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FIRST PERSON

It may seem irresponsible to think about business in the Leadership Under Fire middle of war. But your leadership is really tested only when you come under attack. by Dov Frohman •

Reprint R0612H

It may seem irresponsible to think about business in the middle of war. But your leadership is really tested only when you come under attack.

FIRST PERSON Leadership Under Fire

by Dov Frohman

For me, the recent events in the Middle East business point of view, in anticipation of the have been a painful reminder of one of the missile strikes, the Israeli civil defense author- most important lessons for any leader: You ity directed all nonessential businesses to close

VED. don’t really know what it’s like to run a busi- and their employees to remain at home. The ness until you’ve had to do it amid the turmoil radical uncertainty of the situation—not know- of war. ing how many missiles would fall, where they In 1991, I was the general manager of ’s would fall, what kind of destruction they

ALL RIGHTS RESER operation in , which at the time was (and would inflict—threatened to bring our busi-

TION. still today is) the company’s largest unit out- ness to a halt, even before a single missile had A

OR side the United States. During the First Gulf been launched.

ORP War, I faced what was the most difficult test of It would have been easy to follow the civil my entire career: whether to keep Intel Israel defense directive and close down. Everyone up and running during Iraq’s Scud missile was doing it, and we were not part of the war strikes against Israel or close the operations effort. Intel’s senior executives in California

OL PUBLISHING C until the crisis passed. would have understood. Many of our employ- Of course, many businesses keep function- ees would probably have appreciated the op- ing during wartime. But in the days before the portunity to focus on preparing their families First , Israel confronted what ap- for the attacks. BUSINESS SCHO D

R peared to be an unprecedented threat. The Is- And yet I chose to ignore the government di- A V raeli military assumed that Iraqi missiles would rective, keep our operations open, and ask our be carrying chemical weapons. The govern- employees to continue to come to work. Some ment distributed gas masks and ordered every people thought I was being irresponsible. household to prepare a special sealed room in What right did I have to risk people’s lives in case of chemical attack. Most serious from a time of war? Others thought I was crazy. What OPYRIGHT © 2006 HAR C

harvard business review • hbr.org • december 2006 page 1

FIRST PERSON•••Leadership Under Fire

if any of our employees were killed? What if actly new to Israel; we had had plenty of expe- the government took legal action? What if dis- rience with what it would mean for our busi- gruntled employees went to the press? ness during Israel’s incursion into Lebanon in Despite these risks, I decided to move ahead, 1982. As a result, we made plans for replacing and Intel’s employees responded. In the first key personnel called up to the military and for days of the Scud attacks, when businesses operating the plant with a skeleton crew. throughout the nation were closed, roughly But almost from the moment we finalized 80% of Intel’s employees showed up, day in our contingency plan, it became clear that this and day out, night shifts included. Thanks to war would be very different. The politics of the their performance, Intel Israel was one of the U.S.-created anti-Iraq coalition made it impera- few businesses in Israel (and our tive that Israel stay out of the war. For that semiconductor fabrication plant the only man- very reason, it was in Saddam Hussein’s inter- ufacturing operation) to remain open through- est to provoke Israel into intervening. By Sep- out the entire six weeks of the war. Not tember, U.S. satellites had detected the trans- only did we keep our commitments to global port of ballistic missiles to western Iraq—a Intel, we also established the reputation that, mere seven minutes’ travel time from . over time, would allow us to grow Intel Israel Israeli defense officials were saying that a into an important center of excellence for the chemical attack on the country’s major popula- corporation, Israel’s largest private employer, tion centers was likely—a belief that prompted and a cornerstone of Israel’s dynamic high- them to lease two batteries of Patriot antiair- tech economy. craft missiles, adapted for use against ballistic missiles, from the United States. Instead of A Different Kind of War being behind the lines of the war zone, which I had left Israel in the early 1960s to get a we were used to, we ran the risk of being the PhD in at the Univer- war zone. sity of California at Berkeley, but my dream In October, tensions mounted when the gov- had always been to bring back a new body ernment issued every Israeli a personal protec- of knowledge to Israel and help found a new tion kit, complete with gas mask and atropine field of innovation and industry. So in 1974, I injectors, to combat chemical poisoning. There returned to set up Intel’s first overseas unit, a was something about receiving those kits, small chip design center in . Few people being instructed to carry your gas mask with know it, but we designed the you wherever you went, and having to prepare for the original IBM personal computer. And a sealed room in your house or apartment that in 1984, we opened the company’s first chip brought the uncertainty and potential danger fabrication plant outside the United States, of the situation home in a palpable way. in Jerusalem. By the turn of the year, as the U.S.’s January By the early 1990s, Intel Israel was a key 15th deadline for Iraqi withdrawal from Kuwait outpost of Intel’s global production system. drew near, my disquiet had grown. Many air- The Jerusalem fab was responsible for about lines suspended flights to Israel. The govern- three-quarters of the global output of the 386 ments of the United States and Great Britain microprocessor, at the time the company’s advised their nationals to consider leaving the best-selling product. Meanwhile, our develop- country. Then on Tuesday the 15th itself, the ment center in Haifa was hard at work on new Israeli government announced that all schools products that would be critical to Intel’s fu- would be closed for the rest of the week. ture, including key components of what would Slowly it was dawning on me that our contin- A former general manager of Intel Is- become the Pentium microprocessor. gency plan might be irrelevant to what was rael, now retired, and one of the pio- When Iraq invaded Kuwait in August 1990, likely to be anything but an ordinary war. neers of Israel’s high-tech economy, we knew there was a good chance there would And yet, despite all these warning signs, it Dov Frohman is also the inventor of be a war. So I appointed a task force of senior still came as a surprise when I woke up on the EPROM, the first reprogrammable managers to develop a contingency plan in Wednesday, January 16th, to the news on the computer chip. His book Leadership case Israel was drawn into the conflict. At the radio that, in anticipation of the start of hostili- the Hard Way (written with Robert time, we were assuming it would be a conven- ties and likely missile attacks, the Israeli civil Howard) will be published by Jossey- tional war, and we were confident that we defense authority was directing businesses to Bass in 2008. could handle it. That kind of war was not ex- close and everyone but essential emergency page 2 harvard business review • hbr.org • december 2006

Leadership Under Fire•••FIRST PERSON

personnel to remain home. It was only then ual fight for resources. When we first pro- that I fully understood: We were facing a com- posed setting up the Jerusalem fab in the pletely different kind of problem than the one early 1980s, we were put in competition with we had anticipated. This wasn’t just a matter Ireland to see which country could develop of calling up reserves. The government was the better proposal. We won that round and telling us that nobody should come to work. I by the early ’90s were already starting the immediately called a meeting of the task force process of negotiating and lobbying inside at the Jerusalem fab. Intel to persuade senior management to ex- pand the Jerusalem fab. A Question of Survival I knew Intel’s leaders well and had good re- In the 20 minutes it took me to drive from my lations with them. I had worked with Andy home in the historic village of Ein Karem, on Grove at Fairchild and been among the first the southwestern outskirts of Jerusalem, to generation of employees after he, Gordon the plant in the Har Hotzvim industrial dis- Moore, and Bob Noyce founded Intel in trict, I kept revisiting in my mind the logic of 1968. I was confident that if we had to inter- what I was about to do. It seemed almost irre- rupt production due to the war, executives in sponsible to be worrying about business in the Santa Clara would understand. I wasn’t wor- midst of a potential chemical attack. And yet, ried that there would be a negative impact in if I didn’t think about the possible conse- the short term. quences, who would? One of my core beliefs is that the primary task of a leader is to ensure the survival of the organization. (See the sidebar “Lessons for Leaders in a Crisis.”) It’s a perspective that I’m Lessons for Leaders in a Crisis sure is heavily influenced by my experience as My experience in the Gulf War taught their passivity and helps mobilize them a very young child during World War II. My me a lot about responding to crisis situ- to action. At Intel Israel, our bias for parents were Polish Jews who had emigrated ations. Many of the lessons were specific going against the current made it natu- before the war to Holland, where I was born in to our company and the kind of crisis we ral to decide to remain open even 1939. But after the German invasion of the faced, but if I had to draw any general though most businesses in Israel sus- Low Countries, they were taken and eventually lessons, I guess I would say that in mak- pended operations. It was the perfect killed by the Nazis. I survived only because the ing decisions during a crisis you need to antidote to terror. Dutch underground placed me with a devout keep just three big rules in mind: Trust your instincts. When it comes Christian family in the Dutch countryside who Focus on long-term survival. When to leading in a crisis, good instincts are hid me for the duration of the war. In retro- you are under an attack of the kind we more important than good planning. The spect, I can see how this experience inculcated faced, the easy option is to close down, problem with chaotic situations like war in me a stubborn conviction that survival must and in some cases that’s the right thing is not so much that you can’t anticipate never be taken for granted—and also that the to do. What you need to think about, everything. It’s that you can’t really antic- actions of determined individuals can have a though, are the long-term conse- ipate anything. All you can do is trust truly heroic impact on events. quences. For Intel Israel, shutting down your instincts, embrace the chaos, and My vision for Intel Israel had always empha- would have sent a signal that I agreed then deal with the consequences as they sized survival in a highly volatile industry and with those who thought Israel was a emerge. For instance, we spent a lot of region. As I used to put it, I wanted to create dangerous place to invest in. Over time, time and energy during the crisis trying an organization that would be the last to close employees could have paid for the clo- to anticipate the legal ramifications of in a crisis. To be honest, many Intel Israel em- sure with their jobs, to the detriment of disobeying the government’s instruction ployees, including some of my direct reports, the organization and the country as a to close down. Imagine my surprise didn’t much like this vision. They thought it whole. I think that many of the employ- when I learned, weeks after the attacks was too negative. “Is that the best we can do,” ees who criticized my decision to stay began, that the civil defense directive to they would ask, “just avoid being closed down?” open in the early days of the war would stay home from work only had the status So eventually, we came up with a simple slo- have regretted a closure far more. of a recommendation, not a legally bind- gan: “Survival through success.” Go against the current. Sometimes, ing order. At the time, most people, our- I was convinced that a complete shutdown the best way to survive a crisis is to do selves included, had assumed exactly the of our operations threatened both the success exactly the opposite of what people ex- opposite. So our decision to keep opera- and the survival of Intel Israel. Managing a pect. Doing the unexpected has a galva- tions open was, from a legal point of major unit in a global corporation is a contin- nizing effect. It shakes people out of view, not so risky after all. harvard business review • hbr.org • december 2006 page 3

FIRST PERSON•••Leadership Under Fire

But as Intel grew larger, decision making be- nesses that are designated essential parts of the came more decentralized. The key stumbling nation’s economic infrastructure. In times of block to further investment in Israel was the emergency, sectors such as utilities, defense lingering impression of geopolitical instability contractors, and the national telecommunica- in the region. Indeed, we had already had a tions network are allowed to continue to oper- number of struggles inside the company over ate. But we didn’t have that legal status. The the transfer of strategic technologies and criti- fact is, we had thought about applying for it in cal products to the Israeli operation. Therefore, the past but just never got around to it. It had I was convinced that if we had to interrupt pro- been pushed aside by more immediate and, at duction, even for a brief period of time, we the time, more pressing concerns. And even if would pay a serious price over the long term. we applied for this essential-industry status I had had a glimpse of the risks during a right away, under the current circumstances phone conversation with Intel’s then—execu- who knew how long it would take to receive it? tive vice president, Craig Barrett, in Septem- We decided we were going to act as if we al- ber. Barrett was on a stopover in ready had it until we heard otherwise. on his way to Israel for a routine annual opera- For three hours, we discussed the full range tions review. But he called to tell me that he of risks that remaining open entailed. The was considering canceling the trip. “Grove is main risk, obviously, was the potential injury worried about my coming to Israel,” he told to any of our employees on their way to and me, referring to the company’s then CEO. “He from work. People had sealed rooms at home, thinks it’s too dangerous.” While I convinced and we had created them in all our main facili- him it was safe and he came, the call provoked ties, including the Jerusalem fab. But what a twinge in my gut. If Intel’s senior executives about the daily commute? This was compli- If it was safe enough for were seeing Israel as unsafe, what would that cated by the fact that we had a contract with a mean for our business? My concern wasn’t private transportation company to bring our employees at the phone only for the survival of Intel Israel. It was also employees to work at the Jerusalem fab (a typi- company to travel to for the survival of Israel’s emerging high-tech cal arrangement at most large Israeli compa- sector. Intel Israel was a key anchor of Israel’s nies), so if we were going to remain open, work, there was no still small high-tech economy. If we couldn’t not only our own employees but also the trans- operate in an emergency situation, the trust of port company’s employees would be at risk. I reason why we shouldn’t multinationals and venture capitalists in the weighed the physical risk to our workers and risk it as well. stability of the Israeli business environment contractors heavily, but in the end concluded might crumble. that if it was safe enough for employees at the It’s another of my core leadership beliefs utility company and the phone company to that “when in crisis, you go against the cur- travel to work, there was absolutely no reason rent.” When the going gets tough, genuine why we shouldn’t risk it as well. leadership means making hard choices, At the Wednesday task force meeting, there doing the unexpected—and, sometimes, the were few objections to the idea of remaining seemingly impossible—even in the face of open. To be honest, the whole prospect of mis- opposition. So as I drove to the task force sile attacks seemed so theoretical as to be liter- meeting, I formulated what I saw then as an ally impossible to imagine, almost unreal. In against-the-current decision to assure the the end, we decided that we would issue a company’s survival: We would ignore the “call” for Intel employees to continue to come civil defense directive. I was going to ask our to work—a recommendation, not an order. No people to come to work. one would be punished if they decided to stay home. I made it extremely clear to my direct Back to the Drawing Board reports that there would be no coercion: No “This is a completely different situation,” I said manager was to pressure employees to come to at the start of the task force meeting, “so let’s work who did not want to. think differently.” The first thing we did was to This prohibition was especially important to throw out our contingency plan. The next was me—and not just for ethical reasons. The prob- to ask how we could keep the operations going lem with coercion is that it often leads to back- despite the civil defense directive. lash, creating the very resistance that it is In Israel, there is an official category of busi- meant to overcome. When you order people to page 4 harvard business review • hbr.org • december 2006

Leadership Under Fire•••FIRST PERSON

do something, their first reaction is often, tion, clear communications are especially im- “Wait a minute, if they have to force me, there portant. So we spent the bulk of our time plan- must be a problem with the whole thing.” I ning exactly what to say to our workforce and knew that I couldn’t control every single action coordinating our communications with our of all my managers, but I could make it clear counterparts at Intel in the United States, who that there would be no direct pressure. “Let the would be wondering what impact the missile culture do its work,” I advised. attack was having on our operations. We would also make it clear that keeping Some 75% of the employees on the 7:00 am Intel Israel open for business was critical to the shift made it to the plant. Although I hadn’t future success not only of the organization but told anyone, I had been expecting maybe 50%. also of Israel’s high-tech economy. I believed The relatively high turnout was a major en- strongly that the only way I could expect Israe- dorsement of our decision. lis to take a risk was if doing so was critical to That night, after being at the plant for the country, not just to the company. nearly 16 hours straight, I called Intel senior ex- We communicated our decision to the work- ecutives in Santa Clara. I stayed at the plant be- force on Wednesday afternoon. On the follow- cause I didn’t want to call them from my ing day, with still no sign of missile attacks, home. I had no idea what their reaction was turnout was relatively normal. But that Thurs- going to be, and I wanted them to see that Intel day, January 17th, was also the start of the al- Israel was operating as normal—or as close to lied bombardment of Iraq. What only one day normal as possible under the circumstances. I earlier had seemed like a theoretical possibility explained that we had decided to remain open, would very quickly become reality. but we weren’t forcing any employees to come to work who didn’t feel comfortable doing so, The First Attack and that so far turnout was quite good. They Headquarters was 7,500 At 2:00 in the morning of Friday, January 18th, asked a lot of questions; we discussed the po- I was awakened by the sound of an air-raid si- tential risks. But in the end, they were 7,500 miles away. They simply ren. I joined my wife and teenage children in miles away. Under the circumstances, they sim- had to trust us. the sealed room of our Jerusalem home and ply had to trust us. listened to the radio for the news. Eight mis- siles had landed in Tel Aviv and Haifa; as far as “Scud Business as Usual” the authorities could tell, there were no chem- The second Scud attack came early on Satur- ical warheads. I got on the phone to the mem- day. No one was killed, but some people were bers of the task force and told them to meet injured. Intel’s employees in Jerusalem kept me again at the plant. I grabbed my gas mask coming to work. And when the design center and headed out for the Jerusalem fab. in Haifa opened on Sunday (the first day of When I arrived at the fab at around 3:30, the normal Israeli workweek), turnout was work in the clean room had already resumed. up to 80%. At the sound of the alarm, the employees had After the first few days, we entered a period evacuated to the sealed room, except for a few that I took to calling “Scud business as usual.” who had agreed to stay behind to man some Attacks continued to happen. On Tuesday etching machines that needed continuous night, for example, after two days with no tending to keep the flow of materials going. Scuds, there was an attack outside Tel Aviv that After the report that the missiles had landed, led to the deaths of four people, wounded 96, employees were given the opportunity to call and left hundreds homeless. But we carried on home before returning to the clean room. as if everything were normal, and no one tried Things were tense, but relatively normal. to stop us. By the middle of the week, the civil When the task force convened half an hour defense authority was urging all Israelis to go later, we reaffirmed the decision to call people back to work, so the fact that we were open for to work. Managers had to be contacted and in- business was no longer so unusual. Still, be- structed what to say to their staffs. Employees cause the schools stayed closed, absenteeism at had to be called and told that the plant would most businesses remained high. The stress was indeed be open. The transportation company enormous, and I and my team did all we could needed to devise alternate routes to get around to boost employee morale. (See the sidebar police roadblocks. In the chaos of a crisis situa- “Intel’s Wartime Kindergarten.”) harvard business review • hbr.org • december 2006 page 5

FIRST PERSON•••Leadership Under Fire

As our actions on the night of the first attack us an extremely supportive letter in response, suggest, constant communication was essen- which I had posted on bulletin boards through- tial. The task force met daily to assess the rap- out the organization. His strong public en- idly changing situation and plan our communi- dorsement had an enormous positive impact cations for the day. We used every means we on employee morale. could—phone, e-mail, on-site meetings, face- Today, the decision to continue with busi- to-face conversations—to keep our employees ness as usual doesn’t seem so radical. At the informed of the latest developments. I was time, however, it was pretty controversial. In traveling continually between the three Intel the white heat of the first few days of crisis, sites in Israel—the fab in Jerusalem, the design everybody operated on instinct. People were center in Haifa, and our small sales and mar- so busy that they barely had time to think. keting operation in Tel Aviv—to meet with But once things settled down into “Scud busi- managers and employees in cafeterias and on ness as usual,” some doubts and questions production lines. I felt it was essential that I, as began to emerge. the organization’s leader, be present to em- Some saw the decision to remain open as ployees “in the flesh.” an act of courageous leadership, but others We also took great care in our communica- viewed it as an unnecessary risk, literally play- tions to global Intel to keep senior executives ing with the lives of employees. Some won- informed of the developments on the ground dered how we could justify risking people’s in Israel. After the first few days of attacks, I lives for a company that wasn’t even Israeli. sent a comprehensive e-mail to Intel senior Relatively few people actually refused to come management describing how we were meeting to work, but many were bitter for quite a the “war challenge” and delivering on our com- while. And one individual, who did refuse to mitments to the corporation. Andy Grove sent come to work—and not only during the first week but also in subsequent weeks, after the civil defense directive had been withdrawn— had to be let go. But these complaints never really coalesced Intel’s Wartime Kindergarten into full-fledged opposition to the decision. For Keeping Intel Israel open during the Her concerns, however, turned out to one thing, whatever doubts some people had, crisis certainly presented some unan- be prescient. A few days into the at- there was the basic fact that the vast majority ticipated challenges. One issue that I tacks, a manager at the Jerusalem fab of employees did actually show up. Indeed, in had seriously underestimated was the reported that the lobby was crawling the years since the war, I have often wondered impact of my decision on our employ- with young children. Some of our em- why so many answered the call. Partly, I sus- ees’ families. ployees, especially women, were bring- pect, it was because coming to work was a wel- To her credit, my head of human re- ing their kids to work. After all, the come alternative to the psychological paralysis sources had raised this issue. The only schools were still closed, and, just as brought about first by the prospect, and then woman on the task force and a mother, my HR head had predicted, people by the reality, of the missile strikes. Another she was sensitive to the implications of didn’t want to be separated from their part of it, I think, was that the call didn’t come our decision for our female workforce children in case of an attack. in a vacuum. We had been talking for years (about half of the employees in the Jerus- The organization responded by tempo- about survival through success and the need to alem fab were women). “Can we really rarily entering the education business. do whatever it takes to be the best. So while ask mothers to be separated from their Local managers in Jerusalem set up a kin- not everyone may have agreed with the deci- children during the threat of missile at- dergarten in a support building of the sion to keep operations open, most understood tacks?” I remember her asking at the task fab. It had never occurred to anybody on why we were doing it and trusted that we had force meeting when we decided to re- the task force (including my HR head) the best interests of the people and the organi- main open. that establishing a kindergarten for em- zation at heart. At the time, I didn’t exactly dismiss her ployees’ children might be a good thing For me, one story in particular captures the question. But in the total scheme of to do. But once faced with the fact that way the organization rose to the occasion. A things, dealing with the family fallout concerned parents were bringing their team from the Haifa development center was was not my highest priority. I felt that children to work, it was an obvious step on a conference call with its U.S. counterpart such separations were inevitable in an to take. Throughout the Scud attacks, as when the alarm signaling a Scud attack began environment where the “front” was po- many as 50 children were in the school to sound. To the amazement of their U.S. col- tentially everywhere. on any given day. leagues, team members calmly asked for a page 6 harvard business review • hbr.org • december 2006

Leadership Under Fire•••FIRST PERSON

brief interruption in the meeting so they could at the time. And yet, to this day, I remain con- move to the site’s sealed room, located in the vinced that meeting our commitments to Intel computer center, and then resumed the call a during the war was critical to the future evolu- few minutes later as if nothing had happened. tion of Intel Israel—and, indeed, of the entire Israeli high-tech economy. A few years later, in After the War 1995, Intel broke ground for a second semicon- The last Scud attack took place on February ductor plant in Israel, at Qiryat Gat, on the out- 25th, about six weeks after the bombardment skirts of the Negev Desert. In 1999, the Haifa of Iraq had begun and one day after the start center won the assignment to develop the Cen- of the ground war. On Thursday, February trino portable-computing technology, which 28th, the Israeli state of emergency officially was launched in 2003. And in subsequent ended. All told, 39 Scuds in 18 separate attacks years, whenever we got any push-back about landed on Israeli territory, none carrying doing major projects in Israel, it was always chemical warheads. Although only one person helpful to remind our colleagues that, as the was killed directly by an attack, 74 people died experience during the war had demonstrated, of indirect causes—from heart attacks brought “Intel Israel delivers, no matter what.” on by the missile strikes, for example, or by Today, Intel Israel is the headquarters for the suffocation due to improper use of protective company’s global R&D and product develop- gear. More than 200 were wounded by blasts, ment in wireless technology, as well as a major flying glass, and shrapnel. Property damage to center for chip fabrication. The organization is 4,000 buildings was in the millions of dollars. Israel’s largest private employer (and second 1 And 1,600 families had to be evacuated. largest employer overall), with a workforce of The war had indirect economic costs as well. about 6,600, which is set to reach nearly According to the Israeli Ministry of Finance, in- 10,000 by 2008. In 2005, Intel Israel’s exports dustrial output during the war was at about totaled $1.2 billion and represented 14% of the 75% of its normal level. The costs to the Israeli total exports of Israel’s electronics and infor- economy in lost output totaled approximately mation industry. And in December 2005, Intel $3 billion. announced that it would invest an additional At Intel Israel, we were extremely fortunate. $3.5 billion in a new fab in Israel, the largest None of the Scuds landed in the Jerusalem single investment by a corporation in the his- area, where most of our people worked. No tory of the country. Intel employee or family member was injured

or rendered homeless by the attacks. And in 1. These figures were drawn from the Israel Yearbook and terms of the economic impact, both the Jerusa- Almanac 1991/92 (IBR Translation/Documentation Limited lem fab and the Haifa development center 1992). were able to meet all of their manufacturing and product development commitments. Reprint R0612H Looking back, I realize that the decision to To order, see the next page keep Intel Israel up and running during the or call 800-988-0886 or 617-783-7500 First Gulf War was not as dramatic as it seemed or go to www.hbr.org

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