fear, greed and fairy tales • p.j. o’rourke is out off wworkrk

It Pays to Be Lucky Where Have the Leaders Gone? Formula One’s Benign Despot The Buck Starts Here

The Man Behind the Cloud An Interview with VMware’s Paul Maritz

Q1.2012.2012 chief executive officer Gary Burnison chief marketing officer Michael Distefano editor-in-chief Joel Kurtzman creative director Joannah Ralston circulation director Peter Pearsall marketing operations manager Reonna Johnson

board of advisors Sergio Averbach Cheryl Buxton Joe Griesedieck Byrne Mulrooney Kristen Badgley Dennis Carey Robert Hallagan Indranil Roy Michael Bekins Bob Damon Katie Lahey Jane Stevenson Stephen Bruyant-Langer Ana Dutra Robert McNabb Anthony Vardy contributing editors Chris Bergonzi Stephanie Mitchell David Berreby P.J. O’Rourke Lawrence M. Fisher Glenn Rifkin Victoria Griffi th Adrian Wooldridge

Cover photo of Paul Maritz: The Korn/Ferry International Briefi ngs on Talent and Leadership is published Jeff Singer quarterly by the Korn/Ferry Institute. The Korn/Ferry Institute was founded to serve Cover illustration: as a premier global voice on a range of talent management and leadership issues. The Zé Otavio 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.

ISSN 1949-8365 Copyright 2012, Korn/Ferry International

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13

5 letter from the ceo

Latest Thinking

8 fear, greed and fairy tales What exactly moves the markets? 10 can china continue to grow? The world is betting on China’s growth. 20 13 introverts at the top Quiet leaders are often best. 20 it pays to be lucky 14 time for boards to get serious How to be in the right place at the right time. For boards, it’s time for tough love. BY david berreby Viewpoint 26 where have the leaders gone? 18 if content’s free, i’m out of work The world is clamoring for good leadership. How the Internet is changing one man’s economics. BY glenn rifkin BY p.j. o’rourke 34 formula one’s benign despot In Review Driving at 220 mph, and making money too. BY doron levin 66 “flying without a net” 67 “the elephant in the room” 42 passionate about brands Great brands from the past have a future. Parting Thoughts BY lawrence m. fisher

72 mixing up the disciplines 50 the man behind the cloud What science can teach business. How VMware is changing computing. BY joel kurtzman BY al delattre, kristen badgley and joel kurtzman

70 34 58

58 the buck starts here People want to work in creative companies. BY jane edison stevenson and bilal kaafarani

70 2011 in review The ups and downs of a very strange year.

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Citation_Briefings.indd 1 10/11/11 2:55 PM Briefings onTalen t &Leadership David Strick miles perhour. histruckand Onemanhadsteppedoutof fear anduncertainty. Never before,inalmostthree decades into that cup to get the last drops of thesweetliquid,and into thatcuptogetthelastdropsof Pacific Coast Highway in Malibu, Calif. The sunglistened Pacific CoastHighwayinMalibu,Calif. was themantimidlycirclinganimal was attemptingtodislodgeaMcDonald’ssodacupfromits was pensivelystaringattheground.AsIlookedcloser, I nately, ourprotagonistdecided itwasbesttoleave a fruitless attempt to dislodge it. a fruitlessattempttodislodgeit. skunkwasfranticallyscampering The now itwasstuck. a six-lanehighwaywheretrafficnormallymovesat55 optimism (The answerkeyisonthenextpage.) to methanbad. Overall, Iexpectmoregoodthingstohappen I rarelycountongoodthingshappeningtome. I hardlyeverexpectthingstogomyway. I’m alwaysoptimisticaboutmyfuture. If somethingcangowrongforme,itwill. In uncertaintimes,Iusuallyexpectthebest. Answer truthfull his truckanddroveaway. cluelessness. thehelplessorvictimof hero of Unfortu- head. The skunkhadobviouslyjammeditssnoutsofar head. The left and right, violentlyshakingitsheadbackandforthin left andright, crossroads of uncertaintyastowhetherheshouldbethe crossroads of saw a bizarre sight in the middle of thehighway:Askunk saw abizarresightinthemiddleof somebody elsetosolvethisproblem, andhegotbackin slow to a crawl. Several cars were stopped in the median of slow toacrawl.Severalcarswerestoppedinthemedianof of businessexperience,haveIseen suchpessimism.Chris off the ocean to my right. Suddenly, theoceantomyright. off thetrafficbeganto optimism More interesting to watch than the skunk, however,More interestingtowatchthantheskunk, Just like our protagonist, theworldtoday isgrippedby Just likeourprotagonist, Several weeksago, Iwasdrivingtoworkalongthe

y:

The worldcouldsureusesome.

Agree — ] ] ] ] ] ] clearly ata

Disagree By GaryBurnison ] ] ] ] ] ]

100 points. Gofigure. yers areseeing50percentmorepotentialclientsthan Bergonzi, inanarticletitled“Fear, making siteeHarmonyreportsmoretraffictoitsWeb further left; the right is moving further right. Differences further left;therightismoving furtherright. The leftismoving regulationandfingerpointing. for risk, , observes that we’ve Briefings,observesthatwe’ve issue of interest. This issue of BriefingsquotesDr. issueof This PamelaRutledge, interest. it, youcanmoreeasilyforgiveyourout-of-favorlovedone Greed, BlameandFairy Tales” inthis who perpetuallyforgetsthetoothpastecap.Ifyouarea way up, inthesechallengedtimes. Itseemsthatunem- when the Dow Jones industrialaveragefallsbymorethan when theDowJones unsolvable.”are everywhere,enormous, inextricableand just pent-updemand! bull inabearmarket,however,youwillbeencouragedto percent duringtherecessionassomeformerstarry-eyed ployed andunderemployedpeoplehavemuchmoretime they didthreeyearsago.Ontheotherhand,maybeit’s turns fromwho’skeepingthehousetostuckwith know thattheNewYorkLawJournalisreportinglaw- descended intoapermanentstate debilitating isthepsychologicalandsociologicalaftershock divorce? Well,wecan’taffordthateither.IntheUnited lovers triedtohangon.Presumably,whenthedebate States, thedivorceratebrieflydroppedtoabout3540 communication technologies and the media that problems communication technologiesandthemedia cheaper than chocolates and roses. The onlinematch- cheaper thanchocolatesandroses. The spirit of seeing spirit of the silver lining, onlineromanceis up, overshadow commonalities. Self-interesttrumpsmutual of free-floatingfear,of “reinforced by on their hands to surf theWebforlove…and,yes,on theirhandstosurf it’s much theGreatRecession:fearanduncertainty.of Another aftershockhasbeenan insatiableobsession Yes, manyeconomiesarechallenged,butmuchmore The sideeffectshavebeenmany.The Forexample,inthe How abouttheothersideofhappilyeverafter the ceo from — Q1.2012

5 who studies how emerging technologies affect cognitive America, reality, as former President Bill Clinton recently psychology, observing that “fear creates a divisive, us- said, is that the American dream has been under assault for versus-them environment that influences our behavior.” 30 years. It is precisely at times like these, with much of the In this issue of Briefings, Rifkin cites Michael Useem, world at the intersection of uncertainty and indecision, a management professor at the Wharton School and direc- that leaders must rise above the rest. In the article, “Where tor of the Wharton Center for Leadership and Change Have All the Leaders Gone?” Glenn Rifkin cites Warren Management, who believes that the defining principle of Bennis, the legendary organizational scholar and leader- leadership is “the ability to get beyond self-interest,” to ship author, who talks about a void in leadership across transcend constituencies. I believe a leader does this by the board in these challenged times. I recently had the communicating reality and, second, establishing the privilege of spending a sunny morning in Santa Monica, common purpose, moving self-interest to shared interest. Calif., with Bennis at his home. He often cites Max De People will change only if there is a reason to change. Pree’s assertion that “the first responsibility of a leader is Today, the reason for change is reality. Obviously, to define reality.” there is much more to be planted around these principles Let’s start with reality: Three years ago, the dark-out — strategy, timing, etc. But the cycle of pessimism will be shades were ripped away, exposing more than a decade broken, at least in the West, only if self-interest is tran- of conspicuous consumption in the West. We had simply scended and transformed into a common purpose of mu- borrowed too much and spent more than we earned. G.D.P. tual, shared sacrifice. And, to be clear, I am not advocating growth rates were not real. Another reality: Technology austerity without growth investment. However, in some advances outstripped job creation. It wasn’t simply a global countries in the West, we have simply spent too much labor arbitrage finding places in which workers were paid for too long and made promises that can’t be kept. less for punching red and green buttons. Technology con- It is precisely at this intersection of uncertainty and tinues to significantly disintermediate jobs. At Boeing, from fear that leaders pivot from the past and turn pessimism the point an empty 737 airplane fuselage enters the hangar, into opportunity. to the time it rolls out, is just days. Pivoting is one thing, but luck is another, and we Reality: America’s place in the world has changed. It could use a little good luck now. Why luck in our techno- hasn’t been diminished or disintermediated; it’s just differ- logical age? Because, as David Berreby writes in his article, ent. Long term, it doesn’t have the advantage of scale (two “It Pays to Be Lucky,” a great deal of success depends on countries alone — China and India — have roughly a third being in the right place at the right time — and being pre- of the world’s population). As other economies enlarge their pared to seize the opportunities that presents. This factor middle class, their purchasing power will be breathtaking. affects technology, science and even the markets, and it The United States will have to rely not on 20-foot walls should give us pause. Are we really making the most out along its borders, but rather on skill to tap scale outside of this moment in time? its borders. Traditions. Memories. Contentment. Warmth. Charity. A CEO, a leader, is in the “what” and “how” business. Forgiveness. Celebration. Hope. Resolution. New begin- “What” means setting forth a purpose, a strategy, picking nings. As we enter this charitable season, let us remember people to execute, monitoring and measuring progress, to give the gift that keeps on giving: optimism. The world empowering and inspiring the team and rewarding and cele- could sure use some. brating along the way. “How” means navigating and course correcting, communicating, listening, learning, leading and, most important, anticipating. Answer key: Warren Bennis and I devoted much of our meeting More “Agrees” than “Disagrees”: Spread the love. to discussing the skill of anticipating. As he said, antici- Equal “Agrees” and “Disagrees”: You’ve lost touch with reality. pating must begin with the leader getting “people to look More “Disagrees” than “Agrees”: Start over. at the present and not just try to read the tea leaves. Then you get everyone to start considering the question: Based on what we now know, what are the consequences for us?” — Test adapted from the “LOT-R (Life Orientation Test-Revised)” In Bennis’ speak, you need a team of world-class noticers. developed by Carver, C.S., Scheirer, M.F., and Segerstorm, S.C. In other words, people who can accurately view reality. For First published in the Clinical Psychology Review (2010).

6 Q1.2012 The Korn/Ferry Institute Season’s Greetings The Latest

are complex systems defined by the emergent aggregate behavior of individual actors, but suggests that Fear, Greed those systems are best understood not by trying to account for ration­ and Fairy Tales ality or irrationality per se, but for their emotional underpinnings. How the markets and society at large are losing touch with reality. “Decision making is a combination of reason and emotion. Few things that people do are, as such, irratio- August is always a squirrely particularly new warnings of double- nal,” said Tuckett. month in the markets, but in 2011 it dip recession — only to come roaring In Minding the Markets, his new went full-tilt manic-depressive. After back the next week, clinging to vague book with co-author Richard Taffler, U.S. stocks had risen by more than 21 reports of Europe’s plan to resolve its a professor at the University of Edin- percent in the previous 12 months, fiscal crisis and essentially ignoring burgh School of Management, Tuck- they gave back 16 percent in a two- negative news about U.S. home sales ett argues that financial assets have week span from July 25 to August 8. and corporate earnings. become so complex and the forces Standard & Poor’s downgrade of U.S. These wild convulsions, often acting on them so numerous and debt, as well as renewed concerns based upon no real news and fre- unknowable, that they are nearly im- over the financial survival of Greece, quently flying in the face of the day’s possible to value objectively. There- Ireland and Portugal and the result- developments, would make anyone fore, investors seek to make sense of ing exposure of German and French wonder if the market had become them by creating a narrative — about banks, had sparked fears of another completely untethered from any an individual investment or a mar- global financial meltdown and had supportable vision of reality. “Even ket trend — that conforms to their many economists lowering their rational, seasoned investors feel like powerful emotions and unconscious outlooks for global economic growth they’ve been raked over the emo- fears and desires. For an illustration, and warning of another recession. tional coals,” said James B. Stack, edi- one need look no further than how Although that state of affairs tor of the InvesTech Market Analyst September’s rumors of an inchoate changed little as August wore on, the newsletter. plan to solve the European debt crisis

“Even rational, seasoned investors feel like they’ve been raked over the emotional coals,” said James B. Stack, editor of the InvesTech Market Analyst newsletter.

world’s markets whipsawed up and Psychoanalyst David Tuckett, — a plan about which even many Eu- down, driven by huge and often in- a professor at University College ropean leaders were unclear and du- explicable daily reversals in investor London, would agree with Stack’s bious — were seized upon by world sentiment. In late September, the pointed juxtaposition of reason and markets that seemed to have simply markets once again went into free emotion. Tuckett is on the leading grown tired of negative news. fall, losing six percent in one week edge of a relatively new school of Tuckett’s thesis would seem to — due, in large part, to Fed Chairman thought called “emotional finance,” apply beyond the markets. In politics, Ben Bernanke’s thinly veiled and not which acknowledges that markets in government, in day-to-day busi-

8 Q1.2012 The Korn/Ferry Institute Briefings onTalen t &Leadership Jacob Thomas rorism, individualsaremorelikely Beck hasarguedthatinthefaceof ratives that are ever more fantastic, ratives thatareevermorefantastic, amorphous globalspecterssuchas not tonoticepeople’s increasing ness andsocialdealings, itishard that modernglobalsocietyhas de- to attemptmanufacturetheirown the dark. GermansociologistUlrich the dark. whistlingin that thisisaformof tendency tofashionself-servingnar- ket meltdownsandinternationalter- destructive. Ithasbeensuggested divorced fromrealityandveryoften certainties. environmental disaster,stock-mar- In fact, manyscholarscontend In fact,

“risk” isusedtodescribe awidevari- New YorkUniversityprofessorof rather it is an abstract, pervasive rather itisanabstract, risk-related conversationandlitera- mous, inextricableandunsolvable. free-floating fear.they This isnot, threats totheirwell-being,but ture, pointingoutthattheword that problemsareeverywhere,enor- tion technologiesandthemedia has noted the startling growth of has notedthestartlinggrowthof law and sociology DavidGarland law andsociology experiencing anincreaseindirect ety of otherwiseunconnectedexpe- ety of say, becausepeoplearepersonally scended intoapermanentstateof sense — reinforcedbycommunica- —

“today fearcanmigratefreelyfrom flections onriskarenowabsorbed riences and phenomena. In effect, riences andphenomena.Ineffect, from WisconsintoGreeceSpain Devils andMoralPanics” that“re- into a wider culture of insecurity,into awidercultureof Cohen alsocommentedin“Folk victimization andfear.” Anthropolo- risk now consideredsomeformof to bemanaged.SociologistStanley dence thispastyearasprotesters gist DavidParkinhasobservedthat causal orlogicalconnection.” every conceivable aspect of lifeis every conceivableaspectof one contexttoanotherwasin evi- one problemtothenextwithoutany The transference of fearfrom transferenceof The Q1.2012 9 The Latest Thinking

seemed to transmogrify worries provided by the riots that ignited not only that our global society has about debt and austerity into more across Britain in August, for which become inordinately fearful, but also elemental, diffuse and darker im- no clear reason was evinced other that it is becoming dangerously, pulses. “If people are afraid and feel than a vague, smoldering sense of maybe irretrievably, derivative. As powerless, the act of destruction class warfare. Social anthropologist technology has made us obsessed becomes an act of agency, and they Gabriele Marranci found those riots with tracking and “trending” one seek out a segment of society to “unusual in many aspects, such as the another’s every action, utterance and blame,” said Pamela Rutledge, who heterogeneity of those involved, the data point, we have become caught studies how emerging technologies dynamic of how they started, a lack in a vortex of derivative thinking affect cognitive psychology. “Fear of apparent common strategy and a and derivative action. As we wonder hampers our cognitive and moral lack of shared reasons for rioting. “what it all means for me,” we are capacities. It makes us worry about [The riots] appeared more to be a inexorably drawn to the dominant ‘not enough’ and about ‘losing what’s collective case of violent hysteria narrative, real or imagined, that ours.’ It creates a divisive, us-versus- than an actual riot in the traditional offers some sense of solidity and them environment that influences sense.” solace. And in the process, we put our behavior.” Perhaps the lesson of the vola- our originality, morality, resistance The starkest example of that was tile and violent summer of 2011 is and good sense at great risk. Can China Continue to Grow? With direct investment underperforming, inflation flaring and a real estate bubble looming, the world’s second largest economy must find a new model for sustainable growth.

China, most experts agree, is at a crossroads. Over the past 20 years its mercurial growth, which has in- creasingly shaped the global econ- omy, has been based upon massive fixed investment— roads, bridges, buildings and machinery — as well as low-cost exports, inexpensive labor and artificially cheap money. Many believe this has been a recipe for a “hard landing” — a sharp slow- down in capital spending and pre- cipitously slower growth overall. Among the most pessimistic is Michael Pettis, a senior associate at the Carnegie Endowment for Inter- national Peace’s Asia Program, who recently summarized his view in The Wall Street Journal: “China’s growth was based on large increases in gov- ernment-directed investment. As a consequence, it had to run large trade surpluses to absorb the resulting

10 Q1.2012 © Ashley Cooper/Corbis This can’t espe- continue.Investment, This Navarro, economicsand professorof reforms, includingbetterhealthcare Storing 1.8ZBwouldtake57billioniPadsthat,ifstacked,be25timeshigherthanMt.Fuji. MT. IPAD: it makes thetransitionfroman strug- in crisis, andtheU.S. andJapan is increasinglywasteful.WithEurope and pensionsystemsallowing coupledwithkey and investment, China’s economicgrowthbecome China’s exportswillstagnate.” the yuantostrengthen,”saidPeter that willreplacethem.“China will driven bydomesticconsumption domestic consumptionastheengine less tenable,manyexpertspointto gling with their debt, demandfor gling withtheirdebt, cially ininfrastructureandrealestate, export-dependent economytoone excess capacityinmanufacturing. only continue to grow robustly if only continuetogrowrobustlyif As the original driving forces of As theoriginaldrivingforcesof

The world’sinformationisdoublingeverytwoyears,withacolossal1.8zettabytestobecreatedin2011. 15 inthelargercities. Incomparison, 2008,”World Bankeconomist said Ardo Hansson. The number of newly numberof Ardo Hansson.The flowing out, andtheeconomyis flowing out, raised interestratesfourtimessince rolled outstimulusmeasuresin foreign exchange reserves, which China’s inflation.Manyof fears of inflation, China’s centralbankhas in morethantwoyears, stoking into thecountryfasterthanitis Death ifornia, Irvine,andco-authorof where China’s futuregrowthwill about 10 acrossChinaandmorethan are goingintothealreadyoverstim­ now exceed $3trillion,continue price-to-income ratioisalready been excessivesincethegovernment whereactivityhas property market, banks, thenewloans andmanyof period. Unfortunately, manyargue, banks eighttimesoverthesame themost percent, prices jumped6.4 Cal- public policyattheUniversityof this ratioatsix. housingbubblepeakedwith the U.S. their history. averageproperty The the UnitedStatesatanypointin to beloanedoutbystate-owned these curbswillgreatlyreducethe the reserverequirementratiofor higher than it had been in Japan or higher thanithadbeeninJapan holds inChinaisalreadymuch higher than forecast, andconsumer higher thanforecast, last Octoberandhasalsoincreased ulated propertymarket. by China. come from,capitalisstillflowing centage of the number of house- thenumberof centage of constructed housingunitsasaper- of this year,of itexpanded9.5 percent, overheating. Inthesecondquarter “Concerns arecenteredonthe To soakupliquidityandcurb But evenasexpertsdebate

7 percentayearincreaseinpercapita These measureshavebegunto These The value of China’s valueof importshitarec­ The replace investmentwithconsump- mestic consumptiontocounteract from 46 percent to 35 percent, while from 46percentto35percent, ity pricesandoverallgrowth, manufacturing thathasformed the investment hasgrowntoconstitute income households, andisraising is alsoimprovingthesocialsecurity con- new supplycomestomarket, not beeasytogenerateenoughdo- it issignificantlyreducingthena- nearly half of GDP. of nearly half Chinaisto “If and healthcaresystemstohelplow- in the first three months of thisyear.in thefirstthreemonthsof ally in exactly the kind of low-cost ally inexactlythekindof are makingChineseworkersmore bad assets. power, ChinesePremierWenJiabao tracting propertypricesandcon that downturn. He points out that, that downturn.Hepointsoutthat, try’s 1.3 billionpeoplemorespending try’s 1.3 growth,”Pettis tion astheengineof the personalincometaxthreshold. tion’s disproportionatetradesurplus. tic consumptiontothepointwhere household incomethrough2015. He has targeteda13percentyearin- demand forrealestatejustasahuge during thepastdecade,China’s con- leaving manylendersstuckwith crease intheminimumwageanda struction activity, loweringcommod- share of overallgrowth.”share of said, “householdsmustgetarising GDPhasfallen sumption shareof expensive andlesscompetitive glob- some good effect, increasingdomes- some goodeffect, stimulate domesticdemand,they ord high of morethan$400billion ord highof Michael Pettisbelievesitwill In anattempttogivethecoun- However, evenasrisingwages Source: IDCandMashable.com - Q1.2012

11 The Latest Thinking

basis of the Chinese economy. That, try to sell more, but to improve the omies would give them rapidly in- however, may push China’s export units sold,” said Li Shize, the director creasing revenue to plow back into strategy in a direction many believe of air pollution control at the Minis- R&D, which strengthens their chal- it needs to go in order to create sus- try of Environmental Protection. lenge in the developed markets,” tainable future growth. “As wages are That kind of innovative produc- he said. going up at a very fast rate, this will tion higher up the value chain may Even if such a combination of force China to not just knock off de- also offer China a way to sustain a domestic consumption, innovation signs from the West,” said disruptive- more healthy export trade by selling and continued export vitality does innovation avatar Clayton Christen­ quality and establishing brand iden- compensate for the growing weak- sen. “They’ll have to compete on tity in developing countries. “China’s ness in capital spending, most ex- innovation, because other countries companies face tough competition perts believe that China’s growth is will take the low end.” in advanced markets where, in terms likely to slow to around 7 or 8 per- Such a recalibration of thinking of brands, they are up against firms cent in the foreseeable future. But may already be evident in the auto such as Apple. But in developing then, as Andrew Erickson wrote industry, where government officials economies [like Brazil, India, Russia, recently in his research newsletter, have called for China’s automakers South Korea, Indonesia or Mexico], China SignPost, “20 years of steady to shift their focus away from low- companies such as Haier and Hua- and slower economic growth could cost, high-volume production toward wei are already building up strong be a more attractive path than five producing more fuel-efficient and brand positions,” said John Ross, vis- years of above-target growth fol- technologically advanced models, in iting professor at Antai College of lowed by 15 years of slow growth, as part to address China’s rising depen- Economics and Management at Jiao pollution, health issues, corruption, dence on imported oil. “For the auto Tong University. “Expansion by [Chi- aging population and other sustain- industry to develop, we should not nese] companies in developing econ- ability challenges exact a toll.”

THE EXECUTIVE’S GUIDE TO THE END OF CIVILIZATION In case you’ve been out, the Mayan calendar doesn’t go beyond the year 2012, leading some to believe that the end of civilization is fast approaching. Here are some tips we’ve assembled for the busy executive to prepare for the possible apocalypse: Tie up loose odds and ends: Enter the apocalypse with a clean email in-box and manageable task list. Remember to submit your expense report and power off your computer.

Stop saving for retirement: Cut contributions to your retirement plan and spend your savings quickly, like on a sports car or that holiday to Fiji you’ve been eyeing. If you’re concerned about the early withdrawal penalties, you’re missing the point.

Embrace your inner autocrat: Collaboration always gets the best results but results only matter if there’s a tomorrow. Make business decisions impulsively and unilaterally.

It’s time for unbridled honesty: Now’s not the time for office pleasantries. Feel free to tell your CFO what you really think about his family vacation photos. Get off the grid:Time is limited; destroy anything with a screen and instead, plan some “me time.” Tennis anyone? —Michael Distefano and Stephanie Mitchell Hal Mayforth

12 Q1.2012 Briefings onTalen t &Leadership Edward Kinsella III Introverts attheTop American cultureatlarge,according Wall Street Journalthat“Ididn’t cre- When CEOTimMillerneeded The companygotits$10 million. The young softwaredevelopmentcom- recently publishedin the Academy risk-taking toheed-taking,certainty received another crack at it, butthis received anothercrackatit, mance ratherthanobservers’percep - fast andfrequenttalkersasmore forcements: thecompany’shead ismatic leadership, whileintroverts investors andnailedhispitch when onemeasuresactualperfor - we preferactiontocontemplation, are widelydeemednottobeleader- Corp., potential hewenttoagroupof vert inabusinessworldthatworships ate theexcitementthattheywere a $10 milliondollarinfusionforhis a leadership ofproactiveemployeesproducesoptimalperformance. Although mostorganizationsseekdynamic,charismaticleaders, itmaybethatthequiet behaviors suchastalkativeness, as- pany, RallySoftwareDevelopment than slow ones. This doesusalla than slowones. This Studiesshowthatwerank to doubt. the investorslatertoldhim,because time hebroughtalongsomerein- to authorSusanCain:“As asociety, his presentationwas“allsteakandno Hedidn’the thought. getthemoney, used toseeing.” Millerrequestedand grave disservice.” competent, likableandevensmarter competent, extroverts. Characteristicextrovert salesman anditscharismaticfounder. ship material. siasm areassociatedwithbold,char- sertiveness andover-the-topenthu- sizzle.” MillerlateradmittedtoThe of ManagementJournalarguedthat Miller isaself-describedintro- This perspectiveisreinforcedin This Subscribing tothatview, astudy — orso

are alsomorelikelytobeself-critical view. aregoodlistenersand They and betterabletoseeotherpointsof verts aremorethoughtful,empathetic associate professorattheUniversity study,value. The ledbyAdamGrant, be moreeffectivethanextrovertsat prefer touseone-on-onepersuasion tions of efficacy,tions of introvertsprove to to build commitment to ideas. They to buildcommitmentideas. They leading the kind of activelyengaged leading thekindof employees thatmostcompanies offered evidenceshowingthatintro- Pennsylvania’sof School, Wharton ments. These arealldesirablecharac- ments. These ing theirvisionstop-downtoem- ingly difficultforleaderstosucceed will bemorereceptivetobottom-up and morerealisticintheirself-assess- behaviors.” ployees. Leaderswhoareintroverted by merelydevelopingandpresent- predictable, ithasbecomeincreas- those proposingtolead21stcentury teristics, thestudyconcluded,for life becomesmoredynamicandun- organizations: “As organizational Introversion — asdefinedby Q1.2012

13 The Latest Thinking

The Myers-Briggs Type Indicator, advantages, however, introverts can Other self-admitted introverted which is designed to measure psycho- find themselves at odds with some leaders describe similar hurdles logical preferences in how people aspects of leading. Although intro- and coping strategies. For instance, perceive the world and make deci- version is not the same thing as shy- Dennis Muzza, a senior project man- sions — is simply the tendency to ness, and does not necessarily imply ager at Infosys, was often quiet in draw energy from directing oneself social reticence, the outer-directed- groups, but found that colleagues inward toward concepts and ideas ness that leadership often requires is interpreted his active, thoughtful rather than outward toward people not the introvert’s preferred mode. silence as aloofness or having poor and objects, as an extrovert does. In Laurie Helgoe, author of “Introvert communication skills. Now he sim- fact, studies that measure cerebral Power: Why Your Inner Life Is Your ply emphasizes other forms of com- blood flow show that introverts gen- Hidden Strength,” explained it this munication: “I find I can get my erally have more activity in areas of way: “As American life becomes in- ideas across much more easily in the brain associated with problem creasingly competitive and aggres- writing than getting them heard in solving and planning, while extro- sive, to say nothing of blindingly fast, a meeting. My direct reports have verts show more activity in regions the pressures to produce on demand, also found that I am a lot more that interpret incoming sensory data. be a team player and to make snap approachable via e-mail or instant Although most of us display at decisions cut introverts off from messaging and have gotten used to least some introverted characteris- their inner power source.” communicating with me that way.” tics, born introverts constitute by var- Douglas Conant, the recently There is a lesson in Cook’s un- ious estimates somewhere between retired president and CEO of the apologetic perspective. Although a 15 and 50 percent of the population. Campbell Soup Company, described welter of management literature and Studies show that introverted chil- that phenomenon in an April 2011 executive development dogma still dren are more evaluative of their sur- Harvard Business Review blog: “As peddles the notion that introverted roundings, more cautious and consci- CEO of a company with more than qualities are flaws in need of correc- entious, take in information more 18,000 employees, I’ve found myself tion, it may be those very qualities completely, make more connections particularly challenged because so that provide the best basis from with that information, work more ac- much of my work requires me to be which to enable emergent solutions. curately and concentrate better. Their ‘out there’ in front of others. After In fact, Grant’s report went so far inward bent causes them to gravitate I’ve been in a social situation — in- as to suggest it is the extroverted toward what psychologist K. Anders cluding a long day at work — I need among us who may need to change Ericsson calls “deliberate practice,” the quiet time to be alone with my a bit: “In settings and situations dogged, individual pursuit of master- thoughts and recharge.” Conant went where proactive suggestions are im- ing a task, which is a key predictor of on to say that he has found it helpful portant, leaders who naturally tend high achievement. to be frank with his colleagues about to be assertive may wish to adopt a Despite their many leadership his nature and preferences. more reserved, quiet style.”

Time for Boards to Get Serious A new study suggests that boards must be more engaged, better advised, better informed and — in a word — feistier.

At one time, Lehman Brothers ber 2008, it had racked up $7 billion Every major news outlet and busi- was the fourth largest investment in losses — a casualty, and one of the ness blog asked the same question: bank in the world. But when it filed precipitants, of the global credit cri- Where was Lehman’s board? for Chapter 11 bankruptcy in Septem- sis. Most observers were incredulous. Lehman’s board was there, all

14 Q1.2012 The Korn/Ferry Institute right, said corporate governance ex- Business School, and Charles Elson, do and what they should do going pert Nell Minow, but it was “a risk- director of the John L. Weinberg forward. management committee that didn’t Center for Corporate Governance at Most boards, the report sug- understand or manage its risk.” In- the University of Delaware. The gested, are mired in detached, advi- credibly, only a few Lehman board study assembled a 20-member all- sory roles, focused on process and members had any financial industry star panel, including former Chair- compliance. As a result, they lack a experience, and those that did, said man of the SEC Arthur Levitt, former sense of their own purpose. “A singu- Minow, had spent “most of their working lives tied to a different era — the one before massive securitiza- tion, credit-default swaps, deriva- tives trading and all the risks those products created.” As the scope and depth of the crisis was revealed, it became clear that Lehman’s was not the only board that had gone AWOL. In com- pany after company, such as AIG, J.P. Morgan and Goldman Sachs, simi- larly ill-equipped or passive boards had been unable or unwilling to rec- ognize and stem a tide of outrageous risk taking and questionable ethical behavior. Boards have come under a good deal of scrutiny in past decade, con- tributing to the passing of regulatory legislation such as Sarbanes-Oxley in 2002 and Dodd-Frank last year, as well as a number of so-called “bright- line” standards instituted by regula- tory agencies and stock exchanges. However, the focus on regulation and process controls may have over- looked a larger systemic problem. “There is too great a gap between the popular notion of what boards do and the reality of what they are capa- ble of doing,” says Frank Zarb, senior advisor at Hellman and Friedman, and a veteran of many corporate boards. “The existing system limits the depth of board oversight. We Secretary of the Treasury Paul O’Neill, lar focus on sustaining long-term must either change the system or and other governance leaders from shareholder value is the necessary change expectations.” major corporations and academia. guidepost for boards,” said panel To address that gap, Zarb chaired Their resulting report, “Bridging member Ken Bertsch, president and a recent study, along with co-chairs Board Gaps,” took a critical look at CEO of the Society of Corporate Sec-

Dan Page Glenn Hubbard, dean of Columbia what boards currently can and can’t retaries and Governance Profession-

Briefings on Talent & Leadership Q1.2012 15 The Latest Thinking

als. “Without such clear purpose, CHARGE IT! The value of unused gift cards in directors and boards are more likely the U.S. is estimated to be $2.5 billion. to lose their way.” Source: TowerGroup A defining mission alone is not enough, however. Many boards are spective from qualified advisors, as simply too passive in their oversight required in specific situations.” and monitoring. They are disengaged Along the same lines, boards and complacent because of their part- have to start soliciting more and bet- room dynamics cause most of our time service and overextended ten- ter information. “Boards only know problems. Authority is concentrated ures and are often handicapped by a what the CEO and CFO tell them. among too few, and there is too lack of relevant expertise, a dearth of Nothing more. This is a significant much deference to authority.” The information and an aversion to real problem,” said one panel member. best boards, the report contended, debate, both in and outside of the “If one looks at all the failures of the will actively foment debate and dis- boardroom. “Directors are not a full- last four years, and it is a long list, sent among themselves, as well as time board of managers, nor [do we] the boards were not aware of the with company managers. suggest they should be,” the report risks the companies were taking, Despite the report’s disclaimer stated. “Yet directors must be on the because no one was telling them that boards cannot and should not front lines for the constructive over- about the risks.” Ideally, then, a board do everything, it painted a compel- sight of public companies. To this would reach out beyond the compa- ling picture of an ideal board that is end, it is worth considering how ny’s senior management to a variety strategically involved and continu- to empower part-time boards to a of external and internal sources, such ally engaged and challenging. While greater extent.” as analysts’ reports, the company’s several of the authors’ recommenda- tions might be perceived as blurring Boards need to drop the gloves and mix it up. The best boards, the distinction between board mem- bers, the CEO and other C-suite exec- the report contended, will actively foment debate and dissent utives, that may in fact be exactly among themselves, as well as with company managers. what is needed to curb the abuses of power and ignorance of risk that can First and foremost, the report’s non-senior managers and, especially, instantly sink companies and even authors urged boards to expand their shareholders. The report strongly rec- whole financial systems in today’s expertise. Given a limited number of ommended that boards make liberal hair-trigger environment. Such a seats, they said, it is unrealistic to ex- use of technology such as sentiment model may prove to be a far better pect even the best-composed board analysis, which tracks attitudes, to solution than regulation and stan- to bring to bear all the expertise nec- continually take the share­holders’ dards alone, which allow for little essary for every situation. Therefore, temperature, based on proprietary situational adaptability. boards should regularly seek the per- documents such as email, surveys Panel member Damon Silvers, spective of outside advisors. The au- and call center logs, as well as public- who sits on a number of advisory thors made it clear that they do not domain documents such as blogs, and oversight committees for both envision a board meeting in which forum posts and tweets. the U.S. Congress and the U.S. Trea- each director has his or her own Finally, the report concluded sury Department, summed it up this expert advisor, nor do they advocate that boards need to drop the gloves way: “Managing corporations is checking every statement made by and mix it up. Too many boards, said complicated. Strong boards are the CEO. However, as panel member the authors, make too great an effort much better at managing complexity Ken Daly, president and CEO of the to achieve consensus. According to than regulators or courts or share- National Association of Corporate panel member Paul Washington, holder votes are — but history shows Directors, put it: “Directors can’t of- former chairman of the Society of that without regulators and courts fer perspective in a void. They need Corporate Secretaries and Gover- and shareholder votes, we won’t

the support of knowledge and per- nance Professionals, “Poor board- have strong boards.” Hal Mayforth

16 Q1.2012 The Korn/Ferry Institute Nature’s luxury

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if content’s free, i’m out of work

By P.J. O’Rourke

The medium is the message. And the message is clear: I’m not getting paid.

There have been attempts to erect paywalls around devoted to living on the lam for 16 years like Bulger. And 86.2 some of it — iTunes, The Wall Street Journal, naughty bits. percent of the Massachusetts population is Internet-connected as well. It took Mitt Romney a lot of time playing Angry Birds But consult your 15-year-old son or daughter. Content to come up with what could be a foolproof plan to lose the is free. All news and information, all facts and under- Republican presidential nomination to a crazy Texan who standing, all knowledge of good and evil are a few clicks just might be George W. Bush with Botox and a wig. away, gratis. The serpent is out of business in Eden. The In the 20th century, it was radio and television that forbidden fruit is on the house. No penalty is paid for supplied the free content. They also supplied an example of what happens to the quality of free content when its quan- taking a bite. tity increases. Originally, radio had a narrow transmission bandwidth. Now there’s a Sirius Satellite Radio station for Does this benefit mankind? It doesn’t benefit me. I was a knitting enthusiasts. Once television had three channels (not writer for 40 years. Now I’m a content provider. And content including educational TV, which was not included in anyone’s is free. And I wonder — selfishly perhaps— to what degree viewing). The number of channels today is higher than, free content is beneficial at all. judging by infomercials, viewers can count. In one lifetime You’ll notice how much smarter everyone’s gotten since we went from Alice and Trixie on “The Jackie Gleason Show” WebCrawler was introduced in 1994. to “Real Housewives of Beverly Hills,” and from Orson Wells The economy is purring like a kitten. broadcasting “The War of the Worlds” to commentator Glenn The debt ceiling debate in the U.S. Congress was over in Beck living it. minutes. The House of Representatives googled “spending.” With the Internet, it didn’t take that long. The Internet The Senate googled “revenue.” Then President Obama went to started out as a means for academics and the military to trade Wikipedia and typed in the algorithm for “balanced budget.” hints about solving Fermat’s Last Theorem and bombing The EU installed a Fiscal Discipline app on government Moscow, and it ended up on your Facebook page. Tasty recipe computers in Ireland, Greece, Spain and Portugal. Everything for potato salad. BTW, that dress makes your butt look big. is fine now in Europe. Of course, none of this content, no matter how low we And Al Qaeda’s leadership realized that, with their capac- value it, is truly free. Be it an ancient Philco radio, a laptop, ity to raise money, cause panic and destroy assets, they should school taxes for a new gymnasium or a communication satel- give up on terrorism and start a venture capital fund. lite, we always have to buy the box content comes in. The I don’t entirely blame the Internet. Wide availability of problem now is that the unattractive package we’re paying for free content in America dates back to public libraries and is Mark Zuckerberg and Arianna Huffington. They and their compulsory education. Both started in the Commonwealth of ilk, an ilk pervading the Web, have developed a free content Massachusetts, which is why it’s such a smart place. Repre- business model that’s all too appropriate to the Internet. sentative Barney Frank, mobster Whitey Bulger and presiden- In February 2011, when Arianna made her $315 million tial candidate Mitt Romney are all from there. A grade-school deal with AOL for The Huffington Post and Wall Street was dropout couldn’t foster a nationwide housing bubble the way claiming Facebook should be priced at $50 billion, David Carr, Frank did as chairman of the house Financial Services Com- who covers media for The New York Times, noted: “Most of the mittee. The Boston Public Library probably has a whole section value was created by people working for free.” People like me.

18 Q1.2012 The Korn/Ferry Institute Giving content for free is an age-old commercial strategy Social media in the hands of nonprofessionals may be — the snake oil pitch. Getting content for free from snake oil great for getting people together to riot in London, but let’s makers, selling it and keeping the profits is so new that the see the flash mob build a London Bridge. old-fashioned property law term for it is stealing. The pro-democracy (I guess) tumult in the Middle East has You let a neighbor have a beanbag chair, pole lamp and been credited to e-communication. But I spent a lot of time shag rug (fair metaphor for the contents of The Huffington there as a reporter, starting in 1984 during the war in Lebanon. Post), and she sells them for $315 million at a yard sale. You’d Angry crowds came together in an instant, and police and the sue. But The Huffington Post contributors are up in their at- military shot them long before iPads, Black­Berrys and Twitter tics looking for more stuff — fondue sets and macramé plant were invented. Beirut didn’t even have working telephones. hangers — to give to Arianna. (Incidentally, I covered the Middle East back when journalists Furthermore, in the matter of working for free, I thought were paid to — not just because I was an idiot.) we fought a large Civil War about that. Wikipedia shares the guilt, but at least Wikipedia has the good grace to be — as far as I can tell — a wholly profitless enterprise. It’s a place for the hobbyist, the sort of person who used to build model train layouts or collect old pipe tobacco tins. Better to have him on the Web than on the bar- stool next to you. Yahoo is not a hobby. Content freely gotten and freely given has its charm. The Sermon on the Mount was splendid. But, 2,000 years and counting, no one seems to have listened to it yet. On the other hand, admission to the Roman Colos- seum was free, while gladiator com- pensation was, literally, zilch. If something costs nothing, there’s a tendency to assume it’s worth it. When content loses its worth, we’re deprived of an imperfect, but handy, measurement of whether someone knows something important. It used to be, we had to pay him to tell us. Motivation for producing con- tent is corrupted. Samuel Johnson, by saying, “No man but a The Internet’s post-payment worldview is affecting all blockhead ever wrote except for money,” didn’t mean writers aspects of life. I find that, as of 2010 (carefully checking my made much of it. He meant the other reasons for writing are facts on the Web), nearly a quarter of dating couples met for worse: ego, obsession, infamy, fanaticism. Check any blog. the first time online, as did 17 percent of those who’ve gotten There is a Gresham’s Law of free content — Gilligan’s an- married since 2007. I suspect these digital people don’t under- tics drive out Ginger. And the more free-of-charge the content stand what marriage can teach us about our relationship with is, the more strictly the law’s enforced. Amy Winehouse’s the Internet. Take it from someone who became a husband toxicology report (download all 412 pages?) becomes the cur- before connubial bliss was virtual: When everything you’ve rency of the Internet realm as opposed to coverage of the got to say is worthless, and everything I’ve got to say is famine in … What’s that country in Africa where everyone’s worthless, we’ve been married too long. skinny and has a gun? The threat of amateurism is raised. Not only is the circus P.J. O’Rourke is a political satirist, humorist and author of many books free, but audience members are shouting, “I’ll walk that including “Don’t Vote, It Just Encourages the Bastards,” “Eat the Rich” tightrope!” “I’ll tame that lion!” “Hold my beer while I grab and “Parliament of Whores.” He was foreign editor of Rolling Stone

Steve Lux the trapeze!” magazine and is a regular contributor to The Atlantic Monthly.

Briefings on Talent & Leadership Q1.2012 19 It Pays to Be

metimces, d So k nu L(A y It Pays Very Well)

By David Berreby

n the mid 1990s, designers at a Scottish video game company called DMA Design were trying out a “race and chase” car game. It wasn’t going well. Test players didn’t like the con- trols, and the game crashed constantly. Besides, there was a glitch in the code that made police cars go crazy: Instead of overtaking players and pulling them over, the cops would crash into them at full speed. Oddly, though, this was one Ithing testers liked. So one day it occurred to the designers that — what the heck — they might design a game around their “problem.” “Everybody suddenly went, ‘Hey this is actually pretty cool,’ ” one of the designers explained.

20 Q1.2012 The Korn/Ferry Institute Briefings on Talent & Leadership Q1.2012 21 Result: “Grand Theft Auto” has sold more than 17 million Of course, thinking chance determines everything is a copies, becoming one of the best-selling games of all time confidence killer— it means you can’t be sure there’s any rela- and turning DMA Design (now Rockstar North) into an tionship between what you do and subsequent events. And industry leader. even if you wanted to be this philosophical, it’s practically im- Well, you have to think, that was lucky. possible to see one’s self so passively. The mind has an innate Of course, luck can sometimes be bad, turning a seem- bias to see cause and effect in everything, and an even stron- ingly foolproof plan into confetti. Either way, strokes of for- ger bias to see itself as important. As Nassim Nicholas Taleb, tune have a way of keeping leaders up at night. Here you are, the author (and former trader and hedge-fund manager), likes working to inspire, educate, anticipate and control, reaping to point out, very few of us can accept that we count for little the rewards of your hard work and taking your lumps for in shaping the events that affect us. mistakes. Fair enough. But a stroke of luck, good or bad, has Instead, we prefer to believe that good outcomes arise to make you wonder: How much does skill matter? Or, con- from skill and bad ones from mistakes. Only much later do

versely, how much of leadership success is pure accident? subsequent generations see that the real drivers were else-

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22 Q1.2012 The Korn/Ferry Institute

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Briefings onTalen t &Leadership Michael Witte (all) 2003, Maltbyfoundthat thepsychologists LizaDayandJohn you’re in control, you’re betteroff,andlikelytobemoreeffec- incontrol,you’re you’re mism. Inotherwords, thefactsdon’t if permityou tobelieve neuroticismanddepression,higheronopti- measures of might as well feel that fortune favors you. The alternativeisa might aswellfeelthatfortunefavorsyou.The fact, a belief in luck does seem to be the sort of psychological inluckdoesseemtobethesortof abelief fact, we tendtobelieveinluckasastopgapagainsttotalrandom- ness. Inotherwords, youcan’tin control,you if feelyou’re ple of centuries old. Until the Enlightenment, mostcultures centuriesold.UntiltheEnlightenment, ple of tive, if youbelievethatyou’llbelucky.tive, if trait thatprotectsagainstmentalills. Inastudypublished in hopeless feelingthatnothingyoudomuchmatters. And,in leaders. The ideathatleaderscancontrol eventsisonlyacou- leaders. The undergraduates whobelievedingoodluckscoredloweron example, kingsandothergreat menwereoftenshownriding saw leadersasluck’s passivepatsies. InmedievalEurope,for For millennia,thatwas, thedefaultsolutionfor infact, 18th centuries realized that luck, whileitcouldnotbecon- 18th centuriesrealizedthatluck, word for this meeting of randomness andreadiness:seren- word forthismeetingof and novelistwhocoinedtheword in1754.It’s those oneof na’s anactivemind,readyandable wheelcame thenotionof bling putanendtothissimpleview. but theconsequencesdependonhowaleaderanticipates trolled, couldbemanaged,preparedforandsometimespre- the ficklegoddessFortuna’s wheel,whichborethemupand to appreciatetheopportunityin chanceevents. Englishhasa these occurrencesandcopesafterthem. dicted. They realized, in short, thatleadersneedn’t realized,inshort, sitquietly dicted. They gam- Butcertainadvancesintheartof down asshesawfit. dipity,Walpole, the18th-centuryhistorian thankstoHorace overconfidence and passive resignation: In the place of Fortu- overconfidence andpassiveresignation:Intheplaceof on Fortuna’s wheel.Accidentshappen,andso doluckybreaks, With a better grasp of probability,With abettergraspof the17thand savantsof This kind of thinkingcreatedamiddlegroundbetween kindof This Q1.2012 23 24 Q1.2012 Iain MorleyandtheexecutiveconsultantMarkdeRond, who years after Walpole: “Chanceyears after favorsthepreparedmind.” in thegame’s the codewould havemeantonlycancellation,if ate becauseit’s allaroundus. According totheanthropologist thanks to a famous statement of Louis Pasteur’s,thanks toafamousstatementof made100 has beenvotedthemostpopularinEnglishlanguage.In highly successfulEnlightenmentideasthatwedon’t appreci - luck for the genesis of “Grand Theft Auto.” “Grandluck forthegenesisof Theft accidentalflaw The edited a recent collection of research on the subject, theword researchonthesubject, edited arecentcollectionof science, serendipity’simportanceisnowalmostacliché, Serendipity iscertainlyabetter explanationthanblind “accident.” They andmanyotherdiscoveries “accident.”They Morley anddeRond’scollection,makingbigadvancesinhis Ivory soapandtheotherproducts famouslydiscoveredby field “isnotcomparabletobuyingalotteryticketandthen rin, thePill,penicillin,laughing gas, vaccination,vitaminK, turned. AstheastronomerAndrewC.Fabianhaswrittenin toil andanxiety, toseehow theirseeminglybadluckcouldbe designers hadn’tthoughtand beenprepared,bylonghoursof universe, cosmicphenomenaand/or physics.” sitting backbutrequiresadeepfamiliaritywiththesky, the Similar stories of apreparedmindlie behindPost-its,Similar storiesof The Korn/Ferry Ins titute — includingaspi-

Michael Witte How To Be Lucky

How, then, can leaders, in the words of the idea of heat-forced ink jets by observ- scrawny first version into a cham- Pierre Casse, a professor at the Moscow ing a coffee percolator. pion. The first laser diodes made with School of Management Skolkovo, “create 2. Avoid the herd. There is less III-V semiconductors were famous for an environment open to luck”? Here are chance of being first and less chance of failure. Now they can be found in mil- the keys. being unique if your research and devel- lions of CD and DVD players as well as 1. Keep an eye outside the usual opment, your business model or your computer drives. channels. The physicist Sir Richard H. new marketing campaign is similar to 5. Watch out for the pitfalls of Friend, whose work on polymer organic that of others. planning. Serendipity can be expected semiconductors is the basis of e-ink and 3. Watch out for theory. “It usu- and prepared for, but it can’t be guaran- other serendipitously discovered technol- ally explains things after they have been teed. Therefore, planning that looks for ogies, cites the example of physicists in discovered,” Friend explained. It is better a guaranteed return on investment will the 1970s and 1980s who searched to get someone’s hands dirty actually do- never produce serendipity and may even among known superconductors for the ing something than to spend a lot of time choke it off. Like an insurance company perfect superconducting material. They exploring why it might be possible, or im- that knows there will be 800 accidents failed. The breakthroughs came from possible. Laboratory scientists like to say over the Thanksgiving weekend but can’t solid-state chemistry, with technology there comes a time to “stop reading and say whose car will be totaled, funders can and methods unknown to the experts do an experiment.” That’s advice that ap- expect breakthroughs from communities assigned to the quest. Similarly, the inkjet plies to many kinds of enterprise. “In my of researchers, but they can’t be sure printer was invented in two different labs, own field, we have regularly been assured from which ones. A research program, from two different insights, neither of that what we are trying to do will not marketing plan or long-range strategy which had anything to do with printing. work because literature in similar fields that demands predictable returns on In Japan, Ichiro Endo, an engineer at proves that it cannot,” Friend wrote. “So investment will be one that favors small Canon, took note of how ink squirted far this advice has been wrong on all advances on what is known. And the risk from a syringe after it was touched by a occasions.” in that approach is that funds for the hot soldering iron. Meanwhile, in Califor- 4. Do not underestimate the serendipitous breakthrough will never nia, John Vaught of Hewlett-Packard got power of engineering to make the be awarded.

amphetamine, antihistamines, benzodiazepines, quinine, in- moment its explosive power was needed. Nobel patented sulin, sulfa drugs, nitroglycerin, warfarin, smallpox vaccine, dynamite the following year. electromagnetism, dynamite, the phonograph, X-rays and ra- So even if leaders can’t control their environments, they dioactivity — were the result of accident plus a prepared mind. aren’t really passive in the face of random chance. They can Alfred Nobel’s invention of dynamite illustrates the point. master themselves, and put themselves in the best position In 1866, Nobel was experimenting with nitroglycerin, the to make opportunity out of whatever luck has to offer. Even if main ingredient of the explosives he manufactured for min- Warren Buffett owes a lot to luck, he still differs from Taleb’s ing and construction. Then he dropped a large vial of the liq- lucky monkey. Buffett’s success isn’t about any specific stock uid, which should have caused an explosion big enough to pick, but rather about his approach to all picks. He famously kill him. (He had already lost several factories and a brother had a habit, for example, of seeing all his spending as invest- to nitroglycerin catastrophes.) But the nitroglycerin in the ment opportunities lost. By building future consequences shattered vial didn’t blow up, because it was absorbed by the into his viewpoint — for example, envisioning the gains he sawdust on the floor of his workroom. That was lucky. But could have made on saved money so that he would ask him- Nobel saw what this good luck meant for his product: Testing self if he really wanted to pay $300.00 for a haircut — Buffet the sawdust, he found that he could make it explode. That made himself more capable of seizing whatever opportuni- meant that blending nitroglycerin with an inert substance ties came his way. He left himself open to serendipity. The would yield a product that could be handled safely until the best leaders do.

Briefings on Talent & Leadership Q1.2012 25 Where Have the Leaders Gone? By Glenn Rifkin

26 Q1.2012 Briefings onTalen t &Leadership Credit Q1.2012 27 “When Cicero spoke, people marveled. When Caesar spoke, people marched.” —Cato

t’s been a long and perilous year for opponents and unable to exert the audacity required to lead the country to better times. political leaders around the globe. The Westen piece came at a particularly tense time for the nation and for the country’s leadership. In August, 2011, for example, The New York Times The economy had limped along, and the unemploy- ran a controversial essay in the Sunday Review sec- ment rate had stubbornly settled at above 9 percent tion entitled, “What Happened to Obama?” The article, for much of Obama’s term. For most Americans, written by Emory University psychology professor Washington appeared to be stuck in an intransigent I Drew Westen, offered a scathing commentary of stalemate. The deeply partisan and vitriolic fight over President Barack Obama’s failure to emerge as the raising the debt ceiling by an early August deadline, leader nearly 70 million voters had hoped for and lest the United States default on its debt for the first expected when he was elected in 2008. Recalling time in its history, caused even his most ardent sup- Obama’s inauguration speech in January, 2009, porters to question the president’s leadership skills. Westen noted the feeling of unease that came over He was, they believed, being held hostage by Republi- him listening to the speech. The eloquent young cans pandering to the Tea Party conservatives and president, a man whose brilliant oratory and cha- seemed unable or unwilling to get angry and get risma had inspired widespread hope among voters tough. Conversely, given the mess he was handed that change would come and he would lead us out and the unprecedented opposition he was facing, of the terrible morass created by his predecessor, this was a situation that would have taxed Caesar. needed to tell a story. Obama’s approval ratings dropped precipitously. “The stories our leaders tell us matter,” Westen But Congressional leaders fared even worse. Respect wrote, “probably almost as much as the stories our par- for a deeply divided and gridlocked Congress ents tell us as children, because they orient us to what plunged to historic depths. A Gallup poll of Ameri- is, what could be, and what should be; to the world- cans revealed a stunning 82 percent disapproval views they hold and to the values they hold sacred.” rating of Congress, with Republicans receiving the Obama, Westen posited, failed to tell the story worst ratings. Veteran Congressman Jim Cooper, a that the American people were waiting to hear and Tennessee Democrat, told The New York Times, “This two-and-a-half years into his presidency, he had is not a collegial body anymore. It is more like gang yet to tell the story. The story had to point out not behavior. Too many people here are willing to delib- only what was wrong but who was responsible and erately harm the country for partisan gain.” As the how the wrong would be made right. Rather than stock market tumbled in late summer, there was a filling the giant shoes of F.D.R., Teddy Roosevelt or pervasive sense of dread that the country was head- Dr. Martin Luther King Jr. — men who confronted ing in the wrong direction. It also raised a deeply the bullies who tried to shout them down — Obama troubling question: Where have all the leaders gone? displayed a “deep-seated aversion to conflict” that This question, it seems, has no borders. Most allowed an obstinate Republican party to consis- of the world is asking the same thing. While Obama tently derail his agenda. struggled to assert control in the United States, Despite what many considered significant nations around the globe grappled with their own accomplishments — championing the first major leadership quandaries. Overseas, where the 17-nation health care reform legislation in decades, lassoing euro zone has endured a similar economic crisis, the an economic crisis that was heading for another dearth of strong leadership from both the healthy great Depression, and most of all, sending out an countries such as Germany and the laggards such as elite military commando unit that killed Osama bin Greece and Portugal has had dire effects. Laden — the perception remained that the president Germany’s Angela Merkel, for example, came had failed to ascend to the iconic level of leadership under fire for her failure to assert strong leadership so many had anticipated he would. In his ceaseless in the quest to find ways to assist Greece, which tee- attempts to be bipartisan and act like “the adult in tered on the brink of default, leading to investor the room,” he appeared instead to be cowed by his nervousness around the globe. Italy’s billionaire

28 Q1.2012 The Korn/Ferry Institute Briefings onTalen t &Leadership James Fryer (all) Monetary FundManagingDirectorDominique Minister DavidCameron’s andseveralprevious prime Kahn allegedly had a history of incidents that are now incidentsthatarenow Kahn allegedlyhadahistoryof NewYork Cityhotelroom,andputinjailbefore ministers’ relationshipsanddependenceonMurdoch front-runner tosucceedNicolasSarkozy, Strauss- worried abouttheirfuture.InFrance,theleading ineptitude in his handling of thedevastating March ineptitude inhishandlingof is runningtheshow?AndinJapan, Naoto Kan, its were dropped.(Civilsuitscontinue.)Considereda and his organization. Who exactly,asked, Who and hisorganization. thepublic president, SilvioBerlusconi,oncebeloved,isnow president, by RupertMurdoch’s mediaoutlets, withsomeeditors being releasedonbailbeforethecriminalcharges political corruption,whichhas long beenwhispered prime minister, wasforcedtoresignin Augustafter jailed, turnedupstartlingrevelationsaboutPrime their aftermaths. And inIndia,alleged pervasive his economicsbackground,Strauss-Kahn’s political his approval ratings nose-dived following charges of his approvalratingsnose-dived followingchargesof Strauss-Kahn, wasarrestedforsexualassaultina International Socialist Partycandidateforpresident, coni’s popularityhasplummeted,andItaliansare career appearstobeinruins. Onceastrongcandidatebecauseof coming tolight. embroiled in scandals and charges of fraud.Berlus­ embroiled inscandalsandchargesof earthquake, tsunami and nuclear plant crisis and crisis earthquake, tsunamiandnuclear plant In England, reports of widespread phone-hacking widespreadphone-hacking In England,reportsof

L Leaders in both the arenas of business andpolitics Leaders inboththearenasof Widespread protestshaveerupted throughout the But whatishappeningtodaybeyondthenormal ment critic who embraces Ghandianpoliticaltactics. who critic ment were alternatelydespisedandadoredbythepeople, arguments overwhetherleaders arebornormade. and suffereddefeatnearlyasapocryphaltriumph. about asahindrancetothatcountry’semergence political realities, thismaywellbethenewnormal. become rare, and millions of peoplehavelostconfi- become rare,andmillionsof those consideredgreatleaders and wagedrunning dence intheirleadersandarewaryaboutthefuture. days aregradedregularlyandintensely. Ina24-hour leadership hasbecomeararecommodityaroundthe Building Confidence globe. As a result, strong,effectiveleadershiphas globe. Asaresult, global economic power, is now under the spotlight. spotlight. the global economicpower, isnowunder common threadisclear:Strong,effective,ethical govern- country,outspoken ledbyAnnaHazare,an ebbs andflowsthatdefinestable,largelydemocratic share innumerabletraitsandchallenges, andthese societies. newmillennium Giventhecomplexitiesof Churchill toGandhi,hadtheirebbsandflows; eadership, Even afterall,isanamorphoustalent. our mosttreasuredleaders, fromLincolnto Despite the wide variety of circumstances,Despite thewidevarietyof the Scholars have long studied the attributes of Scholars havelongstudiedtheattributesof

Q1.2012 29 news cycle, aided and abet- it was difficult to remember a time ted by the Internet, Facebook, Twitter and levels when there has been such “a void of transparency heretofore unknown in executive in leadership across the board.” At 86, Bennis has suites, the spotlight on our leaders is bright and lived through 15 presidencies, and he has personally harsh. And many have wilted under the glare. advised several, including Obama. “Every decade, I The question that naturally follows the one can write a piece entitled, `Where have all the lead- above is: What is required to inspire confidence in ers gone?’” Bennis said. “I wrote that for the first our leaders once again? How can leaders turn a tide time in the 1950s. But this is by far the worst case that has left constituencies on every front disillu- of leadership flu I’ve seen. It seems as if nobody has sioned and angry? the touch right now. Why is this? Because we are Warren Bennis, the legendary organizational living in a time where things are changing more scholar and leadership author who has studied and often and faster than ever before. Things are far written about leadership for five decades, said more complex than in 1931.”

30 Q1.2012 The Korn/Ferry Institute Bennis suggested that rebuilding confidence has global market managing director in the life sciences to start with some basic requirements, including a area for Korn/Ferry International, the global recruit- turn toward some clear thinking, pragmatism and ing firm, spends much of his time interviewing lead- truth-telling. “Max De Pree said, `The first responsi- ers and searching for traits that inspire confidence. bility of a leader is to define reality,” Bennis recalled. “There are a couple of ways to look at confidence,” “The reality is that we are in a decline, and our leaders Kizer said. “I consider the confidence of the leader don’t know how to manage during decline. We’re not himself and then look at the confidence that he in- used to this. But we have to face a grim reality, and spires in the people around him. I think the second every leader has to find a way to express it in a way is more important than the first. People can learn to that people can understand.” In addition, Bennis said, we need to hear far more from corporate leaders in addressing the eco- It seems as if nobody has the touch right nomic issues, especially in the area of job creation. The president and Congress can do just so much. now. Why is this? Because we are living Michael Useem, a management professor at the in a time where things are changing more Wharton School and director of the Wharton Center for Leadership and Change Management, agreed. often and faster than ever before. Useem has put together a leader’s checklist of 15 —Warren Bennis “mission-critical leadership principles” and for him, the 15th is the defining principle of leadership: the become confident: the more experience they have, ability to get beyond self-interest, transcend constitu- the more information they have. Some people are encies and do what the country requires. Abraham born with it; others can learn it. But more critical is Lincoln did this when Robert E. Lee surrendered at the question: What do all the interest groups around Appomattox in 1865, just days before he was assassi- you think about you? Your team, your board of direc- nated. Instead of imposing harsh terms and retribu- tors, your customers. Do they have confidence in tion on the Confederacy, Lincoln sent word that he your ability to deliver?” wanted reconciliation, ignoring many political oppo- During interviews, Kizer probes deeply with nents who sought vengeance. those questions. How did that person build his or her In today’s political environment, Useem is clear team? How did they get the team to follow? What kind that no leader, even one anxious to transcend parti- of legacy do they leave behind? sanship, can go it alone. Kizer points to Steve Jobs, the legendary Apple “Are there forces outside Washington that can co-founder and long-time CEO, as a prototypical make a difference? Yes,” Useem stated. “We saw How- confidence-builder. Much of Jobs’ success, Kizer ard Schultz [CEO] of Starbucks begin a campaign he explained, came from his ability to drive innovation called `Just say no to Congress.’” Until Congress gets and to deliver what he promised. But mostly, it came on with the true business of the country and leaves from his incredible impact on those who worked electioneering and partisan politics aside, Schultz around him and for him. “He inspired an amazing urged people in the business community to cut off level of confidence,” Kizer said. campaign donations. Those traits that inspire confidence are what “The Business Roundtable, the National Cham- Kizer seeks when he interviews prospective execu- ber of Commerce, the Council on Institutional tive recruits. From his years of experience, the list Investors and the National Association of Corporate of key attributes he looks for is relatively short: Directors all could and should step up to the plate • A clear vision and suggest actions to restore national leadership,” • Outstanding communications skills to share Useem said. “Obama can turn this around if he the vision can build the momentum and bring in a range of • An ability to follow through and execute on constituents to appreciate why we have to transcend that vision these partisan struggles. They have to understand “People are forgiving and will allow for mistakes,” that if we don’t do that, we are going in the wrong Kizer said. “But if you won’t even admit the mistake direction.” or keep making the same mistake over and over, con- But building confidence in leadership, under cur- fidence will disappear. A strong leader has to have the rent conditions, can be a Sisyphean gambit. Jay Kizer, courage to stay the course but when it is not working,

Briefings on Talent & Leadership Q1.2012 31 not let pride get in the way of only thing that will really reassure people and estab- saying so.” lish a basis for action is a clear, honest explanation,” Handle the Truth Heifetz said. “People need to understand basic economic realities. An ignorant public is like a n fact, there are obviously dry forest ready to burn. It doesn’t take a lot plenty of great leaders in business of demagoguery, when people are fright- Iorganizations, local governments, ened and in pain, for charismatic forces nonprofits and the like. But the prob- to emerge and mislead people. Dema- lem is that these self-effacing, hardworking gogues always emerge in times of crisis people are not at the top of the pyramid where because they are very good at giving people much of the authority resides and most of the prob- simplistic answers.” lems lie. Heifetz offered a favorite quote from Oliver According to Ron Heifetz, senior lecturer in pub- Wendell Holmes: “I would not give a fig for the sim- lic leadership and founder of the Center for Public plicity on this side of complexity, but I would give my Leadership at the John F. Kennedy School of Govern- life for the simplicity on the other side of complexity.” ment at Harvard, those at the top of the pyramid have Another intrusive factor often cited by leader- far more constrictions and obligations than anyone ship scholars is the role money has come to play in else. To gain the authority that gets them to the top, today’s election campaigns, particularly presidential they must form relationships with directors, share- and key congressional races. Election cycles have holders and other constituencies that inevitably morphed into perpetual campaigning, nearly from come with strings attached. Those strings can tie the the day a victor is sworn into office. Campaign finance hands of even the most competent leaders. reform has done nothing to slow the inflow of hun- “Our attention tends to focus upward toward dreds of millions of dollars from special interests authority,” Heifetz pointed out. “Everyone, includ- into the election process in the United States, and ing journalists, scholars, those within organizations, that is much to the detriment of leadership, said focus on people in high positions of authority for Drew Westen. leadership. We are getting some great leadership up “It seems pretty clear that the money in politics and down and far and wide, but not from people at has led to a massive degradation in the quality of the top of the pyramid.” American leadership,” Westen said. “When you have Those with the authority, Heifetz continued, the kind of competing demands that all members of “become selectively responsive to some of their con- Congress have in order to stay in office, the pressure stituencies more so than others. The basic algorithm is intense. It is hard to be much of a leader when you is that these leaders will try to find a way to make a are bought. It takes a person of extraordinary will- dominant coalition hold together in support of their power and integrity not to make the easy rationaliza- position. They will try to find the least common de- tion that they have to take that phone call of every nominator amongst various constituencies to create wealthy person who wants something or they will be a sufficient coalition to keep them in power. They outgunned in the next election. They tell themselves, don’t want to lose their jobs.” `I have to do this or someone worse will get the job.’ ” Of course, in a time of rabid partisan politics For example, Westen said he had recently spoken and deeply entrenched constituencies such as lobby- to a state legislator in Florida whose opponent spent ists and political action committees, creating a bipar- almost $2 million on a statehouse race. “That was for a tisan coalition these days is nearly impossible. To state race!” Westen said. “It’s mind-boggling.” that end, Heifetz believes a leader like Obama has And beyond getting elected, today’s leaders may only one choice in his attempt to build confidence simply be overwhelmed by the magnitude of the job. and accomplish his agenda: to educate and explain “The idea that someone who has never made a series reality to the public. Given how complex the issues of consequential hiring or managerial decisions at all are — everything from health care reform to jobs would have their internship as a President, is actually creation — the public isn’t looking for complex ex- a frightening thought,” Westen added. Charles Handy, planations. They need simple, clear but honest expla- the legendary management guru and author based in nations of what is going on, something Obama has London, agreed. “The job [of leader] is almost impos- often failed to do, according to Heifetz. sible these days. It is too big,” Handy said. “There are “In a prolonged painful economic period, the no secrets anymore. Transparency is great but you

32 Q1.2012 The Korn/Ferry Institute can’t do anything behind closed doors. There are no to embrace the team and root hard for a victory for secrets and everything is out in the open. That makes the Springboks in the Rugby World Cup that was it difficult to plan with any kind of confidence. As a held in South Africa in 1995. An improbable victory result, everybody is reacting immediately to events.” over New Zealand to win the cup only added to the Handy believes the same holds true for corpora- power of the moment. Mandela appeared on the tions, which have grown into multinational behe- field to present the championship trophy to the team moths, far too large and unwieldy for a single leader captain, François Pienaar, an Afrikaner, wearing a to oversee. “You have to be a super-human being to Springboks jersey with Pienaar’s number, and this deal with and ride above it,” he said. symbolic moment helped bring the troubled nation In the United Kingdom, Handy said, the current together in dramatic fashion. prime minister, David Cameron, “is trying to think long-term and to communicate an upbeat message, but he has to keep diving down to make sure the ship “The job [of leader] is almost impossible isn’t sinking, let alone being able to concentrate on where it’s going. It’s very difficult. And it’s even worse these days. It is too big. There are no in the United States.” Manfred Kets de Vries, a clinical professor of secrets and everything is out in the leadership development and founder of INSEAD’s open. That makes it difficult to plan Global Leadership Center near Paris, brings a psycho- logical perspective to his study of leadership. Great with any kind of confidence.” —Charles Handy leaders, Kets de Vries said, can be very dangerous. “Most leaders fall into the trap where they start to believe in their own invincibility, and they become Kets de Vries believes that a great leader needs to more and more narcissistic and omnipotent.” understand the context and the prevailing emotional Kets de Vries explained that “sometimes as a temperature of the country or organization he is leader, you have to play dentist. You have to inflict leading. “There are no babies without mothers, and pain. You have to say no. His message comes out there are no leaders without the context,” Kets de wobbly because he wants to please everybody.” As Vries said. “Great leaders work on people’s pride. If the old adage goes: Trying to please everyone results you have full professors with tenure, what can you do in pleasing no one. More important, it is not a confi- other than appeal to someone’s pride to do better?” dence builder. Coda In fact, many of the iconic historical leaders such as Lincoln, F.D.R., Churchill, rose from obscurity to n early September, Obama spoke to a joint session greatness during times of war. But the ability to in- of Congress to announce a far-reaching jobs pro- spire confidence does not necessarily require a global Igram aimed at cutting into the country’s stagnant military conflict. Some leaders transcend the under- unemployment levels. His disillusioned and weary lying minefields by rising above the bickering and supporters were pleased with Obama’s impassioned conflicts with powerful, symbolic actions. Kets de performance. “This was a startling, feisty, combative Vries said that when he asks students to name the and, in a way, commanding president that has rarely living leader they most admire, 90 percent choose been seen on the stage in Washington,” wrote pundit Nelson Mandela. The former president of South Howard Fineman on the Huffington Post blog site. Africa, who spent 27 years in a tiny prison cell for his “Friends and foes alike had to wonder watching him activist role in fighting apartheid, emerged as a folk tonight: Where has that Barack Obama been? Why hero and could have used his election to the presi- did it take so long for ‘Give ’Em Hell, Barry’ to appear?” dency as a chance to inflict revenge on his enemies. Although his political opponents predictably Instead, he refused to bow to pressure for vindication tried to discredit his effort, the president demon- and gracefully let go of the past to create a stronger strated the type of leadership mien that had been future for the nation. Soon after taking office, for expected when he came into office. Whether or not example, he was pressured to do away with the popu- it proved to be a jumping-off point for renewed con­ lar South African rugby team, the Springboks, which fidence across America, there was no doubting how had long been a symbol of white oppression for the hungry people have been, in these troubled times, black community. Instead, he urged his constituents for a leader to emerge.

Briefings on Talent & Leadership Q1.2012 33 Ecclestone Bongarts/Getty Images

34 Q1.2012 The Korn/Ferry Institute FormulaOne’s

2 Benign 2 0 M P H c a r Despot s , $4 b ill ion in the bank. W e lc o m e t o B e rn ie Ec clestone’s World.

By Doron Levin AFP/Getty Images AFP/Getty

Briefings on Talent & Leadership Q1.2012 35 To fans imbued with the sacred traditions of baseball or football, Formula One motor racing is an exercise in organized high-speed chaos.

Each race car is custom-built under technical rules that Murdoch, another renowned negotiator. But before change constantly. The young, glamorous drivers are em- anybody buys anything, Ecclestone’s opinion looms ployed at fabulous salaries, yet are prone to switch allegiance large. His family trust, which he amassed in part at a pace matched only by the buying and selling of teams and from fees that he earned by negotiating on behalf shuffling of sponsors. At the end of an eight-month Grand the teams, owns a valuable chunk of F1’s commer- Prix race season, the team with the most successful car wins cial rights. The majority owner of the rights is the Constructor’s Title. Confusingly, the champion driver the private equity firm CVC Capital Management, doesn’t necessarily represent the top team. which employs Ecclestone to run the sport as chief If casual spectators are stymied by the blur of names, executive. Could Ecclestone and Murdoch, whose alliances and prizes, they can clearly see and comprehend the mutual enmity is barely disguised, coexist under opulent air of wealth and prestige that enshrouds Grand Prix the News Corporation’s ownership? races. But unlike most other sports that evolved through the Since the late 1970s, Ecclestone’s strategies accomplishments of many, the emergence of Formula One and operating style have become as critical to the — commonly known as F1 — as one of the world’s most lucra- sport’s financial success as technologies like turbo- tive sports marketing platforms is traceable to the ideas, charging are to winning races. Now 80 years old, he began actions and leadership of a single mastermind. competing in minor-league racing while still a teenager. Before Bernard Charles Ecclestone, known ubiquitously Before buying a team, he managed the F1 champion driver as Bernie, F1 was a weekend sport for well-to-do self-financed Jochen Rindt until Rindt died in a crash. But Ecclestone dis- amateurs. Television hadn’t discovered it, and sponsorships covered early that the excitement of deals and high-stakes were irrelevant. He was the first to recognize the sport’s com- negotiations was every bit as alluring as the danger of pass- mercial possibilities and, just as important, proved he could ing on a high-speed curve — which is why a pastime of bring them to fruition. He realized that tobacco companies wealthy weekend enthusiasts, designers and mechanics has and automakers — and later Hugo Boss, Red Bull, Tag Heuer, morphed into a business valued at billions, with a fan base Vodafone and others — could and would pay enormous sums similar to that of the Olympics or World Cup. to build increasingly sophisticated vehicles to carry and tele- “Bernie has created a great, sustainable product; he under- vise their logos and that they would compete in spectacular stands the brand, continuously improves it and deals with races in exotic locations like Monte Carlo and Shanghai. all the adversity,’’ said Herb Fishel, retired head of General A race team owner himself, Ecclestone was the first in Motors’ motor sports programs. ``His actions require risk, his peer group to see that bargaining collectively would be far and he has demonstrated frequently that he is not averse. He more lucrative than negotiating appearance fees separately knows the selling power of the Formula One starting grid with race promoters, the practice in the 1970s. Likewise, his and uses it often.” instincts about how he could attain optimal value from large- Susan Watkins, a Canadian journalist and friend of Eccle­ scale television contracts, as opposed to multiple local deals, stone who wrote a 2010 biography, described her subject were prescient. as “absolutely fearless about taking risks, physically or finan- There has been buzz throughout the 2011 season about cially.” She added, “If he hadn’t those qualities, Formula One the possible sale of F1’s valuable commercial rights to a group mightn’t be where it is right now.” led by the chief executive of the News Corporation, Rupert To appreciate the difficulty of making money from motor

36 Q1.2012 The Korn/Ferry Institute Briefings onTalen t &Leadership www.sutton-images.com flattering headlinesaren’t meanttobetakenpersonally. On Nascar stock-car racing circuit, by contrast, hadbeenagrubby Nascar bycontrast, stock-carracingcircuit, Nascar intoaprofitableenterprise. regional sport until the family of thecurrentCEO,regional sportuntilthefamilyof Brian France, wheel carssimilartothoseracedinF1havestruggledfind would flatten lesser individuals. Though hewouldneversay would flattenlesserindividuals. when tobackoff.Hehaslasted asthesport’s supremerulerby with helpfromMurdoch’s turned FoxTelevision network, anapolis 500. tracksand Squabblesamongtheownersof theIndi- an audiencebeyondtheonce-a-yearphenomenonof by theFrancestargetedayoungermainstreamaudienceand, teams have led to the creation of rivalleaguesthatsplitaudi- teams haveledtothecreationof hunkering downthroughscandals andmediauproarthat decent businessmodel ences, making commercial sponsorships less appealing. The ences, makingcommercialsponsorshipslessappealing.The elevated itfromitsruralSouthernroots. Shrewd marketing sports, oneonlyhastolookattheUnitedStates, whereopen- so within earshot of thepress,so withinearshotof heevidentlygraspsthatun- son reflecthissixthsenseforwhentotakeahardlineand aGrandPrixsea- squabbles thatbubblebelowthesurfaceof site smarts, moxieandfeelformassmedia. As a despot, Ecclestonehasfewpeers.As adespot, Years brokering of The lessonisinescapable:Benigndespotismcanbea The — as longthedespothasrequi-

WPP, theworld’smostpromi- aholdingcompanyforsomeof runs London-basedPRISM,asportsmarketingfirmownedby facts havebeenestablished,”hesaid,“Iwillbeexonerated.” ische Landesbank and his own family trust for $1.35 billion. ische Landesbankandhisownfamilytrustfor$1.35 when aGermanprosecutorarrestedthebankerGerhardGrib- thesizeitis,”would beabouthalf saidSteveMadincea,who week’s thetheaterthatinfusessport. GrandPrix,partof as treacherous, disingenuous ordeceptivehavemissedthe again thatthosewhodisparage Ecclestone’s operatingstyle itsF1stake.In2006, purchaseof Ecclestone nection withCVC’s nent advertising,marketingandpublicrelationsconcerns. German newsreportsimpliedthatEcclestonewasundersus- point. He simply is one of the pre-eminent negotiators of his thepre-eminent negotiators of Hesimplyisoneof point. picion. HetoldBritishreportersthathehadvisitedtheprose- the contrary, theyserveasexcellentpromotionforthe next kowsky on a charge of receivinga$50millionbribeincon- kowsky onachargeof had brokered the sale of acontrollingstakeinF1’shad brokeredthesaleof commer- generation. An appetite for risk, coupledwithan instinctive generation. Anappetiteforrisk, cutor to“clear up” allegations. “Iamconfidentwhenthefull cial rightstoCVCfromJPMorgan,LehmanBrothers, Bayer- “Bernie understands that if F1werejustaboutracing,it “Bernie understandsthatif Last January, splashyheadlines Ecclestonedrewplenty of Exoneration bytheGermancourts wouldillustrateonce Q1.2012 37 38 — Q1.2012 ries describingMurdoch’s buthediddismissthem interest, for therecordas“rubbish.” Later, heopinedtoreportersthat F1turnedintoashow- Italywerepossiblebuyersof family of the EuropeanCommissionwas unlikelytoallowasaleinany he ispitted. generate viewershipandticket sales. Heneverdeniedthesto- grasp of adeal’sgrasp of legality, value,nuance case forEcclestone’s skillatorchestratingmediaattention to event becauseitwouldviolateagreements guaranteeingfree- prove more than a match for most of thoseagainstwhom prove morethanamatchformostof The stircausedbyreportsthatMurdochandtheAgnelli The — and publicityvalue Union’s regulatoryinclinationtowardasale?Maybehewas The dealerrefused,buttheteenagerpersisted,offeringaper- The By theearly1950s, hehadgraduatedfrommotorcycles and News Corporation. much. Was hesendingupatrialballoontotesttheEuropean much. facilities atthetracks. officialsatthe1978German When ing himnearlyblindinhisright eye. ise asadriver, thoughoncertaincornershedidn’t seewell was drivingFormula3, aminorleaguetoF1. Heshowed prom- is believedtobeBritain’s wealthiestindividual, afarcryfrom aged toplaytheaffairformaximumexposurewithoutsaying est trading carsandreal Ecclestone’s to appraise a lightning-quickabiliy nications channelforquickresponsetoaccidents, Ecclestone Grand Prixrefusedtoletdoctorslistenthetrack’s commu- attended everyF1racefrom1978to2004 asthesport’s chief view isanissueinthetalks, sinceitmightdrawbuyersand asked acardealertogivehimspacedosoinhisshowroom. near London.Inhissparetime,heracedmotorcycles. Healso vived theGermanblitzin1939. 15, Atthe ageof hedropped because hehadbeenbornwith congenitalatrophia,render- been responsibleforsafetyimprovementsandbettermedical physician. IncollaborationwithEcclestone,Watkinshas that theNews CorporationandMurdochwereanglingto Eversoslyly, thesport. to-air broadcastof hewasimplying tors in the stands. The Germansbackeddown. tors inthestands. The therace,nevermind80,000threatened tocalloff specta- the teamsandFIAthatspellsoutsport’s governance, tion Internationaledel’Automobile), thattelevisioncoverage his roots as the son of aSuffolkfisherman,whosefamilysur- his rootsasthesonof displayed anuncannyknackfortradingthemprofitably. He comes upforrenewal.Nopay-per- onewillbesurprisedif centage of hisprofitsasrent centage of F1’senhance thevalueof commercialrights. signaling tothemotorsports’rulingbody, theFIA(Fédéra- offer pay-per-view coverage of races.offer pay-per-viewcoverageof of freebroadcasting,apotentialrevenueopportunityforthe of racesmusteventuallyincludeapay-per-viewoptionontop of out of schooltoworkasa£5-a-weekassistantinlaboratory out of “He hasasuperbbrain,”saidDr. SidneyWatkins, who Whatever transpiredbehindthescenes,Whatever Ecclestoneman- With afortuneestimatedatabout$4billion,Ecclestone Next year, thepactbetween theConcordeAgreement, Despite the impairment, Ecclestone’sDespite theimpairment, visualiza- powersof a te semsinpart from — value his firstrealestatetransaction. The Korn/Ferry Ins titute alent for .

Associated Press Briefings onTalen t &Leadership Courtesy Circuit of the Americas A hustlerinhisyouth,heexcelledatchemin-de-fer, blackjack, rencies around.Idon’t thinkanybodyreallyknowshis net ing money,” Watkinssaid. “Hesoldpens, cakes, hundredsof for the lot, according to Susan Watkins, accordingtoSusanunnervingtheseller.for thelot, worth, notevenBernie.” Later, shesaid,“hefoundsomething in partfromalightning-quickabilitytoappraisevalue.He its potential.Utterlyfastidious, appearancesareveryimpor- States tobepurpose-builtforanF1race. by fansandsponsors.ThenewtrackisthefirstinUnited napolis eventuallywerediscontinuedduetoinsufficientinterest places suchasWatkins Glen,N.Y., LongBeach,Calif., andIndia- the latestvenueforF1afterearlier U.S. GrandPrixracesin Management Ltd. an Austin-basedprivate-investmentcompany, ProphetCapital Tavo Hellmund,aformerdriver, andBobbyEpstein,whoowns seating 120,000spectators.Alsointhedevelopmentgroupare 1,000-acre site,whichwillbecalled“CircuitoftheAmericas,” are spendingroughly$200milliontobuildthetrackona in Austineveryyearforthenextdecade. to spend$250millioninpromotionalfeesensureanF1race new circuit,nowunderconstruction.Thestatehascommitted Texas, servesashosttotheF1UnitedStatesGrandPrixata United States. and AbuDhabi,includesonenotableunexploitedmarket,the half abillionworldwideandexpandinginplacessuchasIndia Formula One’sgrowingglobalfanbase,estimatedatperhaps 220 MPHinTexas a white Beatle haircut, hestillmanagestostandout. a whiteBeatlehaircut, things. He’syoulookathisbusiness inter- If apropertyaddict. total in his head. Then, Ecclestonewellmightinstantlybid total inhishead.Then, tant tohim.Asateamownerheinsistedoncleanuniforms, tion arekeen.Hecanlookatashabbyshoppingcenterandsee he loved,racing,andawaytomake moneyatit.” discussed buyingtheBrabham team,MotorRacingDevelop- greyhounds, ginrummy erty andcars. ests, they’re like a bowl of chopsuey. likeabowlof ests, they’re He’s alwaysmovingcur- can glanceatafewdozenvehicles, priceeachone and addthe cars onraceday. Standing5feet3inchestallandcrownedwith stone wounddownhisused-car business. HeandRindthad spit-and-polish orderinthegaragesandaparadeglossfor When Ecclestonewasyoung,“everythingWhen wasaboutmak- “F1 isn’taswellknowninthiscountryNascarorthe Austin, abuddinghavenfordigitalentrepreneurs,willbe Developers, ledbySanAntoniobillionaireRed McCombs, That situationwillchangeonNov. 18,2012,asAustin, Ecclestone’s talentfortradingcarsandrealestatestems Shortly after the death of hisfriendRindt in1970,Shortly afterthedeathof Eccle- — which providedcapitaltobuyprop- reluctantly agreed.Beforethedealclosed,anotherbuyer ments Ltd.,together. Instead,Ecclestonealoneofferedtobuy razor-sharp pressed whiteshirtsanddarkslacks. Likewise, it fromtheoriginalowner, Brabham, thechampionracerJack was Ron’s valuation.” approached Tauranac withahigheroffer £100,000.which Ecclestonerespondedwithabidof Tauranac new outfits, theweekitsown color. eachdayof Forhimself: music scene. gain averysexyentertainmentassettoadditsalreadylively and softwaredesign. East, aswellstudentsseekingcollegedegreesinengineering international citythatcanattractentrepreneursfromtheFar Hahn, Austinhasambitionstopositionitselfworldwideasan and rightoveranelevationchangeof133feet.Accordingto the resultsinAustincoulddetermineachampionteamordriver. Americas. Asthesecond-to-lastracein2012racingseason, Indianapolis 500,” saidJeffHahn,whorepresents Circuitofthe biography. RonTauranac, whoownedtheteam,havingbought to remain in management of thefactoryandteam,wasletgo.remain inmanagementof to thought that meant a price tag of £130,000,thought thatmeantapricetagof accordingtoaval- the team“for theassets,”Watkins’s thevalueof accordingto ham’s color towhitefromgreen.Hekeptsalarieslowand his moneymaking instinctswerearoused. his looked forwaystocutexpenses, buildingawind tunnel out uation of theassets.uation of Ecclestonetoldhisbiographer, But, “that getting more. Shortlyafterward, Tauranac, whohadexpected gated tosellEcclestone,eventhoughhehadanticipated ordered thefactorytobemadespotlessandswitchedBrab- one. He spruced upoperations, inspiffy dressinghisstaff one. of used leasing industrial partstosave on theexpenseof “Bernie quicklyrealizedhisfellow teamownerslovedthe A sticklerforappearances, Ecclestoneimmediately Tauranac sentdocumentssupportinghisvaluation,to If theU.S. GrandPrixtakesoffinpopularity, Austincould The trackwillbe3.4mileslongandcontain20turns,left — but hefeltobli- Q1.2012

39 sport as much as he did, but they weren’t businessmen,” said ish Labour Party solicited a £1 million contribution from Eccle- Nigel Roebuck, a longtime motor sports journalist based in stone. In his telling, he gave it as a way to show gratitude for London. “He was the first real businessman to own an F1 team.” the party not favoring higher taxes on the superwealthy. And Until the 1970s, each team negotiated separate appear- he had good reason to be grateful. Ecclestone’s income the ance fees with local Grand Prix race promoters. Teams could previous year — a far cry from the early days as a used-car earn additional money depending on how they fared in the salesman — was reported to be £54.9 million. race. But promoters often ran short on payday, and big names The young Labour politician Tony Blair and his family like Ferrari routinely commanded outsized appearance fees. had visited Ecclestone at the British Grand Prix at Silverstone Egged on by Ecclestone, “there was a growing sense in those that year. Later, after Labour had won the election and Blair days among the teams that we have the cars and drivers, we became prime minister, Ecclestone visited 10 Downing Street. put on the show and they get all the money from ticket sales,” He argued that tobacco shouldn’t be cut out of sports immedi- Roebuck said. Ecclestone was only too pleased to bargain on ately, as the European Union wanted, but phased out gradu- their behalf in return for a cut. ally. F1 teams were collecting $200 million to $300 million Ecclestone’s first commissions in 1972 were relatively annually from cigarette makers; some of them might be modest, according to Watkins — about 37,500 Swiss francs forced to leave Britain. In Ecclestone’s telling, he hated poli- per race, roughly $9,500. Teams could add to their revenue tics, but as the leader of a small industry, he needed access by recruiting sponsors, which they did with varying success. to explain his side of the story. Sponsor logos appeared on the cars, as well as the mechanics’ British newspapers connected the dots — albeit mis­ uniforms. leadingly. They implied that his £1 million contribution had Under Ecclestone’s tutelage, teams used their leverage to bought the government’s eventual stance that F1 should be gain a share of all fees generated by sales of clothing, posters, exempt from the European Union’s ban on tobacco advertis- trinkets and trackside displays. The Paddock Club, started in ing. Ecclestone, who hadn’t asked for an exemption, kept his 1982, was a high-end entertainment lounge where teams and mouth shut about the truth. Finally the Labour Party, pan- sponsors could treat VIP clients to Champagne, caviar or a icked by the media uproar, returned his contribution — infu- manicure while they waited for the race to begin. But the club, riating the F1 chief. critical to Grand Prix’s luxury image, wasn’t making money Subsequently, F1 teams phased out tobacco sponsorships, in 1986, so Ecclestone announced to team owners that it was as Ecclestone had forecast they would. Grand Prix venues have closing. Immediately, guest traffic increased, and the $1,500 been doing the same. “Tobacco’s void has been filled today per race fee was suddenly not so exorbitant. Tickets to the with financial services companies such as RBS, Santander and Paddock today sell for $4,000. ING, plus automotive suppliers and telecoms like Vodafone,” “What I learned from him is that everything he gains is Madincea said. by taking two steps forward and one back,’’ Madincea said. No wonder Murdoch and the News Corporation are kick- “He banned photographers from the pit lane in 1996 because ing tires, trying to figure out what F1 might be worth. The sport they were getting in the way. The photographers themselves looks fit, flush with sponsorships, 12 teams strong, energized came up with accreditation and special bibs. Problem solved. by a growing base of new and mostly younger fans in Asia. This Nothing would have happened if he had just demanded order.” year, for the first time, Formula One will race in New Delhi. The potential gusher was — and remains — TV. He bought “One of Bernie’s biggest challenges is the aging of the individual broadcast rights in separate markets when they average race fan,” about 55 years old in Europe,’’ Madincea didn’t cost much. It was a risk. By packaging smaller deals into said. But at the race this year in Shanghai, Infiniti, a new omnibus TV contracts, he has been able to generate excellent sponsor of the Red Bull team, drew a crowd of 1,100 to an returns on his original investment, Watkins says. Infiniti dealership to an autograph session with Sebastian A bigger television package broadened F1’s global fan base, Vettel, the 23-year-old reigning world champion. “The two while drawing the attention of advertisers. Sponsorships over- countries with the youngest following are India and China, night grew more valuable because TV could put sponsors’ with an average fan age of 28.” names in front of more eyes. Formula One is set to negotiate a new Concorde Agree- As Ecclestone had foreseen, individual Grand Prix events ment next year with the FIA. As in the past, F1 teams are sure were melding into a single potent F1 brand. Team names like to demand a bigger cut of the sport’s revenue. It’s hard to Tyrell and drivers such as Jacky Ickx and James Hunt gained imagine that Ecclestone won’t be in the middle of the fray. renown. Sylvester Stallone, George Harrison and Arnold Schwarzenegger showed up at races, as well as political fig- Doron P. Levin is a Detroit-based journalist and author. He has covered ures like the German chancellor Helmut Kohl. the world auto industry for The Wall Street Journal, The New York Times, Celebrity naturally attracts controversy. In 1997, the Brit- The Detroit Free Press, Fortune and Bloomberg.

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Some guys buy an old boat, fix it up and sell it; maybe make a few bucks, maybe not. Stephen Julius and Stephen Heese buy old brands, give them a new life, and sell them at a tidy profit. Julius and Heese, aka The Two Steves, specialize in reviving heritage brands, i.e., companies that once claimed a special place in hearts and minds Pbut that have since fallen on hard times, gone bankrupt or disappeared.

42 Q1.2012 The Korn/Ferry Institute SSI ONATEabout brands How a boutique private equity firm fixes broken companies By Lawrence M. Fisher

Briefings on Talent & Leadership Q1.2012 43 44 A Q1.2012 the consumer.” ucts, sotheyneedto triggeranemotionalresponsefrom means making are allluxuryprod- them beautiful.These that canberelaunchedandmade relevantagain.That brandsIboughtare and staydead,”saidJulius. “The has-been. trickisdistinguishingheritagefrom shirts toshotguns. The say a heritage brandcanexistinalmostanycategory, from thoseboxes.”cycle, theyallcheckedof it’s RivaorIndianMotor­ positioning. Whether Chris-Craft, brands thathavehighcraftsmanshipandpremiumprice London office.Heseeksout“authenticbrands, aspirational is oneattribute,”saidJulius, whoworksfromStellican’s bankruptcyin2001.they purchasedoutof theiconicAmericanyachtmanufacturer on Chris-Craft, daystheStevesarefocused cycle brandinAmerica.These the mid-1800s, andIndianMotorcycle,theoldestmotor­ luxurypowerboatsfoundedin Riva, anItalianmakerof rebuiltandsoldCantiera equity firm,theyhavebought, Fun on1941Chris-Craft Runabouts “There arebrandsthatmaybeheritagebutneedtodie “There Julius andHeeselikeboatsmotorcycles, butthey brands,“I lookforcertaintypesof whichheritage of Through Stellican Ltd.,theirLondon-basedprivate Through heritage brandcanexistinalmostanycategory, fromshirtstoshotguns.Thetrickisdistinguishingheritagehas-been. family had lost control of thecompanyin1969, had lostcontrolof family andit passed were practicallysynonymouswith “ladolcevita.” Riva The Riva,theItaliancompany whoseboats their acquisitionof to writeacheckattheend,and ithappensquickly.” the auction,youcanbuyadollarfor25cents. Butyou need buyersat phen figuredoutthatwhentherearenotalotof distressed situations, saidHeese.“Ste - andhewasright,” cash registersandcurrencyexchanges. firm’s earlysuccesseswereinunglamorous fieldssuchas hence focusedonnoparticularmarketsector. Indeed,the wasintentionallyopportunistic, strategy processes. Their soundmanagement newcapitalandtheapplicationof of inmanagementfromTulaneUni- Oxford. HeesehadaB.S. Kennedy School,aftertakingaFirstinClassicsfrom Julius hadcometoHarvardstudygovernmentatthe imagery: It’s theKennedy’s, Hyannis, Nantucket.” classic beauty. It’s feeling.It’s the‘On GoldenPond’ that eleganceand atimewhenAmericawaspure,of feelings of peoplehear‘Chris-Craft,’ itevokes Sarasota, Fla.“When Heese, whoworksattheboatcompany’sheadquartersin The pair’sabilitytomovequicklywasinstrumental in The “Stephen’s thesiswasthatthereopportunity in StevesmetatHarvard BusinessSchoolinthe’80s. The said rebornChris-Craft poweryachtsdojustthat, The nity tocreatevaluethroughtheinfusion tions presentedanoverlookedopportu- simple propositionthatdistressedsitua- lican in1991. firmwasbasedonthe The over theyearsandreunitedtofoundStel- Australia, theNetherlands andtheU.K. tions in16countries. HelivedinAsia, struction productscompanywithopera- ERICO InternationalCorporation,acon- before becomingmanagingdirectorof four yearswithPricewaterhouseCoopers, focus onSpainandItaly. Heesespent multinational clients, withaparticular analysisandimplementationfor egy Group, specializingincompetitivestrat- TheBostonConsulting of London office and attendedBritishboardingschools. had grown upinstrictCatholicfamilies they hadincommon,say, isthatboth CPA, licensed inFlorida.Amongthings ing andcomputerscience.Hewasalsoa versity, withaconcentrationinaccount- But JuliusandHeesestayedintouch After Harvard,Juliusworkedinthe The Korn/Ferry Ins titute

Previous page: Courtesy of Indian Motorcycle. This page: Courtesy of Chris-Craft heritage brandcanexistinalmostanycategory, fromshirtstoshotguns.Thetrickisdistinguishingheritagehas-been.

Briefings onTalen t &Leadership Courtesy of Chris-Craft that major corporations, giventheopportunity, don’t buy thatbrand,”saidJulius.natural guardianof “Itisinteresting launch itandselltoalargecorporation thatcouldbethe company fromStellicanin2000. which acquiredthe pleasure craft, of maker largest Italy’s FerrettiYachts, newRivacaughttheeyeof replicas. The slavish boats thatevokedaclassicerayetsteeredclearof showed hisnaturalflairforfashion,producingalineof like Riva’s the1960s.WithRiva,Julius first Aquaramaof lauded Aquariva,whichtookitslookandfeelfromboats newmodels,brand withafleetof includingthemuch- youcanclosebyFriday…’” him onaMondayandsaid,‘If money. called Stephenhadbeenafterthemforyears. They was ownedbyRolls-Royce,whichdidnothingbutlose boating,”saidHeese.“It Royce. “RivawastheFerrariof hands,through anumberof ultimatelytoVickersRolls- “We takesomethingthat’s completelybroken, re- “We Stellican acquiredRivain1998andre-establishedthe Stephen Julius,theheritagebrandpartneratprivateequityfirm, Stellican

managing both dealer and customer relations with a natural managing bothdealerandcustomer relationswithanatural ing andfiringbuildingteams, butheisalsoMr. Sales, siasm heexudes. Heese isMr. Operations, hir- aveteran of clear-headedcalculationand unabashedenthu- mixture of fire sentences, his Anglo-Italian parentageapparentinthe detail.Hespeaksinrapid- products atagranularlevelof Stellican’sherding thelookandfeelof brandsand their skillsembodiedinitstwoprincipals.combination of what reallysetsStellicanapartmaybethecomplementary their ownabilitiesthatcomeswithrepeatedsuccess. But confidencein backed upbythekindof appetite forrisk, alsohaveabigger shareholders forquarterlyreturns. They longer viewthanacorporationorfundanswerableto marily fortheirownaccounts, JuliusandHeesecantakea ous tothem?” these brands. waswhatsoobvioustousnotobvi- Why Julius isMr. Strategy, butheisalsoMr. Style,shep- wheninvestingpri- Among thereasonsmaybethat, Q1.2012 45 46 Steve Heese,theoperationspartnerinprivateequityfirm,Stellican O Q1.2012 cycles in 1999 at the former CMC’s facilitiesinGilroy,cycles in1999attheformerCMC’s Calif. newcompanybeganmanufacturingmotor ­ The ica Inc. Motorcycle Company(CMC)and IMCOALicensingAmer- to aconsortiumthatincludedthe manufacturerCalifornia Coloradoawardedthe Indiantrademark District Courtof rights tothetrademark. evidently withouttheimportershavingobtainedlicensing the UnitedStatesandlabeledasIndians, them someof various BritishandItalianmotorcycleswereimportedto decline.Forperiodsduringthe1950sand’60s,period of in theworld,butceasedoperations1953afteralong motorcycles Indian becamethelargestmanufacturerof Mass., in1901astheHendeeManufacturingCompany, Stellican’s resourcesandresolve.Foundedin Springfield, we’dcheapenedittomakesell.” thanif betteroff we’re itdoesn’t andif sell, Like me,hewantstoseeitdoneright, He hasn’t beeninthewarehouse10 years. He’s apurist. passionateaboutmarketing. passionate aboutproduct, He leaveseverythingelsetomeandtheteamhere.He’s design, colors, materialsandthethingscustomersees. examined,” saidHeese.“Stephen’s reallygoodatstyling, ease. HegrewupinTampa, Fla.,andishappytobehome. The brandwaslonggoneby1998,The whentheFederal IndianMotorcyclein2006 tested acquisitionof The “Our relationshipworks;it’s probablybestleftun­ real leatherseats,noplastics.” That means“nocompromises,lotsandofchrome, ur strategyisconsistent:Comeinatthetop,” saidHeese.

agreed topurchaseIndianfrom StellicaninApril2011. Victory Motorcycles,mobiles andparentcompanyof company. snow- aleadingmakerof PolarisIndustriesInc., there arefewerbuyersthere,but therearebuyersthere.” like forlike,theirsis$19,900, oursis$29,900. Itmeans seats.We gaveIndianashow-carqualitypaintjob. But, andallHarleyscomewithvinyl are loadedwithplastic, chrome, realleatherseats,bikes Japanese noplastics. The means“no compromises,Heese. That lotsandof rable modelsfromHarley. about50percentmorethancompa- price fromtheoutset, bly, therevived-againIndians commandedapremium 2008 topositivereviewsfromthe motorcyclepress. Nota- firstbikesdebutedinDecember The Kings Mountain,N.C. thing millionin2006 andre-establishedthecompanyin partner.” nese motor­ percent marketshare,eventhoughallfourofthebigJapa- two-cylinder motors.Withinthatniche,Harleyhasa78 for so-calledheavytwins, largemotorcycleswithvertical a premiumalternativetoHarley-Davidsoninthemarket passed, butJuliussawauniqueopportunitytoestablish defects, andthenewIndianenteredbankruptcyin2003. were plaguedbytechnicalproblemsandmanufacturing $200 million,thebikes But despiteacapitalinfusionof deal. Hedidn’t wanttobenamed need money,’ andthefirstguywewenttoputupwhole youever allthepeoplewhohadsaid,‘if made upalistof our own money, We itwouldhavesoldthebrandshort. planswecouldpursue,andhaddoneitwithall of lots were [done with]allourownmoney,” saidHeese.“There Stellican’s ceiling.“Indianwasthefirstdealthatwasn’t than the$10 millioninequitycapitalthatwastypically nity there.” strategist MichaelPortertorealizetherewasanopportu- didn’t businessprofessorand taketoomuchreadingof wasacompleteno-brainer.was IndianMotorcycle.That It only brandontheplanetthatcouldcompetewithHarley saidJulius.authenticity isessentialtothatsegment,” “The And inshortorder, therewasabuyerforthewhole “Our isconsistent:Comeinatthetop,” strategy said Stellican acquiredIndianforareported$30-some- Most potentialbuyersviewedtheremainsand The challengewasthatIndianwouldrequirefarmore The “Only Harleywasconsideredanauthenticbrand,and cycle manufacturersproducesuchbikes. The Korn/Ferry Ins titute — andhewasagreat

Courtesy of Chris-Craft Briefings onTalen t &Leadership Courtesy of Chris-Craft quired, youdeserveagoodreturnand you buytrademarksatauctionandinvesteverythingre- taking,”saidHeese.“When theriskwe’re simply becauseof 35percent, we don’treturnnorthof makeinternalratesof disappointedif say thedealmettheirexpectations. “We’re he doesn’t knowwhentoletgo.” had envisioned,andhedoesn’t becomesoattachedthat perfect businesstotakeittheheightStephen[Julius] bankruptcy, Butwearethe andtheydidthathardwork. not havehadthehearttotakeitallwayrightoutof really letuspickitupalongtheway. Wewouldprobably “They gottherevivalstartedand executive officer. chief ness andbringitbacktolife,”saidScottWine,Polaris’ to stepinandstartpullingtogetherthisfragmentedbusi- Craft, theaverageinvestmenttimewas lessthan24months.Craft, ning, thevaluecreationcurveis verysteep. BeforeChris- added, theyalsotrytoturnbrands quickly. “At the begin- to domorethantwoatatime,” saidHeese.Normally, he brands theprincipalswouldhavedearlylovedtoacquire. dealsitcanpursue,andhaspassedon in thenumberof donewell.”even inadowneconomywe’ve neverhadaloss.achievedourobjectives; we’ve And Chris-Craft’s Corsair Chris-Craft’s The purchaseprice wasnotdisclosed,buttheSteves The “It speaksvolumestowhatSteveandcoulddo, “It’s justStephenandI, sowedon’t havethebandwidth Because thereareonlytwoSteves, Stellicanislimited — knockonwood —

with, Chris-Craft’s latest additiontoitsCorsairlineisnot Yachting Coylewrote:“Given magazine,Jay 36feettoplay all therightbuttons. ReviewingtheflagshipCorsair36in to $550,000. theyarepriced from$47,000Ranging from20 to36feet, priced about50percenthigherthantheirplainerrivals. Stellican’s Chris-Craftcameinatthetop, withyachts a perforatedmetaldashboard.AswithRivaandIndian, such asabundantrealteakandcleverretrotouches nizable fromamileaway, yet alsofeaturerichdetailwork boat-buildingskills.existing veinof Florida, wherehewasabletotapintoarich in factory style withmodernperformance.Heeseopenedanew newChris-Craftmodelsthatcombinedclassic suite of foot-plus megayachts, andchallengedhimtocreatea mph-plus offshoreworldchampioncatamaransto 100-­ whose designportfolioincludeseverythingfrom200 owners thatStellicanessentiallystartedfromscratch. previous Craft hadbeensocheapenedbythesuccessionof at leastcamewithsomeviabledesignsandtooling,Chris- prone toflatten.” recognizedthefactthatallsteepcurvesare strategy That For powerboatlovers, thenewChris-Craftboatspush newChris-Craftmodelshavehullshapesrecog- The SteveshiredMichael Peters, anavalarchitect The Chris-Craft isadifferentstory. UnlikeIndian,which Q1.2012

47 the sort of product that most production boat bean coun- the long haul is: Is that the right approach? Or can you be a ters would come up with. ... Let’s just say she is a beautiful prestige brand and have economical offerings as well?” boat with excellent performance and a pedigree that Many boat companies have cut costs in recent years extends further back into yachting history than most of by moving manufacturing to Asia, but Heese said it is im- us can remember.” portant for Chris-Craft to be made in the United States. Indeed, few American brands can claim as rich a his- “If you think about the feelings that the brand evokes, it tory. Born in 1861, the first year of the American Civil War, evokes feelings of a time when America was more inno- Christopher Columbus Smith built his first “duck boat” in cent than it is now, and people want to know where they’re 1874. He went on to develop the first boatbuilding com- built,” he said. “If you stand at a boat show, over the course pany to produce standardized designs, adopting the Chris- of a week you will get asked that question a lot.” Craft name in 1924. Vanderbilts, Sloanes, Morgans and One way to use Chris-Craft as a platform is to extend Fords were Chris-Craft owners, as were F.D.R., J.F.K., Frank the brand into bags and apparel, a strategy that has worked Sinatra, Katherine Hepburn and Elvis Presley. And yes, that well for sporting goods companies ranging from Patago- is a vintage Chris-Craft piloted by Henry Fonda in “On nia, originally a maker of specialized mountain-climbing Golden Pond.” equipment, to Burton Snowboards. Harley Davidson has a Chris-Craft buyers like the history, but the brand also popular line of leather jackets and other bike-related cloth- delivers a high level of style and substance, said Jerry ing, which Stellican successfully emulated at Indian. Ipjian, an owner of dealerships around the Great Lakes and But such platform plays are more difficult than they in Florida. “When a guy buys a Ferrari, it’s for the looks, the look, said Michael Jager, a brand design specialist who has feel. People buy those things for the quality and distinc- worked with Patagonia and Burton, as well as Levi’s and tion, so they don’t look like everybody else. That’s exactly Nike. Customers today crave authenticity, particularly what Chris-Craft does. It’s an attention getter, it’s quality, from heritage brands, so any line extension that seems it’s elegant. I’ve pretty much eliminated other boats.” opportunistic or fake in any way risks alienating the very Had everything gone according to plan, Stellican people you want to attract, he said. probably would have sold Chris-Craft by now. But with “To own a heritage brand with the word ‘craft’ in the two young children, Heese was tired of chasing deals and title now is just brilliant, that’s everybody’s dream,” Jager moving every two years, and Julius was amenable to hold- said, noting that Levi’s newest brand is called “Made and ing on, even as the offers began pouring in. Crafted.” “But the transition from something so powerful “We made a lifestyle choice not to sell Chris-Craft as a powerboat to apparel is a tricky one. I can imagine a when the phone was ringing off the hook in ’06 and ’07,” Chris-Craft apparel line that really had insight, that really said Heese. “After selling Indian, we made a decision that was about being on the water, but it would have to have Chris-Craft is going to be our platform. We don’t know excellent workmanship and utility.” exactly what that means. We started with zero; in ’08 we Julius and Heese say they will ensure that any exten- did $60 million, and we saw a clear path to $100 million. sions of the Chris-Craft brand meet their standards for Little did we know the world would go into a death spiral. high quality. They intend to keep all product development So last year we did $30 million and in calendar [year] ’11, in-house, but will seek out manufacturing partners with we’ll do $40 million.” proven track records. And Julius said that apparel is just Of course, if the world slips back into recession, all one option. He has not ruled out sailboats, which the origi- bets are off. No one needs a power boat, or any kind of rec- nal Chris-Craft built alongside its better-known power reational watercraft, and the entire industry has been in yachts, and he believes the brand name can be extended to the doldrums for years. Bill Basler, president of the Chris- a wide range of water- and sea-related items. Craft Antique Boat Club, notes that the Smith family was Nor is Stellican done buying heritage brands, Julius notoriously frugal, and aimed to build boats for “every- said. The company made a play for MG, the classic British man,” as Ford had automobiles. Chris-Craft weathered the sports car brand, going so far as to strike a deal with Bob Great Depression by introducing stripped-out models, Lutz, then vice chairman of General Motors, to produce called Utilities, that sold for as little as $595, when most cars on the Pontiac Solstice chassis, but were outbid by the powerboats were $1,500 to $2,500. Chinese. He says he is constantly on the lookout for brands When Julius and Heese acquired Chris-Craft, “I believe that are authentic, aspirational and acquirable. it was their desire to make it a prestige brand,” Basler said. “I’m passionate about brands,” Julius said. “I can “That becomes the marketing challenge to me. Prestige envision products; I can conjure up lifestyles around that means you’re not going to be everyman’s Chris-Craft any- brand. Maybe other people would call it creativity. more. It’s going to be a high-priced boat. The question for I would call it common sense.”

48 Q1.2012 The Korn/Ferry Institute Talent is not just an HR issue... It’s a CEO issue.

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Korn/Ferry Leadership TransformationKorn/Ferry Conference PowerLeadership Your People. Transformation Power Your Business. Conference www.LeadershipTransformationConference.com [email protected] | Scottsdale, USA / +1.952.345.3624| Madrid, Spain Power Your People. Power Your Business. 50 Q1.2012 The Korn/Ferry Institute Briefings onTalen t &Leadership Credit Zé Otavio (all) Man the the Cloud executive managementteam,which includedBillGatesandSteveBallmer. thecompany’sfive-person Maritz wasamemberof PCsweretakingshape.AtMicrosoft, of at Microsoftfrom’86to2000,Windows, whendatabases, clientservers, andnetworks behind another revolutionwastakingplace him throughouthiscareer. where FromIntel, MaritzmovedtoMicrosoft, aul Maritz,CEOofVMware,afast-growinghigh-techcompany how tobuildandrunagreatcompany. Maritzcarriedtheirlessonswith with a$38billionmarketcap,Valley. isbackinSilicon Maritz,whogrew Andrew Grove,stillwalkedthehallsdemonstratingtoyoung Maritz up inSouthAfrica,beganhiscareerLondonthe1970s, andwent Robert Noyce andGordonMoore,itsiconicCEO laterchairman, lutionized computing.HewasatIntelwhenitslegendaryfounders, to work atIntelintheearly’80s, thePCera,whichrevo- atthedawnof — onthedesktopandatoffice.Maritzwas

Q1.2012 51 Now, at VMware, Maritz gets to be a revolutionary for two of these personalities in one person. It’s important the third time, this time focusing on cloud computing. when you are building an organization to have people VMware, as Maritz describes it, straddles two eras — the in positions of leadership who respect each other first being the PC, database and client server era; and the and, most importantly, know who they’re not. Often second, the post-PC era of cloud computing. VMware when I see organizations and teams get into trouble, enables companies to move to the post-PC era without it’s because somebody thinks he’s the visionary, or the abandoning everything that came before it. Maritz, who enforcer, when he’s not. studied history and economics before being introduced to what would become his passion, programming, has Which characteristics do you embody? thought a lot about leadership, his industry and how Maritz: I know the ones I’m not. I’m not the enforcer, the world is changing. Maritz recently spoke with and I’m not the champion of the customer. I’m a cow- Korn/Ferry Senior Client Partners Al Delattre and Kris- ard, I’m afraid to say. I hate confrontation. I’ll do every- ten Badgley, and with Briefings’ editor-in-chief, Joel thing I can to avoid it. So I need to have somebody on Kurtzman, at VMware’s Palo Alto, Calif., headquarters. the leadership team who forces me to come to grips with those issues. Briefings: You’ve been quoted as saying there are four major leadership attributes and that it’s rare to find Given the companies in which you worked, has all four in one person. What did you mean by that? your leadership style changed over the years? Maritz: One of the things I’ve learned is that there Maritz: Yes. When I was at Microsoft from ’86 to 2000, are very few cases, in fact none that I’ve seen, where a there was somebody else who was the external face successful organization is led by a single individual. of the company and who was the symbolic head of the I’m not referring to titles. This is something I saw company. One of the things, among others, that I have when I went to work at Intel in the early ’80s. At Intel, to realize is that now, as a CEO, there’s an element of the founders — who were all still there — were very being the external face of the company that can’t be thoughtful on this subject. Bob Noyce and Gordon avoided. As CEO, people want to know who you are. They Moore had well-defined roles as to what each of them want to know what you think, what your values are. did. Andy Grove, the CEO did, too. Andy was clearly the So, you’ve got to expose yourself in ways that haven’t manager and the enforcer; Gordon was the thought always been comfortable for me. But I’ve learned that leader; Bob was the external spokesperson. I have to do that — especially internally. It’s part of my From this, you can generalize that a team of almost job. Loyalty only comes through contact. And unless any size generally has to have at least four personali- you’re in contact with the people you work with, they’re ties involved. You need somebody who has the vision not going to develop the rapport and loyalty and emo- and understands where you need to go. You need some- tional connection you need. body who’s the manager and knows how to organize people and motivate people to get there and deal with How do you make contact and create rapport? the conflicts and tensions that come up as you try to Maritz: Yes, but I don’t do as much as I should. When move a group of people in a particular direction. You I do it, I enjoy it because I always learn something when need somebody who’s the champion of the customer — I go and sit down and talk to somebody. It’s always inter- someone who can translate your vision into terms esting. So, I’ve given our head of human resources the the customers can understand and provide feedback objective of reforming me in that regard — of getting because of the realities of the marketplace. And last, me to go around more and talk to people. you need the enforcer. You need the guy who can say, “Okay, we’ve debated this long enough. Time to decide.” What else is important internally beside contact? In my experience, you almost never find more than Maritz: In leading a high-tech company, this nebulous

52 Q1.2012 The Korn/Ferry Institute quality we call passion is really important. The kind of And with that, he closed the door and left. That had a big jobs we do here in the heart of Silicon Valley can’t be impact on me. It was the view that everyone in the orga- done by someone just because they’re a professional nization was important, that you don’t automatically manager. These businesses are not like most other busi- get the right to pontificate or have different resources nesses. Our output is a result of some very committed because of your position. and intelligent people creating intellectual goods. They have to be inspired, and they need to feel this is more Have you carried those lessons forward in your than just a business, that we’re actually trying to create career? interesting things, that we’re trying to build new and Maritz: I try to. Intel had a big impact on me, especially innovative products, that we’re taking different ap- about having respect for people. For example, ever since proaches to things. And I don’t think you can really then, I’ve tried to be on time for meetings because mak- inspire the kind of passion these people need to do their ing a bunch of people wait for you is a way of communi- jobs unless you yourself are passionate about what cating that your time is more valuable than theirs. But you do and about what the company does. there’s one thing I always joke about regarding Intel’s culture. Mr. Clean. They actually had a Mr. Clean. Every Does that passion make you in a sense VMware? building had its executive, and every quarter the execu- Does it make you the embodiment of the company? tive would literally do a bed check of all cubicles to Maritz: No. I’m not VMware. But I am passionate about make sure they were clean and neat. You could get cited what we do here. And I find what we do incredibly for sins like bad wire management if you had lots of interesting. But I am not VMware by any stretch of wires underneath your desk. Bad wire management the imagination. And I think that’s actually healthy for was a sin. And I remember when I went to Microsoft the company. I think when you get organizations that in the mid-’80s, I tried to take some of that culture are so completely identified with one individual you with me. really create challenges for yourself going forward, and you also create them for the organization. What would be an example of what you took to Microsoft from Intel? You mentioned how much you learned from your Maritz: How employee reviews were done. Intel had experience at Intel. How has it influenced the way this notion of rating and ranking people where you you lead? were not only rated on a scale of one to five with regard Maritz: One of the things that had the greatest impact to how you did your job, but every group also had to on me was that Intel’s culture was a meritocracy. It was rank employees on the basis of who they would fire first straightforward. It was very explicit and disciplined if they were under a squeeze. That was always very fas- about things.They didn’t have an executive row. Every cinating because if you look at someone’s ranking and if executive sat in a different building, and everybody had you look at their ratings and you’ve got someone rated a cubicle. Now, Andy Grove, who was CEO, had his cubi- five on a scale of one to five, but he’s way down on your cle in the corner, so he had the corner cubicle, but it was ranking, meaning you would let that person go if you still a cubicle. About two or three months after I arrived were under a squeeze, what does that say? When you there, a colleague and I wanted to discuss something. So see that, you immediately have to ask, what’s going on I went and found a conference room and sat in it. Sud- here? It starts a very useful dialogue to have with man- denly, the door opened and it was Andy Grove. It turned agers about how they think about their people. Do they out we were using his personal conference room, which reward people based on tenure and seniority, or the I didn’t know he had. He opened the door and he saw value they contribute to the organization? If you do us and he got a start and we got a start. Then he looked these two very separate exercises, then you can say to a at us and said, “Are you doing work?” And I said, “Yes.” manager, “Look, you’ve got a guy who’s rated very high

Briefings on Talent & Leadership Q1.2012 53 but ranked very low. What’s going on here?” I took that Did Intel influence you in other ways? and merged that into the culture at Microsoft. Maritz: We haven’t instituted it yet, but Intel was very good at teaching courses on big things, like culture, Would you act if there were a big difference between and also on mundane things, like how to run a project. a rating and a ranking? There was even a course on how to run a meeting. What Maritz: Yes. And over the years we got more sophisti- was really interesting was that the courses weren’t cated about it. At Microsoft, people would never give a taught by professionals. Once you became a manager, 5.0 rating, meaning you walked on water. It just wasn’t you were expected to teach a certain number of those the culture. So I’d say, “Look, we’ve got thousands of classes each year. They had people who created the employees. There must be at least one here in this orga- materials, but you were encouraged to personalize nization who’s a 5.0.” Later, I instituted this thing that them. There were courses on how to work. There was whenever anybody got a 5.0 rating, I would get Bill even a course on constructive confrontation, which I Gates and march him down the hallway and have him never taught, but always imagined as a sort of a Monty sit down and have a one-on-one in the office of the Python bit — “This is a course on constructive confron­ person who was a 5.0. It was kind of a fun thing to do tation.” “No, it isn’t.” because everybody would know, and everybody would see Bill Gates walking down the hallway and going into Your own background is anything but typical for a this person’s office and spending an hour there. Bill CEO of a fast-growing high tech company. Would you would really enjoy it because generally the person was mind talking about it? extremely bright, and the one thing you could do that Maritz: I grew up in Southern Africa, on a cattle ranch would always get Bill Gates excited was to have him talk in what’s now Zimbabwe. It was a certainly a very differ- to someone with a high IQ. ent experience from Silicon Valley. We didn’t have elec- tricity in our house when I was young. We used to go Did you bring this approach to VMware? to bed by oil lamp. In some ways, when I look back, I Maritz: In various forms, and not in quite the same have to say I was a very fortunate child. It was a very way. But I do try to push to get people recognized. We rich experience. I had parents who were themselves don’t rank people in the way that I’ve done in the past, well educated and intelligent, both of them products of because every organization is different. the Great Depression era, so they were determined that their children would get a better start than they had got. You said Intel was a very straightforward company. They encouraged us to be educated and to use education How are you making VMware straightforward? as our passport in life. Early on, I was interested in all Maritz: We’re in the process of trying to learn how to things mechanical. Later, I got interested in history and do that right now. One experiment that we’re doing is economics and things like that. When I started at the asking each manager/leader in the company to write University of Natal, I studied economics. While I was down his/her values and to be open about them in there, IBM sponsored a programming contest. This was public and say, look, here are the five, six, seven things in 1974, so there wasn’t a computer science department that guide me in my life. Then, when the time comes yet. Because I was studying economics, I had to take for those managers to be reviewed, we’ll ask everyone statistics. The university decided that first-year they know, does this person behave this way? If they statistics students should learn how to program com- say they have respect for people, do they? There’s no puters. They taught us BASIC programming as an exper­ tale so seductive as the one you tell yourself. So, this iment because somebody had written a BASIC package is to try and be more thoughtful and honest with our- that ran on the mainframe. When IBM held the pro- selves about who we are and who we’re not. We’re gramming competition, I discovered programming and working our way through that. it was love at first sight. I won the IBM competition in

54 Q1.2012 The Korn/Ferry Institute my first year writing programs in BASIC. So I very quickly decided that I wanted to change careers and go into computer science. But clearly the center of the computing universe was not in Southern Africa. On Paul Maritz’s Leadership Style What did you do next? Maritz: My mother was of British origin. Because of oteworthy in Paul Maritz’s description of his that I could go and work in London. I showed up in own leadership style is his focus on interpersonal dynam- London in January 1978, and knocked on doors and ics, engagement and trust. One might expect a CEO who’s said, “Here I am. Have you got work for me?” It was the off-season for recruiting so I didn’t find anything. leading a technological revolution might highlight his Even IBM turned me down. Finally, I got a job at the business instincts, strategic insights, or deep technical Burroughs Corporation, back when there was a Bur- skills. To the contrary, Maritz emphasizes the importance roughs Corporation. In the ’70s, Burroughs was a very of self-awareness, clear and frequent communication, cool company. It was the anti-IBM computer company. and empowering others. This is what we call the Social/ In fact, when I was in college, I worked on BurroughsN Participative leadership style, in which leaders tap into mainframes. They were programmed with a high-level the collective intelligence of their team by eliciting and language and had virtual memory and all the cool things integrating feedback and ideas from others, and by of those days. But for all my excitement, the first job putting a premium on clear and open communication. they gave me was to debug the firmware for the world’s While Maritz describes himself as an introvert, his values first ATM machine. The printer had a bug. For all my and priorities as a leader clearly speak to his attention high hopes about working on the far frontiers of com- and attunement to team dynamics, and to the experi- puter science, here I was debugging the printer in the ence of the individuals who work for him. His ability to world’s first ATM machine. It was a pretty humble start. put himself in others’ shoes and nurture high performers is part of what defines him as a leader. When people think about VMware, they think about cloud computing. There is a lot of talk about the cloud —Dana Landis, Ph.D., Vice President, and how it will change everything. Will it change Global Search Assessment, Korn/Ferry everything? Maritz: It will change quite a lot of things. What it really represents is the next major interaction between enterprise computing — basically business computing it will help free up expenses, which means primarily — and consumer forces. Client-servers were the first operational expenses. interaction. That’s when PCs encountered minicomput- ers. The canonical data fabric that came out of that inter- Does that mean the cloud is about bringing down the action was the relational database. The applications cost of computing? that came out of that were very successful but with an Maritz: It’s more than that. Ultimately, the cloud is going enormous amount of complexity built into them. As a to be about how do we deal with customers in a world result, the client-server generation of computing was where just three years ago 95 percent of the devices inflexible, and businesses had to spend a lot on their attached to the Internet were PCs — hundreds of millions operating infrastructures. We’re going into a new era, of them. Contrast that with that idea that three years the cloud era. With this technology, we can reach cus- from now, fewer than 20 percent of the devices attached tomers and other people in fundamentally different to the Internet will be PCs. There will be billions of ways, more real-time, and in much larger numbers. And devices — tablets, smartphones and so on — attached to

Briefings on Talent & Leadership Q1.2012 55 the Internet. So the question is, how do we absorb all that people like Steve Jobs and Bill Gates saw was, “How that information and make sense of it and construct do we automate the life of a white-collar worker circa new business models out of it? This is one of the most 1975, sitting in front of a desk?” PCs successfully did interesting transitions going on. that. But white-collar work is built around documents, and that’s not what people under the age of 35 are doing Is that the only transition going on? anymore. They don’t sit in front of keyboards and lov- Martz: No. We’re moving into the post-PC era. This ingly prepare documents like paper bills and letters is not just that people are now holding smartphones and forms that look beautiful. Instead, they’re ingesting and tablets in their hands. It’s what they do with these very large streams of information in much smaller devices that is changing. The vision behind the PC era chunks that are coming to them all the time. This brings

56 Q1.2012 The Korn/Ferry Institute challenges: How do you filter all of that? How do you lot of the wellness information, and they have to break comment on it? How do you recombine it, flow it down their own internal silos and say, “We don’t have back out again? These are the forces that are coming an IT organization, and we don’t have a marketing group. together that we lump under the label cloud. They speak We have a business and we’re all in it. So, how do we to a profoundly new set of interactions regarding how use the tools we have at hand to reconceptualize the consumers view and consume information and how business we’re in?” businesses operate. The cloud will require businesses to rethink their How big is this change going to be? business models? Maritz: This change is going to be very profound. When Maritz: Yes. Let me give you another example from a the wheels of change are done grinding, they will have supermarket company. A guy came to us and said, like ground things very fine. And our challenge here at VM- the pharmacy, “The only way we touch our customers is ware, as I see it, is that we were born as the remedial when they get to the checkout counter. By then they’ve technology for the client-server generations to transi- already made all their purchasing decisions, and the tion to what’s coming. We’re kind of straddling the eras, stuff is already in their baskets. We want to reach peo- and these straddles are not easy to do. I think the transi- ple while they’re walking around the supermarket.” He tions I’m mentioning will be a 10- to 20-year journey. went on to say, “So we want to be able to combine infor- We’re still at the beginning of it. mation from the smart device they have in their pocket, from the infrared cameras we have in the aisles, and so What should people running businesses be thinking on. When somebody is standing for a long time in front when they think about the cloud? of the Pampers display, we want to construct an ad for Maritz: Let me give you two examples. I was talking to that person right then and there, not wait until they’ve a pharmacy chain that has been doing some really inter- made their decision and moved on. We want to know esting thinking about how to reconceptualize its busi- when they come back in a month’s time so we can run ness. They have 470 stores around the United States. the data analytics and find out whether they bought any Instead of viewing those stores as a problem — owning Pampers. If not, we want to make them another offer.” or leasing physical real estate in the digital era — they To do that, we’re going to have to have a new generation realized if they view themselves as being in the wellness of applications. But we’re doing this from a world that business, as opposed to being in the pharmacy business, is still in the client-server area focused around non- then their footprint provides enormous opportunities. real-time paper documents such as bills. We have to If, for example, they hired a slightly different type of change that world to one that’s fundamentally a real- person to work in the pharmacies, they could do inocu- time, scaled-out world. These examples are a long way lations of babies. And, they could deliver those inocula- of saying that to enable such a fundamental transition tions at a fifth of the cost of a doctor’s visit. And, because to occur, we happen to be the custodians of one of the of their locations, they’re much more convenient than few technologies that allows you to take the expense a doctor’s visit. They have stores on almost on every cor- out of your existing infrastructure and existing applica- ner. And, if you can’t get an appointment at one store, tions so that you can apply it going forward. there’s another one right down the road where you can get an appointment. But to do all that, the company has Aside from the obvious metrics, like revenue, are you to reconceptualize how they relate to their customers. finding there’s a lot of interest in what you are doing? You can’t do that if the only time you have contact with Maritz: Let me put it this way. At our last VMworld, customers is at the checkout counter. So, they realized which took place in Las Vegas, 19,000 people showed that if they want to build a longer-term relationship up. VMworld is half technical conference, half trade with customers, they have to become a repository for a show, half cult happening.

Briefings on Talent & Leadership Q1.2012 57 Starts 58 Q1.2012 the buck mention adeeper, thinking moreperceptivewayof requires capturingpeople’s heartsaswelltheir minds. theorganizationhasbeen If ful CEOsrecognizethatahard-drivingstrategicagendaisn’t enough.Innovation CEO’s vision,butthevisionmustbeshared;CEOlead,buy-infromoth- innovation fuels the engine of growth, but leadership gets the fuel to the engine. This growth,butleadershipgetsthefuelto theengine.This innovation fuelstheengineof around $65(alevelithasnotreached since).Ithadseveralhighlyprofitablecategory CEO of theFordMotorCompanyin1999,CEO of healreadyhadadistinguishedcareer atthe alienated, theriskfactorgoesupexponentially. paradoxes. the Itmuststartatthetopbutbedisseminatedwidely;itpartof truth is, peoplewanttoworkforinnovativefirms. toomanyCEOsfailto Andyet, had $143 billion in revenue, strong earnings of about $6.6 billion, and a share price of about$6.6billion,andasharepriceof had $143billioninrevenue,strong earningsof leadership isdrivenfromthetopandrequiresthatCEOshaveboth theorganizational grasp thedegreetowhichtheirorganizationslookthemfor guidance. Evenworse, happy The group intomovinginthisdirection,theorganizationwilldemandit. company spanning33years. Atthetimehetookover, Ford wasinexcellentshape.It culture, therightpeopleandleadershiptobringitall together. Let’s faceit, ers is required. And while innovation often requires extra hours of work ers isrequired.Andwhileinnovationoftenrequiresextrahoursof credibility and emotional capital for a successful innovation agenda. The mostsuccess - credibility andemotionalcapitalforasuccessfulinnovationagenda. The he powertoinnovate,likemanyotherkindsofpower, isfraughtwith some CEOsfailtounderstandtheirroleintheinnovationprocess, whichcanretard or evenstopprogress. Approaching innovationcorrectlyisnoteasy. Itrequirestherightideas, theright Here’s an illustration of why this is so important. When Jacques Nasser Jacques became When Here’s why thisissoimportant. anillustration of Here and BilalKaafarani By JaneEdisonStevenson — if theCEOdoesnotprod if

The Korn/Ferry Ins titute — not to

Chris Whetzel (all)

leaders, including SUVs and light trucks in the in the mainstream organization, which prevented United States, and a number of well-designed those innovations from being shared. smaller cars aimed at Europe, Asia and Brazil. It Nasser’s dreams were big. He projected that also had 370,000 motivated employees. PAG would be earning up to 80 percent of Ford’s Nasser’s vision, however, was not to build on profit within a decade, and he projected wildly Ford’s impressive base through an intense focus optimistic sales figures. Jaguar’s sales were pegged on product innovation — new models, new de- at 800,000 cars a year, from about 100,000 in 1999. signs, new technologies, new features. Rather, it (In reality, Jaguar’s 2011 sales are expected to be was to focus on some key acquisitions, like Land just under 200,000.) Volvo’s sales were pegged at Rover, the luxury off-road vehicle brand. It was 650,000 cars in the United States alone (double also to put Ford’s high-end portfolio of cars — Jag- Volvo’s actual 2011 projected global sales figure). uar, Aston Martin, Volvo and Land Rover — into At the same time that he was investing in PAG, a distinct entity, the Premier Auto Group (PAG). Nasser was looking at Ford’s core business as a cost PAG was Nasser’s baby. There were glamorous cutter. In the first year, he closed money-losing regional offices in Berkeley Square in London and plants, discontinued models that didn’t generate an imposing new headquarters building for the desired profits, sold losing operations and weeded group in Irvine, Calif., distinct from the company’s out executives. Not unneeded activities, but diffi- headquarters in Dearborn, Mich. Though the PAG cult to do when you’re aggressively investing in group was run as a business unit, its existence was areas of the company that the work force views as downplayed so that the individual brands would only tangential to the company’s core mission. be seen as independent, and not as units of mass- Nasser also put new human resources policies market Ford. in place, mandating that 10 percent of workers

When the intention at the top is to build a sustainable company that benefits all, decisions are made to further that intention.

As PAG grew ever more exclusive, it became receive a “C” grade, which could lead to termination. more expensive to operate. It populated its adver- Nasser’s justification for this was that new people, tisements not with Ford’s cadre of “regular people,” new philosophies and new technologies were re- but with “beautiful people.” To demonstrate that it quired to assure Ford’s success in the new economy was hip, it even installed fuel cells to heat and cool — all reasonable assumptions, but with a price tag its Irvine headquarters. in terms of employee engagement. While other But while it concentrated on luxury, it also CEOs of his day, most notably Jack Welch at G.E., distanced itself from the rest of the company. Re- used this approach, the changes further alienated member that Ford began in 1903, with a mission of Ford’s employee base and lowered their willing- fulfilling the transportation needs of ordinary peo- ness to stand behind the company’s leadership. ple. This was one of Henry Ford’s most innovative So in 2000, when Ford’s flagship four-wheel- ideas. But now, under Nasser’s leadership, it was in drive sport utility vehicle, the Explorer, was in- the business of selling high-priced cars, like Vol- volved in numerous rollover accidents, the moral vos, and ultra-high-priced cars, like Aston Martins. support that Nasser needed to survive the crisis Rather than being seen as innovating, PAG was gone, and his vision would never be realized. was viewed by the rest of the company as distanc- As the disaster unfolded, employee morale was ing itself from the company and its roots. Instead shaken, and Ford’s famous quality image was tar- of having people in the company buy in to Nass- nished. Ford reported its first consecutive quar- er’s goals for the group, PAG was increasingly terly losses in nearly a decade, and stock prices thought of as a diversion, with many worrying plummeted. that Nasser was taking his attention away from The Explorer incident soured Ford’s fortunes what really mattered. But there was another prob- and contributed to Nasser’s removal in October lem. Even if innovations emerged at PAG, its inde- 2001. By the end of the decade, all of the car brands pendence and isolation were creating resentment within PAG had been sold. When Bill Ford replaced

60 Q1.2012 The Korn/Ferry Institute Nasser as CEO, he announced that his first task stabbing executive culture, with fiefs spread would be repairing stakeholder relationships and around the globe that paralyzed the company’s going back to the basics of the car and truck busi- decision making. Mulally managed to unite (or ness. He also made it clear that his intention for send packing) these competing factions and estab- the automaker was innovation and growth. lish an executive team whose members actually This is an important point — intention is a work together for a common purpose. Ford Motor powerful force in both leadership and innovation. also began leveraging its worldwide capabilities, When the intention at the top is to build a sustain- bringing the cool Ford Fiesta and the new global able company that benefits all, decisions are made Focus to America. to further that intention. When it’s about power All of what Mulally did to move the company or beating the competition or even maintaining forward would be impressive at any time, but it’s the status quo instead of winning for customer, nearly miraculous today. Unlike its two Detroit company and stakeholders, decision making is rivals, Ford didn’t declare bankruptcy and didn’t completely different. request emergency United States government After his tenure as CEO, when Bill Ford worked funds during the recent financial crisis. And while to build an innovation culture throughout the the company is not fully out of the woods, by entire organization, finding someone who could mid-2010 Ford had posted a $4.7 billion profit and carry on his vision of sustainable growth was at began reducing its debt. the top of Ford’s mind. If he had learned one thing Ford and Mulally are proof that extraordinary in running the company, it was that innovation leaders with vision and determination really can too often was lost in the day-to-day drama, and it make the difference in an organization. This is

When it’s about power or beating the competition or even main- taining the status quo instead of winning for customer, company and stakeholders, decision making is completely different.

seldom survived internal politics. So when he especially true when a leader has the support of the went looking for a new leader, he wasn’t looking board. The Ford Motor Company is now in a posi- just for a talented executive but a partner in spirit tion to succeed, not only because of the company — someone who could reinvent and reimagine an Mulally has rebuilt, but the one that Chairman Bill entire corporate culture focused on innovation. Ford has envisioned. The chairman is passionate Bill Ford found his man in the No. 2 chair at an air- about innovation and making its vehicles more craft manufacturer, Boeing. fuel-efficient. By investing in a number of technol- The choice of Alan Mulally shocked industry ogies, including electrification, biofuels, fuel cells observers. Never had someone with absolutely no and more efficient gas engines, Ford is securing its car experience been appointed to such a high posi- future growth. By increasing spending on innova- tion. But the person who drove the development tion when everyone else was cutting back, Ford and commercialization of the innovative Boeing ensured its sustainability. That’s where the compa- 777 had what Ford needed, and he wasted little ny’s future lies. Despite the precarious financial time proving his worth. Sensing long before Ford’s position of the company, Ford has a good chance crosstown rivals that the automotive business was of succeeding because, unlike a decade earlier, its about to get extremely difficult, Mulally’s first task focus isn’t on power; instead, it’s on innovation. was to ensure that Ford had enough cash on hand to weather a recessionary storm. He did this by From Oh No! to Go Hasbro! mortgaging all of Ford’s assets on Wall Street, bor- rowing $23.5 billion. “I spoke to a room with over asbro, the No. 2 toy company in the 500 bankers,” he recalled. “Why did they give us world, has been through an evolution of the money? Because we had a plan.” leadership that has moved the company That plan included fixing an insular, back- from an environment happy with maintaining the

Briefings on Talent & Leadership Q1.2012 61 The reckoning came in 2000. That year, Has- bro’s revenue fell more than 10 percent, to $3.8 bil- lion, and it lost $144.6 million. Fighting to regain its footing, Hasbro turned to Alfred Verrecchia, who had been with the company for 38 years. Ver- recchia was promoted to president in 2000, and he quickly initiated crucial changes, including moving all the far-flung toy divisions to headquar- ters in Pawtucket, R.I., to cut costs and get them to work together; reducing $1.2 billion in long-term debt; and focusing on extending Hasbro’s main brands, such as G.I. Joe, Monopoly and Easy-Bake Oven. In 2003, he was appointed CEO. His leadership helped to complete the turn- around, centered primarily on reinvigorating the company’s classic toys and games and adapting its lineup to the increasing influence of electronics. Between 2003 and his retirement in 2008, the stock price increased 60 percent, net income more than doubled and sales climbed 22 percent. Central to Verrecchia’s success was a young visionary who joined the company in 2000, Brian Goldner. Goldner was responsible for taking Transformers from a $30 million product line to a $500 million core brand. It was no surprise then that the CEO’s mantel passed to him on Verrec- chia’s retirement. Goldner had not only earned the job; he was perfect for it. In his first years, Goldner implemented a strategy that is still leading to sus- tainable growth, even during the economic down- turn. In 2010, the company gave him a raise and a new contract to keep him on board. For nearly a century, Hasbro has made it through the ups and downs of leadership, and through leadership it has a bright future. It wasn’t always on track, but it managed to find its way, as most of the companies we talked about have. What status quo to one on the cutting edge of continu- today’s Ford and Hasbro have in common is some- ing innovation. Founded in 1923 as a pencil-box one at the top who believes in innovation, has the company, Hasbro faced one of its greatest chal- courage to champion it and has the desire for every- lenges in 1996 when Mattel endeavored to take it one involved to win — not for power, domination, over. Though it failed, the attempted coup sent a control or ego — but for customer and company. signal — things needed to change. We started off by saying leadership is the glue Looking to revitalize the company, Hasbro that connects the innovation dots and creates the brought in a consultant who rearranged parts of playbook for a true innovation company to follow. the organization, but without a strong innovation Because we believe that to be true, we want to strategy its traditional brands were neglected. share something very special that CEOs should Instead, the toymaker chased hot licenses tied to recognize and know —the thoughts and feelings movies like Star Wars and Spider-Man. It also suf- of people who work for them, their employees. fered from internal competition, with divisions What follows is a candid, emotional and hopeful acting like unruly siblings, competing against one message, in the form of a letter, that captures the another for attention. thoughts that every CEO should know.

62 Q1.2012 The Korn/Ferry Institute Dear CEO, You hold the keys to our destiny. As your employees, sal for having tried. Making this possible is all in your hands. our future depends on you, so we wanted to share our thoughts You determine whether our focus will be on trying to achieve with you. You are the company’s chief architect — your design what is possible, or on making sure we are never to blame. sets the tone for everything. If you design a business based on We’re excited about the vision you’re creating and hope growth and innovation, we will be unleashed to build and create. you’ll share it in a way that we can relate to. The vision has to If you design a business based on cost cutting or productivity, we be big enough and worthwhile enough to inspire us and clear will stay focused only on what already exists, trying to do things enough so we all know our roles in making it happen. You’re a cheaper, faster, better. How you design the plans will determine great communicator, but sometimes we don’t get the message whether we unite to create an exciting future beyond what any because it’s all wrapped up in fear of failure and pressure to per- of us could individually imagine, or whether we will simply fight form to standards mired in numbers instead of achievements. to survive. We know you’re under tremendous pressure to cut costs We’re committed to doing well, both for ourselves and for and promote efficiency. Things are tough everywhere. We agree our company. With your leadership, we can achieve something that operational efficiency can’t be ignored, but with your guid- great and sustainable. We want to play full out, using all the ance and empowerment, there are people in our organization talents we have to contribute in this world. We measure our who can manage the processes necessary to “do things right.” success by the yardstick you provide. If the measure is doing What these people can’t do is to provide the leadership that what we’re told, then we’ll be careful to do just that. If you set a determines “what the right things are to do.” This is your sole vision that excites us and measures us by our ability to uniquely responsibility. and boldly take it as far as we can, we’ll do that. We crave courageous leadership — unlimited by barriers We need your vision, integrity and courage to bring out that put what’s reasonable above what’s possible. We know that the greatness in each of us. We’re counting on you to be that in today’s world, these words might seem irresponsible or dan- leader, because no one else in the company can take your place. gerous to your career. We also know that as you listen and cre- Only you can set the vision that will inspire and motivate us. ate an environment where we are expected to use our creativity Together, we can achieve the company’s rightful destiny. Your to deliver results and to reach for the stars, imagine and explore, hands control the tremendous resources that are available in “possible” then becomes reasonable. our organization. These resources can either be used to create Growing the company requires that all of us, especially ground-breaking innovation and market supremacy, or they can you, become explorers. Without exploration there is no discov- be micromanaged, diminished and underutilized. The culture ery, and without discovery there is no innovation. That means you create will either focus us on business possibility and an risking failure, something we’re willing to do if you are. abundance mentality, or will keep us contained by fear, using You set the tone. When people see you or someone on our political skills to compete for limited resources in an end- your team annihilate an associate for taking a risk, it ensures less internally competitive game. We want to be part of something that encourages us to move beyond perceived limitations. We want to be proud of you, our CEO, and to feel honored to be a part of this company. We want to believe in what this company can accomplish, not just for ourselves, but for the world. Please call us to a level of greatness that most of us never dreamt possible, but that we are proud to attempt. We are will- ing to stretch ourselves far enough to ensure that we will sometimes fail. And when we fail, we want to feel proud that we took it as far as we could and that we have learned and grown from our mistakes. When we take risks to help push the com- pany forward, your understanding and appre- ciation will ensure that we continue to give it our all, and don’t slink away in fear of repri- that very few of us will ever seek out the opportunity to achieve the latter is true, you’ll need to better harness your weapons to something great. We’re sure you have witnessed this type of achieve your goals. Diversity of thinking is very important in degradation or felt its sting yourself. The ongoing fear this creating an environment of innovation and growth. If you shut creates convinces us that we aren’t empowered to think inde- us down, you’ll lose this advantage. pendently. You will then have to specifically direct us or micro- If you set an innovation strategy and are proactive, not manage us to get anything done. Do you see how this will reactive, in driving it forward, we’ll all thrive. For that to happen exponentially diminish what we can accomplish? Even with you have to outline the priorities for the business and help us your extraordinary capacity, you can’t hope to direct and evalu- to succeed by providing the guidance and tools to do so. ate the work of thousands of people — it’s a waste of your tal- Demonstrate that innovation is a priority by appropriating ent and energy. the needed funds and providing the visibility for people to see Instead of intimidation, what we want and need is a safe this is true. Always remember that actions speak louder than environment where we can risk the occasional failure and speak words. If you’re courageous, we will be too. Take risks to move openly to help the company achieve its goals. In this environ- the company forward through innovation and growth. If you ment, we will have the passion and commitment needed to don’t, in the end, you’ll lose the respect of your best team make our company extraordinary instead of just average or even members and that will hurt all of us — especially you. It’s your mediocre. If you ask for our courage and honesty in telling you responsibility to retain and develop great leaders, because when you or the company is off track, you won’t be told that you without them you can’t succeed. We’re all in this together — look elegant as you step off the cliff and fall to your own demise. or at least we should be. We’ve all seen that happen, and it’s not what we want for you. In the past, many of us have been troubled by the amount Transparency is an innovation imperative and as much as we of time we end up spending on keeping innovation from mov- want greatness for ourselves, we also want greatness for you. ing backward, instead of moving it forward. We’ve worked for You have the power to make this happen, if you remember leaders that had great potential to be an innovation leader, yet to own your own power. What that means is to recognize how they weren’t able to capitalize on their promise commercially. much is under your control and how using that power wisely is We don’t want this to happen to you. Creating a culture that now one of your greatest responsibilities. encourages successful innovation will deliver big dividends for The day you took this job, you changed. As CEO, you’re not all of us. By doing these things, we know we can build a world- the same as you were the day before. If you don’t own your class organization that is united and focused on winning in the own power, you will use it without responsibility. Think of it as marketplace, not just internally. a nuclear weapon. If you use it as a threat or set it off without There’s one last thing we have to say. The most respected thinking, you lead by intimidation. That works for a while, but leaders we know have come to their role with the humility of eventually, silently or openly, people will leave or rebel. Watch a servant. As a CEO who serves, you will empower your people the people inside the company and see if they are acting em- to do amazing things. Believe in what you’re doing, believe in powered or are telling you exactly what you want to hear. If what can be done and stay open, excited and driven to achieve an inspired vision. You’re not in this alone, but you are the only one who can make it happen — because the buck doesn’t just start with you, it ends there too. Sincerely, Your People

Jane Edison Stevenson is vice chairman for board and CEO services at Korn/Ferry International, the world’s leading C-suite talent man- agement firm, and has spent 25 years assessing and recruiting the world’s top innovation leaders. Bilal Kaafarani is group president and chief innovation officer of Yildiz Holdings, the owner of Godiva and more than 90 other brands. He was previously head of global innovation and R.& D. for the Coca-Cola Company and before that held innovation roles at PepsiCo, Procter & Gamble, and Kraft. Adapted from Breaking Away: How Great Leaders Create Innovation that Drives Sustainable Growth — and Why Others Fail, published by McGraw-Hill.

64 Q1.2012 The Korn/Ferry Institute Enjoy the Full Value of Briefings Online

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Embrace Your Fear How to succeed in an anxious world doing the right thing well, and learn and grow from that experience.” As part leadership training and rior to a 2003 playoff part psychology text, “Flying With- game between the Portland Trailblaz- out a Net” takes on the often-over- ers and the Dallas Mavericks at Port- looked soft side of the leadership land’s Rose Garden Arena, a 13-year vortex, and DeLong’s timing could old girl named Natalie Gilbert not be better. In a business world Pstepped onto the floor to sing the that is volatile, stress-filled and un- National Anthem. Natalie had won certain, high achievers are walking a local contest, and her prize was the a very thin line these days. Jobs are honor of singing the anthem before less secure, competition for promo- the Blazers game. But as she began tion is intense, governance and to sing, the young girl, nervous and regulatory scrutiny have increased fighting a flu bug, promptly forgot dramatically, and more work has to the words to the song. In that terrible be crammed into tighter deadlines. moment, in front of 20,000 fans, she No wonder people are anxious. But simply stopped, and time slowed to a apt illustration of author Thomas J. in the macho-tinged atmosphere of crawl as everyone in the building felt DeLong’s theory that leaders in busi- the executive suite, conversation the pain of her humiliating moment. ness must overcome anxiety and fear about vulnerability and self-fulfill- But suddenly, a rescuer stepped of risk in order to achieve fulfilling ment is mostly verboten. High-need- forward. Maurice Cheeks, the Blaz- and satisfying personal success. One for-achievement types suffer in quiet ers’ coach and former NBA star of DeLong’s theories is that high- misery, wrecking their personal lives, point guard, walked from his team’s need-for-achievement individuals and wondering at the end of yet an- bench, put his around the young are often laid low by their own anxi- other 16-hour day, what it’s all about. girl’s shoulder and started singing eties and face the challenge of doing DeLong identifies the Big Three the words. With his help, Natalie the right thing poorly. Maurice Anxieties: Purpose, Isolation and Sig- jumped back in and began to sing Cheeks was not a singer, nor was he nificance. He devotes a full chapter the difficult anthem. Cheeks stayed charged with the task of coming to to each of these leadership traps and by her side, singing along in a voice the aid of bedeviled anthem singers offers compelling examples as well that bespoke his lack of musical abil- at home games. But he acted quickly as useful insights that will resonate ity. No matter. The players were now and with courage, taking a risk in a across a broad spectrum of both singing, and the fans, the coaches, situation that required an immedi- young and experienced managers. In even the referees joined in, and the ate response. As he said later, he the chapter on isolation, for example, odds were that the anthem had never didn’t think about it and probably DeLong, who teaches management been song as loudly and as proudly at didn’t know most of the words him- practice in the organizational behav- the Rose Garden before. Tears flowed self. But he felt that he had to do the ior area at Harvard Business School, from people’s eyes and when she fin- right thing and was willing to put points out, “The fundamental ques- ished, Natalie put her head against himself in a vulnerable position in tions that individuals ask as they Cheeks’ shoulder and got a warm order to do it. stand on the edge of the group are: hug. The crowd stood and cheered as As DeLong assures his readers, ‘Am I in or out? Am I a member of the Cheeks strolled back to the bench. “You can overcome your anxieties club or not? Will I ever fit into this And this story, which appears in and change your behaviors. You can group or team or division or organi- “Flying Without a Net: Turn Fear of display the courage necessary to do zation?’ Certainly some people are Change into Fuel for Success,” is an the right thing poorly: followed by firmly ensconced in their organiza-

66 Q1.2012 The Korn/Ferry Institute Briefings onTalen t &Leadership Hal Mayforth F “Flying Without aNet”“Flying doesnotoffer fident struggle with fears of being fident strugglewithfearsof The majority,The however, feellikethey moment in the computer industry of moment inthecomputerindustryof iorist DianaMcLainSmithuses to isolation, DeLong points out. Even isolation, DeLongpointsout. when Jobs, anacknowledgedindus- John Sculley.John seemslikean- What as fartheiPod,therewasatime a panacea.Butmosthigh-need-for- are driftingtowardtheouteredges positive increasesinproductivity. But timespentwithpeopleinsidethecompanyisstronglycorrelated CEOs spendwithoutsidershasnomeasurableimpactonfirmperformance. public appearances),withonly15percentspentworkingalone.Thetime is spentworkingwithotherpeople(throughmeetings,phonecalls,and ew business relationships have relationships business ew WHAT DOCEOSALLDAY? been moredramaticandvolatile than that of Apple’sthan thatof and SteveJobs that storyorganizationalbehav - try genius, wasactuallyfiredbythe the company’slegacydatesbackonly the 1980s. Forthenewestgeneration to confrontsuchfeelings. those appearingsuccessfulandcon- onefeelssuch to anorganizationif tion’s innercircleandfeelsecure. disenfranchised, andfewknowhow that matter Building relationships With People Work Is company heco-founded.Andit is cient historynowwasawatershed of Applefanatics,of whobelievethat of required engagedcommitment of the circle.”of As inmostprescriptivetexts, It isdifficulttomakethekind On average,85percentofaCEO’stime Source: HarvardBusinessSchool 4.  5. Don’t blink. 3.  2. Let go of thepast. 2. Letgoof 1. withself-awareness. Stoptoreflect, 6.  new-tricks booksoftenfeellike achievement types will see a lot of achievement typeswillseealotof Elephant intheRoom:HowRela- themselves here,andDeLongisgen- tionships MakeorBreaktheSuccess kick off her timely new book, “The “The hertimelynewbook, kick off his prescriptiontosixbasicsteps: Smith recountstheremarkable two- erous withhisadvice.Heboilsdown of LeadersandOrganizations.”of with anagenda. Create avisionorspecificgoal and anetwork Seek supportthroughmentors vulnerable. Take actionthatmakesyou In theend,teaching-old-dogs- Calling ita“cautionary tale,” Apple, thenasix-yearoldgarage IBM. Butherealizedthattheyoung, year bromance and breakup of Jobs Jobs year bromanceandbreakupof met Sculley, a44-year-old marketing innovative companyneededsome warmed-over clichésthatsomehow want tosellsugarwaterfortherest giantPepsiCo,CEO of thetwohitit wizard whowasinlinetobecome and Sculley. ItwasJanuary, 1983, and leadersmarches new generationof Jobs’ perspectiveand,afteracouple Jobs’ and surpassingthatgreatmonolith, nant playerinthecomputerindustry turningAppleintoadomi- visions of publishers. Butgivenhowevery professional leadership. he When to releasingthevauntedMacintosh that beinghuman keep emergingfrombusinessbook Sculley had all the right stuff from Sculley hadalltherightstuff computer, Jobs, just28yearsold,had conceived, well-executedreminder egged Sculleyonbyasking,“Doyou startup, andrunning.Prior wasoff straight intothesametraps, awell- even welcomenowandthen. of months of courtshipandpressure, monthsof of yourlifeorchangetheworld?” of immediately.off strengths andfrailties Pursuing himrelentlessly, Jobs — withboththe — isokay, Q1.2012

67 in Review

Sculley signed on. Smith provides a As Smith makes clear, “Most ships is no longer a soft skill. detailed and analytic account of the leaders today can say a lot about or- “In our shrinking, shifting next two years as the relationship, ganizations and individuals and world of tighter interdependencies built upon misplaced expectations about how best to manage and lead and tough competition, building and intense personality issues, dete- them. But we still know relatively lit- strong relationships is no longer riorated into chaos. By 1985, Sculley tle about relationships.” Despite the an elective; it’s a requirement,” she could no longer control the icono- countless volumes on the self-help writes. “Leaders today must be able clastic Jobs and gave Apple’s board bookshelves about personal relation- to forge relationships that can span the classic “him or me” ultimatum. ships, “very little of this work trans- divides, withstand constant pressure Jobs was fired. fers easily or at all to the organiza- and uncertainty, help them learn and Smith suggests that had anyone tional world.” turn on a dime, inspire trust and involved in the process thought One needn’t look further than confidence in a diverse set of constit- clearly about these two protagonists, the dysfunctional political relation- uents, and make the most of even they might have foreseen the inevi- ships that have sent nations into the hottest conflicts.” table conflict. “Though less notice- paroxysms of economic and cultural A partner at the Monitor Group, able at the outset, two other themes chaos in recent years to realize how Smith is also a founding partner of clashed rather than clicked: Job’s little leaders focus on these crucial Action Design, which dispenses ad- well-known disdain for institutional and foundational elements of their vice about organizational learning. authority (You could say he built organizations. “While many [lead- Her clear-eyed prescriptions are Apple and its products upon this ers] believe relationships are impor- wrought from real-world consulting disdain.) and Sculley’s corporately tant, few can tell you much about the and her cases ring true. Most impor- honed preference for institutional patterns of interactions that define tant, the “Taking Action” sidebars structure and control (to which his how their most important relation- that populate the book offer real- tenure at Pepsi was a tribute).” ships work (or fail to work),” Smith world advice for the executive look- Deconstructing a 26-year old writes. “Others view relationships ing for a Monday morning take-back corporate meltdown (which nearly in a purely transactional light, be- to the office after reading the book. sent Apple into bankruptcy and irrel- lieving what one leader half-jokingly Aside from romantic connec- evance) may seem like an odd vehi- told me: `You hire employees, then tions, perhaps nothing can touch cle upon which to build her case, but people show up.’” business relationships for volatility Smith does a masterful job of analyz- “The Elephant in the Room” is and irrationality. But quoting Woody ing the actual signs and pressure a primer in understanding and Allen from “Annie Hall,” Smith re- points of the conflict to a useful end. building strong organizational rela- counts the joke: “A guy goes to a psy- (The irony is that it was Sculley who tionships. Smith offers a series of chiatrist and says, ‘Doc, my brother’s ultimately failed miserably and case studies in which leaders tango crazy. He thinks he’s a chicken.’ Hor- brought Apple to the brink of disas- through difficult, often debilitating rified, the doctor asks why he hasn’t ter, while Jobs returned 12 years later relationships without the slightest committed him. ‘I would,’ the guy and transformed Apple into the bell- clue as to what might be done to im- answers, ‘but I need the eggs.’” Diffi- wether innovation mega-success prove the situation and turn trou- cult as relationships are, Smith that is dominating the technology bled organizations into winners. She points out, “we need what they give world today.) is clear that understanding relation- us, even if it’s all in our heads.”

THE TRUTH ABOUT E-MAIL: Men are more likely to check their work e-mails during holiday breaks. A small number (19%) admit that the e-mails serve as a welcome distraction.

Source: Harris Interactive Hal Mayforth

68 Q1.2012 The Korn/Ferry Institute lighting the way with our clients

The next time you switch on the high beams of your car, you might wish your lights were made by Arteb Industrias, in Brazil. Founded in 1934 in São Bernardo do Campo, Arteb produces seven million automotive lighting systems a year for the world’s leading auto companies, manufacturing them in Brazil. With 40 percent market share, Arteb is a great example of how a company can thrive in one of the world’s most competitive industries. They do this by using consistent, best-in-class business and manufacturing practices.

Eduardo Eberhardt (right), chief executive of Arteb Industrias since 2008, and Sérgio Averbach, president, Korn/Ferry South America. —Michael Distefano Paulo Fridman Paulo 70

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e r + 72 Thoughtsthoughts Partingparting If newmedicinescanbedevelopedfaster,If morelivescanbesaved,andthequalityof Q1.2012 from what it did wrong. Without thoserecords,from whatitdidwrong.when ful forcompaniestokeepaswell.Irecall,example,one ideas forsparkinginnovation.Forexample,oneunder- goingabouttheirchores.into comingupwithnewwaysof ing wastoopentheinnovationprocess more it wentbacktoacustomercouldn’t close,ittended made eachmonth,thewayMcDonald’susedtoadvertise it widely.per- one To showhow powerfulthatcanbe, achiever inthegroup what wentwrong. nies tellthestory. again, buttheycanalsoofferfreshopportunitiestostudy failedresearchattemptsdonotexist. abound, databasesof punitive prices for the shares of eventhebestpharmaceuticalcompa- prices forthesharesof put out a broad call on the Web to see if any- Web toseeif put outabroadcallonthe pharmaceutical and biotech industries. The reason for doing that should be apparent. reasonfordoingthatshouldbeapparent. pharmaceutical andbiotechindustries. The the chances of successareslimmer.the chancesof Depressedstockmarket and takes moretimetodevelopnewdrugsthaninthepast, team of investigatorshitthewall,he would team of to failagain.Studyingfailures keep records of the sales it lost. As a result, itcouldn’t Asaresult, learn thesalesitlost. keep recordsof keep peoplefromgoingdownthewronginnovationpaths her M.D. degree her M.D. how many hamburgersithadsold.Butthis company didn’t life canbeimproved. Recently, Ihelpedtoorganize company thatlikedtopromoteinternallyhowmanysales cines that fail to gain approval. While databases of successes databasesof While cines thatfailtogainapproval. son see if innovativebusinessleadersmightprodthescientists see if scientists and,inaddition,businessleaders. Ouraimwasto sourcing works. He saidthatonoccasion,whenhis one could solve the problem. Of course, one couldsolvetheproblem.Of mixing upthedisciplines — Another ideapromotedatthescientificmeet- The sessionswerefascinating,withsomereallygood The To makethemeetingsinteresting,weinvitedhigh-level Think aboutthatlapse.Notonlycanmappingdeadends Databases of failedproductsorprocessescouldbeuse- Databases of Sadly, theoppositeisoccurring.Itcostsmoremoneyand a researchphysician — enhances the rate of success.enhances therateof — said a database should be created of medi- said adatabaseshouldbecreatedof — she had only one Ph.D., inadditionto she hadonlyonePh.D., — discussed how crowd-­ discussed — as longit’s not agatheringaimedatacceleratinginnovationinthe ments andmajors,” henoted.“Problemsaremuchmessier focused onthebrain,hebroughtinpeoplewithdiverseback- working side by side. The resultsfromdoingthis working sidebyside.The above. The questionis, Howdoyoulearntospeakeachof above. The pened to have a Ph.D. inbiology,pened tohaveaPh.D. explainedthatinhislab, which points. people totapintothoseI.Q. problem, oftenwithinhours. alotmore There’s brainpower product design or engineering or finance. They are all of the They areallof product designorengineeringfinance. that organizationsneedtosolvearenotjustmarketingor than that.” there’s noendtowhatcanbeaccomplished.“Problemsdon’t there werealwaysafewbizarreideas, hesaid.Butinalmost knowledgeable peoplesaid geneticists, computerspecialists, statisticiansandothers, all grounds. engineers, HehadM.D.s, biochemists, physicists, cases amateursandevenstudents come packagedinthewayuniversitiescreatedtheirdepart- every case,scientistsfromotherinstitutions ent andspecializedlanguages easy. To doso, youhavetospeakandunderstandmanydiffer- entist aNobel Prize. outside a firm than inside it, and new Web-basedtoolsallow andnew outside afirmthaninsideit, ogy, hesaid, youlearntodothat, physicsandsoforth.Butif by JoelKurtzman Yet anotherresearcher, thisoneaphysicistwhoalsohap- The same can be said for business. The biggestproblems samecanbesaidforbusiness. The The But mixingupthedisciplines, thescientistsaid,isn’t those languages? than they gave. The lesson about collaboration is clear. gave.Thelesson aboutcollaborationisclear. they than brought businessleadersintothemixbecausewe ple frombusinessesgotasmuch But somethingreallyinterestingoccurred.Thepeo- new waystothinkaboutinnovation,whichtheydid. thought theirmethodswouldalertscientistsabout When twoormorepeopletrytosolveaproblem, When weorganizedthescientificmeeting, it doesn’tjustaddtowhatthey know; itmulti- plies theirknowledge. — might justwinthisyoungsci- — The Korn/Ferry Ins titute the language of math,biol- the languageof — solved hisunsolvable — maybe more — and insome — some —

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