The Journal of The Human Resource Planning Society Volume 32 Issue 4 2009 People &Strategy
Special Issue: The Drucker Centennial PersPectives What Drucker Means Around the World Richard Straub/Guido Stein/Thomas Sattelberger/Chuck Ueno/Vaibhav Manek/Shuming Zhao/Danica Purg/ Bob Buford/Rick Wartzman
NeW thiNkiNg from drucker’s legacy Design Your Governance Model to Make the Matrix Work Gregory Kesler/Michael H. Schuster Creating a Culture of Agile Leaders: A Developmental Approach Bill Joiner Developing World Class Leaders: The Rohm and Haas Story Rajiv L. Gupta/Karol M. Wasylyshyn Knowledge Management: A Glass Half Full Mary Key/Holly Tompson/Joseph McCann Turning ‘Survive’ into ‘Thrive’: Managing Survivor Engagement in a Downsized Organization Brenda Kowske/Kyle Lundby/Rena Rasch Which is More Important for Successful Change: Commitment to the Organization or the Initiative? Chris Harris/Doyle Lucas Lost in a Time Warp: How Age Stereotypes Impact Older Baby Boomers Who Still Want to Work Ernie Stark Give your Hr team tHe edGe tHey need.
Become an HrPS enterPriSe memBer.
The Human Resource Planning Society (HRPS) is a strategically focused, “ B e i n g an enterprise member of HrPS groundbreaking network of thousands of HR thought leaders and keeps our Hr professionals up to date on innovators representing the world’s most prominent organizations. In global Hr issues, strategies, trends and practices. the conferences provide insight addition to individual membership, HRPS offers Enterprise Membership, and information about the challenges which allows your entire HR team to take advantage of enhanced benefits, facing Hr today as well as a preview of access to a wealth of additional resources and deep discounts on a variety what we will face in the future. my team’s of HRPS learning events. education and knowledge of Hr strategy began with our first HrPS conference and Global in scope and influence, The Human Resource Planning Society continues with every interaction and event.” provides cutting-edge knowledge, professional development and a —Ken Goldstein, Director community of experts to help members address the business needs of today Organizational Development Mattel, Inc. and tomorrow. More information about the Society is available by visiting www.hrps.org, sending an e-mail to [email protected] or calling 800-337-9517.
Reap the RewaRds of enteRpRise MeMbeRship. Visit www.hRps.oRg and join today. Give your Hr team People tHe edGe tHey need. &Strategy Volume 32 Issue 4 2009
articles departments
Design Your Governance Model to Make the 3 From the Executive Editor 16 Matrix Work Drucker: Celebrating the Man Gregory Kesler/Michael H. Schuster and His Mission Ed Gubman
Creating a Culture of Agile Leaders: 4 Perspectives: 28 A Developmental Approach Point/Counterpoint Bill Joiner What Drucker Means Around the World Developing World Class Leaders: Richard Straub/Guido Stein/Thomas Sattelberger/Chuck Ueno/Vaibhav 36 The Rohm and Haas Story Manek/Shuming Zhao/Danica Purg/Bob Rajiv L. Gupta/Karol M. Wasylyshyn Buford/Rick Wartzman
65 Book Reviews Knowledge Management: A Glass Half Full Reviewed this issue: Management Become an 42 Mary Key/Holly Tompson/Joseph McCann Challenges for the 21st Century by Peter Drucker; A Class with Drucker HrPS enterPriSe memBer. by William A. Cohen; The Essential Turning ‘Survive’ into ‘Thrive’: Managing Survivor Drucker by Peter Drucker; Living 48 Engagement in a Downsized Organization in More Than One World by Bruce Rosenstein The Human Resource Planning Society (HRPS) is a strategically focused, “ B e i n g an enterprise member of HrPS Brenda Kowske/Kyle Lundby/Rena Rasch groundbreaking network of thousands of HR thought leaders and keeps our Hr professionals up to date on 67 HRPS News innovators representing the world’s most prominent organizations. In global Hr issues, strategies, trends and practices. the conferences provide insight Which is More Important for Successful Change: addition to individual membership, HRPS offers Enterprise Membership, and information about the challenges Commitment to the Organization or the Initiative? which allows your entire HR team to take advantage of enhanced benefits, 55 facing Hr today as well as a preview of Chris Harris/Doyle Lucas access to a wealth of additional resources and deep discounts on a variety what we will face in the future. my team’s of HRPS learning events. education and knowledge of Hr strategy began with our first HrPS conference and Global in scope and influence, The Human Resource Planning Society continues with every interaction and event.” Lost in a Time Warp: How Age Stereotypes Impact provides cutting-edge knowledge, professional development and a —Ken Goldstein, Director 58 Older Baby Boomers Who Still Want to Work community of experts to help members address the business needs of today Organizational Development Ernie Stark Mattel, Inc. and tomorrow. More information about the Society is available by visiting www.hrps.org, sending an e-mail to [email protected] or calling 800-337-9517.
Reap the RewaRds of enteRpRise MeMbeRship. Visit www.hRps.oRg and join today. The Human Resource Planning Society is a unique and dynamic association of human resource and business executives. We are committed to improving organizational People performance by creating a global network of individuals to function as business & partners in the application of strategic human resource management practices. Strategy Now in its fourth decade of service, the Society is a vital force in addressing and providing current perspectives on complex and challenging human resource and business issues. HRPS is a non-profit organization representing a mix of leading-edge thinkers and practitioners in business, industry, consulting and academia around the world.
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2 PEOPLE & STRATEGY from the executive editor Drucker: Celebrating the man and His mission
ost of us who read this journal owe Drucker, and we hope you will find them to government and business policies that pro- our careers to Peter Drucker. That’s be very valuable. mote ownership over work and funnel such Ma big statement, but it is no exag- a large share of wealth to executives and geration. Drucker invented management as a Our brilliant Perspectives section includes shareholders, while minimizing gains and job field of study and stirred people to think tributes from Drucker followers and students security for employees. It’s no wonder that about it, study it and try to practice it more around the world. We tapped into experts at later in his career he turned his attention to effectively. If you are engaged in people or the Drucker Society (a global group of schol- nonprofit organizations. organization management in any meaningful ars and leaders) and the Drucker Institute way, it is because Peter Drucker was able to (located at the Claremont Graduate Univer- Fortunately, there is evidence that employees convince executives at General Motors and sity in California) to gain their personal understand the dire straits they face. A recent other places that they should try to lead accounts of what Drucker meant to them and Spherion national survey on drivers of reten- more strategically. how he might look at the business world now. tion reported that employees list benefits, pay You’ll be moved as you read them. and growth and earnings potential as their For this reason and many others, we are delighted to publish this special issue cele- brating the 100th anniversary of Peter Drucker’s birth. He was born in Vienna on At the core of his teachings is an enlightened view of November 19, 1909. (Coincidentally I am writing this on November 19, 2009.) 2009 organizations and the idea that effective executives must saw a year full of events commemorating treat their employees in rational and considerate ways. Drucker and his massive contributions to our understanding of organizations and manage- ment, and this issue is HRPS’ salute to him. What would Peter Drucker think about what three biggest reasons for staying at their com- If you haven’t read any Drucker, I urge you is going on in business today, post the global panies. And very large majorities o f employees to do so. We review some of his books—and crash? I’ll add my opinion to those of our are dissatisfied with each. Meanwhile, execu- books about him—in this journal, including Perspectives contributors. Drucker was an tives in the survey continue to believe, as they one of my favorites, Management Challenges optimist, humanist and artist at heart. At the have for years, that management climate, for the 21st Century. He wrote and published core of his teachings is an enlightened view supervisor relationships and the culture/work from 1932 until his death in 2005. No matter of organizations and the idea that effective environment are the main things that retain what book you choose, you’ll find his insights executives must treat their employees in people. This is a huge divide, with ominous to be as fresh and significant today as when rational and considerate ways to accomplish implications for business growth. Still, after they were written. business results. Remember, Drucker focused years of watching executive greed, employees on serving the customer as the main purpose have figured out that jobs are transactions, In putting this issue together, we have done of every organization and was the man who not relationships, and they will stay only if three things: In addition to reviewing books, wrote about employees that we must, “Accept they get what they deserve. we compiled a global appreciation of Druck- the fact that we have to treat almost anybody er and what he meant around the world, and as a volunteer,” to motivate them. We could use another Peter Drucker today to we assembled a set of leading-edge articles tell us how to close this gap, but, sadly, that that update topics that were crucial to Publicly, he would have acknowledged the kind of genius comes around only once. Drucker. It would be impossible for us to extreme dislocations and discontinuities that That’s why it is worth celebrating. publish articles on every topic Drucker people and organizations have experienced pursued. His imagination and breadth were and detailed ways for us to regain control Happy Reading, just too vast: We would need a 300-page over organizational and personal directions. journal. Instead we have a thoughtful mix of Privately, I believe he would be more despair- theory, case studies and research on organi- ing. He would have been appalled at the zation management, leadership, knowledge greed, recklessness and self-serving actions of management and engagement and motiva- so many executives. He would be appalled at tion. We hope these would have pleased how these actions are part of a larger mix of Ed Gubman
Volume 32/Issue 4 — 2009 3 perspectives
Perspectives Anna Tavis, Perspectives Editor
In this special issue, People & Strategy has partnered with the emphasizes Drucker’s continuing relevance as a humanist. Danica International Peter Drucker Society and The Drucker Institute to Purg, president of IEDC-Bled School of Management, focuses on celebrate the centennial of Peter Drucker’s birth. Drucker is the Drucker’s aesthetics, his heightened awareness that management is 20th century’s most prominent management thinker and one of its an art form rather than a science. We conclude with an essay on great social philosophers. We invited Drucker’s disciples from Drucker’s influence in the United States, contributed by Rick around the world to contribute their personal reflections on Wartzman, the executive director of The Drucker Institute at Drucker’s influence in the development of their countries’ approach Claremont Graduate University. to studying management and their management cultures. For many of our readers, this selection of essays will provide a Richard Straub, President of the Peter Drucker Society of Austria, leads the discussion by focusing on the impact of Drucker’s Vien- fresh insight into Drucker’s sustaining contributions to global nese roots on the evolution of his thinking. Following Straub, the management thinking. For others, the historical perspective will be conversation broadens its geography to Europe, Japan, China and particularly interesting. We invite all of you to reflect with our India. Drucker’s global citizenship comes across strongly in the wonderful contributors on the importance of Peter Drucker’s essay by Thomas Sattleberger, CHRO of Deutsche Telecom, who legacy for 21st-century management.
What Drucker Means Around the World
A World Citizen of Austrian strongly influenced his world view. He grew Austro-Hungarian Empire crumbled in a up in a home that served as a salon of sorts cataclysmic tremor ultimately leading into Origin: The Rediscovery for the cultural and intellectual elite of the horrors of the Nazi regime. Its best and the Danube Monarchy—hence his early brightest were pushed into a global diaspora, of the European Roots acquaintance with eminent figures such as impoverishing “old Europe” and bringing of the Father of Modern Joseph Schumpeter, Sigmund Freud, Othmar a wealth of inspiration and intellectual Management Spann and Friedrich von Hayek. treasures to their new home countries. Richard Straub, Peter Drucker Society His origin in a cultural and intellectual hotbed Having been a witness of the ascent of total- of Austria left deep marks on Peter Drucker. We do not itarian fascist and communist regimes in realize today that when we discuss the need Europe, Drucker’s intellectual journey became November 19, 2009, marks the 100th for global mindsets, cosmopolitan attitudes, focused on the idea of a workable society anniversary of the birth in Vienna of the valuing cultural differences, multilingualism, based on freedom—where citizens are world-renowned thinker on management a global business orientation and transdisci- provided a meaningful existence, i.e., status and society, Peter F. Drucker. Although plinary thinking, it was all there at the and function, with an ethical foundation of Drucker spent the greater part of his life beginning of the 20th century, in a world that mutual responsibility by the individual and in the United States, his youth in Austria and another famous Viennese writer, Stefan Zweig his or her society. As the underlying econom- his experiences in Germany and England (1881-1942), called “Yesterday’s World.” The ic theory, he adopted the thinking of a fellow
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Austrian, Joseph Schumpeter. He thought application, and its test is its results,” Druck- him again and remind ourselves what the that Schumpeter had produced the only er wrote. “This makes it a technology. But true responsibility of management is as a “effective contemporary theory of capital- management also deals with people, their role within society. Certainly, it is not serv - ism,” which is centered on private initiative values, their growth and development—and ing the short-term interests of financial and where the enterprising manager is both this makes it a humanity…Management is markets or other parochial stakeholders. the justification and motivating power of thus what tradition used to call a ‘liberal art:’ Europe, like other continents, needs Peter the system. ‘liberal’ because it deals with the fundamen- Drucker’s thinking to build a sustainable tals of knowledge, self-knowledge, wisdom, and functioning society. Europe, though, It is via this route that Drucker discovered and leadership; ‘art’ because it is practice also has the privilege of calling Drucker a management as the “life-giving force of mod- and application.” “great son.” ern capitalism.” He concluded that in a pluralistic society of specialized institutions, management’s task is to make organizations perform, beginning with the business enter- Consequently, the contribution of management is a prise, for the community and for the individual alike. Management “organizes fundamental contribution to a functioning society and human beings for joint performance and not just to the individual institution it serves. should make their strength effective and their weaknesses irrelevant.” Thus, management is the most important “organ” of our modern society—a role deeply embedded in the real- Warren Bennis and James O’Toole observed ity of our social existence as human beings. in their May 2005 Harvard Business Review Richard Straub is president of the Peter Consequently, the contribution of manage- article, “How Business Schools Lost their Drucker Society of Austria. ment is a fundamental contribution to a Way,” that the schools suffer from “an over- functioning society and not just to the indi- emphasis on rigor and an underemphasis on vidual institution it serves. It is clear that relevance. Business schools have forgotten thinking about management from this per- that they are a professional school.” spective and understanding the consequences Peter Drucker’s Early leads to different conclusions than those we As a European and Austrian, I feel strongly have seen emerging during the last 20 years. that Peter Drucker has been denied the Works—Austria and recognition that he deserves on the Germany: The Foundations John Micklethwait, the editor-in-chief of The European continent. This is in stark contrast Economist, said in a BBC interview that to the reception Drucker has experienced of His Weltanschauung in Japan. Drucker was not only a great management Guido Stein, IESE Business School thinker but he was one of the greatest thinkers of the 20th Century, given the sharpness of In the United States his earlier books, like Peter Ferdinand Drucker, Viennese, was born his mind and the breadth of his intellectual the Concept of the Corporation and The in 1909 to a cultured family that fostered curiosity. With his inquiry into society and Practice of Management, had enormous both his literary vocation and his restless management, he takes a very European influence on the way large U.S. corporations intellect. He combined law studies in approach, rooted in a humanities-based organized and developed their management Hamburg and Frankfurt with a job in an general education and an open mind that methods. However, in the 1970s and 1980s export company, and later as a journalist made him a relentless lifelong learner in the his influence on actual practice started to with the Frankfurter General Anzeiger. His best sense of the term. wane. He raised his voice against the excess- doctoral thesis in law dealt with the so-called es and misdirected behaviors in financial forms of quasi-government (quasi-Regierun- Drucker’s holistic and ecology-based engineering that ultimately destroyed long- gen) such as revolutionary governments, approach brought him into marked contrast term value. His voice was heard, given his governments in exile or colonies in the pro- with the academic establishment. The latter fame and reputation at the time as the cess of becoming independent. tried to define management as a “science” “father of modern management,” but he while he saw management in its many dimen- was not listened to. His first book was a study of Friedrich Julius sions and facets (and in particular in Stahl, a mid-19th-century legal philosopher, its fundamental social role) as a “Liberal Peter Drucker’s centenary provides us with and an outstanding political traditionalist Art.” Management “deals with action and a unique opportunity: to start listening to and parliamentarian, in Berlin and Erfurt. ➤
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Entitled Friedrich Julius Stahl, Political is viewed as a succession of contingent events an assessor for various British financial Conservationist and His Historical Evolution, and behaviors; that is, events and behaviors institutions. Some years later he was to the book was published in 1933 by the that might have never occurred, and always become a professor and consultant, activities prestigious German publisher J.C.B. Mohr under the watchful care of Divine Providence he would alternate with his work as a writer, und Siebeck of Tübingen. (Die Augen Gottes). This confers upon such and that would continue right to the end, events and behaviors a specific dignity. making him the most influential management Why should Peter Drucker, at the age of 34, (Later, he would see this tendency combined philosopher to date. have chosen to write about an unknown and emphasized in his readings of Burke, author who was practically ignored by de Tocqueville, Bertrand de Jouvenelle, German historians of political thought? Calhoun, in The Federalist Papers, and in Guido Stein is assistant professor of Berthold Freyberg, a personal friend, North American history and politics.) Managing People in Organizations at provided a probable explanation for such a the IESE Business School in Spain. choice. Drucker’s penchant for the innovative Drucker saw this Jewish thinker not as a and creative syntheses of things, otherwise portent of characteristic features that would deemed incompatible, would seem to account shape future political and social reality, but for his intellectual fascination with the figure as one who examined the discontinuity facing of Stahl, who could be described as the the present; someone who was not asking the personification of paradox, notorious for his question “What will the future be like?” but Is Peter Drucker Still seemingly irreconcilable points of view. rather, “What can we learn about today in Relevant Today? order to build the future?” Like Bergson, he Stahl, Jewish by birth, became the spokesman preferred to “draw out tendencies rather Thomas Sattelberger, Deutsche Telekom AG for Protestant political orthodoxy. Of Bavarian than to prophesize about what will happen.” Board of Management background, he worked earnestly for the This was Drucker’s approach to the profound Who listens today in continental Europe Prussian crown. A committed conservative, he cultural changes (discontinuities) that, when Tom Peters, Ken Blanchard and/or resisted absolutism in favor of constitutional because often hidden, cannot easily be Noel Tichy are mentioned – all of them monarchy. In short, he was a person difficult perceived on the horizon, accustomed as we celebrated management luminaries of the last to categorize, like Drucker himself. It might are to our expectation of continuity. [See, for 25 years? Instead, the superlatives pile up well be ventured that there did exist a personal example, Drucker’s books Landmarks of when a conversation ends with the name of Peter F. Drucker. He was assured the top spot in the global ranking of business leaders as recently as 2001 and again in 2003. Three This was Drucker’s approach to the profound years after his death, and in his centenary cultural changes (discontinuities) that, because year, we wonder what is left of Peter Drucker. To put it another way: Is Peter Drucker—is often hidden, cannot easily be perceived on the his thinking—still relevant today? To answer this question I first set out the main features horizon, accustomed as we are to our expectation of Drucker’s way of thinking. Second, I of continuity. present Drucker’s insights in detail and apply these findings to the present day. Finally, draw some conclusions post-Drucker.
affinity that influenced Drucker’s choosing Tomorrow (1957), The Age of Discontinuity What characterizes Drucker’s way Stahl, which shows quite tangibly that (1969) or The New Realities (1989).] of thinking? Drucker adopted a certain conservative frame Peter Drucker tried to understand the world After publishing his study of Stahl, Drucker of mind during those years that, along with in all its complexity. Together with most other his inveterate tendency toward iconoclasm, left Germany and established himself in Austrian thinkers of his time, he shared an accompanied him throughout his life. London, where he worked for a financial firm aversion to oversimplified explanations and attended classes given by John Maynard without reference to the highest system: In his reflections on Stahl, Drucker goes on to Keynes. In 1937, he moved to the United society. However, Drucker’s thinking is driven describe a lively, dynamic conservativism States to serve as a correspondent for several by an overwhelming desire to extract universal (lebendiger konservatismus) in which history English and Scottish newspapers, and as guidelines from practical experience. Reading
6 PEOPLE & STRATEGY perspectives
his work carefully, one is struck by three that of society. Ducker’s resulting maxim collapse of belief in an all-encompassing, all- characteristic features of his way of thinking: leaves no room for misunderstanding: “Value powerful state. Unfortunately, the moral and service first, profit later.” What turns the failure of management has cleared the way 1. Drucker analyzed things from a bird’s-eye company into a social and political system is for its return. For us, the most important view of society. Therefore, the starting its most valuable resource and therefore the lesson from history should be that all social point for any thought or action is society organizations are essentially fallible and none focus of management: its people. Therefore, and community. His yardstick for should stand above the others. Instead of “every enterprise is a learning and teaching “management” was always its effect on creating a new state monstrosity, we should institution,” and “training and development the common good. reinforce the relationship between the com- must be built into it on all levels.” Following munity and the company as a social 2. The Drucker method combines fundamen- Drucker, what really counts for a company organization. tal skills and knowledge into a highly are its goals and values. If an organization is predictive analytical tool. His motto was, not goal oriented, it simply confuses Although Drucker was principally an advo- “Learn from practice for practice.” Ground- its employees. cate of “the market” as an instrument of ing his work on inner independence, deep historical knowledge and common sense, he minimized the academic success but maxi- mized its practical relevance. He proposed that organizations are effective because “each is autonomous and specialized, informed only 3. Insight is nothing without clear language and easily understandable presentation. by its own narrow mission and vision.” As such, he wrapped his findings up in common-sense principles, understandable to everyone. Drucker defined management as a social control, he retained “serious reservations” function enabling people to achieve their best about capitalism, which adores the economy What insights did Drucker gain? performance. For him, the main problem of itself as “the be-all and end-all of life.” If we Going right back to Drucker’s great works management was crystal clear: Many people are to take from Drucker only one guiding (Concept of the Corporation (1946); The fail to see that companies are a “social principle it is that we should overcome the New Society: the Anatomy of Industrial phenomenon,” in which a very small number limitations of the pure capitalist world view Order (1950); and, above all, The Practice of of decisions are behind 90 percent of all and turn our attention to the major questions Management (1954)), we can identify three results. As such, Drucker appeals: “Always of society: central insights. ask yourself if you are doing the right thing before doing things right.” And the right • Which value system should form the base First and foremost, Drucker elevates the plu- things in management are mostly connected of our society? ralism of organizations into their defining with developing people. For Drucker, the • What should the relationship between the feature. He proposed that organizations are social function of management goes hand-in- individual and society look like? effective because “each is autonomous and hand with the question of legitimate power. specialized, informed only by its own narrow To be legitimate, management must become • How are responsibilities divided among mission and vision.” The crux is that all ear- a true profession like medicine. state, business and civil society? lier pluralist societies destroyed themselves Ultimately, the only way for us as managers because no one took care of the common What guidelines does Drucker give us good, as Drucker states. Due to advanced to reconnect with society is to face the moral to shape today and tomorrow? specialization, the common good is increas- allegations in public and ground our actions ingly lost from sight and the foundations of Today’s world is marked by the worst on a solid moral basis. Whereas doctors take society start to crumble. Drucker has a ready economic crisis in 80 years. Alongside the a professional oath and sit rigid public answer: “If our modern pluralist society is to real economy, its moral foundations are in a examinations, any charlatan is free to call escape the same fate, the leaders of all institu- deep crisis of legitimacy. In 2009, Drucker’s himself a “manager.” tions will have to learn to be leaders beyond original concerns are more topical and cutting- the walls.” edge than anyone could have imagined. Inversely, management’s moral yardstick must be its own Hippocratic Oath, which Companies are social organizations in the According to Drucker, the most important Drucker defines as: “Above all, not knowingly sense that their fate is inexorably linked to lesson from the failure of socialism is the to do any social harm.” We now must regain ➤
VOLUME 32/ISSUE 4 — 2009 7 perspectives
our voice, saying two things: First, there is for society, the economy and the individual learned the main point of corporate manage- no doubt about our profession’s moral as well. ment and the directionality of politics from standards. Second, we will speak out against Drucker’s writings. any violation of our professional standards, whoever is responsible. Finally, to turn Thomas Sattelberger is chief human Lucky Encounters management into a true profession, we also resources officer, Deutsche Telekom In June 1934, at 24 years of age, Drucker by must radically rethink our entry, promotion AG Board of Management. chance encountered Japanese traditional and recognition policies. painting at an art gallery in London and became captivated by this art form. This Until the economic crisis, the Anglo-Saxon interest triggered Drucker’s attraction to MBA was the main route into management. Japanese culture and spurred his lifelong Spin-offs of Harvard and its like have exported interest in Japan. their model worldwide according to the mantra Peter Drucker’s Influence “one size fits all.” Exaggerating the case, one in Japan By the mid 1950s in Japan, the urgent demand could say that traditional, lemming-like caused by the postwar reconstruction after MBAs often are hotbeds of soulless, purely Chuck Ueno, The Drucker Workshop World War II was almost satisfied. This economistic learning. Neither are they better (the Drucker Society of Japan) economic situation led to a growing interest in terms of content: functional silos remain in improved management techniques. The There are a great number of Japanese com- intact; students are not taught systematic, Japan Productivity Center (JPC), established pany executives who devote themselves to the interdisciplinary thinking; leadership is in the spring of 1955, organized seminars, thought of Drucker as the person who invent- reduced to hero-worship. continuously dispatched overseas inspection ed management. The classic The Practice of teams and worked diligently to close the Management sold 1 million copies in Japan, Instead, management education must return management gap between Japan and out of 5 million copies in the world. Drucker’s to its European roots, meaning that training the United States relative to productivity books are always listed as best-sellers. puts the evolution of the self back ahead of improvement. social masquerading. Questioning the exis- After the war, many Japanese company tence of any certainty is essential for character Taizo Ishizaka, Chairman of the Japan Busi- executives were influenced by Drucker’s building. Thus, the main pillars of Drucker’s ness Federation, who visited various places in method must stand at the center of reformed thoughts and his practical management, and the United States as the head of the top man- management education: unbounded think- these principles came into play in developing agement team dispatched by the JPC, wrote ing, moral resolution, inner independence the postwar Japanese economy. Drucker this recommendation for The Practice of Man- and a sound knowledge of history. wrote about his expectation that Japan agement (1956, Japanese edition): “This book was provided for the executive suite of any company which I visited during an inspection trip.” This made a big ripple, and Drucker’s There were enormous numbers of people The Practice of Management suddenly was accepted in Japanese industry. Whereas before (Japanese statesmen, corporate executives and practitioners were having a difficult time with business administration, they finally recovered businessmen) who learned the main point of from their uncertainty and were prepared to corporate management and the directionality of move the country forward. politics from Drucker’s writings. Visiting Japan Drucker visited Japan for the first time in 1959. After that, he traveled to Japan every other year, staying for several weeks and Is Peter Drucker still relevant today? In my would reach a turning point and develop bringing his family. These visits continued opinion, the answer has to be “yes.” Today’s into a new society. Drucker always looked at until 1996 when he was 86 years old. answers may be different, but the central “new society” and was trying to ascertain the questions are still the same. Moreover, most future of management. There were enormous After his first trip to Japan, Drucker said: “My of Drucker’s principles cut to the core of all numbers of people (Japanese statesmen, cor- Japan visit was undertaken with pleasure. being and, therefore, are timeless. That goes porate executives and businessmen) who I wanted to watch Japanese traditional painting
8 PEOPLE & STRATEGY perspectives
to tell the truth.” However, after the first trip Diamond Inc., which translated many of Peter Drucker’s Drucker became passionate not only about Drucker’s books, has published 80 of his titles Japanese traditional painting but about the in Japan (including collections of his writings) Contribution to Indian country itself. Drucker met corporate execu- since Automation and the New Society tives who had vision and courage; and he was (1956). A total of 4 million copies have been Management Thought convinced of Japan’s potential. He discussed sold by Diamond Inc. alone as of November and Practice the implications of Japanese-style manage- 2005 (Memo, 14 Nov. 2005, Diamond, Inc.). ment for Westerners for the first time in the This sales volume is possible for a literary Vaibhav Manek, KNAV and PRISM Center 1971 Harvard Business Review article, “What book in our country, but for business books, of Learning We Can Learn from Japanese Management.” even by a non-Japanese, we have never seen Note: KNAV is an international accounting, tax and business advisory firm. The PRISM Center of Learning offers the Drucker Curriculum in the Indian subcontinent, Drucker is one of three Americans whose concepts in partnership with the Drucker Institute, of management helped raise the Japanese economy Claremont Graduate University. after World War II, the others being William Edwards Among the scores of nations that have been influenced by Peter Drucker, India is a prom- Deming and Joseph Moses Juran. inent one. Drucker is a name that invigorates many minds and businesses in India. In terms of his contribution to management studies, Contribution and Influence on Japan an equal to Drucker’s books. His popularity right from undergraduate courses on com- remains a deep-rooted factor in Japan. merce and economics, to professional courses Drucker wrote in the preface to the Japanese such as chartered accountancy, to manage- edition of Innovation and Entrepreneurship In his book, Management Challenges for ment degree courses at India’s business (1980), “Great time passed since I started the 21st Century (1999), Drucker wrote: schools, the work of Peter Drucker is widely minute observation for Japan. I visited Japan “I very much hope that Japan will find a read and acknowledged. regularly for more than 25 years, and the solution that preserves the social stability, the most were considerably long-term stays. In community and the social harmony that Most students in India’s colleges and both the economic world and the govern - lifetime employment provided, and yet universities studying various disciplines of ment, there are many extremely close creates the mobility that knowledge work management, law, commerce, social sciences, friends…However, I did not work very much and knowledge workers must have. Far more organizational behavior and finance would in Japan.” Drucker also said, “Corporate is at stake than Japan’s own society and civic have grown up having read Drucker. executives whom I got to know in Japan are my friends, not my clients. I don’t think I got any consulting charges from them.” Most academicians, professors, researchers
Drucker is one of three Americans whose and doctoral students of management have read concepts of management helped raise the Drucker’s books and articles. Japanese economy after World War II, the others being William Edwards Deming (1900-1993) and Joseph Moses Juran (1904- harmony. A Japanese solution would provide Likewise, most academicians, professors, 2008). In June 1966, Drucker’s contributions a model — “for in every country a functioning researchers and doctoral students of manage- to the modernization of Japanese industrial society does require cohesion.” ment have read Drucker’s books and articles. management and Japan-U.S. friendship were Some have even acknowledged references to recognized, and the Japanese government Drucker’s thoughts and ideas in their work, conferred on him the Order of the Sacred Chuck Ueno is director of The Drucker and have built upon his thoughts. Treasure (Zuihousho), an honor established Workshop at the Drucker Society on January 4, 1888, by Emperor Meiji of of Japan. Drucker’s seminal work on “organization,” his Japan as the Order of Meiji. thoughts on the concepts of “knowledge ➤
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worker” and “innovation and entrepreneur- entrepreneurship can be found manifested in ship,” and his work on the “effective many of India’s current booming economic Vaibhav Manek is the hon. vice presi- executive” have found a tremendous following scenarios. As a prominent example, the Indian dent of the Drucker Society, Mumbai, in India. Many corporations use Drucker’s population of more than 1 billion, once con- India. He is also a partner in the KNAV, thoughts in their training programs and imbue sidered a liability, is now considered a Mumbai Office and cofounder of these thoughts in their executives’ work. meaningful contributory asset—both in terms PRISM Center of Learning. of gross domestic output and a large market, Infosys Technologies, one of India’s and the which no serious global corporation can world’s most respected companies, is built on afford to ignore. This has led to large foreign the foundations of ethical management and direct investments and has unleashed a new integrity in leadership, ideals that Peter breed of Indian entrepreneurs ready to conquer A Thinker Beyond His Time Drucker stood for all his life. Says Kris the world, which ultimately has resulted in Gopalakrishnan, CEO and co-founder of more disposable income in the hands of the Shuming Zhao, School of Business, Infosys, “Drucker is an essential. Others have average Indian. Nanjing University only picked up on his thoughts.” From mobile phones to Internet technology After attending the Academy of Management Drucker in, Landmarks of Tomorrow, writes to consumer goods to high-end services, one Conference in Hawaii in August 2005, my with reference to India: “I am convinced of can also see the luxury segment of high-end wife and daughter accompanied me on a Gandhi’s lasting impact—unless indeed, brands coexisting and thriving. Information much-anticipated trip to Claremont Graduate Independent India collapses into anarchy, technology application is an area where India University (CGU) to visit with Professor Peter civil war, totalitarianism, or before a new has gained an undisputed global leadership Drucker. It turned out to be our last meeting conquest by a foreign invader. But it is unlike- position, with many corporations outsourc- as he passed away in November 2005. The ly that there will ever be an attempt to realize ing their non-core business and knowledge news was difficult to accept. Just as his Gandhi’s society, that post-mortem dream processes to Indian BPOs and KPOs, and hav- thoughts and ideas were always new and that was to be more truly a fulfillment of the ing their software written by sophisticated provocative, I imagined that Drucker would basic values of the West than any other Indian companies. stay young forever. Seeing the collected works Western country has ever been, and which yet of Drucker on my bookshelf is comforting. was to rest on the non-Western foundations In 2004, Peter Drucker in an interview in an Although he is gone, his works, his spirit and of India’s own spiritual heritage. That issue of Fortune said: “The medical school in his thoughts will endure, making his life attempt—despite its nobility and popular New Delhi, All India Institute of Medical Sci- memorable to those who admired and learned appeal—has failed.” ences, is perhaps one of the best in the world. from him. The First Meeting My first encounter with Drucker was in the Although he is gone, his works, his spirit and his summer of 1981, when I was attending his lectures at CGU. At that time, very little was thoughts will endure, making his life memorable to known about Drucker in China. China fol- those who admired and learned from him. lowed a highly centralized planned economic system and managerial model. Because there was little emphasis placed on the importance of learning management theory and practice, It is important to note that Gandhi’s ideals And the technical graduates of Indian Insti- I chose linguistics and education as my grad- have never been fully realized in India, tute of Information Technology in Bangalore uate major, rather than management. I did although many institutions were founded on are as good as any in the world. Also India not regret that choice until I returned to those principles. Today, it is the free market has 150 million people for whom English is China to work at Nanjing University in 1983. and the knowledge worker that are driving By then, many aspects of life in China were the main language. So India is indeed becom- the economy, with full freedom for citizens to changing. China had adopted an economic ing a knowledge centre.” set up entrepreneurial ventures in an environ- reform and opening-up policy. The changes ment that fosters business. became increasingly significant over time. Drucker’s belief that we are driving towards Similarly, the thought that it is incongruity an era of knowledge workers is amply proven By 1984 China had embarked on a semi- that ultimately leads to innovation and in this part of the world. commodity economy, which made me realize
10 PEOPLE & STRATEGY perspectives
the growing importance of management effective and rewarding. Managers lead sion to talk with Drucker about China’s principles and practices. I became determined employees not only through knowledge, economic reform and enterprise manage- to study for a Ph.D. in management at CGU. ability and skills but also through vision, ment. He agreed that China’s economic My return to Claremont provided a number encouragement, responsibility and integrity. reform and enterprise management have of learning opportunities to interact with Drucker explored the importance of indi- achieved substantial success. Drucker empha- Drucker and enhance my knowledge of vidual humans to an organization, how to sized that management practice always management. build harmonious relationships between precedes management theories. He recalled that in those years when he was learning the Japanese management experience, he trav- He suggests that we must understand and appreciate eled to Japan many times to understand the practice of management. individual characteristics if we are to treat employees We discussed that technology and capital are as human beings who contribute to the organization merely tools for developing countries, which will produce sufficient effects only by the through their talent. efficacy of competent managers. The core challenges facing China are to cultivate large numbers of effective managers who under- Although he was an accomplished well- individuals and organizations, and how to stand how to manage and how to lead. They known thinker and communicator, Drucker create organizations that build responsibility must promote the development of enter - was human. In conversations with students, and self-management. prises, and also know how to motivate he would take the time to emphasize and employees and reward their achievements. explain points. To his students, Peter Drucker As a “social ecologist” Drucker has become He emphasized that in today’s China, and the legend became Peter Drucker the teacher. known as a thinker who integrates the spirit even all over the world, nothing is more In him, you found a knowledgeable senior of “the unity of knowledge and practice” important than this. Following this way of mentor who was effective at giving systematic (Drucker 2006). His perspective draws atten- thinking, China should cultivate its own guidance and support. tion to the importance of analyzing changes managers who are familiar with and under- from both social and historical perspectives. stand the country and people, and also are The Pioneer of Modern Human Resources Management Drucker, as the founder of modern manage- The core challenges facing China are to cultivate ment, has contributed a significant body of work in the field of human resource manage- large numbers of effective managers who understand ment. His writings convey the basic theme of “human-centered” management systems how to manage and how to lead. (Drucker, 2005). “Human beings are the most important resource of enterprises” is his central point. This approach allows one to appreciate the deeply rooted in the Chinese culture, society influence of management and predict the and environment. In his 1954 seminal book, The Practice of direction of change. Leaders look at change Management, Drucker emphasizes the unique as opportunity, and seek to find suitable effec- The change in China is dramatic. The change value of human resources for their individual tive responses both inside and outside of is not evolutionary change: It is revolutionary contributions to an organization. He suggests organizations. Managers must know how to change. The development of Chinese produc- that we must understand and appreciate shape future policy, create transformation, tion has evolved from “Made-in-China” to individual characteristics if we are to treat and at the same time balance between employees as human beings who contribute “Copy-in-China” to now “Innovate-in-Chi- innovation and perpetuation. to the organization through their talent. na.” This evolution is totally supported by human talent. With the increasing penetra- Drucker’s writing and consulting challenged Accurate and Profound Insight about tion of a knowledge economy worldwide, the managers to empower employees with a sense China’s Development importance of human resource management of accomplishment to make their jobs more Visiting the last time in 2005, I had the occa- has gradually emerged as a critical theme. ➤
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It is noteworthy that since the 1980s, schol- Peter Drucker: More than we understand that he was for several years ars, managers and business leaders have come the sole teacher on Japanese art in Pomona to appreciate the relevance of Drucker’s a Management Thinker College? Art helped him to understand better management ideas in China. Evidence of his Danica Purg, IEDC-Bled School of the Japanese culture, and particularly the influence can be seen in the Drucker learning business culture. institutions that have been established in Management cities including Beijing, Shanghai, Nanjing Peter Drucker is perhaps the best example of He saw also here—as everywhere else—the and Xi’an. Simultaneously, a number of a European who later in the United States parallels. He defined Japanese paintings Chinese enterprises have gained great became the most impressive management as “copying to perfection” and “creative achievements through the application of thinker of our times. In his personality the old imitation,” and so he saw the Japanese indus- modern management practices that are and new times flowed together, and he has trial and managerial approach. His obsession with quality had a relation to art as well. He describes in one of his books how he attend- ed a 1929 performance of Verdi’s Falstaff at His interest in art, and Japanese art in particular, the Hamburg Opera. He was so much can be seen as a spinoff of his admiration for impressed by the composition that he wanted to carry out his own life’s work in the spirit Japanese management that inspired him to build a of Verdi, who once said: “All my life as a musi- cian I have striven for perfection. It has always collection of Japanese art. eluded me. I surely have an obligation to make one more try.”
Willingly or unwillingly, Peter Drucker has derived from Drucker. Zhang Ruimin of been as much a citizen of the world as an inspired me not only to integrate ethics in Haier Group of China illustrates one well- American. Without idealizing his youth in management education at IEDC Bled School known example among others. Austria, we can see that it certainly provided of Management, but also to develop the topic him the social, historical and cultural basis of “Art and Leadership” to enrich leadership We honor Drucker’s memory as a friend, for development of his skills and talents. And development with lessons from art as a tool mentor and teacher. Undoubtedly, he will as it counts the same for great artists, it is for reflection on organization, on oneself and be long remembered for his lasting unique difficult to say what part of his extraordinary on the meaning of life in general. contributions to the theory and practice feeling for the “Zeitgeist,” always including a of management—the founder of modern view to the future, came from his talent of management. observation and understanding, or from his craftsmanship. Professor Danica Purg is president of Note: This article is excerpted from a longer IEDC-Bled School of Management, Slovenia. article which is part of NSFC Research Being a lawyer by education, he increasingly Project 70732002. believed that the main issues in business could not be resolved by legal or organizational References solutions only. Increasingly, cultural, socio- Drucker, P. F. (1954). The Practice of Management [M], logical and psychological analyses and New York: Harper & Row. associations filled his books. More and more Managing Yourself Drucker, P. F. (2005). The Effective Executive (in Chinese) he stressed the importance of self-knowledge [M], China Machine Press. and what he called the quality area of ethics. Bob Buford, The Drucker Institute
Drucker, P. F. (2006). Management Challenges for the 21st As Peter Drucker understood so well, we Century (in Chinese) [M], China Machine Press. Therefore, it has been a special but not a sur- have a problem—a big problem, a 30-year prising experience that his home library has problem. been filled with books about art. His interest Shuming Zhao is a professor at and in art, and Japanese art in particular, can be At the beginning of the last century, life dean of the School of Business, seen as a spinoff of his admiration for Japa- expectancy was around 50 years. If you are Nanjing University, People’s Republic nese management that inspired him to build 50 years old today, you are in the period of China. a collection of Japanese art. But it has been I’ve dubbed “halftime.” It’s a feeling of certainly more than that. How otherwise can “Been there. Done that. Now what?” You
12 PEOPLE & STRATEGY perspectives
now can reasonably expect to live 30 more issues that I have received, that most people Peter Drucker, American productive years. don’t know what to do with the second half of their lives. Rick Wartzman Much of this special issue of People & Strategy Peter Drucker’s core philosophy—that effec- is focused on how Peter Drucker’s deep “A pier is nothing other than a frustrated tively managed, ethically led organizations knowledge of the globe has helped to make bridge,” Shimon Peres has said, capturing this are the key to a healthy society—was forged his teachings relevant to an amazing mix predicament both precisely and poetically. “It in Europe. It was there that the Vienna native of countries and cultures. But Drucker, of is connected to one shore only and does not devoured the works of Wilhelm von Hum- course, was focused on generations as well as have another shore to attach itself to.” boldt, Joseph von Radowitz and Friedrich geography, on people as well as places. We have a lot of “frustrated bridges”—pro- Julius Stahl. It was there that he was exposed And toward the end of his own long life—one fessionally as well as personally. What’s more, to the economic theories of Joseph Schum- that saw him wear the multiple hats of our angst has been exacerbated by a period peter and John Maynard Keynes. And it was university professor, management consultant of almost indescribable financial insecurity. there, most significantly, that he witnessed the and writer—he began to explore how untra- rise of Fascism. ditional, serial careers were creating a Among Drucker’s greatest strengths was his quandary for the many who had expected ability to “look out the window and see what’s Yet it was in the United States, where Drucker lifelong stability. visible but not yet seen.” His contribution was arrived in 1937, that his philosophy has to ask the right questions at the right time. In been tested to the fullest—for better and “In a few hundred years,” Drucker declared, his last book, Management: Revised (with Joe for worse. “when the history of our time is written from Maciariello), Drucker wrote the following: a long-term perspective, I think it very prob- Although he retained a thick Austrian accent able that the most important event those Knowledge workers . . . face drastically throughout his long life, Drucker became an historians will remember is not technology, new demands: American through and through. He was a not the Internet, not e-commerce—but the • They have to ask, “Who am I? What are keen observer of the national scene, leading unprecedented change in the human condi- my strengths? How do I work?” some to liken him to a latter-day de Toc - queville. He loved baseball (and even advised tion. For the first time—and I mean that • They have to ask, “Where do I belong?” literally—substantial and rapidly growing the Cleveland Indians for a season). The numbers of people have choices. For the first • They have to ask, “What is my White House sought his counsel. time, they will have to manage themselves.” contribution?” But it was through his landmark books on Managing oneself, however, is far easier said Can any of us afford not to be wrestling with how organizations should function, includ- than done. As Drucker warned: “We are the answers? ing 1946’s Concept of the Corporation and totally unprepared for it. Up until around 1900, even in the most highly developed countries, the overwhelming majority of Managing oneself, however, is far easier said than people simply followed their father’s foot- steps—if they were lucky. If your father was done. As Drucker warned: “We are totally unprepared a peasant farmer, you were a peasant farmer. for it. Up until around 1900, even in the most highly If he was a craftsman, you were a craftsman. There was no such thing as upward mobility. developed countries, the overwhelming majority Now, suddenly, a very large number of people choose what they want to be. And what’s of people simply followed their father’s footsteps— more, they will have more than one career. The average working life span is now close to if they were lucky.” 60 years. In 1900, it was 20.”
Ready or not, we live in an age of self- 1954’s The Practice of Management, that determination. But with this marvelous Bob Buford is the chairman of Drucker truly shaped his adopted home, opportunity has come tremendous anxiety. the Board of Advisors at the Drucker helping to usher in what historian Alfred I can say with certainty, based on hundreds Institute. Chandler has called “the Golden Age of busi- of conversations and e-mails about midlife ness” in America. ➤
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perspectives “Our strategy requires us to be more innovative, efficient and faster. How can we give managers the skills to lead their teams in this new reality?” Specifically, Drucker’s ideas and ideals led Over time, however, Drucker would not only Given his level of outrage, one can only imag- countless executives in the decades after see his wisdom embraced; he would also ine what Drucker would have made of the World War II to try to balance the needs of watch it being woefully ignored. latest economic crisis, an extraordinarily shareholders, employees and the community costly mess triggered by everything he at large. And his principles helped create a By the 1980s, Drucker had grown tired of decried: an emphasis on short-term gains work environment that provided dignity and the naked greed exhibited by U.S. corporate over long-term stewardship; the substitution a sense of fulfillment for millions of people. leaders. (Partly as a result, he increasingly of cleverness for genuine innovation; a wide- spread failure to heed the first responsibility of every professional: “Above all, do no harm.” we do that Specifically, Drucker’s ideas and ideals led countless Surely, Drucker would be angered and deeply saddened by what has transpired during the Take a deep breath. DDI can help. For 40 years, executives in the decades after World War II to try last year or so. But we can also assume that to balance the needs of shareholders, employees Drucker would not have given up completely we have helped organizations manage talent through on American business. Deep down, after all, good times and bad. Depend on us for a full range and the community at large. And his principles helped Drucker’s thinking always had “a hopeful of talent management programs to help leaders cope cast,” in the words of his biographer, create a work environment that provided dignity and Jack Beatty. in today’s dynamic business landscape—all with the a sense of fulfillment for millions of people. same exceptional quality and focus on results that After the publication of Post-Capitalist have helped 1000s of companies around the world Society in 1993, Drucker was asked by an interviewer whether he believed his books succeed by connecting their talent strategies to their When Jim Collins and his coauthor Jerry turned his attention to the work of non- had been properly understood. “I would hope business strategies. DDI can help you: Porras dug into the backgrounds of “visionary profits.) He likened those on Wall Street to that American managers—indeed, managers companies” such as General Electric, Johnson “Balkan peasants stealing each other’s sheep.” worldwide—continue to appreciate what • Develop exceptional performers at all levels, & Johnson, Procter & Gamble, Hewlett- He spoke out against the obscene amounts of I have been saying almost from day one: that from individual contributors to senior leaders. Packard, Merck and Motorola, they found pay being pulled in by CEOs—a peculiarly management is so much more than exercising Drucker’s “intellectual fingerprints” every- American phenomenon. rank and privilege, that it is about so much • Hire people who perform better and stay longer. where: “David Packard’s notes and speeches more than ‘making deals,’” he replied. from the foundation years at HP so mirrored • Identify and groom your top leadership team. Few top executives, Drucker said, can fathom “Management affects people and their lives.” Drucker’s writings,” Collins has remarked, “the hatred, contempt and fury that has “that I conjured an image of Packard giving Can there be any doubt that America needs • Transform your performance management been created” because of their king-sized management sermons with a classic Drucker Drucker now more than ever? system to foster clear accountability and flawless compensation. “I don’t know what form it text in hand. When we finished our research, execution. Jerry and I struggled to name our book, will take, but the envy developing from rejecting more than 100 titles. Finally in frus- their enormous wealth will cause trouble.” Rick Wartzman is the executive director Your talent is your business. He thought that pocketing millions while tration I blurted, ‘Why don’t we just name it of the Drucker Institute. It’s our business, too. Drucker Was Right, and we’re done!’” (They passing out pink slips was, in particular, eventually instead settled on Built to Last.) “morally unforgiveable.” Hot off the presses! Leaders Without Sea Legs: Threats to Staying Afloat in Uncertain Times–visit www.ddiworld.com/wedothat1.
The Talent Management Expert
14 PEOPLE & STRATEGY Ad2009wedothat_OurStrategy_PeopleStrategy:Layout 1 9/16/2009 2:05 PM Page 1
“Our strategy requires us to be more innovative, efficient and faster. How can we give managers the skills to lead their teams in this new reality?” wedothat Take a deep breath. DDI can help. For 40 years, we have helped organizations manage talent through good times and bad. Depend on us for a full range of talent management programs to help leaders cope in today’s dynamic business landscape—all with the same exceptional quality and focus on results that have helped 1000s of companies around the world succeed by connecting their talent strategies to their business strategies. DDI can help you: • Develop exceptional performers at all levels, from individual contributors to senior leaders. • Hire people who perform better and stay longer. • Identify and groom your top leadership team. • Transform your performance management system to foster clear accountability and flawless execution. Your talent is your business. It’s our business, too. Hot off the presses! Leaders Without Sea Legs: Threats to Staying Afloat in Uncertain Times–visit www.ddiworld.com/wedothat1.
The Talent Management Expert Design Your Governance Model to Make the Matrix Work
Gregory Kesler and Michael H. Schuster, Competitive Human Resources Strategies, LLC The Matrix is Here to Stay
Peter Drucker argued that “the best structure will not guarantee results and performance. But the wrong structure is a guarantee of nonperformance.” Drucker stated that organization structure should only be as complex as it needs to be. But as early as the mid-1970s he argued in support of the matrix: “It will present greater difficulties than either work-focused or result-focused design. But there are organizational problems where the very complexity of relationships makes [a matrix] the only appropriate design principle” (Drucker, 1973).
rganization structures have become resources fully. (Drucker also argued that around the world. Isdell’s (and his team’s) as complex as the business chal - organization structures needed to separate success in “managing the matrix” is arguably Olenges they face. Matrix structures the work of operating management—manag- the major difference in Coke’s performance are designed to balance competing, but equal- ing things we know—from the work of since 2005 versus the previous six years. ly important, priorities and decision rights innovation.) Few may achieve the level of across global, local and functional units. flexibility of culture and structure that Cham- Despite a great deal of frustration over its bers envisions. But all global, multi-business Corporate Versus failures, the matrix is here to stay. In fact, companies must find ways to manage the Operating Governance increasingly complex matrix structures will chaos and continuously rebalance the tension continue to flourish. among customer intimacy, brand building, Corporate governance is the system and pro- functional excellence and cost effectiveness. cesses by which power is managed in the Heywood, et al. (2007), offered a persuasive And today they must do so in the context of business enterprise—the means by which case that companies are likely to generate Sarbanes-Oxley and what are likely to become business corporations are directed and con- more value by reducing the negative effects even more stringent fiduciary controls, with trolled (Schliefer and Vishny, 1997). Prior to of complexity through clear operating-model board and regulatory oversight. the Sarbanes-Oxley Act of 2002, a body of choices and clear roles and decision rights literature addressing corporate controls was than by attempting to simplify organization Coca-Cola’s chairman, Neville Isdell, made well established. Sarbanes-Oxley added a structures and business models. Cisco’s “dis- major strides turning around the brand giant stimulus to both corporate activity and aca- tributed-innovation” networks and boards during the past four years by embracing the demic interest in the subject of governance deliver 70 percent of the company’s innova- complexity of seeking both global brand and control (Romano, 2005). tions today, according to CEO John Chambers excellence (with leveraged R&D spend) and (McGirt, 2009). Chambers’ drive to shape a local responsiveness with bias to action. It But it is useful to separate corporate gover- culture of enterprisewide collaboration began was precisely his predecessors’ refusal to nance, meeting the legal requirements of with a massive restructuring shortly after the manage the built-in conflicts between local governance embodied in legislation (e.g., tech bust of 2001. His objective is to maxi- and global that accelerated the company’s Sarbanes-Oxley, FASB) and corporate char- mize innovation through simultaneous slide to degraded earnings, sluggish sales ters (board rules and bylaws), from what we empowerment and integration. growth and stagnated innovation. Isdell’s term operating governance. At its basic level, “freedom within a framework” (Kesler, 2008) corporate governance structures specify Cisco is already teaching AT&T, GE, Procter became the means to corralling an accepted the distribution of rights and responsibilities & Gamble and others how to bring Web 2.0 level of chaos—a way to engage the natural among different participants in the to life in their businesses through creative tension between many new global initiatives corporation such as the board, managers, combinations of organization and technology. and the need for geographic GMs to get more shareholders and other stakeholders. Control Cisco is convinced that real innovation is pos- aggressive about finding local solutions to and governance provide the structure through sible only when diverse functions, P&L units brand, product and revenue gaps. which company objectives are set, and the and market leaders collaborate together and means of attaining those objectives and mon- with customers. Chambers wants to do it in a Isdell dubbed his framework the “manifesto itoring performance, while assuring the manner that reduces dependency on him and for growth”—a sweeping vision, long-term enterprise acts as a responsible member of other top executives to manage the work. objectives and set of beliefs about the world the community. and business that empowered and demanded, In nearly all multi-nationals, the drive to in uncompromising fashion, that leaders Operating governance, in contrast, refers to innovate must be balanced with pressure to would work together and with corporate the way managers within the business make reduce costs and to leverage corporate social responsibility to re-energize the brand decisions and the ways they delegate decision- ➤
VOLUME 32/ISSUE 4 — 2009 17 making vertically into the organization centers of excellence and so on. In many, deci- like China to assure more management (driven by structure, policy and process). sion rights have become highly problematic. attention. Additionally operating governance reflects There are many reasons for this: • Corporate functions now demand a the way that decision rights are allocated stronger hand in setting worldwide horizontally across functions and business • Today’s growth strategies demand priorities and resource allocation (“end-to- units. Put another way, operating governance competing priorities b e balanced, especially end”) for the entire function—often is the process—intentionally designed or by with regard to geographic market sparring directly with local and global happenstance—by which power is managed. management versus global product/ business unit demands. Power is embedded both vertically, as in what category management. is delegated down through organizational • Innovation i n most sectors demands greater • Pressure to reduce costs and to leverage key layers, and i t i s embedded horizontally, among integration of efforts across business lines, company resources across businesses peer units, as in who carries decision rights geographies and functions—and externally remains high—especially in a worldwide between potentially conflicting organiza- with customers and suppliers. recession. tional entities or functions. • Geographic footprints for business growth Governance practices are often left undone or Most companies simultaneously have global have shifted dramatically and traditional incomplete. Conscious design of operating businesses with regional and in-country man- regional structures are dated—often governance frameworks is critical to making agement, corporate staffs, business-unit staffs, requiring the elevation o f emerging markets complex, matrixed organizations work. As an illustration, Table 1 provides an example of the potential areas of conflict between global Table 1: TEnSiOn in ThE mATRix—TYPicAL cOnfLicT AREAS bETwEEn product and territorial general managers. GLObAL And LOcAL-GEOGRAPhic buSinESS uniTS Global Product Division Geographic Division An examination of 12 major global consum- Product investment priorities—new technology Strong voice in product creation priorities— er packaged goods companies reveals the (fewer, bigger bets) continued local development difficulties in staying the global course. Most Global product standards, specs and Local adaptation of product to local customer/ consumer packaged-goods companies find pricing corridors consumer needs themselves managing primarily on the local- Assure all aspects of brand management are Keep brand “stories” relevant national axis in the matrix, despite claims to aligned with positioning being global. (See Figure 1.) Few have suc- Provide best practice and guidelines for develop locally relevant media strategies and cessfully shifted the power to the global axis developing local media strategies manage execution of their matrix on a sustained basis. Provide global copy strategy for major Tailor global campaigns to maximize impact advertising initiatives Nestlé appears satisfied to manage a few core Set demand-creation budget for global Set demand-creation budget for the food products globally, while continuing to geographic units encourage local-national innovations in food brands products and formulas. Unilever has made numerous efforts, on the other figure 1: cOnSumER PAcKAGEd GOOdS cOmPAniES mOvinG fROm hand, to move further into the global space GEOGRAPhY TO cATEGORY dEciSiOn mAKinG in the model, and is now pushing hard in this direction. But P&G and a handful of others are among the few who set a course, and Single Category Multiple Categories despite some very rough bumps, have moved continuously to shift the power in the matrix from primarily entrenched, regional P&Ls to powerful global categories, matrixed with regional-market development units and
Category strong core functions (Kates & Gal- Orientation braith, 2007).
P&G found a way to reinvigorate local mar- keting influence with clear division of roles and responsibilities, relative to the center. The journey was painful, but it has clearly paid off as P&G has substantially outperformed Orientation geographic its peers in innovation and growth. P&G’s willingness to engage leaders around the Adapted from: McKinsey review of annual reports; company world in building relationships, spelling out Web sites; press releases; press clippings decision-rights and actively managing its complex customer and innovation networks has contributed significantly to its success.
18 PEOPLE & STRATEGY other forms of operating governance. But it without wasted energy. In our view ROM More than is clear that these tools are far more likely to demands we not ignore these time-wasting Decision Rights gain traction when they are part of a sys - conflicts. It requires that executives learn to temic and behavioral view of operating manage the tension in a surgical, efficient It is clear to most leaders that structure alone governance—when there is a framework or fashion in the best interest of customers and does not drive effective execution. Jay Gal- larger context that is an integral part of the owners. Again, Drucker spoke to this, argu- braith’s star model (Kates and Galbraith, way the business is run. ing complex organization designs need “clear 2008) argues for alignment of business pro- goals, high self-discipline throughout the cess, rewards, people and structure with the We have experimented with tools intended to structure and a top management that takes strategy. It is less obvious to organization create greater role and power clarity, like the personal responsibility for relationships and designers that clearly defined operating-gov- RAPID tools. In attempting to assemble these communications” (Drucker, 1973). ernance process and practices are a critical tactics into a coherent approach, we have part of the design. Today the business must discovered a powerful model, developed by Levers of Governance meet tougher corporate-governance stan- Robert Simons (1995, 2005) that provides a dards and manage faster, more effective practical lens for engineering the right power and Control decisions around strategy and execution—at dynamics into the organization design. all levels of the business. Employing Simons’ framework management Simons proposed four levers of control can create a change strategy to consciously (Simons, 1995): A recent and widely read Harvard Business make governance part of the strategy-execu- Review article by Rogers and Blenko, “Who tion work. 1. belief systems, used to inspire and direct Has the D?” (Rogers & Blenko, 2006), the search for new opportunities; described four common opportunities for 2. boundary systems, used to set limits on dysfunctional conflict, role ambiguity and Return on opportunity-seeking behavior; plodding, ineffective decision making: Management 3. diagnostic control systems, used to monitor 1. global versus local; Recall the goal of Cisco’s CEO to “reduce and reward achievement of specified goals; and 2. center versus business unit; organization dependency on himself and senior executives.” Underlying the Simons 4. interactive control systems, used to 3. function versus function; and model sits the same idea, a compelling con- stimulate organizational learning and the 4. inside versus outside partners. cept about time and attention he has dubbed emergence of new ideas and strategies. “return-on-management” (ROM). Manage- The authors outlined a compelling case for ment attention is a fundamental constraint in Simons’s levers are presented in Figure 2 on defining roles in a manner that clarifies sim- business execution. Prioritizing opportunities the next page. ple, clear decision making whenever possible. to invest management time is a key part of They argue for the use of a decision-rights operating governance. According to Simons, these four levers create process characterized by an acronym, RAPID the opposing forces—the yin and yang—of (recommend, agree, perform, input, decision), Because matrix organizations are more com- effective strategy implementation. Two of to clearly identify a single decision maker for plex, they require more management time. these control levers—belief systems and inter- all key decision points where matrix tensions Anyone who has worked in a large matrix active control systems—create positive and live. Many organizations have taken this type company knows the risks of prolonged deci- inspirational forces. They drive managerial of model and developed detailed decision sion making, complex communications and energy. The other two levers—boundary sys- charts, guidelines, statements of principle or the need to sort through competing priorities tems and diagnostic control systems—create ➤
VOLUME 32/ISSUE 4 — 2009 19 figure 2: R. SImONS’S fOuR LEvERS Of cONTROL TO SuPPORT STRATEGY culture is still intact. People assume they are ImPLEmENTATION empowered to act in its complex matrix. Innovation is equally real in Nike’s belief sys- tem, and this ethic energizes the design Driving core values Expanding Options community in the matrix to translate prod- uct-performance technologies into indie and urban fashion statements that are as hip in Belief interactive Tokyo and Beijing as they are in Milan and Systems Networks New York.
Drive Two: Interactive Networks innovation Exploiting market opportunities requires organizations to break out of limited search Strategy routines. Interactive practices are the catalyst for innovation and adaptation (Simons, 2005). Governance must encourage continuous search activity and create information networks Narrow
the focus to scan and report critical changes, and make Diagnostic Boundary it the practice to widely share information Controls Systems and insights. Interactive governance tactics allow for search “beyond boundaries”—that may lead to modification of strategies and, in turn, the other governance levers. One of the purposes of a matrix organization is to pro- taBle 2: SAmPLE Of GOvERNANcE TOOLS wIThIN EAch Of ThE LEvERS— mote this creativity through competing points of view. BALANcING POwER IN ThE mATRIx Beliefs • values • cSR commitments Bartlett and Ghoshal (1989) argued 20 years • Design principles • Executive speeches • Direct management interaction • Internal education programs ago for the importance of relationships— building and other “soft” processes needed to Networks • Global business planning teams • formal networks and councils • Executive talent reviews and • Action-learning teams create “transnational” effectiveness. Interac- talent movement • Ideation teams tive governance practices are likely to be • co-location arrangements easier in companies with rich traditions of • Town hall meetings dialogue and relationship building. Compa- Boundaries • Decision-rights docs • Success profiles nies that quickly form teams around business • Role definition • formal business process problems are likely to be most effective with • P&L alignment; budget ownership • Procurment policy these practices, but all competitive businesses • Brand and corporate identity rules need to get better at this “soft” set of gover- Controls • Business dashboards • Benchmarking nance practices. Without these practices, the • Balanced score cards • Performance management practices • Performance data • Audits of various types tension in the matrix is wasted energy. • Organization effectiveness studies Antonio Lucio, formerly chief marketing offi- cer at Pepsico, outlined a perfect example of constraints and ensure compliance—thereby One: Beliefs interactive governance at work in the brand focusing and conserving managerial atten- Beliefs are an explicit set of organizational giant (Lucio, 2005). His goal was to make tion. Creating a proper balance among these norms that senior managers communicate for- local marketers and bottlers successful. competing levers and providing effective mally and reinforce systematically to provide Lucio explained, “We operate through a decision rules achieve an optimal return on values, purpose and direction to the organiza- bottom-up, highly participatory and interac- management. Managing power in the matrix tion (Simons, 1995). Beliefs inspire and guide tive process. It is lengthy and time consuming, means finding the balance in these forces. The the search for opportunities to increase value but highly effective. There is a committee— wrong constraints on the wrong axis in the and provide guidance to managers on how to consisting of people from the top 29 countries matrix—say, product management—destroys manage relationships internally and externally. around the world—that drives everything we initiative and creativity. Unlimited freedom to A strong commitment is measured by accep- do. At Pepsi, the local marketer owns the all axes in the matrix assures lack of focus tance of the organization’s beliefs and values branding locally: the actual manifestation of and poor return-on-management. (Steers 1978, Tirole, 2001). the positioning statement within the context of his/her particular market. What we, at the Table 2 outlines tactics that we have found Beliefs are most likely to be effective in com- center, do is provide a menu of programs that useful related to each of the four levers. Each panies that have well-defined cultures and first and foremost, those local guys helped lever is discussed below. leadership norms. At Nike, the “Just Do It” develop. They provide input to everything we
20 PEOPLE & STRATEGY do at the center and at each and every step of Colgate’s consumer brands have been world- the development process—from advertising wide for a long time, and its geographic to product development.” business units are still the dominant voice in the matrix, empowered to adapt products to local habits and tastes. But the brand book for Three: Boundaries Colgate’s big-red toothpaste icon makes it very But Lucio doesn’t stop there in describing the clear how the brand will be positioned and its process at Pepsi. He goes on to say, “We also brand boundaries must not be violated. have a smaller operating group, consisting of seven regional vice presidents and four core brand VP’s from the center who make final Four: Diagnostics decisions on the work developed by the team Diagnostic-controlling tools monitor the of 29. If there is discrepancy, I cast the final compliance of results and behavior against vote.” Even with all the creative touch points, the strategies, objectives and fiduciary there are boundaries and clarity at Pepsi. accountabilities of a company. Simply, these
Boundaries must be applied in all businesses, but some companies are more likely to rely on them than others for governance. Companies with histories of managing multiple P&L units from the center rely heavily on these tools.
Boundaries impose limits on the organiza- are the measures that drive the right behav- tion’s search for opportunities. They spell out iors in the business in a fashion that allows what may not be done and often specify the self-correction. Diagnostics include classic consequences of boundary violations (Sand- financial controls (income statements and ers, Hamilton and Yuasa, 1998). Boundaries balance sheet) as well as operational, market come in two forms: business conduct and and customer measures used to execute busi- strategic-decision alignment. ness plans. Diagnostic-based governing methods have been drivers of innovation in Business conduct boundaries define accept- companies that have established dominance able behaviors. These are governed by regulation, policies and codes of conduct in a particular competence—for example (Gatewood and Carroll, 1991). Strategic Walmart for supplier management, Dell for boundaries limit areas of opportunity in the cash and inventory management or 3M for search for growth and innovation. At Nike, new product creation. it is not OK for locally generated product- innovation to diminish the brand stories that Diagnostic controls require active manage- come from the center. rial involvement in working through data, assessing risk and making tough decisions. Boundaries must be applied in all businesses, The meltdown of capital markets in 2008 but some companies are more likely to rely was largely related to a shortage of diagnostic on them than others for governance. Compa- controls and a complete lack of management nies with histories of managing multiple P&L understanding of the risks that were being units from the center rely heavily on these incurred in opaque derivatives collateralized tools. The line items in budgets can be shaped with sub-prime mortgage debt. The matrix to alter the horizontal power dynamics organization in institutions like Citigroup between geographic units and global product units. The third line in Table 2 presents a (organized around a set of three axes: cus- series of tools that reflect the allocation of tomers, geography and products) had become power and responsibility. They range from quite complex. Citi’s top executives appeared budgetary to brand and policy considerations. unwilling to manage the infamous power These limiting or boundary devices tend to be struggles within the matrix—or possibly they less subject to near-term adaptability. did not know how to act. ➤
VOLUME 32/ISSUE 4 — 2009 21 Historically, the organization design at ABI • Create great experiences—product, services The Case of Apparel was focused on a product and geographic and content. Brands Inc. matrix. Some products were managed glob- ally and others were managed very locally. These insights led to a strategic decision to The objective in applying the four-levers Leadership discovered that the old structure realign the historic, product business units model is to achieve an approach to gover- made it very difficult to create consumer- into five global, consumer-aligned category nance through a balance across all four of the aligned category focus because its three business units, and to re-focus the product levers in the framework—suited to the busi- separate product units each went to market business units into more creative product- ness strategy. The story of Apparel Brands separately. Products that consumers might development units. (See Figure 3.) This Inc. (ABI – name changed to protect anonym- naturally buy together would arrive weeks decision was validated through various ity) provides some valuable insights into how apart or fail to blend in style and color. And research methods, including extensive con- sumer research. Simons’s framework can be used as a road it was extremely difficult to align resources map to do just that. around big, global bets, due to the autonomy of regional business units. Challenges in ABI is a highly successful $12 billion mar- keter of apparel and accessory brands. Its It was clear that the new consumer-focused the Matrix brands are very visible all over the world, and strategies called for less geographic autonomy its quality products enjoy attractive margins and greater reliance on globally coordinated Matrix tension is nothing new to ABI, and decision making. Top executives spelled out as a result of the power of those brands. But cynicism long ago gave way to gentle humor a set of organization-design criteria. They ABI began to discover that its intense focus among insiders who agree that a matrix is sought an organization that would create on great product, developed in several parts “just part of working at ABI.” But the poten- these capabilities: of the world, was limiting its ability to tial for confusion and bottlenecks was ratcheted higher with the new organization communicate directly enough with consum- • See the world through consumers' eyes. when it was launched in late 2006. ers—and that it had become more difficult to deliver compelling brand stories around the • Create and sustain relationships by Global categories would have to take power world. Its leadership sought more growth consumer segments. from both local geographies and the com- through better alignment with highly dynam- • Use a consumer category lens to inform all pany’s powerful product divisions—without ic consumer segments. The result was a decisions. compromising product excellence or local strategic decision to develop, market and relevance in critical markets. And the corpo- manage retail through global, consumer- • Get beyond single transactions and always rate brand organization would be expected focused categories. deliver a premium product. to continue its very strong leadership of the “brand ethos.” Even with cooperation from a broad base of leadership (which was large- Figure 3: ThE nEw GLObAL cATEGORY ORGAnizATiOn dESiGn AT Abi ly accomplished through a persuasive case for change) the opportunity for unclear roles was high. cOO Go-to-market (GTM) process definition was part of the fix. But the process designers were flummoxed by the difficulties in defin- ing who had the D in each of its key milestones in that process—including lock-
VP European- VP north VP Latin ing in global product designs, setting VP Asia Served Area America America directed global-product assortments and GM, category A planning worldwide launches and ad campaigns. The challenge would be to man- VP Product VP Marketing Region category A age the tension among category, geography creation GM, category b and several functions through each GTM Region category b milestone—in a manner that served consum- Region category c GM, category c ers—and ultimately, shareholders, the best way possible. Region category d GM, category d Shortly after the announcement of the new Region category E organization, a steering committee composed GM, category E of the COO and his direct reports set about actively managing a transition (that is now more than two years in progress). Marketing Product creation Merchandising commercial Sub-teams, guided by the steering committee, were assigned to complete several parallel
22 PEOPLE & STRATEGY work streams at the start—all aimed at effec- non-overlapping roles—to avoid redundant tive completion of what the COO described as The Boundaries Lever staffing and slow decision making. the most difficult change ever initiated in the at ABI company. The four governance levers, adapted We strongly recommend first defining very from Simons’s work, were used as a key frame- Boundaries impose limits on teams’ and indi- bright lines by forcing simple three-word work for guiding the change strategy. viduals’ search for opportunities. Brand is the descriptions that capture the essence of the heartbeat at ABI, and it is the inspiration for value that each axis contributes—then build much creativity. But there also are controls specific roles around those bright lines (Bar- The Beliefs Lever intended to avoid brand-diminishing deci- tlett and Ghoshal, 1989). At ABI, after lengthy at ABI sions and behaviors inside the company and debate, the role of each major axis was boiled with its franchise and retail partners. to its essence: Simons argues that beliefs should drive the • global category mission: strategist, search for opportunities. ABI has made its Decades earlier, ABI discovered the hard way architect, and creator; values statement part of the management that geographic decentralization and weak process for years. But the executive steering boundaries exposed its supply chain to seri- • geography mission: sensor, integrator and committee reached beyond company values ous ethical issues in the form of sweatshops market activator; and and child labor. The company’s response was to guide the implementation of the new cat- to centralize supply chain management and • global retail mission: builder, translator egory structure in ABI. A compelling business to establish rigorous, formal policy and audit and executor. case was the starting point. The CEO and practices to eliminate those lapses. (These COO worked together to create a leadership boundaries actually evolved into beliefs that With these bright lines drawn, the steering document that laid out the exciting shifts later became part of the emerging social committee developed a set of decision rights for underway within five different “consumer responsibility agenda for the company.) each of the five major GTM processes, spelling communities” that were at the core of ABI’s out “who owns the D” for several key decision opportunities. Shifts among competitors Later, these boundaries served both ethical points in each. These were worked widely were described along with larger business and strategic objectives. In the matrix, the across the company, with edits along the way, trends—all adding up to a compelling case supply-chain function has not been a strong until every function and business unit had put for a new organization aimed at tapping into leadership presence in the company. But in the its imprint somewhere on the documents. Two these global consumer communities. The emergent category structure its role is being years later a second round of reviews led to road show was very much about building a strengthened (a horizontal re-balancing of more edits, based on two years of experience new set of shared beliefs. power) to improve the economics of the pro- in the new category flying formation. curement spend—an increasingly important Executives understood that the most difficult element of strategy alignment. The function is The Diagnostics Lever change would be behavioral. The key was to being centralized and is receiving formal deci- maintain the collaborative culture while sion rights in the go-to-market process. at ABI expecting greater leadership from the newly staffed category general-management posi- As mentioned earlier, RAPID and similar Simons (2005) argues for setting the right tions. A sub-team of the steering committee decision-rights documents can be effective “span of accountability” in designing indi- next began to assemble a set of guiding prin- boundary-defining devices when they are vidual managerial roles in the business. In our ciples for developing the details of organization part of a larger governance model for the experience, a functional manager typically structure in the countries, the functions and business. The major challenge in defining should be accountable primarily for those in the new category teams (horizontally). roles and decision-rights is to create discrete, process measures, elements of the P&L that ➤
VOLUME 32/ISSUE 4 — 2009 23 he or she could directly influence (e.g., a pro- ers to consider prospective changes in the curement manager accountable for cost of market and in the economy, and they alert key purchased materials). actors to the changing future needs of the business. They create dialogue within the A P&L leader, on the other hand, should be organization and they are designed to pro- held accountable for a broad mix of results duce modification or revision to the strategy reflecting a range of trade-off decisions he or and, subsequently, the other three gover- she might make. These role-design decisions nance levers. often are not handled very well. “General man- agers” often are given too broad or too narrow At ABI, relationships are an ever-present part a span of accountability. In the matrix this issue of the way business is done. Interactions are is critical because the head of a global business candid and spirited. But like any culture, the unit (product, category or customer) does not players can become internally focused. The control all of the elements in the trade-off deci- consumer-based categories energized the lead- sions she might make to drive profitable ership dialogue at ABI. The interactive growth, but will have very substantial influ- governance process was enriched with fre- ence—given the right leadership skills. She quent consumer forums at the corporate center should be measured as if she has those skills. from each of the targeted lifestyle groups.
The new process required open dialogue, and functional, category and regional leaders compared and debated their assessments of shared talent.
Effective measures had not always been used Few governance practices have more impact at ABI, but the new global category leader- than interactive talent reviews. The chief human ship jobs (five global GMs) were designed resources officer at ABI worked to create a with attention to the metrics. Steering-com- much stronger role for the corporate center in mittee members laid out the measures of all facilitating worldwide talent forums. The new key roles, side-by-side. First, the company approach tipped the matrix to a strong, func- established clear market measures and own- tional and category voice in rating leaders, ership for the consumer. For category GMs, including a “51-percent vote” in staffing and ABI defined profitability as gross margin, promotion decisions across the company. based on the ability to set prices and drive revenues through superior product innova- The new process required open dialogue, and tions and brand strategies. functional, category and regional leaders compared and debated their assessments of ABI assigned region GMs operating income shared talent. Power allocation around all metrics, based on their ability to sell into retail talent decisions (in the matrix) was played accounts and influence retail sell-through to out in these forums at least two levels deep into the organization. After a couple of annu- consumers; regions carried allocated corpo- al cycles, the change in behavior is startling rate costs as well, given that they continued to when these practices are effectively used, and own the most assets and numbers of people in ABI was no exception. the business. Realigning the reporting systems was a challenge, requiring two years of man- Interactive business planning was another ual reporting during the transition. ABI powerful lever in adjusting the governance of established robust performance reviews and ABI. The company replaced product-focused other management routines to work through and geographic-focused strategic planning in the results on a continuous basis. the first full year of the new organization. In its place appeared a category-focused strategy Interactive Practices lens. Initial strategy meetings were awkward. Product and region leaders bit their tongues at ABI while category GMs brought their business cases forward, with varied levels of effective- Interactive governance practices are central ness. But the learning was quick. Soon to organizational learning. They allow lead- category strategies were translated into annu-
24 PEOPLE & STRATEGY al and quarterly go-to-market plans through be given to whether goals are best served The effort management takes to labor through highly interactive meetings with worldwide by introducing practices that are culture these elements of design, early on, will pay off leadership, aimed at deciding what the appar- friendly, or whether to select practices to many times over in the return-on-manage- el collections would look like three and four challenge the culture. Both are likely to be ment time needed later to make the whole or more seasons ahead. appropriate, but each should be considered greater than its diverse and often conflict- deliberately. ing parts. European managers balked at the thought that 5. The cost of management time in the effective American-based leaders could make fashion matrix is higher than in simple structures. choices that would suit European consumers. References Issues of complexity, decision delay and But highly interactive governance processes frustration—as well as decision-quality Bartlett, C., and Ghoshal, S. (1989). Managing across assured strong, consumer-focused voices from gaps—can be vexing. Thus, in looking at borders. Boston: Harvard Business School Press. many parts of the world in those decisions. decision rules and operating governance Mistakes were made. In some categories the Drucker, P. (1973). Management: Tasks, responsibilities, frameworks, management needs to be global center over-reached its ability to create practices. New York: Harper & Row. guided not by architectural elegance, but “global product.” In others, assertive geograph- rather by returns on management time and Kates, A., and Galbraith, J. (2007). Designing your orga- ic managers dragged the process backward. But nization. New York: Jossey-Bass. expense. Does giving more people more in the second cycle, ABI adjusted, people lis- input improve the quality of decision making Kesler, G., (2008). How Coke’s CEO aligned strategy and tened and the results were favorable. or strangle initiative in endless “process?” people to recharge growth: An interview with Neville Isdell. People & Strategy, 31(2), 18-21. One of the major conclusions after the second 6. In ABI, effective measures embedded in cycle of GTM planning was that the process Gatewood, R., and Carroll, A. (1991). Assessment of ethical solid management routines enabled the performance of organization members: A conceptual frame- was too burdensome, required too many multiple power centers of the matrix to work. Academy of Management Review, 16(4), 667-90. people in the room at one time and was sim- work together to self-correct. Return on ply too expensive to operate. ABI considered management improved during the second Heywood, S., Spungin, J., & Turnbull, D. (2007). Cracking the complexity code. McKinsey Quarterly, No. 2, 85-95. more efficient practices for gaining input and year of the change process. This should be ownership. And in the end, it became clear the goal. Lucio, A. (2005). Leading global brands bulletin. Effective- that fewer people could effectively participate brands.com. in some decision-making forums. People had 7. Openness to new ideas was easy in the ABI culture. More hide-bound companies find McGirt, E. (2009, January). Revolution in San Jose: a to trust others to act on their behalf. hard-core republican turns Cisco into a socialist enter- this difficult. Setting the right interactive prise. Fast Company, 88-134. practices is critical to keep leadership tied Insights for ABI to the outside forces that matter. Controls Rogers, P., and Blenko, M. (2006). Who has the D? How are important, but governance also must clear decision roles enhance organizational performance. Harvard Business Review, 84(1), 52-59. and Others serve to keep the business open to new ideas. It is important to overcome the risk Romano, R. (2005). The Sarbanes-Oxley Act and the mak- The application of the model at ABI and other that management attention becomes overly ing of quack corporate governance. Yale Law Journal, 114. client companies reveals some useful insights focused on internal tensions. about strategies to make the matrix effective: Sanders, J., Hamilton, V., & Yuasa, T. (1998). Institution- alization of sanctions for wrongdoing inside organizations. Law and Society Review, 32(4), 871-930. 1. It is probably not the scope of authority Conclusion and ownership embedded in a given Schliefer, A., & Vishny, R. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 783-783. function or axis so much as it is clarity that Operating governance is a challenge in the drives success in the matrix. complex, matrix organization, but it is a Simons, R. (1995). Levers of control: How managers use critical part of making the matrix work. innovative control systems to drive strategic renewal. 2. The four governance levers must be aligned Organization design is not complete until Cambridge: Harvard Business School Press. and integrated into a whole to be effective robust governance tools are designed in. Cre- in creating the optimal balance of vertical Simons, R. (2005). Levers of organizational design: How ate a framework to bring those practices managers use accountability systems for greater perfor- and horizontal power across units. Decision together into a coherent whole. Tie practices mance and commitment. Cambridge: Harvard Business rules need to be considered in that to the business strategy to assure the right School Press. balance. functions, businesses and geographies inter- Steers, R., & Koch, J. (1978). Job attachment, satisfaction 3. By nature, some organizational units (e.g., act in a way that serves the objective. Use four and turnover among public sector employees. Journal of product development) tend to act as lenses to design balanced power in the matrix: Vocational Behavior, 12, 119-128. catalysts for divergence and innovation, beliefs systems, boundary systems, diagnostic Tirole, J. (2001). Corporate governance. Econometrica, relative to Simons’ model; others (e.g., controls and interactive practices. 69(1), 1 finance) by nature are charged with constraining opportunities and focusing attention. These realities should be Gregory Kesler and Michael H. Schuster, J.D., Ph.D., are managing partners at Competi- considered in balancing the formal power tive Human Resources Strategies, LLC (CHRS), a consulting firm based in Narragansett, that each is given in the matrix. Rhode Island, and Wilton, Connecticut. Schuster is also professor of Strategy, U.S. Coast 4. Each of the four levers will be more or less Guard Academy. The authors can be reached through www.chrs.net. useful in a given culture. Attention should
VOLUME 32/ISSUE 4 — 2009 25 Are we tackling Social Media?
Today’s talent shares information faster and wider than ever before. Our Online Employer Reputation Audit scours websites, blogs and social media to see what people are saying about your employer brand. Hodes works with you to craft a customized solution that accentuates the positives and addresses the negatives, helping you and your brand become the talk of the town.
www.hodes.com/listenin Are we tackling Social Media?
Today’s talent shares information faster and wider than ever before. Our Online Employer Reputation Audit scours websites, blogs and social media to see what people are saying about your employer brand. Hodes works with you to craft a customized solution that accentuates the positives and addresses the negatives, helping you and your brand become the talk of the town.
www.hodes.com/listenin Creating a Culture of Agile Leaders: A Developmental Approach
Bill Joiner, ChangeWise The globalized economy and the spread of connective technologies force the pace of change and the degree of complexity to shift for organizations to an entirely new level. To enjoy sustained success in this turbulent environment, organizations in all sectors need to develop a level of agility that matches this unprecedented level of change and complexity. This means learning to navigate constant change and to effectively manage increasing interdependencies with customers, strategic allies and other stakeholders—including the planet itself.
s James McNerney, the respected important changes, decide what initiatives They are motivated to more fully align CEO of Boeing says, “Institutionally, they need to take, scope these initiatives their behavior with their values and Athe ability to be agile enough is the and determine needed outcomes. Highly aspirations. As a result, they are more gut issue in leading an organization today” agile leaders can be visionary. At the same proactive in seeking and using feedback (Geoffrey, 2006). Yet most of today’s organi- time, when called for by specific situations, and in experimenting with new mindsets zations operate at a level of agility better they can “downshift” into strategic or and behaviors. suited for a less-demanding era (Economist tactical direction setting. Intelligence Unit, 2009). • Stakeholder agility allows leaders to identify What Robert Did the key stakeholders of an initiative, Who will create and lead the agile organiza- understand their views and priorities, The real-life case of “Robert,” a top executive tions we need? The answer must be agile determine where greater alignment is needed in a Canadian oil corporation, illustrates leaders. There is a huge need for agile leaders and forge greater alignment. Highly agile what highly agile leadership can look like. and leadership cultures that model and sup- leaders are decisive, yet they can understand Robert is one of those rare leaders (fewer than port agility across the enterprise. To help and appreciate frames of reference that 10 percent, according to the research) whose make this happen human resource executives differ from their own. They seek input from agility level matches that of the current busi- need to gain a clear understanding of what key stakeholders not simply to gain buy-in, ness environment. His approach to leading leadership agility is, how it can be assessed but because they feel that genuine dialogue change differed from that of his predecessor, and how increased levels of agility can be will improve the quality and effectiveness of an executive whose level of agility was better developed—in executives, in high-potential their decisions and their initiatives. suited to a rapidly passing era. managers and throughout the organization. • Creative agility empowers leaders to Robert had just been named president of the transform complex, novel problems and oil corporation’s refining and retailing com- What is Leadership opportunities into desired results. As pany. Competitively, the company was leaders increase their agility, they become Agility? positioned around the middle of the pack in more comfortable with novelty and un- a mature, margin-sensitive market where certainty. Because they clearly understand Leadership agility is the ability to lead effec- long-range demand was projected to be flat. the limitations of any single perspective, tively when rapid change and uncertainty are With little to distinguish it from other region- they encourage the expression of multiple the norm and when success requires consid- als in the price and quality of its products, its viewpoints and the questioning of eration of multiple views and priorities. It earnings were going steadily downhill. Its underlying assumptions. Their willingness requires a process of using enhanced awareness future looked dismal. to experience the tension between differing and intentionality to increase effectiveness views and criteria gives them enhanced under real-time conditions: stepping back In his newly promoted position, Robert faced abilities to discover practical creative from whatever one is focused on, gaining a the biggest leadership challenge of his career. solutions to challenging problems. broader perspective and bringing new insight The company badly needed a short-term into what needs to be done next. • Self-leadership agility allows leaders to increase in its stock price, and Robert’s pre- accelerate their own development by decessor had focused like a laser on achieving Through our in-depth research on leadership determining the kinds of leaders they want this objective. Seeing stockholders and cus- agility, Stephen Joseph and I found that to be, use their everyday initiatives to tomers as the company’s key stakeholders, he highly agile leaders actually use four kinds of experiment toward these aspirations and had done everything an experienced oil com- agility to complete successful initiatives (Join- then reflect on and learn from these pany executive would do to raise the stock er & Joseph, 2007): experiences. Highly agile leaders want to price. He had taken many steps to make the increase their awareness of behaviors, company more efficient, including a series of • Context-setting agility enables leaders to feelings and assumptions that would layoffs, but these steps had not produced the scan their environment, anticipate normally escape their conscious attention. desired results. Privately, he had been consid- ➤
VOLUME 32/ISSUE 4 — 2009 29 ering which division would have to be sold of breakout strategies that would result in a ing that period, annual earnings went from or shut down. By the time Robert became more innovative organization. $9 million to $40 million, and cash expenses president, morale within the company was at were reduced by $40 million a year. The bot- an all-time low. People at all levels were frus- In contrast to his predecessor, Robert realized tom line was that the company was clearing trated and unhappy. The whole organization that he and his top management group might $71 million a year more than it was when he was in a state of fear, and everything was truly not have all the answers. He hired a world- took over. up for grabs. class strategy consulting firm. He also set up 10 “idea factories:” creative strategic think- In the business press, the company went from Within a short period of time, Robert took a ing sessions, where employees and other being a “bad bet” to “one of the darlings of stance that initially seemed counterintuitive. stakeholders, including environmental advo- the stock market.” A once-faltering company So far, the company had been unable to raise cates, developed ideas for the top team to had become one of the most efficient and its stock price, yet Robert set out to achieve consider. People responded with enthusiasm, effective refiners in North America and one much more than that. He articulated a vision generating a huge number of ideas. of the top retailers in its marketplace. to transform the company into the best regional in North America. In fact, he wanted Robert then held a two-day retreat where he This amazing turnaround is directly attribut- to develop an organization whose business and his top management group synthesized the able to Robert’s ability to consistently embody performance and innovative ways of operat- strategy firm’s ideas with those generated by many of the key characteristics of highly agile ing would be benchmarked by companies the idea factories. As he put it later, “We tried leaders: His predecessor’s approach to con- from a wide variety of industries. to involve as many people as possible in the text-setting was to focus squarely on the strategic review process. We invested time and achievement of essential strategic objectives. As he put it, “In archery and karate, they teach energy up front to listen to people, build trust Robert’s approach was to frame the you to shoot through the target.” In other and get everyone aligned. It paid off, because achievement of these objectives in a broader words, as they moved toward this vision, he we started to think with one brain. Instead of context, thinking beyond his industry and believed the stock price would increase. By being at cross purposes, we could understand expanding strategic objectives to include the putting the stock price goal in this larger con- and support each other’s decisions.” development of a culture of participation, text, Robert overturned his predecessor’s empowerment, and teamwork. assumption that the company’s options were The new strategies that emerged went well limited to difficult but familiar cost-cutting beyond those Robert, his team, and the strat- Robert’s predecessor focused on stockholders solutions. Instead, he decided to develop a set egy firm would have generated on their own. and customers as the key stakeholders. Robert The strategic review resulted in a smaller, included a broader range of stakeholders in more agile organization with a much stronger his strategic review, opening the process to a “people strategy” designed to catapult the wider range of viewpoints. He achieved align- company into the ranks of high-performing ment and commitment, where his predecessor’s organizations. When the new game plan was actions had inadvertently created an environ- ready, he and his executive team presented it ment of fear and decreased productivity. to the employees before they announced it to the market. Robert’s commitment to creative problem solving was especially striking. Rather than The presentation included some bad news, assume that only top executives and expert but when it ended people applauded. During consultants could solve the company’s prob- the months that followed, Robert and his lems, he saw the need for fresh ideas team repeatedly communicated their new generated from a variety of different perspec- vision and its implications for employees in tives. In fact, about one-third of the new many different forums. As the new strategies strategies that were implemented came exclu- were implemented, they kept everyone updat- sively from the idea factories. ed on the performance of the business. Every year, Robert met with each of the company’s Levels of Leadership 20 management teams to discuss objectives and strategies and check for alignment. Rob- Agility ert’s participative approach to transforming his organization not only led to innovative Unfortunately, both broad experience and the strategies, it developed the commitment, trust research on leadership agility indicate that and alignment necessary to implement them leaders like Robert are difficult to find. In reliably and effectively. addition, despite inspired efforts by leader- ship development professionals, when the As a result, during the next three years Robert competencies that Robert exhibited are and his executive team were able to lead the taught, they often do not “stick,” even for company through an amazing turnaround. At executives and high-potential managers. the end of this period, the company not only survived without selling any of its divisions, Are agile leaders simply born that way? Or, it entered a phase of aggressive growth. Dur- do they have a unique personality and back-
30 PEOPLE & STRATEGY Table 1: The experT, AchIeVer And cATAly sT leVels of leAdershIp AgIlITy expert achiever Catalyst
assumptions Tactical, problem-solving orientation. Strategic, outcome orientation. Visionary, facilitative orientation. about Assumes that leaders are respected Believes that leaders motivate others by Assumes that leadership involves leadership and followed by others because of their making it challenging and satisfying to the articulation of an innovative, expertise and authority. contribute to larger objectives. inspiring vision and bringing the right people together to transform vision into reality. feels that leadership is about empowering others and actively facilitating their development.
Pivotal Either strongly assertive or very primarily assertive or accommodative skilled in balancing assertive and Conversations accommodative in dealing with with some ability to compensate with accommodative styles as needed in differences. may flip from assertive the less preferred style. Will accept or specific situations. likely to identify to accommodative and the reverse. even initiate feedback, if seen as helpful and question underlying assumptions, Tendency to avoid giving or requesting in achieving desired outcomes. including their own. genuinely interested feedback. in learning from diverse viewpoints. proactively seeks and utilizes feedback.
leading Teams more a supervisor than a manager. operates like a full-fledged manager. Intent upon creating a highly creates more of a group of individuals meetings to discuss important strategic participative team. Acts as both team than a team. Works primarily one-on-one or organizational issues are often leader and facilitator. models and seeks with direct reports. Too caught up in orchestrated to gain buy-in to own views. an open exchange of viewpoints on details to lead strategically. challenging issues. empowers direct reports. uses team development initiatives as vehicles for individual leadership development.
leading organizational change initiatives are organizational initiatives include analysis organizational change initiatives often Organizational focused primarily on incremental of external environment. strategies to include development of a culture that Change improvements inside unit boundaries gain stakeholder buy-in range from promotes teamwork, participation, and with relatively little attention to one-way communication to solicitation empowerment. proactive engagement stakeholders. of input. with diverse stakeholders reflects a belief that this input will increase the quality of decisions, not just gain buy-in.
Adapted from Joiner and Josephs (2007). ground that make them difficult to emulate? Developmental stages should not be confused more systematic and practical understanding Fortunately the research on leadership agility with thinking styles, learning styles, or per- of the relationship between developmental suggests a more optimistic conclusion: The sonality types. People of all styles and types stages and leadership effectiveness. behaviors exhibited by highly agile leaders can be found at every stage (Joiner & Josephs, are made possible by a distinct set of mental 2007; Wilber, 2000). Stages are progressive We chose the five most relevant adult stages and emotional capacities that can be learned levels of mental and emotional growth. As and gave them names that emphasize their and developed. Moreover, these capacities adults evolve through these stages, they characteristics in action contexts: Expert, develop in stages. As leaders develop from develop the capacity for more complex Achiever, Catalyst, Co-Creator and Synergist. one stage to another, these capacities allow thought and find it easier to understand and Quantitative and qualitative data from 604 them to develop entirely new levels of leader- empathize with differing viewpoints. Adults managers were examined in detail to dis- ship agility. These agility levels can b e assessed, do not automatically progress through these cover relationships among these stages and and—when the right kind of training, coach- stages as they age (Kegan, 1982, 1994; Kohl- leadership behavior in three distinct arenas: ing and facilitation are provided—leaders, berg, 1981; Loevinger, 1976). However, leading organizational change, leading teams teams and leadership cultures can develop people who have plateaued in their develop- and engaging in pivotal conversations (Joiner new levels of agility. ment can reignite this growth process when & Josephs, 2007). exposed to appropriate conditions (Joiner & These findings emerged by looking at leaders Josephs, 2007; Torbert & Associates, 2004). Our research found that managers at differ- through the lens of stage-development psy- ent stages clearly exhibit qualitatively chology—a field that began in the 1920s with During the 1980s and 1990s, William R. different leadership behaviors, while retain- Jean Piaget’s research on stages of childhood Torbert and his associates conducted research ing the capabilities they developed at previous development (Piaget, 1954; Flavell, 1965). that found that leaders at more advanced stages. Table 1 provides brief descriptions of During the second half of the last century, it stages were more effective in a variety of lead- managers at the agility levels most relevant to expanded to include stages of adult develop- ership tasks (Fisher, Rooke, & Torbert, 2000; today’s leadership development challenges: ment (Fowler, 1981; Kegan, 1982; King & Merron, 1985; Rooke & Torbert, 1998; Smith, Expert, Achiever and Catalyst. Kitchener, 1994; Kohlberg, 1981; Loevinger, 1980; Torbert, 1991). In 2001, inspired by 1976; Perry, 1999; Richards & Commons, these studies, Stephen Josephs and I launched About 45 percent of the management popula- 1984; Wilber, 2000). a multi-year research project to develop a tion is Experts and 35 percent are Achievers. ➤
Volume 32/Issue 4 — 2009 31 the “whole” (leadership culture) can be inferred from the sum of the “parts” (indi- vidual leaders). Yet the level of agility in an organization’s leadership culture has a pow- erful influence on an individual manager’s behavior, regardless of his or her personal agility level. Therefore, it is important to assess not only the agility levels of individual managers but also, at least informally, the agility level that predominates in the overall leadership culture.
The key characteristics of Expert, Achiever and Catalyst leadership cultures are fairly distinct:
• In Expert leadership cultures managers tend to operate within silos with little emphasis on cross-functional teamwork. Only about 5 percent are Catalysts, 4 percent To focus simultaneously on the development Organizational improvements are mainly are Co-Creators and 1 percent are Synergist of agility in individual leaders, intact leader- tactical and incremental. Managers tend to leaders. The remaining 10 percent are pre- ship teams and leadership cultures, be overly involved in their subordinates Expert. Co-Creators and Synergists are organizations need to supplement rather than work, fighting fires and interacting with replace current practices. The first steps are highly principled, true servant leaders (Green- direct reports one-on-one. As a result, to assess the leadership culture, clarify the leaf, 1977) with a deeply felt sense of life managers have little time to approach their desired leadership culture and engage the purpose. They seek to create shared visions own roles strategically. with other principled leaders and to forge executive team in a process of parallel assess- stakeholder relationships characterized by ment and visioning regarding its own • In Achiever leadership cultures managers deep levels of mutual influence and genuine development. articulate strategic objectives and make dedication to the common good. sure they have the right people and The best sequence of these initial steps for a processes in place to achieve these Co-Creators and Synergists are inspiring particular organization depends on its unique objectives. Managers work to develop leaders who provide a glimpse of the possible history and situation. Facilitation of the effective teams, orchestrating them to longer-term future of leadership develop- desired change in the leadership culture achieve important outcomes. This is a requires a focus on the usual leverage points customer-centric culture that encourages ment. However, experience and research required for culture change—individual and and rewards customer-focused cross- indicate that the most frequently experienced team coaching, senior executive involvement, functional teamwork. Change initiatives leadership development challenges for the competency models and leadership develop- typically reflect an analysis of the larger great majority of today’s organizations can ment programs—but with particular attention environment, and consultation with key be met by developing existing Expert leader- to the characteristics of individual, team, and stakeholders is a cultural norm. ship cultures to the Achiever level and existing organizational agility levels. Achiever cultures to the Catalyst level. • Catalyst leadership cultures are animated by a compelling vision that includes high Assessing Levels of levels of participation, empowerment and Developing a Culture teamwork. Collaboration, decisiveness Leadership Agility and candid, constructive conversation are of Agile Leadership Many organizations already conduct aggre- norms. Senior teams become living gate, “bench strength” assessments of key laboratories that create this kind of culture Traditionally, leadership development initia- groups of leaders, using the criteria specified within the team and work together to tives have focused on the growth of the in their competency model. An assessment of promote and encourage this culture in the individual leader. However, applying a sys- leadership agility can be readily added to this organizations they lead. Leaders not only tems perspective broadens the view of process. For example, our ChangeWise Lead- coach their people, they also actively solicit leadership development to include a comple- ership Agility Bench Strength AssessmentTM informal feedback and work to change mentary focus on the development of intact produces an aggregate assessment of the per- their behaviors in ways that are beneficial leadership teams and leadership cultures. A centage of managers currently operating at the to the organization and themselves. company’s leadership culture is a distinct and Expert, Achiever and Catalyst levels in three powerful part of its organizational culture. key leadership arenas: leading organizational In assessing leadership culture, it is important Specifically, it is an expression of the implicit change, improving team performance and to keep in mind that, while a company’s over- assumptions and values its managers share engaging in pivotal business conversations. all leadership culture typically has many about effective leadership, as well as the uniform elements throughout, it is not unusu- shared norms and practices that shape leader- While undeniably valuable, aggregate assess- al to find somewhat different agility levels in ship behavior. ments have one limitation: They assume that cultures found at different managerial levels.
32 PEOPLE & STRATEGY Thus, it is useful to ask what level (or levels) For these changes to take place, not everyone time, they are less wedded to their expertise. of agility predominates in the top tiers, among at the top needs to become a Catalyst, and not Consequently, it is easier for them to manage middle managers and in the lower manage- everyone at the middle levels needs to become and collaborate with others, acknowledging ment ranks. an Achiever. However, the percentage of their areas of proficiency. Expertise is best Catalyst in the senior ranks needs to increase, utilized in Achiever and Catalyst leadership Organizations that have assessed agility lev- the percentage of Achiever middle managers cultures, where it is used for clear strategic or els in their leadership culture have typically needs to increase and attention needs to be even visionary ends. identified Catalyst leaders here and there, and given to shifting the overall leadership culture some note pockets in the organization where at the top and middle levels. This means Finally, do not confuse levels of agility with the culture has Catalyst characteristics. How- increasing the quality of teamwork, both leadership styles. Facilitating development to ever, even in companies that have enjoyed a internally and with other teams; building a new level of agility is not about forcing a good deal of past success, the top-level leader- stronger cross-functional relationships; and uniform leadership style on the organization. ship culture tends to be strongly Achiever, developing an organizational culture that The whole range of differing personality, while the middle-level culture is often strong- supports needed levels of agility. Once a new thinking and leadership styles exist at each ly Expert. At the same time, individual Expert leadership culture genuinely takes hold, its level of agility. Effectively utilized, this diver- managers can be found in top executive norms begin to influence everyone’s behavior, sity of styles can contribute in important ways groups, and Achievers can be found at the regardless of their agility level (Joiner, 2002). to an organization’s agility and effectiveness. middle levels. Sometimes high-potential managers, who tend to be high-functioning One concern sometimes raised when discuss- Achievers, often with Catalyst leanings, are ing an organization’s optimal agility level is Working with Executive Teams held back by Expert managers to whom this: If many of the organization’s Expert No culture change effort is likely to be success- they report. middle managers learn to lead at the Achiev- ful unless the organization’s top executives er level, who will do all the tactical work that champion it (Kotter, 1996). When a change in Clarifying the Desired needs to be accomplished on a daily basis? leadership culture is needed, especially toward This is a good question and requires a the Catalyst level, full-fledged leadership of the Leadership Culture thoughtful response. change by the executive team is absolutely An organization is most effective when its agil- essential. This team needs to learn to embody ity level matches the pace of change and the When middle-management cultures operate the new culture in its daily interactions with degree of interdependence in its internal and at the Expert level, as many do, managers one another and with those they lead. external work environment. Generally speak- tend to become overly involved in the details ing, if the rate of change is rapid but episodic, of their subordinates’ work. When this kind A newly hired Catalyst CEO who was seven an Achiever leadership culture is likely to be a of culture becomes more Achiever-like, mid- months into the revitalization of a once-suc- good fit. If the pace of change is somewhere dle managers take a more strategic approach cessful business described it this way: “In between rapid and constant, a Catalyst leader- to their own roles and delegate much of the many ways [working with my executive ship culture is probably needed. tactical work to lower-level managers. In team] is like a laboratory. I’m trying to devel- addition, Achiever managers at any organiza- op an executive team that can serve as the The other factor to consider is the degree of tional level still retain the ability and prototype of a participative culture, which interdependence: the extent to which the orga- nization’s sustained success depends on effective coordination with other organiza- tions and among internal units. If consistent Once a new leadership culture genuinely takes hold, success requires a moderate level of coordina- tion, an Achiever culture is probably adequate. its norms begin to influence everyone’s behavior, But if the business need for coordination is regardless of their agility level. extensive, a Catalyst culture likely is required.
Almost invariably, the appropriate conclu- sion in today’s turbulent economy is that a inclination to do tactical work when needed. they can then disseminate to the rest of the Catalyst leadership culture is needed, at least Catalyst leadership cultures at the senior lev- organization.” (Joiner & Josephs, 2007) at the top levels. In addition, if the current els can utilize an even broader range of middle management culture is predominantly capabilities, because they can function well at Catalyst executives often have the foresight to Expert, movement to an Achiever culture in three levels: visionary, strategic and tactical. hold off on “rolling out” a culture-change pro- this tier is likely to yield an enormous improve- cess until they and their executive team have ment. Further, many companies are A concern also can arise if Expert leadership at least begun to embody the desired culture introducing Achiever-level methodologies at is equated with expertise. The two are not the in their everyday actions. This, of course, the bottom levels of the organization. The same. In many ways, expertise is the lifeblood makes top-level team development work an current interest in “lean” is a good example of any business. However, Expert leadership essential and preliminary part of the process. (Womack & Jones, 2003). Not surprisingly, cultures limit the way in which this expertise these methodologies work best when an is used. Achiever and Catalyst leaders retain To foster increased agility in an executive Achiever-level leadership culture is developed and build on the kinds of expertise they devel- team, it is helpful to guide them through an as part of the change effort. oped at previous agility levels. At the same assessment of the pace of change and degree ➤
VOLUME 32/ISSUE 4 — 2009 33 of interdependence in their own external and the Expert level and could benefit from an • First, unless new behavior is role-modeled internal environments, similar to the organi- Achiever-like approach, three key questions at the top, it is unlikely to catch fire at other zational assessment described earlier. This can be used to stretch his or her context-set- levels. can lead to a discussion of the team’s optimal ting agility, and likely make the initiative • Second, the coaching process can support agility level: Given the results of the environ- more effective: mental assessment, what level of executive executives in consciously promoting a new leadership culture among the managers in team agility would likely lead to optimal • What conditions in the larger context are business performance? Many executive teams driving the need for this change? their own organizations. For example, an have never discussed the kind of leadership executive who wants to help his or her they want to encourage on their team and in • What is the scope of this change? (What will organization shift from an Expert to their organization. be changed and what will not be changed?) Achiever leadership culture can do a number of things to encourage various aspects of • What are your desired outcomes? (How this shift: Emphasize cross-functional The executive team also needs to assess its will you know this change is successful?) agility level. Expert teams tend to operate in teamwork. Set up cross-functional teams to a “hub-and-spoke” pattern. Group members These may seem like basic change-manage- make needed organizational improvements. are coordinated by the manager, who focuses ment questions, and they are. But they are Model cross-functional teamwork. Tell more on supervising individual members questions that Expert leaders rarely ask. If the stories that highlight the business value of than on developing the team as a whole. As a executive usually leads at the Achiever level cross-functional teamwork. Coach result, the Expert “team” is not so much a true and could benefit from a more Catalyst-like subordinates to increase their effectiveness team as a collection of individual contribu- approach, the coach can follow each of the in working cross-functionally. Reward tors. Achiever teams are real teams of a sort. above questions with one that takes the them for constructive risk-taking in this Led by a manager who feels a responsibility executive’s thinking to a deeper level: area. Celebrate successes. to bring people together and motivate them, Achiever teams engage in important strategic • To what extent are the organization’s and operational discussions, though these are Facilitating Change: Enhanced culture and working relationships part of often orchestrated to guide people to the the reason this initiative is needed? Competency Models “right” decisions. The systems a company uses for talent man- • What assumptions might you be making agement, including selection, training, Catalyst teams are true high performing teams, about the scope (boundaries) of your performance evaluation, rewards and succes- characterized by robust participation: frank initiative that it might be useful to sion planning, can also be used to support the discussion, skillful listening and high-quality examine? problem solving and decision making. Cata- shift to a more agile leadership culture. lyst team leaders develop a significant level of • What is a compelling vision for this change Because these systems are typically based on trust within the team that allows them to move that could inspire others by conveying the criteria explicated in a companywide compe- explicitly from consensus decisions to unilat- deeper meaning or satisfaction it can have tency model, the model should ensure that it eral decisions and back again, as needed, while for them – and for you? adequately specifies the levels of agility need- retaining the team’s commitment. ed for effective leadership in the firm’s Another essential methodology for facilitat- emerging business environment. ing change in the leadership culture is team Facilitating Change: Individual coaching. Really a set of methodologies, team One option taken by some companies is and Team Coaching coaching can include team assessments, facil- simply to treat agility as an additional com- itation of important real-time meetings and petency. But this approach overlooks the When the current agility levels of the executive facilitation of off-site meetings designed to fact that agility levels are rooted in develop- team and organization have been assessed and address special team issues. Team coaching mental stages. Growth into a new stage the desired agility levels clarified, there is usu- can also involve the facilitation of “learning fosters new internal capacities that enhance ally a gap between current and desired levels. teams” of managers (intact or otherwise), everything a leader does (Joiner & Josephs, who also work with the coach one-on-one. Developmental activities can be initiated to 2007). close the gap. One methodology that can In “learning team” sessions, managers receive contribute significantly to these changes is A more powerful alternative is to examine an both peer and professional feedback about coaching based on 360-degree feedback, existing competency model from the perspec- their attempts to address real issues in a more beginning with the top executive and his or tive of the levels of agility needed in the agile and effective manner. The key is to use her team. The company’s usual 360 instru- company’s leadership culture, acknowledg- seasoned coaches who understand what each ment (which typically reflects its competency ing that the desired agility level may be level of agility looks like for individuals, model) can be supplemented with an assess- different for different management tiers in the teams and organizations. ment of individual agility levels. hierarchy. This approach begins with an examination of the extent to which the com- There are numerous ways that the leadership Facilitating Change: The Power petencies in the current model adequately agility framework can be used to enhance represent those needed for the agility levels coaching conversations. Take as an example of Executive Leadership needed in the leadership culture. This is espe- a line executive planning to lead a change Work to shift the leadership culture at the top cially important for tiers of the organization initiative. If this executive habitually leads at is essential for two reasons. that need to operate at the Catalyst level.
34 PEOPLE & STRATEGY An informal review of competency models not only teach desired leadership practices Kegan, R. (1982). The evolving self: Problem and process in used in a range of industries indicates that, and behaviors, but that simultaneously facil- human development. Cambridge: Harvard University Press. while Catalyst leadership behaviors appear itate growth into the corresponding stages of Kegan, R. (1994). In over our heads: The mental demands here and there, the vast majority of compe- adult development. Otherwise, the behaviors of modern life. Cambridge: Harvard University Press. tencies identified in these models are and practices extolled in these programs are Achiever-level characteristics. One conse- not likely to stick (Joiner & Josephs, 2007). King, P.M., & Kitchener, K.S. (1994). Developing reflective judgment: Understanding and promoting intellectual quence of these models is that they lead to growth and critical thinking in adolescents and adults. San 360-feedback instruments that give many Francisco: Jossey-Bass. executives and high-potential managers very Summary high scores, leaving them with the impression Klemp, G. (2009). ChangeWise Leadership Agility 360 validation manual. Boston: Cambria Consulting. that they have little room left to grow. This is The pace of change and degree of interdepen- dence in today’s global business environment unfortunate when companies have such a Kohlberg, L. (1981). Essays on moral development. Vol. 1: great need for their high-functioning Achiev- demands that corporations develop organi- The philosophy of moral development. San Francisco: ers to continue their leadership development zations where at least the top tiers of Harper. to new levels of agility. management are capable of functioning at the Catalyst level. To rise to this historic chal- Kotter, J. (1996). Leading change. Boston: Harvard Busi- ness School Press. lenge, organizations need to help many of Facilitating Change: Action their Achiever senior managers grow into the Loevinger, J. (1976). Ego development: Conceptions and learning Programs Catalyst level and many of their Expert mid- theories. San Francisco: Jossey-Bass. dle managers develop to the Achiever level. Another key application of competency mod- Merron, K. (1985). The relationship between ego develop- And they need to focus not just on the devel- ment and managerial effectiveness under conditions of els is leadership-development programming. opment of individuals, but also on the high uncertainty. Unpublished doctoral dissertation: Har- Reflective action is both the essence of leader- development of leadership teams and the vard Graduate School of Education, Harvard University. ship agility and the primary means for leadership culture. The task of bringing a developing from one level to another. For this Perry, W.G., Jr., (1999). Forms of intellectual and ethical leadership culture to a new level of agility is development in the college years: A scheme. San Francisco: reason, the best leadership-development pro- not something that can be accomplished by a Jossey-Bass. grams for increasing agility levels are ones that few heroic leaders. It is necessarily a collective Piaget, J. (1954). The construction of reality in the child. emphasize action learning. The workshops in undertaking. these programs need to show participants New York: Basic Books. more agile approaches to challenging conver- Raelin, J. (2008). Work-based learning: Bridging knowl- sations, team issues or organizational change References edge and action in the workplac e. San Francisco: projects, and then guide them in applying these Jossey-Bass. new approaches both during and after the Dotlich, D.L., & Noel, J. (1998). Action learning: How the Richards, F.A., & Commons, M.L. (1984). Systematic, workshop. Often the most effective action- world’s top companies are re-creating their leaders and themselves. San Francisco: Jossey-Bass. metasystematic, and cross-paradigmatic reasoning. In M. learning experiences take place in well-planned L. Commons, F. A. Richards, & C. Armon, C. (Eds.), programs that combine multiple learning Economist Intelligence Unit (2009). Organisational agili- Beyond formal operations. New York: Praeger. modalities: 360-degree feedback, coaching, ty: How companies can survive and thrive in turbulent times. London: Authors. Rooke, D., & Torbert, W.R. (1998). Organization trans- leadership workshops, learning teams, and formation as a function of the CEO’s developmental stage. individual or group projects (Dotlich and Fisher, D., Rooke, D., & Torbert, B. (2000). Personal and Organization Development Journal, 16(1), 11–28. Noel, 1998; Raelin, 2008). organisational transformations. Boston: Edge/Work Press. Smith, S. (1980). Ego development and the problems of CEOs and other top executives frequently Fowler, J. W. (1981). Stages of faith: The psychology of power and agreement in organizations. Unpublished doc- human development and the quest for meaning. San Fran- toral dissertation: School of Government and Business assume that they have reached a stage in their cisco: Harper. Administration, George Washington University. careers where they no longer need leadership training. If the world stood still, this assump- Geoffrey, C. (2006, October 30). How one CEO learned Torbert, W.R. (1991). The power of balance: Transforming tion might be valid. However, the world is to fly. Fortune International, 154, 38-40. self, society and scientific inquiry. Thousand Oaks: Sage. changing at faster and faster pace. In this con- Greenleaf, R. (1977). Servant leadership. Mahwah: Paulist Torbert, W.R., & Associates. (2004). Action inquiry: The text, even those Achiever-level executives who Press. secret of timely and transforming leadership. San Fran- have been extremely successful in the past cisco: Berrett-Koehler. Joiner, B., & Josephs, S. (2007). Leadership agility: Five need to learn to lead at a new level of agility. levels of mastery for anticipating and initiating change. Wilber, K. (2000). Integral psychology: Consciousness, San Francisco: Jossey-Bass. spirit, psychology, therapy. Boston: Shambhala. Regardless of the participants targeted by a particular action-learning program, experi- Joiner, B. (2002). From disconnect to dialogue: Transform- Womack, J., & Jones, D. (2003). Lean thinking: Banish ence has shown that it is not necessary to ing business results through pivotal conversations. Retrieved waste and create wealth in your corporation (revised and from http://www.changewise.biz/tips_and_tomes.html updated edition). New York: Free Press. design some workshops for Experts and oth- ers for Achievers. What tends to work best is to find or design programs that can help both Expert and Achiever leaders develop to their Bill Joiner is President of ChangeWise, a leadership and organization development firm next levels in at least three key application headquartered in the Boston area. He is co-author of Leadership Agility and co-design- areas: leading organizational change, leading er of the Leadership Agility 360. He earned his doctorate in Organization Development teams and navigating challenging business at Harvard University. conversations. To do this, use programs that
Volume 32/Issue 4 — 2009 35 Developing World Class Leaders: The Rohm and Haas Story
Rajiv L. Gupta, formerly with Rohm and Haas Karol M. Wasylyshyn, Leadership Development Forum For nearly 25 years the Rohm and Haas Company, recently acquired by Dow, ran what was one of the longest continuous high-potential development programs in a global company. The manufacturer of chemical and electronic materials focused on its top 70 senior executives and high-potential managers who represented significant geographic, gender and race diversity. Further, an assessment of more than half of these business and functional leaders, conducted by an outside evaluator as part of the Rohm and Haas-Dow transaction, found many of them to be “significantly above the industry benchmark” in terms of customer and marketplace focus. A senior member of this outside evaluation firm described Rohm and Haas as one of the best “CEO schools” he had ever seen.
his program, named Leadership 3000, We cannot yet fully assess how Rohm and of the effort Feck said, “We need to go inside resulted in the development of a highly Haas executives fared in the move to Dow. out. We need to assess the whole person, not Tdiverse group of global leaders and However, at this writing, the majority of just one’s profile of leadership competencies. ensured a smooth leadership transition at the Leadership-3000-trained executives found We need to have real relationships with these CEO level. Furthermore, the program helped comparable or better positions in Dow or people, and they need to know themselves deepen the self-confidence and preparedness other companies. The C-suite executives who and understand what influences their behav- of key business leaders who drove two of the were retirement eligible (two) or who had a ior in good times and bad. Their accurate self company’s boldest initiatives through the last change of control provision (three) either left awareness is essential for continued learning two decades. The first was the building of its the company and retired fully or accepted and personal growth. Continued learning electronic materials business. The second was C-suite roles in other public companies. and personal growth are essential for the the expansion of Rohm and Haas’ presence development of world-class leaders.” in Asia—ahead of its competitors. By 2008, more than half of the company’s earnings Leadership 3000: The This view of high-potential development led were contributed by electronic materials and to four principles that guided the creation, business expansion in Asia. Conceptual Spark implementation and consistency of Leader- ship 3000: The conceptual spark for Leadership 3000 Regarding business growth, in the space of 20 occurred in 1986 when then-CEO Larry Wil- years (1988-2008) Rohm and Haas grew 1. a holistic development model; son charged his corporate head of human from a mid-sized hybrid chemical company resources Mark X. Feck with the develop- 2. trust grounded in confidentiality; (a combination of commodity and specialty ment of a program that would help groom chemicals) to a global leader in specialty 3. the power of psychological insight; and chemicals and electronic materials. As mea- the next generation of business leaders. At sured by growth, profitability and valuation that time, the company’s portfolio was dom- 4. the conveyance of executive wisdom. multiples, Rohm and Haas remained among inated by mature businesses with minimal the leaders in its industry. Clearly, both the growth potential so Wilson knew he needed Holistic Development quality of its business portfolio and leader- leaders who had stronger strategic focus, cre- ship talent were recognized by major ative thinking and business acumen. In Model companies in the industry—including Dow— addition to these leadership competencies, which purchased the company for a Feck believed that certain leadership behav- While the four-phase model of Leadership substantial premium. iors—including courageous decision making, 3000 (described below) typically unfolded bias for action, boldness versus hierarchical over a nine- to 12-month timeframe, it was Over the last decade, total shareholder return approval-seeking and deepened self-aware- positioned as a boundary-less process versus (TSR) far exceeded peer companies and over- ness—also must be increased if Wilson’s a contained program. In other words, after all market performance. During the last five objective were to be met. participants completed the four phases, they years, Rohm and Haas TSR was at 17.3 per- could continue consultative dialogues with cent compared to the S&P 500 of -4.8 percent. Given both the competency-based and behav- anyone in their Leadership 3000 develop- Finally, the closing price of $79.40 per share ioral focus of this development initiative, ment “brain trust.” This “brain trust” represented an approximate 30 percent pre- Feck chose a clinically trained consulting psy- included their boss, and at least one C-suite mium above the company’s all-time high of chologist (Wasylyshyn) as his program design executive, as well as Feck and the consultant. $62 per share (July 2007). partner. In expressing the philosophical core An unforeseen retention benefit of this ➤
VOLUME 32/ISSUE 4 — 2009 37 boundary-less approach was revealed over In addition, participants created a master greater self-awareness and confidence that time when participants felt comfortable action plan (MAP) to guide ongoing the consultant would apply the information enough to use brain-trust members as sound- development activities. The promise of confi- to their development agendas. Each partici- ing boards to discuss the calls they received dentiality also surrounded all data-gathering pant also spent a half-day giving a life history from executive recruiters. and feedback meetings, as well as subsequent that revealed key thematic material with discussions and/or ongoing coaching of par- implications for leadership effectiveness. Given the commitment to understand each ticipants once the core components of the participant as a whole person, the company program were completed. provided an optional and confidential “spou- The Conveyance of sal partner” module to those who wanted to Executive Wisdom explore the work-family integration issue. A The Power of number of the company’s recent C-suite exec- Psychological Insight Each participant was invited to choose a utives pioneered this dimension of the program member of Rohm and Haas’ Executive Com- and affirmed its help in managing the relent- Rohm and Haas used a number of resources to mittee (EC) to be part of his or her development less tension between career and personal deliver on the goal of psychological insight or, “brain trust” in the action-planning phase. priorities. The authors are unaware of other in Feck’s words, “accurate self-awareness.” In This meant that the CEO or another C–suite companies that include this holistic element addition to a battery of standardized psycho- executive attended every action-planning in high-potential development activities. metric tools appropriate to a business setting meeting. The C-suite member joined the par- (See sidebar below.), participants were offered ticipant’s boss (who may or may not have In the spousal partner module, Rohm and the option of including a projective technique, been a member of the EC), the corporate head Haas used a customized interview protocol the Rorschach. Tools like the Rorschach are of HR (initially Feck and then four others with each partner individually. The data were based on the projective hypothesis that one’s after his death in 2000) and the consultant, then analyzed and captured in a report pro- response to an ambiguous stimulus—in this who facilitated the discussion. vided to the couple as the basis for a case an inkblot—can reveal deeper facets of the facilitated and action-focused conversation personality. Interestingly, every Leadership While time consuming for EC members, their with the consultant. Each couple examines 3000 participant elected to include the Ror- active involvement sent an emphatic signal the stressors, strains and opportunities of schach despite how “far out” Feck thought this about their commitment to development. executive-couple life. The outcome—con- particular tool would seem to them. Their participation also reinforced the power structive problem solving—proved useful to of conveying wisdom, i.e., that their work couples grappling with such issues as expatri- In hindsight, this outcome was influenced by experiences, triumphs, mistakes, emotions ate assignments or repatriation. participants’ appetites for holistic experi- and other accumulated learning could enrich ences, trust in the process, genuine desires for action planning in inestimable ways. . Finally, the holistic intent and flexibility of Leadership 3000 were evident by efforts to be there for participants when they were faced with difficult personal events. For example, when the father of a French execu- Leadership 3000 Data-gathering Sources tive died unexpectedly, the consultant Leadership Competencies Rohm and Haas Essential arranged for the executive to meet with a I. Outside-in Perspective Leadership Behaviors bilingual bereavement counselor. On some • Market-aware and • Courageous Leadership level, customized efforts such as this contrib- Customer-driven • Emotional Fortitude uted to the overall credibility of the program and helped build relationships that deepened • Strategic Focus • Enterprise Thinking over time. • Global Perspective • Pragmatic Optimism • Steel Trap Accountability II. Speed to Market Trust: Data • Bias for Action • Truth-telling Confidentiality • Adaptive to Change • Tough on Talent • Creative Problem Solving Battery of Psychometrics In an effort to underscore the developmental • Life History (versus evaluative) intent of this work, all the III. Pursuit of Profitable Growth data generated became the property of the • Professional Credibility • Watson-Glaser Critical-thinking Appraisal participants. This meant they were free to • Business Acumen • Life Styles Inventory 1 share data with their bosses and/or others but • Persuasion and Influence • Revised NEO Personality Inventory the consultant was not. No reports were writ- (NEO PI-R) • Safety Performance ten. The traction, momentum and value of • BarOn Emotional Quotient Inventory (EQi) Leadership 3000 were maintained through • People and Performance • Rorschach the participants’ presentation during an Management action planning meeting of their strengths to • Interpersonal Effectiveness leverage and their areas for improvement.
38 PEOPLE & STRATEGY The Model Table 1: strengths to leVerage Top 5 leadership Strengths Number of Participants: Number of Participants: This high-potential development model con- to leverage 1986-1999 2000-2008 sisted of four distinct phases: Bias for action 7 12 1. data-gathering; strategic focus 5 11 2. feedback; Creative thinking 2 10 3. action planning; and Business acumen 5 8 Courageous leadership 4 8 4. follow-up.
The nine- to 12-month timeframe for the When Gupta became CEO in 1999, these dotal data, the following factors merit model to unfold gave participants sufficient competencies were amplified and the Rohm mention: time to “work” their master action plans and Haas Essential Leadership Behaviors (MAPs) and to be ready to probe for further were added to the data gathering as indicated • the increased and active participation of development guidance from their “brain in the sidebar on the previous page. the CEO and other C–suite executives in trust” in the follow-up phase. On the surface the action planning phase; These data were woven together in the feed- this model appears similar to high-potential • the learning and experiences of Wave 1 back phase that concluded with the development initiatives in other companies. participants—as transmitted to Wave 2 identification of specific strengths to leverage However, as indicated in the previous four participants; principles, there were distinctive differences and improvement areas. Unlike other high- in the nature of the data gathering, action potential development programs—where • the intensified scrutiny of potential planning, follow-up and activities beyond the action planning can be left to the individual in Leadership 3000 participants; concert with an HR professional and/or actual program. It was through these differ- • the use o f Leadership 3000 a s a n assimilation coach—this action planning was enriched by ences that participants experienced the “going tool for external C-suite hires; and inside-out” that Feck believed essential for the active participation of C-suite executives. sustained learning to occur. • a more rigorous corporate talent- These same executives, i.e., members of a management process informed by a steady The multifaceted nature of the data gathering participant’s “brain trust,” also attended the set of leadership competencies and (See sidebar on previous page.) surfaced a follow-up meetings. During these meetings, behaviors. rich tapestry of biographical, psychological, several months after the action planning leadership-competency and behavioral infor- event, participants presented annotated ver- For this article, we have focused primarily on mation. While companies can spend sions of their original action plans that the Wave 2 (2000-2008) participants. This considerable time and other resources identi- indicated progress made and areas in need of group demonstrated these traits: fying their leadership competencies, it is further guidance. The follow-up phase also worth noting that CEO Wilson identified the allowed considerations of next roles, includ- 1. bias for action (high energy, boldness, and first competencies used for 360 data-gather- ing potential expatriate assignments. accountability); ing saying, “ We don’t need to spend any more 2. strategic focus (high impact on business time on this—these are the fundamental Findings—Strengths unit success and strategic thinking); competencies our leaders need to have so let’s get started.” to Leverage 3. creative problem solving (analytical skill/ problem-solving and strong innate capacity); These were: As the due diligence in the Dow transaction 4. business acumen (industry knowledge, found, this Rohm and Haas high-potential financial skill and legal expertise); and 1. the ability to earn trust and support among group possessed leadership competencies and superiors, colleagues and subordinates; behaviors on a par with talented leaders in 5. courageous leadership (creating/leading other companies. What is more significant energized teams and standing up to senior 2. the ability to form realistic vision for the about these findings is the variance repre- management). organization; sented between Wave 1 (1986-99) and Wave As compared to Wave 1, there were signifi- 3. the ability to communicate vision and 2 participants (2000-2008) as indicated in cant increases in the number of participants inspire commitment/quality performance; Table 1 above. in each of these strengths to leverage. 4. toughness and drive to overcome In terms of leadership competencies and obstacles; behaviors—as first articulated by Wilson and Findings— Feck—Wave 2 participants showed consider- 5. the ability to size up opportunities/ able progress. No doubt many factors problems and take effective action; and Improvement Areas contributed to this variance, and it is difficult 6. managerial and administrative to pinpoint with precision which factors were The improvement areas also tracked with competence. most significant. However, based on anec- experiences of other global companies com- ➤
Volume 32/Issue 4 — 2009 39 mitted to high-potential development. Again, managing emotions, especially anger and 4. courageous leadership (impact and what was most significant about the Rohm frustration, attunement to/empathy for boldness as a leader); and and Haas findings related to the variance others, and quality of relationships— between Wave 1 and Wave 2 participants as transactional versus meaningful, listening 5. strategic focus (developing a business indicated in Table 2. and stress management; vision, need for greater external perspective and customer focus). 2. persuasion and influence (clarity of Specifically, the top five improvements areas objectives and communication skill); were: As compared to Wave 1 participants, there 3. people development/performance man- were considerably fewer in Wave 2 with 1. emotional fortitude (included a host of agement (focus on career development, courageous leadership as an area for improve- behaviors related to the four core dimensions teamwork, motivation and dealing with ment. There was a notable decrease in the of emotional intelligence—self-awareness, performance issues efficiently; number of individuals who had some aspect
Excerpts from a Leadership 3000 Master Action Plan (MAP)
Strengths to Leverage > Boldness—“My leadership metamorphosis” • Leadership Impact • Do not be held back by process; use and trust my gut more on out-of-the-box staff appointments and on how my organization • Business Acumen needs to be structured to support recent realignment of • Strategic Focus strategic priorities. • Set and actively follow up on bolder stretch development > Leadership Impact objectives for each member of my leadership team (LT). • Shift my leader focus from micro to macro—promote the “we.” • Step up the quality and candor of this year’s performance reviews; • Commit more time to coaching high-potential talent (e.g., make certain each LT member is clear regarding how I see his/ quarterly 1:1 meetings focused exclusively on specific her respective strengths and weaknesses. Ensure focused developmental activities and direct reports’ career aspirations). development plans are in place. • Export talent to other parts of the company. • Challenge corporate barriers and/or organization totems (e.g., • Make necessary personnel changes, i.e., get right people in right the sales incentive plan). roles and ensure conditions for them to be successful. • Manage my “brand” more proactively, i.e., convey to all stakeholder > Impatience—The “dark side” of my bias for action groups the what and why of my key objectives more clearly. • Keep things in perspective with reality-testing questions like, “What must be done now? What can wait? How long can certain • Schedule quarterly lunch/dinner times in effort to get to know things wait?” and explore potential synergies with other (non-U.S.) business unit and functional leaders. • Delegate realistically versus putting people in unnecessary overload. > Business Acumen—Deepen financial knowledge, increase under- • Stay close to individual team members—especially during standing of financial strategy at corporate level. high-stress periods. Be attuned to their needs and display empathy. • Establish quarterly informal mentoring meetings with company CFO. • Intensify alignment on key objectives by ensuring monthly team • Lead new business unit turnaround (relocation to Europe). and scheduled 1:1 meetings. • Enroll in Wharton Advanced Management Program (Q4). • Take a “burn-out audit” of my team in an attempt to understand where everyone’s limit is—and then be responsive to those limits > Strategic Focus by not piling work on people who are already in overload. • Step up meetings with external customers and prospects. > Political Savvy • Leverage experiences in Asia especially in terms of supporting peers’ relationship-building with key stakeholders in this priority- • Have direct conversations with key peers and members of my growth region. leadership team to ensure that they understand what’s motivating me versus the perception that it is all about my career ambition. • Temper tendency to push my strategic growth agenda too aggressively at both the customer and supplier levels. Repair • Deepen relationships with one or two confidants in the company two strained customer relationships. with whom I can close the door, hear what I need to hear about how I’m perceived and vent my frustrations when venting is what I need to do. Development Areas • Boldness > Work-Family Integration • Impatience • Participate in Leadership 3000 Spousal Module—use this as a • Political Savvy springboard for planning of upcoming family relocation to Europe. • Work-family Integration
40 PEOPLE & STRATEGY of emotional fortitude as a development Table 2: ImproVement AreAs focus. Nearly one-third fewer Wave 2 par- ticipants had persuasion and influence issues Top 5 leadership Strengths Number of Participants: Number of Participants: compared to Wave 1. There was a small to leverage 1986-1999 2000-2008 decrease in Wave 2 participants who had stra- emotional fortitude 27 16 tegic focus as an improvement area. persuasion and influence 17 12 Developing people/ Because strategic focus is one of the most 11 11 challenging leadership competencies, we performance management were not surprised to see it persist as an Courageous leadership 22 10 improvement area. However, given the sig- nificant increase in Wave 2 participants with strategic focus 10 9 strategy as a strength, a common action step was to pair participants in informal peer 7. short-term mentoring relationships; and people-management capabilities—peo- mentoring relationships that helped individu- ple management especially as it relates to the 8. participation in community-based non- als capitalize on their respective strengths. empowerment of their most talented employ- profit organizations to build leadership ees. These leaders also will value the power There was no change between Waves 1 and 2 skills; of continuous learning, and they will be on the competency of people development/ 9. the orchestration of for-profit board rewarded by the significant time they spend performance management—one of the peren- appointments; deepening their global networks and ensur- nial and most challenging of high-potential ing the authenticity of the relationships development areas. A host of issues continued 10. mindfulness meditation; and within these networks. Furthermore, they to thwart and probably intensify the lack of 11. coaching in emotional intelligence. will be distinguished by their ability to inte- progress in this area. These included the grate and apply intellectual (cognitive) and accelerated pace of business challenges, While participants benefitted from working emotional (behavioral) intelligence. demanding economic conditions, work over- their MAPs, we believe the sustainability and load, cultural differences (particularly as impact of Leadership 3000 tracked back to Finally, these leaders will ensure that suffi- related to providing sound performance feed- the interaction of its four guiding principles— cient resources and time—including their back to people in other geographic regions) holistic approach, trust grounded in own—are allocated for the development of and the lack of user-friendly performance- confidentiality, the power of psychological the next talent wave. Talent management, management systems. For the most part, insight and conveyance of executive wisdom. with leadership development as a critical actions related to the people development/ From the moment of invitation, participants dimension, persists as a “burning platform” performance-management competency issue in emerging markets, as well as in the were made to feel honored, respected and involved ongoing coaching by the boss and/ United States. Fully talented leaders are in safe. This ignited an attitude of discovery and or external consultant. dangerously short supply. So while there are sustained learning. For some, this had cascad- specific lessons that might be taken from our ing effects for their spouses and families. See work at Rohm and Haas in developing world- Sidebar B for excerpts from the MAP of one Action Planning class leaders in the end, it is as of the company’s most gifted business unit simple—albeit as demanding—as creating a directors. Of note is his inclusion of the Spou- Rigorous adherence to creating targeted, robust leadership development model and sal Module. realistic and robust master action plans staying with it. (MAPS) as the tangible outcome of Leader- ship 3000 continued as an overarching priority. A wide array of development Some Final Thoughts resources was represented in these MAPS— Rajiv L. Gupta is former chairman and As the global business environment continues some familiar and others less so. In the CEO, Rohm and Haas Company. to evolve in its complexity and Darwinian broadest terms these resources included: challenges, the demands of its leaders will Karol M. Wasylyshyn, Psy.D., is presi- intensify exponentially. Surely the economic dent of Leadership Development 1. job rotations; disruptions of 2008-2009 had significant Forum in Philadelphia, Pennsylvania. 2. assignments in other cultures; adverse effects on most industries, including chemicals and electronic materials. This eco- 3. executive seminars (both brief and resident- nomic volatility has yet to settle and, in ial in world-class business schools); tandem with efforts to manage the immedia- 4. specific courseware in areas such as cy of this issue, business leaders will have to strategic thinking and innovation deal with increased regulations, other gov- management; ernment and political influences and geo-political conflicts. 5. formal communications skill training; 6. company-based courses in functional Given these relentless pressures, the most areas such as finance and information effective business leaders will continue to technology; leverage their strategic, financial, operational
Volume 32/Issue 4 — 2009 41 Knowledge Management: A Glass Half Full
Mary Key, Key Associates, Inc. Holly Thompson, Institute for Corporate Productivity Joseph McCann, Davis College of Business
* The authors thank Klara Nelson and Michael Weeks of The University of Tampa for assistance in preparing and supporting this survey and also Jay Liebowitz, Orkand Chair in Management and Technology at University of Maryland, University College, for his insights. Peter Drucker was convinced that to succeed in a dynamic, global economy, leaders must not only recognize the principles of knowledge management (KM), they also must engage fully in KM practices across the organization. Drucker noted as early as 1959 that “productive work in today’s society and economy is work that applies vision, knowledge and concepts – work that is based on the mind rather than the hand” (Drucker, 1959). Indeed, Peter Drucker first coined the concepts of the “knowledge economy,” “knowledge worker” (Drucker, 1959, 1966, 1969, 1973) and “knowledge organization” (Drucker, 1973, p. 450). The term “knowledge organization” has since evolved to be called the “learning organization” (Senge, 1990).
knowledge application is quintessential Conditions for Drucker. Consistent with the six points Research Design Knowledge Work above, he believed this was best accomplished & Method by creating a supportive environment and Drucker goes so far as to say, “Knowledge culture for knowledge creation, sharing To gain deeper insights into the current worker productivity is the biggest of the 21st and retention. knowledge management practices of organi- century management challenges. In the devel- zations, the Institute for Corporate oped countries it is their first survival We now call this focused attention on knowl- Productivity (i4cp), together with the Center requirement. In no other way can the devel- edge application “knowledge management.” for Effective Organizations (CEO) and the oped countries hope to maintain themselves, There has been more than a decade of inten- Human Resource Planning Society (HRPS), let alone to maintain their leadership and sive cultivation of the ideas and practices conducted a comprehensive study on knowl- their standards of living” (Drucker, 1999, p. surrounding it by such thought leaders as edge management in the fall of 2008. The 157). To maximize effectiveness and produc- Davenport & Prusak (1998), De Geus (1997), survey was completed by 426 organizations tivity of knowledge workers, he described the Edvinsson & Malone (1997), Nahapiet & and administered online to a mix of indus- six conditions that must exist (1999, p. Ghoshal (1998), Nonaka & Takeuchi (1996), tries. The survey focused on KM practices in 142): Stewart (1998) and Liebowitz (2009). Liter- general, as well as knowledge retention, as both have implications for how well organi- • Clarity is essential about the tasks to be ally thousands of research studies have since followed. zations manage employees and the potential performed. loss of knowledge through retrenchments, • They must be able to manage themselves Given the importance attached by Drucker “boomer” retirements and normal knowl- edge worker exits (Key, 2008). with some degree of autonomy. and these successors to KM, we now ask how far we have progressed in meeting the knowl- • Their primary focus must be on continuous Survey respondents are from a wide variety edge challenges he first identified. To find out, innovation and creativity. of levels within the organization. About 25 we investigated the extent to which this is percent are managers; 29 percent are direc- • Continuous learning is essential and is a occurring today. Are leaders fully embracing core responsibility. tors; and almost one-third are at the management strategies that promote KM? Is vice-president level or above. Similarly, these • Quality counts as much, if not more than, it becoming commonplace for organizations surveys reflect a broad range of industry par- the quantity of work they produce. to promote “a learning culture”? What busi- ticipation: 18 different industries are ness and financial payoffs are organizations • And they must want to be part of the represented with the most respondents iden- experiencing as a result of KM? What barri- organization with aligned goals and their tifying healthcare and related fields (12.8 presence must be seen as an asset rather ers are being encountered when organizations percent); retail (11.5 percent); entertainment than a cost to the organization. attempt to implement KM practices? and hospitality (10.8 percent); and transpor- tation (10.8 percent). About 35 percent of the Drucker was concerned with the manager’s For further investigation and learning, we sample are from organizations with fewer role in making sense of the complexity of tak- contrast Toyota and General Motors as a case than 1,000 employees and 32 percent are ing created and shared knowledge to build study—a poignant comparison because employed in midsize companies (1,000- operating efficiency and performance. His Drucker critiqued GM for its inability to 10,000 employees); 33 percent of respondents passion for making operating performance learn from customers and focus on sustain- are from large organization with more than show up on the bottom line through focused able markets (Drucker, 2006). 10,000 employees. ➤
VOLUME 32/ISSUE 4 — 2009 43 The survey data were analyzed and correla- cating that they are increasing the knowledge pursue KM initiatives? Do KM practices tions between K M efforts and major indicators content of their products and services. actually pay off in terms of measurable busi- of market performance were examined. ness results, and are those results reflected in Organizers developed a Market Performance Drucker wrote “management’s task is to actual financial performance? Because most Index for these analyses. It was determined make people capable of joint performance, to managers can only target a few change initia- through self-reports from the respondents in make their strengths effective and weak- tives each year, they need to make sure that the areas of revenue growth, market share, nesses irrelevant” (Boudreaux, 2005, p. 20). the ones selected will result in the anticipat- profitability and customer satisfaction. The He redefined the role of manager, at a time ed payoffs. survey primarily sought to understand the when the command and control approach frequency with which organizations were was prevalent. Drucker emphasized the Respondents were asked to comment on the engaging in KM practices and the extent to importance of managers making valuable extent to which their KM efforts have helped which these practices were related t o improved knowledge accessible and coaching others. them achieve business outcomes: “Was there market performance. Survey questions Given these views, he might be disappointed a pay-off for investing in KM initiatives? If focused on the prevalence of organizational that the survey only shows 23.8 percent of so, to what extent was your performance in cultures that promote learning, the benefits of managers viewing themselves as mentors and the market affected?” KM practices and the barriers that keep orga- coaches to a high or very high extent. When nizations from effectively creating, sharing the Moderate response scale category is Clearly, some outcomes for organizations and retaining knowledge. added, with another 42 percent, there are implementing KM practices occur more fre- 65.8 percent responding in total that they quently than others, but the overall impression viewed themselves as mentors and coaches, from Exhibit 2 is that benefits are relatively Research Findings at least some of the time. limited in the majority of responding organi- zations. The highest rated item, Improving Promoting a Learning Culture Similarly, Drucker’s point that “continuous Client and Customer Relationships, was These results suggest that the majority of learning is essential and a core responsibility” reported to a High or Very High extent by organizations are not taking the necessary directly relates to the survey item that asked only 29 percent of respondents. Efforts to steps to build learning cultures, as evidenced whether “managers view themselves as active speed up the time it takes for employees to by the consistently low percentages in the learners.” Again, there were only 27.3 percent move up the learning curve and acquire new High or Very High response columns in of managers with High or Very High respons- skills and competencies were reported to be Exhibit 1. It also appears that organizations es, but an additional 40.9 percent in the occurring to a High or Very High Extent for are having difficulties deciding how to pri- Moderate response scale category resulting in only about 22 percent of respondents. These oritize their KM initiatives, with only 18.1 68.2 percent total. These are respectable per- results suggest that the benefits of KM are not percent stating that they believe they are centages overall, indicating that about one in being realized to the greatest extent possible effectively focusing their KM initiatives on four organizations overall are at the highest in the majority of organizations. business critical targets. level of practices most associated with active learning cultures. Nonetheless, for organizations that do make On the “glass-half-full” side, organizations the investment in KM practices, there is a sub- report they are doing a good job of sharing stantial payoff in terms of improved market the knowledge they have created, with 38.4 The Payoffs for KM performance. In fact, each of the KM efforts percent stating that they do this to a High or Why would leaders today, with all of the listed in Exhibit 2 is significantly correlated Very High extent and 34.4 percent also indi- various pressures and demands on their time, with the Market Performance Index. The KM
EXHIBIT 1: ARE ORGANIZATIONS PROMOTING A LEARNING CULTURE?
Moderate Very High Response Items Not At All Small Extent High Extent Extent Extent
We are aware of where our critical knowledge 4.1% 8.7% 43.6% 19.9% 3.7% deficiencies are.
We are increasing the knowledge content of our 4.1 20.3 41.2 25.3 9.1 products and services.
We support open, ready access by employees to the 5.4 22.7 33.6 30.9 7.5 knowledge we create.
Managers view themselves as active learners. 3.4 28.4 40.9 20.6 6.7
Managers view themselves as active mentors 4.1 30.2 42.0 18.0 5.8 and coaches.
Knowledge is easily acquired from experts and 2.0 26.4 44.9 21.3 5.4 co-workers within our organization.
We are effective at focusing our knowledge retention 12.7 29.1 40.1 15.4 2.7 initiatives on business critical targets.
44 PEOPLE & STRATEGY barriers to KM. Survey coordinators asked EXHIBIT 2: THe PAY-oFF FoR KNoWleDGe mANAGemeNT respondents: What are some of the top fac- Potential Business Outcomes/Benefits Percentage Answering Correlation with tors that prevent you from effective KM to a High or Very High Market Performance practices? These primary barriers are cited in Extent Index* Exhibit 3 and include “not enough time and Increase operating efficiency and productivity 22.1% .24 financial resources” and “a lack of manage- ment support and accountability.” Improve client/customer relations 29.2 .20 Improve vendor/supplier/partner relations 19.8 .19 By far, the ability to devote sufficient time to successfully add new products/services 24.5 .19 designing and implementing KM practices is the key barrier. On the other hand, keeping Capture and retain critical knowledge from 23.6 .14 up with technology changes was not viewed exiting employees by respondents as a primary factor in pre- speed up employee learning curve regarding venting KM practices, with only 15 percent 27.8 .18 new skills/competencies saying that this is the case. Competing pri- Improve knowledge sharing across orities exhaust an organization’s resources 24.8 .18 operating units and the ability of managers to focus long enough to see these initiatives pay, despite Improve knowledge sharing across 21.6 .19 clear evidence that KM can yield positive management levels business outcomes. Prevent research duplication/development efforts 16.7 .21 Retain key knowledge workers/talent 24.2 .19 Hewlett Packard (HP) provides a good exam- ple of a technology company that takes the Improve on-boarding process for new employees 25.7 .13 time to effectively capture knowledge in a Identify key competencies and success factors very dynamic organization (Gotthart & 26.9 .16 for specific roles Haghi, 2009). Managers create Knowledge *All correlations are significant at the p<.05 level (2-tailed). Briefs, or KBs, that are short documents of no more than 10 pages that describe new tech- nologies, lessons learned, best practices and/ EXHIBIT 3: BARRIeRs To eFFeCTIVe KNoWleDGe mANAGemeNT (select all that apply) or strategic and technical data that are writ- Response Items Percentages (most cited) ten exclusively by employees. KBs went into practice in April 2001. To date, 4,000 KBs are Not enough time 62.5% available to anyone in the company, and Not enough financial resources available 48.5 about 600 new KBs are published annually. Each KB goes through a peer review and edi- lack of management support 48.5 torial process, and only those that are relevant lack of accountability 47.8 and of high quality are chosen. Difficulty in calculating an RoI for knowledge retention efforts 37.9 To make writing KBs more attractive, HP Difficult to maintain/pass on 35.9 offers incentives that become part of employ- organization/technology changes too fast for knowledge ees’ career paths. Monetary awards are given 15.0 retention efforts to be valuable to employees who write several KBs, and the best KBs are selected for publication in the HPS Technical Journal, read throughout initiatives having the closest association with edge Exchange had to prove itself. Was it the HP community and often provided to improved market performance appear to be worth the financial investment to maintain it? customers. Time is an issue, but taking the efforts to improve operating efficiency and To answer this question, business impact and time has to be a priority since it produces productivity (r = .24) as well as initiatives ROI were assessed across time and groups. big results. aimed at eliminating duplication of efforts in While the process of deciding what to measure research and development (r = .21). and how to get precise measurements was labor intensive, researchers found an overall Implications—What Would To illustrate this point, Accenture, the global benefits-to-cost ratio of 20:1. The final assess- Drucker Recommend? consulting and technology services company, ment was that it is worthwhile to implement Based on these results, we are forced to say recently created a knowledge management well-designed and supported KM tools, given that Drucker’s “glass is half full.” Notable system called The Knowledge Exchange the resulting improvements in productivity. progress has been made across a entire cross (Aaron, 2009). Its primary purpose is to help section of organizations in recognizing the employees gather and make more efficient use importance of KM, but practices vary wildly of vast amounts of business information. If Barriers to Km and multiple issues remain undermanaged. successful, it would allow employees to Why don’t more organizations implement Our research demonstrates that there are sig- increase operating efficiency as well as overall KM initiatives if they are beneficial? The nificant correlations between specific KM productivity. Like other programs, The Knowl- study revealed several basic and pervasive practices and business performance, but it ➤
Volume 32/Issue 4 — 2009 45 GM and Toyota
In the fall of 1994, Drucker outlined how GM was on a losing path cutback in production – the cost of two idle U.S. plants has been (Drucker, 2006). He observed that GM’s lack of market focus and estimated to be approximately $35 million a month. But, while some inability to take decisive action would have dire consequences. Druck- of Toyota’s workers may not be on the production line, they are not er stated that GM did the right things for 70 years, even withstanding idle; workers are engaged in learning and focusing on longer-term the Great Depression without a loss of market share. However, in the maintenance and quality improvement projects that they didn’t have late 1970s, GM’s assumptions about the market and production were as much time for when production was brisk. Workers spend time in no longer valid. The market changed to reflect “lifestyle” segments training sessions and in exploring better, more efficient ways to assem- and income became only one factor in the “why to buy” equation. ble vehicles. “It would be crazy for us to lose people for 90 days and then rehire and retrain people and hope that we have a smooth ramp- GM attempted to compete by automating the large-scale mass produc- up coming back in,” Jim Lentz, president of Toyota Motor Sales, told tion process and ignored the benefits of lean manufacturing. Lean the Wall Street Journal (Linebaugh, 2008). manufacturing occurs when small-scale production allows for short runs and variations in models so that they are less costly and more GM has been moving to a debilitating cash position for years and, in profitable than long runs of uniform products. turn, GM’s cash needs have now gotten so out of hand that the com- pany is depending on government money to survive. Although Toyota Drucker saw GM as “patching things over with prodigious energy, hard is also having short-term cash-flow difficulties at present, it does not work and lavish investments of time and money” (Drucker, 2006, p. have GM’s record of years of cumulative cash-flow losses (More, 146). However, this strategy only confused the customers, dealers, 2009). Unlike GM’s resistance to learning and focus, Toyota has mod- employees and even GM’s management. In Drucker’s estimation, GM eled it and that has paid off. Toyota has minimized its cash losses neglected its real growth market in light trucks and minivans. Long a during the downturn in the global markets and continues to be playing proponent of the importance of effectiveness over efficiency, Drucker at the top of its game. saw both effectiveness and efficiency together as the ideal. GM ignored both operating principles in how it has run its business (Druck- Here are some of the comparison factors between GM and Toyota that er, 2006). reflect Drucker’s observations:
In contrast, Toyota took a different path and the results speak for GM Toyota themselves, with Toyota’s success as a top performer in many car segments. Toyota is an example of laser focus on its market and, Loss of market focus and an Highly market focused and unlike GM, has clarity in its brand categories. Customers have clear unwillingness to trim its portfolio willing to limit its portfolio choices with Toyota, unlike GM’s brand confusion. The Ivey Business of cars (95+ in its portfolio) Journal Online (More, 2009) gives the following example: Let’s assume Assumption that every car in Has selected its market you have $25,000 to spend on a car. You could choose from two to the portfolio must produce segments and unlike GM doesn’t three different Toyotas, while, with the GM divisions, you could buy long-term, net cash flow and compete with itself in them many different cars across a confusing array of brands, models and high market share in those dealer portfolios. segments, while competing with itself in many market segments GM cars have been competing with each other by targeting the same In need of government bailout – Solid net cash flows until car buyers and market segments for a long time: This requires the negative net cash flow recently size of the market share to be larger before a particular vehicle can Customer confusion Clear choices for the customer be profitable and create positive cash flow. Unfortunately, GM’s market share continues to slide. Toyota’s focus on fewer car styles that appeal Vast amounts of mechanical Offers two basic engine choices to different segments with less overlap is far more profitable than GM’s and cosmetic variations leading and builds on efficiency of less to inefficient production and options and outsource suppliers unwieldy and unprofitable approach in the past. It is only under the increased numbers of outsource orders of a government-forced restructuring that GM is reducing its suppliers number of brands. Confusion among many Clear strategies and programs employees on what they can to educate employees on their Toyota also serves as a model for manufacturing effectiveness, and do to improve efficiency and role, work requirements and how its use of lean manufacturing has helped set it apart from its com- effectiveness they can innovate to improve petitors. Furthermore, Toyota’s culture reflects Drucker’s belief in the efficiency and effectiveness importance of ongoing education for the knowledge worker. In 1999, Excessive duplication of people Streamlined approach to adding Toyota established the University of Toyota and provides ongoing train- and resources people and use of resources ing and development programs for its 8,500 employees and over 100,000 dealer associates worldwide (Morrison, 2008). Complex and fragmented High degree of market focus manufacturing, huge increases yields lower car unit variable in the number of different costs, and therefore higher unit In this time of widespread cutbacks, layoffs and furloughed work- parts, platforms, engines, and margins, e.g., high positive cash forces, Toyota models how to address knowledge and talent retention. transmissions, driving up the flow for Camry Toyota announced in late 2008 that a decision had been made to unit variable costs of producing retain all well-performing, nonunion, U.S. employees despite the eco- each car and dramatically nomic downturn. Like other automakers, Toyota is facing a huge reducing unit margins
46 PEOPLE & STRATEGY also illustrates that the organizations most benefitting from these practices are still relatively limited in number. It is unfortunate that more organizations are not fully engaged in KM practices: Their business performance could be positively impacted. Still, high- performing companies incorporate KM into the daily life of the organization and have systems in place to capture, transfer and rep- licate best practices. That is quite clear from this study.
KM activities should be embedded within the DNA of the organization. Employees should be recognized and rewarded for engaging in KM activities and their use should be reflect- ed in performance plans. Many organizations haven’t developed cultures in which learning and KM are priorities. By doing so, an orga- nization can model the principles Drucker emphasized: clarity on tasks, continuous learning and innovation, focus on quality and goal alignment with the overall direction of the company. KM strengthens the role of the knowledge worker, reinforces the view that workers are assets and supports the Human Resources Development and Management, 9(2/3), More, R. (2009, March/April). How General Motors lost effectiveness of a knowledge-based learning 305. market focus – and its way. Ivey Business Journal Online. culture. London, 73(2), 1. Key, M. (2008, October 24). The loss you can’t afford. TrendWatcher, Institute for Corporate Productivity. Morrison, M. (2008, January). Leaner e-learning. Train- References Retrieved from http://www.i4cp.com. ing, 45(1), 16-18.
Liebowitz, J. (2009). Knowledge Retention: Strategies and Nahapiet, J., & Ghoshal, S. (1998). Social capital, intel- Aaron, B. (2009). Determining the business impact of lectual capital, and the organizational advantage. Academy knowledge management. Performance Improvement, Solutions. Boca Raton, FL: Taylor & Francis/CRC Press. of Management Review, 23, 242-266. 48(4), 35-45. Linebaugh, K. (2008, October 13). Toyota keeps idled Nonaka, I., & Takeuchi, H. (1996). The knowledge creat- Boudreaux, G. (2005, Winter). Peter Drucker’s relevance workers busy honing their skills. Wall Street Journal ing company: How Japanese companies create the for electric cooperatives. Management Quarterly, 18-32. Online. Retrieved from http://online.wsj.com. dynamics of innovation. New York: Oxford University Press. Davenport, T.H., & Prusak, L. (1998). Working knowl- McCann, J., & Buckner, M. (2004). Strategically integrat- edge: How organizations manage what they know. Boston: ing knowledge management initiatives. Journal of Senge, P. (1990). The leader’s new work. Sloan Manage- Harvard Business School Press. Knowledge Management, 8(1), 47-63. ment Review, 32(1), 1-17. De Geus, A. (1997). The living company. Boston: Harvard McCann, J., Weeks, M., & Nelson, K. (2007). Survey on Stewart, Tom A. (1998). Intellectual capital: The new Business School Press. knowledge management. Unpublished. wealth of organizations. New York: Currency Doubleday. Drucker, P. F. (1959). Landmarks of tomorrow. New York: Harper.
Drucker, P. F. (1966). The effective executive. New York: Mary Key, Ph.D. is the president of Key Associates Inc., an organizational effectiveness Harper. consulting firm. She is the former Leadership Pillar Director for the Institute for Corpo-
Drucker, P. F. (1969). The age of discontinuity. Oxford: rate Productivity (i4cp) and currently serves as an Executive in Residence for i4cp. She Butterworth-Heinemann. has authored several books, including CEO Road Rules: Right Focus, Right People, Right Execution. She can be reached at [email protected]. Drucker, P. F. (1973). Management. New York: Harper.
Drucker, P. F. (1999). Management challenges for the 21st Holly B. Tompson, Ph.D. is a senior research analyst at the Institute for Corporate century. Oxford: Butterworth-Heinemann. Productivity. Tompson has taught in the management departments of several universi- ties, including the University of Waikato in Hamilton, New Zealand, and, most Drucker, P. F. (2006, February). What executives should recently, The University of Tampa. She can be reached at [email protected]. remember. Harvard Business Review, 146-147.
Edvinsson, L., & Malone, M. S. (1997). Intellectual capi- Joseph McCann, Ph.D. is dean of the Davis College of Business and Professor of Man- tal: Realizing your company’s true value by finding its agement at Jacksonville University, Jacksonville, FL. He has contributed in the past to hidden brainpower. New York: Harper Collins. People & Strategy and other leading journals on organization design and change topics. Gotthart, B., & Haghi, G. (2009). How Hewlett-Packard He can be reached at [email protected]. minimizes knowledge loss. International Journal of
VOLUME 32/ISSUE 4 — 2009 47 Turning 'Survive' into 'Thrive': Managing Survivor Engagement in a Downsized Organization
Brenda Kowske, Kyle Lundby and Rena Rasch, Kenexa Research Institute
48 PEOPLE & STRATEGY Layoffs, downsizing, right-sizing, reduction-in-force: to the workforce they add up to job loss and a great deal of stress for employees and their loved ones. Laid-off workers are left with uncertainty, often in a state of near panic. In this recession those numbers are large and getting larger.
ut there is often more to the story. compensate for lower sales by reducing human months following the downsizing event. It is Although still employed, the survivors capital-related operational costs. Some studies difficult to say where employees go after leav- Bof reductions in force are often demor- have argued that the impact of downsizing on ing an organization after downsizing: Perhaps alized—left as walking wounded. Blindsided profitability and shareholder value is actually they choose to pursue educational opportuni- by the extrication of their friends and col- quite limited (Lewin & Johnston, 2000, Cas- ties or personal life goals. Presumably, leagues, the remaining employees question cio and Young, 2003; De Meuse, Bergmann, marketable talents such as high-performance their own security. Mistrust in senior man- Vanderheiden, & Roraff, 2004). and a jack-of-all-trades capability are also agement festers as survivors struggle to valuable to competitors (despite the slowing understand why the layoffs were necessary, “Survivor sickness” (Band & Tustin, 1995) of hiring rates) that some organizations are why certain people were chosen and what and “survivor syndrome” (Kim, 2003) may picking up top talent. they need to do in order to be among the very well work against potential returns. And blessed that stay. layoffs can negatively affect the organization- Previous research reveals some hopeful al culture, creating ramifications for employees insights: For example, employee perception Amid this bleak scenario, senior managers and customers (Bastien, Hostager, & Miles, of control over outcomes, trust in manage- are tasked to motivate the remaining work- 1996; Shah, 2000). A review of survivor ment a lack of identification with laid-off force and lead the organization to recovery engagement in the 2007-2009 economic crisis employees and a sense of fairness may miti- and beyond. Peter Drucker once pointed out, provides some valuable insights. gate the negative effects on phenomena “Accept the fact that we have to treat almost similar to employee engagement, such as sur- anybody as a volunteer.” Those remaining at The data used in this study demonstrated that vivors’ organizational commitment (Brockner the organization are choosing to be there, U.S. workers’ employee engagement, as mea- et al., 2004; Brockner, Grover, Reed, DeWitt, and it is up to management to reinvigorate sured by the Kenexa’s Employee Engagement & O’Malley, 1987). Our research points to the survivors. Index, was significantly lower (p < .001) if other bright spots that should be considered layoffs had occurred in the preceding 12 as companies seek to minimize the downside To discover the most effective way to emerge months. If no layoffs had occurred, U.S. of downsizing. from downsizing with an intact, energized employees scored a 71 percent on the workforce, the Kenexa Research Institute Employee Engagement Index in 2009. Only ™ Retaining the Survivors (KRI) used the WorkTrends data to explore an average of 57 percent of U.S. employees the effects of layoffs on employee engagement answered in the affirmative to the of the There are aspects of the organization and the and turnover intent, and to identify the work 1 Index’s four items if a layoff event had taken job that employers can manipulate in order to characteristics most important to layoff sur- place. In short, organizations may have cut engage and retain the survivors. Previous vivors’ engagement with their work and the operational costs, but they are more likely to research (Trevor & Nyberg, 2008) has dem- organization. Our findings translate into rec- have a portion of their workforce disen - onstrated that organizational commitment ommendations meant to enable executives gaged—fertile ground for the symptoms that moderates the relationship between layoffs and HR practitioners who are seeking to accompany survivor sickness: anxiety, depres- and turnover–in other words, the more com- retain the talent they chose to keep. sion and low self-confidence (Kim, 2003) that mitted and satisfied employees were with their may negatively affect the organization’s com- choice to join an organization, the weaker the The Outcomes of petitiveness over the long term. relationship between layoffs and turnover.
Downsizing Conventional wisdom assumes that, in the In the same study, HR practices also mat - context of high unemployment rates in an tered, specifically formal arrangements for Downsizing, planned or unplanned, often economic downturn, employees who made addressing perceptions of injustice (referred accompanies attempts to reduce costs while the cut and avoided layoffs stay at the orga- to as “procedural justice”), feelings of “fitting improving efficiency and sustaining efforts nization, at least until the job market loosens. in” and job fit, plus the cost of leaving to the devoted to meeting production and perfor- Not so, according to research by Trevor and employee (i.e., “job embeddedness”), and mance goals. Simplistically speaking, Nyberg (2008): Voluntary turnover rates career development support, such as succes- organizational leaders are looking to maintain increase within the calendar year of, and 24 sion planning. or improve profit margins. In healthy times leaders seek a “lean-and-mean” organization 1. Kenexa’s Employee Engagement items include the concepts pride in the organization, likelihood of referring a friend by aligning with core strategy and reducing to work at the organization, overall company satisfaction, and that the employee rarely thinks about leaving the redundancies. When times are hard, leaders organization. ➤
VOLUME 32/ISSUE 4 — 2009 49 The magnitude of the reduction has an uncer- high turnover rates, engagement positively layoffs were men and 46 percent were women. tain impact on employees. While some affects business outcomes as well. Prior Layoff survivors were generally equally distrib- research has demonstrated that the magni- research has found it to be significantly relat- uted among employees aged 25-34 (27 percent), tude of the layoff event is virtually irrelevant ed to customer service scores (Wiley, 1996) 35-44 (24 percent) and 46-55 (25 percent), with (Trevor & Nyberg, 2008), others have shown and business financial performance metrics a smaller percentage of employees in the young- no effect when smaller reductions are com- (Wiley & Campbell, 2006). est (18-24; 8 percent) and eldest age groups pared to larger reductions of more than 10 (55-64; 15 percent; over 65, 1 percent); 18 per- percent of the workforce (De Meuse et al., In the context of layoffs, employee engage- cent of employees in organizations that had 2004). Therefore, any employer seeking to ment is even more important. Using statistical conducted layoffs were represented by a union soften the blow to the organization after regression analysis to investigate interaction and 82 percent were not. downsizing should attend to certain employ- effects, we found that employee engagement ee characteristics regardless of reduction makes the difference between employees’ The largest groups of employers who had magnitude, but certainly in cases of a large intent to stay or go, but even more so if the conducted layoffs were in retail/wholesale reduction of force. organization has downsized. If layoffs had trade (10 percent), heavy manufacturing (10 occurred, disengaged employees were 2.5 percent) with fewer in healthcare services (8 The Effect of times more likely than engaged employees to percent), light manufacturing (6 percent), consider leaving their organization in the education (6 percent) and construction or Employee Engagement next 12 months. Given the relationship engineering (5 percent). among layoffs, engagement and turnover on Retention intention, organizations that wish to retain In this research, we identified the pivotal the remaining workforce should seek ways to aspects of work related to layoff survivors’ Employee engagement is a critical piece of a reengage them. engagement, the results of which enable lead- satisfied, stable workforce. Defined as the ers to prioritize intervention strategies. To extent to which employees are motivated to contribute to organizational success, and are Research Method investigate exactly how to build engagement willing to apply discretionary effort to accom- during times of layoff stress, we used the rela- plishing tasks important to the achievement of The Kenexa Research Institute (KRI) investi- tive weights analysis technique (RWA; Johnson, organizational goals, our study found employ- gated possible influencers of turnover intent 2000; Lundby & Johnson, 2006). By selecting ee engagement significantly and negatively following layoff events using the Work - the sample of U.S. employees who indicated related to turnover intent, i.e., if the employee Trends™ data, an employee opinion database that their organization had completed layoffs is “seriously considering leaving in the next 12 resultant of the 2009 WorkTrends survey. in the last 12 months, we were able to use RWA months” (r = -.41, p < .01). Although we were This survey is administered annually online to identify the most important aspects of work not able to correlate engagement with actual to randomly selected people in the United as they relate to employee engagement, there- turnover, turnover intention has been shown States, and they are allowed to take the survey by answering the question, “How can to be an antecedent to actual turnover (Mitch- if they work full time at an organization with employees’ engagement be strengthened in the ell, Holtom, & Lee, 2001). at least 100 employees. From a total sample year following layoffs?” size of 9,998 U.S. employees, we were able to Other closely related constructs to engage- focus on the survivors of layoffs, or the To identify the most critical items for bolster- ment, such as job satisfaction, job involvement employees whose organization had “laid off ing employee engagement from the 115 items and organizational commitment have been employees in the last 12 months” (n=4281). in the WorkTrends survey, we used the RWA found to be related to turnover itself (Grif- cascading technique suggested by Lundby feth, Hom, & Gaertner, 2000). Beyond the For the sake of context, 54 percent of the and Johnson (2006). In order of importance, costs of hiring and training that accompany employees who worked at an organization with RWA identifies potential ways to drive
50 PEOPLE & STRATEGY employee engagement. Unlike correlation Exhibit 1: Rank oRdeR of layoff suRVIVoR engagement dRIVeRs and and regression, RWA reflects the unique vari- theIR RelatIVe weIght. ance each aspect of work accounts for in engagement. For example, let’s say the Work- Rank theme RW item (shortened text) Trends’ dimensions, or items grouped into 1 Confidence & security 9.8% Confidence in the future of company themes, make up the whole pie of engage- ment. RWA identifies each dimension’s slice 2 Career advancement 7.9% feeling of a promising future for me at my company size: aspects of confidence and security 3 stress & Balance 7.8% organization supports work/life balance account for 9.8 percent of the pie, while 4 the work Itself 5.9% get excited about my work career advancement’s slice is 7.9 percent of the pie. The benefit of RWA is that the slices 5 senior management 5.7% Confidence in senior leaders do not overlap; that a piece of the pie is 6 Corporate Responsibility 5.6% Corporate responsibility (CR) efforts increase assigned to only one dimension of work. work satisfaction These percentages give you the relative importance of dimensions of the workplace 7 Rewards & Recognition 5.5% satisfied with the recognition received for the work done to engagement. 8 training & development 5.4% given a real opportunity to improve skills in my In the WorkTrends survey, KRI measures company employee engagement in addition to 18 9 ethics & Integrity 5.3% organization strives to serve the interests of dimensions encompassing 115 employee atti- multiple stakeholders tude items. This analysis used RWA to select 10 Quality & Improvement 5.2% day-to-day decisions prioritize quality and the dimensions and items most closely related improvement to engagement, taking into account the extent of their relationship to each other2. 11 Customer orientation 5.1% employees recognized for delivering outstanding customer service Driving Employee 12 work Processes 5.0% People I work with do their very best 13 health & safety 5.0% safety is a priority Engagement throughout 14 manager effectiveness 4.8% overall managerial performance the Downsizing Process 15 diversity 4.3% employees have equal opportunities for advancement (and Beyond) 16 Innovative Climate 4.1% action on promising new or innovative ideas. 17 Communication 4.0% open, honest two-way communication It seems a lofty goal to maintain or increase employee engagement despite layoffs. 18 goals & Performance 3.5% fair job performance evaluation Strengthening engagement can be counterac- tion taken against the collective angst and concern for employees’ well-being. For those raise the scores’ averages; after layoffs, man- anxiety felt by employees during downsizing. who have experienced layoffs, concerns agers consistently rate their workplace Exhibit 1 lists those aspects of work most about safety being a priority are downgrad- opinions as more favorable than individual important to layoff survivor’s engagement in ed out of the top 10 important issues, unlike contributors. (See Exhibit 3 on next page.) order of magnitude. their colleagues who have not experienced a recent downsizing. Several conditions of the layoff event may Many of the issues that are important to sur- be associated with employees’ engagement. vivors are also important to employees whose Beyond the most important issues in survi- In WorkTrends, we measured two such con- organizations have not downsized in the past vors’ engagement, we can also look to the gap ditions: the time since the layoff event and 12 months. For comparison purposes, a sepa- in ratings between those who have been the “proximity” of the event through the rate RWA (R2 = 0.77) on employees in through organizational layoffs and those that question, “Were members of your work- non-layoff organizations demonstrated that have not. By looking at employees’ reports of group laid off?” If we correlate the time since these employees also place primary impor- favorability and fulfillment of the top 10 the layoff event with engagement, we can tance on their confidence in the organization’s items most important to employee engage- preliminarily investigate if and when effects future, are looking for a promising future for ment, we can identify the aspects of of layoffs on engagement might subside. The themselves and seek recognition and training employees’ work and attitudes which down- WorkTrends data find a very small but sig- opportunities. sizing most affects. (See Exhibit 2 on next nificant correlation (r = .06; p < .01) between page.) Overall, layoff survivors were signifi- the Employee Engagement Index and the However, those experiencing layoffs place cantly less satisfied with these aspects of time elapsed since the layoff event. (See more importance on the organization’s cor- work. In addition, the sentiments of employ- Exhibit 4 on next page.) Using t-test and porate responsibility efforts and its attempts ees in managerial and supervisory positions Cohen’s d effect size analyses, we also found to serve multiple stakeholders, not just shareholders. They value their confidence in 2. RWA attempts to “orthoganalize” predictors (i.e., force/rotate predictors to be uncorrelated) while measuring the strength senior leaders over the non-layoff employ- of relationship between the dependent and independent variables. For this analysis, the RWA model accounts for 77 ees’ interest in management showing a percent of the variance (R2 = .77) in the engagement measure. For a technical explanation, see Johnson (2000). ➤
Volume 32/Issue 4 — 2009 51 that, in unaffected workgroups, survivors’ sified into three categories: (Schaufeli & Bakker, 2004). We also know engagement was slightly but significantly that engagement at the organizational level is higher (d = 0.2 standard deviations) than for • confidence in the vision for the future; related t o turnover (Harter, Schmidt & Hayes, survivors in workgroups whose team was 2002). Recently, Macey & Schneider (2008) • supportive management; and downsized. (See Exhibit 5.) have posed a hypothetical model, based on • the work itself. previous research, that suggests engagement If we examine the top 10 aspects of work that and related constructs such as motivation are important to survivor engagement, items Other studies have demonstrated the influ- and commitment can be influenced by orga- identified in the RWA could be logically clas- ence these forces may have on engagement nizational innovations.
Exhibit 2: PERcEnT Of EmPLOYEES RATinG TOP 10 iTEmS fAvORAbLY: LAYOff SuRvivORS AS cOmPAREd TO EmPLOYEES in ORGAnizATiOnS wiTh nO LAYOffS in ThE LAST 12 mOnThS3.
confidence in the future of company
feeling of a promising future for me
Organization supports work/life balance no layoffs in past 12 months Get excited about my work Layoff survivors confidence in senior leaders
cR efforts increase work satisfaction
Satisfied with the recognition
Opportunity to improve skills
Organization serves multiple stakeholders
daily decisions prioritize quality
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Percent Responding Favorably
Exhibit 3: PERcEnT Of EmPLOYEES RATinG TOP 10 iTEmS fAvORAbLY: mAnAGEmEnT LAYOff SuRvivORS cOmPAREd TO individuAL cOnTRibuTOR SuRvivORS4.
confidence in the future of company
feeling of a promising future for me
Organization supports work/life balance individual contributor survivors Get excited about my work management layoff survivors confidence in senior leaders
cR efforts increase work satisfaction*
Satisfied with the recognition
Opportunity to improve skills
Organization serves multiple stakeholders
daily decisions prioritize quality*
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Percent Responding Favorably
3. T-tests demonstrate that all comparisons were significantly different at p<.01 level. 4. Asterisks denotes results of t-tests when comparison was not significant at the p<.05 level.
52 PEOPLE & STRATEGY These three broader categories provide a Exhibit 4: employee engagement Index (eeI) leVels sInCe layoff eVent. direction for leaders to begin their drive for improved employee engagement. Following a discussion of these aspects of work, we will 100 lay out a few action steps that could help sup- 90 port the organization a s i tattempts t o improve employee engagement index survivor engagement. 80 linear trend
70
Confidence in and 60
Vision for the Future 50
40 As we can see from the results, there is a focus Percent Percent Favorable on – and no doubt uncertainty in – the future. 30 The confidence and security dimension was 20 the most important issue for strengthening employee engagement, followed by a view of 10 a promising future for the employees them- 0 selves. This substantiates earlier KRI research >=1 2 3 4 5 6 7 8 9 10 11 12 on engagement (Kenexa, 2008). However, Months since layoff event additional analyses demonstrated that, com- pared to employees who have experienced layoffs, employees who have not experienced Exhibit 5: employee engagement Index (eeI) leVels sInCe layoff eVent. layoffs are 3.5 times more likely to have con- fidence in the future and 2.4 times more likely to envision a promising future for 100 themselves at work. With the other items’ layoff/no layoff group differences at approx- 90 employee engagement index imately 10 percentage points, employees’ 80 confidence in and vision of the future is a 70 clear opportunity area. 60 It is difficult to build confidence without 50 foundational trust in leadership, and by proxy, the organization’s future viability. 40 Percent Percent Favorable Trust and confidence go hand-in-hand 30 because both constructs are based on an employee’s expectation of desirable outcomes 20 that matter to him/her. While an employee 10 builds confidence in the organization by looking out for social cues, such as organiza- 0 Workgroup Members laid off No workgroup members laid off tional and coworker opinion, that will help predict personal outcomes (Leiter & Harvie, 1997), trust is based on the expectation that for the organization, examples of previous Communicate the future interactions will be positive (Robin- successful change implementations, and the son, 1996). The question now arises, “How long-term strategy. potential down-side of their actions (Pater- do we build trust and confidence?” During times of high organizational stress, son & Carey, 2002). senior leadership is likely continuously evaluat- ing its strategy against progress and making Communicate about the change. Thus, leaders can pursue strengthening trust adjustments in response to the current condi- In a world of unknowns, employees will and confidence by clearly communicating tions. Sharing the strategic discourse with likely attempt to predict the future by reflect- why the layoffs occurred and how the action employees, and conveying a confident vision, ing on the past. Trust can be built by openly of downsizing, as a fulfillment of organiza- can help create confidence and a feeling of addressing the past, and then moving on to a tional strategy, will position the organization involvement (Cobb, Wooten, & Folger, 1995). vision of the future. In a unique sample of for future success. While senior leaders often layoff victims and survivors, research demon- Confidence in management is also important take center stage in articulating strategy, strated that trust in management was to survivors’ engagement. Confidence cas- strongly and positively related to the quality managers can play a particularly important cades: Supervisors’ confidence in the of communications about the downsizing role by transmitting that message to employ- organization has been found to be positively event, specifically messages surrounding the ees, given the closer relationships they often related to their subordinates’ confidence in rationale for the layoffs, a post-layoff vision enjoy with the workforce. the organization (Leiter & Harvie, 1997). ➤
Volume 32/Issue 4 — 2009 53 Show what a bright organizational policies or culture into actual consideration future means for each employee. for individual employees. Engagement may also be related to support and recognition, the It is all well and good that the organization seventh-ranked item among the top 10. Dur- will be viable in five years, but employees are ing times of uncertainty, recognition for a job also concerned with what it means for them, well done may be all the more important. both in terms of security and career growth. If competitors recover faster, the survivors The ninth most important aspect of work that saw the organization through layoffs underscores the value of supportive manage- may be tempted to catch the rising star. Com- ment. Employees associate their engagement municating a clear path for their growth and after layoffs with a leadership team that is tangible investment in training and develop- concerned with the needs of multiple stake- ment may help employees remain excited holders, not solely stockholders. The sixth about their current employer. element of work also supports this assertion: Survivors value their organization’s role in the larger community through their corpo- Play fair. rate responsibility efforts. Together, these According to past research, fairness and com- results indicate that after the layoffs have munication likely support trust. Hopkins and taken place, employees are also looking to Weathington (2006) supported the findings management at large to show that company presented here: In a sample of lay-off survi- leaders care and are concerned for the well vors, trust was found to be strongly and being of the workforce and the greater exter- positively related to organizational commit- nal community. ment and organization satisfaction, and strongly, negatively related to turnover inten- tions. These authors threw fairness into the Support work-life balance. mix—distributive justice (rewards and While there is no easy solution to keeping resources are doled out fairly, procedural jus- work hours reasonable and work time flexible tice, and that decisions are made based on fair after layoffs, there are approaches that a processes) and interactional justice (the manager can use to help find the efficiency degree to which people are treated with that will allow workers to balance home and respect and dignity). work lives. For example, employees are often a tremendous resource for creative ideas Fairness had a role to play in that perceptions around workforce planning and production of distributive and procedural justice medi- activities. ated the relationship between trust and organizational commitment and satisfaction. Whether the staff reduction is permanent or Paterson and Carey (2002) found that per- temporary, managers can involve employees ceptions of interactional justice mediated the in identifying work-arounds and modifica- relationship between leaders’ communica- tions to enhance efficiency. Doing so not only tion about the layoff event and its positive would help alleviate the workload so employ- effect on employees’ post-downsizing trust in ees can work reasonable hours, but also it management. Leaders should ensure that could have the benefit of helping employees resource allocation decisions (distributive feel more confident in their position with the justice), the procedures used to implement organization and more in control of their job decisions (procedural justice) and the treat- and work environment. ment of subordinates (interactional justice) are perceived as fair (Greenberg, 1990) if they If survivors feel more in control of outcomes wish to belay the negative effects of layoffs. at work, negative effects of layoffs on survi- vors can be partially mitigated (Brocker et al, 2004). Managers who demonstrate empathy Supportive by supporting employees’ attempts to main- Management tain work/life balance and sympathize when work is overwhelming stand to strengthen Our research demonstrates that management their professional partnership through a genu- plays a role in engaging layoff survivors. ine concern for their employees’ well-being. Employees associate support for work/life bal- ance with their own feeling of engagement, perhaps testament to the emotional toll layoffs Recognize achievements. take on employees. It is often managers who Morale usually runs pretty low after a down- translate the organization’s work/life balance sizing event, as this and other research has
54 PEOPLE & STRATEGY shown. A little pat on the back, particularly for survivors who are working harder to Which is More Important for Successful Change: cover for the absence of others, might really make a difference to employees. Managers Commitment to the Organization or the Inititative? can also use recognition to convey to direct Chris Harris, Harris Lean Systems reports that their role in the organization is indeed important, strengthening their team’s Doyle Lucas, Falls School of Business, Anderson University feelings of job security. Interestingly, the sat- We all have heard the famous statistic that predict the desired discretionary behaviors. isfaction with recognition emerged as more 60 to 80 percent of change initiatives fail to We were surprised by the findings: important to engagement than both fair pay produce their intended business result (Beer and satisfaction with the amount of pay. • Among production associates (those & Nobria, 2000; Kling, 2004). Much of the actually creating products), we found a literature in organizational development sug- focus on building emotional commitment Broaden the definition of gests that change success depends on new to the organization, not the change behaviors acquired by employees (Burke & itself, was more powerful in accounting “important stakeholders.” Litwin, 1992; Pitts, 2006). for the desired behaviors. Companies are increasingly making invest- We set out to answer the question: “Is a • For support associates, however, we ments in social responsibility. Employees found the opposite. The company is value these efforts. In fact, according to the company better off focusing on building employee commitment to the organization, better off focusing efforts on building historical WorkTrends data and data used in emotional commitment to the change this study, U.S. employees’ reports of their or should it focus on building commitment to the change initiative to create the desired initiative, not to the organization. satisfaction in and the “genuineness” of their new behaviors?” • Employees with less than one-year tenure organization’s corporate responsibility efforts at their organizations had the highest have risen each year since 2007, and signifi- To answer this question we surveyed more correlation between desired behavior and cantly so between 2007 and 2008 (p < .01). than 800 employees at multiple levels in commitment to the change initiative. This finding supports the preliminary notion three different manufacturing facilities. We • The longer the tenure with the company, that employees’ engagement with and com- focused on the dimensions of commitment, the less that desired behaviors could be mitment to an organization is supported by behaviors and demographic characteristics. explained by commitment to the change. the organization’s involvement not only with All three organizations were converting from employees themselves but in perceived sus- a historical mass-production mode to just-in- These findings suggest that human resourc- tainability. time or lean production manufacturing. es, often in the role of designing, supporting and communicating change projects, can The Work Itself We found that an employee can be commit- tailor efforts to engage employees and fos- ted to the organization or the change initiative ter desired behaviors. Because there does in two different ways: Our results suggest that satisfaction with not seem to be a universal relationship • Emotional commitment reflects belief in between commitment and behavior, custom- one’s work and the perception that manage- the merits of the target. ized approaches may have more impact. For ment values quality are also positive forces in example, in the companies we studied, it engagement with layoff survivors. It is easy • Continuance commitment reflects a cost appears that new support associates would to see why these aspects of work made it on associated with not being committed. For example, an employee may be be more likely engaged by understanding the list: Excitement can be tough to muster in committed to the organization because how certain behaviors will help the project a post-layoff environment, and quality might he or she cannot afford the perceived be successful. Conversely, a longer tenured decease as fewer employees attempt to hold cost of changing jobs. (Herscovitch & production associate may be more swayed fast to pre-layoff standards. Meyer, 2002). by understanding how his or her actions will help the company. Behaviors also manifest themselves in dif- Bolster work excitement. ferent ways: For more on the methodology and results of Being excited about work can be difficult • Compliance behaviors represent meeting this study contact Chris Harris at chris.har- when employees are preparing themselves for the minimum requirements of the [email protected] or Doyle Lucas at the next round of layoffs. Prior research has change initiative. [email protected]. found that layoff survivors suffer from nega- • Discretionary behaviors go above and tive health outcomes (Matthew, 1987), such References beyond the minimum, such as actively as the significant association between mea- Beer, M., & Nobria, N. (2000). Cracking the code of cooperating or championing the change. Harvard Business Review, 78 (3), 133-141. sures of anxiety and depression and initiative. For the organizations we perceptions of low job autonomy and secu- studied, for example, “taking charge” to Burke, W. W., & Litwin, G. H. (1992). A causal model rity, and high work load and group conflict improve processes and eliminate waste of organizational performance and change. Journal of (Kim, 2003). Chances are increased employee was the most desired discretionary Management, 18 (3), 523-545. anxiety and depression will severely mitigate behavior and the one we measured. the existing work excitement employees had Herscovitch, L., & Meyer J. P. (2002). Commitment to organizational change: Extension of a three-compo- prior to downsizing. Work design and career Our hypothesis was that an emotional com- nent model. Journal of Applied Psychology, 87 (3), opportunities may be ways to keep jobs mitment to the change initiative would best 474-487. intrinsically motivating to employees. ➤
VOLUME 32/ISSUE 4 — 2009 55 Institutionalize quality with a healthy balance sheet and employees Judge, T. A. & Piccolo, R. F. (2004). Transformational and Transactional Leadership: A meta-analytic test of their professional success assurance. that are committed and engaged are far better positioned for future growth. relative validity. Journal of Applied Psychology, 89: Quality continues to be a priority for employ- 755-768. doesn’t just happen.
ees’ post-downsizing. For employees who Leiter, M. P. & Harvie, P. (1997). Correspondence of super- want to feel as though they are doing a good Brenda Kowske, Ph.D., Kyle Lundby, visor and subordinate perspectives during major job (and indeed, may be feeling as though Ph.D. and Rena Rasch are with Kenexa organizational change. Journal of Occupational Health doing a good job will help them keep their Research Institute in Minneapolis, Psychology, 2: 343-352. job), the degradation of quality may contrib- Minnesota. ute to de-moralizing the workforce. Total Lundby, K. M., & Johnson, J. W. (2006). Relative weights of predictors: What is important when many forces are operat- Quality Management (TQM), Six Sigma and ing. In A. Kraut (Ed.), Getting Action from Organizational process redesign strategies may be ways to Surveys (pp. 326-351). Westport, CT: Greenwood. further engage the workforce in meaningful References Matthew, K. A . et al. (1987). Stressful work conditions and ways that service customers well, while add- Bastien, D. T., Hostager, T. J., & Miles, H. J. (1996). Cor- diastolic blood pressure among blue collar factory work- ing to a sense of meaning for employees. porate judo: Exploiting the dark side of change when ers. American Journal of Epidemiology, 126: 2: 280-291. competitors merge, acquire, downsize, or destructure. Journal of Management Inquiry, 5: 261-275. As we pursued this research, additional ques- Kenexa (2008). Engaging the employee: A Kenexa® ™ tions and research opportunities came to Band, D. & Tustin, C. (1995). Strategic downsizing. Man- Research Institute WorkTrends report. Wayne, PA: light. A predictive, peer-reviewed study inves- agement Decision, 33: 8: 36-45. Author. tigating the effects of layoffs on survivors’ Kim, W-B. (2003). Economic crisis, downsizing, and ‘lay- engagement in different industries and under Brockner, G., Grover, S., Reed, T., DeWitt, R., & O’Malley, M., (1987). Survivors’ reactions to layoffs: We get by with off survivor’s syndrome’. Journal of Contemporary Asia, various economic conditions is needed. The a little help from our friends. Administrative Science Quar- 33: 4: 449-464. intersection of country culture and econom- terly, 32: 4: 526-541. ics, downsizing and engagement also has yet Lewin, J. E., & Johnston, W. J. (2000). The impact of to be explored. However, our research pro- Brockner, J., Spreitzer, G., Mishra, A., Hochwarter, W., downsizing and restructuring on organizational competi- Pepper, L., & Weinberg, J. (2004). Perceived control as an tiveness. Competiveness Review, 10: 1: 45-55. vides some direction that employers might antidote to the negative effects of layoffs on survivors’ consider immediately as they prepare for organizational commitment and job performance. Admin- Macey, W. H. & Schneider, B. (2008). The meaning of their organization’s recovery. istrative Science Quarterly, 49: 76-100. employee engagement. Industrial and Organizational Psy- chology, 1: 3-30. Cascio W. F. & Young C. E. (2003). Financial consequenc- Summary es of employment-change decisions in major U.S. Mitchell, T. R., Holtom, B. C., & Lee, T. W. (2001) How corporations: 1982-2000. In K. P. De Meuse & M. L. to keep your best employees: Developing an effective Marks (Eds.), Resizing the Organization (pp. 131-156). retention policy. Academy of Management Executive, 15: With proper leadership, the act of downsiz- San Francisco: Jossey-Bass. 4: 96-108. ing, however painful, presents an Cobb, A., Wooten, K., & Folger, R. (1995). Justice in the opportunity for business leaders to bring the Paterson, J. M. & Carey, J. (2002). Organizational justice, making: Toward understanding the theory and practice of change anxiety, and acceptance of downsizing: Prelimi- surviving employees together to help make justice in organizational change and development. the business more competitive. This takes Research in Organizational Change and Development, 8: nary test of an AET-based model. Motivation and Emotion, attention, effort and heart. 243–295. 26: 83-103.
De Meuse, K. P., Bergmann, T. J., Vanderheiden, P. A., & Robinson, S. (1996). Trust and breach of the psychological Our research demonstrates that downsizing Roraff, C. E. (2004). New evidence regarding organiza- contract. Administrative Science Quarterly. 41: 574-600. can have a profound impact on how employ- tional downsizing and a firm’s financial performance: A ees see the workplace, and in turn, their long-term analysis. Journal of Managerial Issues, 16: 2: Shah, P. P. (2000). Network destruction: The structural commitment to stay or their intention to quit. 155-177. implications of downsizing. Academy of Management Journal, 43: 101-112. In the wake of layoffs, leaders are tasked to Greenberg, J. (1990). Organizational Justice: Yesterday, You need to make it happen. bolster employees’ confidence in the organi- today and tomorrow. Journal of Management, 16: 399- Schaufeli, W. B. & Bakker, A. B. (2004). Job demands, job zation’s leadership team, provide a vision for 432. resources, and their relationship with burnout and engage- the future, equip managers to be supportive ment: a multi-sample study. Journal of Organizational Griffeth, R. W., Hom, P. W., & Gaertner, S. (2000). A meta- Behavior, 25: 293-315. You have the education. You have the credentials. But to really succeed, “ i t is crucial for us to continually sharpen our and reinvigorate the work itself, demonstrat- analysis of antecedents and correlates of employee you need more. You need a trusted resource for knowledge on trends business and hr acumen, develop ourselves ing their belief that employees are the turnover: Update, moderator tests, and research implica- Trevor, C. O. & Nyberg, A. J. (2008). Keeping your head- and techniques driving the newest and most successful HR strategies. and bring external insights to the business. organization’s most important asset. tions for the next millennium. Journal of Management, 26: count when all about you are losing theirs: Downsizing, hrps has provided enormous value to 3: 463-488. You need access to a community of like-minded peers with whom you can voluntary turnover rates, and the moderating role of HR strategize regarding the business needs of today and tomorrow. You need me through the network of relationships practices. Academy of Management Journal, 51: 2: 259- i have built, the great content and learning Layoffs have a significant effect on the opti- Harter, J. K., Schmidt, F. L. & Hayes, T. L. (2002). Business- The Human Resource Planning Society (HRPS). mization and utilization of the organization’s unit-level relationship between employee satisfaction, 276. from the conferences and workshops workforce. Retaining key talent will be criti- employee engagement, and business outcomes: A meta- Global in scope and influence, The Human Resource Planning Society and best practice sharing that is offered. Wiley, J. W. & Campbell B. H. (2006). Using linkage during these difficult economic times, this cal for supporting recovery; leaders who fail analysis. Journal of Applied Psychology, 87: 2: 268-279. provides cutting-edge knowledge, professional development and a community research to drive high performance: A case study in orga- is one membership i will be sure to keep!” to remember this may emerge in a strong fis- Hopkins, S. M. & Weathington, B. L. (2006). The relation- nizational development. In A. Kraut (Ed.), Getting Action of experts to help members address the business needs of today and —Lynn Tetrault, Executive Vice President cal position but without the hearts and minds ship between justice perceptions, trust, and employee for Organizational Surveys (pp. 150-182). San Francisco: tomorrow. More information about the Society is available by visiting HR and Corporate Affairs, AstraZeneca PLC of their workers. attitudes in a downsized organization. The Journal of Jossey-Bass. www.hrps.org, sending an e-mail to [email protected] or calling 800-337-9517. Psychology, 140: 477-498. Wiley, J. (1996). Linking survey results to customer satis- In the words of Drucker, “Unless commitment Johnson, J. W. (2000). A heuristic method for estimating faction and business performance. In A. Kraut (Ed.) is made, there are only promises and hopes... the relative weight of predictor variables in multiple Organizational Surveys: Tools for Assessment and Change. but no plans.” Organizations that emerge regression. Multivariate Behavioral Research, 35: 1-19. (pp. 330-359). San Francisco: Jossey-Bass. Invest In your future. vIsIt www.hrps.org and joIn today. 56 PEOPLE & STRATEGY professional success doesn’t just happen.
You need to make it happen.
You have the education. You have the credentials. But to really succeed, “ i t is crucial for us to continually sharpen our you need more. You need a trusted resource for knowledge on trends business and hr acumen, develop ourselves and techniques driving the newest and most successful HR strategies. and bring external insights to the business. You need access to a community of like-minded peers with whom you can hrps has provided enormous value to strategize regarding the business needs of today and tomorrow. You need me through the network of relationships The Human Resource Planning Society (HRPS). i have built, the great content and learning from the conferences and workshops Global in scope and influence, The Human Resource Planning Society and best practice sharing that is offered. provides cutting-edge knowledge, professional development and a community during these difficult economic times, this of experts to help members address the business needs of today and is one membership i will be sure to keep!” tomorrow. More information about the Society is available by visiting —Lynn Tetrault, Executive Vice President HR and Corporate Affairs, AstraZeneca PLC www.hrps.org, sending an e-mail to [email protected] or calling 800-337-9517.
Invest In your future. vIsIt www.hrps.org and joIn today. Lost in a Time Warp How Age Stereotypes Impact Older Baby Boomers Who Still Want to Work
Ernie Stark, Bellevue University
58 PEOPLE & STRATEGY Worry about an adequate supply of labor while in the throes of the worst economic downturn in 25 years? Really? Yes. Even now, there are signs that the economy has bottomed and is starting to recover. When it fully recovers, businesses should expect to face a phenomenon seldom witnessed in the United States: a struggle to keep aging workers far beyond the customary age of retirement. Will those workers delaying retirement be subjected to the time- warped stereotypes about aging that burdened past generations? Could this stereotyping hurt their employers?
than they did 50 years ago. So there is reason documents this reality. People, in general, are A Strange Phenomenon to believe that the physical ravages of aging simply more negative toward older people may not force the baby boomers to exit their (Kite and Wagner, 2004). In situations lacking If the anticipated economic upturn is some- jobs at the traditional retirement age. For relevant information, younger workers, on what sharp and rapid, rather than having an another, baby boomers have done a lousy job average, received higher performance ratings ample pool of labor to meet the increasing of saving for retirement: Anywhere from 15 than older workers, and younger workers demand for goods and services, U.S. busi - to 23 million of the approximately 78 million are, in general, favored over older workers nesses may be competing for labor from a baby boomers may be forced to remain in the when performance ratings are compared shrinking pool. If the economy recovers as workforce because of inadequate financial against each other (Finkelstein, Burke, and expected, by the year 2012 there will be resources (Stark, in press). Raju, 1995). approximately 21 million new jobs, but only 17 million new entrants into the labor force Coming to terms with an aging population “Ageism” as a term was first coined by Rob- (Schramm and Blake, 2004). and a growing tide of graying workers rep- ert Butler, former director of the National resents a very strange phenomenon for U.S. Lurking behind the relatively small number Institute on Aging, in 1969. Like any preju- businesses. Many business leaders would dice, it is an unconscionable discrimination of working adults today over 64 years of age love to emulate the Google business model (5.6 million) looms 36.4 million workers based on actual or perceived chronological in which bright young people are hired and age to mark out a class of people who are between the ages of 50 and 64. As the leading turned loose in an internal environment edge of the post-World War II baby boom, systematically denied opportunities and designed to foster peak performance, speed resources that others enjoy (Glover and Bra- this cohort represents fully 25 percent of the and innovation. Such a desire will soon run nine, 2001). Not only does ageism operate current workforce (Grossman, 2008). headlong into the harsh realities of a shrink- without conscious awareness, the resulting ing labor market, increasing competition for discrimination often is without intent to If these baby boomers choose to retire and those bright and energetic young employees, harm (Levy and Banaji, 2004). leave the labor force as past generations did and reconciling corporate images of vigor- around age 65, there simply are not enough ous and energetic organizations with the Time-warped stereotypes driven by experi- younger workers to take their places in an reality of an increasing portion of the work- ences with past generations can be expected expanding economy. An increasing inability force composed of individuals at or near the to motivate ageism, as an increasing number to find the necessary number of replacements end of their traditional 40- to 45-year career of baby boomers work past the customary suggests that employers will seek to keep the spans. Perhaps, we are moving into an era in age of retirement (Grossman, 2008). boomers at work. which having one’s car fixed or tonsils removed by a 75-year-old will seem normal One of these stereotypes is that older workers Employers are aware of this impending short- (Collins, 2009)? age, and even in the presence of the current experience greater fatigue and have less economic downturn, a recent survey of more energy than younger workers. While it is than 140 midsize and large U.S. employers Across a New undeniable that physical capacities decline revealed that 61 percent have developed or Landscape Carrying with increasing age, this occurs with varying will develop programs to retain targeted degrees of gradation (Shah and Kleiner, employees near retirement age (Miller, 2009). Old Baggage 2005). A belief that these baby boomers can- not bring levels of energy to work necessary There are indications that many of these Age-related biases and preconceptions in to keep up with their dynamic younger peers aging workers will be inclined to respond which youth is the standard held in highest increases the potential for time-warped, age- positively to offers of extended employment. esteem—young is always better, and old age ist behavior and language by and among For one, people are living considerably longer is bad—permeate U.S. society, and research management and younger employees. ➤
VOLUME 32/ISSUE 4 — 2009 59 A second prevailing stereotype is that older the workplace using a sample of 1,958 indi- baby boomers will draw on mental energy to individuals are more resistive to change, less viduals. These 913 females and 1,045 males, compensate for the inevitable decline in interested in receiving training and less will- ages 30 to 75 and working a minimum of 30 physical energy as they work past retirement ing to gain new knowledge than younger hours per week for wages or salary, were age. Witness the venerable Bobby Bowden workers (Swift, 2004). A recovering economy drawn from the database of the National and Joe Paterno, whose mental energies led drives the need to create and maintain cut- Survey Of Midlife Development In The Unit- their college football teams to bowl victories ting-edge innovation, and this implies that ed States 2 (Ryff, et al., 2006). For this study, in their late ’70s and early ’80s, for an exam- management constantly will require employ- individuals were classified according to the ple of this possibility. ees to engage in ongoing training and skill decade grouping into which they fell at the upgrading. Stereotyped as unenthusiastic time of the survey (30-39, 40-49, 50-59, Or, perhaps this was the wrong question to about and unresponsive to ongoing training 60-69 and > 70 years of age). ask, because we might expect that indicators in their jobs, older baby boomers quickly may of energy levels should be evident during the be identified as constituting a hindrance to a workday. For example, individuals with high firm’s ability to adapt and respond to change. Working Past Retirement Will energy levels may engage more frequently in This stereotype is likely to encourage further Not Mean Retiring On the Job intense levels of work than individuals with ageist behavior and language. Older workers (age 60 to 69) did not report lower levels. experiencing any appreciably greater decline A third prevailing stereotype is that older in energy during the five years prior to the From a time-warped perspective, older work- individuals are less knowledgeable than survey than their younger peers, who were ers with dwindling reserves of energy would younger workers regarding the technical between 40 and 59 years of age. Given that a be expected to pace themselves rather than aspects of their jobs due to the half-life of decline in physical energy accompanies engage in frequent displays of intensity. And, technical knowledge (Latchman, 2004), and increasing age due to decreasing physiologi- a lack of energy reasonably could be expect- they do not possess the intellectual ability cal functions, we would logically expect a ed to contribute to not getting all necessary necessary to cognitively master advances in greater degree of difference between respon- tasks done. Viewed from a time-warped ste- technology (Kanfer and Ackerman, 2004). dents 60 to 69 and those 20 years their junior. reotype, younger workers with higher levels Time-warped beliefs regarding the outdated Physical energy is defined as relating to the of energy will respond to increased levels of nature and decreased usefulness of the knowl- activity level of one’s body ranging from low job intensity and meet all the demands of edge inherent in baby boomers forestalling physical energy (e.g., lethargic) to high (e.g., their job rather than leaving job demands retirement may well motivate management heart racing), while mental energy relates to unmet, as might older workers who have and younger workers to see them as “dead the activity level of one’s mind ranging from lower energy levels. wood” that should be pruned from the firm. low (e.g., no motivation) to high (e.g., racing thoughts) (USA Swimming, 2008). To study this, individuals were asked, “How often do you have to work very intensively? Ignore These Stereotypes Perhaps older individuals in this study were That is, how often are you very busy trying referencing their mental energy, whereas the to get things done?” and, “In the past year, We studied how stereotypes about aging younger were referencing their physical ener- how often at your job have you had enough likely to accompany post-retirement working gy. Furthermore, if mental energy degrades at time to get everything done?” A lack of ener- baby boomers might influence behaviors in a slower rate than physical energy, perhaps gy might b e observable i n not having adequate
Exhibit 1: FREquENcY OF hAviNG ENOuGh TiME TO GET EvERYThiNG dONE AT ThE JOb (LEFT) ANd FREquENcY OF iNcidENTS WhERE ThE JOb MAdE RESPONdENTS TOO TiREd TO dO ThiNGS AT hOME (RiGhT).
3.8 — 2.9 —
3.7 — 2.85 —
3.6 — 2.8 —
3.5 — 2.75 —
3.4 — 2.7 — everything done at job tired to do things at home Mean responce of time to get 3.3 — 2.65 — Mean responce of job makes you too
3.2 — 2.6 —
30-39 40-49 50-59 60-69 Over 70 30-39 40-49 50-59 60-69 Over 70 Grouping of Respondents' Age Grouping of Respondents' Age
60 PEOPLE & STRATEGY reserves upon leaving the job to meet demands Finally, as represented in Exhibit 1, individu- In response to a global question about the at home. So we also asked: “How often in the als in this study between 60 and 69 years of value of learning and growth to experiencing past year has your job made you feel too tired age gave fewer indications of job demands a good life, the percentage of workers age 60 to do the things that need attention at home?” making them too tired to do things at home to 69 indicating these were important to Responses (reverse coded from the original than younger workers between 40 and 59 experiencing a good life did not differ appre- survey) ranged from 1 = Never to 5 = Almost years of age (p<0.05). Individuals over 70 ciably from the percentage of younger all of the time. years of age also demonstrated no statistically workers giving the same indication. Young significant difference in their responses when and old appeared to place equal value on According to the data, workers over age 60 compared with workers younger than 59. learning and growth. appeared no less likely than younger workers to report that they worked intensively at In reflecting on this, we might consider that Next we asked, “How often does your work their jobs. There was no statistically signifi- home-related demands experienced by demand a high level of skill or expertise?” cant difference in the responses of the various younger workers (e.g., children, shopping, From a time-warped perspective, older work- age groups. If working intensely reflects one’s housework, yard work, community activities, ers resistant to learning new skills could be energy level, it does not appear that older etc.) are likely to be more intense and require expected to perceive their jobs increasingly workers have any less energy than younger greater levels of energy (both physical and demanding higher levels of skill and expertise workers. Furthermore, as represented in mental) than for baby boomers with empty than their younger peers. A second question Exhibit 1, workers younger than 60 appeared nests, established careers and decreasing inquired, “How often do you learn new things at work?” From the time-warped view, because more likely than workers over 60 to report mortgages (Huffman, Youngcourt, Moncher, they are resistive to learning situations, older problems with having enough time to get Henning, and Goh, 2008). workers would be more likely to perceive they everything done (p<0.05). Certainly not are forced to learn new skills and acquire new what one would expect if workers in their To the point, we could predict that baby information than younger workers. Still, no late 60s are experiencing declining energies boomers working past retirement would evidence was found of a statistically significant and vitality. report fewer incidents of work-related demands draining the energy required to difference in the response to these two ques- tions across the age groupings. However, we might consider that the lack of meet demands at home, along with fewer difference between older and younger work- occurrences of work-family conflict nega- tively impacting their job performance. Finally participants responded to, “Please ers in experiencing intense work situations indicate how strongly you agree or disagree (even allowing for declines in physical energy) with this statement: ‘I do not enjoy being in results from experience and previously Working Past Retirement Will situations that require me to change my old learned strategies and procedures (often Not Mean Avoiding Learning familiar way of doing things.’” The rather called crystallized intelligence) that enables uncomplicated logic here is that if the time- older workers to organize, prioritize and Something New warped perception that older workers are manage their work to a degree greater than There certainly is reason to expect that the innately resistance to workplace change younger, less experienced workers (Meyers stereotype about older workers resisting wrought by new knowledge and practices is and Conner, 1992). They may actually work training will be attached to baby boomers true, the responses of older workers would be “smarter” rather than “harder.” Such ability choosing to work past retirement. Research- more strongly in agreement with the state- might predict that baby boomers working ers have reported that as people age, they are ment than would the responses of younger past retirement ultimately position them- less likely to engage in mandatory or non- workers. Responses (reverse coded from the selves in jobs in which they can cope well, mandatory job training and demonstrate less original study) ranged from 1 = Disagree both mentally and physically, while younger motivation to learn (Colquitt, LePine, and strongly to 7 = Agree strongly. Here again, no workers still are attempting to master the Noe, 2000; Maurer, Weiss, and Barbeite, statistical difference in response was found complexities of their jobs. 2003; Renaud, Lakhdari, and Morin, 2004). across the various age groupings. ➤
VOLUME 32/ISSUE 4 — 2009 61 These results certainly appear at odds with more to work environment issues than to their younger peers because of a perception earlier research about older workers and train- characteristics associated with aging. that they possess more current knowledge and ing, and there are numerous factors that appear mastery. Responses to this question (reverse to moderate any relationship between aging coded from the original survey) ranged from and receptiveness to training and learning: Gold Among Those Silver Hairs 1 = Never to 5 = Once a week or more. Individuals were asked, “To what extent does • First, training that is not generalizable the statement ‘I feel that others respect the As illustrated in Exhibit 2, older workers across a wide range of tasks and not work I do on my job’ describe the way you feel reported, on average, a greater frequency of immediately task-applicable has been about your current job?” From a time-warped sensing that their work efforts were respected shown to carry less value for older workers view, if the accumulated knowledge acquired by fellow workers than did workers younger than training related to specific tasks and by older workers throughout their careers was than 50 (p<0.05). Kanfer and Ackerman behaviors (Roβnagel and Hertel, 2008). perceived as being obsolete and outdated, this (2004) allow for such a reality in their discus- sion of crystallized intellectual ability. Crystallized intellectual ability is associated with a totality of educational and experien- if the knowledge acquired by older workers throughout tial knowledge, tends to increase well into middle age and includes both occupational their careers was perceived as being obsolete and knowledge and avocational knowledge (e.g., outdated, it would be reflected in reports of being hobbies, music, culture, etc,). This knowledge is likely to be highly intuitive and will have slighted or discredited by their boss more frequently. been obtained and stored through an accu- mulation of episodes acquired over years of experience (Raelin, 2007). • Second, management frequently fails to use likely would be reflected in reports of older methods that meet the needs of older workers experiencing less respect for their This suggests that younger workers may well workers, such as ensuring that training em- efforts than younger workers, whose efforts perceive baby boomers working past retire- phasizes “hands-on” learning techniques, is would reflect more current knowledge and ment as having an accumulation of unstated self-paced and takes a practical approach mastery. Responses to this questions (reverse knowledge acquired from a lifetime on the (Armstrong-Stassen and Templer, 2005). coded from the original survey) ranged from job, knowledge that they desire but that orga- 1 = Not at all to 4 = A lot. nizational training can neither identify • Finally, certain employment policies and nor provide. practices such as age bias in recruitment, Another question inquired, “How often do selection, performance appraisal and you feel that you are ignored or not taken seri- Furthermore, as illustrated in Exhibit 2 older assignment to training opportunities act to ously by your boss?” The logic here was much workers reported, on average, fewer incidents dampen the enthusiasm of older workers the same as with the previous question: If the in which their boss failed to take them seri- for job-related learning activities (Spitulnik, accumulated knowledge acquired by older ously or ignored them than did their younger 2006). Thus, we have reason to speculate workers throughout their careers was per- peers age 40 to 49 (p<0.05). Precisely why that any aversion to job-related training ceived as being obsolete and outdated, it would such a difference would pertain only in com- and learning opportunities b y baby boomers be reflected in reports of being slighted or dis- parison to those 40 to 49 years of age remains working past retirement age will be due credited by their boss more frequently than unexamined. However, we may assume that
Exhibit 2: A GRAPHic REPRESEnTATiOn Of mEAn diffEREncE in THE fREquEncY Of SEnSinG THAT wORk iS RESPEcTEd bY OTHERS AT THE jOb (LEfT) And THE fREquEncY Of fEELinG iGnOREd OR nOT TAkEn SERiOuS LY bY OnE’S bOSS (RiGHT).
3.70 — 2.20 —
3.65 — 2.00 — boss 3.60 — 1.80 —
work at job 3.55 — 1.60 —
3.50 — taken seriously by 1.40 — Mean responce of other respect my Mean responce of being ignored/not 30-39 40-49 50-59 60-69 Over 70 30-39 40-49 50-59 60-69 Over 70 Grouping of Respondents' Age Grouping of Respondents' Age
62 PEOPLE & STRATEGY rather than being devalued by their boss tion of older workers perceiving discrimination because of a perceived lack of applicable because stereotypes are motivating ageist knowledge and experience, many baby boom- behavior may put many a firm at risk of an ers working past retirement age will be given ADEA suit in which the plaintiff cites a bevy greater deference than a large segment of of comments from management and younger their younger colleagues. workers as the single discriminatory factor.
Employers must realize that older workers The Potential High will not sit idly by and accept age discrimina- Cost of Time-Warp tion; they will file age discrimination suits, and they will win (Santora and Seaton, 2008). The three age-related stereotypes examined The financial implications of this caution in this study undoubtedly have an extensive should not be ignored. Between 1994 and following throughout the general population, 2000 the median award in age discrimination but our results suggest that they may not rep- cases was $268,926 (Rupp, Vodonovich, and resent reality. Yet, even when presented with Crede, 2005), and later settlements have facts to the contrary, disconfirmation of ste- ranged from $6.2 million to $58.8 million reotypes is a slow and begrudging process (McCann and Giles, 2002). Thus, it behooves (Hilton and von Hipple, 1996). employers to achieve a greater understanding of the influence of age-related stereotypes in An issue of great concern for any employer the workplace and the potential for negative should be the potential of dissimilarities, such outcomes as these fractures, fissures and fault as age within an organization, and wrong lines threaten to split things apart. beliefs, such as age-related stereotypes, to produce organizational fissures, fractures and fault lines. These organizational divisions Escaping the Time Warp can engender task conflict, emotional conflict and behavioral disintegration, all of which What should you take away from this article? negatively impact performance (Li and Ham- Most importantly, stereotypical beliefs about brick, 2005). Driven by time-warped older workers associated with past genera- stereotypes about older workers, expanding tions are not likely to hold for baby boomers. ageism by managers and younger employees Existing perceptions regarding the energy of carries the potential to produce real perfor- older workers will be much more complex mance problems. than previously thought. Certainly, baby boomers likely will have less energy to engage Nor should these concerns be taken lightly in in physically intensive tasks than their the face of recent court rulings involving the younger peers, but do not be surprised if their Age Discrimination in Employment Act level of mental energy is indistinguishable (ADEA). Because the courts have avoided from their younger peers. And, this admoni- second guessing employers when exercising tion takes on greater importance since that learning opportunities for older workers their rights to make personnel decisions, indi- physically demanding jobs are decreasing are not reduced. Certainly, you will need to vidual plaintiffs traditionally have difficulty and cognitively demanding jobs are increas- incorporate training techniques to which older prevailing when filing claims under the ADEA ing (Rix, 2006). workers positively respond, but perhaps a using disparate treatment (Schuster, 2009). greater training challenge will be to design and However, increased sensitivity on the part of Consider that rather than avoiding intense implement training programs for supervisors older workers to ageist-oriented language work situations because of a lack of energy, who will be managing older baby boomers. and behavior in the workplace is likely to baby boomers may be more energy efficient become a focal point in establishing a prima- than their younger peers because their job Finally, recognize the value accorded the job facie case of disparate treatment. and career history have enabled them to knowledge and expert mastery represented become proficient in recognizing, prioritizing by baby boomers working past retirement With the Supreme Court’s ruling in Smith v. and organizing resources critical to respond- age. Take steps to identify the knowledge, City of Jackson, plaintiffs can now advance a ing to intensive work demands. Furthermore, skills and relationships that constitute the claim of disparate impact under ADEA. A expect baby boomers to be less likely than expertise possessed by these older workers unique provision associated with any claim their younger peers to report work-family and transfer this information to younger of adverse impact is that when the plaintiff is conflicts resulting from job demands that workers before the boomers exit from the unable to point to a specific requirement or leave little energy for home. workplace. Allow these aging baby boomers practice resulting in violation of the four- to mentor younger workers who desire to fifths rule, the law allows the plaintiff to Reconsider the stereotypical view that older access their lifetime of work experience. bundle related practices together and chal- workers are less interested in job-related learn- lenge it as one discriminatory practice (Walsh, ing experiences and access to job-related “Managers and companies need to work 2007). The potential of an increasing propor- training than their younger peers, and ensure to change their attitudes toward older
VOLUME 32/ISSUE 4 — 2009 63 workers. Older workers are not just a com- Grossman, R.J. (May, 2008). Keep pace with older Raelin, J.R. (2007). Toward an epistemology of practice. modity that can be thrown away…It is workers. HR magazine, 39-46. Academy of Management Learning and Education, 6, Issue 4, 495-519. incumbent upon managers to seize the Hilton, J.L., & von Hippel, W. (1996). Stereotypes. opportunity to make the workplace a better Annual Review of Psychology, 47, 237-270. Renaud, S., Lakhdari, M., & Morin, L. (2004). The deter- place for all concerned.” (Santora and minates of participation in non-mandatory training. Seaton, 2008, p. 104). Huffman, A., Youngcourt, S.S., Moncher, C.M., Henning, Relations Industrielles, 59, 724-721. J., & Goh, A. (2008). Work and family experience over time: Why key life-stages influence work-family conflict. Rix, S. (2006). The aging workforce: Will we ever be ready A paper presented to the annual meeting of the Institute for it? The Gerontologist, 46, 404-409. Ernie Stark is a faculty member at the of Academy of Management, Anaheim, CA. August 8-13. Roβnagel, C.D., & Hertel, G. (2008). Work motivation: Bellevue University College of Business Kanfer, R., & Ackerman, P.L. (2004). Aging, adult Active self-regulation can overcome passive decline. A in Bellevue, Nebraska. development, and work motivation. Academy of Manage- paper presented to the annual meeting of the Institute of ment Review, 29, Issue 3, 440-458. Academy of Management, Anaheim, CA. August 8-13.
Kite, M.E., & Wagner, L.S. (2004). Attitudes toward older Rupp, D.E., Vodonovich, S.J., Crede, M. (2005). The mul- adults. In T.D. Nelson (Ed.). Ageism: Stereotyping and tidimensional nature of ageism: Construct validity and prejudice against older persons, 129-161. group differences. The Journal of Social Psychology, 145, References Issue 3, 335-332. Latchman, M.E. (2004). Development in Midlife. Annual Armstrong-Stassen, M., & Templer, A. (2005). Adapting Review of Psychology, 55, 305-331. Ryff, C., Almeida, D.M., Ayanian, J.S., Carr, D.S., Cleary, training for older employers. The Journal of Management P.D., Coe, C., Davison, R., Krueger, R.F., Lachman, M.E., Development, 24, No. 1 & 2, 57-67. Levy, B.R., & Banaji, M.R. (2004). Implicit ageism. In T. Marks, N.F., Mroczek, D.K., Seeman, T. Mailick-Seltzer, D. Nelson (Ed.). Ageism: Stereotyping and prejudice M., Singer, B. H., Sloan, R.P., Tun, P.A., Weinstein, M. and Brim, O.G., Baltes, P.B., Bumpass, L.L., Cleary, P.D., Feath- against older persons, 49-75. Williams, D. (2006). Midlife Development in the United erman, D.L., Hazzard, W.R., Kessler, R.C., Lachman, States (MIDUS2), 2004-2006 [Computer file]. M.E., Markus, H.R., Marmot, M.G., Rossi, A.S., Ryff, Li, J., & Hambrick, D.C. (2005). Fractional groups: A new ICPSR04652-v1. Madison, WI: University of Wisconsin, C.D., & Shweder, R.A. (2003). National Survey of Midlife vantage on demographic faultlines, conflict, and disinte- Survey Center [producer], 2006. Ann Arbor, MI: Inter- Development in the United States (MIDUS), 1995-1996 gration in work teams. Academy of Management Journal, university Consortium for Political and Social Research [Computer file]. 2nd ICPSR version. Ann Arbor, MI: Dat- 48, No.5, pp. 794-813. [distributor], 2007-03-22. aStat, Inc./Boston, MA: Harvard Medical School, Dept. of Health Care Policy [producers], 1996. Ann Arbor, MI: Maurer, T.J., Weiss, E.M., & Barbeite, F.G. (2003). A Santora, J.C., & Seaton, W.J. (2008). Age discrimination: Inter-university Consortium for Political and Social model of involvement in work-related learning and devel- Alive and well in the workplace? Academy of Management Research [distributor], 2003. opment activity: The effects of individual, situational, Perspectives, 22, Issue 2, 103-104.
Schramm, J., & Burke, M.E. (2004). Workplace forecasts: A strategic perspective. SHRM Research. Available at http://www.shrm.org/trends/04forecast.asp.
Older workers are not just a commodity that can be Schuster, M.H. (2009). Obama and HR Strategy: Likely Implications of the Administration’s Employment and thrown away…It is incumbent upon managers to Labor Policies. People & Strategy, 32, Issue 3, 18-25.
seize the opportunity to make the workplace a better Shah, P., & Kleiner (2005). New developments concerning discrimination in the workplace. Equal Opportunities place for all concerned. International, 24, (5/6), 15-23.
SHRM (2007). Retrieved at http://www.shrm.org/ webcast/07august/mahaney.asp.
Spitulnik, J.J. (2006). Cognitive development needs and Butler, R.N. (1969). Age-ism: Another form of bigotry. motivational, and age variables. Journal of Applied performance in an aging workforce. Organization Devel- Gerontologist, 9, 243-246. Psychology, 88, 707-724. opment Journal, 24, 3, 44-53.
Collins, G. (2009, February 12). The Stump theory. New McCann, R., & Giles, H. (2002). Ageism in the workplace: Stark, E. (in press). Fractures, fissures, and fault lines: York Times, p. A35. A communication perspective. In T.D. Nelson (Ed.). Age- Challenges accompanying baby boomers retaining ism: Stereotyping and prejudice against older persons, employment in a recovering U.S. economy. Journal of Colquitt, J.A., LePine, J.A., & Noe, R.A. (2000). Toward 164-199. Cambridge, MA: MIT Press. Applied Management and Entrepreneurism. an integrative theory of training motivation: A meta- analytic Path Analysis of 20 years of research. Journal of Meyers, C., & Conner, M. (1992). Age differences in skill Swift, J. (2004). Justifying age discrimination. The Indus- Applied Psychology, 85, 678-707. acquisition and transfer in an implicit learning paradigm. trial Law Journal, 35, (3), 228-244. Applied Cognitive Psychology, 6, 429-442. Finkelstein, A.M., Burke, M.J., & Raju, N.S. (1995). Age USA Swimming (2008). Chapter 7—Physical and mental discrimination in simulated employment contexts: An Miller, S. (2009). Phased retirement keeps boomers in the energy: Controlling your energy levels. Retrieved at http:// integrative analysis: Journal of Applied Psychology, 80, workforce. HR magazine’s 2009 HR trendbook (61-62). www.usaswimming.org/USASWeb/, May 28, 2008._Rain- 652-663. bow/mental%20Toolbox%20Documents/ Pierson, D. (2008, December 10). Economic recovery not a81ea790-6db5-4787-be04-be554ed53f40/mental_ener- Glover, I., & Branine, M. (2001). Introduction: The chal- seen until 2010, Chapman University forecast says. Los gy.pdf. June 4, 2008. lenge of longer and healthy lives. In I. Glover & M. Branine Angeles Times. Retrieved December 31, 2008, at http:// (Eds.), Ageism in work and employment. 3-21. Burlington, www.latimes.com/business/la-fi-econ10- Walsh, D. (2007). Employment law for human resources VT: Ashgate Publishing. 2008dec10,0,6470589.story. practices. Marion, OH: Thompson/Southwestern.
64 PEOPLE & STRATEGY edited by John Bausch and Patsy Svare book reviews A Must Read Worthwhile Skim It Over Bottom of the Stack
Management Peter Drucker published Management Challenges In his analysis of how organizations should be struc- for the 21st Century in 1999 as a “call for action.” tured in the future, Drucker reframes the issue. Challenges for His predictions 10 years hence are spot on: Things Instead of addressing the question, “What is the the 21st Century have changed and the discipline of management right structure for organizations i n the years ahead?” needs to keep up. Was he prescient? Yes and no. Drucker points out that there may well be no “right” Drucker shrewdly pointed out what the rest of us organizational structure. What we will need, he should already have known: “The challenges of contends, is “the organization that fits the task.” Author: Peter F. Drucker tomorrow” (as he called them) can be seen all around us today. Similarly, Drucker contrasts the “old” concept that Publisher: Harper Business management’s domain is inside of organizations Working from trajectories built through an examina- with what he proposes is the new: that “manage- Reviewer: Marcie Schorr tion of history and the evolution of the field of ment exists for the sake of the institution’s results.” Hirsch, Ed.D., HirschHills management in developed countries, Drucker In other words, ditch boundaries. To thrive in the Consulting reminds us of what transpired and suggests where future, organizations will draw resources from we are headed. He constructs a prism of key anywhere they can be found and use them however “certainties”—phenomena sure to affect organiza- is required. tional strategy—ranging from demographics to politics, and projects the patterns of 21st century Although Drucker’s ideas are sophisticated, his management through that filter. What results is a thinking and writing is so lucid as to make them spectrum of directions for the future that likely seem obvious. His concepts are explained simply, result from pressures impacting organizations as and they resonate with reality. The ideas featured contexts shift and circumstances morph. in Management Challenges for the 21st Century are accessible and inspiring. Will they bring about Drucker’s prognoses are powerful because his widespread organizational change? It is difficult to orientation is toward creating new paradigms for say. But I would be willing to consider the serious what management will mean in the future. Rather possibility that they might. Our “old” model regard- than reading tea leaves, he provides a lens that ing change, “You can’t teach an old dog new tricks,” allows for new understandings of familiar issues. might need to be reconsidered. Perhaps “old dogs He relies on a “from-to” model of comparison, pre- can teach us all a few new tricks” is the new orga- senting the “old” management constructs and nizational change paradigm for the 21st century. re-envisioning them. In each instance, he provides the key to understanding the change and identifies Thanks, Peter Drucker. And keep teaching us. We the contextual variations that give birth to new thinking. can always use a few good new tricks. For example, he reflects on the 20th century’s attachment to the notion of teams as the optimal organizational structures.
The Essential The Essential Drucker is a collection of chapters and regulations will change over time. But the heart of articles from Drucker’s 60 years of writings. Druck- how individuals address these changes is how they Drucker er explains that the book has two purposes: to size up situations, analyze relevant aspects, weigh provide an introduction to management and to give alternatives and apply judgments to arrive at deci- an overview of his works on management. The book sions that move organizations forward. draws from 10 of Drucker’s major works from 1954 Moreover, Drucker’s concepts of the “knowledge Author: Peter F. Drucker to 1999 and is organized into three sections: Man- worker” and the transformation of the workplace Publisher: HarperCollins agement, the Individual and Society. from manual labor to knowledge work are central to understanding management work today. The key task Reviewer: John Noonan, The question to ask today is “Are Drucker’s essen- of a knowledge worker is to make effective decisions, Vice President, HR Services, tials still essential?” Conseco Services, LLC and managers are a special kind of knowledge work- The answer is an unqualified yes. Here is why: er. Drucker’s writings dive deep into all the factors Drucker understood that successful judgment and affecting how managers make decisions. decision making are the core challenges for execu- tives. Technology, populations, economics and ➤
VOLUME 32/ISSUE 4 — 2009 65 book reviews A Must Read Worthwhile Skim It Over Bottom of the Stack
Drucker’s writing style is direct and straightforward. required reading for anyone in business because it The Essential There is elegance to simple declarative sentences: foreshadows several key movements, including Drucker When you read Drucker you will not suffer through the strategic planning, TQM/Six Sigma, Balanced (continued) jargon and hyperbole that afflicts most business writ- Scorecard, Management by Objectives and Social ing. Drucker’s books tend to be long and some readers Responsibility. Better yet, go back to Drucker’s complain that he is wordy. However, unlike many of seminal work, Management: Tasks, Responsibilities, today’s business books, where authors expand 30 Practices, and read the five chapters from which pages of content to fill a 250-page book, Drucker’s Chapter 3 is drawn. It is even richer. books are long because he has a lot to say. The Essential Drucker also contains four chapters In The Essential Drucker, many of the selections drawn from my favorite Drucker book, The Effective have been abridged from the original. Chapters have Executive. These chapters provide penetrating and been shortened, examples and context edited out. practical advice on how effectiveness can be The result is a series of chapters that get right to learned, such as determining where and how to the point and provide a comprehensive overview of make a contribution, leveraging your strengths and Drucker’s thinking. making the best use of your time. It is very practical and straightforward. My personal favorite is Chapter 3, “The Purpose and Objectives of a Business.” This selection highlights Everyone in business should be grounded in the writ- many of Drucker’s key contributions: the purpose of ing of Peter Drucker, and The Essential Drucker is an a business is to create a customer; a business has excellent place to start. Over the years, some have two basic functions—marketing and innovation; and discredited Drucker, but my sense is that people who the critical question for top management is, “Who do not appreciate Drucker are like those who do not is our customer?” This chapter alone should be appreciate Shakespeare. Genius is timeless.
Living in More Peter Drucker is famous as a scholar, teacher and personal growth and development; and finally, to consultant. Anyone who has read Drucker’s work enhance generosity through volunteerism, social Than One World: has no doubt noted the breadth of his perspective entrepreneurship, teaching and mentoring. How Peter Drucker’s and insight. Bruce Rosenstein in Living in More Than Wisdom Can Inspire One World, introduces the reader to Peter Drucker “One reason Drucker’s ideas resonate so power- and Transform Your Life as a person, his philosophy of life and learning and fully for knowledge workers,” notes Rosenstein, “is suggests that Drucker’s holistic approach to life that his is a perfect prototype of the species. For might be a model for others to follow. many years, he lived a complex life, juggling multiple careers as a successful teacher, writer and consul- The book is neither biography nor compendium. tant and made it work. He thought through his own Author: Bruce Rosenstein Rather, drawing insights from interviews and asso- contributions and said it was important for his read- Publisher: Berrett-Kohler ciation with this master teacher, Rosenstein takes ers to be thoughtful about their own lives.” Publishers the reader on a journey of thoughtful reflection Reviewer: Steven H. Hanks, regarding life and career. While one could peruse the book’s 129 pages in a Director of Graduate Studies in Human Resources, Jon M. The journey Rosenstein proposes challenges the three-hour airplane ride, I am not sure that is the Huntsman School of Busi- reader to reflect on life in its fullest sense. Drawing right venue for this volume. Far better would be to ness, Utah State University artfully on Drucker’s self-development and self- pack it along on your next fly-fishing trip in Montana management advice for leaders and knowledge or that ocean cruise you’ve been planning. Thought- workers, Rosenstein amplifies the sage’s call to ful reflection is essential to truly capture the classic knowledge workers to live in more than one world— Drucker insight contained in its pages. A careful to find passionate interests outside one’s work and read will leave you feeling you have spent the day job; to open new avenues of growth, friendship and with Professor Drucker, reflecting on purpose, self- community; to find and develop one’s core compe- leadership and life—certainly a day well spent. tence and apply it in multiple venues; to be self reflective and align one’s values and place; to create the future through spreading out, defining interests and values, developing parallel careers and aban- doning avenues that no longer hold promise for
66 PEOPLE & STRATEGY book reviews A Must Read Worthwhile Skim It Over Bottom of the Stack
A Class with What would it be like to be in the classroom with Here are some of Drucker’s basics that stand out Peter Drucker? What would he say? How would he in this book: Drucker: say it? And what would it be like to experience • Approach Problems With Your Ignorance— Drucker in action? Bill Cohen effectively engages The Lost Lessons Not Your experience of the World’s Greatest the reader as he captures the essence of Drucker’s Management Teacher classroom, and the power and simplicity of his • You Can’t Predict the Future, But You Can teaching methodology, in A Class with Drucker. This Create It book is for you whether you, like this reviewer, were • You must Know Your People to lead Them privileged to have been in Drucker’s classroom, or, • People Have No limits, even After Failure Author: William A. Cohen, Ph.D. you like millions of others, are eager to simply learn the management and self-development lessons • The management Control Panel Publisher: AmACom Drucker taught. • Base Your strategy on the situation, Not on Reviewer: sarah smith orr, This book follows Drucker’s primary teaching a Formula executive Director, Kravis model: asking questions, coupled with anecdotal • How To motivate the Knowledge Worker leadership Institute, accounts of real-life situations. Through this liter- Claremont mcKenna College; ary classroom, you can experience lessons as • Drucker’s Principles of self-development Adjunct Professor, Peter F. Drucker presented them, and benefit from Cohen’s Drucker and masatoshi Ito This book will challenge your thinking through Druck- capacity to ferret out, summarize and offer practi- Graduate school of manage- er’s teachings, while expanding on those lessons cal applications of the learning jewels that evolved ment, Claremont Graduate with insights into Drucker as a person and a teach- in class. university er. The impact Drucker has had on his students, As Cohen points out, Drucker “frequently taught in whether in the classroom or the corporate board- ‘shorthand’ giving guideposts that needed to be room, is profound. As Drucker said, “It is not up to developed fully by those who received them.” This others to develop us once we leave the comfort of was sometimes frustrating to Drucker’s students, the home or school, it is up to ourselves.” A Class as he rarely taught students how to do something with Drucker is one viable means of achieving self- but rather challenged learners by asking questions. development. Cohen, with humility and honesty, also gives the reader insight on how he performed as a student and what he learned. He weaves in anecdotes based on his experiences, feelings and perceptions to build on the simple, yet profound concepts he acquired as a Drucker student.
HRPs news The 2009 HRPs Fall executive Forum: Talent Advantage is more Important Than ever
The october 2009 HRPs Fall Forum was right these issues, learn from the speakers and case installed one son as Coo and they decided not on target because the “it” topic of 2010 will be studies and network with each other. to sell the business but rather to grow it. By talent: how to find it, how to develop it and how creating a vision, building a strategic plan, to keep it. The issue of a talent shortage may The conference began with an intriguing story engaging employees in a structured method seem unusual with 10 percent+ unemployment from the Ceo and the HR executive of a family- and generating confidence in the future, the in the united states, but we know this recession owned, multi-generational national food company grew and prospered, and continues to is ending and the aging of the baby boomer has products company. The company was forced do so today, with the son now Ceo. changed forever the way we do business. A into great change with the death of the father/ large group of HR and talent leaders from Ceo who built the business. With that came big across North America came together to discuss decisions—the wife/mother became Ceo, she ➤
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The family believes in measurement: “If you PPG, IBM, Raytheon and JDS Uniphase, covering and competing for the same talent. And what don’t measure, you cannot move the needle.” a variety of issues. At PPG, we walked through of those people who have been working 12-, The family also evaluates results to stay on the a project of talent management assessment 14- or 16-hour days? When will they simply be cutting edge of its highly competitive industry. and measurable results in a business unit with too tired and leave? Finally, what happens to a strategy that opened the search process to diversity when speed-to-hire becomes a top Jack zenger of zenger Folkman drew on his avoid regrettable turnover of employees. At IBM issue again? years of research and consulting to depict the the hiring process needed to define specific reality of great leaders. He defined leaders as levels of leadership skills, those who could lead Our good friend Beverly Kaye of Career Systems people who set stretch goals and have the abil- in a very distributed, global way. That model had International summed up the coming talent ity to articulate a vision, communicate and changed since 2005 because the way business shortage so well when she told us the employ- develop people, collaborate and innovate and is conducted at IBM has changed. ee base is divided into POBBOs (pushed out but create emotional bonds. His stories of leaders better off), SOBBOs (staying but building who have created heartfelt connections with Another presentation showed how recruiting is options) and HOBBOs (hanging on but bummed people were clear and thoughtful. Imagine life affected by the financial crisis. Statistics indi- out). And she reminded us that there are without the bonds created by Walt Disney, Oprah cate that 90 percent of employees, director “always choices for great talent.” She left us Winfrey or Lee Iacocca. level and above, are listening to recruiter calls, with the question: “Can people do their best giving the impression that when the market work in YOUR organization?” A big pause…and The variety of corporate case studies allowed takes off, many employees will change posi- the audience left with new and better tools to participants to choose from a list that included tions and their companies will be left recruiting try to answer this very big question.
HRPS, People & Strategy Attend First Global Drucker Forum
The First Global Peter Drucker Forum convened in Vienna, Austria on The focus of the two days of rich debates was the relevance of Peter November 19, 2009, to celebrate the centennial of Peter F. Drucker. Drucker’s thinking for current management issues. Most participants Drucker devotees gathered to laud and further study the world’s most attempted to answer the same question, speculating on Drucker’s prolific management thinker, first-ever Professor of Management and the interpretation of the current financial crisis and the state of the world’s founder of management science. They discussed the impact and endur- economy. Many of the commenters in this issue’s Perspectives sec- ing relevance of Drucker’s thought leadership in the 21st century. tion take on the same topic.
The Vienna Conference was part of a series of commemorative confer- C.K. Prahalad, the Paul and Ruth McCracken Distinguished University ences and workshops, including Drucker centennial events at the professor of Corporate Strategy at the Ross School of Business of Drucker Institute in Claremont, California, and Drucker Centennial the University of Michigan, remarked, “No other person has had the Global Conferences in China, Korea and Brazil. impact on the practice of management that Drucker did.”
Anna Tavis, Perspectives Editor for People & Strategy, attended the Additionally, Drucker’s importance for the human resources profes- Vienna forum and led a panel discussion. People & Strategy distrib- sional cannot be underestimated. HR professionals confidently can uted pre-publication copies of the Perspectives section from this claim Drucker as the first advocate of “talent management,” and the special issue to all conference participants. Copies also were distrib- strategic view of the employee’s value to business success. uted at The Drucker Institute’s annual Drucker Day on November 7 in Claremont. Participants at both meetings welcomed HRPS’ contribu- Celebrated as a visionary by most at the conference, and by most that tion and appreciated the depth of thought presented in our journal. have ever read or heard him, Drucker himself rejected the label of “guru.” “I never predict,” he wrote, “I simply look out of the window More than 300 of the world’s leading management thinkers and prac- and see what is visible but not yet seen.” titioners came to Vienna, Drucker’s native city, for this landmark event. Among the presenters were Yves Doz, Charles Handy, Philip Kotler, Peter Lorange, Fredmund Malik, C.K. Prahalad and Hermann Simon.
68 PEOPLE & STRATEGY
33rd AnnuAl HrPS GlobAl ConferenCe Realities New New Learnings oPPortunitieS for leAderSHiP The game is changing. businesses worldwide are adapting to new rules and realities. Human resource strategies, policies and practices must adapt as well. Attend the HrPS Global Conference for a viewpoint of these new realities through the eyes of thought leaders and strategists. learn how to optimize success in this “new normal” from information sharing and experiences of your peers. leave re-energized and prepared to implement ideas to immediately to benefit your organization.
April 25 –28, 2010 • Loews Coronado Bay • San Diego, California reGiSter todAy At w w w.HrPS.orG!
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