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CHAPTER VII - Leadership in an Era of Disruption

The final segment of the Roundtable focused, as in past years, on the question of leadership—in this case, defining the particular qualities needed by a man or woman who can successfully lead an organization in a time of continual disruption.

Jerome Vascellaro, COO at TPG Capital, started the discussion by asking the Roundtable participants to imagine that they had been asked to serve on a search committee for a new CEO at a “big, complicated company” who will be expected to take the firm through a major transformation. What criteria should the committee use in evaluating candidates?

Vascellaro proposed that a leader will need to have three different types of skill sets: a compelling vision for the future, the ability to navigate through disruption, and the skills to effect a transformation of the organization to respond to the new challenges it faces. He then offered a starting list of specific characteristics in each of these categories:

  1. Leadership for the future
    1. Authenticity
    2. Tri-athlete (ability to deal with financial, social, and environmental issues)
    3. Telescopic (the ability to work on both the macro and micro levels)
    4. Boldness: a willingness to take risks
    5. Transparency
    6. Stamina (given the demands of global travel and dealing with a myriad of people)
  2. Leadership through disruption
    1. Must be an “and” person, not an “or” person
    2. Grasp of scale, scope and barriers, and an ability to work effectively in different conditions
    3. Strong governance skills (ability to work effectively with a board)
    4. Ability to empower and engage employees (not easy to do in a big organization)
    5. Strong, clear values, vision and goals, and the ability to communicate them to others (since everyone will find out everything, it’s better for them to hear it directly)
  3. Leadership through a transformation
    1. “Vision with stretch” (how many CEO’s actually have a vision and are willing to stretch an organization?)
    2. Commitment to meeting specific performance (quarterly earnings) and corporate health (retention of best people) goals
    3. Commitment to making tangible changes (a corporate culture will not change without actual physical changes on the operational level, including changing job functions)
    4. Willingness to change personal behavior (or changing personnel)
    5. Growing leadership capacity (going through a transformation doubles everyone’s workload; they need to do their normal jobs and work on moving to the new thing)
    6. Ability to plan and execute the plan (change needs to be rigorously architected, with the right kind of tools: “in a city, you need a map; in a swamp, you need a compass”)

Stephen Gillett responded that his company let its CEO go earlier in the year and embarked on a search for a new leader. He cautioned that companies often seek candidates with “perfect” resumes, who often end up as failures. Given that traditional skills are not as relevant as they once were, Gillett offered his own list of criteria for leadership in a time of disruption:

  1. Always be a student (don’t try to be a know it all).
  2. Do not outsource talent acquisition (it’s not enough to just lower the attrition rate of an organization; leaders need to actively seek out the best talent).
  3. Be a coach and mentor to a team.
  4. Have intellectual humility (when you encounter a better idea anywhere in the organization, be willing to accept it).
  5. Minimize casualties (think hard about the consequences of decisions).
  6. Understand your accent (everyone is shaped by their training, their experiences and where they come from; tune into and respect the core space of a company and its distinctive culture).
  7. Understand the essential archetype of the business (avoid creating a Mr. Potato Head organization by assembling “best of breed” resources from disparate sources).
  8. Be good at giving equity to others (in an experiment at Stanford, half of a group was given a lottery number, while the other half was invited to write their own number, and the group was then invited to sell their numbers: those who wrote their own numbers asked over ten times more for theirs. How can a leader get workers “to write their own numbers?”)

These lists provoked a variety of responses. David Stern said that everything on the lists resonated with him based on his 30 years of experience leading the NBA—a period in which the league underwent enormous growth and change. When he first came to the league office, it had a staff 24 people; when he left, there were some 1,500. He personally hired the first 150 new employees, but after that, he could not do it himself. But given the importance of hiring the right people, he believed that the head of HR had to report directly to him.

Other key lessons for leaders:

Distributing power. In order to truly distribute power to others—a necessity in a large organization—leaders need to create a culture that they are happy with, that supports the values that they want the organization to embody. Everyone needs to know that what they are doing is important. And every manager needs to know how to empower others. At a time when things are changing rapidly, everyone needs to learn to act faster, and the primary barrier to change is people. If he were to write a book of advice for leaders, Stern would emphasize the importance of “episodic micromanagement.” When things are going smoothly, there is little need to intervene in management issues. But when a crisis occurs, or when a major opportunity presents itself, it is time for a leader to roll up his sleeves and get involved in responding. Ultimately, a leader needs to be seen as the captain of a ship who is prepared to steer through stormy waters.

Empathize…and Plan. In a continually disruptive environment, a leader needs to be empathetic to everyone, to understand everyone’s value propositions. According to Dan Doney, leaders need to assume that they are always working in a coalition, not a hierarchy in which they can issue orders. In the new environment, management is (still) about exercising control, while leadership is about giving control. While it is important to be decisive, even with imperfect information, decision making should be delegated as much as possible—within a “rigorously architected” plan.

Asking Questions. Jonathan Taplin highlighted the importance of asking questions on the list of key leadership qualities. When Jeff Bewkes became the CEO of Time Warner, conventional wisdom was that it was necessary to keep getting bigger in order to survive. But the first thing he did was to ask questions about whether this imperative made sense for Time Warner. He concluded that the company needed to get smaller, and proceeded to divest AOL, then sell Time Warner Cable and eventually the magazine division. The result was that the company’s stock went up. To accomplish his goals, he had to challenge people on the board who were defensive of their past decisions to grow. He also changed key managers. When he appointed a new head of the movie production company, he picked “a digital guy,” since he had concluded that the future of the company depended on learning how to make money in a digital world. As a former CEO who understood money, Bewkes was able to steadily increase shareholder value even through a time of massive disruption and change.

In the past, strong leaders were defined by their ability to have the right answers. In the future, they will be defined by asking the right questions. John Hagel noted that one reason that trust in organizations has been declining is that leaders still present themselves as knowing it all, which is not credible in a world of continuous disruption. Leaders need to maintain a creative tension between not-knowing and taking decisive action. After-action reviews can be helpful in figuring out what worked and what did not, but Stephen Gillett added that in addition to doing a lot of post-mortems, Symantec now does pre-mortems, trying to anticipate why a plan might fail.

Masculine/Feminine. Ping Fu added that CEOs need to take on more female qualities—the ability to form strong relationships, the ability to be empathetic. Like a mother, a CEO needs to offer unconditional love to her employees. Just as all children are different, so all employees are different; not everyone can be an “A team” player. An organization needs different kinds of people, those who like to work on the edge as well as those who are good at process. She agreed that it is essential for leaders to be able to ask questions rather than having answers, and a willingness to seek help when needed. She recalled that when Jeff Imeldt became the CEO of GE, he acknowledged that he did not know everything he needed to know about his job. Although he recognized that he needed to act as “the captain of the ship” at work, when he went home, he focused on the questions he needed to ask. Ping asked him if she were working for him and did not know the answer to a question, how would he react if she came to him for help? His response was that no one in his organization would ever do that.

Being a CEO is not the same as being a COO: the CEO needs to be the coach of a winning team, helping everyone to get better, willing to embrace different types of talent who augment the leader’s skills. Leaders need to shift from command and control to trust and track—which is harder to do.

On-the-Job Learning. Sonny Garg confessed that he had made an entire career out of having jobs (including HR, finance, innovation and IT) that he knew nothing about when he started. In fact, the most useless document in a company is the organization chart. The right way to see an organization today is as a network, and leaders need to learn how to leverage that network—identify the key influencers, the people who know what is really going on, no matter what their titles are. The leader’s challenge is to “formalize the grapevine.” (Abhi Ingle explained that AT&T established a wiki that allowed everyone to share their opinions. Having the wiki made it possible to get “real input” from employees after a town meeting.)

Every organization has its own set of narratives, and the stories will be different for employees than for the CEO. There is always the “water cooler narrative” of rank-and-file employees, which often does not get heard since large organizations typically do not allow people to express themselves fully. In a network, human capital and trust are what matter the most. Building trust depends on the willingness of CEOs to reveal themselves, to share openly their personal narratives.

The question that kept recurring throughout the discussion was how to get an organization to change. Robin Chase re-emphasized the need to learn: to posit what you want to do, then do it, and then evaluate its success. The most important ability of an organization is the ability to experiment, iterate, evaluate and evolve.

Jerome Vascellaro concluded with a story from World War II. At the beginning of the war, the U.S. faced a severe shortage of rubber. The President’s advisors presented him with two alternatives: he could either to go to the existing rubber companies and get them to do whatever was required to increase their production, or he could go to the citizens of the country and ask them to contribute the mats from their cars and other household rubber products for recycling. FDR picked the second alternative because it provided an opportunity to engage people in the war effort.

Change—especially disruptive change—is much more likely to happen when everyone has equity in the outcome.

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