“While today a cloud of controversy swirls around academic circles about the impact of microcredit on poverty, Yunus continues to stay the course and flourish as Managing Director at Grameen. This article looks at the leadership and management style of Muhammad Yunus and explores what can be learned about leading long-term change from his forty years at the Grameen Bank.” Lessons from Muhammad Yunus and the Grameen Bank Leading Long-term Organizational Change Successfully By Katharine Esty “There is nothing more difficult to the last three years. When I went back to take in hand, more perilous to con- Bangladesh in January 2010, I interviewed duct, or more uncertain in its success, him twice, for two hours each time. While than to take the lead in the introduc- there, I also interviewed 14 others who tion of a new order of things.” know Yunus in various capacities—people — Niccolo Machiavelli who work at Grameen, two of his brothers, The Prince (1532) and an editor of the English newspaper. I had another interview with Yunus in I first met Muhammad Yunus in 1993 September 2010 in the US. I have also when I was consulting to UNICEF in Ban- interviewed about a dozen people here in gladesh. I was wowed, mesmerized, and the US who worked with Yunus at vari- bowled over. Here was a person who was ous periods of his long career. I have read dedicating his life to eliminating poverty the four books authored by Yunus and a and who had been able to transform an number of books about the Grameen Bank. experimental project to lend money to I have also familiarized myself with many the poorest of the poor into a huge and of the current articles on microcredit and thriving bank, the Grameen Bank, with microfinance. millions of borrowers across Bangladesh. From this research and supported by Yunus has successfully led the Bank since the knowledge I gained from thirty years as 1983. His model of small loans to the poor, an organizational consultant, I have identi- or microcredit, has been so successful fied eight key actions that undergird the that people have come from all over the successful leadership of Yunus for so many world to sit at the feet of the Bangladeshi years. I compare and contrast these factors banker and learn from him. Microcredit with John Kotter’s and Rosabeth Kanter’s has spread round the globe, and in 2006, models of successful change and conclude Yunus achieved worldwide recognition with some preliminary thoughts about when he received the Nobel Peace Prize. how leading successful long-term change While today a cloud of controversy swirls differs from leading more time-limited around academic circles about the impact change efforts. of microcredit on poverty, Yunus continues Most of what has been written about to stay the course and flourish as Man- organizational change is about short-term aging Director at Grameen. This article change: a new program, a merger, or a looks at the leadership and management restructuring effort. Less attention has style of Muhammad Yunus and explores been given to what is necessary to lead what can be learned about leading long- change successfully over the long haul. term change from his forty years at the It makes sense that, just as a marathon Grameen Bank. requires quite different skills and abilities I have been conducting research on than a sprint, so long-term change must the leadership of Muhammad Yunus for require a somewhat different skill set and 24 OD PRACTITIONER Vol. 43 No. 1 2011 abilities than leading a change project or management team. When I interviewed a practices completely upside down. Not only program with a one or two year time frame. number of the executives at the Grameen did he lend to the poor with no collateral, Bank in Dhaka, I found most of them were which was unheard of, but also, when The Leadership of Muhammad Yunus the original team going back to those first he discovered that women used loans loans in Jobra. Of course, some have come to improve the situation of their family In 1972, Yunus returned to Bangladesh and gone. His second in command and the more often than men did, he focused on after eight years as a student and professor heir apparent for many years recently left lending to women. When he started out, in the US and became a professor of eco- the bank. I was told he had appeared too only 2% of bank borrowers in Bangladesh nomics. He had no intentions of becoming eager for Yunus to retire and he was edged were women. In the 1980s, women in a banker. Bangladesh had been devastated out. Bangladeshi villages spent their lives in by its War of Liberation and a famine The early years of his organization the confines of their family compounds followed shortly thereafter. In his autobi- were rocky. In spite of Yunus’ impressive and many had never even touched money. ography and again in an interview with results, none of the bankers in the region As the years passed, Yunus succeeded in me, Yunus has told me how the faces of would help Yunus expand his experimental attracting women so that today 98% of the silent starving people haunted him, and his economic theories seemed like fairytales, totally useless (Yunus, 1999; Interview, One day he lent some small amounts of money, less than 2010). He wanted desperately to be helpful. In the nearby village of Jobra, he set up twenty-seven dollars in all, to forty-two impoverished villagers. a cooperative with farmers and landown- To his surprise, they paid him back. he discovered over the ers to grow rice more efficiently. The yield at the end of the season was high but he next months and years that not only do the poor pay back discovered the farmers had robbed him of their loans even without any collateral, but also they pay his share of the profits. Seeking another way to help the poor, back at rates far higher than the 60% rate that was typical of Yunus took groups of his students and commercial banks. This was the defining moment for Yunus . colleagues for numerous field trips to Jobra to learn about poverty. One day he lent he had found a practical way to help. some small amounts of money, less than twenty-seven dollars in all, to forty-two impoverished villagers. To his surprise, project. They just didn’t believe Yunus’ Bank’s borrowers are women. Locating his they paid him back. He discovered over the reports or his numbers. Eventually, in 1983, branches in remote villages, he brought next months and years that not only do the after years of negotiating with skeptical the bank to the people rather making them poor pay back their loans even without any bankers and haggling reluctant govern- travel to the larger towns and cities. collateral, but also they pay back at rates far ment officials, the Bangladesh government Other banks lent to individuals but higher than the 60% rate that was typical recognized his organization, now called instead Yunus required borrowers at Gra- of commercial banks. This was the defin- the Grameen (village) Bank as an inde pen- meen to form peer support groups and to ing moment for Yunus (Yunus, 1999). He pen dent bank. use their loan for a small business. At first had found a practical way to help. Although pilot projects usually Yunus thought all the borrowers in a group Ending poverty became his life pur- flounder when they are taken to scale, should be in the same kind of business. pose and the vision for his organization. Yunus was able to expand his bank steadily From trial and error, Yunus learned that It was compelling enough to motivate throughout Bangladesh. In 1983, when the groups of five worked better than ten and employees and grand enough to provide Grameen Bank became an independent that having a mix of different kinds of busi- them inspiration. What sets Yunus apart entity, it had 86 branches and 58,000 bor- nesses in each group was more productive from many other leaders is the fact that rowers; by 2010 there were 2,800 branches than single business groups. this vision has guided him since 1976. and more than seven million borrowers, all Yunus promoted societal and cultural Day after day, decade after decade, he has of them poor people (Yunus, 2009). Yunus change as well as organizational change. struggled relentlessly and single-mindedly knew how to get the resources he needed His overarching goal was always the against all kinds of obstacles and chal- to fund this growth. During the 1980s and alleviation of poverty and he was ready to lenges to bring his dream into reality. up until 1995, international aid agencies challenge cultural traditions when they As Yunus began lending to more and granted Yunus more than 35 million dollars stood in the way. He explained to me that more people, he saw the need to build an to help his bank expand and move towards he came to understand that transformative organization. His colleagues and students self-sufficiency. change was possible from living through evolved over the years into his staff and his Yunus turned conventional banking the late 1960s in the US. He participated Lessons from Muhammad Yunus and the Grameen Bank: Leading Long-term Organizational Change Successfully 25 in the Civil Rights Movement and protests changed his strategies and tactics many rather than desks with drawers where against the war in Viet Nam while a stu- times.