.These work. AZapposjobiscovetedanddifficult work. In onebuilding,atourgrouparrivesin tech company. Butgoodluckfindinga to get (the company hires just 1 percent of to get(thecompanyhiresjust1percentof Henderson isn’t Silicon Valley Henderson isn’t Silicon makes ithardertogetintothanHarvard). applicants, whichHsiehpoints out door tolookforajobatanotherhigh- gruntled employeecan’t justgonext — finance,IT, businessdevelopment, 0 1 0 2 . 2 Q — adis- — and - 19 20

I And somepeoplearenotcomfort - Wynn Las Vegas andBellagio,Wynn Lasnotedthatmostcompanies flustered or responds by asking, “Why wouldyouaskme flustered orrespondsbyasking, (see box)andoneisto“buildapositiveteamfamily right for it but spend virtually no time at all worrying whether from entry-leveltomanagement.Applicantsareaskedques- are?” Or“Howweirdareyou?”Theanswerslessimpor work really hard at deciding if aprospectivecandidateis work reallyhardatdecidingif at Zappos. tions like“Onascaleofoneto10,howluckydoyouthink the company is a good fit for an applicant. Zapposdoes.the companyisagoodfitforanapplicant. that?” there’sagoodchanceheorshewouldnotbefit tant thanhowapersonreactstothequestion.Ifsomeoneis they aregoingtobeagoodfit.” that we’re prettyconfident that we’re there are no boundaries in place?” Ratner there arenoboundariesinplace?” everyone. explained. “Dotheywantthator not? employees areaskedhowtheyfeelabout encouraged, itisexpected.Zapposmanagersareexpectedto sources. “We spend a lot of timewithpeoplemakingsure spendalotof sources. “We slowly,” saidRebeccaRatner, Zappos’s humanre- directorof such fraternizing. socializing withtheirteam.Prospective spend between10 percentand20 percent spirit.” Socializingamong co-workersafterhoursisnotjust of theirworktimeawayfromtheoffice of 0 1 0 2 . 2 Q n ordertoensurethatthechaosiscontrolledandhard “We spend a lot of timedeciding,andwehirevery, spendalotof “We very “How will they really feel about it if “How willtheyreallyfeelabout itif work thatcreatesprofitsisactuallyperformed,Zappos Ratner, agamingindustryveteranwhoworkedat is fanaticalabouthiringandtrainingtherightemploy- Zappos has an unusual list of 10 corecorporatevalues Zappos hasanunusuallistof Several roundsofinterviewsarerequiredforeveryjob, ees. Itsexecutivesareawarethatthiscultureisnotfor Measure Twice, CutOnce family memberstoapplyforjobs. countless employeeshaveencouraged and brotherworkforthecompany place. Indeed,bothHsieh’s father son andGoogle,Zapposemployees 2008, familyand thereisasenseof support thatpermeatesthework- — Despite layoffsin November feel strongly that they are part of feel stronglythattheyarepartof take chances, pushtheenvelope. about theopportunitytolearn, grow, becreative,themselves, selves. They talkconstantly selves. They asmuchwecanbe something biggerthanthem- — that - conduittosatisfiedcustomers. employeesaretheonly Hsieh isconvincedthat “When peoplehearhowTony packedupapickuptruckand “When As thecompanygetslarger, thechallengeistomaintain Among themostpopularclassesisaZapposhistorycoursein find 80 percent of itsmanagersfrominsideoverthenextde- find 80percentof riculum for all employees and more than 80 percent of its riculum forallemployeesandmorethan80percentof Becker emphasized the importance of storytellingintheZap- Becker emphasizedtheimportanceof more withless.” fortable hereeither. peoplebecomefriendsin- We feelthat if about Zappos.” newhires Beckersaidthatabout2percentof whose missionistomakepositiveconnectionscustomers. Customer LoyaltyTeam orcallcenter, with360employees we won’t hirethem.” new hire is offered $2,000 to quit. “Sometimes, toquit. peopletake new hireisoffered$2,000 which keyplayerslikeTony Hsiehtelltheirownstories. able crossingthatlineandprobablyaren’t goingtobecom- plicant maybethebesttechnicalfit;theyabletohit people aboutthesacrificesmadeinthosefirstfewyearsand bolting togethershelves, pickingandpackingshoes, ittells pos culture.“Peopleconnectwiththesestories,” heexplained. beyond foreachother.” the groundrunningandadddirectrevenuetobottom have takenthebuyoutbonusthusfar. demonstrates our core value of stayinghumble anddoing demonstrates ourcorevalueof drove toKentuckypersonallyhelpsetupourwarehouse, line onDay1;andwecouldbedesperateforthem,”Ratner lic speakingtowritingbettere-mails, freeforallemployees. group). “They end up being stuck at a job they don’t like. We endupbeingstuckatajobtheydon’t like. group). “They growth and offers an array of classesinnewskills,growth andoffersanarrayof frompub- can’t quit because they need the paycheck,” saidLorenBecker,can’t quitbecausetheyneedthepaycheck,” cade, accordingtoBecker. companyemphasizespersonal The employees havetakenatleastoneclass. Zapposintendsto enough thattwoweeksintotheinitialtrainingperiod,every supervisor of thePipelineTeamsupervisor of (asZapposcallsitstraining stated. “But if theydon’tstated. “Butif passthecultureinterviewprocess, justco-workers,gosomuchfurther,stead of they’ll aboveand only wantpeoplewhotobehereandarepassionate on ajobanditisnotexactlywhattheyhadinmind,but At the heart of theZapposexperienceiscompany’s At theheartof The bottomlineisthatjobskillsarenotenough.“AnThe ap- Even aftersomeoneishired,Zapposremainswary Zappos’s PipelineTeam hascreatedabroadtrainingcur- Zappos edge. to grow the business and make sure that we getic and creative,” said Rob Siefker, senior still havethisculturethat’s vibrant, ener- “The bigthingis, Howdowecontinue “The s n I y r r e F / n r o K e h T

HAPPY T I T u t e Michael Sipe 10

Credit ZAPPOS

CORPORATE VALUES 10 6 5 4 3 2 1 9 8 7 Be humble Be passionateanddetermined Do morewithless Build apositiveteamandfamilyspirit with communication Build openandhonestrelationships Pursue growthandlearning open-minded Be adventurous,creativeand Create funandalittleweirdness Embrace anddrivechange Deliver “Wow!” throughservice r B Photo: Michael Sipe. Overleaf and this page: people photos courtesy of Zappos. i “But it’s are likefamily. notthemoney;it’s the people.They e Most customersareworriedaboutshoesizeorquality When shegothome,thesurprisedcustomerwasbowled When We allcomefromsomanydifferent placesthatwespend fication Thanksgiving together.”Thanksgiving col- She notedthatdespitealackof yet a company gets a random out-of-office reply and takesthe Team. “As leaders, ourNo. 1responsi- response card saying, “Thank youforbeingsuchanawesome response cardsaying,“Thank reps aretrainedthatthereisno pushing cus- manager of theCustomerLoyalty manager of ing andareputonatrackthatwilldeterminehowfarthey for example,mustneverbe walk for a few days.” The call-center rep sent out a handwritten never happenatanothercompany,” shesaid. an out-of-office reply from the customer: “I’m goingtobeout an out-of-officereplyfromthecustomer: a customerane-mailalertaboutorderandreceivedback into greatexperiencesforraving nie Simms, abuyerinthechildren’s merchandisinggroup. person. Ireallyappreciatewhatyouaredoingforthiscause.” play andthecamaraderieisgenuinesupportive. zeal place thatisproducingstock-optionmillionaires. The bility istokeeppeopleengagedina time to send me a handwritten card. You guysareamazing!” time tosendmeahandwrittencard. Each newskillsetbringsabumpinpay, upto$26anhour. All tional 25skillsets tomers to buy more expensive products and there are no throughout theday. Inacity filledwithcallcenters, Zappos the phone,e-mailorchatline.” their experienceheretranslates here isaboutworkinginaplacewheretheworkfeelslike doing agreatthing,”shepostedonZappos’sWebsite.“And lege, she became a buyer in 18 months at Zappos. “That could lege, shebecameabuyerin18months atZappos. “That can climb and how much they can earn. There areanaddi- can climbandhowmuchtheyearn.There customer-servicetrain- center repsgothroughfourweeksof coming birthdays, familypets, orsomespecialmomentthat color. Butmanyfindthemselvestalkingtoarepaboutup- considered transactions. Call-center customers on the other end of customers ontheotherendof call-center environmentsothat employees arecompensatedcompetitively, butthisisnota employees receivefullmedicalbenefitsandfreefood sales quotas and no hard sells. Everycallisaboutconnection. says itrarelylosesagoodemployeetothecompetition. over. “Myownfamilydidn’t eventhankmeortellIwas I’mparticipatinginabreastcancerawareness theoffice. of opens thedoorforapersonalbutpoliteconversation. I F n e l a T n o s g n “I make half of whatImadeatmy lastjob,” of “I makehalf saidStepha- It isnotaboutthemoney. Managers andothersalaried Reps can take the initiative in creative ways. One rep sent Customer encounters, Starting at$11anhour, call- averageforthelocalmarket, — that areavailableforcall-centerrepstoacquire. — from learninge-mailskillstoorderveri- t & L h s r e d a e i p yourself.” your relationships)andbeingpartofsomethingbiggerthan Hsieh, thereremainsamorepotentcatalysttothatend:hap make peoplehappyandmorepurposefulintheirjobs, you is short-lived.Mostoftheframeworksforhappinesscon- what makespeoplehappy. Heisconvincedthathappyem- will haveaformulathatcanproducegreatandsustainable not juststudiedthephenomenonbuthehaswrittenabook ness, thenhappinessisthemeanstoachievethat.” predicting whatwillmakethemhappy,”Hsiehsaid.“They ployees aretheonlyconduittosatisfiedcustomers, sohehas points toresearchthatilluminatesdistinctcharacteristicsof bulent global business environment, theability toofferthis bulent globalbusinessenvironment, somethingspecial.Inanuncertaineconomy andtur- part of perceived progress,connectedness(meaningthedepthof philosophy, Hsiehhasrecentlyembracedtheideathatone piness. and Asalifelongskepticwho sneeredatpsychology think, ‘OnceIachievethisoroncegetthis,I’llbehappy.’But the end,”Hsiehsaid.“An altruisticviewsayshappinessisthe training for a marathon, a challenge he himself hastakenon training foramarathon,challengehehimself kind of nurturingenvironmentcanbepowerful. Hsiehbe- kind of lished in2010. long-distance running,canbeachievedhaphazardly, Hsieh lieves thatif,byusingprovenresearch,youcanfindawayto usually that kind of happiness of kind that usually Business, andmanyotherpublications.Heis co-authorof“MBAinaBox: Practical IdeasfromtheBestBrains in Business”andotherbooks. Glenn RifkinhaswrittenforTheNewYork Times, Fast Company,Strategy+ companies. “You canargue,which isthemeansandwhich companies. “You clude thattherearefourthingsrequired:perceivedcontrol, corporate Petridishforitscultivation.Hecomparesitto happinessandcreatea can studythetheoryandscienceof end. But if yourgoalistobuildalong-termprofitable busi- end. Butif several times. Ratherthanpresumingthathappiness, like on the subject, “DeliveringHappiness,”on thesubject, whichwillbepub-

“The researchshowsthatpeopleareactuallyverybadat

Clearly, employeesatZappos feeldeeplyconnectedand F Happiness Runs ments,” shesaid. workers drovemetogetmytreat- pos isfocusedonprofits. But for through chemotherapy, myco- another. “When Iwasgoing another. “When pos employees take care of one pos employeestakecareof San Francisco, addedthatZap - work inprogress, rifewithpo - tential. Likeanybusiness, Zap - or Hsieh,Zapposremainsa Nordstrom employeefrom — like winning the lottery the winning like Alesha Giles, aformer 0 1 0 2 . 2 Q — - 21 W 22 succession 0 1 0 2 . 2 Q 2009 she became Yahoo’s2009 shebecame executive presidentandchief fore theybeganasearchandtoBartzaftersheaccepted vants haveachievednearconsensus:mostcompanies company, shetoldhiminsomanywordstogoaway. Bartz toofferherhispositionatopthepioneeringWeb When aYahooco-founder,JerryYang,firstcalledCarol How Yahoo ChangedtheGuard

prepare forCEOsuccession,in goodtimesandbad. perspectives andinsightsonhowcompaniescanbetter they putitoff,oftenuntilacrisisforcestheirhand. treat estateplanning.It’s so unpleasanttothinkabout, their boardstreatsuccessionthewaythatmanypeople their offer. Morebroadly, theywereaskedtosharetheir has writtenaboutCEOsuccession,andforoncethesa- do itbadly. executivesand Itseemsthatcorporatechief leadership andexecutivedevelopmenttodisclosewhat under pressurearenotsolucky. counsel they might have given to Yahoo’scounsel theymighthavegivento directorsbe- critics, she is unquestionably a capable executive, having earned her stripes in the turnaround of Autodesk, a strug - officer. MostcompaniesexecutingaCEOsuccession Although Yahoo’s choice of Bartz was not without Yang persisted,Bartz reconsidered,andearlyin Nearly every management guru worthy of the name asked four thought leaders in the field of Briefings askedfourthoughtleadersinthefieldof A CaseStudybyLawrence M.Fisher Yahoo and its star dimmed.Semel cameunderfirefrom Yahoo, broadening the company’s services through inter- Magellan? But the rise of Google, with a different value Hollywood mogul,succeededTimKoogle,whohad retirement is all the more fortunate, given the company’s and vanquishing its early rivals. Remember Excite or nal development and an aggressive acquisition program, Yangaid andhisfellowco-founder, DavidFilo, who about aided designpowerhousewithamarketcapof proposition, siphoned advertising dollars away from been selectedbythecompany’sventurecapitaliststo design software lead Yahoo.lead In2001, Terry Semel,anaccountantturned acoherentsuccessionplan. lack of $6 billion. That Yahoo was able to lure her out of semi- of out her lure to able Yahoowas That billion. $6 gling companyknownforoneproduct company’s diminishedmarket share,andforwalking shareholders forhislavishcompensation despitethe Yahoo. share thetitlechief By most measures, Semel was an able leader for leader able an measures,was most Semel By Bartz, 60, isactuallythethirdoutsidertappedto — when shearrived,nowacomputer- s n I y r r e F / n r o K e h T

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u t e John Ueland B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 24 drumbeat is. collective what the hearing on and be focused You haveto 0 1 0 2 . 2 Q — MichaelUseem August 2008 as part of a settlement of a fierce Yahoo’s chairman, Roy Bostock, the activist Yang’s re-electiontothecompany’sboard. Microsoft foraninitial88percentshareof Instead, shesoldYahoo’ssearchbusinessto Web portalandcontentsite,whereusers resigned in2007. met Jerry Yang at Cisco Systems, where they might also want to do a search. “We have might alsowanttodoasearch.“We front cash.Yahoosharesdropped15percent. investor Carl C. Icahn accused the board of who wereperhapshopingthatshecould was alsoadisappointmenttoshareholders, away fromanunannounced,butmuch Chambers, Cisco’s chief executive, has said he now hasamarketcapofabout$23 billion. acquisition and of trying to “entrench their and that she was the best choice available to which wasnottobeasearchengine,perse, vestors had misunderstood Yahoo’svestors hadmisunderstood charter, point, one-third of shareholders voted against bring backMicrosoft’sheftyprecrashoffer. proxy battle, held a stake of roughly 4.5 per- positions.” Icahn, who joined the board in believes that the two will work well together both served on the company’s board. John posting their objections on the Web. a “What past and present Yahoos were not shy about then-public offerinFebruary2008tobuyYa- the company had made, and, not surprisingly, the company, who pointed to several billion hoo for $44.6 billion in cash and stock. At one leaked, acquisition bid from Microsoft. He leaked, acquisitionbidfromMicrosoft. dollars worth of search engine acquisitions loser” was one of the nicer comments. longtime Yahoo observers inside or outside like GoogleorMicrosoft’s Bing,buttobea Semel as president, or Yang, who took the chief Susan L.Decker,aninsiderwhosucceeded gradually been reducing his holdings.Yahoo gradually beenreducinghisholdings.Yahoo cent inYahooasofAugust2009,buthas chines” to thwart Microsoft’s attempted creating “self-destructive doomsday ma- executive slotandrejectedMicrosoft’sby- search revenueina10-yeardeal,withnoup- never beenasearchcompany,” shesaid. In one of many tart-tongued letters to But shareholderswerenohappierwith But Bartz can give as good as she gets. She NewYorkTimesthatin- Bartz toldThe One of Bartz’s first acts as chief executive That That explanation did not sit well with

“My resignationinawayiscomplimentto “You “You always know where she stands,” Cham- 1999, and is expected to shutter or divest i’m dumbstruck, as i tr Yahoo. He also notes her plain-spoken style. Yahoo’s profitmorethantripledto$186.1 Yahoo acquired for more than $4 billion in Author: “TheGoPoint: WhenIt’sTimetoDecide” William andJacalynEganprofessorof you, in that I do not believe that Yahooyou, inthatIdonotbelieve any Wharton School,UniversityofPennsylvania. reshape thecompanytoherdesign,revising million, or4centsashare,yearearlier. Rev- million, or13centsashare,upfrom$54.3 in Yangin orBostock’s office,consideringhow Michael Useem nouncing hisdecisiontostepdownfromthe net adswasstabilizing,particularlyfrom well-placed expletiveortwo. She isknownas way at Yahoo, where she has moved swiftly to are paying off. In the quarter ended Sept. 30,are payingoff.InthequarterendedSept. a toughcookie,butshealsohasanopen, board. “Iwishyoucouldbecloned;because bers said. “You may not always like it.” jobs, or 5 percent of the work force. She has person asdirectandquick-witted,quickto to chooseasuccessor, andknowing thean- the organizational structure, replacing senior ter areporter’simpertinentquestionswith the GeoCitiesWeb-hostingservice,which tense situations. hoo executivessaidthatspendingonInter- longer needsanactivistshareholder.” large marketers. laugh andwillingtoteaseherwaythrough (Crown Business/Random House,2006). Leadership andChangeManagementatthe could useaCarolBartzasCEO,” hewrote. cated inletterstoBartzandBostockan- compassionate side,andcomesacrossin management anddirectoroftheCenterfor executives andcuttingcosts, including 675 enues fell 12 percent, to$1.58Yaenues fell12percent, billion,but - so many of thecompaniesincountry so manyof shut down parts of thebusiness,shut downpartsof including other suboptimal units. Indeed, Bartzhasbeenknowntocoun- These characteristicsshouldeaseher These Even Icahn was mollified,asheindi- Early indicationsarethatBartz’sefforts s n I y r r e F / n r o K e h T y to put my self T I T u t e John Ueland r B John Ueland i e You should see that there is this possibility. The nameisstillthere,butit’s adifferent The you’ve gottoaskyourself,haveyoureached you’ve you never should have allowed that to happen. run itwhenit’s almostbeenreincarnated? rector oreventheirinvestors, eventhough fall out of favorwith theirboardorakeydi- fall outof imagination. Now, areyouthepersonto inherently you have lots of moneymanagers inherently youhavelotsof who losefavorwiththeboardortopexecu- Charles Schwabbegantosuffer.They might Compaq, hedidn’t seethatcoming.Often nism toward the chief executivehasbeen nism towardthechief vessel withadifferentcharter. a perniciousside,butyoucan’t turnablind push. Ithinkit’s farmorecommonthanany big successwithSchwab’s movementonto hehada building up. Pottruck, Inthecaseof bation can precipitate a desperate move, when breathing downyourneckandyouhaveno the Pierre Omidyar [founder/chairman of the PierreOmidyar[founder/chairmanof the companyisnotdoingbadly. Ithinkthat tives, learnthatandgetoutbeforethere’s a buthisrelationshipwith the Internet, there’s andthisantago aprecipitatingevent, tions in which a founder found himself in a to thecompany, themtoo. andtoeachof ho to David Pottruck, Pottruckdidn’t seeit ho toDavidPottruck, have tobefocusedonandhearingwhatthe You holders. thebeast. Itisthenatureof happens muchmoreoftenistopexecutives have riddenitout. handle it. You run the risk that a small pertur- dled. It’s best to handle it before you have to good example company, it’s grownbeyondyourwildest coming. When EckhardPfeiffergotoustedat When coming. collective drumbeatis. choice but to pay attention to them. That has choice buttopayattentionthem.That company andyouhaveanymarketcapatall, eBay] momentin1998.builtthe You’ve eye toequityanalystsandthelargestshare- exits throughmymind,afewthoughts similar circumstance stand out. One is if you’re apubliclytraded you’re Oneisif stand out. swer tothatquestionhasberesponsible of us read about. For a host of reasons, Forahostof usreadabout. CEOs of I F n e l a T n o s g n Also, whatwedon’t seebutnodoubt As I run a bunch of theseabruptforced As Irunabunchof When CharlesSchwabgavetheheave- When Third, take a look at successful transi- Second, particularly for Jerry Yang,Second, particularlyforJerry — to see how this can be han- — t and eBay is a pretty & L h s r e d a e i p it seemstomethat y Ana Dutra you haveandletthemknowwhoare. you’ve gottodo,includingcreateastrategy, you want them to do. This isdifferentina you wantthemtodo. This relationship withthetop25investorsand run by the seat of thepants.run bytheseatof Companycul- ment team,andthatincentivesmatchwhat into asimilarsituation,Ihavefourhumbly with employees, withtheboard. with people. all thekeyshareholdersandpersonalize appropriately, gotatopmanage- thatyou’ve public chagrin back, maybeevenhireanexecutivecoachor back, Yahoo.big companylike Smallercompanies Chief executiveofficerofleadershipandtalent tionship withthem. ture isthewayyouultimatelycarryday how importantitistodeveloparealrela- doing and how you’re doing,withcustomers,doing andhowyou’re did the right thing. They hadtheirinternal did therightthing.They lot’s checklist before they take off, of the things Korn/Ferry International.Author:“FastConsolida - get peopletomoveintothatrole. consulting andexecutivevicepresident, Chicago, confirm thatyouhavefaithinthepeople certain that you’ve gotpeoplegroupsaligned certain thatyou’ve consultant, togiveyouanalteregowhois consultant, extremely well informed about what you’re extremely wellinformedaboutwhatyou’re equity analysts. submitted suggestions: one reasonCEOpayhasexploded tion: CreatingValue inaBrutalEconomy.” • • • • Know theboard:Icannotoverstress For CarolBartz,oranynewCEOcoming

Architecture iseverything,somake Get outthereonaroadshowtomeet Make certain you’re gettinggreatfeed- Make certainyou’re Pull out the checklist, almost like the pi- so it’snotanevent potential candidates,done it years they’ve in advance, companies thatdoitbetternotonlyhaveidentified If welookatbestpractices inCEOsuccession,the — is ithasgottentougherto ahoo actuall — to much y , it’sacontinualprocess. — AnaDutra 0 1 0 2 . 2 Q 25 candidate, and then they looked outside and pends. As you look at the company going for- found somebody who was more strategic, ward, if successful execution of the strategy more of a visionary and more charismatic. is going to require a CEO very different from One thing that boards fail to realize in CEO the current one, then you should probably succession is that a great president or COO involve the CEO less, because the tendency is will not necessarily be a great CEO, though for people to pick people like themselves. sometimes it’s the only option. The other issue is how open-minded is the If we look at best practices in CEO suc- CEO really to identify, groom and transition cession, the companies that do it better not to the person who will be their successor. only have identified potential candidates, Understanding exactly what leadership they’ve done it years in advance, so it’s not traits and what knowledge will be necessary an event, it’s a continual process. They follow to pull the strategy forward is incredibly crit- them, and others are added to the pot, from ical. That’s exactly the value of having a very inside or out, and some are removed. What objective process to follow and a tool to meas they do really well is market scanning, so ure the candidates. Make the strategy very they’re always looking at and developing clearly articulated. their internal talent, but also who is avail- But oftentimes we find that the board is able in the marketplace. not aligned. We need to identify then what One thing that surprises me is when I factors may prevent an insider or outsider ask clients whether they have a contingency from succeeding. Condition No. 1 is a clean plan and so few do. It’s shocking, even after process. Second, be very open and very clear stories like Coca-Cola, where Bob Goizueta on the process to the internal candidates. died of lung cancer with no successor in You have to ensure that somebody who place, or McDonald’s, which lost two CEOs comes in will be able to engage the people in a year — one to cancer, one to a heart who were not chosen. If you don’t want to attack. Does the board know exactly who will lose them, you have to think about what the take over and for how long? dynamics will look like going forward. Succession planning is much easier for Some companies are at the point where companies whose CEOs are not doing well, they have just finished identifying the strategy moving forward and they are entering the execution phase. Think about a company From a people perspective, very quickly that has just completed a major merger or who are your high-value acquisition. They need somebody who can identify come in and embrace the road map that has players. You want to empower them to already been laid out and accepted by all the main stakeholders. If you bring in somebody — Ana Dutra do the right things for you. who’s intent on moving and shaking and starting from scratch, you have a problem. But there are cases where what you need or if the company is not doing well, than for is somebody who is really going to challenge companies that are very successful or with a the status quo and redefine what the strategy CEO who is very charismatic. Those boards is and will be. Here’s the challenge: in a situa- are handicapped, they are so fearful of even tion like that, on the one hand, you do need to addressing the issue with the CEO. take the time to understand the context, to But I ask them, how many of you do per- know who your stakeholders are and what formance reviews every year, how many of they are expecting. On the other hand, the you do comp studies? It’s the same thing. If honeymoon is going to be shorter because you call it succession review instead of suc- there is such hunger for results that you have cession planning, I think that boards would to do a few things quickly to be real. be more comfortable dealing with it. I would advise Carol Bartz to look at Another question is, To what extent do everything that’s broken, that needs to be we involve the CEO? My answer is, It de- changed, from an ease of implementation or 26 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e r B John Ueland i e clearl You wanttoempowerthemdotheright fixed. Figureoutwhatarethreethingstodo Are theKey to Succession Planning” Author: “TheCEOWithin:WhyInside-Outsiders you inthefirstdays. right awaythatwillshowyouareforreal. right upfront, you will be questioned. risk approach, and then she will start to see for yourrelationshipwiththeboardvery incoming CEO.truthisboardswantto The identify whoareyourhigh-valueplayers. who are not, andyoucanseethatintheir who arenot, with whomshecangettogetheroneonone, where the directors felt they had to act, and where thedirectorsfelttheyhad toact, are yourtruesupporters, identify theones board that has denied this kind of helptoan board thathasdeniedthiskindof no-brainers, becauseyou’re because they’re body language,inthewaytheyinteractwith pride because thesepeoplecanbeinvaluablein board, whichshouldbetheirbiggestfan. there’s intown. anewsheriff tial aschangingthebusinessdevelopment things foryou.Identifythepeoplefirstwho time to do the big moves that if you try to do things that you can just get done. What you’re take advantage of that. take advantageof tion. It’s justsillyfortoo-proudCEOsnotto crisis.times of Peoplelovetobeinthatposi- two personalmentorsontheboard,people they chosetolookoutsidethecompany fora Joseph L.Bower hearing fromeveryonethattheyhavetobe happens isbecausethatCEOsodrivenby doing then is gaining credibility and buying (Harvard BusinessSchoolPress,2007). Baker Foundationprofessorofbusiness Sometimes, it’s somethingasinconsequen- administration, HarvardBusinessSchool. clear: here’s whatIexpectfromyouinterms call andchangingtheday. Itjustshows successor. Atsuchatime,the boardhasto see thenewCEOsucceed.Butwhatoften of support and advice. I’ve never heard of a neverheard of supportandadvice.I’ve of own I F n e l a T n o s g n I wouldrecommendthatshefindoneor From apeopleperspective,veryquickly Second thingismakeyourexpectations Some thingsyouhavetodorightnow, — — he orsheendsupalienatingthatvery y wanting tosucceedonhisorher ahoo hadreachedapoint t & L h s r e d a e i p Yahoo chose an outsider who is also a Silicon a also is who outsider an Yahoochose Valley insider, although from a much smaller insider,much Valley a from although Let’s pick one of those. Occasionally an active The rest of themjustscramble. restof The your companyperformedinthe bottom10 really are. most of thetimepeopleinsideacompany most of roughly 5 percent. Why isn’t ithigher?He or Why roughly 5percent. managing forsuccession,theyhavebeenthe insider that has the perspective of anout- insider thathastheperspectiveof insider tounderstandwheretheweaknesses is doing pretty well. In picking Carol Bartz, Carol picking In well. pretty doing is with union workers, and Alan Mulally [Ford’s and wehavetogetanewCEOit’s assim- as thesteadiness manufacturing massive about still is aircraft a broadview, thecom- astrategicviewof number of themreallydoinvestin number of not something to which many companies ple as that. It’sple asthat. whentheboard aquestionof president and chief executive, previously ex- previously executive, chief and president broadly. wentoutside OrlookatFord.They pany. yougetconsul- Almostallthetime,if base. board would decide that the insiders weren’t board looked at who else was good and said, paid a lot of attention. they When got near percent of itsindustry fortwoyearsinarow,percent of think they’re prettygood.Ittakesanunusual think they’re the automobileindustry, butcommercial tants in,alltheydoisaskwhatareyour talent and the process of succession. talent andtheprocessof trol. Inthosecircumstances, some the time that the CEO was going to retire, the the chance that you got rid of yourCEOwas the chancethatyougotridof had steadyprofits. It’s notsomuchthelevel do, they tend to hire from within the industry loses confidence in the management. loses confidenceinthemanagement. good enough, and they would look outside. companies thatareverystrong,have companies thathavereallydoneagoodjob company with a very different customer executive of Boeing Commercial Airplanes] Commercial Boeing of executive chief and Boeing of president vice ecutive strengths, whatareyourweaknesses, and sider step up and say we’re notdoingwellenough, step upandsaywe’re A Booz & Company study showed that if A Booz&Companystudyshowed thatif Ideally, Iwouldsuggestyoulookforan If youlookatwhatprivateequitypeople If When I look around and think of the Ilookaroundandthinkof When Even inearliertimes, successionwas — an insiderwhoisabletoreallyhave — that they’re undercon- that they’re really are. weaknesses where the understand insider to unusual It takesan — Joseph L. Bower — JosephL. 0 1 0 2 . 2 Q 27 28 half-cocked. 101 andgoesoff Management forgets everyone succession issues, when wegetinto For somereason — William J.Rothwell — 0 1 0 2 . 2 Q In some ways, getting on top of finance is eas- ria flow from some sense of whatthefuture ria flowfromsomesenseof mandate for the new CEO is basically clean basically is CEO new the for mandate for theperformanceisCEO’s, it’s justcir- iest. iest. The people, if you’re any good, you begin Yahoo’sin But sale. for ready it get and up it ways overridingthings, likeintellectual in- There areal- skills.who hasaspecificsetof anybody fromtheoutsidecouldcomeinand already intimately familiar with the com- and she has to get on top of all three quickly. and howithastobemodified. asfastshe are therethreatsahead?Then, nancials, thecashflow. thebalancesheet, Is and cometounderstandassessherteam. but itwouldbeanunusualsituationthat pany, takes longer, because you tend to get the job of the future CEO? Yes, thefutureCEO? the jobof uptoapoint, the views of the board members can be. to get a sense and understanding of fairly tegrity, personalintegrity, lead- evidenceof the boardisn’tviewthatresponsibility of they relax. It’s easier to be critical from the from critical be to It’seasier relax. they that investors outside of experience the trick istofindsomeonewho, asfaryou he orshecandeviseanappropriateapproach high priorityitems. she’s First, gottomeet quickly. The strategic problem, unless you’re dustry andenoughstrategiccapabilitythat disparate views. It’s surprising how different lookingforsomeone ducting asearch,you’re Second, shehastogetaquickfixonherfi- good understanding of whatisthere. good understandingof cumstances. can, she has to assess what the strategy is can, shehastoassesswhatthestrategy before seen I’ve Icahn’ssatisfied. case, been can tell,hasenoughexperiencewiththein- company needsgoingahead,andthosecrite- ership, whatthe butyouhaveasenseof she mightbenearretirementanyway. Or seems perfectly clear in retrospect that the that retrospect in clear perfectly seems say, iswhatthiscompanyneeds. The This shouldbe. strategy she inahealthysituation,istheshipleaking, once theygotintothecompanyandhavea outside. situation, the see and inside they’re once At leastinprinciple,whenyouarecon- You cansay,Wait aminute,isn’t that I can think of other situations where it where situations other of think can I It’s really strategy, people and finance, Carol Bartzhasreallytwoorthreevery William J.Rothwell for y ficult leap. IncumbentCEOs find thatpro- They areoftensaddledwithkeepingasenior They Author: “EffectiveSuccessionPlanning:Ensuring Within” (AMACOM,2005). me biastocloneourselves. Menprefermen, ferent kind of person,onewhomightbe ferent kindof in succession following was based on the environment, following wasbasedontheenvironment, white people. If businessconditionsare white people.If women preferwomen,whitepeople which just isn’t working. They needsome- which justisn’t working.They whether thatpersoncanhelpMicrosoft get it is critical, but even if things are going well, what you’re really saying is, How are we going and yourthinking,areunderattack. new strategy, which is inherently critical of ation is healthy or problematic, is that the board, soit’s difficulttobringinpeoplebe- but theenvironmenthaschanged.Itisadif- board is looking to the new CEO to develop College ofBusiness,Pennsylvania StateUniversity. thing proprietaryandkeeping amonopoly, tions evenaboutBillGates’successor, and the seniorteamasawholefabricandtake that mostCEOsbroughtinfromoutsidefail. to change, because the world is changing. the existing CEO. If there have been problems, hand toreplacethekeyreports, andlookat holden tothenewCEOratherthantheir lone gunman. dramatically increased. doxes in the whole process, whether the situ listen tomeaboutthis Professor ofhumanresourcedevelopment,Smeal Leadership ContinuityandBuildingTalent From changing, wemightneedacompletelydif- completely different values. This raisesques- completely differentvalues. confident. It’sconfident. easytofeelthatyoupersonally, very cess uncomfortable,unlessthey’re executive teamwhohavesupportfromthe systems view, ratherthancominginasa offensive tothecurrentleader, onewith over its problem of wantingtokeepevery- over itsproblemof own agenda. Then the chances of failureare thechancesof own agenda.Then Another problemthatwerunintoalot A smartboardwillgivetheCEOafree Looking at Yahoo,Looking at they were the strategy One of the most extraordinary para ahoo, theyshouldbearinmind — s n I y r r e F / n r o K e h T and myclientsneverreally — is avoidingthelike- - T I T - u t e John Ueland one who can strike alliances. everyone forgets Management 101 and goes The question with Yahoo is, Do they off half-cocked. About 70 percent of succes- have a board that is on target with this, does sions fail, and it usually goes back to one of the new CEO have the freedom to deal with those three things. the complete executive team? Or is this just Another key issue is sustainability, an external hire and the direction isn’t clear keeping it going. A lot of companies experi- and the choice of the person is superficial? ence a succession crisis, and then since it One of the issues that is always a factor personally affects the leadership, everyone is is how knowledgeable the board members highly motivated to do something for a short are about the talent available in the business time. But the program eventually fails for and the talent that is available outside. Board lack of sustained support. members are often not that knowledgeable A bigger group of companies suffer about succession. CEOs pick their buddies to from what I call the like-us syndrome. They serve on the board, and people with H.R. look at outside candidates and say, they background are often not well represented. won’t fit in here. The real problem is taking This also plays out with the issue of ex- that at face value and not digging deeper. ecutive pay. There’s nobody that knowledge- Maybe we don’t want someone who fits in able about H.R. on boards, with the result here, maybe we want someone who thinks that they do things about compensation that quite differently, to take us to the next level. an individual knowledgeable about comp Many of these problems start at the practice wouldn’t advise. board level. We see too little discussion There are three general rules of thumb about how to get boards more accountable, about how we pick successors. If the board is more active, more knowledgeable, and more happy with the direction of the business, willing to hold CEOs accountable for things and we have one or more qualified candi- that go beyond the quarterly result or even dates internally, then the usual advice is to the daily stock market. Everything in our cul- promote from within, to get more of the ture rewards that short-term thinking. same and continuity. If they’re not happy, but don’t want to make too radical a change, they source a CEO with a track record in their industry, who It takes time, even with the right person, will be comfortable making the sort of changes they want. The third rule is if the to get results. If we’d judged Lee Iacocca on just board is not happy with direction and would his first year at Chrysler, we’d have fired him. like a radical change, they should select a — William J. Rothwell CEO from outside the business and outside the industry. That leads to a CEO who does not buy into industry wisdom, but comes in with a lot of questions that might otherwise It takes time, even with the right per- be taken for granted. son, to get results. If we’d judged Lee Iacocca One of the reasons CEOs don’t build on just his first year at Chrysler, we’d have successors from within is the board doesn’t fired him. But he brought them around. insist they do so. There are really just three The question is, Where do we need to things to pay attention to: goals, roles and ac- drive the business, and who’s best equipped countabilities. What do we want out of this? to do that, and then will we give them the free Who is doing what? What is the CEO’s role, hand they need to pick the people they need the board’s role, H.R.’s role, the role of oper- to best accomplish that? Or are we going to ating managers? Then accountabilities: how play the politics of the senior group? are we holding people accountable for achieving the goals and acting the roles? Lawrence M. Fisher has written for The New York This is Management 101. But for some Times, Strategy + Business and many other publica- reason when we get into succession issues, tions. He is based in San Francisco. B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 29

talent Singapore Bets Bigon Talent By developing a sophisticated knowledge base at the Biopolis biomedical research hub, Singapore assumes it will gain an economic advantage.

新加坡希望通过启奥生物医药研究园建立起来的成熟智库，给本国带来经济优势。

By Deborah L. Jacobs

Philip Yeo, mastermind of the Biopolis Q 2 . 2 0 1 0 31 32 I up herownmedicalresearchinstitutefocusingongrowth, and waspreparedtoofferattractiveperches. Swaincouldset arship programforyoungSingaporeansandotherendeavors. to Singaporefor10 yearsoncreatinganinternationalschol- ready friends threewereal- The a weekendinParisdiscussingtheproject. suggested theyeachtravelhalfwayaroundtheworldtospend marqueenamesandhad buildingarosterof the processof lis,Yeo anewbiomedicalresearch hubinSingapore. wasin university anddeanofitsmedicalschool,accompaniedher. Holmes, then60andvicechancellorofhealthsciencesatthe University ofCalifornia,SanDiego.Herhusband,EdwardW. ments, most recently as dean for translational medicine at the 0 1 0 2 . 2 Q molecular cardiologistinastringofsenior-levelappoint- with morethanalifetimeworthofachievementsas to a high-class job interview. Swain was 56 at the time, in 2005fromherhomeSanDiegoforwhatamounted t was springtimeinPariswhenJudithL.Swainflewthere NowYeo wantedtohirethemasfull-timeemployees Their host was Philip Yeo, hostwasPhilip theBiopo- themastermindof Their — thehusband-wifeteamhadbeenconsultants 遇也足以令夫妇俩难以抗拒。就算没有杨烈国法国大餐和卢浮宫一游的款待，这般待应。Holmes将可以主持国家医学研究委员会的工作。重点研究传染性疾病的成长、发展、代谢和免疫反当诱人的待遇。Swain可以设立她自己的医学研究所，年国际奖学金计划以及其他项目的建议。档已为新加坡担任了10年顾问，提供有关建立新加坡青共度周末并讨论该项目。这三人是老朋友了，这对夫妻的花名册，就提议他们三人各自飞行半个地球，来巴黎 Yeo 人杨烈国（Philip ）。杨烈国当时正在酝酿医药园科学副校长及医学院院长，也陪同她一块儿来到巴黎。 W.长。她的丈夫Edward Holmes当时60岁，是该校卫生圣地亚哥分校转换医学院（Translational Medicine）院心脏病学家的她曾担任过许多资深职位，时任加州大学试。Swain那年56岁，已经拥有了许多终生成就，作为乡圣地亚哥飞抵巴黎，接受一场可谓高层次的工作面类似地，伯乐杨烈国陆续招募了约100名医药学术现在，杨烈国想要全职聘请他们，并已备好了相接待他们的是全新的新加坡启奥生物医药园的策划 Swain从家 2005年4月的巴黎还是春天，Judith L. Judith L.Swain s n I y r r e F / n r o K e h T T I T u t e Previous page: Norman Ng/Associated Press. This page: A*STAR Corporate Communications. The greatest lure is intangible and development, metabolism and the immunological response to infectious disease. Holmes would head the National Med- goes to the heart of what motivates ical Research Council. Yeo’s proposal would have had plenty creative and innovative people: of appeal even without a fine French dinner and a trip to the Louvre. the chance to do leading-edge work With similar flair, Yeo has recruited about 100 other in the company of leading-edge stars from academic medicine, persuading them to leave family, friends and colleagues to work in a tiny city-state colleagues and under the auspices with an oppressive tropical climate. Among those recruits of managers who value their work. are the British experts Alan Colman, who helped clone Dolly the sheep in 1996 and now focuses on diabetes, and David P. Lane, who discovered the p53 tumor-suppressor gene. 界的明星人物，说服他们离开家人、朋友和同事，来 Compensation packages are generous without being ex- 到一座气候压抑的热带小城邦工作。这些员工中有曾 orbitant. Pay is typically 15 percent to 20 percent more than 于1996年参与克隆多利羊、目前主攻糖尿病的英国专 star performers could command in their home countries. 家Alan Colman，以及发现p53肿瘤抑制基因的David P. There is also a housing allowance based on the size of a fam- Lane。 ily, an education stipend for children through high school 薪酬优厚却也合乎情理。工资要比那些明星人物在 and tax subsidies so that scientists will be no worse off finan- 本国所得高出15%到20%。另外还有基于家庭大小而定 cially than if they were working in their home country. 的住房津贴，孩子直至高中教育的津贴和税收补贴。有 But Yeo’s power of persuasion has very little to do with 了这些，科学家们在这里的生活条件不会比在本国差。 lavish soirées, salaries or executive perks. The greatest lure is 但杨烈国的说服力绝非奢华的晚宴，高薪和行政津 intangible and goes to the heart of what motivates creative 贴。其实最大的吸引力是无形的，也是激励创新人才的 and innovative people: the chance to do leading-edge work in 真正动因，那就是有机会与最顶尖的同事共事，开展最 the company of leading-edge colleagues and under the aus- 前沿领域的工作，并得到管理层的赏识和重视。除了薪 pices of managers who value their work. In addition to salary, 水，生物医药园的明星员工还可获得为期五年的研发经 star performers at the Biopolis receive a five-year research 费，让许多来自美国和其他地方的科学家摆脱了依靠各 budget, freeing them from having to live from grant to grant, 种补助金来维持研究的命运。此外生物医药园还提供充 as many scientists must do in the United States. With an 足的旅费，这些明星员工每年可以回国10至12次，这样 ample travel budget that enables them to take 10 to 12 trips 他们能够四处走动，与工作中至关重要的各界人士保持 home per year, they can move about the world, maintaining 沟通。 contacts that are crucial for their work. Edison T. Liu是生物医药园于2002年从位于马里兰 Edison T. Liu, recruited to the Biopolis in 2002 from the 州贝塞斯达的美国国家癌症研究所聘请来的。他将自己 National Cancer Institute in Bethesda, Md., likened his Sin- 的新加坡同事们比作交响乐团成员。他们所盼望的是这 gapore colleagues to members of a symphony orchestra. They 样一个平台，“在那里才华能得到施展，付出能得到赏 want “an environment to practice their craft, a place where 识，需要时能得到帮助”，他说道。 their work is going to be appreciated and where there are 如今的生物医药园汇聚了来自50多个国家的约 others if they need assistance,” he said. 10,000名员工。2003年至今，园区内已陆续有7幢大楼平 Today, about 10,000 people from more than 50 nations 地而起。新加坡人口不足五百万，却大力投资于这个研 are employed at the Biopolis, which has grown to seven 发中心。2001年6月启动的一期建筑费用为4亿美元，同 buildings since 2003. Singapore, which has a population of 期的经营预算也高达15亿。一期之后，又有一笔1.29亿 less than 5 million, has made an enormous financial invest- 的支出用于建筑工程费。 ment in the research center. Construction costs during the 新加坡相信，这一大手笔的投资最终将带来相应的 first phase, from 2001-6, were $400 million, and the operat- 经济回报。由于药物的研究、开发和审批周期至少需要 ing budget for the same period was $1.5 billion. An additional 15年，生物医药园至今尚未开发出一鸣惊人的药物。无 $129 million has been spent since then just on construction. 论是研发出治疗癌症或其他疾病的新药物，还是创造更 Singapore is betting that the investment will ulti- 多的就业机会，这些最大的回报也许都还要等上很长一 mately work to its economic benefit. So far, no blockbuster 段时间。 drugs have been developed — the cycle of research, develop- 杨烈国把这种长期投资比作种榴莲树，需要7年的 ment and approval takes at least 15 years. The biggest payoffs, 精心培育，才能收获这种带有臭味却独具东南亚特色的 whether in the form of cures for cancer and other diseases or 绝妙水果。他认为，目光短浅者就只能种种豆芽，虽不 job creation, may be far down the road. 出几日的培育便可食用，但相比榴莲，价值大打折扣。 Yeo compares the investment time frame to planting a B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 33 34 enough seniorscientiststotrainyoungeronesonthewayup. talentinthepipeline,andtherewerenot was adearthof earning abachelor’sdegreethroughpostdoctoralstudy. There Yeo’s economicplan.Training ascientisttakes12years, from olis, which emerged from these aspirations, opened in 2003. groups that populate Asia were a particular concern. Biop- The cially prevalent in the various ethnic, racial and genetic that were underserved. Colon and other cancers that are espe- bringing research from the laboratory to the bedside in areas sales,” he said. He also wanted to improve medical care by food chain, from innovation to production, marketing and Singapore doesnotrequireresearch proposals, heexplained. Nicolaou,anexpertinsyntheticchemistry.ideas,” saidK.C. oratories, whalesarefree“to pursuewhattheythinkaregreat gaporean scientiststrainedabroad. IntheirSingaporeanlab- nowned scientists whom he recruited to be mentors to the Sin- been awarded. expenses andstipends. Sofar, thescholarshipshave 900of costs about$720,000includingtuition,travel perstudent, program,funded from2001-10 to cover1,000 scholars,This in Singaporeforfiveyearsaftercompletingtheirdoctorate. programsandwork tween theirbachelor’sdegreeandPh.D. salaried internshipinaSingaporeresearchlaboratorybe- they mustagreetoa“bond.” Itrequiresthey doaone-year uate andgraduatescienceeducationoverseas. Inexchange, gaporeans givenscholarshipstocompletetheirundergrad- “guppies” and“whales.” guppiesaretalentedyoungSin- The tists in the pipeline and senior scientists, referring to them as T Competitive but offerfarlesssubstance,hesaid. growing beansprouts, days which areedibleinamatterof delicacy. Short-termthinkersshouldconfinethemselvesto bears thenotoriouslystinkyfruitthatisaSoutheastAsian nurturingbeforeit durian tree,whichtakessevenyearsof develop future industries that could create jobs 2001, was to nurture a fledging pharmaceutical industry and the Agency for Science, Technology and Research (A*STAR) in ties inbiomedicalresearchanddrugmanufacturing. nomic DevelopmentBoardfrom1986-2000, sawopportuni- advantages.Yeo, theSingaporeEco- whowaschairmanof not richinnaturalresources, so itmustlookforothermarket itsneighborsinSoutheastAsia,Singaporeis Unlike manyof prises aroundtheworldtoexpandtheirproductsorservices. analogous tocompetitivepressuresthatcauseprivateenter- 0 1 0 2 . 2 Q he impetusfortheBiopoliswasuniquetoSingaporebut Yeo theequation addressedbothsidesof But Singaporelackedtheintellectualcapitaltodrive The whales in Yeo’s whalesin The metaphoraretheinternationallyre- His idea, when he became head of what is now known as Strategy — — youngscien- “a whole K.C. Nicolaou说道。他还补充道，究”，合成化学专家K.C. 加坡的实验室里，鲸鱼们“能自由从事自己感兴趣的研他们应邀成为那些新加坡海归科学家的导师。在他们新名学生。其中包括学费、旅费及津贴。至今该奖学金已批予900 资金起，资助每位学生约7.2万，计划资助1000名学生，新加坡工作五年。这一奖学金计划，从2001年10月募集一年的带薪实习项目；而在取得博士学位之后，必须在学位和博士学位之间，在新加坡的研究实验室参与为期作为交换，他们必须同意一种契约关系，即在攻读学士在海外接受本科及研究生科学教育的新加坡青年人才。鱼”和“鲸鱼”。孔雀鱼指那些获得国家奖学金资助而的青年科学家和资深科学家，他分别戏称他们为“孔雀乏资深的科学家手把手培养青年科学家成长。整整12年。一方面输送的年轻人才太少，另一方面，缺济振兴大计。培养一位科学家，从学士到博士后，要花 2003年应运而生。体的癌症。正是出于上述种种愿望，生物医药研究园于关注的是结肠癌和其他肆虐亚洲各民族、种族和基因群投入临床使用，惠及那些医疗落后地区的百姓。他尤其他也希望能够全面改善医疗服务，使实验室的研究成果物链那样，从创新到生产、再到营销”，他说道。同时发展未来产业，从而创造就业机会——“就像一整条食学技术研究局），他的想法是培养刚起步的制药行业，杨烈国看到了生物医学研究和制药业的无限商机。市场优势。1986年至2000年任新加坡经济发展局主席的邻国不同，新加坡不具备自然资源的优势，它必须另寻扩大其产品和服务的竞争压力相类似。与其众多东南亚独特性所决定的，但其本质却和激发全球所有民营企业 substance, hesaid. in amatterofdaysbutofferfarless ing beansprouts,whichareedible should confinethemselvestogrow- delicacy. Short-termthinkers stinky fruitthatisaSoutheastAsian ing beforeitbearsthenotoriously which takessevenyearsofnurtur- frame toplantingaduriantree, Yeo comparesthe investmenttime 杨烈国比喻中的鲸鱼都是一些享誉国际的科学家，杨烈国强调了这一等式的两边——人才输送管道中可是，新加坡人力资本匮乏，难以落实杨烈国的经 2001年，带领着A*STAR（即现在著名的新加坡科虽然生物医药研究园发展的内在动因是由新加坡的竞争战略 s n I y r r e F / n r o K e h T T I T u t e Courtesy of SPRING Singapore 在新加坡，不要求上交开题报告。 “The hope is that economic growth and innovations will “这样做是希望带来经济增长和创新产品”, flow from there,” said Nicolaou, whose specialty is the foun- Nicolaou说道，他的专业方向是基础新药物研发。这12 dation for drug discovery and development. Profits from in- 家生物医药园研究所带来的知识产权利润会在每家研究 tellectual property emerging from any of the 12 Biopolis re- 所和A*STAR之间分配。 search institutes are split between the individual institute Nicolaou的孩子不幸身患残疾，因此当时他并没有 and A*STAR. 应杨烈国之邀来新加坡办研究所。杨烈国为此提了个折 Nicolaou, who has a child with a disability, was not will- 衷的办法：他让Nicolaou找一个“Nicolaou 2号”来管 ing to relocate when Yeo invited him to come run an insti- 理这家研究所。这样，他本人就可以偶尔来新加坡，大 tute. But Yeo proposed a compromise: he asked Nicolaou to 多数时间则能远程提供他的专业知识。同时，他能继 recruit his own No. 2 to run the institute and Nicolaou would 续担任加州拉霍亚斯特克里普斯研究所化学系主席，依 come to Singapore occasionally, offering his expertise for the 旧在他的实验室工作，并继续担任加州大学圣地亚哥分 most part remotely. Nicolaou could maintain his chairman- 校化学教授。 ship of the chemistry department at The Scripps Research In- 这样的诱人提议，杨烈国彻底把他吸引住了。 stitute in La Jolla, Calif., along with his laboratory there, and “你无法对他说‘不’——实在难以抗拒啊”, his appointment as a chemistry professor at the University of Nicolaou说道。 California, San Diego. With this offer, Yeo had him hooked. 好心绑匪 “You can’t say ‘no’ to him — he’s irresistible,” Nicolaou said. 杨烈国戏称自己是“人才绑匪”。身为出色的工程师，他热爱阅读，而且一碰上科学期刊上自己不明白的 Benevolent Kidnapper 地方，就会去请教一些新加坡博士。2002年诺贝尔奖获得者、南非生物学家Sydney Brenner就曾帮助杨烈国初拟了他想要纳入麾下的“鲸鱼”花名册。 Yeo refers to himself playfully as a “kidnapper of talent.” An 杨烈国不仅给予人才专业的回报，还提供诱人的国 engineer by training, he reads voraciously, consulting Singa- 际化经历。新加坡不仅以高效著称，还是个文化大熔 porean doctors when there is something he does not under- 炉，汇聚了印度文化、中国文化和马来文化。但英语还 stand in a scientific journal. Sydney Brenner, a South African

Pairing Singaporeans with foreign scientists is a tool for transferring knowledge.

B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 35 biologist and 2002 Nobel Prize winner, helped Yeo compile 是这里的主要语言，所以不像在亚洲的其他国家，西方 his initial list of whales to recruit. 人在这里不太会遭遇文化冲击；因此新加坡人称 “稀 In addition to the professional rewards, Yeo could offer 释了的亚洲”。在汇丰国际一项2009外籍人士眼中最热 an attractive international experience. Singapore has a repu- 情好客的十个国家的排名中，新加坡位列第八。 tation for efficiency and is a melting pot of cultures, includ- 杨烈国同时也很关注家庭对海外来新工作人士的影 ing Indian, Chinese and Malay. Yet English is the dominant 响。杨烈国第一次找David Lane时，他的两个孩子都才 language, and Westerners do not tend to experience the cul- 十几岁，所以他还不想搬往新加坡。为此，杨烈国请 ture shock there that occurs elsewhere in the region; Singa- 他担任顾问一职，监管分子与细胞生物学研究所的工 pore is often referred to as “Asia lite.” In a 2009 ranking by 作。2004年，等两个孩子都上了大学后，Lane和他的妻 HSBC Bank International of the 10 countries worldwide that 子Birgit（也是位科学家）才来到新加坡。 are most hospitable to expatriates, Singapore was eighth. 留住人才的关键 Yeo is also sensitive to the role that family plays in making overseas assignments successful. David Lane had two 杨烈国并没有单纯地把明星员工的忠诚度和生产力 teenagers when Yeo first approached him and was not ready 与他们的出勤率划上等号。 to move. In response, Yeo offered him an advisory role, super- 他说：“只要他们的研究所运作良好，我就不在乎 vising the Institute of Molecular and Cell Biology. After both 他们在哪里”，他还提道，“那些要求员工像埃及法老 children had gone to college, Lane and his wife, Birgit, also a 的奴隶似地紧跟自己脚边的老板是招不到人才的——他 scientist, came to Singapore in 2004. 们招来的只是奴隶”。杨烈国承认，这种人才管理模式取决于对诚信制 Keys to Retention 度的高度忠诚和遵守。但据他说，多数情况下，这个方法在他那行得通。然而这一模式里不存在终身聘用制度——生物医药园每三到五年对科学家们进行一次 Yeo does not equate physical presence with star performers’ 考核，那些不达标的就得走人。这些科学家们都知 commitment or productivity. 道，曾有一所著名的美国大学因未能实现种种既定目 “So long as they’re running the institute well, I don’t care 标，A*STAR取消了对其的经费资助。还有一位研究所 where they are,” he said. Managers who demand that their 所长，因为违反了人体试验的有关规定而被开除，新加 recruits “be at their feet like slaves of the pharaoh of Egypt 坡这些规定的严厉程度绝不亚于美国和欧洲。 won’t get talented people — they’ll get slaves,” Yeo added. 尽管一些雇员已经加入新加坡国籍，但这并非杨烈 Yeo acknowledged that this approach to managing tal- 国的初衷。他也并不期望建立一个百分百新加坡人的科 ent depends on a high degree of loyalty and adherence to 学家团队。他说理想的结构是有50%的外籍人士。国际 the honor system, but said it has worked in most cases. Still, 化的团队不仅能拓展海外网络，还能“不断鞭策本土员 there is no tenure — scientists are reviewed every three to 工”，他说。 five years. And those who do not measure up are let go. Scien- 杨烈国会偶尔问问员工快不快乐，这一点是出了名 tists at the Biopolis are aware of a major U.S. university that 的；他知道，那些工作不开心的人会离开公司。所以留 had its funding from A*STAR cut because it did not deliver 住人才的关键是 “一定要让他们有被需要，被重视的 on its goals and milestones. And one institute director was 感觉”，他说。这是人才培养的软性的一面，是金钱不 fired for not following the rules on human experimentation, 能衡量的。 which are just as strict in Singapore as in the United States 全球金融危机反而促进了新加坡人才库的扩容。青 and Europe. 年博士后们纷纷来新加坡找工作，因为这里蕴藏着其他 Although some recruits have become Singaporean citi- 地方没有的工作机会。同样，那些退休大限将至，事业 zens, that is not one of Yeo’s goals. Nor does he aspire to build 前景黯淡的老年科学家们，也来到新加坡寻求机会。 a team of scientists that is 100 percent Singaporean. Ideally, 伊藤昭一直以来研究病毒在疾病（尤其是癌症）引 50 percent of the scientists would come from other countries, 发方面的作用。2001年他遇到杨烈国时，正赶上伊藤63 he said. An international team provides links to overseas net- 岁生辰，也就是他从东京大学法定退休的年龄。于是， works and “keeps local people on their toes,” Yeo said. 杨烈国邀请伊藤和他实验室所有的九名同事加入生物 Yeo has been known to occasionally ask recruits whether 园。当时伊藤觉得这一邀约好得难以置信，还记得当时 they are happy; he realizes that those who are not, will not 他问了杨烈国预期的回报是什么。杨烈国的回答是“‘ stay. The key to retention is to “make sure these people feel 出色的科学’”，伊藤说道。 wanted and valued,” he said. It is the soft side of nurturing 医药合作伙伴 talent that cannot be measured in dollars and cents. The global financial crisis has expanded the talent pool 在生物医药研究园，学术型科学家能与来自诺华、 for Singapore. Young postdocs are finding job opportunities 美国礼来、葛兰素史克等制药公司的研究员共事。 36 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e r B Norman Ng/Associated Press i e Philip Yeo 株，Herrling说道。新一代药物能够应付对于现存药物具有抗药性的疟疾菌的疾病。在新一代疟疾类药物的研发上也已有了进展，以蚊子为病毒传播媒介，常见于新加坡等许多热带国家主要目标是推出针对登革热的首例药物，登革热是一种物，新加坡可以第一个取得开发权利。研究所的一个药物生产技术的专利权，而一旦公司决定不生产某一药取该公司的企业所得税。根据协议，诺华公司拥有所有的合作，由政府提供营业成本的50%，并且10年内不收 Herrling说。自世界各地的科学家们来说，这里还有旖旎的风光，地人接触的机会——研究所里40%是新加坡人——对来习惯”，他接着说。新加坡可以为我们提供许多和当工作的进行，影响该地区医生的想法和“医生们的用药学，还需要了解当地文化，因为它可能会影响疾病预防疗这些疾病的药物。这项任务不仅需要熟悉分子生物在肺结核、疟疾和登革热最猖獗的地方，开发出用以治华热带疾病研究中心2003年进入新加坡，当时的目标是 he’s irresistible.” “You can’tsay‘no’tohim— I F n e l a T n o s g n 为了达到这一目标，诺华与新加坡政府展开金融上据诺华国际企业研究负责人Paul Herrling介绍，诺 t & — K.C.Nicolaou L h s r e d a e i p

also of thecultural environmentthatmayimpedeprevention also of molecularbiology,requires anunderstandingnot onlyof but work This corporate researchatNovartis InternationalA.G. saidPaulHerrling,headof these diseasesaremostprevalent, treat tuberculosis, malariaanddenguefeverclosetowhere which cametoSingaporein2003, wastodevelopdrugs to EliLilly&CompanyandGlaxoSmithKlinePLC. A.G., researchers frompharmaceuticalcompaniessuchasNovartis A Pharmaceutical ence,’ YeoYeo’s whatheexpectedinreturn. answerwas“ thought theofferseemedtoogoodtobetrue,recalledasking hislaboratorytojointheBiopolis.nine membersof Ito, who YeoUniversity whenhemet in2001.Yeo invitedItoandall mandatoryretirementfromKyoto birthday andtheageof in causingdiseases, especiallycancer, wasnearinghis63rd they attainacertainage. veteran scientistswhoseetheiroptionsdiminishingonce sameistruefor in Singaporethatdonotexistelsewhere.The t theBiopolis, academicscientistsareintermingledwith The goalattheNovartis Institute forTropicalThe Diseases, Yoshiaki Ito, whohasfocusedontherolevirusesplay ” Itosaid. Partners 0 1 0 2 . 2 Q ‘good sci- 37 经度和纬度

管理创新人才是门艺术。培养他们独立思考能力的最好方法就是给予他们多于其他员工的自由度。同时，你应该注意不要造成大家各自为政、没有团队合作的局面。杨烈国，新加坡生物医药研究园背后的总策划人，擅长管理明星员工。卡耐基梅隆大学教授的Robert E. Kelley 教授研究过许多不同企业的明星员工。这里列举了他们两位关于如何创造一个有利于创新人才发展的工作环境的建议。 • 仔细勘察后才分配任务。无论何时，多从不同角度考虑，而不是武断地选择某一任务的最佳人选，或者采取一刀切的方式。 • 建立联系。多给明星员工时间和经费用于建立他们的人际网络，这样他们就能成为公司和外界的交流桥梁。 • 给予充分自由。不要以为明星员工若不在你视线范围内就一定是在偷懒；有时离开惯常的工作环境，反而扩大了他们的视野。 • 观察活动规律。有心设计公共场所，创造互动机会。比如提供休息室、会议室、和便于大家一起就餐的大餐桌和美食广场。 • 对问题的及时把握。定期地询问明星员工，“你快乐吗？”或者“你无聊吗？”这能使你在问题产生的初期就及时予以解决，避免员工突然辞职。

and “how doctors in the region think and use medication,” he 另一更直接并出乎合作双方意料之外的回报是诺华 said. Singapore offered access to local talent— 40 percent of 因其在新加坡所从事的研究而获赠的两笔分别为2,000 the institute members are Singaporean — and an attractive 万的奖金。一笔来自英国慈善组织维康信托，用于疟疾 environment for research scientists recruited from around 研究；另一笔来自Bill & Melinda Gates基金会，用于肺 the world, Herrling said. 结核研究。这两笔奖金不仅给国家注入了资金，还创造 In this endeavor, Novartis is a financial partner with the 了就业机会，Herrling说道。 Singaporean government, which has agreed to pay 50 per- 近来，在争夺人才方面新加坡面临着中国的竞 cent of the operating costs and suspend corporate income 争。Herrling称，中国正努力吸引那些曾去美国留学的 taxes for 10 years. Under the arrangement, Novartis owns the 优秀本土科学家回到祖国。诺华正在上海建立研究基 patents on any drug production technique, but if the com- 地，其规模远大于新加坡的研究基地，诺华想借此专攻 pany decides not to produce a particular drug, Singapore is 某些在亚洲最为常见的癌症。 first in line for development rights. A major institute goal is 合作环境 to create the first drug for dengue fever, a mosquito-borne vi- rus present in Singapore and many other tropical countries. 无论是医药园的实体设计还是园区内的各种活动， And there has been progress on a next-generation malaria 都旨在促进来自不同行业和不同学术界的科学家们跨学 drug to treat strains that are resistant to existing remedies, 科的思维碰撞。所有的大楼都坐落在一个公园般的场所 Herrling said. 内，彼此间步行便可抵达，并由人行天桥相连接。科学 A more immediate and unanticipated payoff for both 家们好像是一个个他们在实验室内研究的对象——分 parties has been two $20 million grants that Novartis was 子——总有机会撞见对方，有时候四处走走就能遇见， awarded for research in Singapore. One, to fund malaria re- 更多的时候，是在就餐时喧嚣的医药园餐厅和新加坡传 search, was awarded by the Wellcome Trust, a charity in the 统美食广场碰见。 United Kingdom. The other, for tuberculosis research, came 对于东南亚美食爱好者来说，新加坡就是个美食天 from the Bill & Melinda Gates Foundation. In addition to 堂。许多外国科学家俨然已成为当地的美食家。 bringing money into the country, these grants have created “许多合作是在餐桌上达成的，” Herrling说。 jobs, Herrling said. 新加坡礼来药物发现中心（该中心在医药园占地 Lately, Singapore has faced some competition for talent 面积达50,000平方英尺）常务董事兼研发长Jonathon D. from China, which is trying to lure back some of its best na- Sedgwick说，不同的研究机构术业有专攻，这也营造 tive-born scientists who have been educated in the United 了一种激发头脑的学术氛围。经常有学者来此进行公开 States, Herrling noted. Novartis is currently setting up a re- 演讲——这是作为独立经营实体的医药公司所不能复制 search facility in Shanghai, much larger than the one in Sin- 的做法。 gapore, to focus on certain cancers that are more common in 这里也鼓励更多的正式合作。虽然每个研究所有 Asia than in other parts of the world. 它自己的工作进程，但其中有一部分是能够互相合作 38 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e Longitude and Latitude

Managing innovative, creative people is an art. The best way to nurture their independent thinking is to afford them more latitude than you might give other employees. At the same time, you should be mindful not to spawn a work force in which everybody is a solo act rather than a member of a team. Philip Yeo, the brains behind the Biopolis in Singapore, is a master at managing star performers. Robert E. Kelley, a professor at Carnegie Mellon University, has studied them in many different corporate settings. Here are their suggestions about how to create a work environment in which innovators will thrive. • Reconnoiter before making assignments. Whenever possible, ask for other perspectives rather than making assumptions about the best person for a particular assignment or taking a one-size-fits-all approach. • Build connections. Provide star performers with the time and budget to network so that they can create a bridge between your company and others. • Give them free rein. Do not assume that because star performers are not within your line of sight that they are not working; sometimes getting out of the usual work environment expands their horizons. • Observe traffic patterns. Arrange physical space to create opportunities for interaction, for example by providing lounges, conference rooms and large tables in cafeterias or food courts that encourage people to eat together. • Make sure you are on course. Periodically ask your star performers, “Are you happy?” or “Are you bored?” That will give you a chance to correct problems early on and avoid surprise departures.

的，有的还能和医药公司合作，为某一共同目标努力。 Collaborative Environment 在这点上，Swain说，学术研究机构和商业公司的关系有着“十分积极的一面”。Swain是转化医学领域的专 B oth the physical plant of the Biopolis and activities within 家，主要研究将实验室研究成果转换为实际药物或疗 the community are designed to foster the exchange of ideas 法。她指出，每项实验室的突破必先通过制药公司才能 between various disciplines and between research scientists 惠及病人。和制药公司合作，研究员们就能更好地确保 from industry and academia. All the buildings, situated in a 其发现能够到达最终受益者。和美国一样，新加坡也有 parklike setting, are within walking distance of each other 利益冲突规定，限制研究员与病人间的直接沟通。 and connected by skywalks. Like the molecules that are the subject of their laboratory work, scientists have occasion to 下一步 bump into each other, either in the course of moving about 生物医药园已通过奖学金项目储备了一定的青年科 or, more often, in the Biopolis’ restaurants and traditional 学家，同时也具备经验丰富的导师，现在是时候迈出下 Singaporean food courts that bustle at mealtimes. 一步了。杨烈国于2007年离开A*STAR，在全新的政府 For lovers of Southeast Asian cuisine, Singapore is a gas- 机构SPRING（新加坡标准、生产力及创新委员会）担 tronomic delight, and many international scientists have 任主席——好比一所得到大力资助的美国联邦小企业 become enthusiastic connoisseurs of the local cuisine. 署。它通过拨款来资助初创企业，鼓励青年科学家们对 “A lot of great collaboration is being done over lunch,” 其想法进行商业化运作。 Herrling said. 杨烈国当时聘请的那批科学家们说，他离开公司 The presence of various research institutes, each with 后，他们的生活没有变化，他的影响力还在，和许多人 its own specialty, also creates an intellectually stimulating 仍旧保持着友情。但很显然，生物园正在过渡期，从人 academic atmosphere, said Jonathon D. Sedgwick, managing 才建设的鼎盛时期过渡到一个共同合作、实现回报的成 director and chief scientific officer of the Lilly Singapore 熟阶段。 Centre for Drug Discovery, which occupies 50,000 square 接任杨烈国A*STAR主席一职的林泉宝，拥有剑桥 feet of space at the Biopolis. There are frequent lectures by 大学数学学位，而他大部分的职业生涯是作为一名军 guest speakers, all of which are open to the public — some- 人，最高头衔是武装部队总司令——相当于美军参谋长 thing that pharmaceutical companies could not duplicate if 联席会议主席。加入A*STAR之前，他在教育部工作了4 they were operating as standalone entities. 年。林泉宝说A*STAR下一个焦点将是推动新加坡国内 More formal collaborations are encouraged as well. Al- 外的合作。 though each institute has its own agenda, a few of them might B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 39 Josh Lerner, a professor at Harvard Business School, called Singapore’s emphasis on human capital a “refreshing contrast” to the norm.

work with each other and with pharmaceutical companies to- wards a common research goal. In this respect, relationships between academics and companies are “very positive,” said Swain. An expert in translational medicine, the specialty of turning laboratory discoveries into practical drugs or thera- pies, Swain noted that every laboratory breakthrough must go through a drug company before it can benefit the patient. By working with pharmaceutical companies, research scientists are in a better position to ensure that their discoveries are ac- cessible to their ultimate customer. As in the United States, there are conflict-of-interest rules in Singapore that prevent researchers from having direct contact with patients. Next Steps

With young scientists in the scholarship program and ex- perienced ones to train them, both Yeo and the Biopolis are taking the next logical steps. Yeo left A*STAR in 2007 to head a new government agency, the Standards, Productivity and Innovation Board, known as SPRING Singapore — a richly funded version of the U.S. Small Business Administration. Through grants, it will finance start-up enterprises, encouraging young scientists to commercialize their ideas. Scientists recruited by Yeo said their lives have not changed since his departure, and he maintains his influence and friendships with many of them. But it is also clear that the Biopolis is going through a transition, from the heyday of talent buildup to a more mature stage of collaboration and striving to realize returns. Lim Chuan Poh, who succeeded Yeo as the head of A*STAR, has a math degree from Cambridge but spent most of his career as a soldier, rising to the level of chief of defense — Singapore’s counterpart to the chairman of the U.S. Joint Chiefs of Staff. Before joining A*STAR, he did a four-year stint in the Ministry of Education. Lim said A*STAR’s next focus will be fostering collaboration both globally and within Singapore. It involves “a hugely complicated process to ensure that all these different capabilities can work together,” he said. Lessons From the Biopolis

On many levels, Singapore’s Biopolis provides a valuable Philip Yeo model for private companies that want to maximize the eco- 40 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e r B Opposite page: Norman Ng/Associated Press. This page: Hal Mayforth. i e DJ Working Unlimited 出版社，2009） Guide ，DJ ning Smarts:APractical,User-Friendly, Action-Oriented - 规划房产：一本实际好用的行动指南》（Estate Plan 刊》等许多国家性刊物撰稿。她的最新著作是《聪明化学反应对，就会释放无限的潜力。的才智资本。虽然它能带来的收益还很难量化，但只要员工从他们工作中获取的巨大满足感，和他们本身强大物医药研究园看上去几乎就是乌托邦。这也表明了明星新事物，厌恶重复。清楚什么样的工作对自己有意义。他们喜欢有机会尝试究过许多其他企业的明星员工）。他还提到，这些人很 Kelley教授说（他虽然没有研究过生物园的员工，但研创新的员工却渴望多样化，卡耐基梅隆大学的Robert E. 更大的科研产出。的、开放式的补助比起那些必须频繁申请的补助能带来种反其道而行的方法可能有它的好处。研究表明，长期用指标量化生产力的时代浪潮背道而驰。Lerner说，这说道。在于大楼和钱”，更重要的是创造力和创新精神，他企业家手上。然而，新加坡却理解了创业精神“不仅仅办公园区，又或者是停留在“项目资助”上，把钱交到所谓的“纯硬件”发展上，比方说建个大楼或者漂亮的新加坡的一些看法。鼓励创业的焦点往往停留在Lerner About It，普林斯顿大学出版社，2009）中，他谈到对 toDo What Venture CapitalHaveFailed—and and PublicEffortstoBoostEntrepreneurship Why Dreams: Broken 告终的原因——及其解决方案》（Boulevard of 书《断梦大道：鼓励创业和风险投资的努力都以失败这种重视称为与传统思维的“鲜明对比”。在他的新疑提供了一个宝贵的典范。员工经济价值的私营企业，新加坡的生物医药研究园无合作”，他说。 I F n e l a T n o s g n 曾为《纽约时报》、《商业周 Jacobs Deborah L. 在大范围裁员时期，许多有才华的人面临失业，生许多管理者认为标准化能促进效率，而努力开拓 “其中最主要的是科学和创造性的过程。”他说。医药园特有的人才培育模式也与当下日益高涨的利 Lerner把新加坡对人力资本的哈佛商学院教授Josh 从多个层面而言，对于那些想最大限度发挥知识型生物医药园的教训这会是“一个无比复杂的过程，以确保各方共同 t & L h s r e d a e i p is right. is right. to quantify, thepotentialisenormouswhenchemistry tellectual capital.Althoughthefinancialresultscanbehard theirin- star performersderivefromworkandthepowerof theimmensesatisfaction utopian. Butitisalsoareminderof people arelosingtheirjobs, theBiopolismayseemalmost and abhorrepetition. relishthechancetotrynewthings to them,Kelleysaid.They workthatismeaningful thekindof als haveclearnotionsof different settings,These individu- thoughnotattheBiopolis. Mellon Universitywhohasstudiedstarperformersinmany crave variety, saidRobertE.Kelley, aprofessoratCarnegie to efficiency, workerstryingtobreaknewintellectualground cess,” hesaid. which peoplehavetofrequentlyreapply, hesaid. ended grantsleadtomorescientificoutputthanonesfor approach, Lernersaid.Studiessuggestthatlong-term,open- productivity. Andtheremaybesomemerittothatcontrarian usingmetricstoquantify the growingcontemporarytrendof tion, hesaid. and notjustaboutmoney,” butaboutcreativityandinnova- derstands thatentrepreneurship“isnotjustaboutrealestate moneytoentrepreneurs.the handingoutof Singaporeun- oring orfancyofficepark, “financialengineering,”through focus onwhatLernercalled“pure hardware,”likeabuild- It ismorecommonthateffortstopromoteentrepreneurship toDoAboutIt”What (PrincetonUniversityPress,and 2009). to Boost Entrepreneurship and Venture CapitalHaveFailed to BoostEntrepreneurshipand PublicEfforts Why BrokenDreams: “Boulevardof new book, contrast” tothenorm.Lerner wroteaboutSingaporeinhis called Singapore’s emphasison humancapitala“refreshing workerswhosejobitistoadvanceknowledge. nomic valueof Unlimited, 2009). Smarts: APractical,User-Friendly, Action-OrientedGuide”(DJWorking many othernationalpublications.Hernewbookis“EstatePlanning Deborah L.JacobshaswrittenforTheNewYork Times,BusinessWeek and At a time of widespreadlayoffs,At atimeof whensomanytalented manymanagersthinkthatstandardizationleads While “A itinvolvesthescientificandcreativepro- bigpartof nurturingenvironmentattheBiopolisalsobucks The Josh Lerner,Josh aprofessoratHarvardBusinessSchool, B Source: World Tourism Organization,2009 • during thisrecession: have seenaboostininternational tourism Just ahandfulofcountriesworldwide • Australia • Sweden • ON, ON, B ON VOYAGE ON Taiwan Hungary • South Korea 0 1 0 2 . 2 Q

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41 42 gurus 0 1 0 2 . 2 Q t more more alent europe’s europe’s magpie America has a vast army of showmenreadytoflyanywhereintheworld.Asiahasvener- America hasavastarmyof Waterloo everydayandwerenowbeing‘downsized’ and‘outpaced’. Andhewroteabouthis invented asseldombeforecompaniesslimmeddowninorderto dealwithglobalcompe- Charles Handy. Handyhasmadeanentiresubjecthisown nature of workoverthepastfewdecades.nature of Inthelate1970shenoticedthatworkwasbeingre- able Kenichi Ohmae and any number of youngerIndiansandChinese.ButEuropehaspro- able KenichiOhmaeandanynumberof thing different tition andtradeunionslosttheirpower. Managerialcapitalismwasbeingreplacedbysome- themes withanacuteeyefordetail. tellectual distinctionwouldjustify. to adjust themselves in consequence. Handy looked at these changes from the point of view to adjustthemselvesinconsequence.Handylookedatthesechanges fromthepointof duced remarkablyfewworld-classthinkers, certainlyfewerthanitseconomicweightandin- chosen subjectwithuniquepanache so muchas‘shamrocks’ of theworker:companymenwhohadspent thepastfewdecades gettingonthe7.10of for organisation’ andthe‘portfoliolife’. Hearguesthattoday’sorganisationsresemblenothing A flavour of Handy’s writing can be discerned from two of his best images One of the few Europeans who has undoubtedly made it into the first division of gurusis thefewEuropeanswhohasundoubtedlymadeitintofirstdivisionof One of Europe hashardlydistinguisheditselfintheproductionofmanagementgurus eagle: than — moreentrepreneurialandunpredictable new — withthethreeleavesrepresenting coreemployees, subcontractors — workplace mixingvividimageswithliteratewritingandbroad b — thefundamentalchangesin y adr y — andworkerswerehaving i an wooldr an s n I y r r e F / n r o K e h T — the ‘shamrock . i dge T I T u t e Joe Ciardiello (all) by adrian wooldridge

B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 43 and temporary workers. He also argues that today’s growth is the ultimate measure of the good life. They workers are destined to live ‘portfolio lives’. As bio- have awarded themselves generous holidays (try get- logical life expectancies increase while organisational ting anything done in France in August) and generous life expectancies contract, workers are destined to protections against profit-maximising companies. live more than one professional life. They may well Europe’s approach to the labour market, which shift from one vocation to another; they will cer- Americans have long regarded as a prime example tainly spend some time as ‘contract workers’ as well of the enfeeblement of the Old World, has also stood as ‘core employees’. up to the recession remarkably well. Output fell far harder in Germany than in the United States during the worst months of the economic crisis. But Ger- many’s unemployment rate barely rose, and consumer spending remained relatively robust. Europe also made imaginative use of job subsidies, paying people to stay in jobs, albeit with lighter workloads, rather than throwing them onto the dole. There are certainly risks involved in this strategy: in the long run it makes it difficult to transfer workers from declining industries to rising ones. But in the short term it seems to have helped Europe to weather the shock of recession better than America: consumer demand is holding up better and workers are keeping their skills sharp rather than idling on the unemployment lines. This is, in short, an area in which Euro peans have a distinct comparative advantage. Yet the number of European business writers who have devoted themselves to plough- ing Handy’s furrow is remarkably small. European business schools have failed to embrace the subject with the enthusiasm that it deserves. The Lon- don Business School devotes no more time to studying ‘shamrock organisations’ or ‘portfolio lives’ than the Sloan School of Management, for example. Some You might have thought that Handy would have of the best European writers on work have nothing produced plenty of imitators across Europe, given to do with management theory. I challenge any man- the success of his writings and the attractions of ager to produce a useful insight from Keith Thomas’ management guru-dom as a career. Handy eschewed ‘Oxford Book of Work’ or from Alain de Botton’s the pseudo-scientific jargon that prejudices educated recent book on ‘The Pleasures and Sorrows of Work’, Europeans against management theory. He proved erudite and entertaining though both books are. that you can write about business with references Handy has blazed a trail only to find that his fellow to Aeschylus and Aristotle rather than just Balanced European management thinkers have decided en Scorecards and Economic Value Added. Handy played masse to walk in the opposite direction. a leading role in establishing business studies in the Happily, Handy is not entirely alone. A few United Kingdom — he was one of the founders of the writers are following on his trail. None of them can London Business School and he later became a sort of be described as ‘the new Charles Handy’. They lack live-in management guru at Windsor Castle, explain- his literary flair and his eye for the big picture. But ing management to the British establishment. they all recognise the importance of the subject that Handy has chosen a subject at the very heart of he made his own — and they all realise that work is European civilisation — the evolution of work and likely to be redesigned even more dramatically in the the balance between ‘work’ and ‘life’. Europeans are next 30 years than it has been in the last. less enslaved by the Puritan work ethic than Amer- Richard Donkin chronicled changes in the na- icans. They are also less convinced that economic ture of work and employment in a weekly column 44 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e for The Financial Times for 14 years. He has also pub- ‘Give me your arm, old toad; help me down Cemetery lished two informative books on the subject — ‘The Road’. Future of Work’ (2010) and ‘Blood Sweat and Tears: Avivah Wittenberg-Cox writes about a subject The Evolution of Work’ (2002), which is being repub- that Handy tended to gloss over — the growing role lished under the blander title ‘The History of Work’. of women in the labour market. Wittenberg-Cox He is more of a magpie than an eagle: you read him argues that the world of work is being reshaped by for nuggets of information rather than for pan- three massive forces — women, weather and the oramic views and grand theories. But his nest is nev- Web. Fifty years ago, women had only a marginal role ertheless full of fascinating objects, and his views are in the labour market. They performed menial jobs invariably sensible. — Larkin’s ‘loaf-haired secretary’, for example — and Donkin brings an historical perspective on re- left work as soon as they married. Today they make cent ‘revolutions’ in the workplace. He points out up about 50% of the work force in America and most that many cutting-edge management ideas, like con- northern European countries, take 80% of consumer cern for workers’ health, are in fact old hat. In the 1920s and 1930s many successful companies built playing fields and social clubs in the name of efficiency and loyalty (and before that, of course, British public school masters based their regimes on the motto ‘mens sana in corpore sano’). Donkin is also relentlessly sensible — perhaps not the most exciting of qualities but nevertheless an invaluable one in an area dominated by faddists and snake-oil salesmen. He points out (just as Charles Handy did a generation ago) that the life of a ‘portfolio worker’ is far from easy. Free- lancers relish their freedom. They are de- lirious about the fact that they no longer have to get on that 7.10 to Waterloo every day. Donkin expects their numbers to increase as people revolt against the relentless demands of today’s corporations and the soulless language of ‘scientific management’. But they are constantly worried about where the next paycheck will come from. Work tends to take the form of pre-industrial agriculture — too much work interspersed with too little and feasts interspersed with famines. They also find that freedom can turn into anomie and self-direction into loneliness. They miss the casual bonhomie of office life and the discipline imposed by a daily routine. Above all, Donkin understands our ambivalent purchasing decisions, and run some of the world’s attitude to work — how we regard it simultaneously best companies, including PepsiCo and W. R. Grace. as a blessing and a curse, indeed the foremost of all Organisations as diverse as Goldman Sachs and the curses, imposed upon Adam for his disobedience in Organisation for Economic Cooperation and Devel- eating the apple. We resent the fact that we constantly opment (OECD) have declared that the arrival of ever have to check our BlackBerries for messages even as more women in the labour force is helping to power we try to relax in the evenings. But if the BlackBerry economic growth. ‘Womenomics’ is one of the trend- fails to deliver its messages then we suffer from a iest terms in business writing. sense of ennui. He quotes Philip Larkin’s great poem Yet most societies are having a difficult job ad- ‘Toads’ about the ‘sickening poison’ of office life. But justing to a more female-friendly labour market. he also reminds us that Larkin wrote a later poem, Women are still confronted with a soul-destroying ‘Toads Revisited’, in which he acknowledges that he choice between motherhood and their careers. This rather likes his ‘in-tray’ and his ‘loaf-haired secretary’. means that all too many highly successful women B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 45 46 Library, 2009 Source: Corporate 18.5%). (a medianof their malepeers packages of as thepay times asmuch slashed three packages were compensation in 2008,andtheir counterparts did what theirmale just 58%of the U.S. earned Female CEOsin TOP THE AT EVEN LESS EARN WOMEN 0 1 0 2 . 2 Q

Marjorie Scardino and Anglo American’s Cynthia B. most prominentfemalebossesinEurope, Pearson’s means thatcompanieshaveanevergreaterincentive female-friendly environments, wherewomencan followed bylongholidays, meansthatwomenwill in general,EuropehasbeenbehindAmericaterms in keepingitsmostsuccessfulwomenwork.But world yougo, themorefemale-free itbecomes. ing lives become longer and Generation X-ers of both ing livesbecomelongerandGenerationX-ersof thewarfortal- intensificationof ing decades. The Carroll, areAmericans.Only9%ofEurope’sboard women on boards. France has been notably successful ing) domesticcommitments. will continuetomakedramaticadvancesincom- women arebettersuitedthanmentodealwiththe vative companies, fromgiantslikeIBMandSunMi- problem. Norwaythreatenedcompanieswithlegal jargon has it. It also means that the upper ranks of Italsomeansthattheupperranksof jargon hasit. pay a lower price for taking several years out of their pay alowerpricefortakingseveralyearsoutof jobs to have children. Some of theworld’smostinno- jobs tohavechildren.Someof they are‘off ontothe ramped’ ‘mommytrack’, asthe to make better use of their female employees. The theirfemaleemployees.to makebetteruseof The tensive andthebacklashagainstimmigrationgrows, dominated by men. The furtherupthecorporate dominated bymen.The drop out of thefull-timeworkforceintheir30s drop outof directors are women, compared with 17% in America. growing complexity of careersingeneral,aswork- growing complexityof countries haveproducedinnovativesolutionstothis corporations andprofessionalservicefirmsarestill craft careersthatarecompatiblewiththeir(chang- crosystems tostart-upslikethemanagementcon- ent, aspopulationsage,jobsbecomemoreskillin- ent, sanctions iftheyfailedtoincreasethenumberof sultancy EdenMcCallum,arealreadycreatingmore ‘workbingeing’ sexes rejectthetreadmillforadietof of promotinghighlysuccessfulwomen.Twothe Wittenberg-Cox pointsoutthatsomeEuropean Wittenberg-Cox arguescogentlythatwomen But sheislessconvincingwhenarguesthat ment restsontwobigassump- next generation of management next generationof they are to succeed. This argu- they aretosucceed.This to become‘gender bilingual’ if problems, andthattomorrow’s successful companieswillhave ferences willbe a source of tions those psychologicaldif- genetically different from men(more collaborative and more empathetic) andthat — thatwomenare —

Wittenberg-Cox operates at the intersection of consul- fined by a maelstrom of forces fined byamaelstromof The FinancialTimesdecidedthatitnolongerneeded The ruthlessly competitive when it when competitive ruthlessly comes to choosing tal- ‘company’term (the succeed to ration from comes monthly columnforHumanResourcesmagazine, Donkin turned himself into a freelancer in 2002 when make full use of what she regards as women’s distinc- from pensionarrangementstoeducationandtrain- ferent types of women just as there are lots of differ- womenjustastherearelotsof ferent typesof idea about strategy or core competences. This isa orcorecompetences.idea aboutstrategy This ing. Yet for the most part, the European management- work wheneverandwhereverhecan ance of being soft and fuzzy fact such in as are Google collabo- on depended always have Companies were. will have all sorts of consequencesforeverything will haveallsortsof with theirAmericanrivalstoproducethenextbig European And work. as such subjects soft with ies how to become ‘bilingual organisations’ that can and also writing about travel, fishing and sailing. assumptions are questionable. There are lots of dif- arelotsof assumptions arequestionable.There bread together). And companies that give the give appear - that companies And together). bread pity: in management, as in so many other areas of asinsomanyotherareas of pity: inmanagement, area. this in advantage comparative its on build work theworldof redefinitionof population. The the panies toremainslim,thegrowingdiversityof thepressureoncom- population, thewarfortalent, business gurusarestillobsessedwithcompeting by turningtheirsubjectintoahardsciencetobother European businessschoolsarestilltoopreoccupied two Latin words ‘cum’words Latin two breaking meaning ‘pane’ and Adrian Wooldridge isco-authorofseveral booksandisthe theory industryhasbeenremarkablyreluctantto tive talents; she is also a ubiquitous writer and lecturer. tancy and political activism. She is CEO of 20-first, a gen- him. Likemostfreelancers, hedependsongetting dent on collaboration and empathy than they ever they dent oncollaborationandempathythan doing as much consulting and lecturing as possible, life, supposedlysoftsubjectscan oftenbethemost der consultancy that specialises in teaching compan competitive advantage in the new economy. Butboth cused of beingatouchy-feelytype.Andthereisno cused of challenging andthemostrewarding. exemplars of CharlesHandy’s‘portfolioworkers’.exemplars of ent and dealing with their rivals. ent types of men: Lady Thatcher couldhardlybeac- men:LadyThatcher ent typesof solid evidencethatcompaniesareanymoredepen- sen a better subject. The world of workisbeingrede- worldof The sen abettersubject. management editorforTheEconomist . HeisbasedinLondon. These portfolioworkerscouldhardlyhavecho- These Donkin and Wittenberg-Cox are both perfect both are Wittenberg-Cox and Donkin s n I y r r e F / n r o K e h T — the ageing of the theageingof — writinga

T I T

u t e Hal Mayforth d o w n t i m e

Never interrupt your enemy when he is making a mistake. —Napoleon Bonaparte

About the time we can make the ends meet, somebody moves the ends. —Herbert Hoover Clockwise from top left: © Peter C. Vey/Condé Nast Publications/www.cartoonbank.com, © Alex Gregory/Condé Nast Publications/www.cartoonbank.com. © Alex Gregory/Condé Nast Publications/www.cartoonbank.com, Vey/Condé Nast Peter C. Clockwise from top left: © © Jack Ziegler/Condé Nast Publications/www.cartoonbank.com. Chast/Condé Nast Publications/www.cartoonbank.com, © Roz

B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 47 An Interview With Daniel Vasella, Chairman and Chief Executive, Novartis

Marc Rosenthal Courtesy Novartis Hal Mayforth Courtesy Novartis

aniel Vasella, chairman and chief executive of Novartis, was trained as a he has invested heavily in research and development. physician and practiced medicine for eight years before joining Sandoz, Perhaps most controversial for the chairman of a Swiss-based firm Da Swiss drug maker, which merged with Ciba-Geigy in 1996 to form No- whose oldest antecedent company was started in 1758 was Vasella’s vartis. Vasella was Novartis’s first president and became its chairman in decision to move Novartis’s research center from Basel to Cambridge, 1999. In January 2010, Novartis, the world’s third-largest pharmaceu- Mass., to be near universities like Harvard and M.I.T. In addition, in No- tical company in sales, agreed to buy a controlling interest in Alcon, a vember 2009, Novartis announced a $1 billion investment in research Swiss eye-care firm, from Nestlé, subject to the approval of the share- and development and the creation of a Shanghai research center. holders and the companies’ boards. Vasella is a man of many parts. He has been called a risk taker, a Vasella’s strategy for Novartis has been bold. Since becoming chair- strong advocate for cutting-edge research and development, a people- man, he has sold the company’s agriculture businesses, its medical nu- oriented manager and a passionate family man; he has been observed trition businesses and its baby foods division. During that same period, taking calls from his children during senior-level business meetings. he spent $59 billion on acquisitions (not including the January purchase Vasella spoke with Joel Kurtzman, editor in chief of Briefings on of Alcon’s shares) to create a company that produces prescription drugs, Talent & Leadership, about Novartis and about some trends he sees for vaccines, generic medicines and over-the-counter products. In addition, the coming decade. People-Centric 49 Science Briefings: The world has just come through a very turbulent decade. What do you think is in store for the next one? “The global economy Vasella: Looking at things we can see today, I would say the global economy is moving toward the East. Certainly, if is moving toward the East.” trade and growth patterns continue, we will have Asia, probably led by China, becoming a major force in economic development, economic power and, as a consequence, military and political power too.

When you say economic power, are you talking beyond manufacturing? Are you including areas that you’re involved in, which are highly research oriented? Vasella: Yes. The fact is that with growing economic power, you also have more investments being made in the deeper education of people in Asia. The Chinese government, for example, is focusing more on educating young people in the sciences and in technology. So while we in the West have seen a decline in the attractiveness of these areas to students, in other parts of the world the natural sciences are seen as areas for the very highest levels of achievement. This is not just China. In India, for example, if you have a child who is studying medicine or engineering, it is viewed very positively. As a result, the number of scientists from this part of the world will be increasing. As a matter of fact, in the United States, which is still at the forefront of the sciences, we are seeing growing numbers

of scientists from Asia. Thomas Meyer Credit Once an industrial You recently moved the research head- populations healthy. In the quarters of Novartis from Switzerland complex, Novartis’s U.S. first, but also in Europe to the United States and built up a new and in urban centers around tools to understand biologic research center. Do you foresee making the world, an increasing per- systems, to discover new tar- new campus in our customers need. Patients can ar- similar investments in R&D facilities in centage of the population is gets and drugs and model their ticulate needs, but seldom solutions. Asia as well? becoming obese. With obe- interaction. At the same time, Basel is for knowl- So, in highly technical fields, the people Vasella: We’ve already announced it. sity you have a lot of second- informatics helps us to conduct doing the most complicated scientific We are investing $1 billion in a new ary diseases — diabetes, hy- research globally as communi- edge workers. It has work sometimes don’t know enough state-of-the-art R&D facility in Shang- pertension and so forth. cation tools have now perme- about the patient’s reality. hai and are planning to increase the These are growing trends. In ated our entire organization, outdoor parks and It is therefore important to bring number of scientists there from about the U.S., recent studies show including the lab benches. scientists together with the needs 180 currently to 1,000 researchers. a building designed the direct and indirect costs and realities of the patient. We have So, we are already building up in Asia. of obesity are huge, reaching What are some other trends to make it possible for our scientists, yearly costs of almost $500 you see developing? by Frank Gehry. through empathy and imagination, to So you foresee Asia’s continued billion. In fact, obesity, diabe- Vasella: We are observing an understand what’s going on with pa- economic and research rise during tes, cancer, dementia and aging society worldwide. And as people tients. And then, thanks to our scien- the next decade? cardiovascular diseases are projected to age, they are more often chronically ill. tists’ knowledge, they can embark on Vasella: Yes. What is happening is that create more than $1 trillion in annual While this is more pronounced in the finding potential solutions. That’s what we have created — or are in the process costs each by 2025. Western economies, it is happening I mean by the human resource. of creating — a kind of research and de- So the crucial question, in my everywhere. In addition, there is a de- Now, this is a very important velopment triad, where we have the review, is not, “How do you cure obesity?” sire among people to retire early, rather point. Scientists have to understand search headquarters in the Cambridge/ because that’s very difficult, as we all than later, which means a bigger por- fully what the patient needs. But “un- Boston area in the U.S. The main rea- know. It is, “How do you prevent obe- tion of the population is living off the derstand” is not the right word exactly. son for that is the availability of talent sity? How do you keep people fit and work of others, rather than from their Scientists have to have an emotional, and the closeness to top academic in- trim rather than trying to get them to own work. This is creating economic intellectual, scientific and human un- stitutions like Harvard and M.I.T. And lose weight, which is a real challenge?” pressures that are not sustainable. derstanding of the patient’s needs. then we have our traditional research They need to understand the impact center for Europe in Basel, Switzerland, On a global basis, how will you What are some of the consequences they have on patients’ lives — on in- and now, in addition, for Asia, we have make certain Novartis’s innovation we’ll see from the aging of the popu- dividuals. This is true for all our em- our center in Shanghai. engine continues to work fully on lation? ployees and as we rationally and emo- all continents? Vasella: The factor that is linked most tionally understand this, our intrinsic Do researchers from each of these Vasella: First, the human resource is closely to aging and the chronic dis- motivations become much stronger to areas collaborate with one another, still our most critical ingredient for suc- eases that accompany it is ever-in- do an excellent job. We identify our- or do they work independently? cess. You have to have technology, and creasing health care costs. So, I see selves with common goals that drive Vasella: They collaborate across the you have to invest in it. And, of course, two fundamental challenges emerging. the overall corporation. continents. This is made possible we have to focus on science, because The first one is that we need to keep through a very deep penetration of in- science is the foundation of innovation. formation technology into the area of But we also have to understand what biomedical research. Bioinformatics allowed us to develop very sophisticated 51 As a CEO, how do you keep track of what “Good your company does on a global basis? Vasella: Well, that’s really two or three And technology? and questions. One is: Can we keep track How does that factor in? of the scientific developments that Vasella: When you work across are taking place around the world and geographies, you can — through e- great can we understand them? And my an- mail and other technologies — instantly swer is, Only a very few people can, and communicate. We can do it by voice. people attract I’m not one of them. The speed of de- We don’t have to see each other, but velopment and of the discovery rate we can do that too through Skype and better makes it impossible for most to keep other technologies. These factors im- up with rapidly growing knowledge. For prove how we work together, real time, people.” me, there is no way really of follow- twenty-four hours a day, seven days a ing closely, from a content perspective, week. We really can collaborate across what scientists are doing. So the ques- continents. tions then come up: How do you know And that’s what you mean by the In our labs, scientists can commu- what you need to know? And how do Do you foresee this accelerating human factor? nicate their data across the globe with- we know that we are on track? in the new decade? Vasella: Yes. The human factor and a out removing their gloves. They can There are several ways of tackling Vasella: I don’t know about accelera- capability factor. I think either you’re compute very complex correlations, that. One is, for example, to have peer tion, but you are right. That’s what his- in a virtuous or a malignant circle. simulate molecular structures and look review processes within the company tory has taught us. We are, of course, Good and great people attract better at the best possible chemical structures and then peer review processes with always worried about the future. We are people. On the other hand, when you of potential drugs. All of this and more outside experts, who will, in detail, visit so dependent on innovation and our in- have weakness, then you attract weaker is now possible. We can now run mod- the research programs and talk to the novation capability. It is absolutely vi- people. Now, that’s hard to prove, els all day long, all night long, all week scientists, and serve as evaluators and tal for us to be able to again and again although most would agree. But even- long. And when you combine this with advisors, and sometimes as pupils of the create better medicines and vaccines. tually everybody finds out, namely the robotics, then you have experiments scientists and report on what they see. What I’m seeing now happening in our day you can look at the output, the that can be made by a few people that Second, you look at your leader- research efforts is that we have a richer results. And so you look at the number formerly would have needed armies of ship in science. I strongly believe that pipeline than we ever had before. So of new targets and programs, the num- people. So these are all tools where in- excellence and scientific and human I’m personally very optimistic that we ber of positive proof-of-concept trials formation technology, combined with credibility are very crucial and that if will continue to push the frontiers fur- and eventually the number of regula- robotics, for example, and other inven- you have that, you can attract world- ther. We will tackle problems we would tory approvals you get, and then you tions have facilitated, accelerated and class talent. If you have really great tal- never have thought we could tackle in know. But this takes years. opened up new fields in science that the past. So I’m fundamentally confi- ent, then the chances are that they in we couldn’t really tackle before. These dent regarding the sciences, based on turn can attract really good people, and are some of the dimensions in which IT what I’m seeing. that gives you a better chance of suc- has changed the way we operate. ceeding in a systematic way. Credit In your field, the timelines are among the longest of any industry. And yet, you’re also required to be among the most innovative of any industry. Is that a difficult balancing act to manage? Vasella: We have different degrees of innovation. We have breakthrough innovation. It takes longer, and it’s less predictable and more risky. But once you have a platform, you can derive new products from the platform, and then it becomes more predictable. And finally you have modifications of existing products, which may be relevant in the usage of a medicine but may not be great innovations. And that’s even more predictable. So you try to have a portfolio of projects with different risk profiles and different development timelines. The objective of a well-managed portfolio is finally a continu- ous stream of new and better products.

Your reputation is as a risk taker. Aside from the portfolio approach, how do you look at risks as a leader? Vasella: Let me first say that taking no risks may be the biggest risk of all. In the field of R&D, the biggest risk is not so much the internal programs, because we see their evolution and we expense as we go. The more risky undertakings, in my view, are when we license-in compounds, where we don’t always have full knowledge and where we may be missing some facts that the seller Courtesy Novartis knows or doesn’t know. These principles are also applicable to our commercial activities, where it is especially risky to enter areas you don’t know and fully understand. But if you don’t take any risks, you don’t make money. 53 So you license-in research? ample, your feelings in an employment interview can be very important. If you are Vasella: Yes. We are in an inside/outside interviewing a candidate and you become bored, that may be a sign that you can- and outside/inside network, where knowl- not concentrate for a personal reason. Or that the candidate is not giving you the edge is being exchanged and contacts are real story, that he is covering up something. Or you become impatient as you’re ongoing. I think these contacts are very getting lost in what he is saying because he is unstructured or repetitious, or that critical for the development and absorption he is so obsessed that he goes from one detail to the next detail. of knowledge. It’s not an option not to be So when you have certain emotions, you have to try to understand. “Is it in touch with the outside world. In-licensing I look at as a complementary factor, coming from me?” “Is it coming from the other?” And if it’s coming from the other, not a primary driver. It can be a good addition, but it never should replace organic “What does it mean?” And, “What is the other person doing to me?” And “How can growth and organic innovation. However, it is also true that sometimes there is a I use that in order to understand the other person better?” paradoxical thing to be observed — that the internal researchers are tougher with In addition, the whole question about how you relate to patients, when you’re the external projects than their internal projects. They think that if you license-in, in this industry, is a deeply emotional one. You can take it from the commercial then the external project will get the budget they want. So that is a potential dan- point of view. You can take it from a scientific point of view. You can take it from an ger of being misled, which one has to be aware of. emotional point of view. But the reality is that we have to think about what we do from a number of different perspectives. How do you deal with that? Vasella: You have to make sure that internal projects are evaluated on a peer review Are different people oriented differently? Do some favor the rational and scientific, basis and that the people are as objective as one can be. But I think one shouldn’t others the emotional, others the commercial? have illusions. Occasionally, people make mistakes and make misjudgments, Vasella: Yes. We all have inclinations, and most of us have the capability to develop myself included. That’s our human nature. We can not avoid it completely. It’s at least an understanding of other areas of expertise than our own. This is impor- like aiming for perfection in oneself. That’s not obtainable. Everybody has weak- tant as we create very complex things, which can only be done through open col- nesses. It is, however, crucial to recognize where we have our weaknesses and laboration across different knowledge areas. Some people are very skilled special- accept this reality. ists; others have the ability to switch from one area to the other.

And yet, weaknesses are weaknesses. How do you compensate for them? As a leader of a company, do you select for a certain type — say, rational or scien- Vasella: Where we have weaknesses, we have to try to compensate through other tific or commercial— for senior positions? Or do you select for adaptability? Some- people. That’s one reason, by the way — and it’s only a small reason — that I think one who can move between different states? continuity of leadership is so important. You build complementary leadership Vasella: That’s an interesting question. I first look for competence from a technical teams. It’s important to get that right. You need continuity in business, and you point of view, because that’s a fundamental condition. Second, I look at interper- need it in the sciences. Not too short, but not too long either. sonal competence. So, the question is, “Can this person interact? Can they create a link when you talk to them? Is there an emo- It’s interesting that you lead a scientifically based tional contact or not? Is it somebody who creates company and that you use words like empathy and a certain bond or not?” And without going into an the human resource as they relate to research. analysis of how they do it, the question is, “Are Where does that come from? they capable of doing it?” And, of course, I look Vasella: It comes from my deep belief that in order to see if they have humor. “Can they laugh about to deal with each other in an adequate way, we have themselves? Do they understand a joke?” This to acknowledge the human factors in ourselves first helps you understand the functioning of the per- and in others also. And we have to see those factors son and whether they have emotional baggage. not as weaknesses, but as a reality, as a source of But then I look for intrinsic motivation and integ- strength and also as a source of diagnostics. For ex- rity; both are a must. Then you have to ask, “What are the needs of double-income couples or singles?” Grocery shopping was one of them. And so we added Which of the types you described do you favor? Peo- a grocery shop, which now is in high demand, ple who are emotional or scientific or commercial? and postal services, and banking services and a Vasella: All of them. They all have importance. If pharmacy. somebody is a researcher, I’m not asking him to be And many of our people have children, so a commercial person. That’s not the aim of the ex- child care is a must. Historically, we didn’t have ercise. But they have to understand that there are children on the campus. But why shouldn’t par- some economic realities, and that money is not end- ents be able to bring children on the campus over less, and that there is reality to the budget and that lunchtime? Of course, there were some concerns we all have to work within constraints. about liabilities. But the reality is that it is less dangerous than walking in a city. Novartis has a campus in Basel designed by some of And, for the first time this sum- the world’s most creative architects, like Frank Gehry. Thomas Meyer mer, I saw parents with strollers The campus has been heralded for its inventiveness. and small children and larger chil- What is the reason for devoting resources to a cam- dren, all walking around the campus like that? pus. It was great. Vasella: Our first intention was to create an environment where human beings are We also think about the at the center, not machines. We come from a chemical production history. So it’s outside space. Where do people a transformation from an industrial production site to a knowledge center where meet? So the green spaces and human beings, not machines, create knowledge and value. So, we asked, “What parks play a big role. During the kind of environment do we need in order to achieve that, to make people under- mild period of the year, you can now see associates who take their computers and stand their importance?” The answer was that to create knowledge, we need an work outside with wireless. Or you see little groups of three or four people sitting environment that is open, because communication is so important and transpar- outside around a table, working or having a cup of coffee under the trees, debating ency and openness are so important, and where people feel at ease. and discussing. The new campus creates a much less rigid kind of environment. So, the first conclusion was that we wanted to go from individual offices, We also decided to integrate art and architecture where practicable. It may which we historically had in Basel, to open-space offices. Not cubicles, but open not be for everyone, but a majority of people have responded very positively. And floors. We call it “multispace” because we have conference rooms and also small the acceptance rate has been extraordinarily high, and the feedback is very positive. rooms, where people can have one-on-one discussions that will not be overheard So, in the building where the people work who are most critical to what we do, the and where they can have confidential telephone calls. But, basically, we wanted to positive rating was 70 percent. foster cross-functional, cross-individual integration. In addition, because we are dealing with knowledge workers, we had to ask The images of the campus show something that is remarkably well-designed what people with high levels of education and knowledge are looking for. Do they and imaginative. want to go to a canteen where they are being served mass food? Or do they pre- Vasella: We had 100,000 visitors last year. And the feedback is often, “How can fer to go to places like restaurants? The answer is obvious. They much prefer to go I get a job here?” to restaurants — and not to the same restaurant every day. From the point of view of sitting in restaurants, you ask, “What do we want to signal? Do we want to signal high standards? Do we want to signal that we pay attention to quality in everything we do?” And we do. 55 56 Africa breadbasket. be thenext of famine,may perennial land DECADEAhead The interesting tonotewhattheexpertsthinkmightlieahead. we moveintowhatcouldbeanewbeginning(ornot!),it’s Paris HiltonandthefallofTigerWoods sumitallup.So,as to say, humantragedy, war, economicsetbacks,theriseof makeup. Nooneneedstorecountthelast10years.Sufficeit turned outtobe strong now, givenhowmuchofawashoutthefirstdecade no exception.Indeed,theurgetopredictisparticularly start ofanewdecade,thesecondmillennium,is New beginningssetoffarashofprognosticationsandthe 0 1 0 2 . 1 Q , the 1 da teline — alltheproblemsofPandora, withoutthe Goldman SachsprojectsthattheUnited McKinsey &Companyestimates thatad- The InternationalEnergyAgencysaysthe “By 2020,geneticsandbrainsimulation Europe, whereFrance banned thehead Movies willbesimultaneouslyreleasedon tive budgetdeficitsoverthenextdecade. States willrackup$10.5 trillionincumula - demand through2020 by23percent. agement systemswillcutexpected energy - vances likebetterlightingandenergy-man through 2030.mand forgreenenergy world willspend$26trilliontomeetde- for marriage,lifestyleandhealthcare.” will begivinguspersonalizedprescriptions Muslims. minarets, willemergemoretolerantof instateschoolsandtheSwissoutlawed scarf DVD, intheatersandonline. 1 the BlueBrain projectinSwitzerland — HenryMarkram, director of 3 4 4 2 4

Brain chipimplantscouldbeaturn-on. “Technology will infiltrateeveryaspect By 2020,3-DSkypingandteleconferencing In 2020,mostbankingtransactionswillbe By 2020,11.8percentofChina’spopula- By 2030,theworld’spopulationwillhave might beabletocontrolamouse. butyou e-mail messagejustbythinkingit, probably won’t beabletowriteacomplex You chip sensorimplantedinyourbrain. hadawireless something—provided you’ve computers andphonesjustbythinkingof You mightbeabletocontroltelevisions, fridge. Expecttofeelwatched matically restockyourInternet-connected homes andoffices. Supermarketswillauto- Web andeveryscreenin seamlessly tothe gateway toglobalcommunications, andlink mobilephonewillbea ourlives.of The will beubiquitous. done onmobiledevices. tion willbeover65. more-developed ones. regions willgrow31timesfasterthanthe less-developed more-developed world.The thisgrowthwillcomefromthe percent of Only3.2 grown byaround20 percent. government, butbybigcorporations.”government, Daily Telegraph editor consumertechnology 6 6 6 6 — — Matt Warman, Matt notby 5 7

This page: Getty Images/Zap Art. Opposite page: istockphoto.com. “There are now three times more mobile Outdoor smoking will be banned in most 1 The Christian Science phone subscribers than Internet users. In places, as the political strength of the dwin- Monitor, http://www. the decade ahead, mobile and Web will dling number of nicotine addicts wanes. 8 csmonitor.com/World/ collide to fulfill the promise of technology: Global-Issues/2009/1231/ helping people help themselves. The open The proliferation of video and the ubiquity Predictions-2010-Six-ideas- exchange of information will lead to a more of volunteer exhibitionists will have nearly that-will-shape-the-world informed, engaged, and more empathetic destroyed the pornography industry. 8 7 2 The Times of London, global citizenry.” http://www.timesonline. — Biz Stone, co-founder, Twitter Newspapers will not have Web sites. Web co.uk/tol/news/science/ sites will have newspapers (as well as robust earth-environment/ “It will be the hottest decade ever, as global video and audio channels). Every major article6968250. warming continues, though individual years media personality will generate content on ece#cid=OTC- will vary. Renewables will boom, especially all platforms. 8 RSS&attr=6939611 solar power, as new technologies and falling prices kick in. Nuclear power will make no By 2020, India and China together will add 3 The Advertiser http:// real contribution; any new reactors will not 300 million people, the population of the www.theadvertiser.com/ 8 come on stream before the end of the de- United States. article/20100104/ cade. Evidence that mobile phones endanger LIFESTYLE/1040310/ health will increase. Continued shrinkage China has set a goal of producing 15 percent Entertainment-predictions- of the Arctic icecap could provide the first of its energy from nonfossil fuel sources by for-next-decade climate ‘tipping point’.” 7 2020. 9 — Geoffrey Lean, Daily Telegraph columnist 4 Kiplinger’s Personal Finance, By 2020, researchers will have discovered http://kiplinger.com/ DVDs will be as old school as videocassettes many more genetic variations that substan- magazine/archives/whats- were in 2010. Blockbuster Video, Netflix and tially raise the risk of common conditions, in-store-for-the-next- standalone DVD rental outfits will be out like diabetes, heart disease and psychiatric decade.html of business, replaced by online on-demand disorders, and it will be possible to detect movies and TV programs. 8 these in embryos. This will feed much wider 5 USA Today, http://www. interest in embryo screening, which is cur- usatoday.com/news/ rently used by only a few couples each year, nation/2010-01-04-2020- and encourage fresh controversy over the the-next-decade_N.htm ethics of designer babies. 9 6 Nielsen, http://blog. nielsen.com/nielsenwire/ By 2020, Internet search content will be a consumer/2010-u-s- mix of text, speech, still and video images, outlook-a-cross-industry- histories of interactions with colleagues, look-at-what-well-watch- friends, information sources and their and-buy/ automated proxies, and tracks of sensor readings from global positioning system de- 7 The Daily Telegraph, vices, medical devices and other embedded Jan. 2, 2010 sensors in our environment. A majority

of search queries will be spoken, and an 8 The Chicago Tribune, experimental minority will be through Jan. 3, 2010 direct monitoring of brain signals. 9

9 Nature, http://www.nature. com/nature/journal/v463/ Fresh water will n7277/full/463026a.html be the source of more international friction than oil.8

Q 1 . 2 0 1 0 57 governance

Giving Boards Their

he chief communications officer of a Fortune 50 com- far greater than this executive realized. It no longer is pany was quick to say, “No thank you,” when an inde- enough for boards to refrain from communicating or to pendent communications advisor offered assistance to the communicate only through the legally required proxy, 10K company’s board and the lead director. and 8K documents. They must do more to show they are rep- “You raise some important challenges in your memo, resenting owners and holding management accountable. without question,” the communications officer said in her T Operating Behind the Scenes e-mail response to the consultant. “We believe our staff, Voiparticularly our general counsel, already works closely and Many board members believe that it is entirely appropri- ce well with our board to ensure we exercise best practices in ate for them to funnel their communications through corporate governance. And when there are specific media management and are puzzled by suggestions that they are and communications opportunities, I would be incommunicative. Some still operate as members of old- engaged as well. So, at this time, I don’t see a need.” boy networks and do not believe they answer to anyone. The communications officer might have been wiser to “I cannot see any reason for the board to ever commu- give the overture a second thought. In this period of intense nicate. The board’s job is to ensure that management is board scrutiny, when boards must assert their indepen- communicating,” said one bank chairman who sits on

dence and authority, getting outside help may have a value three Fortune 100 boards and requested anonymity. “We Nigel Buchanan 58 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e by Karen Kane

aren’t seeking publicity.” also important. She added, “I have never had a shareholder To other board members, the 8K, the 10K, the proxy group ask something that was inappropriate. They are and other governance documents that boards routinely aware of Regulation FD. I think it’s important to listen and file provide more than ample transparency. sometimes agree to disagree. We have learned so much Still others see perils in independent communica- talking to shareholders. It’s made us better directors.” tions. Some, for example, are concerned that by speaking Some directors see dangers in boards being more open independently, they will inadvertently run afoul of selec- and consequently giving shareholders greater voice in Voi ctive disclosure regulations that prohibit providinge infor- board-related decisions. One former corporate executive mation to some members of the public, but not others. and now a director on several boards, who requested ano- “Many directors are reluctant to engage shareholders nymity, expressed concern over shareholder nomination out of concern for Regulation FD and their ability to insure of board members. Over the past several years, he said, he that the conversation does not cross the line,” said Bonnie has seen “random” suggestions from shareholders for nom Hill, lead director of Home Depot. She agrees that having a inees that reflected the concerns of “painters and poets.” board-shareholder communication policy and media Forces for Change training are key ways to successful interactions. Defining the context and scope of the dialogue with shareholders is Despite widespread resistance though, forces are coalescing B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 59 60 These shareholdersbelievetheylackaccess These resent usasshareholders,” saidAnneSheehan,directorof rector andlecturerattheMillsteinCenterforCorporateGov ment System(CalSTRS),thesecond-largestpublicpension fund in the U.S. “Board members forget that. Yes, “Board membersforgetthat. theymaybe fund intheU.S. fensive andtooreactiveintheircommunication,”hesaid. for boardseats. ing directors and a practical means of ousting boards. The oustingboards.ing directorsandapracticalmeans of The which wouldfacilitateshareholders nominatingboardcandi nominated throughaninternalprocessbuttheyneedthe ness intheircommunications. shareholderdis- Inlargepart, and majorityvoting.“Today, thegovernmentistakingcon- area whereboardsaretoodefensiveandalloftenreacting vocating forsay-on-pay, majorityvotingoreveninbattling activists’ demandstoberecognizedasowners, whetherinad- “under-representation”and toinformation.This feedssome poorly andcriticizedseverely,” saysFredG.Steingraber, chair- being largelyledordrivenbyCEOs, todirectorstakingmore the past15years, accordingto StephenM.Davis, executivedi- to compelboardstowardsgreaterindependenceandopen- tions withshareholdersandalltoofrequentlybeingde boards,trol of largelyduetodirectorsnotbuildinggoodrela- to eventsratherthanproactivelyleadingwithmoretranspar tion andCEOsuccessionexecution,whicharebeinghandled importance,isrightuptherewithCEOcompensa- terms of dates, asthewaytogiveshareholdersagreatersayinchoos government topresstheissue. corporate governance of theCaliforniaStateTeachers’corporate governanceof Retire- change. “Yes,wefeeltheneedtoremindthemthattheyrep- content, intensifiedbytherecentfinancialcrisis,content, hasspurred control. Followingthecorporatescandalsinearly‘90s, ernance and Performance at the Yale School of Management. Yale Management. ernance andPerformanceatthe Schoolof ent andtimelycommunication,”saidSteingraber. Hehasob- shareholder activismbymajorinstitutionalinvestorsduring shareholders’ votesinannualelections tokeeptheirjobs.” shareholders gainedinfluencewithvictoriesonsay-on-pay served thatinthepast10-15 years, boardshavechangedfrom 0 1 0 2 . 2 Q “The subject of board-shareholdercommunication,in subjectof “The A sense of voicelessnessandhelplessnesshasfueledthe A senseof Pension fundsseeboardsbecomingmoreamenableto SEC Chairman Mary L. Schapiroseesproxyaccessrules,SEC ChairmanMaryL. This shift to “Shareholder communicationisan United Kingdomandotherboards. man and CEO emeritus of A.T. Kear- A.T. man andCEOemeritusof ney andadirectorfor3iPLCinthe — from — to thedirectors behind-the-scenes advisors highly accountablepublicfigures - - - - - “When itbecomespersonalized,helpsdirectorstounder “When In addition, boards may put themselves in the position of be- In addition,boardsmayputthemselvesinthepositionof A LessoninBoard-ShareholderInteractions (CalPERS). This shift (CalPERS). This Koppes, formerdeputyexecutive officerandgeneralcounsel By establishingindependentcommunications, boardsand mation thatboardsareonlybeginningtograsp. for theCaliforniaPublicEmployees’RetirementSystem fund in the U.S., was threatening to put Schering-Plough on was threateningtoputSchering-Plough fund intheU.S., Plough also met with a range of shareholders, alsomet witharangeof Plough discussing ing abletomakeamajorcontributionriskmitigation. its focus list, whichmeantidentifyingthecompany astrou- its focuslist, CalPERS,” said Susan Wolf, the chief governanceofficer.CalPERS,”Wolf, the chief saidSusan As thecompensationcommittee andthecom- with thechairof also win them the confidence of shareholders,also winthemtheconfidenceof enablingtheir also haveanimpactonboardelections. boards of Europeancompaniesarealsoprovidingmomen- boards of part of anewshareholder engagementprogram,Schering- part of pair thecompanyandestablishahigh-performanceculture governanceofficer,pany’s firstchief metwithCalPERStore- bled. Breakingwithtraditionalcorporatepractices, FredHas- tum forchange. their companiesmaysucceedinquietingdissentingshare them tobecomeaccustomedamorepublicrole,”saidRich tors wereneitherseennorheardanditwilltaketimefor their views on a range of issues,Wolf. their viewsonarangeof says that couldsustainlong-termgrowth. highly accountablepublicfigures holders and staving off governmentintervention.Butitmay holders andstavingoff quest time to let the new leadership execute its strategy tore- quest timetoletthenewleadershipexecuteitsstrategy Sheehan, referringtowhatareknownasbrokervotingrules. SEC haspostponedproxyaccesschangesforthe2010 proxy companies to operate more in the interests of thelongterm. companies tooperatemoreintheinterestsof could begained.In2003, CalPERS, thelargestpublicpension cially if heorsheistargetedbyano-votecampaign,”said cially if newbrokerruleswill shareholders. of can voteonbehalf The stand the importance of reachingoutandcommunicating.”stand theimportanceof san, Schering-Plough’s executive,along chairmanandchief season buthasjustchangedtherulestolimitwhenbrokers “Many directorsbegantheirboardcareerswhendirec- “Since then, we’ve enjoyedaverygoodrelationshipwith “Since then,we’ve “I thinkthiswillgetindividualdirectors’attention,espe Newer, youngerdirectorsandthosewhohaveservedon Schering-Plough provides a good illustration of what providesagoodillustrationof Schering-Plough — from behind-the-scenesadvisorsto s n I y r r e F / n r o K e h T — is aprofoundtransfor-

— - T I T - - u t e Nigel Buchanan r B Nigel Buchanan i e For boardsthatdecidecommunicating independentlyis risk programworksbestforthecompany. regulatory boardsmaybeabletostaveoff risk oversight, many of our peer companies face,” says Wolf. ourpeercompaniesface,”says many of management’s proposals, veryfewwithholdvotesondirec- more than simply be introduced. Allowing the chairs of the more thansimplybeintroduced.Allowingthechairsof in the best interests of thecompaniesandshareholdersthey in thebestinterestsof for employeesatlargewouldgoalongwaytowardsopening involvement with employees. They couldaccomplish thisin involvement withemployees. They at Yale. theyestablishsolidrelationshipswithlong-term at “If ner at the law firm Weil,Gotshal&Manges.ner atthelawfirm Onestudysug- a riskmanagementculture,saysIraM.Millstein,seniorpart proach. Bybettercommunicatinghowtheboardishandling aseparaterisk includingtheformationof board handlesrisk, ployee understandinghisimpactonrisktaking,responsi boards havemorefreedomtoplanforthelongterm.” part byattendingtheoccasionaltownhallmeetingand bility foractingwithinacceptablelimitsandhisultimateac ter support long-term objectives of thecompany.”ter supportlong-termobjectivesof tors and largely we’ve avoidedtheadversarialsituationsthat tors andlargelywe’ve holder rightsbillsseektobemoreprescriptiveabouthowa key committees to make brief reportsandanswer questions key committeestomakebrief loyalty of theirinvestors,”loyalty of saysDavis, theMillsteinCenter of Developing aBoardCommunications Plan Sheehan, “Itdemystifiestheprocess, whichenablesustobet- gests that operational risk can only be fully addressed if itis gests thatoperationalriskcanonlybefullyaddressedif committee. Manyboardsresistsuchaone-size-fits-allap- communicated throughouttheorganization,witheachem- changes and let the board continue to decide what kind of changes andlettheboardcontinuetodecidewhatkindof countability. To directorsmayneedgreater achievethat, channels of communication. channels of serve control over their risk mitigation practices. While risk serve controlovertheirriskmitigationpractices.While stand the guidance the board is giving to management,” says stand theguidanceboardisgivingtomanagement,” serve, thereisnosingleformula forthemtofollow. there But, showing upataninvestorconference.Andtheyshoulddo oversight remainsaboard’sresponsibility, variousshare- owners organization, theboard’sgreatestimpactcouldbeincreating I F n e l a T n o s g n “If boards handle it right, theycanwinthelong-term boardshandleitright, “If “As wehaveenjoyedverystrongvotesinfavorof aresult, “We wanttouseourinteractionwiththeboardunder- “We At leastsomeshareholdersseeitthesameway. More communicativeboardsmayalsobeabletopre- Since boards play a critical role in setting the tone of the Since boardsplayacriticalroleinsettingthetoneof

is a — typically investorswithlongertimehorizons profound transformation

beginning t & L h s r e d a e tograsp. i p — - - - thatboardsareonly The purpose of communicationmustbetogenuinelyweigh purposeof The munication policies, themorelikelydirectorswillbecomea media tocommunicatewiththeirstakeholders. Directors munication is not a one-way street, accordingtoDavis.munication isnotaone-waystreet, True meaningful communication. Activist investors will react badly Depot calledCalSTRSasitwasworkingontheboard’ssucces- from shareholdersathome;andotherissues. force forrestoringtrustandoptimal performanceintheir from theirrecommendations. Home institutions. would includehowitwilldesignateaspokespersoninany theirsugges- implemented oneof investors. Shareholdersknewwhenthecompany information calculatedtoplacatestakeholderswithouttruly ing aplan. when thefinaldecisiondeparted are somecommonprinciplestheyshouldconsiderindesign appropriately aswellinformingandpersuading,hesays. portunity andbegintotakestepscraftindependentcom- rules the road. Those probably want to establish some rules of termined; how directors will respond if theyreceive calls termined; howdirectorswillrespondif tions andreceivedanexplanation their corporationsandsometimesjudiciouslyjoiningthose A formerboardsecretary, KarenKaneconsultsto boardsofdirectorsand to weak attempts at dialogue, lip service or an avalanche of to weakattemptsatdialogue,lipserviceoranavalancheof the perspectives of othersindecisionmaking. the perspectivesof dates andskillsetsitshouldconsider, saysSheehan. during proxyseasonorwhenaninvestorraisedissuewith given situation;howthespokesperson’s messagewillbede- conversations. communication meanslisteningrespectfullyandresponding communicating withthem. commitment toregularratherthanepisodiccommunication forSchering-Plough’scommunications strategy boardtoits should bemonitoringthe“chatter” intheblogosphereabout sion plans and asked the pension fund what kind of candi- sion plansandaskedthepensionfundwhatkindof is basedinChicago. other in-person contact, boards can take advantage of social boardscantakeadvantageof other in-personcontact, Most importantly, theyshouldcommitthemselvesto Whatever thestrategy,Whatever thesoonerdirectorsseeop- Wolf attributed much of the success of therevamped thesuccessof attributedmuchof Wolf It is also important for boards to understand that com- that understand to boards for important also is It To ensurethataboardspeakswithonevoice,itwill Besides usingshareholdermeetings, townhallsand 0 1 0 2 . 2 Q - 61 governance Keeping Boards

Boards of directors survive on information. When directors lack the right information and when they fail to energeti- cally pursue it so that they can ask probing questions and engage in wide-ranging discussions with management, all-too-familiar trouble develops.

By the time Edward D. Breen Jr. took over as CEO and chairman of Tyco International in July 2002, the company was in the midst of what threatened to become a death spiral. Its stock price had tanked, it was deep in debt, its once-stellar reputation was sullied by scandal, employee morale was in tatters and the company’s strategic momen- tum had stalled. The previous CEO and chairman, L. Dennis Kozlowski, had become the latest poster boy for executive excess, accused of raiding the company treasury to pad an increasingly lavish lifestyle — including a $2 million 40th birthday party in Sardinia for his wife and Ba $6,000 shower curtain for Tyco’s New York City apartment. Almost overnight, Kozlowski went from being touted on magazine covers as “the next Jack Welch” to being investigated for fraud. Although Kozlowski was widely considered the prime culprit in Tyco’s reversal of fortune, the company’s passive and disengaged board of directors, which appeared Serge Bloch Informed By Lew McCreary Lew By 0 1 0 2 . 2 Q 63 64 He became convinced that the board of directorsthathired He becameconvincedthattheboardof my firstyear,”“Wedidn’t havethemoney, saidBreen. andwe Dennis.” On hiswatch,Tycoboughtalmost600companies failed to prevent, orevenrecognize,theperilsthatnearly failed toprevent, forms aimedatensuringthatno futureTycoboardwouldal- ing velocitylefttoolittletimetothoroughlyevaluateandin if game,saidBreen.“ if andplaying thewhat- ings talkingaboutthebalancesheet,” awakened ittotheriskscompanyfacedandfailed acquisitions in2001 alone.AccordingtoBreen,thedeal-mak- nervous.” passivity. Itfailedtopursue informationthatmighthave between 1997and2002, includingnearly$20 billionworthof trol during the company’s years of explosivegrowth. trol duringthecompany’syearsof to functionmainlyasarubberstamp, ranaclosesecond.Ac- that mighthavecausedasmart boardmembertogetreally we What if thefinancialmarketstightenup? if What turn? tegrate allthosenewproperties. him toreplaceKozlowskialsoneededreplacingsinceithad had an$8stockprice.” question the wisdom of management’squestion thewisdomof deal-makingpace, destroyed Tyco. Centraltotheboard’sdysfunctionwasits low asimilarcrisistodevelopon itswatch.Inrevisingboard gestion that brought it to the brink of bankruptcy,gestion thatbroughtittothebrinkof saidBreen. cording to Breen, the Tyco board had let risk get out of con- cording toBreen,theTycoboardhadletriskgetoutof can’t raise money for a little bit of time?’ Very basicquestions can’t time?’ raisemoneyforalittlebitof said Breen. of acquisitions,of thenickname“Deal-a-Day earninghimself or unknownquality 0 1 0 2 . 2 Q “We had $32 billion in debt, and$13billionwasowed in had$32billionindebt, “We “Just imagine if theboardhadspenttwoorthree meet- “Just imagineif Kozlowski hadpoweredTyco’s growththroughafrenzy Breen’s research fornewdirectorsusheredinarangeof Over time, the profusion of acquisitions Over time,theprofusionof — ‘What if thestockmarkettakesadown- if ‘What gave the company a bad case of indi- gavethecompanyabadcaseof — some of poor someof - The difficultyboardsencounterinobtainingcriticalinfor- The recent years.informationwithwhich thevolumeof Infact, management knows mation haslongbeenseenasachallengetogoodcorporate merous newdisclosuresthatmultipliedtheinformation rate governanceresearchfirm. right data,”saidNell Minow, CorporateLi- The co-founderof motivated to take advantage of voluminousinformationto motivated totakeadvantageof icance onthe[meetingagenda],youmighthave10 to15 in onwhatiscritical.Andmanagementmaysometimesbe as much as possible. It is more a problem of quality than of qualitythanof as muchpossible.Itismoreaproblemof along byglobalizationandtheoccasionalluridbusinessde vard Business School who has served on the boards of public vard BusinessSchoolwhohasservedontheboardsof businessadministrationatHar- an emeritusprofessorof a floodinthelast25years. agement customarilydelugesboardswithanalysts’reports, and sometimesfire,topmanagement;thusmanagementre and Minowdescribedthatessentialconflictintheir1995 boards receivedrisesteadilythroughoutthe1990s I.CashJr., readingandnotmuchmore,”saidJames pages of boards needtoconcernthemselveshasgonefromatrickle performance. Andthatdelugehasbeensteadilygrowingin banes-Oxley Act in 2002. That legislationdemandednu- banes-Oxley Actin2002. That bacle brary (www.thecorporatelibrary.com), anindependentcorpo- practices, thekey Breenandthenew board tackledmanyof ports totheboard,whichoversees itsperformance,theau “Corporatebook, Governance.” Itistheboard’s jobtohire, Monks between boardsandmanagementteams. RobertA.G. tors. everyboardis, Sothemissionof toclosethegap inpart, the companythandodirectors, shareholdersorregula- thors observed. And yet “in the overwhelming majority of thors observed.Andyet“inthe overwhelmingmajorityof quantity. Clearly, theboarddoesnotneedtoknoweverything directors neededtoreview. divert directors’attentionfromvitalfacts. Data Mining governance. Managementinvariablyknowsmoreabout companies since 1984. Cash saw the volume of information companies since1984.Cashsawthevolumeof compliance filingsandmemosonstrategy, riskandfinancial cate andevenmisinformastoenlighten.Boardscanbeso challenges commonlyconfrontedbycorporatedirectors. compensation andinformation,” theywrote. cases, directorsarebeholdentomanagementfornomination, ent conflict of interest that is at the core of therelationship interestthatisatthecoreof ent conflictof overwhelmed withinformationthattheyareunabletozero “Very often, they’ll burythemindata,butit’s often,they’ll notthe “Very In themid-1980s,signif- therewassomethingof “if The motivationto misinformcanarisefromtheinher- The The job of boardsthenistoavoid beingdrownedin- jobof The Boards usually have no shortage of information.Man- Boards usuallyhavenoshortageof But the flood of informationcanserveasmuchtoobfus- But thefloodof — and then spike sharply with the passage of theSar- andthenspikesharplywiththepassageof — justthereallyimportantthings. s n I y r r e F / n r o K e h T — nudged - T I T - - u t e Serge Bloch (all) To Ensure Candor at the Top,

Begin at the Beginning

Nell Minow, co-founder of The Corpo- for family vacations and wandering by some meeting in Maui for rate Library, an independent corporate 10 minutes so that you can call it a business expense, governance research firm, believes that you’re out.” an ounce of prevention is worth a pound Step 2: Ensure Compliance — “The next thing you do is put N of cure in ensuring that management is your money where your mouth is,” Minow said. That means forthcoming with information. She urged boards to take three making sure that incentives and compensation are designed to precautionary steps when hiring a CEO. reinforce a board’s expectations. Step 1: Define Integrity— Boards should make their expec- “You have genuine clawbacks, and you have pay that is gen- tations clear from the outset. Minow said a candidate should be uinely tied to performance,” she said. “And you don’t go back told: “Look, you need to know upfront that job one around here on that. Just because the economy is down, you don’t say, ‘Well, is integrity. As Warren Buffett has been known to say, ‘If you you tried really hard.’ None of that. You really have to commu- lose money for us, we will be understanding; if you lose reputa- nicate this as powerfully and continuously as possible — with tion for us, we will be ruthless.’ So you need to know right now your words and with your incentive compensation as well.” that we expect no bad surprises. We don’t want to read in Bar- Step 3: Assess Performance — This step requires that ron’s about our financial problems. If there’s bad news, we want boards form close relationships with the CFO, the general coun- to be told about it immediately, candidly and completely by you. sel and the chief integrity officer, if there is one, so that direc- And if that ever does not happen, you’re out. The policy of this tors have 360-degree views of the company’s and the CEO’s board is that if it’s a matter that would lead to the dismissal of performance, said Minow. Boards should also form good rela- a middle manager, it will lead to the dismissal of the CEO. So, if tionships with the secondary level of management to get addi- you’re lying on your resume, or if you’re using the corporate jet tional perspective.

formation, to pull out the information they need and to get presentations or slide decks. the information they cannot obtain from management by “If you ask for an open dialogue at the board meeting, other means. hundreds of questions usually get at all the issues,” he said. ”Versus a board that just sits there and lets management pres- Taking Control of Information ent, and maybe once an hour there’s a question.” One of the principal ways that boards can regain control Another innovation at Tyco is the institution of regular of the information they receive is by setting the agenda for teleconferences in the months between the board’s six formal board meetings. meetings. There are a small number of agenda items for each “I can’t emphasize enough that the board itself needs to of these calls, but the bulk of the time is left for open discus- control the agenda for board meetings,” said Minow. “The sion. Breen finds that often questions raised by the telecon- board has to say to the CEO, assuming the CEO is chairman, ferences surface at the next formal meeting. ‘If you’ve got good news, send it to us in an e-mail. We’re Field Work happy to have it, and we’ll stand up and applaud. But the board meeting, when we’re all in the room together, is about Boards can also exert control over the information they ac- the bad news. It’s about the toughest problems and the hard- quire by conducting firsthand research themselves. Minow est questions. That’s why we’re here. So we start with that, thinks field trips are a must. and if there’s time left over, we get to the good news.’ And The Home Depot, for example, has required its direc- that’s why the board has to control the agenda. Because if they tors to make three store visits a month, said Minow. Home do, they will also control the information they receive.” Depot’s directors “would hang out in the parking lot for a At Tyco International, the board now routinely proposes while and ask people coming out of the store if they’d gotten topics for discussion, said Breen. He also is careful to leave everything they needed” and whether the shopping experi- plenty of time in meetings for discussion; there are no long ence was acceptable, Minow said. “Then they’d go inside and B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 65 What Tools

These Portals Be

Board portals — secure online platforms ware provider, board portals make possible user authentication, where directors can gain access to infor- remote access and information and communication encryp- mation and communicate and collabo- tion. They also have document management capabilities that rate with each other — are being widely apply even to files downloaded for off-line use. The information B adopted by corporate boards, said James embedded in files is recognized in some states for auditing pur- I. Cash Jr., an emeritus professor of business administration at poses, like verifying that materials were sent, received and read Harvard Business School. Cash has helped boards use technol- by a certain time. A company’s policies regarding the retention ogy to gather and share information and advised them on the and purging of documents can also be applied to all files, anno- governance issues associated with their use of technology. tations and communications. Two portals available commercially are Directors Desk Portals make it easier for directors to meet informally, outside (www.directorsdesk.com) and BoardVantage (www.boardvan- of their usual meeting schedule. During the financial crisis in late tage.com). Both are what are known as hosted solutions, mean- 2008, boards held video conferences and teleconferences and ing the vendor provides the application as a fee-based service. took formal votes on an almost weekly basis, business that would Whether developed and deployed internally or hosted by a soft- have been very difficult to conduct without portals, Cash said.

look around. And then there’d be an announcement on the PA company’s customers or employees — are full of diverse view- saying, ‘One of our board members is here today. If any em- points on corporate performance. Increasingly, companies ployee or customer wants to talk to him, here’s where you’ll actively monitor what is said about them on Twitter, Face- find him.’ ” book and the Web sites of specialized advocacy communities The Tyco board has become as intent upon doing its that coalesce around various consumer interests and sectors. own research as its predecessor was complacent about it. Boards should just as actively seek out those perspectives. The board has launched a range of risk-mitigation activities Minow also recommends that boards visit Yahoo and across the business, including trips to foreign facilities, said The Motley Fool message boards, where they are apt to find Dennis Carey, a senior client partner in Korn/Ferry Interna- valuable information from unhappy employees as well as in- tional’s CEO and Board Services Practice. Carey believes that vestors. Boards can only get a comprehensive picture of a few boards take risk assessment seriously enough. company by gleaning information from as wide a variety of “Many boards still have not gotten to the point where I sources as possible, she said. would feel comfortable saying that they have very effective Trust, but Verify risk-mitigation discussions at the board level,” he said. Risk-assessment visits to worldwide business units are In addition to independently gathering intelligence, boards now a staple of Tyco directors’ work, said Breen. Directors must cast a skeptical eye over the information they do receive spend a large part of one day meeting with the presidents of from management. local business units and their direct reports. Board members “You can’t do better than to quote Ronald Reagan, ‘Trust, ask the local managers what they think are the two or three but verify,’ ” said Minow. While she believes it is important worst things that could happen to them at any moment. Di- for boards to build good relationships with management, rectors also tour the facilities and meet with employees to an- she sees the job of verification as a perennial board challenge. swer their questions. Breen and other top executives deliber- (See sidebar, page 65, “To Ensure Candor at the Top, Begin at ately do not attend. the Beginning.”) “We let the board team go do it and have a freely flowing Minow recalled a conversation with a director of one of dialogue,” he said. the largest companies that imploded in the financial crisis Boards can also take what amount to virtual field trips. to illustrate the pitfalls of directors taking what they are told The growing number of social networks and online commu- at face value. She said the director told her, “I used to ask the nities — many of which are largely populated by a particular CEO to get back to me on some things, and he wouldn’t do it. 66 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e And I thought, oh well, he’s busy, I don’t want to bother him. we wanted to find people who were highly respected by the But now I realize he was just hiding stuff.” investor community,” said Carey. “We recruited a couple “Directors have to be immensely alert to discontinuities of people who were in the mold of no-holds-barred, share- and inconsistencies — to things that just don’t seem right,” holder-activist-supported directors. I wouldn’t do that in said Jay W. Lorsch, a professor of human relations at Har- every case, but in this case it made sense.” Carey also looked vard Business School. “If you smell smoke, you better go see for strong executive experience and hired two CEOs, William if there’s a big fire.” S. Stavropoulos of Dow Chemical and Rajiv L. Gupta of Rohm But boards must tread a fine line in questioning man- and Haas. agement because maintaining a close relationship with “These are big, global, complex companies that would management is crucial to the performance of a board’s re- not compete against Tyco but faced some of the same issues sponsibilities, according to Lorsch and other observers of that Tyco would have to deal with,” said Carey. corporate governance. The paramount goal of a board is to build a trusting relationship with the management team, these observers believe. That relationship is presumed to lubricate a candid, productive give and take, which in turn helps directors develop insight into management’s thinking and overall performance. Boards “can’t start to look like watchdogs,” said Lorsch. “Even the audit committee, if it gets too aggressive, can create tensions.” So checking up on the management team “has got to be done carefully and with a fair degree of what I would call delicacy,” he said. That can be a tall order, he admitted. Even when there is not a deliberate effort to conceal information, there is the danger that management is not in control of its operations. Lorsch believes that management’s failure to comprehend the risks that their companies were exposed to, rather than deliberate wrongdoing, caused many of the recent corporate crises. To protect against this, boards must be able to unravel what management cannot. Building a board composed of experts in key disciplines — finance, risk, compensation and talent management— can therefore be critical. Likewise, directors with specific industry knowledge or track records of executive leadership in companies of comparable structure, scale and reach bring a significant advantage in their ability to understand what Courage Above All they see and hear from management. Carey, of Korn/Ferry In- ternational, said that most audit committees he has worked While it is crucial for boards to independently collect infor- with have at least two financial experts. mation and have the expertise to understand financial state- “There’s a plethora now of CFOs and former CFOs on ments and accounting rules, it is most important of all that board audit committees — many, many more than were on they have “intellectual courage and curiosity,” said Minow. boards before Sarbox,” said Carey, referring to the Sarbanes- In January 2001, Kozlowski presented the Tyco board Oxley Act. This is preferable to having professors of account- with a new CEO employment contract stipulating “that a fel- ing serve on boards because CFOs know better what can be ony conviction would not be grounds for termination,” said done to shade data, and they know what questions to ask of a Minow. company’s CFO, he said. “And they signed it,” she said. “Now, don’t you think Carey, who recruited Breen and then Tyco’s new board, maybe that was a red flag, and someone should have raised said he looked for “a world-class independent director who his hand and asked, ‘Is there something you want to tell us?’ was a high-octane, high-energy person but also someone of That’s not an issue of information — they had the informa- great integrity.” Carey found Jack Krol, the former CEO of E.I. tion right in front of them.” du Pont de Nemours, and the two of them assembled the rest of the new board. Lew McCreary is a Boston-based writer and editor. He is a former senior “Because Tyco had had an investor crisis of confidence, editor at the Harvard Business Review. B r i e fi ngs on Talen t & L e a d e r s h i p Q 2 . 2 0 1 0 67 i n r e v i e w

Putting Leadership on the Couch

“Reflections on Character and Leadership,” by Manfred Kets de Vries (Wiley, 2009)

Manfred Kets de Vries uses the principles of psychoanalysis to explore an often ignored aspect of leadership development: Who you are is how you lead.

If you have never read Manfred Kets de Vries, you should treat yourself. Judged by The Economist to be one of the world’s 50 leading management Ithinkers, Kets de Vries paints a far more authentic portrait of leadership and its underpinnings in his eclectic writings than can be found in the vast majority of the leadership category, dominated as it is by books with facile formulations.

Kets de Vries took an atypical route to the study of management and leadership. After early studies in chemical and mechanical engineering, he turned to economics, but was troubled by traditional economic theories, which assumed rational behavior in individuals. It seemed to him that the behavior of homo economicus had more to do with rationalization than rationality. Later, as he delved more and more deeply into the study of organizational behavior, he became convinced that too much attention was being paid to structures and systems and too little to the vagaries and idiosyncrasies of the human personality. Then, at Harvard, he took a course — “Psychoanalytic Psychology: An Organizational Theory” — that unlocked the door to his life’s work. In the ensuing four decades, Kets de Vries’ research at institutions like McGill, Harvard and INSEAD has methodically probed the dynamics of individual leadership and organizational change by applying 68 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e the principles of psychoanalysis to them. His many should not be leaders at all. That is not resulting writings refreshingly address the to say, however, that all leadership character- inconvenient truths and dark sides of lead- istics are immutable. Rather, the book sug- ership and organizations that many authors gests that efforts to create or transform lead- eschew. ers will probably not be successful in every A recently published three-volume series case or even in the majority of cases and that titled “On the Couch with Manfred Kets de true leaders do not emerge solely from com- Vries” (Wiley, 2009) offers a wonderful intro- pleting workbook exercises and receiving duction to the author’s work. Comprising 360-degree feedback. essays originally written between 1976 and Though stark, Kets de Vries’ message is 2008 and updated and revised by the author, ultimately encouraging. In the latter third of the trilogy explores the link between person- the book, he focuses on how leaders can be ality archetypes and leadership. The latter transformative by displaying personal cha- The book books in the series focus on how an individ- risma that fosters passion and conviction and suggests ual’s personality type, whether he’s in a by creating organizational structure that fos- that true position of leadership or a member of a man- ters creativity and ownership. These are famil- agement team, determines his career devel- iar themes in leadership literature, but they leaders do opment and the functioning and success of take on freshness and weight when viewed not emerge his organization. However, it is the first from Kets de Vries’ clinical perspective. book, “Reflections on Character and Leader- To illustrate these forces of change, the solely from ship,” that constitutes the best overview of author describes the impact of three leaders completing Kets de Vries’ seminal thinking. whom he considers designers of prototypical The tenor of the book is evident from postindustrial corporations: Richard Bran- workbook such tantalizing chapter headings as “The son, founder of Virgin, was a flamboyant and exercises and Pathology of Leadership,” “The Despot’s intuitive builder of a company that valued in- Toolbox,” “The Organizational Fool” and novation and creativity above all else; Jack receiving “When the CEO Is a Neurotic Impostor.” Kets Welch, former CEO of General Electric, was 360-degree de Vries’ intention is not to turn executive an exacting, no-nonsense transformer of a feedback. coaches into psychoanalysts but rather to once-sclerotic company into a lean conglom- provide a fresh context for their efforts. The erate; and Percy Barnevik, former chairman reader never feels as if he has wandered into and CEO of ABB, was a soft-spoken, analytic the thickets of psychoanalytic nether re- integrator of geographically dispersed busi- gions or the deserts of management-speak. nesses into a global organization. Kets de Vries plays the two disciplines off of The book’s final chapters address what each other, making them both relevant. Kets de Vries sees as the greatest leadership Make no mistake, this book is not a glo- challenge of the 21st century — globalism. rified PowerPoint presentation that can be He says that a new kind of global leader will skimmed during your average airport lay- be needed and that the prototype of a cultur- over. It is pleasingly dense with facts and in- ally empathetic and adaptable leader will sight, but far, far from dry, drawing on a probably emerge from Europe because of its wealth of historical, psychoanalytic and liter- diversity, geographic concentration and ary examples ranging from Hitler, Freud and growing sense of unity. Alexander the Great to Gustav Mahler, Franz “The best leaders are those who know Kafka and Ingmar Bergman. how to balance action with reflection by us- The overall conclusion one reaches from ing self-insight as a restraining force when reading this book runs counter to the cur- the sirens of power are calling,” writes Kets rently popular notion that everyone should de Vries. They are those who “retain their be a leader. That conclusion is: Who you are sanity in what seem insane places,” he con- is how you lead. Many traits of leadership, tinues. It is precisely these capabilities that good and bad, are intrinsic to the individual Kets de Vries believes can be identified and and some of them are immutable. For that nurtured with a psychoanalytic approach reason, many so-called leaders are toxic and to leadership development. 70 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e i n r e v i e w

Chief Emotional Officer

“Think Again,” by Sydney Finkelstein, Jo Whitehead and Andrew Campbell (Harvard Business Press, 2009)

“Think Again” explores how we make decisions and how we can make them better.

Organizational culture reveres and rewards rationality. A successful leader’s stock in trade is rigorous analysis of data and information, Ocareful consideration of multiple options and clear-eyed strategic planning, leavened with a touch of the maverick’s intuition.

Well, that is a widely held view anyway.

The truth, however, is nearly the opposite, according to Sydney Finkelstein of the Tuck School of Business, and Jo Whitehead and Andrew Campbell, both of the Strategic Management Centre at Ashridge Business School. As they explain in their book, “Think Again” (Harvard Business Press, 2009), when seeking a solution amidst incomplete data and multiple uncertainties, the human mind’s initial gambits are predominantly unconscious, intuitive and emotional. In other words, in “Star Trek” terms, we are all more Captain Kirk than Mr. Spock. How the Brain Makes Decisions

Evolution, say the authors, has given us the ability to quickly assess and react to the complex world around us. We continually, unconsciously, seek to recognize complex patterns — visual, structural and sequential — in our experience. We then file the patterns 72 Q 1 . 2 0 1 0 The Korn/Ferry Ins tit u t e away so we can take action based on our past marketing and a cultlike affinity with its cus- experience the next time we encounter tomers and distribution channels. In the end, situations that fit those patterns. The brain the Snapple business lost $75 million in also associates each of these stored patterns 1995, suffering a 5 percent decrease in sales. with an emotion. This “emotional tagging,” More Red Flags as it has been called, operates as a fast-access filing system in our thought process, further The authors identify two additional signs guiding us to the kind of rapid response that that a disastrous decision is likely to be made: rational analysis alone could not trigger. inappropriate self-interest and inappropri- Emotions are advantageous in that they ate attachments. The notion that self-interest often help us get to the right answer effort- can work for the common good forms the lessly and efficiently. However, because pat- basis of much of economic theory and regu tern recognition requires the brain to fill in lates society at large. But self-interest and The authors’ blanks and guess when there is incomplete personal attachments to people, places or field work information, the brain can make connections things are counterproductive when they do between past and current situations that do not align with the interests of the organiza- reinforces not exist. The authors call these “misleading tion. Inappropriate self-interest — financial the view experiences.” And the strong emotional tags gain, ego, personal enmity, personal prefer- linked to past experiences can drive us to in- ence and even nostalgia — was found to be a that, contrary accurately size up current circumstances, factor in two thirds of the cases of failed de- to what we what the authors call making “misleading cisions studied by the authors. prejudgments.” believe about Designing Safeguards Unfortunately, once a misread pattern ourselves, or a misleading emotional tag has set a bad Because red-flag states of mind for the most human beings plan in motion, human nature is not likely part reside in the unconscious, Finkelstein, to lead us to review or reverse our course. Re- Whitehead and Campbell conclude that rely- do not search shows — and the authors’ field work ing on self-awareness or self-regulation are normally reinforces — that, contrary to what we be- unreliable strategies for making sound deci- lieve about ourselves, human beings do not sions. Instead, they recommend that indi- do much normally do much conscious analysis, such viduals and organizations counterbalance conscious as identifying and comparing options or human biases with planned, systemic inter- challenging assumptions and initial assess- ventions that they call “safeguards.” These analysis. ments. In the interest of quick, decisive ac- safeguards involve supporting decision tion, our brain has evolved to arrive at a plan makers by providing them more experience, and not actively search for disconfirming in- data, analysis and formal venues for debate formation. To the contrary, it seeks input and challenge. that will confirm its original course and re- While these kinds of safeguards are evaluates only if the plan proves flawed — likely to minimize the chances of disastrous and sometimes not even then. decisions being made, it is debatable whether Such misreadings occur all the time in they will ultimately lead to better decisions. the business world. In 1994, William D. After all, any process designed to smooth out Smithburg, as CEO of Quaker Oats, spear- lows is also likely to dampen highs, kind of headed the acquisition of Snapple Beverage, like organizational Valium. The authors con- believing that its declining brand could be cede that what they call “toxic levels” of safe- revived with the same marketing tactics that guards can be paralyzing and have to be care- had worked with the Gatorade Company, fully administered. Ultimately, however, the which Quaker Oats had acquired under question is whether we want our leaders to Smithburg’s leadership a decade earlier. be stewards or avatars. If the latter, we may Smithburg failed to recognize that, beyond just have to ride the roller coaster, red flags superficial similarities, Snapple was not like and all. When you think about it, there was Gatorade. It was an offbeat brand, driven by probably a good reason that Kirk, and not an entrepreneurial sensibility, grass-roots Spock, captained the Enterprise. 74 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e i n r e v i e w

A View From the Bridge

“Your Next Move,” by Michael D. Watkins (Harvard Business Press, 2009)

Michael D. Watkins makes the case that successfully managing one’s professional transitions is the essence of leadership.

The arc of your executive development is defined by a series of crucial inflection points— transitions in role, responsibility, style or location Tthat can, depending upon how well you handle them, either propel your career forward or derail it. Michael D. Watkins’ new book, “Your Next Move” (Harvard Business Press, 2009), provides a lucid guide for navigating these transitions.

Watkins is a widely recognized authority on the subject of leadership transitions. In his earlier book “The First 90 Days” (Harvard Business School Press, 2003), which has become a classic of the genre, he identified several principles followed by all successful newly appointed executives and the organizations that hire them. In “Your Next Move,” he has expanded on that thinking and explored the common factors that underpin all successful transitions. Drawing on his hands-on executive development work as chairman of Genesis Advisers as well as his academic research at IMD, INSEAD and the Harvard Business School, Watkins has concluded that most leaders experience some or all of the following eight key transitional challenges at some point in their professional lives: • Promotion. Any upward move in a hierarchy requires subtle adjustments in focus, perspective and leadership style. • Leading Former Peers. A frequent challenge accompanying promotion is establish- 76 Q 1 . 2 0 1 0 The Korn/Ferry Ins tit u t e ing authority and redefining relationships nates some of the more nuanced require- with co-workers. ments of working within that shadow orga- • Corporate Diplomacy. Promotions nization, such as how to build one’s own and even lateral moves within an organiza- influence network, how to distinguish be- tion can often require a transition from us- tween professional relationships and alli- ing direct authority to building alliances and ances and how to make changes in leader- consensus. ship style that may be required at different • On-Boarding. Joining a new organiza- levels of an organization. Leaders may, for tion requires significant cultural and politi- example, be required to change from “ana- cal adaptations including the building of ver- lyst to integrator,” from “tactician to strate- tical and horizontal networks. gist” or from “warrior to diplomat,” Watkins • International Assignments. Leading writes. an organization in an unfamiliar ethnic cul- Although focused on executives and Executive ture calls upon new resources of flexibility their individual development, “Your Next transitions are, and openness, both at work and at home. Move” is equally compelling on the subject • Realignment. To affect fundamental of transition from an organizational per- in effect, the changes in an organization that is in denial spective. It makes the case that an organiza- synapses of the about the need for change calls upon a wide tion’s executive transitions, in the aggregate, range of unique strategic, political and per- provide a map of its evolution, its character organization’s sonal skills. and its success. Executive transitions are, neural network • Turnarounds. Saving an organization in effect, the synapses of the organization’s and they test or division that is already in trouble calls for neural network and they test the viability crisis leadership, requiring a very particular of its wiring. the viability set of competencies. In the book’s last chapter, Watkins of its wiring. • The Business Portfolio. The ultimate asserts that expedited employee transitions test of leadership: Figuring out where to de- are an essential element of managing enter- vote resources and how to integrate efforts prise risk and confer a major competitive in a multifaceted organization in which each advantage on a company. Further, he empha- component is in a different stage of develop- sizes that any organization’s support of ment or crisis. executives joining a company or moving Watkins acknowledges that this is not a to new positions within it must be well definitive list of transitional challenges, but integrated with its recruiting standards and contends that they are the elemental ones priorities. and that all transitions would involve some “The best transition-support systems variation on these basic themes. In “Your cannot compensate for the sins of poor re- Next Move,” he explores specific cases of cruiting,” Watkins writes. executives who have met or failed to meet The book’s only weakness is that this these challenges. By revealing in each case promising discussion is not sufficiently pur- both the personal and organizational adapta- sued. Watkins briefly outlines an approach tions required, the book instructs on two lev- to effective transition management, but he els: it encourages individual leaders to exam- misses an opportunity to more fully elabo- ine their own skills and development needs rate on an important issue to which most and it explores how organizations can help organizations pay a good deal of lip service those individuals manage their transitions. but little serious attention. Watkins’ discussion of the subtleties of Nevertheless, unlike many books that transition is the most informative aspect of address individual leaders’ development, the book. He writes, for instance, about the “Your Next Move” is smart and relevant. It “shadow organization,” the informal power is worthwhile reading for anyone who is structures and cultural idiosyncrasies that currently in transition, anticipating transi- exist in every company and come most tion or simply seeking fresh perspective on strongly into play during times of personal how to better navigate his or her current and organizational flux. He deftly illumi- position. 78 Q 2 . 2 0 1 0 The Korn/Ferry Ins tit u t e 80 thoughts t h g u o g h n t i t r a p Parting n i t r a P T s t h g u o h n r a e l d n a h c t a w George Soros, thelegendaryhedgefundmanager, philanthropistandsocialactivist. assumptions over what was true. They begantoissue assumptions overwhatwastrue.They assumptions begantodivergefromreality, peoplechosethe ple eagerlyassumedtheywouldbetrueforever. proved by the collapse of the Soviet Union. mentation requirements, ashousingpriceswere mortgages witheasiertermsandlittleornodocu- tors’ moneyandhisown.Howdidhedo? hisfundandtoactivelymanageinves- to takethehelmof their exoticfinancialinstruments,holdings of topping outandcreditscoresweredeteriorating. the assumptions that people were making about the way eco- ing. PeopletalkedabouttheAmerican export nomics worked began to seem wrong to him. For example, numbers, heexplainedthatwasneververy hesaid.Infact, deep andhowlongtherecessionwouldbe,toexplain But whatwasreallyinterestingaboutthebreakfast Not longago,Iattendedabreakfast even as the risks of theseproductswereincreas- even astherisksof corrected themselves knew inadvancethattroublewasbrewing. he haddonesomorethanonce.Healsosaidthatwhen 2007 to2009had predictedtheGreatRecessionof andthat how hehadbeennavigatinghiswaythroughit. he didn’t remember which saw itcoming,in2006, retirement hedecidedtocomeoutof his approachwasphilosophicalandobservational. Economics.him hisdegreeattheLondonSchoolof Instead, way heexplainedhisapproachtoinvestingandthereason surge, failingtonoticethatitwas basedon Soros said, people began believing that housing prices would good atmathandthathisinabilitytodofiguresnearlycost only go up, that the stock market was the best place to invest under all conditions, and that the markets always worked and 0 1 0 2 . 2 Q He finishedtherecession$4billionor$5ahead Investors from around the world increased Not withouthumor, bysayingthathe Sorosstartedoff The point of thebreakfastwasforSorostodiscusshow pointof The The problemwas, accordingtoSoros,The thatwhenthese assumptions seemedcorrectatthattime,andpeo- These Soros said he began to worry about the economy when Soros’s theglobaleconomywasnotbasedon analysisof — a fact people said was somehow — much of it for his own account. itforhisownaccount. muchof

— inNewYorkwhoseguestspeakerwas by JoelKurtzman and the relative value of thedollar,and therelativevalueof andbegan talkingabout amples inwhichperception,notreality, heldsway. ex- itsvalue.Sorosgaveanumberof a dollarthathadlosthalf as the ones they have given Soros. people’s assumptionsdiverge fromrealevents, theyactasif right to be there, either because they managed lots of money right tobethere,eitherbecausetheymanagedlotsof reflexivity waswhatgoingonintheroomasmaster reality could give each of us a payoff, in our own realms, as big their own and dismissed them, even though they worked. They talked philosophy. Peoplebeganfilingout. their assumptions, notreality, insighthas This arecorrect. favored theirperceptions, amaster. whiledismissingthoseof from thegroup’s reactionthatSoros’s philosophywasplaying didsoeven thoughthesewerethe They faces wentblank. ful that understanding the difference between perception and familiarity, areluctancetochange,rigidthinking,andhost very toolsthatSorosusedtomakehismoney. ceptions trumpreality. ourneedfor dosobecauseof They how peopleperceivetheworldandactontheirassumptions, out in front of hiseyes.out infrontof itseemed theirown.Andyet, or hadinvestedagreatdealof $13billion. given Sorosapersonalnetworthinexcessof of reasonsknownonlytoSorosandafavoredfew.of uncomfortable, judging from the looks on the faces of the uncomfortable, judgingfromthelooksonfacesof people departing early from that New York breakfast. But people departingearlyfromthatNewYorkbreakfast. from some of Soros’sfrom someof determinationtoquestion transitory with high levels of uncertaintyandriskallaround, itmay with highlevelsof not waste the experiences of that era. We could all benefit thatera. not wastetheexperiencesof be thetoolweneedtonavigateourwayahead. assumptions. Ourjobnowistowatchandlearn.Itwould As soonasSorosstoppedtalkingaboutfinancialflows All of thepeopleinvitedtobreakfasthadearned All of Accepting realityoverwhatwebelievetobetruemay There aremanyareasinbusinessandlifewhereper There People heard Soros’s views, noticed that they didn’t match But evenmoreinterestingthanwhatSorossaidabout But as we move into the new decade, we should be mind- Soros called this phenomenon be a shame to walk out of theroomnowiser.be ashametowalkoutof The decadejustconcludedhasbeenapainfulone. Let’s The s n I y r r e F / n r o K e h T reflexivity. This means when T I T - u t e Robert Risko