QUARTER ONE

VOLUME FOUR NO.

Decisions. Results.

Talent + Leadership

THE MANUFACTURING AND DESIGN ISSUE:

THE AMERICAN MANUFACTURING RENAISSANCE IS B&O THE APPLE OF EUROPE? $14.95 US / CAN LOCKHEED MARTIN CEO ROBERT STEVENS The aim for Chief executive officer Gary Burnison Chief marketing officer Michael Distefano Korn/Ferry Briefings Editor-in-chief Joel Kurtzman is audacious: creative Director Joannah Ralston to provide great circulation director Jaye Cullen MARKETING MANAGER Stacy Levyn insights to help online manager Lindsey Koh PROJECT MANAGER leaders lead. Tiffany Sledzianowski STRATEGIC CONSULTANTs Robert Ross, Roland Madrid

Not by telling Board of Advisors Sergio Averbach Robert Hallagan Stephen Bruyant-Langer Katie Lahey them what to Cheryl Buxton Robert McNabb Dennis Carey Byrne Mulrooney think — but what Bob Damon Indranil Roy Ana Dutra Jane Stevenson to think about. Joe Griesedieck Anthony Vardy

contributing editors Chris Bergonzi Stephanie Mitchell David Berreby P.J. O’Rourke Lawrence M. Fisher Glenn Rifkin Victoria Griffith Stephen J. Trachtenberg Dana Landis Adrian Wooldridge

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Creative designed and serviced by For questions, concerns or inquiries: Studio +1.818.932.0499 / [email protected] 6732 Eton Ave., Woodland Hills CA 91364 USA As You Like It GODIVA © 2012 16 planning for transition Succession was on the agenda at CEO Q1.2013 Robert J. Stevens’ first board meeting. BY clarke havener and joel kurtzman

4 letter from the ceo 25 the trouble with rewards More money doesn’t always lead to latest thinking higher performance. 6 the science of listening BY david berreby

To lead, you need to know what people think. 32 facing now 8 is the party over for brazil? How different was 2012 from 2011? After tearing up the charts, growth has slowed Not very different at all. to 2 percent. 11 generalist managers make 34 the new math for manufacturers a comeback The U.S. is becoming a preferred manufacturing center. BY christopher r. o’dea Too much specialization can limit agility. Viewpoint 42 denmark’s bang & olufsen Apple’s founders were inspired by Europe’s B&O. 14 the capabilities gap BY lawrence m. fisher Good governance requires experience, which is in short supply. 52 what do p. diddy, sergey brin and BY richard emerton peter drucker have in common? Some of the world’s finest leadership academies In Review can be found at Montessori Schools. BY glenn rifkin 70 “the passage of power” 62 me vs. we and the art of balance Parting Thoughts People constantly trade self-interest for 72 are things really as bad common purpose.  BY david berreby as they feel? BY joel kurtzman 68 giving thanks A tribute to some of the world’s most 42 generous companies.

34 52

62 Performance. As important on the track as it is for lasting success.

Advice you can trust starts with a conversation.

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For the Love of Money

Money, money, money immediately said, “The singular goal found that above a certain size, the po- of the people on the outside is to be tential for a bonus negatively affected Must be funny back on the inside, and the only objec- participants’ ability to succeed at a In the rich man’s world tive of the people on the inside is not simple arcade game. The phenomenon to be back on the outside.” A sad com- seems to be explained by “loss aver- Money, money, money mentary, but probably truer than we sion.” Humans fear the pain of losing Always sunny would like to believe. Power is all too more than they desire the pleasures often seated at the right hand of money. of winning. The more reward on the In the rich man’s world But I have a different view: money line, the more the participants focused can rent loyalty, but it can’t buy it. If on losing — and lose they did. All the things I could do money is the only thing keeping em- Another study, at the London School If I had a little money ployees at your company, you’ll only of Economics, found that financial It’s a rich man’s world* keep them until someone else makes incentives undermine overall perfor- a higher offer. mance because they can “reduce intrin- And yet, many leaders hear “reward” sic motivation and diminish ethical or he No. 1 reason for divorce in and automatically jump to money. In other reasons for complying with work- America: money. The source of fact, money is only the most expensive place social norms such as fairness.” T countless wars throughout his- and least motivating currency circulat- In my sixth year as a CEO, I’m not tory: money. What it takes to be presi- ing in the 21st century workplace. Even naïve — how employees are paid cer- dent of the United States: money, and a worse, typical money-based reward tainly influences how they behave. But lot of it — how about needing to raise systems have been shown to produce a how much, and in what ways? Business $1 billion for a job that pays $400,000 multitude of negative outcomes: poorer management psychologist Frederick a year, puts you in the world’s tiniest performance, diminished creativity Herzberg first articulated the idea that bubble, turns your hair gray (except for and reduced interest in tasks that were “hygiene factors” — such as salary, secu- Ronald Reagan thanks to tubes of Gre- once intrinsically interesting, to name rity and status — were crucial for avoid- cian Formula). And half the world al- just a few detailed in Dan Pink’s excel- ing job dissatisfaction, but had little ways disagrees with you — no matter lent “Drive,” a well-researched, forward- impact on job satisfaction. In other what you do. thinking examination of employee words, you want to pay employees Money is like water. It is necessary, psychology. Pink shows that using re- enough so that money is their least and in many parts of the world it is in wards to motivate knowledge workers concern at the workplace — but to mo- short supply. It has a purpose, but it’s requires an approach far more subtle tivate, reward and celebrate them, not durable. In excess, it’s overly visible than “carrot and stick.” the buck (literally) stops elsewhere. and utterly destructive. One counterintuitive example: You Once upon a time, a faraway king- I recently asked a former Cabinet might guess that the bigger the per­ dom was devastated by drought. The member, “What was the most surpris- formance bonus, the greater the effect. crops failed, and the ground hardened ing thing about Washington, D.C.?” He Not so. In a study at CalTech, scientists and cracked. And so the king ordered

4 Q1.2013 Korn/Ferry BriefingsB onTalen David Strick riefings onTalen “nothing couldstopusuntilwehad finished thejob.” Besides, andtheyhadnoth- itwashot, reality? CEOsareinabrutalfightfor members seehowtheirworkaffectsthe in all the land. The crewarrivedwith in alltheland.The ing todrink. ing awholethatis, indeed,greaterthan is moresustainablethanthenot-so- thecows who satlistlessinthedust, ing today, forthatwillbethe starting ing Now,” whichmeansaccurately view- we weredigging,”theworkerssaid, what hadmadesuchadifferencein ness, learningagility andculturaldex- picks andshovelsbegandigging. back to the task. They dugdayandnight They back tothetask. back tothiskingdom.” jail. Hiswisestadviser, however, asked bers of theteamcometogether,bers of becom- With purpose,individualmem- picture. bigger picture.Purposeisthat ployees needheightenedself-aware - point fortomorrow. istoday’s What to speakwiththeworkers. “Come,” to dig,thekingorderedthemputin their tools. Allthisdiggingwasabsurd! the adviser said. “You’re bringinglife the advisersaid.“You’re that werechewingdrystrawinsteadof turned tobrownstubble,thechildren the kingdom,pastfieldsthathad their work. “Once weunderstoodwhy their work. the sum of theparts.the sumof Purposecaptures his staff tohirethebestdiggingcrew his staff he said, and led the crew on a tour of he said,andledthecrewonatourof hearts andminds. driven byinnovatorswhoarecapable durable “howmuch.” “why”aligns, The until theystruckwater. theking When unifies and elevates. At every level, team Six feet, eight feet, tenfeet eightfeet, Six feet, green grass. “You’re notjustdigging,” green grass. “You’re growth andrelevance.Easyis came toseethewell,heaskedcrew ers keptdigging.Finally, theyputdown of crossingborders.of over. Inthisdecade,growthwillbe Immediately, theworkersrushed In thisknowledgeeconomy, em- The moral of the story: The “why” thestory:The moralof The This issue of Briefingsisabout“Fac- issueof This Enraged thatthecrewwasrefusing t & — L eadership the work-

“go into yournextcompanymeeting “I doubledogdareyou,”management I’d add a related fourth. For a moment, addarelatedfourth.Formoment, I’d yet themostpotentrewards, themost root characteristic. They maketheem- They root characteristic. meaningful celebrations, sharethis must changeaccordingly. Sowhatare what we do in the service of some- what wedointheserviceof idea of “love”idea of intoyourmanagement actions arehelpingtheorganization and celebrateseachotherdeeply and and say, wereallyneedinthis ‘What work. This isnottheassemblyline,and This work. according toPink: and collaborativeimpulsesintotheir progress andgetbetteratsomething part of somethingthatisbiggerthan part of progress. Peoplewanttoknowthat be challenged,tocontribute,rec- personally, byacommunitythattrusts acommunitythatappreciates part of ployee feelloved.Love,here,isbeing place contextisunderstandable that matters” themselves. they belong,thatareanintegral thing largerthanourselves.” this dichotomy, lovewinseverytime. tives matter:“for loveorformoney.” In the organicicecreambusiness, or terity. mustbringcreativeideas They today’s workersafter? the wayemployersmotivateworkers community thatsupportsitsmembers’ each othertodotherightthing, bya expert Gary Hamel told BigThink.com, expert GaryHameltoldBigThink.com, secondary totheemployees’desire studies andassumethatonlytwomo- set asidethefootnoted,peer-reviewed something similarlysoftandsquishy. won’tstrategy workunlessyou’re in our ownlives” ognized andtounderstandhowtheir organization is, weneedmorelove.’ • • • You mightthinkthatbringingthe Look tomaximizethreethings, To autonomy, masteryandpurpose, The recoilfrom“love” inawork The Compensation, while important, is Compensation, whileimportant, Purpose Mastery Autonomy — — “the yearningtodo “the urgetomake — “the desiretodirect — and

” -

*ABBA. “Money, Money, Money.” Arrival.Polar “thank you.” Celebrate theincremental “We couldn’t have doneitwithoutyou,” “We may bedisappointed.Rather, believe recognition shouldbeconstantandtai- means goingbeyondwhatevermight it with reason. Why shouldrelation- Why it withreason. in yourteammembers, andyouwill what we remember most, thequality,what weremembermost, autonomy, masteryandpurpose. what heisreallysayingtoeachcontrib- Journeys, notdestinations, areoften achievements aswellfinalresults. at hand be amazed. be promised in their contract. Informal be promisedintheircontract. through theheartandthenfollowing to changeminds, bygainingaccess tion remainsthemostpotentmeans team memberstobelieveinyou,you the way. depth and richness of experiencesalong depth andrichnessof lored totheemployeeandsituation utor is, “You areloved.”utor is, “You Records, 1976. genuinely, personallyappreciatethem ers? When theleadercommunicates,When ers? ships inbusinessdifferfromanyoth- As aleader, youarelookingfor if Leaders needfollowers, andemo- Letting employeesknowthatyou — a handwrittennote,simple

Q1.2013

5 The Latest T in ing

The Science of Listening How our brains help to create what we hear

GEN’s Chairman of the far-flung, it has become axiomatic ing so as to confirm the mutual un- Board Kevin Sharer recalled that effective leadership is predicated derstanding of both parties. Mhis moment of epiphany. on effective communication and, in That kind of listening is difficult “The best advice I ever heard about particular, on finely honed listening to master, in part because it is at odds listening — advice that significantly skills. Yet, according to Ram Charan, with today’s frenetically multitask- changed my own approach — came a noted business adviser who has ing, information-overloaded, distrac- from [then IBM CEO] Sam Palmisano, worked with top executives at some tion-driven world, but perhaps more when he was talking to our leader- of the world’s most successful com- importantly because it runs counter ship team. Someone asked him why panies, “Corporate leaders’ 360-de- to the way our brains have evolved his experience working in Japan was gree feedback indicates that one out to function. Our listening brain is so important to his leadership devel- of four of them has a listening deficit wired to do exactly what active lis- opment, and he said, ‘Because I — the effects of which can paralyze tening discourages: evaluate input, learned to listen by having only one cross-unit collaboration, sink careers predict outcomes, make judgments objective: comprehension. I was only and, if it’s the CEO with the deficit, and perform triage, all on a moment- trying to understand what the person derail the company.” to-moment basis. That mode of func- was trying to convey to me. I wasn’t Charan was referring specifically tioning, according to recent thinking listening to critique. I wasn’t listen- to a deficit in the kind of listening in cognitive neuroscience, evolved ing to object. I wasn’t listening to Palmisano described — a complex as the brain’s strategy to use its finite convince. I was listening solely for skill known as active or empathetic neural capacity efficiently. comprehension.’ ” listening in which the listener sus- “Rather than waiting to be acti- As organizations have become pends his own frame of reference vated by sensations, [the human flatter, more virtual and increasingly and fully attends to the speaker’s. brain] is constantly generating pre- The listener avoids engaging in im- dictions that help interpret the mediate judgment, prejudice, as- sensory environment in the most sumptions, rebuttal or criticism. He efficient manner,” wrote Harvard is open not only to the spoken word, Medical School neuroscientist Kes- but also to body language and emo- tutis Kveraga et al. in a 2007 paper, tional subtext. He does not try to “Top-down Predictions in the Cogni- evaluate or solve problems in the tive Brain.” “There are many statisti- moment, but simply restates to the cal regularities in our environment speaker what he believes he is hear- and the brain uses them to short-cut

SAY WHAT? coffeedence (n.): The sudden burst of confidence, focus, or creativity one experiences during

or immediately following the consumption of coffee/caffeine. Source: Urban Dictionary Hal Mayforth

6 Q1.2013 Korn/Ferry Briefings onTalen Carl Wiens memory of pastexperiencestointer- memory of mation rapidly, andusesittogener- magnetic resonanceimagingreveal words, theprefrontal cortex,which what happenswhenwelisten.As ate predictionsthathelpinterpret processing insimilarfuturesitua- pret sensoryinformationandpredict that input. [It]continuouslyemploys that input. the brainextractscoarse,gistinfor- primaryprincipleisthat tions. The take in the stimuli of thespeaker’s take inthestimuliof tive process. Techniques likepositron the immediatelyrelevantfuture.” lights upwithactivityaswecontinu- largely a top-down, strategic, cogni- largely atop-down,strategic, enables organizingandprioritizing, emission tomographyandfunctional That meansthatlisteningis That t & L eadership responses canbeseenasthebrain’s models theworldasadynamicsys- induced byastimulusandthereby attempt to minimize the free energy attempt tominimizethefreeenergy brain College London,wrote:“The against whatweknow, ourpastex- ally vettheincominginformation periences andourtheoreticalcon- the brainissensitivetoprobabi - tem. Perceptionistheoptimization Neurology, Instituteof the University KarlFriston,professorat the subject, listic contextinwhicheventsare encode the most likely cause of that encode themostlikelycauseof encountered.” stimulus. This isclearevidencethat stimulus. This struct of thefuture. struct of or inversion of thatmodel.Cortical or inversionof In one of a series of paperson aseriesof In oneof you know to outweigh some of what you knowtooutweighsomeof in fact, prettymuchthenormindaily in fact, ing canbehugelybeneficialwhen advantage: “The capacitytousewhat advantage: “The non-conscious, mayquiteliterally be determining much of whatwe be determiningmuchof Edinburgh University, thisisagreat the sensorydataisnoisy, ambiguous the incomingsignalseemstobesay- that perceptionisinextricably tied life. This underlinesthesurprising life. This chology andLanguageSciencesat chology expectations, bothconsciousand our extent towhichthestructureof sor at the School of Philosophy,sor attheSchoolof Psy- see, hearandfeel.” or incomplete According to Andy Clark, profes- According toAndyClark, That further suggests, said Clark, furthersuggests, saidClark, That — situationsthatare, Q1.2013

7 The Latest Thinking

Is the Party Over for Brazil?

or most of the decade since Goldman Sachs’ Jim O’Neill Ffirst conferred fab-four status SOCIAL MEDIA BOLSTERING BIG BRANDS on Brazil, Russia, India and China, Fortune Global 100 companies have more accounts on social media platforms even giving them the catchy nick- than ever before, with an average of: 10.1 Twitter accounts, 10.4 Facebook name of “the BRICs,” those emerging pages, 8.1 YouTube channels, 2.6 Google+ pages and 2.0 Pinterest accounts. economies had certainly lived up to Source: Burson-Marsteller expectations. On average they grew faster than the rest of the world — four times faster than the United to understanding and imagination. bottom-up process to become truly States, in fact — and became the If conscious perception is a predic- open to the input of others. As Ram darlings of overseas investment tive, top-down process in which the Charan concluded, “Truly empathetic portfolios, attracting $70 billion in brain continuously compares incom- listening requires courage — the mutual funds alone. Then, in 2011, ing information to what it already willingness to let go of the old habits their growth decelerated dramati- knows about the world, then that and embrace new ones. But once ac- cally, prompting another Goldman reservoir of knowledge is what we quired, these listening habits are the Sachs economist, Dominic Wilson, call understanding and that top-down very skills that turn would-be leaders to report, “We have likely seen the process, when operating in a free- into true ones.” peak in potential growth for the floating way without external stim- If we each are indeed creating BRICs as a group.” uli, is what we call imagination. In our own individual perceptions, per- The sudden downshift was fact, researchers from Washington haps empathetic listening is what largely the result of Europe’s deep- University in St. Louis have found enables those perceptions to dovetail ening sovereign debt crisis, which through advanced brain imaging into collective understanding. In his severely reduced demand for the techniques that the mental processes 1949 classic, “Language in Thought manufactured exports of emerging of remembering the past and envi- and Action,” S.I. Hayakawa expressed economies and suppressed prices sioning the future are strikingly it this way: “A human being is never for their commodities. European similar. dependent on his own experience banks that had been sluicing capital “In other words,” said Clark, “the alone for his information. Even in a into the developing world pulled human brain is deploying a funda- primitive culture he can make use back in the face of uncertainty at mental, thrifty, prediction-based of the experience of his neighbors, home. However, even as the Russian, strategy that husbands neural re- friends, and relatives, which they Indian and Chinese economies sources and, as a direct result, deliv- communicate to him by means of slowed, they still grew at 4.3 percent, ers perceiving, understanding and language. Therefore, instead of re- 7.8 percent and 9.2 percent respec- imagining in a single package.” maining helpless because of the lim­ tively. Brazil, on the other hand, Viewed from that perspective, itations of his own experience and lagged the pack at 2.7 percent after then, the challenge of active, empa- knowledge, instead of having to dis- having reached a peak of 7.5 percent thetic listening requires no less than cover what others have already dis- a year earlier. a willful override of the brain’s pre- covered, instead of exploring the false Until recently, Brazil’s economy ferred mode of operation. It requires trails they explored and repeating boasted large and vibrant agricul- that listeners quell the brain’s bio- their errors, he can go on from where tural, mining and manufacturing logical need for efficiency, prediction they left off. Language, that is to and planning and employ a purely say, makes progress possible.”

8 Q1.2013 Korn/Ferry Is theParty Over for Brazil?

B ©Eraldo Peres/AP/Corbis riefings onTalen facturing sectorstruggledbecause in worldmarkets. Domesticcon- nese demandforrawmaterials, it the overvaluedBraziliancurrency the Americas. Drivenbysoaring had steadilyexpandeditspresence ground nearly to a halt. The manu- The ground nearlytoahalt. commodity pricesandrobustChi- cent of theeconomy.cent of lastyear, Then grewtoaccountfor60per- credit, sectors andthelargestoilfindsin sectors thathadbeenroaringahead sumption, spurredbyplentiful t & L eadership flation begantoratchetbackcon- (the real)openedthefloodgatesto market depressedprices. cre- Job ing aspectwasthatallthedemand ing fell.Interestratehikesthathad ation slowedsharply. Capital spend- been putintoeffectduringthefirst plunged ascarmakersidledfactories to whittledownhighinventories. half of 2011 inanattempttocoolin- of half Steel millsslowedasaglutinthe cheap imports. Automobileoutput sumer spending. “The mostshock- sumer spending.“The Rousseff, Brazil’s governmentbegan Central Bankbegancuttinginterest at Raymond James &Associatesin at RaymondJames to adopt a series of aggressivestrate- to adoptaseriesof Sao Paulo. gies to try to reverse the trend. The gies totryreversethetrend.The components contracted(atonce),” said Mauricio Rosal, chief economist said MauricioRosal,chief legislators “sweepout”corruption. onstrators demandthatBrazil’s be thekeytoitsrevival.Here,dem- growth, butdomesticreformsmay drastically constrainedBrazil’s The globaleconomicslowdownhas Under newPresidentDilma Q4.2012 9 10 Q1.2013 The Latest Thinking “Brazil Cost”), theintrinsicpremium 100 analysts. rates again real andreigniteconsumerspend- inadequate infrastructure,alimited its economyisweigheddownbyan ing. The government alsotookmea- ing. The paid fordoingbusinessinthecountry. problems are locally rooted. They say problems arelocallyrooted.They patches toanincreasinglyexhausted Brasilia, professor attheUniversityof points inoneyear, downtoarecord judicial system.Allthispushesup the notorious“Custo Brasil”(the tax code,anexpensiveandunder- transportation system,anunwieldy the governmentismerely“applying qualified laborforce,antiquated does, despitethebuffetingva- that, likely tocomeinatlessthan2per- laws, corruptionandadysfunctional low 8percent ulate growth, reduce the value of the ulate growth,reducethevalueof garies of theglobaleconomy,garies of Brazil’s growth model.” Manybelieve,ashe cording to a Central Bank survey of Central Banksurveyof a to cording ac- year, cent growthfortheentire According toDavidFleischer, a — made-in-Brazil goods. Despite thesestimulus in early2012 andis Asianim- ing floodof industries froma grow- and trucks. Italsoinsti- panded (0.02 percent) packages, however, the to increasegov- pledged ports, includingraising tuted $1billionintax taxes onforeign cars consumption and stimulate cuts to further economy barelyex- ernment purchasesof sures toprotectBrazil’s lopping off 450basis loppingoff — inanefforttostim- “Brazil isnotgoingtogrowunless “The timehascometoprioritize “The “the governmentisexacerbating Association of Supermarkets,Association of agreed: International. Honda, president of theBrazilian Honda, presidentof Brazil’s governmenthasdoubledits ment addstotheproblembyover- Richard Hamilton,headLatinAmer- isolated measures, becausethey infrastructureand ian associationof inefficiently. sincethe1990s, Infact, will forreform.Instead,thegovern- Congress haveshownmuchpolitical we makethenecessaryreforms. The in theBrazilianeconomy, whichare ica riskanalystatBusinessMonitor nies, effectivelycrowdingoutthe incurringhuge now at40percent, Godoy, ABDIB, presidentof aBrazil- private sector. “InBrazil,wehave picked projectsandfavoredcompa- just a question of thisyear.”just aquestionof point overthenextfewyears,” said the BrazilianInfrastructureCenter. this philosophythatthestateis the Brazilianeconomy,” saidPaulo don’t takeusanywhere,” said Miguel dress thecompetitiveproblemsof leaders areclamoringforreform. likely tocomeaheadatsome great investor, butitisveryineffi- country isnotcompetitive.It’s not cient andveryslowtomakedeci- capital goodsindustries. Sussumu sions,” saidAdrianoPires, headof structural reformsthatreallyad- spending as a percentage of GDP,spending asapercentageof spending anddoingsoextremely some of thesestructuralimbalances some of obligations bysubsidizinghand- “It’s notenoughtocarryout Increasingly, manybusiness By employingstimulusmeasures Still, neither Rousseff norBrazil’sStill, neitherRousseff

Advisor. “The governmentneeds a Advisor. “The Neil Shearing,CapitalEconomics’ recently toldtheFinancialTimes:“All Daoud, adirectorforGlobalFinancial ment. Productivity growth for the past Productivity growthforthepast ment. frothy expectationsengenderedby which isaboutparforthe(current) ing, andatsomepointthathasto with a prolonged period of lackluster with aprolongedperiodof alistic. But it can do 3 or 4 percent, Butitcando3or4percent, alistic. inflows. Addtothatastillovervalued would focusonincreasingitspro- ically aversetosaving. and whenthiswillplayoutishard annually, investmentonly19percent by furtherunderwritingconsump- this hope of the Brazilian decade, of theBraziliandecade,of this hopeof the beginning of aneededcorrection. the beginningof the BRICnarrative,othersseeitas to call.” tion thegovernmentisgivinghouse- Hamilton,and the world,saidBMI’s high interestratestoattractcapital holds incentivetotakeonevenmore decade hasbeenonly0.9percent ductivity, privatesavingsandinvest- debt, exacerbatingthecountry’sdefi- debt, growth of 6percentayear,growth of wasunre- growth plan.” Mostagreethatany growth, disappointing in light of the growth, disappointinginlightof come tothedebateaboutBrazil.” chief emerging markets economist, emergingmarketseconomist, chief economy. Perhapssomesanity has chronic non-competitiveness. “In currency andyouhaveaformulafor end cits andperpetuatingitsrelianceon stage of development of Brazil’s developmentof stage of sustainable growthplanforBrazil suming alotmorethanitisproduc- saidHamilton,“Braziliscon- short,” some of themosthighlyleveragedin some of of GDP,of andBraziliansremainchron- Although someseeitplayingout Brazilian consumersarealready — oratleastslowdown.How Korn/

F

erry

©Eraldo Peres/AP/Corbis B William Rieser riefings onTalen T 21st-century management not depth, will bethekey tosuccessful Many are beginningtoargue thatbreadth, Make aComeback Generalist Managers Yale, contendedthatincreasedspe- Vikram Mansharamani,alecturerat MIT Sloan School of Management, Management, MIT SloanSchoolof Thomas Malone,aprofessoratthe Thomas reasons, though,thefuturemaybe- recently contendedthatweareen- ized tasks.” Uptonow, thiscanon which drew a good deal of reaction, which drewagooddealof will createanagileuniversehasen- ing redefinedbyexpertise,notspan networked andlessbounded,the Jobs aregettingmorespecialized, Jobs petitive environment. Forvarious petitive environment. prevailing wisdomisthatincreased panies havebecomeflatter, more people workinteamsandcrossfunc- to ‘domain expertise’ asanenduring that the big bang of specialization that thebigbangof the worldperforminghighlyspecial- tion” inwhich“jobsatomizeinto tering “theHyperspecializa- Ageof tional boundaries, andsuccessisbe- hancing it:“Businessthinkerspoint defined problems within constrained long tothegeneralist.” cialists aregreatatworkingwell- cialization islimitingagility, noten- countered veryfewheretics. peopleallover complex networksof cient andrapidlyadaptive.Ascom- source of advantageintoday’scom- source of specialization isthekeytoagility. of control.InHarvardof BusinessReview, According toMansharamani,spe - However, inarecentHBRblog ment isthesearchforagile he corporate quest of themo- he corporatequestof organization — t flexible,effi- & L eadership matters in making a sound forecast matters inmakingasound ists, ontheotherhand, wrote Mansha well-defined.” General- working onproblemsforwhich not evenrecognizewhattheydon’t able fortheinsightstheyprovidein and broadperspective. accurate predictorsthanarenon- expertise,expertsareless area of also tryto“applyformu- a University of Pennsylvaniapsy- a Universityof nections acrossdomainsand are greatatmakingcon- practice: “Expertswithadeepfocus published the results of a20-year published theresultsof perspective trumps that critical area of a project, butmay aproject, that criticalareaof tech companyAnchorTherapeutics, they “toilwithinasin- to the oft-cited work of P to theoft-citedworkof tions thatarerarely the parametersarenotclear. know aboutthewiderissues.” has witnessedthatphenomenonin domains, butbecause depth of knowledge,” depth of laic solutionstositua- gular tradition,”they chology professor.chology In2005, Tetlock experts. Heconcludedthat what environment, breadth of breadthof environment, study suggestingthatwithinagiven on aparticularfieldmaybeinvalu- or experienceasgoodjudgment or decisionisn’t somuchknowledge “In today’suncertain Rick Jones,bio- formerCEOof ­ramani. Hepointed hilip Tetlock, hilip Tetlock,

Technologies. “There isperhapsno Technologies. “There mon-sense view.” in plainview,”V.P. said Kochikar, associate vicepresidentatInfosys better example of thisthanthere- better exampleof clairvoyant flairorcutting-edge, cent financialcrisis. Youdon’t need coming scures our vision of thingsthatare scures ourvisionof specialized competencetoseewhat’s “Overspecialization oftenob- Lee Thomas, a team facilitator of ateamfacilitatorof Lee Thomas, — justacrystal-clear, com- Q4.2012

11 12 Q1.2013 The Latest Thinking

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a P Sao Tokyo Oslo Fr San Stockholm DC Washington, Paris . . aolo . . ancisco R . obin . “The abilitytoconnecttheproverbial “The Anheuser-Busch, Scotiabank, and Anheuser-Busch, Scotiabank, MetLife allhaveinstitutedprograms In somecases, specialistjobsarebe- management andanalyticsatPrice- functional rolesacrosstheenterprise. focus, clearthinking,imagination Dipesh Lall, director of information Dipesh Lall,directorof for managers to learn all aspects of a for managerstolearnallaspectsof ing outsourced or handed off tocon- ing outsourcedorhandedoff [Today] therearefewopportunities General Electric, longfamousforits General Electric, IBM, and attemptingtoobviateit. and inclusiveness. waterhouseCoopers LLP. “As onefaces nies evolvedto‘functional’ structures business. This may be one of therea- maybeoneof business. This to berecognizingthatpossibility that allowtheirmanagerstogain tions, someemployerswanttore- to paintingeachdotperfectly,” said to cutcostsandreduceduplication. duce their overall number of employ- duce theiroverallnumberof dots willalwaysbeasuperiorskill gle toperform.” characteristics, includingexternal executive training,evaluatespeople globaland experience inavarietyof ees andfindpeoplethathavemultiple sons whymanyorganizationsstrug- sultants, events. asurprisingturnof skills andcanworkcross-functionally. on a number of decidedlygeneralist on anumberof s . on . More andmorecompaniesseem But somearenotsosurprised. Given sluggisheconomiccondi- $270 $281 $285 $285 $302 $303 $306 G roup — Many who dismiss the value of gen- Many whodismissthevalueof rebranding of whattruegeneralists rebranding of Ron Ashkenas. “Butthedangeris managers typicallypossesstraits false choice.Effectiveleadersand ing willingnesstotolerateandtem- where deepexpertiseisnecessary answer isn’t toabandonspecializa- andcomplexproducts,”nology said breadth. The debatealsopresentsa breadth. The ageneralist.”perspective of per ambiguity. aresomeskills There people with deep knowledge of tech- people withdeepknowledgeof balance, whichwon’t beeasy.” perspective, andweendupgetting that canbeclaimedbyeithercamp. “multi-specialists,”the valueof “ver- tion, butrathertofindtheright trapped insilos. Mysenseisthatthe the LargeHadronCollider in Europe have alwaysbroughttothetable:an human activitiesrequiretherich higher-order problems, oneneeds generalist debateisasemanticone. going sofardownthatpathno each of whichislittlemorethana each of eralists will,inthesamebreath,tout specialization thesedays skillsets,” satilists” and“T-shaped strong generalistabilityandanabid- surgery, buildingbridges, running optimal combination of depthand optimal combinationof one isabletoprovidethebroader butaplurality, evenmajority, of “The worlddoesrequiremore “The To somedegree,thespecialist/ — Korn/Ferry weneed

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The

CapabilitiesGap way to annual meetings. Recent re- The supply of quality non-executive directors search has identified new requirements for the role: a greater time commitment, is not keeping pace with the demand a broader skill set and a deeper techni- cal capability. John Peace, chairman of Standard Chartered, noted in a recent interview Pushing accountability up the corporate food chain that “the basics of true independence and integrity are still of fundamental has become the norm. Blame for unethical corporate importance, but it is what we have lay- behavior — rightly or wrongly — is often laid on ered on top that has made the job so challenging and time-consuming to- the board of directors, the de facto guardians of the day.” Indeed, NEDs must not only bring sophisticated behavioral attributes to business world. the table, they must also possess hard- edged skills and experience in areas The rout of directors at Barclays tise to do the job in the heat of today’s such as risk, numeracy, finance and early in the summer of 2012, with the boardroom. technology. As such, the most sought- resignation of both the bank’s chair- There is growing recognition that after directors now have such a diverse man and board remuneration chair, the answer just might be “No.” A vi- and complex skill set that one might aptly demonstrated how boards take cious cycle is creating a widening gap describe them as the superheroes of the bullet when the pressure is on. Even between what the market requires the corporate world. It is no surprise at firms unaffected by the likes of the from its directors and what the market that such individuals are alarmingly Libor fiasco, the high-risk environment can provide in terms of talent. The scarce. of the post-crash economy means im- problem is one of supply and demand. The bar has unquestionably been proving corporate governance has be- On the one hand, increased operational raised. While boards still prize tradi- come a top priority. complexity is driving high demand for tional NED qualities such as indepen- This is no small task. The operating quality NEDs. That same complexity is dence and experience, the greater tech- environment is more challenging than creating a progressively more demand- nical demands require an exceptionally ever. External market factors, none of ing job brief. This widening capability well-rounded and high-caliber crop which firms can directly control, all gap has significant implications for of talent. The expanded and more de- weigh heavily on the demands of the the overall health and competence of manding brief means only the best boardroom. These include unparalleled boards. With fewer candidates able to NEDs will add the value that boards financial instability, increased share- provide the lengthening list of compe- desperately need. This will affect board holder demands, a rapidly evolving reg- tencies required for an NED role, there composition and recruitment pro- ulatory landscape and intense media is increased risk that boards will fail to cesses. As boards become more specific scrutiny. As companies maneuver past provide the holistic oversight requisite in identifying their talent needs, so the these obstacles, the need for outstand- in today’s market. search for suitable candidates becomes ing non-executive directors (NEDs) has The demands of the NED role have harder. never been more pressing. The ques- evolved beyond the “cushy” reserve it Compounding this challenge is tion is whether there are enough peo- once was. Long gone are the days of the need to maintain diversity on the ple with the necessary skills and exper- reading board papers in the car on the board in all its guises: race, gender and

14 Q1.2013 Korn/Ferry Briefings onTalen 2012 © Christiane Beauregard “nice fishingfor tohave” When asset. yond the usual pool of candidatesis yond theusualpoolof rhetoric. Genuinelydiverseboardsare rhetoric. fast becominga“need tohave” nota found whonotonlyoffertheskillsnec- ingly underpressurenotonlytofind ing pool of talent, individualsmustbe talent, ing poolof nationality tonamebutafew.With the where findingtherightNEDcandidate anced anddiverse.Amongtheshrink- posing lawsrequiringatleasta60-40 presents additionalchallenges. castingthenetbe- boardroom talent, becomes likelookingforaneedle in This couldleadtoasituation profiles. ble, butalsofittherequireddiversity European Commissionrecentlypro- to ensurethattheirboardsarewellbal- the best-qualifiedindividuals, butalso toward enforcedquotasnevertheless the agendahasclearlymovedbeyond clearly asmartstrategy, butthe trend essary tofillgapsaroundtheboard ta- split betweenmenandwomenby2015, Search committeesareincreas- t & L eadership While remunerationmaynot bethe While ratio weighingheavilyontheminds right candidatesareidentified,many must grapplewiththerisk-reward ful catalysttosupportthispush,may ing regulation,thepersonalliability ing NEDresponsibilities. Amidgrow- world needthebesttheycanfind. are becomingextremelyhigh.Boards beinganNED and reputationalrisksof are increasinglycautiousaboutassum- broaden the pool of qualifiedcandi- broaden thepoolof primary motivationforthebest direc- the requirementtosearchlongerand the corporatehaystack. tors, itisincreasingly affectingthe talent justwhenboardsalloverthe harder forfemaleNEDswillhelpto have the unintended consequence of have theunintendedconsequenceof dates. Howeverquotas, whileapower- does notstopthere.Evenwhenthe dramatically reducingthesupplyof of the talent they are trying to attract. thetalenttheyaretryingtoattract. of The focusonboarddiversityand The The quandary of boardrecruitment quandaryof The No. 1talentchallengefacingboardsto- result of thecapabilitygap result of requirements of therole. requirements of require recalibratedandtargetedboard- mand forhighlyqualified,dedicated ing supply of suitablecandidatesisthe ing supplyof ing introduction of diversityquotas,ing introductionof willingness of executivestotakeon willingness of and skilleddirectorswithadiminish- national candidates, andwiththeloom- the addedresponsibilitiesandtime therefore anurgentpriorityandwill too hightoignore. talent pooldramaticallydepleted. those whomovelastwillfindthe day. poorgovernance riskof The deeper andfurtherforqualifiedinter- Richard Emertonisaseniorclientpartner and serving Europe,theMiddleEastand Africa succession strategies. Boards mustlook succession strategies. managing partner, boardandCEOservices, from hisbaseatKorn/Ferry’s offices inLondon. Addressing thepredicamentis The collision of anincreasedde- collisionof The — Q1.2013 issimply —

asa 15 16 Q1.2013

Credit Credit Planning for TransitionPlanning theLockheed MartinCorporation ChairmanandChief Executive Officer, An Interview with Robert J. Stevens, tors have beenplanninghissuccession. Why tive, isnotsomuchconcerned with thepast world’s largest defense contractor, rolls. CEO in2004,Stevens andhisboard of direc- Y Because that’s the way Lockheed Martin,the Lockheed Martin’s chairmanandchief execu- Lockheed Martinisthehistoryof aviation, spend somuchtimeonanevent sofar away? as heis with thefuture. Sincehisfirst days as and modernbusiness.ButRobert J. Stevens, defense, aerospace, information technology ou couldsay thehundred-year historyof

Q1.2013 17 To Stevens, succession is not just about finding the Different times require different types of leaders. Rec- right candidate for the right spot. It is about building a ognizing this, Stevens did not just build a succession pro- group of leaders strong enough and experienced enough cess — he created a leadership-development protocol spe- so more than one manager can do each of the company’s cially tuned to Lockheed Martin’s culture and future. An top jobs. And, given that some of Lockheed Martin’s pro- integrated leadership-development program and center grams go on for decades, it is also about building a team did not exist before Stevens assumed the corner office. that can work together for the long haul. To do that takes Robert J. Stevens recently spoke about the succes- training and education. But it also requires experience in sion process he put in place with Clarke Havener, Korn/ different businesses, geographies and roles. It requires Ferry’s Global Sector Leader for Aviation, Aerospace and employees to move out of their comfort zone. Defense, and Joel Kurtzman, Editor-in-Chief of the Korn/ The importance of building a top team with that much Ferry Briefings on Talent & Leadership. What follows is an experience became evident when Stevens’ designated edited version of that conversation.

successor, who was due to take over in a matter of months, Previous page: Gary Landsman abruptly left the company under a cloud in November 2012. Without a delay, Stevens and the board promoted Marillyn Hewson, a 30-year veteran of the company, to president and chief operating officer, and elected her to the board of directors. Hewson, executive vice president of Lockheed Martin’s biggest business area, Electronic Systems, will become the company’s chief executive Jan. 1, 2013. Stevens will become executive chairman the same day. With about 82 percent of its roughly $46.5 billion in revenue coming from U. S. government work, and with many of the corporation’s government customers around the world facing some type of austerity, Lockheed Mar- tin’s new leader, Hewson, will inherit a business environ- ment far different from the one Stevens did.

Lockheed Martin’s F-35 Lightning II, also known as the Joint Strike Fighter, has been under development since 2001.

18 Q1.2013 Korn/Ferry Marillyn Hewson, Lockheed Martin’s executive vice than just the phasing of succession that we discussed. It president of Electronic Systems, will become presi- included a very significant discussion about what kind of dent and chief executive officer in January 2013. talent we will need, what kind of company we are today, When did you begin putting your succession plan in what kind of company we will need to be in the future, place? and how that translates into the dimensions of leadership STEVENS: It was a topic at the very first meeting I had with and professionalism. We also discussed how we go and the board as a new CEO in 2004. It was also a topic at acquire the right inventory of talent, and how we exercise Marillyn’s first meeting when she was elected to the board. the major muscle groups of that talent to assure that they’re In my first meeting, talking about succession planning not just good people but that they’re the right executives gave me a little moment of pause, because it was my first for the demands of the business today, and for where the day in office. But our board was very— and I think appro- business will be going in the future. priately — insistent on recognizing that succession plan- Did you raise these issues with your board right away? ning isn’t optional. It’s essential. STEVENS: Yes. But it was of mutual interest. As the CEO, I Why is it so important? described the strategy, but there was a great appetite on the STEVENS: We recently experienced an unexpected change part of our board members because they’re experienced, in our succession plan. But because we developed a deep many of them having served long and distinguished careers reservoir of talent, the change was seamless — even though in executive management, all of whom have seen good and the candidate was different. We were ready because we really awful examples of transitions and succession. We didn’t look at succession as a static process. We’ve always concluded early on that there were probably two or three seen it as dynamic, requiring more than one person capa- attributes that ought to be design features of our succes- ble of doing each job. There are many examples where a sion planning that we would steer for. leader or members of the leadership team make a huge, What were some of those design features? leveraged difference in how the organization performs. So, when we developed the plan, it was enterprise value STEVENS: We talked about how to grow our talent from that we talked about. And of course it was much more within. I didn’t want to be one of those people that runs

Courtesy Lockheed Martin up against our mandatory retirement age — and I’m not there yet! — and says, “Well, thanks very much. This has been swell,” and then leaves the board and the company and our customers to figure everything out. So we devel- oped a premeditated “grow talent from the inside” ap- proach. That was one feature of our succession architec- ture. I think recent events show that the approach worked. Another was to make the transition when the company was strong.

Were there other features to the plan?

STEVENS: Another feature was to work to construct a busi- ness model that’s going to be durable with respect to strat- egy, operations and financial performance. We didn’t want to create a dilemma in which a new team not only has to make the transition work, but has to do it against an external environment that’s sort of falling away from them. We talked about the features of the transition we needed to put in place and not about a specific time. So, I had a pretty long horizon to work with because of these early conversations in 2004. But I set up a template early because that’s the kind of people we are at this company. Everything has a model. Everything has a structure to it.

Briefings on Talent & Leadership Q1.2013 19 Did being so structured help or hinder the efforts? So the Center for Leadership Excellence was set up to develop talent as part of your succession plan? STEVENS: It’s a funny thing. It’s an incredible strength. And it can be an odd constraint. We are systems engineers and STEVENS: I would say it was more tied to what you can call so we think that way. We’re not particularly good at short- a “foundational element of transition,” which is leader- term business models because we have 40-year product ship development. The same is true for a program called cycles. I mean, we think in long arcs, which suits some Full Spectrum Leadership, which is a curriculum or an market environments and circumstances and is very ill- architecture for leadership development. We are a very fitted to others. But that’s the model we use. So, I pre- analytical community. You can’t just go out and tell people sented the succession model to the board a couple of times. to be good leaders. They’ll ask, “What does that mean?” We refined it together a couple of times. And then we started to populate the model. “Do we have talent inter- What does it mean? nally? Should we go get talent from outside,” which we’ve STEVENS: There are five dimensions in our Full Spectrum done in many cases at varying levels Leadership program. These allow us to understand the constructs of leadership down to the kinds of skills you How did you measure progress in the succession plan- need to develop and the kind of thinking you need to be ning process so you knew you were on the right path? developing. It’s been an incredibly useful vocabulary and STEVENS: The honest answer is you don’t really know if has provided structure. And the great thing about it is we the specific details are working in advance. But we had made it up. So it’s not so rigid that you can’t move it. But enough maturity in the board, and enough individual and again, notionally we know it’s right. collective executive experience to know notionally we were right. And we also made some huge investments in talent along the way. Those investments paid off, and will continue to pay off.

Such as? STEVENS: Our Center for Leadership Excellence, for exam- ple. We did not have leadership development programs in 2004 like we do now. The center is a gathering place for our executive talent from across the corporation. Think of a pool of 17,000 people in a 120,000-person company — supervisors and above. We bring them here for both pro- fessional skills training and leadership-development ex- periences. I learn from them. They learn from us. And we get to see one another. We see the talent in the pool. We say, “Well, that person has demonstrated some real exper- tise in an area.” So one of our early convictions — “Grow from within; do it when you’re strong” — was a recogni- tion that you need to rotate people through the organiza- tion so they can have broad experiences in leadership. But you can’t grow up in one organization, in one function, or one program, and aspire to be CEO. The business is too complicated for that. I’ll pick on my successor as an exam- ple. In her 30-year career, Marillyn had 19 different assign- ments, made eight moves, and worked in three of our four businesses. She’s had corporate assignments. Those rota- tions have given her a broad set of leadership experiences she’ll need as CEO. It also gave us insight. We saw Maril- lyn was able to add creative ideas to every business she led, and people liked that. They also saw she made each busi- ness perform better with regard to the P&L.

20 Q1.2013 What are those five dimensions? to progress through this leadership development experi- STEVENS: The first one is called “Shape the future.” I’d call ence, to higher levels and different jobs, is a function of that the strategic element. The second is “Build effective how well you are doing in these dimensions. It’s how I relationships.” This is a team sport: You are on a team, you evaluate you, your peers evaluate you, your subordinates lead a team, you’re part of a team. Third is to energize the evaluate you. Everybody in this company is evaluated the team. The business needs leaders who create a positive same way, including me. We do 360-degree reviews. Every- environment. The fourth dimension is, “Deliver results.” one is evaluated the same way because the goal here isn’t We’re a business, so you need to get results. And the fifth to use evaluations as a hammer to punish you; it’s an instru- is so critical to our culture and the nature of the business ment to inform and enlighten you. But there’s an added we’re in. It’s “Model personal excellence and integrity and dimension as well. We take customer surveys to ask them accountability.” That’s the ethical commitment. Why is what they think of us — and they can be brutally honest. that so critical? Because, as a global security company, we But you’d rather hear it than have a massive blind spot that are the largest provider of systems and services to our gov- is disabling. ernment and friendly and allied governments. The work that we do has big consequences. It’s mission oriented. If You have a number of programs at Lockheed Martin we don’t believe in our mission, then we can’t serve our that run longer than a CEO’s tenure. customers’ interests. The military has a great and deserved STEVENS: We’ve been building C-130 aircraft for 56 years. reputation for high integrity. If we don’t play the same That’s more than the terms of three CEOs.

Courtesy Lockheed Martin way, we can’t possibly serve that customer community. So we orient around those five dimensions. We measure peo- Which raises an interesting question: With so many ple on them. We give feedback on them. And your ability long-duration programs, what is the ideal balance between CEO as steward and CEO as innovator? STEVENS: We do both here. But I’d say we weight pretty heavily the stewardship responsibility. There will be, cer- tainly, views to the contrary. But my personal sense is that Lockheed Martin, and companies like us, are part of a na- tional trust. There are not many companies and not many groups of people on the planet who can do what we do here. We helped get the Mars Rover down onto Mars be- cause we built the aeroshell that shields it during its de- scent. That’s pretty cool. And we’ve been doing things like that for generations. These are big, national imperative missions with high consequences. So, we need the notion of stewardship.

Was there an overall philosophy behind your succession efforts? STEVENS: We regard executive leadership as a privilege; part of the discharging of the responsibilities associated with that privilege is you’ve got to hand it off. It’s not about me. It’s not about the board. It’s about the health of this enterprise because we make so many commitments of a mission-critical nature to so many customers, many of whom quite literally put their lives on the line. So we’re not going to fail in our duty to make sure that these enter- prise goals and commitments are transitioned generation to generation. I think if you’re a shorter-cycle business, maybe it doesn’t weigh on you as much. But we’re a very long-cycle business. So, each of us feels a stewardship re- sponsibility as part of our talent development efforts to

The High-Altitude Airship is a helium-filled craft capable of ascending to 60,000 feet. It can use solar power to generate some of its own energy. Q1.2013 21 make sure that the executive team understands the essence of this business and who we are.

Does that mean you favor stewardship over innovation? STEVENS: We have a certain cyclicality to this business. And you can’t always predict when the cycle comes. But when we look out today for the next 20 years, it is my sense, and I think our collective judgment, that we’re probably not going to see any massive new, far-reaching technology development programs. A next generation of satellites that uses laser-linking communications rather than radio, for example. Why is that? Well, when you look at the fiscal condition in the United States, and you can expand that globally, all the governments that we interact with, and there are many, are all facing fiscal challenges. The global security demands really haven’t fallen. In fact, there’s a very complicated global security environment out there today. But the resources available to meet those demands are clearly constrained. Which means govern- ments are not going to have the multibillion-dollar pack- ages of resources to say, “Let’s go invent a high-risk, high- payoff solution.” If you were in the high-risk, high-payoff

Lockheed Martin’s Aegis Combat System protects naval warships around the world and has been in production for decades.

22 Q1.2013 environment, you might want somebody who was exqui- chairman? Executive or non-executive chairman? We sitely good at some engineering domain. But that’s proba- looked at all the dimensions you might think about that bly not a demand the next chief executive officer will be might be relevant to a thoughtful discussion about what compelled to address. would be the best architecture for us. We did that within our industry, and we looked beyond our industry. You were chief financial officer at one time. Was that something you sought out? Did you do it with a small group in the CEO’s office? STEVENS: I was asked to become the CFO. And when I was Or did you put a larger team together to manage the first asked I conveyed to my boss at the time that I didn’t transition? think it was a great idea. I thought I had an idea of what a STEVENS: It was a very small group, and I did a fair amount big league CFO should look like, and I didn’t think I looked of it myself. There were also very private conversations like that kind of person. And so the first conversation was with the board that unfolded in executive session. We a conversation. The next one sounded a lot less like a con- discussed the analysis, the potential candidates and even versation and more like, “You’re our next CFO. Now go combinations of executives, because this is a team sport figure it out.” So I worked with a team here that was really and you have to plan for any eventuality. You want to good at that. make sure all the positions work well together. The model was very helpful, and when you put it up in front of a Did you enjoy being CFO, by the way? board in executive session — and we spent hours doing STEVENS: I did, and I learned a lot. I would tell you, on the this — and the board would look at it and say, “Well, that scale of innovation and creativity, you won’t find me in sounds wrong.” Or, “How will you manage this interface the record books as a great chief financial officer. We had over that period of time?” Or, “What would your role be a lot of debt, so we worked to sell some assets, strengthen versus their role?” And, “What’s the role of chairman or the balance sheet and reposition the company. Again, I executive chairman versus CEO?” And, “How will you in-

Courtesy U.S. Navy Courtesy U.S. did this with members of our team. It was pretty basic teract with the lead director?” That’s a hugely healthy dis- blocking and tackling in the CFO’s world. cussion. And it unfolds from having our kind of model and a fully engaged board. Did you benchmark yourselves against other organi- zations to develop your succession process? What was your relationship with the board like during STEVENS: Absolutely. But our model was self-generated. the succession? We looked across the aerospace and defense industries for STEVENS: Very supportive. Very aligned. I am not uncom- what we would regard as peers. We looked at the transi- fortable in front of the board, and they are certainly not tion dynamics, the age of the CEOs when they announced uncomfortable tasking or challenging me. We’ve known their retirement. We looked at how long between the an- each other a long time. It’s very honest. It’s very open. It’s nouncement and the actual retirement. We tried to look without pretense. When our board says, “I’m skeptical at how much transition time there was with a new CEO. about your ability to do this,” it’s a fair comment. And I’m Did the retiring CEO stay on the board? Did he stay as not offended by it. I say, “That’s a good point. Let me think more about how that might work.”

How long before the succession did you develop the actual model? STEVENS: I’ve had the model for the last five years. Have I changed the model? Yes. It’s interactive. There’s feedback from the board. There’s timing. I thought of it as a Gantt chart almost, where there are activities we have to com- plete over time. And we shaped it over time — lengthened this cycle, shortened that cycle, made it more robust. We wanted to see more iterations of talent development; we moved people and put them in different roles. Some of it involved rotational assignments. If we’re going to think about someone for expanded responsibility, we have to take that person out of the job where he’s comfortable.

Q1.2013 23 Lockheed Martin built the aeroshell that shielded the Mars Rover during its descent.

You have a military background in the Marine Corps. How much did that inform your style of leadership? STEVENS: It was foundational. Just huge for me. And I don’t think I’m unusual. I would tell you that I was not a Did you stage-manage rotations for executives during disciplined kid growing up. I had poor grades in school. the transition? And my father died when I was in high school, which STEVENS: I would say it was choreographed, but in a gen- wasn’t helpful when you’re not disciplined. And even be- eral way. A lot of people were involved. If we have someone fore I graduated from high school, I went to see the Ma- who’s good at certain things, she might be three moves rine recruiters. My Marine experience was foundational away from what might be her final executive position for me, because the discipline is exquisitely good. You re- here. For her to demonstrate qualifications, she’s going to ally feel part of an organization that’s driven by values, have to do that for a period of time, then do something and you recognize that you are part of something bigger. else for a period of time and then perhaps something else. You see examples of leadership every day. It’s not an ab- You get a chance to ask, “What do you think she should do stract concept in the Marine Corps. I grew up in a steel- now? What do you think she needs in the future? How do worker’s family in Pennsylvania. We had no financial re- you think you can cultivate that?” The choreography in- sources, but nobody felt poor. We had a great appreciation cludes getting people coaching. Work assignments, men- for work ethic. As a founding member of Local 1000 United toring and objectives. And, it’s voluntary. It’s elective. It’s Steelworkers of America in 1936, my dad worked every highly energizing to the team. day in the mill except for World War II, when he and his brothers went to war. When he got back, the next day, he Your succession plan sounds like a leadership program went back to work. I’m not suggesting that’s a great model, on steroids. Is that a fair assessment? but that’s what he did. My mother was a housewife, but STEVENS: Yes. Talent and leadership development, in a during the war she went to work in a bomb factory. That systematic sense, have a component called succession. I was the only time she worked. would love to stay here forever. Who wouldn’t want to do this? I mean, it’s exciting. Every day is invigorating. But Your family sounds very dedicated. the logic lobe of your brain says you can’t. And so part of STEVENS: We believed in service. We were expected to the responsibility of my having had the privilege of doing work. We were expected to participate and be involved this job is succession. The board understands that. We un- in school and church and community. And we were. My derstood that. So it was part of talent management. Talent older brother is a retired major general in the United management includes this progression to broader respon- States Army. And I’m very proud of him. Citizenship is sibilities, which is integrated into the succession plan. a responsibility and a privilege. I really believe that. NASA/JPL-Caltech/University of Arizona NASA/JPL-Caltech/University

24 Q1.2013 Credit Trouble The By David Berreby

Rewards With Illustrations by RomanMuradov

Q1.2013 25 26 Q1.2013 I Magic Markers, gottoworkimmediately. they Then There, they were asked if they’d liketodrawforavisi- they’d theywereasked if There, regular 3-,4-and5-year-oldlives. regular classroom,thechildrenwerefreetochoose found themselves playing anoddlittlegame with some visiting adults. were escortedbacktotheirregularclassroomand wasn’t toldabouttherewardinadvance,butgotitas among manyoptions(likegoingoutside,playingwith a surpriseaftertheymadetheirpictures. paper.where theyfoundMagicMarkersandsheetsof blocks, aswelldrawingwithMagic usingPlay-Doh, job they’d geta“Good Award”(withtheirname, job they’d Player they lookedparticularlyinterestedindrawingwith they’d gettoputonabulletinboard.Athirdcohort they’d theschool,aribbonandgoldseal)which the nameof tor. theydidanice Inaddition,someweretoldthatif searchers overturn our understanding of motivation.Intheir overturn ourunderstandingof n theearly1970s,55kidsatStanford University’s BingNursery School It wasthataftermathreallyinterestedthere- The children, all of whomhadbeenpickedbecause children,allof The One byone,theywereescortedtoa“surprise room” — psychologistswhoseworkatBinghelped “toys” Napoleon that, observed,havealwaysbeenim- Markers). Watching throughaone-waymirrorinthe Markers). These rewards, course,needn’t of bepayraisesoran- These who had not expected a reward spent about a sixth of who hadnotexpectedarewardspentaboutsixthof ated the Legion of Honortorecognizeachievementin ated theLegionof nual bonuses. Inancienttimes, theymightbefood,sex portant in getting the best out of people.(Havingcre- portant ingettingthebestoutof put. Peopleworkbecauseleadstootherthings put. their playtimewithMagicMarkers. Andthekidswho the new French republic, he said of itsranks, hesaidof the newFrenchrepublic, withtheir that they desire. Their motivesareextrinsictothem. that theydesire.Their tional relationshiptoeffort:Moreincentive,moreout- the reverse,notjustforchildrenbutadults. Con- time drawing. had beentoldtheyweredrawinginordertoearnthat days after the experiment, theteamsawthatchildren days aftertheexperiment, crete rewardsaresupposedtohaveasimplepropor- shiny incentive? They spent only half as much of their asmuchof spentonlyhalf shiny incentive?They or status. shiny Often,thesemotivatorsarethesortof Classical economictheory, course,predictsjust of Korn/Ferry

Credit various medals and sashes: “We call these children’s ments in the 1970s, the two worlds have met. Today, it’s toys, I know, it’s been said already. Well, I replied that clear that leaders, either in business or politics, can’t af- it’s with such toys that one leads men.”) ford to ignore what goes on inside people’s heads — the Whatever the external reward, there’s no denying drive to do something for its own sake, not because of that mapping it to motivation makes it easy for a leader what it will bring in in pay, fame or perks. These intrin- to shape incentives: It’s just a matter of figuring out sic motives mix with extrinsic motives to make people how much (or how little) to give in pay, benefits, bo- perform. It’s a dynamic mix — a mix that can be man- nuses, shiny trophies and back-pats in order to get the aged. In fact, it has to be, if managers want to avoid needed amount of cooperation and work out of your suboptimal results and unpleasant surprises. people. In many situations, for example, offering only Of course, any good model is supposed to be sim- money or other external incentives can reduce motiva- pler than its original. No one ever thought extrinsic tion. One case in point: In the spring of 1993 Frey and motives explained all human actions. It just seemed another economist, Felix Oberholzer-Gee, interviewed that the theory captured what incentive-makers needed 305 people in two Swiss towns that were potential sites to be effective. We’ve always known that motives var- for a nuclear-waste repository. Asked for their opinion, ied among individuals, and that people did remarkable nearly 51 percent of the interviewees said they would things for love, honor, revenge, pride or other “exter- consent to having the nuclear-waste facility in their nalities” that can’t be quantified. (It was to express the community. The researchers also asked how people

Concrete rewards are supposed to have a simple proportional relationship to effort: More incentive, more output.

fundamental mystery of human motives that Woody would feel if the Swiss Parliament agreed to pay each Allen once asked, “Why does man kill? He kills for food. villager a hefty sum in compensation for putting the And not only food: frequently there must be a bever- facility in their midst. Result: The percentage in favor age.”) People value things other than bonuses and pay was cut in half, to 24.6 percent. packages and employee-of-the-month citations. (Self- Frey calls this a “crowding-out effect”: Money, the employed people, the economist Bruno Frey has noted, extrinsic motive, crowded out the intrinsic desire to tend to report more satisfaction at work than their “do our part” as responsible citizens, just as the “Good higher-paid peers at corporations). And many profes- Player Award” crowded out the kids’ desire to draw be- sionals feel, as does Seattle doctor Carol Wiley Cassella, cause drawing is fun. This is almost always unfortu- that “more money isn’t the answer.” nate, because intrinsic motives (such as genuine inter- “Salaried physicians tend to be more satisfied with est in the task, a sense of community and “doing your their work than more highly paid, fee-for-service phy­ share,” control over the outcome of the work, and even, sicians, even when their work hours are comparable,” Frey says, simple acknowledgement that one has in- she wrote recently, in an essay on how incentives turned trinsic motives) are stronger and longer-lasting than her from a happy and idealistic general practitioner extrinsic ones. into a more burned-out specialist. Wikipedia, Firefox “Crowding out,” Frey argues, explains why monitor- and Apache are also proof that compensation and “gold ing workers often doesn’t yield higher productivity: stars” don’t make the world go round: Those enterprises Where there is a personal relationship and sense of were all created, and are maintained, by volunteers who community between employee and employer, moni- are paid exactly zero and remain little known. toring is felt as a statement of distrust, a rupture of Nonetheless, for decades, the model-world workers warm human bonds. Pay and benefits aren’t sufficient chasing pay and perks stayed separate from the real to replace the lost desire to be a good citizen. world of individual psychology. Today, though, this is Being a leader, Frey argues, is the art of managing no longer true. the environment so that intrinsic motives aren’t Since the Bing Nursery study and similar experi- crowded out by extrinsic ones in this way. The true artist,

Briefings on Talent & Leadership Q1.2013 27 he suggests, can go one better than that by managing found. But the trick is to introduce an element of ran- matters to encourage “crowding-in” effects: circum- domness into the scoring. stances where extrinsic and intrinsic motivators rein- In one recent experiment, Howard-Jones had 11-year- force each other. old pupils at a school in Cyprus play a computer game To understand the difference between intrinsic mo- in which they had to answer 30 math questions like “Is tives and extrinsic ones, consider how you feel when it true that 13 times 42 is 564?” Before each question, doing something for its own sake. It could be working though, the child had to decide whether to receive it on your backhand, or your fantasy baseball team, or from “Mr. Certain” or “Mr. Uncertain.” Mr. Certain gave your memoir, or your kid’s dollhouse. Whatever the ac- a point for each correct answer. Mr. Uncertain flipped a tivity, your priorities, as you lose yourself in this pleas- virtual coin and awarded either two points or zero for ant experience, are about its inherent interest, or per- the same right response. haps the satisfactions of being a good mother, sister, If you expected that the students would prefer Mr. neighbor or the like. One thing you’re almost certain Certain, you’d be wrong. Mr. Uncertain was chosen, on

But there are times when uncertainty about a payoff motivates people more than a guaranteed reward.

not to be thinking about is a bottom-line result — not average, more than 61 percent of the time. To explore because that goal doesn’t matter, but because the mea- why, Howard-Jones and his collaborators interviewed surable product (how much in how much time) is not 10 of their 50 participants. Asked why they had picked central to the experience. Your game will get better as Mr. Uncertain, they explained that, much as they under- you work at it. The dollhouse might be done Sunday, or stood that he could cost them points, there was some- maybe it will be next Saturday. You’re absorbed in the thing just more interesting and exciting about him. process, but the time and size of the payoff is uncertain. “You are stressed,” one child said, “but if you win It could be that this uncertainty is a byproduct — then you forget about that!” In the language of aca- that you don’t measure your progress because you’re demia, Howard-Jones and his colleague Skevi Deme- “in the zone,” thinking of other things. But recent evi- triou wrote, “a learner can find a task more emotionally dence from psychology and brain science suggests that appealing when an element of uncertainty is intro- this is not so. Instead, researchers have found, the mind duced that is not wholly defined by the learner’s own is drawn to uncertainty. In other words, the fact that ability.” In another of his experiments, teams of teen- you can’t be sure of your results might not be a side- aged students answering biology questions would effect when you’re doing what you love. It may be a sometimes say they hated to lose points by bad luck crucial part of the fun. Uncertainty, then, may be part (“73 points and I got wiped out!”), at the same time as of what makes an intrinsic incentive feel intrinsic. they were saying they wanted to play another round. Of course, this implies something about motivation In other words, by turning the learning and testing that is very much at odds with rational-economic-man process into a game, Howard-Jones had motivated expectations (even more than the fact that paying peo- students to reach far beyond their usual comfort zone. ple to do something can cause them to do less of it). It It’s a result that wouldn’t surprise any parent who has implies that there are times when uncertainty about a grumbled about the lousy test scores of a teen who payoff motivates people more than a guaranteed reward. has memorized every anatomical and historical detail After all, educational theory emphasizes “reward about every character in World of Warcraft. Framing consistency,” and students, when they have a choice a problem as a game — an effort whose outcome is by on test questions, tend to pick the ones they’re sure to definition unpredictable— motivates extra attention solve, notes Paul A. Howard-Jones of the University of and effort. Bristol’s School of Education. Howard-Jones thinks that That’s true in the world of work as well as school. In caution stems from fear of looking bad. It’s actually not September 2011, a paper in the journal Nature Structural that difficult to get students to reach higher, he has and Molecular Biology announced that an international

28 Q1.2013 Korn/Ferry Briefings onTalen Credit And part of uncertainty’sappealmightjustbethatit And partof makes extrinsicrewardsfeelliketheoneswegetwhen whose playerscompeteinteamstofindthebestsolu- we arepursuingsomethingforitsownsake virus needstoreproduceitself?Medicalresearchers Jones believes,Jones isthat“element uncertainty”that of precise outcomeisuncertain,hopedfor, alwaysworth presented their problem to the online game Foldit, presented theirproblemtotheonlinegameFoldit, piques ourinterestandseemstogoosemotivation. three-dimensional structure of anenzymethattheAIDS three-dimensional structureof team hadsolvedalongstandingprobleminmedicalre- tions to protein-folding problems. Those playerscame tions toprotein-foldingproblems. Those hadn’t cracked the problem in 15 years of trying. The hadn’t trying.The crackedtheproblemin15yearsof up withthekeyinsightthatallowedmedicalre- gamesters diditinthreeweeks. chasing butnotentirelyunderourcontrol.Inother search on HIV and similar viruses: What istheprecise What search onHIVandsimilarviruses: searchers tosolvethemystery. Conventionallabwork The appeal of games over plain old work, Howard- gamesoverplainoldwork, appealof The t & L eadership — when “reward chemical,”dopamine,issecretedbyspecialized reward feellikeanintrinsicone. roscientist nowattheKoreaAdvancedInstituteforSci- words, uncertaintycanmakeanextrinsic anelementof we like. ward circuit” inwhichdopamine-makingcellssendthe neurotransmitter to other parts of the brain. But, inter- thebrain.But, neurotransmitter tootherpartsof and happy. Havingsomethingweliketriggersthe“re- pamine generallymakesusfeelinterested,confident gun toexplainhowandwhythebrainiswiredinthis cells and absorbed by other neurons. The uptake of do- uptakeof cells andabsorbedbyotherneurons. The can helptomotivatepeople,neuroscientistshavebe- effects of anticipation while working with a pair of anticipationwhileworkingwithapairof effects of ence andTechnology, discoveredthedopamine-driven estingly, thisalsohappenswhenwewantsomething seemingly irrationalway. About tenyearsago, ChristopherD. Fiorillo, aneu- Whenever weenjoyordesiresomething,thebrain’sWhenever Even aspsychologistshavefoundthatrandomness Q1.2013 29 30 Q1.2013 Source: just aslikely todothis asmen. the samegender. Women are collaborate with colleagues of 40% more likely tochoose Researchers say workers are BIRDS OF A FEATHER I nnovi s “whenever I kick I’m neversurethatIwillscore.”“whenever IkickI’m Butif National MentalHealthandhiscolleagues Institutesof But whentheoutcomewasnotsocertain,withreward monkeys. Aftertheprimateshaddoneanexperimental formally inClaudeShannon’sformally informationtheory, which found thatthistuning-to-uncertaintyworksthesame increases arousal,” says Brian Knutson, a professor of increases arousal,”saysBrianKnutson,aprofessorof were, again,50-50. “Duringanticipation,uncertainty winning areward(money, juice) thistime,insteadof way in human brains. The researchers’ MRI scans of 31 researchers’MRIscansof way inhumanbrains. The ward-circuit thatrespondednottotherewarditself, were muchmoreactive.Inotherwords, thiswasare- viewed by Howard-Jones put it, in a regular soccer game, put it, viewed by Howard-Jones thestudentsinter- new informationatall.)Asoneof gettingtheirjuice. animals were100 percentcertainof volunteers foundthatthedopamine-producingparts rewardwasexactly50-50.when thechanceof portant to future success. (This hasbeenrepresented portant tofuturesuccess. (This andneuroscienceatStanfordUniversity.psychology say,probability at, thecells 25percentor75percent, gettingtherewardwas theprobabilityof When pected: but rather to the odds of winning it. Andthiscircuit winningit. but rathertotheoddsof that weshouldbedrawntotheuncertainpayoff.Un- secondslater.they weretogettheirrewardacoupleof their juicereward,thecomputerwouldgivethema task andwerewaitinghopefully, lickingtheirlips, for zero, the cells were quiet. The samewastruewhenthe zero, The thecellswerequiet. dition thatcontainsthemostnewinformation.Abso- defines 50-50odds, maximumuncertainty, asthecon- doesn’t getexcitedbycertainty, butratherbyitsoppo- lute certainty about anything, of course,bringsyouno lute certaintyaboutanything,of Some of theanimals’dopamine-makingcellswerere- Some of certain situationsyieldinformationthatcouldbeim- information:Ittoldthemhowlikely crucial pieceof sponding inawayFiorilloandhisteamhadn’t ex- site. The cellsmeasuredbyFiorilloweremostactive site. The of their brains were most active when their chances of theirbrainsweremostactivewhenchancesof of or A couple of yearslater,A coupleof the Jean-ClaudeDreherof There are, it turns out, soundevolutionaryreasons are,itturnsout, There (the old-fashionedincentiveapproach).Anotherwas reward-chasingiscalledgambling,and modeof That Fehr of the University of Zurich,forinstance,heand theUniversityof Fehr of motivational toolkit. motivational toolkit. might be mostly love for the child; Tuesday’s a mix of might bemostlyloveforthechild;Tuesday’samixof feeling iscommoninlawfirms, writesJenniferAlvey, insights frombehavioralandbrainscienceistheevi- it hasbeenpopularformillennia.What’s newinthe it’s justapracticewithoutgoalkeeper“everything is isn’t yourenemy, either, your anditcanbeapartof not happen,andthatthisexcitementcanfeedonitself. ating it.” a bonusortwo, andstopappreci- youstartexpectingit, gotten a bloggerand“recoveringlawyer”:“Once you’ve work? No. 3, thebonusthatmightornotbepaid. Onewasahard- would becompensatedfortheirwork. and so on.) Uncertainty is not a magic bullet. Butit and soon.)Uncertaintyisnotamagicbullet. a generouspaymentinadvance(callitthe“employer- forworkaboveabaseline apayoff and-fast guaranteeof a kid’ssandwichfortheschoolday. Monday’smotive place itspayrollorganizationwithacrapstable.Any preferred, whichalsohappenedtoproducethebest paid atthe“employer’s” discretion(youcouldcallthis that people are tantalized by a payoff thatmayor that peoplearetantalizedbyapayoff trusts-you” approach).Andthethirdwasabonustobe tivation anywhere.Consideraparentputtingtogether to day. notpeculiartowork;it’s (That’s mo- afeatureof his colleagues gave teams of Munichuniversitystu- his colleaguesgaveteamsof dence that the power of thegambleisn’tdence thatthepowerof confinedto dents a set of tasksalongwithachoiceabouthowthey dents asetof love andobligation;Wednesday’sagrimfeelingthat casinos. Ina2007 experimentbytheeconomistErnst easier andIdon’t feelsoexcitedwhenIscore.” Asimilar employee’s intrinsicandextrin- motivationisamixof sic drivers, andit’s adynamicmix,changingfromday someone has to do it, since the other parent forgot, sincetheotherparentforgot, someone hastodoit, one “you-trust-the employer”). The optionthestudents one “you-trust-theemployer”).The This isn’t tosuggestthatanycompanyshouldre- This Of course, itdoesnottakeanMRIscannertoknow Of

Korn/Ferry

Hal Mayforth A fascinating encounter

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10 million people play World of Warcraft. MIT author Sherry Turkle says “We’re alone together.” The U.S. has more than 400 billionaires. 46 million Americans live below the poverty level. Wind is a non-polluting energy source. Wind turbines are expensive and mar the landscape, prompting protests.

U.S. immigration laws made tighter. 76% of patents at U.S. universities have at least one foreign-born inventor.

U.S. football is America’s Bigger, stronger, faster football players equal more most popular sport. cases of brain damage. U.S. stock market gains U.S. unemployment stuck above 8 percent. lead developed world.

Queen Elizabeth celebrates Prince Harry dances nude in Vegas. 60 years on the throne.

China becomes second-largest economy. Human rights violations persist. Euro holds the European Union together.

Europeans can’t agree on how to fix their currency. NOW Mexico’s GDP jumped 45% since 2000 Mexico’s drug war death toll tops 54,000. with immigration to the U.S. at

its lowest levels since the 1950s.

Mexico fields an army and police U.S. Department of Defense estimates drug cartels force of 85,000 to fight drugs. now have 110,000 “foot soldiers.” Congressional Research Service says 29% of Arctic ice melts, a new record. natural gas finds and “tight” oil give U.S. the

world’s largest hydrocarbon reserves.

Food in America is so abundant that Americans Obesity in the U.S. affects more than a toss out 100 billion pounds of it a year. third (37.5%) of the population. Global group of 440 scientists map Rates of genetically caused diseases “junk” DNA and its 4 million switches. like autism at an all-time high. Rover Curiosity travels 350 million NASA’s $17 billion budget is same as miles to land on Mars. Brazil is investing in transportation for 2014 World Cup.

Chinese economy grows at 7.6 % in 2011. Chinese factory output declines 11 consecutive months.

2011 — Arab Spring. 2012 — Arab Spring contends with more bloodshed. Germany announces an end to Germany plans to replace nuclear nuclear power by 2022. with coal, highest CO2 emitter. The euro was introduced on Jan. 1, 2002, and Ten years later, Europe had nothing was greeted with fireworks and celebrations. to celebrate. November 2011, Silvio Berlusconi One year later, Berlusconi, claiming resigned in disgrace as Italy’s prime minister. he “always behaved correctly, both in public and in private” is preparing for

another run for Italy’s top job.

When Disneyland Paris (or Euro Disney) Now, Disneyland Paris is the most- opened in April 1992, it was greeted by protests, visited attraction in Europe, with sparse crowds, large budget overages. more visitors than the Louvre and the Eiffel Tower combined.

South Korea’s “Miracle on the Han River” Despite this, South Korea is experiencing

FACING economic boom fueled growth of giants record high rates of suicide, low rates of like Samsung and Hyundai. fertility and a general sense of ennui. Madagascar, the fourth-largest island in the Madagascar’s unstable government, lack of infra- world, is home to one of the earth’s most diverse structure and numbing poverty have kept tourism ecosystems and a remarkable array of flora at bay, with less than 200,000 visitors to the island and fauna, making it a prospective tourist mecca. in 2010. If Rip Van Winkle tumbled into bed at the beginning of 2011 and awakened at the end of 2012, his beard

might be longer, and perhaps grayer, but other than that he would find things pretty much the same. Europe —

still negotiating on its debt. Middle East — still in flames. Iran-Israel —far too tense. U.S. — lackluster growth.

China, India and Brazil — slowing down. Greece and Spain — hanging by a thread. Profits — beginning to shrink.

Congress — approaching the fiscal cliff. Asia — big tensions over tiny islands. Ice caps — melting. CO2 — rising.

Oceans — Texas-sized mess in the middle of the Pacific. Uncertainty — high. Hope — plunging. Nerves — fraying.

For those of us who believe our fate is in our hands — a dwindling group, if you believe the polls — the question is, why has so little changed? Why hasn’t the time been seized, carpe diem style? Markets are a good proxy for why. In Econ 101 they teach that if people agree tomorrow will be better than today, share prices rise. When they think only storm clouds loom, prices fall. When they can’t agree on anything, the markets crawl sideways, like a crab. Which is where they are now. The world is locked in a colossal argument and no side is winning. On the one hand Keynesians argue “Borrow, spend, and pay it back later when growth resumes.” On the other hand conservatives say, “We’ve borrowed far too much already. Debt payments will stifle future growth.” No economic Solo- mon has emerged to say definitively which side is right. And so it goes. People march in the streets, and people are line for assistance. People carry placards protesting the 1 percent and tempers flash. With so much doubt, hiring slows. There is no peace without agreement and lately there is no agreement.­ The question is whether there can be real, sustained growth without such agreement. And, in the end, what are all these disagreements about, really? Fluff or substance? Ego or common good? Sense or nonsense? My way or the highway? So how long will all these arguments go on? Until some brave soul raises a hand and reminds us that we are all in this together. As the English philosopher Thomas Hobbes said 400 years ago,

“A kingdom divided in itself cannot stand.” Nor can an economy or a world. — Joel Kurtzman Again. year. been quite a It’s

10 million people play World of Warcraft. MIT author Sherry Turkle says “We’re alone together.” The U.S. has more than 400 billionaires. 46 million Americans live below the poverty level. Wind is a non-polluting energy source. Wind turbines are expensive and mar the landscape, prompting protests.

U.S. immigration laws made tighter. 76% of patents at U.S. universities have at least one foreign-born inventor.

U.S. football is America’s Bigger, stronger, faster football players equal more most popular sport. cases of brain damage. U.S. stock market gains U.S. unemployment stuck above 8 percent. lead developed world. Bill Mayer

Queen Elizabeth celebrates Prince Harry dances nude in Vegas. 60 years on the throne.

China becomes second-largest economy. Human rights violations persist.

Euro holds the European Union together. Europeans can’t agree on how to fix their currency. NOW Mexico’s GDP jumped 45% since 2000 Mexico’s drug war death toll tops 54,000. with immigration to the U.S. at

its lowest levels since the 1950s.

Mexico fields an army and police U.S. Department of Defense estimates drug cartels force of 85,000 to fight drugs. now have 110,000 “foot soldiers.” Congressional Research Service says 29% of Arctic ice melts, a new record. natural gas finds and “tight” oil give U.S. the

world’s largest hydrocarbon reserves.

Food in America is so abundant that Americans Obesity in the U.S. affects more than a toss out 100 billion pounds of it a year. third (37.5%) of the population. Global group of 440 scientists map Rates of genetically caused diseases “junk” DNA and its 4 million switches. like autism at an all-time high. Rover Curiosity travels 350 million NASA’s $17 billion budget is same as miles to land on Mars. Brazil is investing in transportation for 2014 World Cup.

Chinese economy grows at 7.6 % in 2011. Chinese factory output declines 11 consecutive months.

2011 — Arab Spring. 2012 — Arab Spring contends with more bloodshed. Germany announces an end to Germany plans to replace nuclear nuclear power by 2022. with coal, highest CO2 emitter. The euro was introduced on Jan. 1, 2002, and Ten years later, Europe had nothing was greeted with fireworks and celebrations. to celebrate. November 2011, Silvio Berlusconi One year later, Berlusconi, claiming resigned in disgrace as Italy’s prime minister. he “always behaved correctly, both in public and in private” is preparing for

another run for Italy’s top job.

When Disneyland Paris (or Euro Disney) Now, Disneyland Paris is the most- opened in April 1992, it was greeted by protests, visited attraction in Europe, with sparse crowds, large budget overages. more visitors than the Louvre and the Eiffel Tower combined.

South Korea’s “Miracle on the Han River” Despite this, South Korea is experiencing economic boom fueled growth of giants record high rates of suicide, low rates of like Samsung and Hyundai. fertility and a general sense of ennui. Madagascar, the fourth-largest island in the Madagascar’s unstable government, lack of infra- world, is home to one of the earth’s most diverse structure and numbing poverty have kept tourism ecosystems and a remarkable array of flora at bay, with less than 200,000 visitors to the island and fauna, making it a prospective tourist mecca. in 2010. Lewis Hine/Getty Images the New Math for Ma nufacturers: made in the U.S.A. BY Christopher O’Dea What a difference a decade makes. After a 10-year binge of building low-cost production centers in China, some manufacturers reached for the slide rule — and the new math told them to build the next plant in the United States. Seven industry groups are particularly ripe for “reshoring” — the practice of increasing production in the United States by moving jobs back from abroad or building new plants here. All told, these seven industries account for nearly $2 trillion in annual United States consumption of manufactured goods that are essential to modern life: computers and electronics, appliances and electrical equipment, machinery, furniture, fabricated metals, plastics and rubber, and transportation goods. In 2010, the United States imported nearly $200 billion worth of these products from China; they clearly offer a major opportunity for domestic manufacturers. With manufacturing’s share of United States employment down to 9 percent, from 20 percent 10 years ago, some analysts believe a rebound in the factory sector won’t do much to help job growth. But that’s the old math. The real opportunity for American manufacturers 36 Q1.2013 What makes these industries prime candidates for moving new makestheseindustriesprimecandidatesformovingnew What flect thatcontingency:LaborcostsinChina’s manufacturing- flect Renewed interestintheUnitedStatesasamanufacturing High-skill factoryjobscouldaccountfor400,000 to1million intensive easternareasareup19percent;transportationcosts ing Group. Sirkin’s team,whichidentifiedthesevenindus- with revenueover$1billionaremovingproductionorseri- vices thataccompanynewplants. production of 10 to 30 percent of thegoodsthatUnited 10 to30percentof production of allsizes,platform isexhibitedbycompaniesof saidHalSir- production out of Chinaisthatfactorywagesaccountforamod- production outof to $90, comparedwithjust$25to$30 in 2000; andcompanies tics Ultimately,the figureisabove50percent. BCGprojectsthat companies tries ripeforreshoring,foundthat37percentof that innovation,productdevelopment andcustomerservice the nationalunemploymentrateby1.5 to2percentagepoints. kin, leader of themanufacturingpracticeatBostonConsult- kin, leaderof have recognized the risk of relyingonlongsupplychainsthat have recognizedtheriskof oilisnow$80 abarrelof have increasedastheaveragepriceof duction linestoengineeringanddesignteams large partoftotalcost.ThekeydriversBCG’sprojectionre- States nowimportsfromChinainthosesevengroupscould companies couldbuildincremental newmanufacturingca- closer tocustomersandthesales andmarketingteams. can allbemademorecompetitive bylocatingmanufacturing can bedisruptedwithoutwarning.Finally,companiessee cost locations, noranchoredbynecessitytotheUnitedStates. est share of totalproductioncostsforthesegoods,est shareof whilelogis - shift back home before the end of thedecade,enoughtolower shift backhomebeforetheendof ously considering it, whileforcompaniesover$10 billion, ously consideringit, of asmany3millionjobsinmanufacturingandtheser- of POISED FOR LIFTOFF FOR POISED While some companies and communitycolleges are adapting Germany’s vaunted apprenticeship system the cost of education and training on a broader basis? abroader on training and ofeducation cost the Goldman Sachs, “the U.S. is regaining its perch as the undisputed economic superpower of the world.” world.” ofthe superpower economic undisputed the as perch its regaining is U.S. “the Sachs, Goldman is not just an uptick in basic jobs jobs basic in uptick an just not is industries. industries. skilled workers and placing them in jobs. And with fiscal strains at every level of government, who will foot will foot who ofgovernment, level every at strains fiscal with And jobs. in them placing and workers skilled strength. According to Sharmin Mossavar-Rahmani, chief investment officer for wealth management at management wealth for officer investment chief Mossavar-Rahmani, to Sharmin According strength. of school-to-workforce transition, the United States lacks a consistent, proven model for training highly highly training for model proven aconsistent, lacks States United the transition, of school-to-workforce enough workers trained in the high-tech systems and problem-solving techniques used in today’s factories. manufacturing math to add up for America, things are moving in the right direction as the economy gathers gathers economy the as direction right the in moving are things America, for up to add math manufacturing potential to become the preferred base for 21st-century manufacturing in a wide range of essential ofessential range awide in manufacturing 21st-century for base preferred the to become potential Production intheseindustriesisneitherdestinedforlow- — Some expertsbelievethechanging coststructuremeans shipping costs,pro- andtheproximityof timetomarket, But the United States faces challenges. The foremost is people: manufacturers can’t find find can’t manufacturers people: is foremost The challenges. faces States United the But — as welcome as those jobs would be. The United States also has the the has also States United The be. would jobs those as welcome as — contribute a While it may take several years for the new new the for years several take may it While Korn/Ferry

Credit ©Bettman/Corbis

Briefings onTalen Credit “It’s notnecessarilythatcompaniesareuprootingandclosing August confirmingthetwo-frontrebound.AMay 2012 survey returning overseasoperationstoNorth Americaandbuilding nies operating in the manufacturing-intensive Yangtzenies operatinginthemanufacturing-intensive River need ittokeepfeedingChinesedemand,”Sirkinsaid. new operationsintheregion.“Companies donothaveto are ‘coming back’canbemisleading,”saidArvindKaushal, billion indicatedthatNorth Americanmanufacturersareboth pacity in the United States instead of China.But“sayingpacity intheUnitedStatesinsteadof jobs plants. leader of themanufacturingpracticeatBooz&Company.leader of close and write off the capital of aplantinChina,becausethey thecapitalof close andwriteoff sector identified as ripe for resurgence, released a study last sector identifiedasripeforresurgence,releasedastudylast of 229 companies with global revenues totaling some $935.3 229 companieswithglobalrevenuestotalingsome$935.3 of But risingcostsremainachallengeforAmericancompa- Companies involvedinelectronicsmanufacturing,one

But thekeyquestioniswheretoaddcapacity.” t & L eadership

TRAINING THE NEXT GENERATION NEXT THE TRAINING 100 years, adecisiveedgeforthechemicalindustry. America’s impressiveproductivitygainsoffsetwageratesin firms inChinaasawhole,”saidKentKedl,managingdirector The UnitedStatesnowhasenoughnaturalgasto last The at least That delaywillgivetheUnitedStatestimetoredress acritical That yond the tipping-point industries. The naturalgasbonanza yond thetipping-pointindustries. The rious hindrancetotheirbusiness, comparedto34percentof rating North Carolina’s attractivenessasafurnituremecca. market, producers are replacing economies of scalebasedon producersarereplacingeconomiesof market, makes the United States the location of choice for energy- choiceforenergy- makes theUnitedStateslocationof Delta, or Y.R.D., wherecostincreasesaremoreintensethan Delta, orY.R.D., from variousindustriesareplanning89projectsworthan it, you can make it,” said John Akin, a sales manager for C.R. Akin,asalesmanagerforC.R. saidJohn youcanmakeit,” it, imports fromChinainthe$75billionAmericanfurniture increase intheworld2011, despitefallingprices, andac- in other areas of China.AccordingtotheAmericanChamber in otherareasof intensive chemicalplants. Informa- AccordingtotheEnergy new constructionintheUnitedStates. With$13billionof ness Reportfor2012 ataconferenceinSuzhouearlierthisyear. ness andpoliticalriskconsultancy. KedlpresentedtheAmeri- and productivity of Americanmanufacturing.Despitea and productivityof China thatremainloweronanabsolutebasis. Onsrud, a producer of machinetoolsinTroutman,Onsrud, aproducerof But N.C. percent of transportation goods and 71 percent of furniture. furniture. percentof transportationgoodsand71 of percent the United States today manufactures $3.4 trillion worth of trillionworthof the UnitedStatestodaymanufactures$3.4 computer-controlledtoolscanbelostif the flexibilityof tion, according to BP’s StatisticalReviewofWorldEnergy 2012. tion, accordingtoBP’s that Americansconsume.Eveninindustriessuffered those inchemicalsandfertilizerproduction. Energy, theDepartmentof tion Agencyof manufacturers decade of joblosses,decade of BostonConsultingGroupnotesthat States companies in the Y.R.D. considerrisingcoststobease- States companiesintheY.R.D. States istheplacetobe.Alreadylargest-volumenatural goods annually goods havetobeshippedfromoverseas, andthat’s reinvigo- gas producer, theUnitedStateslogged thelargestproduction changes in response to customer demand. “If youcandraw changes inresponsetocustomerdemand.“If timethatenablerapiddesign cheap laborwitheconomiesof CommerceinShanghai’scan Chamberof annualChinaBusi- counted for just over 20 percent of global naturalgasproduc- counted forjustover20 percentof extensive outsourcingtoChinainthepastdecade,alarge estimated $65billiontostartoperatingby2018, with62of share of productionremainsintheUnitedStates share of of Greater ChinaandNorthof AsiaatControlRisks, aglobalbusi- of Commerce inShanghai,49percent“ofof respondingUnited of appliancessolddomestically,of machinery, 61percentof 70 A key driver of Americancompetitivenessisthescope A keydriverof The goodnewsforAmericanmanufacturingextendsbe- The For Americanfurnituremakers, highercostsarespurring For manufacturers that use a lot of energy,For manufacturersthatusealotof theUnited — equal to nearly three-quarters of thegoods equal tonearlythree-quartersof — 52 percent Q1.2013

37 38 — 225 studentseachyearwithcertificatesordegreesinmanufac- 1978 to 1983,” said Jim Filipek. As head of themanufacturing 1978 to1983,”Asheadof saidJimFilipek. American manufacturing.InthepasttwoyearsDynomaxhas Q1.2013 In mostcases, studentsdon’t needtoembarkonajobsearch When itcomestopreparing Americanyouthforcareers,When how- filling industry’sdemandforskilledmanufacturingworkers. ment. “We needahigh-performance, flexibleworkforce,” “We ment. Dynomax designsandproducessophisticatedpartsforair- from commercialandgovernmentcontractsinaviation ing programs“arelonggone,”butFilipekisinstrumentalin ing jobscan’t befilled.Despiterecenteffortstoincrease the Chicago, Filipekoverseesaprogramthatgraduatesmorethan worker generates average revenue of $500,000,worker generatesaveragerevenueof apotential anywhere throughaLaborDepartmentapprenticeshipfrom active workers. Andthere’s notadeep bench trainedmanufacturingworkers,number of theproblem is tal- aerospace. Butexpansionhasbeenlimitedbythelackof now,” Kaushalsaid.Heestimates thataskilledmanufacturing plenty of profitableworklinedup,”plenty of said Tessa Bergmans, people weneed,”Bergmanssaid. people thatyouessentiallyhave twochoicesinlife,”said trol andengineering.Today, Labortrain- thoseDepartmentof turing skillsthatrangefromweldingtonumericmachinecon- DuPageinwestsuburban programatCollegeof technology tute, the education and research affiliate of thetute, theeducationandresearchaffiliateNationalAsso- manufacturingenviron- today’s team-based,technology-rich the active workers are above the age of 45.the activeworkersareaboveageof that Filipek estimates College of DuPagecoulddoublethesize that FilipekestimatesCollegeof human resources manager at Dynomax Inc. in Wheeling, Ill. Wheeling, in human resourcesmanageratDynomaxInc. has doubledinthelast10 years, Kaushalsaid,to20 percentof did. “Ilearnedcoremanufacturingskillsthatcouldbeused love to have: more business than it can handle. “We have love tohave:morebusinessthanitcanhandle.“We likely togetworsebeforeitgetsbetter.the percentageof The aprojected600,000 $300billionif newmanufactur- loss of grown tomorethan220 people,from70, as ordersincreased company’s growth illustrates the strength of thereboundin company’s growthillustratesthestrengthof craft fuselages, wingsandotherassemblies, whichrequire ciation of Manufacturers.ciation of ent. “We’re having a hard time getting enough of theskilled havingahardtimegettingenoughof “We’re ent. ever, the current approach is falling short. “We have told young havetoldyoung ever, “We the currentapproachisfallingshort. significant customizationandextremelyhighquality.The said JenniferMcNelly, theManufacturingInsti- presidentof skilled manufacturing work force that is over the age of 55 skilled manufacturingworkforcethatisovertheageof skills gapisabigconcern;therearedefinitelyslowdowns shortage of themanufacturingprogramandstillnotmeetdemand. of LEARNING BY DOING LEARNING demand issointenseforworkerstrainedincertainskills The opportunity cost of lost business can be high. “The lostbusinesscanbehigh.“The opportunitycostof The Driving thatdemandisaproblemanycompanywould Government hasalessdirectroleinthisareathanitonce — the skilledworkersabletooperateeffectivelyin — 50 percent of 50 percentof

Apprentices studymath,science andengineeringwhile Today, beingseen asapathtosecureworkand insteadof Bush administration,isnowvicepresidentforexternaland regulatory affairsattheCareerEducationCorp., a for-profit Diane AuerJones, inremarkstoanAmericanEnterprise Insti- worst of all, dead-end. The abilitytoapplycognitiveskills all,dead-end.The worst of ascendancy, manufacturing developedanimageproblem. postsecondaryeducationinthesecond assistant secretaryof at aschoolthathasreallynicepennantorfootballteam post-secondary educationcompany, andshewritesforThe Chronicle ofHigherEducation’s blog,Brainstorm. better addressedbyscientific or engineeringinnovation. tute conferenceonthechallengesfacingAmericanhigher that rewardedfinancialsolutions toproblemsthatmightbe to makethingspeopleneedwas pushedasidebyasociety education. The firstchoiceis“atraditionalfour-yeardegree education. The earnings, manufacturingisseenasdirty, dangerousand, swimming pool.” secondchoiceis “skid The row.” Jones, an One waytofillthejobsgapisthrough apprenticeships. Somewhere duringAmerica’s climbtoglobal economic Korn/Ferry

©Bettman/Corbis America’s Gain Isn’t China’s Loss

port, R.I., who studies the national secu- ing its edge. In fact, China has moved rity implications of China’s science and steadily toward leadership of the ma- lthough technology policy. This time, China built chine tool industry — the heart and soul wage increases in China’s factory belt roads, highways, and airports to help of manufacturing. The Shenyang Ma- are spurring some manufacturers to companies move west, and “now it’s chine Tool Co. recently opted to “Go build new plants in America, Beijing is working.” West,” moving some production from working hard to reconfigure its produc- China’s leaders know the manufac- coastal Shenzen to the western city of tion resources to maintain its competi- turing power that drives rising living stan- Kunming. Already ranked No. 1 by some tive position and continue to dominate dards results from advanced technolo- observers, Shenyang is developing a strategically important industries. The gies and the underlying scientific and suite of new machine tools that will in- stakes are high. Analysts estimate China engineering research. So, along with in- clude its own control processor, a spe- needs to create 24 million new jobs an- frastructure, China’s leaders are building cialized market now dominated by Sie- nually to keep pace with its population an innovation ecosystem, encouraging mens. But the strategy of the chairman — an 8 percent growth rate — so this collaboration between the lower levels of and CEO, Xiyou Guan, is as much Ameri- year’s slowdown will make it harder for national ministries and state-owned en- can as Chinese. His plan calls for Ameri- Beijing to satisfy rising expectations. terprises that Walsh calls “stovepipe mo- can marketing acumen — Shenyang be- To offset labor cost increases, China nopolies.” It’s a lesson that United States gan recruiting United States executives reinvigorated a domestic “Go West” pol- policy makers are learning too, Walsh in 2012 to sharpen customer-service ca- icy, encouraging companies to move said. “You need manufacturing at the core pabilities and develop a solutions-ori- lower-skilled jobs to its less-developed level in order to have high-end innova- ented approach. The blueprint? “Apple interior provinces. China tried a similar tion.” Chinese technology development is has been inspirational to Chinese lead- initiative before, but companies stayed guided through “innovation clusters” laid ers,” he said. Its tools are already used to put, said Kathleen Walsh, associate pro- out by the Chinese Academy of Sciences, build Apple products, and Shenyang will fessor of national security affairs at the she said. position its new lineup at the forefront of United States Naval War College in New- That doesn’t sound like a nation los- innovation — it’s called i5.

working under the guidance of an experienced mentor. manufacturing talent without slowing production. They’re typically paid, sometimes at a lower rate than full- Harp is part of an employment ecosystem that has posi- time employees, and employers often pay the education bill tioned South Carolina to land more than its share of new too. Apprentices are usually hired after completing the pro- manufacturing jobs as the renaissance unfolds; the state even gram, and commit to repay a share of their educational costs has an agency called Apprenticeship Carolina that oversees if they leave before a specified date. incentives. Booz and Boston Consulting Group cited Georgia, Apprenticeships give German manufacturers an edge. North Carolina, Tennessee and Alabama as also having strong They’ve used the approach for centuries at home, where it’s job-attraction programs. They share an aggressive approach called the dual system (see sidebar), and brought the practice to bringing jobs to their states, including tax incentives, edu- with them to the United States. Robert Bosch, a German cation credits and apprenticeship offices that connect compa- manufacturer of goods ranging from dishwashers to car nies with community colleges and technical or vocational chassis, has used apprenticeships to train skilled workers for schools to train workers — in effect replacing the recruiting more than 20 years. In the United States, the company turns and training functions that so many companies threw over- to Mitchell Harp, head of the Apprenticeship Office at Trident board when they set sail for low-cost locations a decade ago. Technical College in Charleston, S.C., where Bosch’s primary United States operations are based. “We put it together TED-HEADS for them,” Harp said. Trident designs and teaches targeted The National Academy of Sciences is among a chorus of policy coursework that dovetails with mentored on-the-job training. voices seeking to revitalize America’s factory talent pipeline, Classes of up to two dozen apprentices obtain immediate and conferences on the manufacturing renaissance are as hip work experience, while Bosch grooms each generation of as TED happenings. A group of think tanks, law firms and

Briefings on Talent & Leadership Q1.2013 39 lobbyists held its second such annual event earlier this year in Washington. Gene B. Sperling, director of the National Economic Council, said the United States is an increasingly attractive manufacturing site in light of the latest thinking on manufacturing costs. “Stop looking at your unit costs over the last 10 years, and start looking at a ‘total cost of production’ Extensive market-focused career preparation that com- approach over the next 10 years,” he said. That view originated bines specialized classroom study with on-the-job training with Harry Moser, a former machine-tool CEO who created under the tutelage of experienced mentors — it’s the Ger- the Reshoring Initiative, a nonprofit effort dedicated to revi- man way. According to Friedrich Hubert Esser, president of talizing American production. Companies can use the initia- the Federal Institute for Vocational Education and Training, tive’s software to assess their total cost of production. which oversees Germany’s apprenticeship system, “Our goal in Germany is an education system in which vocational Noting the “outsized role that manufacturing plays,” and university education are on an equal footing.” Sperling said the sector “is worthy of a special emphasis.” German companies, educational institutions and trade The White House is pulling several levers. Perhaps most far unions work in a cooperative system with roots in medieval reaching is the 2013 budget request for a one-time $1 billion guilds; together, they establish specifications for dozens of payment to create the National Network for Manufacturing jobs and careers, and create the dual-track academic and Innovation, a new group of up to 15 regional Institutes for workplace programs to train the employees that employers Manufacturing Innovation to “revitalize United States man- believe they’ll need each year. The system is governed by ufacturing.” The goal is transformational — N.N.M.I. is in- German federal laws covering vocational training. tended to spark a quantum improvement in the creation of German companies have taken their centuries-old ap- jobs by leveraging advanced manufacturing techniques. proach around the world. A unit of the German Education The President’s Council of Advisors on Science and Tech- Ministry, iMOVE, exports Germany’s expertise in training nology recommended coordinating the effort among federal and regularly conducts workshops and conferences in such agencies working on the same topics. Leading that mission key areas as China, India and the Middle East. German is the nation’s new chief manufacturing officer, Michael F. companies set up shop in South Carolina 20 years ago and Molnar, an engineer with 25 years of experience at Cummins have used apprenticeships to train United States workers. and a stint in the Bush White House. Molnar operates from Many are designed by the Apprenticeship Office at Trident the National Institute of Standards and Technology, a unit Technical College in Charleston, S.C., which develops of the Commerce Department. During an interview with courses integrated with training by company mentors. Briefings at the International Manufacturing Technology Trident opened its apprenticeship office nearly 15 Show in Chicago, Molnar zeroed in on the importance of years ago, when South Carolina was bleeding jobs, as core manufacturing: a manufacturing job generates eight addi- industries like textiles collapsed in the face of cheap im- tional jobs in the production supply chain and related ser- ports. Today, the German way has caught on, and the chief vice work, and more than 85 percent of the value of U.S. of the Trident apprenticeship effort, Mitchell Harp, spends exports comes from manufactured goods. “This is how we most of his time educating senior executives about what maintain our standard of living,” Molnar said. apprenticeships can and can’t do. “The apprenticeship Even though public comments on the N.N.M.I. weren’t model is not a quick fix,” Harp said. “I call it an investment due until late October, Sperling began “a pilot demonstra- model. It allows employers to take control, and it pays off tion of the N.N.M.I. concept,” the National Additive Manu- in the long run.” The company can select specific people facturing Innovation Institute, in August. Seeded with $30 from its ranks or the schools’ roster; classroom work is million from the Departments of Defense and Energy and tailored to business needs; and apprentices become pro- NASA, the innovation institute was created by a broad con- ductive team members within six months. sortium of research universities, private companies, com- One key to success is finding the right people to serve munity colleges and economic development agencies in as mentors, Harp said. In addition to teaching apprentices Ohio and Pennsylvania. specific skills, mentors model workplace behavior. Perhaps There’s no doubt that additive manufacturing — often the most important function is the least obvious. “There’s called 3D printing — is a revolutionary technology. It’s a practical knowledge that is not in a book,” said Tessa Berg- way to make products by depositing thin layers of material, mans, human resources manager at the aerospace manu- facturer Dynomax Inc. “Mentors need to show that to some- like powdered metal, one atop another according to a digital one, so they can continue the work.” blueprint. This process reduces product design time, saves Once senior executives adopt the apprenticeship model energy and reduces inventory cost for producers and their for their training needs, they typically stick with it. “I’ve customers. Deere, Ford and Airbus use additive techniques never had a company say they don’t like it,” Harp said. “They say, ‘How can I make it work in my company?’” 40 Q1.2013 Korn/Ferry and tools to make parts and subassemblies. According to the On the shop floor, apprenticeships are making a come- Defense Department, the technology could be used on air- back, and the Labor Department is doing more to explain and craft carriers for making airplane parts that would other- promote the concept, for both industrial and service workers. wise need to be flown in. Ford makes transmission parts for The Labor Department reported that more than 400,000 peo- its first-stage vehicle testing with machines from ExOne, a ple were enrolled in registered apprenticeship programs in Pennsylvania-based company that was a member of the win- 2011. And a recent department study found that people who ning NAMII consortium. ExOne’s “digital part materializa- complete such a program can expect to earn some $240,000 tion” is also used to make artificial hips, prosthetic limbs more over a 36-year working life than nonparticipants. and most hearing aids. The company is owned by an investor To help fill the talent pipeline, Filipek hosted a meeting group led by Ken Rockwell, son of the founder of the aero- in November 2011 for 300 high school students to meet with space giant Rockwell International. dozens of local manufacturing companies, ranging from fast-growing midsized specialty firms like Dynomax to bed- BUILDING COMMUNITIES rock giants like Molex Inc., a global leader in electrical con- While printed airliners might someday ferry passengers be- nectors. “I don’t think it’s mainstream yet, but parents who tween printed terminals, United States manufacturers aren’t have experienced the great recession personally are rethink- ing manufacturing,” Harp said. That rethink could be just what’s needed to help the renewed interest in manufacturing work go viral. McNelly said the Institute’s engagement strategy — Dream It, Do It — is designed to “go where the kids are.” Dream It, Do It pro- motes regional clusters and manufactur- ing partnerships among the key constitu- encies that affect decisions about plant location, training, education and eco- nomic incentives. Begun nine years ago, programs are now in 20 states. The initia- tive gives 16- to 26-year-olds — and their parents, teachers and counselors — an up-to-date picture of advanced, high-tech manufacturing as a career path. Increasingly, the kids are at the plant or on the floor at major technology shows. On one Saturday in September, nearly 40 students from Eisenhower Middle School in Rockford, Ill., were viewing robots and 3-D printers at the International Manu- facturing Technology Show. They were waiting for Washington’s strategic plan to pay off. Many prac- the second group to take part in Rockford’s Introduction to tical efforts to solve the training problem are under way at the Manufacturing Program. Students submit essays to gain local level, between companies and community colleges, often admission to the program, which is administered by Tech- in states with accommodative labor laws. Works, a local incubator supported by manufacturers in The Manufacturing Institute is developing a credential- the region, including Sandvik Coromant of Sweden, HAAS ing system for secondary school students, based on precision- Automation of California and Doosan Infracore of Japan. manufacturing skill standards from several trade groups. This year’s class was selected from more than 200 applicants “This actually gives graduates skills that have labor market — a sharp rise from the 60 who applied the first year. value,” McNelly said. The credentialing initiative gave the In the end, McNelly said, there’s no more powerful way institute a network worthy of a political campaign. “I know to attract recruits than tapping directly into the energy and how many certified production technicians there are in Kan- aspirations of young people and their parents in the places sas or Texas,” McNelly said. “Do I tell everyone? No. But we where they live and work. After all, she added, besides all

©Bettman/Corbis talk about it” on visits to other states. that stuff, “Manufacturing builds communities.”

Briefings on Talent & Leadership Q1.2013 41 Denmark’s bang & olufsen apple’s european Inspiration

By Lawrence M. Fisher • Illustrations by Bill Mayer

ong before Steve Jobs met Steve Wozniak, or Bill Hewlett met Dave Packard, Peter met Svend and begat Bang & Olufsen from a farmhouse deep in the Danish countryside. Founded in 1925, Bang & Olufsen has long been an icon of high tech wedded to high style, and has sustained a culture of innovation longer than Apple, longer than Hewlett-Packard, longer than just about any other company. But even giants can stumble. By 2008, when the global financial crisis struck, B&O Lwas poorly positioned, with aging products and a workforce that had grown complacent from years of strong sales at high profit margins. At a time when consumption of music and video was moving rapidly to small portable devices and mobile phones, B&O’s core audio offerings were still compact disk players, albeit beautiful ones, and large-screen televisions, which although undeniably elegant, were priced far higher than products from market leaders like Samsung. The company posted losses for several years. This was the scenario that confronted Tue Mantoni when he was plucked from B&O’s board to become president and chief executive officer. A former consultant with McKinsey

42 Q1.2013 Korn/Ferry and Co., Mantoni had earned a reputation as a turnaround artist as president and chief executive of Triumph, Great Britain’s revered but long-underperforming motor- cycle manufacturer. Though Danish, Mantoni had lived in the United States and the United Kingdom for a number of years. With a young family, he was ready to return home to his roots, and ready for a fresh challenge. “The opportunity, combined with a sense of responsibility, made me decide yes,” said Mantoni, 37, in an interview at B&O’s headquarters in Struer, Denmark. “Be- cause I’d been on the board, I’d had a peek into the business at that level. But you real- ize there’s a lot you know when you’re on the board, and a lot you don’t know. I would say now, 18 months into it, that the challenges have been bigger than I expected, but the opportunities are also bigger than I had hoped for. What I saw was a brand with 87 years of heritage and success, which is really unmatched in the industry.” That heritage is one of serial innovations. The founders, Peter Bang and Svend Olufsen, began by creating the first table radio that could be powered directly by

Briefings on Talent & Leadership Q1.2013 43 household electrical current, or AC. In the 1920s, a radio was wave of the hand, while another, a wall-mounted unit called still a luxury item that also required a large set of accumulator the BeoSound 9000, mounted six disks at once, with a laser batteries to light its many vacuum tubes, which tended to go that flitted from one to another in a fraction of a second. flat at inopportune times. Peter Bang developed a power sup- The trouble was that some of these products, launched in ply called the Eliminator, which could be plugged in. Despite the 1990s, were still in the line 15 years later, and cool though competitors’ advertisements showing electric chairs and elec- they still were, were no longer perceived as cutting edge. Worse trocuted children, the product was a hit. yet, for young people, especially Danish young people, there The young company diversified into gramophones, and was an element of “your father’s Oldsmobile” about the prod- through a subsidiary, projection and sound equipment for uct line. Aside from headphones, there were no mobile prod- movie theaters. A Bang & Olufsen radio was the first to offer ucts, nothing for an iPod. multiple presets for different stations, and the company also “The direction that most technological innovation takes introduced the first phonographs combined with an accom- today has to do with mobility, and an integration between panying wire, and later, tape, recorder. The Danish royal fam- physical space and online social communities or streams of ily were steadfast customers, as were theaters throughout information,” says Jeppe Trolle Linnet, who is researching the Northern Europe. Although Nazi forces bombed the B&O fac- intersection of technology and culture at the University of tory in 1943, a tip from the Danish Underground allowed em- Southern Denmark. B&O “had a connection to the domestic ployees to remove key design documents, and they were able sphere and to the home which doesn’t really symbolize mo- to rebuild from the ground up in one year. Despite the devas- bility. It’s an association with the parental generations, some- tation, there were no layoffs. thing slightly bourgeois, striving to show your good taste.” As hi-fi, stereo and television became must-have items for For Mantoni, who favors Converse tennis shoes with his the burgeoning postwar middle class, B&O was ready with slacks and blazer, that was a fatal flaw. “When I came in we products that offered a unique combination of performance decided to kill those products, he said. “They were successful and Bauhaus-inspired design. Seven of the company’s sleek for us, but they pointed to the past.” Indeed, there are no CD audio components earned places in the Museum of Modern players in the current B&O line; their place taken by units Arts’ permanent collection in New York. Standout products like the BeoSound 5, a network audio player that accesses digi- included the BeoGram 4002, a turntable whose pickup arm tal files in any of the current formats, as well as Internet travelled across the record in a straight line, rather than an arc, radio. It also links to DVD and Blu-ray players from other thus reducing tracking error and distortion. One CD player, manufacturers. It looks like no other stereo component ever the BeoSound 3200, featured doors that magically opened to a made, and in a typical B&O touch, features a selector knob

44 Q1.2013 Korn/Ferry that spins silently until you slow down to pick a selection, was not shy about reaching out. A tiny engineering firm in whereupon it emits subtle clicks for each album. Sausalito, Calif., developed the acoustic lens technology that But the company needed more than new products. Reve- allows the company’s speakers — large, small and even auto- nues had fallen from $853 million to $528 million between motive — to produce a coherent stereo image regardless of 2008 and 2009, dragging the stock price with it from $52 to the listener’s position in the room or the car. B&O also ac- $8.50. The founders’ families were forced to merge their vot- quired technology for digital amplifiers that allows it to pack ing shares with the broader public shares, Mantoni was given one to three powerful amplifiers in each speaker, delivering a mandate to shake up the management suite, and hundreds up to 2,500 watts per side. of employees were laid off. But don’t call it a turnaround. Battle No. 2. was perhaps the most dramatic, the launch of “When you talk about a turnaround, that is a quick fix,” a new product category, indeed a new brand called B&O Play. said Christian Iversen, vice president for corporate services, If B&O had previously ignored Apple to its peril, Play is explic- who was recruited from Lego, that other iconic Danish com- itly Apple-centric, though it is also compatible with Google’s pany. “But in a company like this, with our brand reputation, Android technology. Play products include docking stations, it is much more about transforming the company for the including the first one to work with Apple’s new iPhone 5; a future, rather than just getting back to profitability and then streaming audio player styled after the company’s portable continuing business as usual. We didn’t need a turnaround, radios from the early 1960s; and a new lower-cost television, we needed a transformation.” in 32- and 40-inch sizes. All of these products support Apple’s Picking Six Battles AirPlay and Google’s DLNA standards, so music can be in- stantly streamed from mobile devices like iPods, iPads and oward that end, Mantoni and the revised senior man- iPhones and their Android equivalents. In a first for B&O, the agement team defined six must-win battles. “The ambi- Play products are sold online, and through Apple stores. tion was to make very clear what the six areas are where “Internally, we call the target customers Mr. and Mrs. Mac, Twe needed to win, where we needed to be successful,” he but it might just as well be Mr. Android,” said Zean Nielsen, said. “These describe where we are today, and where we want to be in the future. We identified key performance indicators and defined a five-year horizon. The first two years are for fix- ing problems. After that we see significant growth potential.” Among the six battles, the team determined that acous- tics is the hero, meaning loudspeakers for the home, for tele- visions and in automobiles, where B&O is a supplier to Audi, BMW, Mercedes and Aston-Martin. With a fresh emphasis on acoustics innovation, this is an area where the B&O magic is readily apparent. A visitor is proudly shown to a model listening room, patterned after a typical Danish living room, right down to the shelves full of books and Mid-century Mod- ern furniture. The speakers, initially hidden behind an acous- tically transparent but visually opaque black curtain, turn out to be far smaller than their symphonic sound would suggest. Indeed, project coordinator Jens Rahbek sees a parallel between this illusion and Bang & Olufsen’s market position. “On a worldwide scale, B&O is a small company. But in terms of loudspeakers, we are not small. Only Harman and Bose are larger.” That relative preeminence allowed B&O to recruit world- wide for acoustics engineers to come work in Struer, a fjord- side hamlet about four hours’ drive from Copenhagen. “We can attract people from all over the world to move here with their families, here in the middle of nowhere,” said Mantoni. “What draws them is the opportunity to innovate, but you have to focus. I’d much rather try to attract 20 acoustics engi- neers than three each across seven disciplines.” At the same time it was adding engineers in-house, B&O

Briefings on Talent & Leadership “Apple gear never quitegottothesame quality level inmany ways, but Apple was priced better for massconsumption.” They wantfantastic pictureandsound,buttheywanttocon- They recognize eachotherandthenstreamwirelessly. who- Plus many yearsbecauseAppleengineershaveoftenexpressed focused moreonmarketingthecompany’ inspiration whenIdevelopedproductslikemyCOREremote when no other hi-fis had remote controls,” said Wozniak, Ap- when nootherhi-fishadremotecontrols,” saidWozniak, and fittothehand,thinkingforhumantouch.B&O and hisdesign-marketing-savvypartnerSteveJobs, in were bothknowntobeB&Oowners. Andthefamousdivi- veterate inventor, andthearistocraticSvendOlufsen,who an admirationforthecompany’swares, anditsco-founders who arelaunchedintotheircareersin20s orearly30s. ple’s co-founder. “Ilearnedalotaboutproductsbeingsimple, president of Bang & Olufsen U.S.A. “These areindividuals “These Bang&OlufsenU.S.A. president of trol everything from their smart phone. We use Apple AirPlay trol everythingfromtheirsmartphone.WeuseAppleAirPlay has very‘Apple’ approaches, this Iapplied alotof veryright. ever comes over can whip out their iPhone and play a track, andplayatrack, ever comesovercanwhipouttheiriPhone some waysmirrorsthebalancebetweenPeterBang,anin computernerdparexcellence, Wozniak, sion betweenSteve or playDJfortheevening.” sowhenyouwalkinthedoor,or AndroidDLNA, thedevices “I hadBang&Olufsenequipmentinmyhomeanera In awayit’s surprisingthatB&OignoredAppleforso s innovations. ­

Wozniak saidB&Owasthegear“hewouldhaveplacedabove B&O had pioneered the concept, andformuchthesamerea- B&O hadpioneeredtheconcept, few buttons on the unit itself andhitone,maybeforradio,few buttonsontheunititself its moreidiosyncraticandinevitablyexpensiveprod- if they’re not they’re goingtocutcorners, hirepeoplewho notthey’re they’re if in Europeandparticular, sobattleNo. inDenmark, 3be- are less than the best,” said Mantoni. “Of the700stores, saidMantoni. the are lessthanthebest,” appropriate forradio. Sobeautiful.Applegearneverquite nowherethatwere and thenotherswouldlightupoutof seea howitworkedwithhumans.all othersbecauseof I’d after leavingApple. priced betterformassconsumption.” trimming old,underperformingstores. tion. BythetimeMantonicameonboard,B&Ohadabout700 they allreceivetrainingandsupportfromtheparentcorpora- ucts, sotheytendedtolanguishinacorner. UnlikeApple’s got tothesamequalitylevelinmanyways, butApplewas came optimizing the retail network. That meansaddingnew That came optimizingtheretailnetwork. control,” hesaid,referringtoauniversalremotedeveloped stores intheUnitedStates, AsiaandSouthAmerica,butalso son. Traditional stereoandTVstoreswereill-equippedtosell stores, buttheyweredisproportionatelybased auniqueasset, stores, manyB&Ooutletshaveindependentowners, though “You needtomakesurethestoresareprofitable,because “You Many yearsbeforeAppleopeneditsownretailstores, Referring tohisAppleco-founder, thelateSteveJobs,

Credit Credit transformation leading the CEO TueMantoni:

bottom 10 to 20 percent are never going to make it, so I’d nomically. Central to this effort was the opening of a new rather see them go away,” he said. While the corporate-owner- facility in Singapore, chosen for its proximity to suppliers in ship model obviously works for Apple, it is too capital-inten- Asian countries, and the high quality of the local workforce. sive for a smaller company like B&O, and there is an addi- Although B&O still manufactures many finished products tional advantage to independent owners, he said. “You should in Struer, it also has a major plant in the Czech Republic and not underestimate the importance of the personal relation- sources components from all over the world. As part of the ships. The guy who installs your BeoSystem is walking around restructuring, B&O opened a small software-development in your bedroom. If you have friends over and there’s a prob- department in Aarhus, Denmark, a major university town, lem with the system, you’re going to get that guy on his mobile to take advantage of the engineering talent pool there. phone, and some of these guys have been around for 20 years. Finally, battle No. 6 was simply to speed up execution It becomes much more than a supplier-customer relationship.” throughout the organization. This included the implementa- Battle No. 4 was to increase B&O’s presence in the so- tion of a trimmed, nimbler workforce; moving the sales and called BRIC countries: Brazil, India, Russia and China. Central marketing department from Struer to Lyngby, a suburb of to this effort was a strategic partnership with Sparkle A, a Chi- Copenhagen; and the consolidation of European sales regions nese retail distribution network, and A Capital, a China-based from four to two. financial firm. The new partners were issued new shares that gave them a 6.12 and 1.72 percent stake, respectively, in B&O, he business logic behind B&O’s transformation is that in return for a capital infusion of 177 million Danish krone, the new brand, B&O Play, as well as the automotive busi- about $30 million at the time. B&O corporate also took over ness, will both drive growth and bring fresh customers management of retail operations in Hong Kong and southern Tto the core luxury brand of Bang & Olufsen. Strategic pri- China and established a master dealer in India. orities for the coming year include further expansion of the No. 5 on the list of must-win battles was to transition re- acoustics product portfolio; to continue building B&O Play search and development processes, with a major focus on with an expanded product line; to increase the number of re- bringing new products to market much faster and more eco- tail outlets outside Europe and further reduce the European

48 Q1.2013 Korn/Ferry

store network to improve quality, customer satisfaction and “Impossible dealer profitability; continued expansion in China; and to lift organizational skills and competencies, with a particular em- to Objectify” phasis on innovation and sales and marketing. On approaching Bang & Olufsen’s headquarters in Struer, the In the United States, Bang & Olufsen looks to expand its glass doors silently glide open in a move reminiscent of the sales presence through its new partnerships with Apple and company’s classic BeoMaster 3200 that is by no means coinci- by opening more B&O stores across the heart of the country. dental. The executive wing is a transparent structure of alumi- Currently, B&O stores are clustered on the coasts, but even num and glass that appears to float above the ground. And the here there are notable gaps — no stores in Seattle, for instance. reception area is an oak-floored, high-ceilinged room, devoid While B&O Play is a cash-and carry-business, the company is building on the custom-installation aspect for its luxury of furniture, logos or product, but graced by a black concert brand, a major differentiator from competing manufacturers. grand piano, and, on one wall, the company’s new mission “We like to sit the customer down and have an interaction statement: Bang & Olufsen exists to move you with enduring while they enjoy a glass of wine or a coffee, and then go to their magical experiences. homes, so the system can be integrated,” said Nielsen of B&O If as Socrates famously said, the unexamined life is not U.S.A. “It’s a custom-installation sale, rather than a retail sale.” worth living, for a human being, Bang & Olufsen has long ap- Although audio enthusiasts are notoriously fickle, chang- plied the maxim to corporate life as well. To a degree unusual ing components as their enthusiasms wax and wane, the for any company, the company has long paid a high degree strong design element helps make Bang & Olufsen a perennial. of attention to maintaining and advancing a culture that de­ It consistently scores high on the so-called WAF, an industry emphasizes traditional hierarchy in favor of more flexible forms term meaning “wife acceptance factor,” which is not to be and individual initiatives. Bang & Olufsen has long prided itself underestimated. on being a values-based organization, a conceit that plays out “B&O has understood for decades a truth that escapes most of the audiophile community — that innovation in- in a notably flat management structure, which is mirrored in volves more than advancing circuitry,” says Ken Askew, a the transparent construction of its offices. San Francisco audiophile and former reviewer for Stereophile “Contrary to the iron cage, the glass cage suggests the magazine. “B&O has done more than its share of that for a idea of a ‘greenhouse,’ which encourages and inspires personal very long time, but with the added dimension of producing growth,” Jakob Krause-Jensen, an anthropologist and associate equipment that insinuates itself into customers’ lifestyles professor at the Danish School of Education, Aarhus Univer- instead of intruding on them. Music and the visual arts are sity, wrote in “Flexible Firm, The Design of Culture at Bang & sensual, and that should be the touchstone for equipment Olufsen” (Bergahn Books, 2010). “The glass cage is not the site design that brings them into the home.” of an indiscernible, managerial omnivision. On the contrary, in Design consultant Michael Jager, a partner in Jager Di the case of Bang & Olufsen, it is the administrators, the staff, Paola Kemp Design, said B&O needs to work harder to put a the ‘prison keepers,’ who are exposed to being watched as well.” human face to their leading-edge design, the way Apple has For his ethnographic study, Krause-Jensen spent six months made its chief designer, Jonathan Ive, the face of every new product launch. “They need to work on the humanization of working at Bang & Olufsen, primarily in human resources, but the brand, within the ‘maker culture,’ ” he says. “They need also in product development, which is considered the heart and to show: ‘We build and make this.’ What does that look like, soul of the company. He found an organization that expends feel like and sound like? I think they need to telegraph that considerable time and energy on its culture, bringing in Danish a lot more graphically.” management thought leaders like Professor Majken Schultz Early signs are that the new management team’s efforts of the Department of Organization at Copenhagen Business are paying off. For fiscal year 2012, which ended in June, School, but also the organizational culture guru Edgar Schein revenues were $522 million, up from $487.56 million in the from the Massachusetts Institute of Technology. previous year. And B&O is profitable again, with earnings be- “There is a clear empirical connection between Edgar Schein fore tax of $18.05 million, compared with just $6.94 million and the managerial thinking at Bang & Olufsen,” Krause-Jensen in fiscal 2011. writes. But “the concept of ‘culture’ is not used strategically at Mantoni is cautious about the near-term financial out- Bang & Olufsen,” he adds. “In the most common native under- look, noting that the economic crisis in Europe will weigh on Bang & Olufsen’s results even as the BRIC countries pro- standing, it is ‘the way we do things around here,’ tied to locality vide new growth. The turnaround is complete; the transfor- and practice, and seen to be almost impossible to objectify.” mation is still a work in progress.

Briefings on Talent & Leadership Q1.2013 49 From the global team at korn/ferry international From the global team at korn/ferry international 52 Q1.2013 Peter Drucker What do What P. Diddy, Sergey Brin, have incommon Montessori education Photographs by Asia Kepka

and business leaders, a producing creative has proven tobea potent predictor By GlennRifkin it comesto of future success. When

Credit Credit The unique and widely lauded education method, created more than a century ago by an Italian physician and education visionary, is built around the concept of self-directed learning, mixed-age classrooms, collaboration, creativity and social responsibility.

Eliminating the rigid structures of conventional class- cause you have something to express or you just want to do it rooms, a Montessori school encourages students to embrace that afternoon, not because the teacher said so. This is baked their curiosity, think imaginatively and see the world as an in how Larry and Sergey approach problems. They’re always array of possibilities. In other words, it is an innovation in­ asking, ‘Why should it be like that?’ It’s the way their brains cubator at the most basic level. And not surprisingly, the were programmed early on.” method has spawned a long list of overachievers. Despite its century-old existence and thousands of Mon- When TV journalist Barbara Walters interviewed Google tessori schools around the world, the unique teaching method, founders Larry Page and Sergey Brin in 2004 and asked what hailed by its proponents as far more effective and rewarding drove their success, she received an unexpected response: than conventional public education, has received little atten- “nursery school.” tion outside its core support group. Its supporters call it Page and Brin are products of a Montessori education. “the best-kept secret in education.” But lately, the Montessori “We both went to Montessori school,” said Page, “and I think Method has sparked a growing wave of interest due to recent (our success) was part of that training, not following rules blogging on the remarkable list of Montessori alumni. Though and orders and being self-motivated, questioning what’s go- the sampling is hardly scientific, the varied and eclectic mix ing on in the world, doing things a little bit different.” of famous people who include Montessori in their educa- Marissa Mayer, CEO of Yahoo and a former Google vice tional background is too compelling to dismiss, especially president, told Wired magazine in 2011, “You can’t understand in the world of business. Google unless you know that both Larry and Sergey were Besides Brin and Page, the list of entrepreneurs and inno- Montessori kids. In a Montessori school, you go paint be- vators includes Jeff Bezos, founder and CEO of Amazon.com;

54 Q1.2013 Korn/Ferry entrepreneur Peter Sims wrote, “The Montessori educational approach might be the surest route to joining the creative elite, which are so overrepresented by the school’s alumni that one might suspect a Montessori Mafia.” Indeed, in a six-year study of 3,000 innovative executives, professors Jeff Dyer of Brigham Young University and Hal Gregersen of INSEAD in Europe discovered that a significant number of the respondents had gone to a Montessori school “where they learned to follow their curiosity.” The most creative respondents spoke about being raised in a support- ive atmosphere where curiosity and inquisitiveness were strongly encouraged. In an interview with Fortune, Gregersen said, “If you look at 4-year-olds, they are constantly asking questions and wondering how things work. But by the time they are 6 1/2 years old, they stop asking questions because they quickly learn that teachers value the right answers more than provocative questions. High school students rarely show inquisitiveness. And by the time they’re grown up and are in corporate settings, they have already had the curiosity drummed out of them.” For Padmasree Warrior, chief strategy officer and chief technology officer at Cisco Systems, her Montessori educa- tion in Vijayawada, a town in southern India, had a signifi- cant impact on her business success. Warrior attended a Montessori school from kindergarten through high school and vividly remembers being left to fig- ure out the answers to problems on her own, a sometimes daunting and time-consuming endeavor that Montessori encourages. Steve Case, founder of AOL; management guru Peter Drucker; “That stayed with me,” Warrior said. “Not being afraid media mogul and rapper Sean “P.Diddy” Combs; the late Kath- of problems; looking at every problem as an opportunity to arine Graham, former owner and publisher of the Washington solve it versus being stumped by it.” Post; Jimmy Wales, founder of Wikipedia; and Will Wright, Warrior credits Montessori for instilling self-confidence SimCity computer game designer. Alice Waters, renowned at an early age, a crucial foundation for her leadership skills. chef and owner of Chez Panisse in Berkeley, Calif., studied “Walking into ambiguous situations and being comfortable the Montessori Method and is a former Montessori teacher. with that is hugely helpful with my job,” she said. “Most exec- Beyond the business realm, the list extends to a raft of utives want everything laid out clearly with all the i’s dotted highly creative, talented and accomplished people, including and t’s crossed. But the real world is not like that. In my job, famed chef Julia Child; Jacqueline Kennedy Onassis; cellist setting the technology direction for a massive technology Yo-Yo Ma; George Clooney, award-winning actor, producer company, you only get so much information, and at some and activist; actor John Cusack; actress Dakota Fanning; point you have to make decisions and be comfortable with country singer Taylor Swift and magician David Blaine. The that. That’s something I learned early on.” Nobel laureate in literature, Gabriel Garcia Marquez, author Schools, Not Factories of “One Hundred Years of Solitude,” credits his Montessori experience for a significant part of his success. n the ongoing debate about the future of education in the “I do not believe there is a method better than Montessori U.S., many rue the factory model that has been in place for making children sensitive to the beauties of the world and for the nation’s public schools for more than a century awakening their curiosity regarding the secrets of life,” Gar- and became a model for school systems around the world. cia Marquez has said. Steve Denning, an author and global leadership guru, is often In a 2011 blog on the Wall Street Journal website, author and asked about the best ideas for education.

Briefings on Talent & Leadership Q1.2013 55 “The biggest problem is that we’re applying a factory and flourish in that kind of world. The Montessori method model made up of hierarchical bureaucracies and a focus on fits perfectly into America’s emerging economy.” efficiency, scalability and grinding out graduated students,” How It Works Denning said. “This system is run for the convenience of par- ents and educators and has little to do with lifelong learning s the young students arrive at the Cambridge Montes- that is critical to the future of the economy. When I started sori School in Cambridge, Mass., Katelyn Ryan, their writing about this, people told me that we don’t need to in- 29-year-old teacher, reaches out to welcome each one vent a new system, it is already there. Montessori has been and shake their hand. A visitor quickly realizes that this class- doing this for more than a century.” room is different, physically and cognitively, from any public Denning pointed out that the most successful companies grade school he has seen. these days are following vastly different strategies than the Brandon, a quiet but precocious 5-year-old, heads directly hierarchical bureaucracies that focus on little besides maxi- for one of the open wooden shelves that ring the classroom mizing shareholder value. Getting managers focused on effi- and pulls out some crayons and a poster-like outline of the ciencies and savings ahead of adding value for customers is a United States. Without prompting, he begins coloring in the philosophy that is rapidly showing its age and ineffectiveness. states as he concentrates on staying within the lines. When Denning suggested that a radical shift to a creative, innova- Benjamin, a 4-year-old, arrives to join in, Brandon silently tive economy — as demonstrated by the likes of Apple, Google welcomes him by making room and eventually begins sug- and Amazon.com — is required for 21st-century winners. gesting coloring tips to the younger child. Over the next hour, “You have the basic challenge of a fundamental shift from Brandon moves, unprompted, from one task to the next, the old model to running organizations aimed at adding quietly working with arithmetic materials, reading and value for customers, and running those organizations in a other sensory tools that are a core feature of the Montessori very different way to accomplish that,” Denning said. “The Method. Brandon embodies the very concept of self-directed problem is that to do that, you need people who are graduates learning, which is at the heart of Montessori. of a Montessori program. You need people who are creative Ryan, who has taught at Cambridge Montessori for five self-starters, who are comfortable doing that and want to live years and is a product of a Montessori education herself,

56 Q1.2013 Korn/Ferry Popperfoto/Getty Images Briefings onTalen B Graham Bell.Edisonfounded aMontessoriSchool,andBell was embraced by thelikes of ThomasEdison andAlexander to theUnitedStates intheearlypartof the20th centuryand son, BrunoBettelheimandAnnaFreud. Shebrought her ideas were studiedby such leadinglightsasJeanPiaget,Erik- sori’s methods,literally beggingtobetaughtmore andmore. the classroom wildanddisruptive, quicklyembraced Montes- as practical life skills.Thechildren, many of whomentered environment focused onlearningacademicsubjectsaswell of working-class Italians,Montessoriprovided awarm, stable runner totoday’s day-care centers. For theseyoung children sori setupher CasadeiBambini(Children’s House)asafore- cation from tryingher methodson“normal”children, Montes- idea of education.In1907, blocked by Italy’s Ministryof Edu- creating theteachingmethods thatwould redefine thewhole like spongeseager toabsorbeverything andlearn. notion thatchildren, regardless of their environment, were ered unteachable.Theresults startledher butreinforced the were methodsfor teachingchildren whohadbeenconsid- vation andexperimentation. Sherealized quicklythatthere tally challengedchildren in whathadbeenaninsaneasylum. dren. In1901,shewas appointeddirector of aschoolfor men- potential inaway thatwas generally notavailable tosuchchil- just neededalearningenvironmentthatwouldfoster gence andpotentialasthechildren of theupper classes.They she discovered,cameintotheworldwithsameintelli- talent wasuniversalbutopportunitynot.Thesechildren, the university’s free clinics.Inher work there, sherealized that tered thechildrenofRome’sworkingclassanddestituteat throughout Europe. women’s rights,childlabor laws andhumanisticadvances first female physician. Shebecameanearlyadvocate for and insteadpursued ascienceeducationandbecameItaly’s Italy, Montessorirefused tofollow traditional women’s roles ing abetterpartofthemselves.” their soulsthatledtoalllatentpowers, reveal- almost seemedasifaroadhadopenedupwithin theyappeared restedof work, anddeeplypleased.It thechildren hadcompletedanabsorbingbit “When Her reputation spreading quickly, Montessori’s methods As ascientist,Montessoribasedher program onobser- Teaching attheUniversityofRome,Montessoriencoun- From theseearlyexperiences, Montessorisettowork on wisdom. Inaconservative bastionlike 19th-century played anearlypenchantfor buckingconventional orn inAncona,Italy, in1870,MariaMontessoridis- t & L eadership

— MariaMontessori

when anew generation of advocates spearheadedtheeffort. tessori schoolsdidnotreappear intheU.S.until1960s, essen mounted avocal campaign denouncingMontessoriand fiercely dedicatedtothefactory modelfor education, in 1913.ButtheeducationalestablishmentU.S., and hiswife founded theMontessori Education Association creativity, curiosityandself-awareness are the potentoffspring characteristics are strong predictors of future success. of aMontessorieducation.Ingrained atanearlyage,these flourished • Classr • There • Children • Teachers Among thekey tenetsof theMontessoriMethod: •  • S •  The foundational precepts o •  • Montessori Children Rote new skills,moving ahead when they are ready an individualpace.Students progress asthey master Montessori themselves. intelligence andeachlearnsinhisor her the children ar simply learningexperiences. helping children trulyunderstand asubject. for thechildr tially drove her outof thecountry. Thoughher methods tudents

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57 moves slowly around the classroom, which bears little resem- ect, Ryan talks with him and reminds him of tasks he has yet blance to a conventional public schoolroom. Absent is the to complete. Montessori is all about self-directed learning, teacher’s desk at the front of the room, the large blackboard and about allowing the child’s natural sense of curiosity and dis- the neatly arrayed rows of student desks. Instead, Ryan kneels covery to flourish. “The learning is all tactile, sensory learn- next to each child, quietly asking about what the child is work- ing,” Ryan explains. “We don’t try to have 20 students all fo- ing on, making suggestions and offering encouragement. In cused on the same subject for 45 minutes and then switch to Montessori, teachers are facilitators not instructors, guiding another subject. In that setting, you might have five who are the natural process of learning. There are tables and chairs, all focused while the rest are bored or disinterested. Here, each child-sized, and an array of Montessori educational tools, most child is focused on their task.” of which date back to the origins of the method created by Ma- “Dr. Montessori was brilliant, and she doesn’t receive ria Montessori in the late 19th and early 20th centuries. Child- the credit she deserves when you think about educational sized cooking utensils and a kitchen area are part of the design reform,” said Dr. Ingrid Tucker, head of the Cambridge Mon- in order for the children to learn practical skills as well. tessori School. “What are school systems today trying to do? There is a sense of calm and quiet purpose in the room. The very things she has done for 100 years.” When one younger boy, age 3, has trouble focusing on a proj- Tucker, who taught for years in private high schools, could

58 Q1.2013 Korn/Ferry One such school is part of the Milwaukee public school system. It serves a mainly urban minority community and has been in operation since 1997. A 2006 study by professors Angeline Lillard of the University of Virginia and Nicole Else- Quest of the University of Wisconsin revealed that even in a public Montessori school, subject to state laws on education and curriculum, the student achievement was notable. “On several dimensions, children at a public inner city Montessori school had superior outcomes relative to a sam- ple of Montessori applicants who, because of a random lot- tery, attended other schools,” the authors wrote. “By the end of kindergarten, the Montessori children performed better on standardized tests of reading and math, engaged in more positive interaction on the playground and showed more ad- vanced social cognition and executive control. They also showed more concern for fairness and justice.” Too Old to Unlearn?

uch of the discussion surrounding the Montessori Method is focused on educational philosophy. But what about its potential impact on business and leadership? Given the spate of successful alums in the corpo- always recognize the children who had early Montessori rate environment, are there lessons to be learned and adapted training. “I was blown away,” she said. “These kids were so in training and development programs for prospective man- much further ahead in math and in their other skill sets. There agers and executives? was a level of sophistication, of maturity, of depth and greater Daniel Pink, a best-selling author who writes about the understanding and personal inquiry that set them apart.” changing world of work, believes the use of Montessori Of course, the Montessori Method is not without its de- methods in corporate training is “a great idea.” Initiating tractors. Montessori has no tests, no grades and no home- such training is something else, however. “It would require work. Conventional educators say that there is no reliable people to unlearn some bad habits they’ve acquired in other way to measure the Montessori outcomes. Over the years, types of formal education,” Pink said. “But that’s a speed parents and conventional educators have also worried that bump, not a brick wall. If Montessori-style internal training Montessori is too structured an environment and that stu- isn’t already happening, someone should start it. It’s an idea dents are not allowed to play or “be children.” Because most whose time has come.” of the more than 5,000 Montessori facilities in the U.S. are Clearly some of the key attributes of Montessori are private schools with often pricey tuitions (the Cambridge essential elements for strong leadership: Montessori School costs around $23,000 per year), some crit- • Self-directed learning ics say Montessori is only available to privileged children. • Focus on creative problem solving and innovative In fact, a large percentage of Montessori schools around thinking the world are located in impoverished neighborhoods and • Students teaching other students cater to underprivileged children. Maria Montessori set up • Stoking and encouraging curiosity the very first Montessori preschool in 1907 in one of Rome’s • Comfort with ambiguous situations most downtrodden neighborhoods, and this Casa dei Bam- • Self-mastery of concepts to instill self-confidence bini became a model for future Montessori schools. In the • Embracing failure as a learning opportunity U.S., more than 350 public and charter Montessori schools While intriguing, the concept has yet to get much trac- have achieved high levels of success. tion among corporate leaders. Given that Montessori’s core

“What are school systems today trying to do? The very things the Montessori method has done for 100 years.” —Ingrid Tucker

Briefings on Talent & Leadership Q1.2013 59 “We’re a global economy now, and all of a sudden what is valued is creativity, the

ability to collaborate, passion, engagement.” —Aidan McAuley

enrollment is between ages 3 and 12, it isn’t clear that hard- Peter Sims is convinced that future generations of leaders ened business-type adults are malleable enough to unlearn will require the kind of educational experience that Montes- bad habits and embrace such new ways to see the world. sori generates. But people like Denning believe that Montessori-like “I believe that the leaders of the future are the ones who thinking is no longer a luxury but a necessity for a new mil- will be able to think in an inductive, deductive, rational way lennium economy. and in a much more qualitative, discovery-oriented way,” “An education like Montessori is a crucial part of this fun- Sims said. “It is especially important when they don’t know damental phase change to a creative economy, which is well what problems they are even trying to solve. In that situation, under way,” he said. “The old dinosaurs are dying faster and you have to be comfortable with failure, comfortable with faster, and new ones like Google and Amazon are emerging experimentation and not being perfect. Otherwise, you end faster and faster. Some look at the current economic scene up getting suffocated. and see a deep recession, but we’re actually in a phase change “If you feel comfortable doing both analysis and discovery to a different kind of economy. It is why we shouldn’t hold when you are younger, you are at a distinct advantage in this our breath for the old dinosaurs to start growing fast again.” world,” he said. “It is becoming, not just a distinct advantage, Finding the kind of leaders who feel comfortable and but there is going to be no other way to be raised if you want thrive in this new environment is a challenge. Cisco’s War- to be a professional.” rior believes that her career has enjoyed significant benefits Rick Fredkin is a perfect example. A successful small busi- from her Montessori background. ness owner, Fredkin, 30, started Hardwick Technologies, a “Much of what we did in Montessori was as a group,” she computer consulting firm in Watertown, Mass., five years said, “and I like being part of a team. You weren’t forced to be ago. He attended Cambridge Montessori School from ages 3 part of a group all the time, but things usually were done that to 5 and then entered public school. The transition from the way. I like to share my thinking, but I am also pretty decisive nurturing, calm environment of Montessori to conventional and opinionated. The result is that I’m comfortable doing public school was so wrenching that Fredkin failed every sub- things as an individual and comfortable being part of a team.” ject and eventually convinced his town outside Boston to allow him to drop out after ninth grade.

Who will lead us next?

iven the odds, our artists from the Cambridge Montessori School have a bright future. We look forward to seeing their names in lights as they grow up, find careers, and be- Gcome, in turn, role models for the generations to come.

60 Q1.2013 Korn/Ferry “I did some home schooling and enrolled in some college Aidan McAuley, sales capability manager at Coca-Cola classes, but essentially, I started working professionally at in St. Louis, has so much enthusiasm for the Montessori age 12,” Fredkin said. “I did programming for companies all Method that he helped form an online advocacy group called over Boston.” He grew increasingly independent, traveling to Montessori Madmen. These are fathers of young children Tokyo alone at age 15 and interacting with business people enrolled at Montessori schools who are pushing hard for the of all ages. He credits the Montessori environment, with its spread of the innovative educational technique. mixed-age classrooms, for making him comfortable working “Montessori is about following your interests and devel- with adults when he was still a teenager. oping skills where you don’t just learn but you learn how to According to Fredkin, leaving school so young “was an teach as well,” McAuley said. “When a young child learns act of desperation to do something productive.” Fredkin isn’t that, it stays with them throughout their life. They develop completely sure why he was so miserable in a conventional respect for others, and that is the kind of thing that impacts classroom: “I theoretically had the intelligence to learn,” but organizations like Coke or any large company. he was rebellious and had grown up with a highly successful “With so many functional groups, the idea of understand- father, computer science legend Edward Fredkin, who trav- ing different tasks and people in other groups is critical to any eled a lot and often pulled his son out of school to travel with corporate success,” he said. “We’re a global economy now, him. Finding himself in a structured classroom environment, and all of a sudden what is valued is creativity, the ability to bored, daydreaming, watching the clock, was too constricting collaborate, passion, engagement. This generation is grow- after the Montessori experience. ing up on the Internet, and they are not interested in Though Fredkin is hesitant to place too much emphasis a job that tells them what to do. They want to see what they on experiences he had from ages 3 to 5, he is clear that his are capable of.” Montessori experience was “extremely nurturing and calm- What McAuley and other Montessori advocates see is ing, which was very powerful even at such a young age.” He something innate in all of us. “We all want to have a sense of sees himself today as a creative person who “thinks about purpose and be engaged in the work we do,” McAuley said. things, finds solutions, gets it done.” And this fall, Fredkin has “If we do that, we’ll reduce turnover, our sales will increase, enrolled his own 3-year-old son at the Cambridge Montessori people will be happier at work. When we look at Montessori School. “For my son, there was no other choice,” he said. “It children, we have to find ways for our workers to engage was just so clear to me.” with their work in the same way.”

Briefings on Talent & Leadership Q1.2013 61 nlike his fellow theoretical biologists, David Sloan Wilson spends a fair amount of his time on applied science. A few years ago, for ex- ample, he and his students started looking at community spirit and altruism in their univer- Usity town in upstate New York. The researchers counted Halloween and Christmas decorations, reasoning that neighborhoods with more holiday bling showed more community spirit. They also polled high-school students, asking them to rate how much they agreed with state- ments like “I think it is important to help other people.” And they had the kids play two-person economic games in which cooperation yields better long-term results for both players — but only if neither succumbs to the temptation to go for a quick, selfish payoff.

Cities all over the United States show a marked variation in income from neighborhood to neighborhood, and you might expect those differences to affect how public-spirited and cooperative neighbors are. According to the researchers, it did: The more affluent a neighborhood was, the less likely residents were to be cooperative, helpful and public-spirited. Wilson’s project has a practical, untheoretical fix-things- now side: He wants to harness knowledge of human na- ture to improve people’s lives. One of his other projects organized neighborhoods to WEWe vs. Me compete with each other in and the Art transforming vacant of Balance lots into recreational space. This exercise showed the same inverse By David Berreby correlation between income level and coopera- tiveness. “Some of the people in low-income neighbor- Illustrations by Travis Foster hoods are the most amazing networkers that I have ever seen,” Wilson wrote on the blog Big Ideas Online. On the other hand, “some of the so-called ‘nicer’ neighborhoods are sadly inert. Each family keeps a tidy home and lawn and doesn’t make trouble for the others, but positive social con- nections are almost non-existent.” Of course it’s also possible that the residents of the higher-end homes were more involved with others who

Korn/Ferry Briefings onTalen Credit And politicalscientistshavefoundthatresearch And it’s notanoutlierinresearchonhowthemindand means of feelingclosetoacquaintancesandrelativeswho means of more planetickets, broadbandInternettelephonyandother foster neither total selfishness nor group worship. They in- foster neithertotalselfishnessnorgroupworship. ways be in conflict. Instead,apersoninanorganizationhas ways beinconflict. in ‘team’ ”or, isnosuchthingassociety, alternately, “There were physically distant. Given the last 300 years of economic Giventhelast300yearsof were physicallydistant. weren’t nearby, becausetheirhigherincomeaffordedthem as their own, even if objec- as theirown,evenif motives,a volatileandcomplexmixof some“for me” and align. Nor, forthatmatter, al- canyouassumethatthey’ll as much as you can in the realm of money,as muchyoucanintherealmof and recognition and happierteammembers. brain work. The consensusviewonhumannaturefromsci- The brain work. powerful hunger to have more of whathedesiresandto powerful hungertohavemoreof their careerswillrespondtopoliticians whowanttoreduce tive measureswouldshowaconflict. the group’s interest the teamallhehas. Youcan’t assumethosedriveswillneatly to advanceasanindividualandaseparateimpulsegive this drive for individual advancement is also the driver of this driveforindividualadvancementisalsothedriverof there are only individuals and families,” as Margaret Thatcher there areonlyindividualsandfamilies,” asMargaretThatcher have morechoicesinlife.Manyleadersassume,though,that history, fewtodaywoulddenythateachhumanbeinghasa daily lives, thechoice, despitetheeconomicirrationalityof gender discrimination, and African-Americans who are in are who gender discrimination,andAfrican-Americans collective, not individual. Women whohavedonewellin collective, notindividual. ence, in fact, is that any member of agroupwillfeeldrive isthatanymemberof ence, infact, subjects’ calculationsabouttheir interestsinpoliticsare stinctively keepthose“me” and“we” drivesinsomekind some “for we.” Effectiveleaders, arethose who itturnsout, opportunities forself-advancement? anorganization,thantogiveher ateam, oremployeeof of organizational success. Howbettertomotivateamember of harmony. It’s not as easy as proclaiming “There is no ‘I’ isno‘I’ harmony.of It’s notaseasyproclaiming“There once toldhertroops. Butitleadstomoreeffectiveteamwork and theirgroupsorganizationsbenefitfromthatchoice. Wilson’s worksuggeststhatthisorthodoxyiswrong. Put simply, humansoftenput“us” “me” aheadof intheir For example, studies have shown that members For example,studieshaveshownthat t of organizations, if they reportthem- if organizations, of & L eadership selves satisfiedwiththeir position, willsee ME Q1.2013 63 the ranks of the elite will still be concerned about the plight of other African-Americans rather than voting the interests of their economic class. Many managers compare their work to herding cats, but human beings are put together very differently from loner animals. In fact, we are far more prone to cooperate than our close relatives, chimpanzees and bonobos, are. These apes share more than 98 percent of their genetic code with hu- man beings, yet they couldn’t calmly share an elevator with strangers, or choose sides with unknown fellow-apes for a friendly game. On the continuum between total self-interest and complete devotion to the greater group, apes are closer to cats, while human beings are closer to bees or ants. In fact, some psychologists and biologists have speculated that the human species has crossed the line and joined the ranks of “extra-social” species, whose members are so de- voted that a large group of individuals can be viewed as if it were a single “super-organism” — like a beehive or anthill. In the view of Selin Kesebir, a psychologist at the Uni- versity of Virginia’s Darden School of Business, our minds are shaped to make us cooperative members of a hive. “Iden- tification with a group is the switch that activates these mechanisms,” she wrote in a recent paper. Any group will do if it provides the psychological pathway from “me” to “we”: religion, nation, race, ideology, sports team, military unit, and, of course, a corporation or work team. Each of us, she argues, is an individualist ape much of the time, but capable of becoming a loyal drone under the right circum- stances. Once we sense that we’re part of a hive, we have psychological mechanisms that make it easy for us to get in line and do our part, while our chimp cousins would keep insisting, with bites and kicks and screams, on getting their own way. One of these mechanisms is quick and untroubled

communication — the sense that among “us” it is easy to comprehend what others mean, that here “we” all understand each other. It is “that absence of self-consciousness [emphasis added], that ease and fellowship and sense of common values which make for intimacy, and sanity, and the quick give and take of familiar intercourse,” as Virginia Woolf once put it.

WEQ1.2013 Korn/Ferry 64 Communication is more than nouns and verbs. A shared culture of references, folktales, proverbs and the like also marks group members as belonging together, as do music, dancing and marching — synchronized sounds and movement helping to communicate that “we are one.” Our communication channels allow us to share goals and plans — to understand that a desired outcome (win this election, get this company back on top, move this stuff out of the garage) is shared and to be able to do the complex mental work of taking one’s place in a mosaic of different workers doing different things. As Kesebir points out, even the biology of the human eye makes it easier to work to- gether: The visible white surrounding our iris is unusual (our primate relatives have dark eyes that don’t “pop” against surrounding skin tones) and encourages sharing ideas in the most literal sense. If a group member shifts her gaze to look at something, others notice it and are likely to look at the same place. Another trigger of we-feeling is a sense of tradition, taboo or authority. It may be embodied in a leader or sacred figure, but it need not be. Often, this sense arises in an unconscious but powerful consensus based on shared history and shared rules. This is important to note because deference to group authority is not necessarily the same as deference to a single person. In fact, a feeling of “we” is easier to stir when team members believe that all are being treated the same, and the sense of “we’re all in it together” is often enough to transform straying cats into eager bees. As anyone ME

with kids knows, people the world over have a natural fascination with “fairness” and easily resent a sense that any individual has special privileges or advantages. This is part of the mentality of groups, Kesebir says, because a sense that all members are treated the same evokes that feeling of shared destiny, that the fate of one is the fate of all. This intense interest in fairness makes group members eager to punish anyone they perceive to be cheating. Self-centered as we often are, when we see a conflict between our interests and those of a group to which we belong, we tend to prefer the interests of the group.

Briefings on Talent & Leadership Q1.2013 65 That is one of the most striking lessons of an economic experiment called the Ultimatum Game. Research at the psychological and even physiological level has shown that human beings have a built-in sense of justice. In the Ulti- matum Game, for example, two players are told they will split a reward. One player can offer any kind of split he likes (50 -50, 60-40, even 1-99) and the other player can either accept or reject it. No negotiation is allowed — Player 1 makes a single offer and Player 2 accepts or rejects. A purely rational participant, as Player 1, would offer an unfair split, perhaps as drastic as 1-99 (to minimize loss), and a rational Player 2 would accept it, reasoning that some gain is better than zero gain. Yet people around the world do not follow that strategy. Instead, proposers are much more generous, and receivers are far more determined in their re- fusal to accept unfair offers. The proposers’ generosity is a striking example of putting “we” ahead of “me.” Though the rules of the game would let them propose a 99-1 split, they do not want to see themselves as such an unfair person. What’s important to understand here is that the partici- pants in these experiments were not consciously thinking that they wanted to help the wider community or serve hu- manity. They were thinking about themselves. But instead of asking “What’s in it for me? How do I maximize my util- ity?” they were wrestling with a different question: “What kind of person am I?” Their desire to be fair made them put their own economic interests aside in favor of decisions that benefited others. Because we selfishly want to think well of ourselves, we’re motivated to act unselfishly. In fact, some recent studies suggest that working in teams makes participants want to be even more unselfish. According to the theory of “competitive altruism,” people often find themselves in settings where they strive to outdo

one another in their unselfishness, in order to gain a valu- able reputation for generosity. In one study of informal WE work groups in a village on the Caribbean island of Domi- nica, the men with reputations for generosity attracted the most helpers and got the most hours from others. While social scientists are still debating these theories, the evidence is convincing that human beings are an odd combination of “in it for me” and “in it for we.” It’s not hard to see how the triggers that psychologists discuss — making group members feel they communicate well among them-

66 Q1.2013 Korn/Ferry selves, share a common fate and are largely alike — could get them to want to work for the good of the team. But the “we” mentality can be taken too far. When indi- viduals in an organization give up too much of their inde- pendence, the group will reject new ideas or, in the worst case scenario, any ideas at all. Dancing, marching and chant- ing in unison are fun, but how often do they produce new insights? Too much “we” spirit is often at the root of com- plaints of prejudice and workplace bullying, where an “out- sider” is usually the target. Team spirit is great, but you don’t want the love of the hive to wipe out the workers’ desire to distinguish themselves. At the same time, many organizations’ incentive struc- tures produce the inverse problem: They encourage employ- ees to think “What’s in it for me?” by stressing only salary, benefits and individual competition. The built-in drivers of “we-feeling” will break down in unfavorable environments. If team members don’t see the triggers, they won’t get the feeling. And even if they do have the feeling, a hyper-indi- vidualist environment can train them out of it. (Students of economics, for example, are much more unfair in the Ultimatum Game than typical players.) An organization that lacks we-feeling is not operating at full potential, because it isn’t tapping the vast reserves of time and energy that are unleashed when group members feel they are part of some- thing bigger than just “me.” In other words, somewhere between a completely “me”- centered approach (which fails to leverage the natural “groupiness” of the human mind) and a collectivist night- mare (which crushes all the benefits of individual initiative), there is a “sweet spot”: an organizational culture that cele- brates individual achievement and the pleasures of doing your bit for the team. If an organization is leaning too much

to collectivism, getting to that sweet spot may mean telling bosses to dial back the team spirit and let every employee decorate his cubicle how he likes. If, as is more likely, a team ME member is leaning too much toward “me-first,” it may be a matter of thinking differently about the rewards of working in the organization. Perhaps it’s time to put less emphasis on pay and more on the pleasures of collaborating. Or to set up a softball team. It may not be easy to find, but the zone between “me” and “we” is where individuals do their best work.

Briefings on Talent & Leadership Q1.2013 67 Top companies by donations

Wells Fargo & Company $213,481,849 (cash) Walmart Exxon Share of 2010 pretax Chevron Mobil profits donated in 2011: $342,350,438 (cash) $209,280,000 (cash) 1.1% $616,591,031 (products) $232,658,037 (cash), Share of 2010 pretax Share of 2010 pretax Goldman $2,007,943 (products) profits donated in 2011: profits donated in 2011: Sachs Group Share of 2010 pretax 0.7% 4.1% profits donated in 2011: $337,077,886 (cash) 0.4% Share of 2010 pretax profits donated in 2011: 2.6% Global Honor Roll** Edison — Italy ENI — Italy Grupo Ferrovial — Spain Hochtief — Germany Nestlé — Switzerland NextEra Energy — U.S. Statoil — Norway Total — France Walt Disney — U.S. Weyerhaeuser — U.S. Whole Foods Market — U.S.

68 Q1.2013 Giving Back J.P. Morgan Chase & Co. General Electric Bank of America $202,961,667 (cash), Company Citigroup $70,473,269 (noncash gifts $208,425,075 (cash) Target $144,100,000 (cash), $121,910,534 (cash) such as art and real estate) Share of 2010 pretax Corporation $1,900,000 (products) Share of 2010 pretax profits donated in 2011: Share of 2010 pretax profits donated in 2011: $146,119,380 (cash), Share of 2010 pretax The company lost money in profits donated in 2011: $63,155,311 (products) profits donated in 2011: 0.9% 2010, so this figure cannot 1.1% Share of 2010 pretax 1% be calculated. profits donated in 2011: 4.7%

60% of companies increased their Companies that donate total giving since 2009. • products or a portion 48% of companies increased their • giving by more than 10%. of proceeds with every purchase: The consumer staples (25%) and health TOMS Shoes Kenneth Cole (Awearness) care industries (25%) had the largest • Warby Parker Krochet Kids International percentages of growth in giving. Figs Honest Tea 81% of companies gave 20% or more • to either education, health or social Kayu 31 Bits services causes.*** Paul Newman Burt’s Bees

In spite of trying economic times, some companies continue to make giving back a top priority. Briefings is proud to celebrate the companies that are making a difference this holiday season and all year round.*

*2011 donations as a percentage of 2010 pre-tax profits. Source: The Chronicle of Philanthropy ** Fortune Magazine’s Annual Rankings 2012 ***According to the 2012 Corporate Giving Standard Survey conducted by the Committee Encouraging Corporate Philanthropy (CECP). Respondents include 62 of the top 100 companies in the Fortune 500 . Giving Briefings Back on Talent & Leadership Q1.2013 69 In Review near irrelevance. Smirking political ing about it for the first time. By pre- Master of insiders called him “Rufus Cornpone” senting the events from Johnson’s and the oft-heard query around Wash- point of view, Caro adds a powerful the Game ington about the former “master of dimension to an historic moment the Senate” was, “Whatever happened we had believed had been as well Amassing power is one to Lyndon Johnson?” His blood feud documented as possible. There are thing, wielding it is another with Robert Kennedy only made dozens of LBJ biographies yet Caro things worse. Like a caged lion, he finds a way to incorporate such re- roared for a while and then fell into markable detail with his sturdy writ- a quiet state of abject misery. ing style and unparalleled knowledge But an assassin’s bullet changed of his subject that history buffs will all that in the shortest, breathtaking have their breath taken away. And instant. Lyndon Johnson, with the the accomplishment goes well be- president’s bloodstained widow yond history. It is an unmatched por- Jackie Kennedy by his side, took the trait of leadership achieved, lost and oath of office on Air Force One just regained in a heroic manner that no before the plane, carrying the dead great novelist could have conjured president’s body, set off for a solemn from the imagination. journey back to Washington. For those of the ’60s generation In a small room at Parkland Me- who were left with little compassion morial Hospital, when JFK’s chief of for LBJ and his unfortunate and mis- staff Ken O’Donnell came in and said guided choice to escalate the war in simply, “He’s gone,” Johnson’s hang- Vietnam, Caro has provided the in- dog look of the past three years dis- sight and nuanced understanding of t would be difficult to imagine a appeared. It was replaced by an ex- this complex, driven politician that more stunning and remarkable tran- pression that those who knew him no one else has attempted. Few great sition into leadership than that expe- the longest, his oldest aides and al- historical figures live up to the over- rienced by Lyndon Baines Johnson. lies, recognized. “The big jaw jutting, used cliché “larger than life,” but Lyn- In the space of those few horrible the lips above it pulled into a tight, don Johnson was such a man. Caro’s seconds in Dallas on Nov. 22, 1963, grim line, the corners turned down biography is the kind generally re- Ithree rifle shots cracked through the in a hint of a snarl, the eyes, under served for history’s greatest leaders, air and changed the course of history. those long black eyebrows, narrowed, and he brilliantly makes the case that With President Kennedy mortally hard and piercing,” Caro writes. “It Johnson belongs in this high echelon. wounded in the limousine just ahead was an expression of determination In “The Passage of Power,” set in of his own, Vice President Johnson, and fierce concentration; when Lyn- the years 1958 to 1964, Caro reveals whose political fortunes up to that don Johnson wore that expression, a Johnson’s complex personality fueled moment were so bleak that he was problem was being thought through most notably by his deep-seated fear mired in an extended depressive funk, with an intensity that was almost of defeat and humiliation, a humilia- was suddenly the president of the palpable.” tion a teenage Johnson experienced United States. In “The Passage of Power,” the when his father, once a respected Having become a scorned, ridi- fourth installment of his planned state senator whom he idolized, lost culed (but mostly ignored) political five-part biography “The Years of everything during the Depression ghost in the vibrant Kennedy admin- Lyndon Johnson,” Pulitzer Prize- and became an object of ridicule and istration, Johnson, who had given up winning author Robert A. Caro revis- scorn in their tiny hamlet in the im- his powerful leadership position in its the Kennedy assassination in a poverished Texas Hill Country. the U.S. Senate to join Kennedy’s manner so riveting, so poignant, so Rising from such poverty, John- presidential ticket, had sunk into masterful that it is as if one is read- son had a lifelong dream to become

70 Q1.2013 Korn/Ferry Briefings onTalen Hal Mayforth LBJ wastednotimeinestablishing Within thatmix,sevenpresidents White Housewaseffectivelyblocked White young Kennedy, provedtobetragi- Kennedy neededyou.” Inanaddress F. Kennedy, theyoung,charismatic run for the White House.Carospends run fortheWhite mainder of theterm,imploringeach mainder of in the mantle of powerandleader- in themantleof it cametotheapparentlyvigorous Caro for good,LBJjoinedtheticket. individually, “Ineedyoumorethan ing Johnson’s reluctanceandambiv- and not just of themilitary.and notjustof After a nario, seeminglyfar-fetchedwhen ally ascendedtothepresidency. alence aboutleapingintotherace Johnson hadtoweighhisdifficult Johnson abouttakingtheVPslot, Johnson believinghecouldnotwinthe JFK, ble. Hisemergenceasthemostpow- theUnitedStatesand president of tion period, Johnson cloaked himself cloakedhimself tion period,Johnson to remainwithhimthroughthere- to Congressfivedaysafterthe assas- that 10 vicepresidentshadeventu- to thepresidency. Hehadaidesre- the first half of thisvolumerecount- of the firsthalf the 1950ssetstageforalikely himself asthecommanderinchief, himself destined forthejob. deftly andsensitivelyhandledtransi- died in office. Thisportentoussce- died inoffice. death inofficeasapossibleroute until it was far too late to derail John until itwasfartoolatetoderailJohn cally prescient. cally prescient. erful man in the U.S. Senateduring erful manintheU.S. explains that Johnson considered explains thatJohnson erner on the ticket, approached erner ontheticket, election withoutapalatableSouth- ship soeffectivelythatheseemed search thenumbers, andtheyfound senator from Massachusetts. When senator fromMassachusetts.When out of the33whohadserved, out of openly declareditasoftenpossi- options. Believinghispathtothe He cajoled most of JFK’s Cabinet JFK’s He cajoledmostof On thatfatefulDallasafternoon, t & L eadership “had madethepresidencyhisown,” Act, Head Start, Medicareandalist Head Start, Act, New Dealtofind,perhapsnotan Kennedy andthenemployedhis racism, thisTexas rancherdisplayed ment of aprogramwithgoalssonew ment of most hard-heartedobstructionists mastery of congressionalprocedures,mastery of rial couldmoreeloquentlyhonor it. Hehaddoneitwithanannounce- it. it wasmuchmoreaswell,”Timemag- into willingplayers. writes Caro, “put astamp, abrandon President Kennedy’smemorythan and ambitiousthatitwasnecessary azine reported.Withthisspeech,he theUnionad- gaveaStateof Johnson and 36thpresidencies, 8, onJan. 1964, as partisanitistoday. Inatimeof powers of persuasionthatturnedthe powers of to gobackFranklinRoosevelt’s through aCongressthatwasnearly the Voting Rights the Civil Rights Act, tactics andrelationshipstopassa the earliest possible passage of the the earliestpossiblepassageof dress. “Masterfulasitwaspolitically, civil rightsbillforwhichhefought so long.” Hecannilygavecreditto of histransitionbetweenthe35th of sination, Johnson said,“Nosination, Johnson memo- openly advocatedsegregationand other GreatSocietylegislation of once-doomed taxcutandbulldoze In whatCarowriteswastheend 65% of polledsenior businessexecutives believe acorporate CEOisasskilledor THANKS BUT NO THANKS better than apresidential candidate with atraditional Reading amagnificenttreatiseon resistance, towardacommoncenter. Beyond theirflawsliesaninherent rational aswitnessingsuchaleader fered respect. Caro’sfered respect. deftstorytelling in actionrealtime. wins anotherPulitzerPrizeforthis ality. hisfellowSouthern Though able insightintothiscomplexperson- and deepresearchprovideremark- an icygazesointensethateventhe awaiting thefinalinstallment volume, andhisreadersareeagerly integrity. Weforgivetheirtrespasses as president verse forces, oftenagainstintense and extraordinaryabilitytopulldi- poor thatcouldonlybeborneby because theyseemmorethanmortal. tempered, LBJcouldturnon the toughest opponentsgrudginglyof- himself. how thishappensisnearlyasinspi- legislators assumedhewasasegre- quently flawed carry thebaggageof leaders, werepeatedlylearn,fre- gationist, LBJhadempathyforthe gationist, charm orfixahesitantplayerwith equal, butatleastacomparison.” cused onJohnson’s singlefullterm complexity andoften-questionable someone who had livedsuchalife political background. Butonlyaquarter of those Source: executives say they’d beinterested inthejob. It would be no surprise if Caro It wouldbenosurpriseif Profane, heavy-handed,and mean- Th e Korn/Ferry — of this work. Great thiswork. of I n s

titute — fo- Q1.2013

71 72 Parting Are ThingsReallyThatBad? Q1.2013 It required a painstaking accumulation of ev- It requiredapainstakingaccumulationof years ago, basedonprinciplesponderedbyAr- market in Pasadena, Calif., and bumped into one of thosesci- market inPasadena,Calif.,andbumpedintooneof ing, a group of earthlingsloweredasix-wheeled,car-sized ing, agroupof ity toreachacompromise,China’s loomingslowdownand idence andknowledgefrommenwomen we allseemdepressed. we are all part of thatgroup.we areallpartof around theworld. are remarkable. And, if you think about it, inaway, youthinkaboutit, are remarkable.And,if the world who mapped the rest of our DNA, theyearwouldhavebeenacolossal letdown. ourDNA, the worldwhomappedrestof 350millionmiles,after avoyageof andthe440scientistsat33researchcentersaround CuriosityRoverlandingflawlesslyonMars, Let’s notforthe2,000-pound If behonest. brate. And the rest of us?Comparedtothosespaceexplorers,brate. Andtherestof bers originallyfromeverycontinent pictures, theylooklikeeveryoneelse.Asindividuals, theyare Europe’s Congress’s failuretomakeadealonitsdebt, inabil- the JetPropulsionLaboratoryhigh-fivingandhuggingeach tensions inthePersianGulf.Andwhilewewereallbellyach- tory. Ittookequationswritten byNewton 350 humanhis- to planandexecute.Ittookallof died beforeitscompletion.Others laboratory onto the surface of Mars.laboratory ontothesurfaceof like any other bunch of smartpeople.Butasagroupthey like anyotherbunchof chimedes, Pythagorasandtheirpredecessors. experts startedontheprojectand these except Antarctica.Acoupleof entists, Judgingfromthe youprobablywouldnotknowit. other was a treat. Atleastsomeonehadsomethingtocele- other wasatreat. Watching thosescientists, engineersandtechniciansat Think about it. Formorethanayearpessimistsbemoaned aboutit. Think The team itself wasglobal,withmem- teamitself The Theirs wasnotajourneythattookfiveyears Theirs Now, youwerepushingashoppingcartthroughsuper- if Thoughts by JoelKur t zman But inthelastdecade,300millionpeoplejoinedmiddle rather circuitousroute. members burnedwithastrongdesiretoinvestigatespace from theiryouth.Others, likeAdamSteltzner, whoconceived if you’re livingincountrieswherebombsarefalling,theyare. you’re if with doubtaboutalmosteverythingpoliticalandeconomic. were high-fivingeachother, uswerewracked toomanyof a six-degrees-of-separationway. us. Allof whilethey Andyet, joined theeffortinmiddleornearend.Someteam the SkyCranelandingsystemforgettingontoMars, tooka class in China and India, with tens of millionsmoreontheir class inChinaandIndia,withtensof second, (seeourdiagraminthisissue)wererelatedtous slowed itdownfrom17,000 milesanhourtoafewfeetper The pointis, thepeoplewhosentthatcraftintospaceand The So, you have to ask, arethingsreallythatbad?Isuppose So, youhavetoask, way. thesepeople,especiallykids, Someof watchedthe Rover touchdownandwereinspired. cure disease,stretchourminds, ponderourori- these things just for the fun of it. They diditto They it. these thingsjustforthefunof matter wherewelive.Andyes, politiciansare still feuding.Butwhilewelistentoallthose lished theresultslastsummer. didn’t do They 4 millionDNAswitchesinourcellsandpub- ple at JPL, orthe440researcherswhomapped ple atJPL, honking horns, wemightthinkaboutthepeo- gins. They diditforus.gins. They Yes, no weseemtobestuckintraffica lot, just bethattheworldhasnotlost itsway, These areremarkabletimes. And,itcould These but is in the midst of finding it. Think findingit. but isinthemidstof about wherewestarted.

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Robert Risko The aim for Chief executive officer Gary Burnison Chief marketing officer Michael Distefano Korn/Ferry Briefings Editor-in-chief Joel Kurtzman is audacious: creative Director Joannah Ralston to provide great circulation director Jaye Cullen MARKETING MANAGER Stacy Levyn insights to help online manager Lindsey Koh PROJECT MANAGER leaders lead. Tiffany Sledzianowski STRATEGIC CONSULTANTs Robert Ross, Roland Madrid

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