Force For Change: How Leadership Differs from Management

Overview

The critics who despair of the coming of imaginative, charismatic leaders to replace the so-called manipulative caretakers of American corporations don't tell us much about what leadership actually is, or, for that matter, what management is either. Now, John P. Kotter, who focused on why we have a leadership crisis in The Leadership Factor shows here, with compelling evidence, what leadership really means today, why it is rarely associated with larger-than-life charismatics, precisely how it is different from ...

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Overview

The critics who despair of the coming of imaginative, charismatic leaders to replace the so-called manipulative caretakers of American corporations don't tell us much about what leadership actually is, or, for that matter, what management is either. Now, John P. Kotter, who focused on why we have a leadership crisis in The Leadership Factor shows here, with compelling evidence, what leadership really means today, why it is rarely associated with larger-than-life charismatics, precisely how it is different from management, and yet why both good leadership and management are essential for business success, especially for complex organizations operating in changing environments.
Leadership, Kotter clearly demonstrates, is for the most part not a god-like figure transforming subordinates into superhumans, but is in fact a process that creates change — a process which often involves hundreds or even thousands of "little acts of leadership" orchestrated by people who have the profound insight to realize this. Building on his landmark study of 15 successful general managers, Kotter presents detailed accounts of how senior and middle managers in major corporations, in close concert with colleagues and subordinates, were able to create a leadership process that put into action hundreds of commonsense ideas and procedures that, in combination with competent management, produced extraordinary results.
This leadership turned NCR from a loser to a big winner in automated teller machines, despite intense competition from IBM. The same process at American Express and SAS helped businesses grow dramatically despite the fact that they were "mature" and "commodity-like." Kotter also shows how leadership turned around operations at P&G and Kodak; produced huge business successes at PepsiCo, ARCO, and ConAgra; and made the impossible occasionally happen at Digital.
Thousands of companies today are overmanaged and underled, John Kotter concludes, not because managers lack charisma, but because far too few executives have a clear understanding of what leadership is and what it can accomplish. Without such a vision, even the most capable people have great difficulty trying to lead effectively and to create the cultures which will help others to lead.

Building upon his landmark analysis of the job of the general manager and hisinfluential work on leadership, power, and influence, John Kotter now focuseson the human factors which bring change.

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Editorial Reviews

From the Publisher
Paul Fulton President, Sara Lee Corporation Kotter's insights are remarkable. A Force for Change will be required reading for all our young managers.

William H. Genge Chairman, Ketchum Communications, Inc. John Kotter demythologizes the concept of leadership and clearly distinguishes it from management. In the process, he provides new guidelines for leaders and managers trying to optimize their relationships and effectiveness.

Michael M. Lombardo Center for Creative Leadership The most compelling and incisive description of leadership processes and structures that I've ever seen.

Thomas J. Mithen General Electric Full of powerful, useful ideas that will be of great service to those who have been struggling to define and assess leadership.

Warren R. Wilhelm AMOCO Corporation One not only learns from his book, but is excited by it. The weaving of research results and case examples is extremely effective.

Robert E. Gregory, Jr. President, VF Corporation A Force for Change will be received as the seminal work on the nature and function of leadership.

Irvine 0. Hockaday, Jr. Chief Executive Officer, Hallmark Cards, Inc. There are many echoes but few voices writing about leadership and management these days. John Kotter's is one of those voices. His concepts offer fresh perspectives which hit home with force and endurance.

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Product Details

  • ISBN-13: 9780029184653
  • Publisher: Free Press
  • Publication date: 4/28/1990
  • Pages: 192
  • Product dimensions: 6.40 (w) x 9.50 (h) x 0.80 (d)

Meet the Author

John P. Kotter is Professor of Organizational Behavior at the Harvard Business School. He has won McKinsey awards for two Harvard Business Review articles and has received the 1985 Johnson, Smith and Knisely Award for new perspectives on executive leadership. Professor Kotter has achieved international recognition as an expert on leadership in business with his works The General Managers, Power and Influence, and The Leadership Factor, which have been translated into six languages.

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Read an Excerpt

Chapter 1: Management and Leadership

The word leadership is used in two very different ways in every day conversation. Sometimes it refers to a process that helps direct and mobilize people and/or their ideas; we say, for example, that Fred is providing leadership on the such and such project. At other times it refers to a group of people in formal positions where leadership, in the first sense of the word, is expected; we say that the leadership of the firm is made up of ten people, including George, Alice, etc.

In this book, I will use the word almost exclusively in the first sense. The second usage contributes greatly to the confusion surrounding this subject because it subtly suggests that everyone in a leadership position actually provides leadership. This is obviously not true; some such people lead well, some lead poorly, and some do not lead at all. Since most of the people who are in positions of leadership today are called managers, the second usage also suggests that leadership and management are the same thing, or at least closely related. They are not.

Leadership is an ageless topic. That which we call management is largely the product of the last 100 years, a response to one of the most significant developments of the twentieth century: the emergence of large numbers of complex organizations. Modern management was invented, in a sense, to help the new railroads, steel mills, and auto companies achieve what legendary entrepreneurs created them for. Without such management, these complex enterprises tended to become chaotic in ways that threatened their very existence. Good management brought a degree of order and consistency to key dimensions like the quality and profitability of products.

In the past century, literally thousands of managers, consultants, and management educators have developed and refined the processes which make up the core of modern management. These processes, summarized briefly, involve:

1. Planning and budgeting — setting targets or goals for the future, typically for the next month or year; establishing detailed steps for achieving those targets, steps that might include timetables and guidelines; and then allocating resources to accomplish those plans

2. Organizing and staffing — establishing an organizational structure and set of jobs for accomplishing plan requirements, staffing the jobs with qualified individuals, communicating the plan to those people, delegating responsibility for carrying out the plan, and establishing systems to monitor implementation

3. Controlling and problem solving — monitoring results versus plan in some detail, both formally and informally, by means of reports, meetings, etc.; identifying deviations, which are usually called "problems"; and then planning and organizing to solve the problems

These processes produce a degree of consistency and order. Unfortunately, as we have witnessed all too frequently in the last half century, they can produce order on dimensions as meaningless as the size of the typeface on executive memoranda. But that was never the intent of the pioneers who invented modern management. They were trying to produce consistent results on key dimensions expected by customers, stockholders, employees, and other organizational constituencies, despite the complexity caused by large size, modern technologies, and geographic dispersion. They created management to help keep a complex organization on time and on budget. That has been, and still is, its primary function.

Leadership is very different. It does not produce consistency and order, as the word itself implies; it produces movement. Throughout the ages, individuals who have been seen as leaders have created change, sometimes for the better and sometimes not. They have done so in a variety of ways, though their actions often seem to boil down to establishing where a group of people should go, getting them lined up in that direction and committed to movement, and then energizing them to overcome the inevitable obstacles they will encounter along the way.

What constitutes good leadership has been a subject of debate for centuries. In general, we usually label leadership "good" or "effective" when it moves people to a place in which both they and those who depend upon them are genuinely better off, and when it does so without trampling on the rights of others. The function implicit in this belief is constructive or adaptive change.

Leadership within a complex organization achieves this function through three subprocesses which, as we will see in further detail later on in this book, can briefly be described as such:

1. Establishing direction — developing a vision of the future, often the distant future, along with strategies for producing the changes needed to achieve that vision

2. Aligning people — communicating the direction to those whose cooperation may be needed so as to create coalitions that understand the vision and that are committed to its achievement

3. Motivating and inspiring — keeping people moving in the right direction despite major political, bureaucratic, and resource barriers to change by appealing to very basic, but often untapped, human needs, values, and emotions

Management and leadership, so defined, are clearly in some ways similar. They both involve deciding what needs to be done, creating networks of people and relationships that can accomplish an agenda, and then trying to ensure that those people actually get the job done. They are both, in this sense, complete action systems; neither is simply one aspect of the other. People who think of management as being only the implementation part of leadership ignore the fact that leadership has its own implementation processes: aligning people to new directions and then inspiring them to make it happen. Similarly, people who think of leadership as only part of the implementation aspect of management (the motivational part) ignore the direction-setting aspect of leadership.

But despite some similarities, differences exist which make management and leadership very distinct. The planning and budgeting processes of management tend to focus on time frames ranging from a few months to a few years, on details, on eliminating risks, and on instrumental rationality. By contrast, as shown in the chapters that follow, that part of the leadership process which establishes a direction often focuses on longer time frames, the big picture, strategies that take calculated risks, and people's values. In a similar way, organizing and staffing tend to focus on specialization, getting the right person into or trained for the right job, and compliance; while aligning people tends to focus on integration, getting the whole group lined up in the right direction, and commitment. Controlling and problem solving usually focus on containment, control, and predictability; while motivating and inspiring focus on empowerment, expansion, and creating that occasional surprise that energizes people.

But even more fundamentally, leadership and management differ in terms of their primary function. The first can produce useful change, the second can create orderly results which keep something working efficiently. This does not mean that management is never associated with change; in tandem with effective leadership, it can help produce a more orderly change process. Nor does this mean that leadership is never associated with order; to the contrary, in tandem with effective management, an effective leadership process can help produce the changes necessary to bring a chaotic situation under control. But leadership by itself never keeps an operation on time and on budget year after year. And management by itself never creates significant useful change.

Taken together, all of these differences in function and form create the potential for conflict. Strong leadership, for example, can disrupt an orderly planning system and undermine the management hierarchy, while strong management can discourage the risk taking and enthusiasm needed for leadership. Examples of such conflict have been reported many times over the years, usually between individuals who personify only one of the two sets of processes: "pure managers" fighting it out with "pure leaders."

But despite this potential for conflict, the only logical conclusion one can draw is that they are both needed if organizations are to prosper. To be successful, organizations not only must consistently meet their current commitments to customers, stockholders, employees, and others, they must also identify and adapt to the changing needs of these key constituencies over time. To do so, they must not only plan, budget, organize, staff, control, and problem solve in a competent, systematic, and rational manner so as to achieve the results expected on a daily basis, they also must establish, and reestablish, when necessary, an appropriate direction for the future, align people to it, and motivate employees to create change even when painful sacrifices are required.

Indeed, any combination other than strong management and strong leadership has the potential for producing highly unsatisfactory results. When both are weak or nonexistent, it is like a rudderless ship with a hole in the hull. But adding just one of the two does not necessarily make the situation much better. Strong management without much leadership can turn bureaucratic and stifling, producing order for order's sake. Strong leadership without much management can become messianic and cult-like, producing change for change's sake — even if movement is in a totally insane direction. The latter is more often found in political movements than in corporations, although it does occur sometimes in relatively small, entrepreneurial businesses. The former, however, is all too often seen in corporations today, especially in large and mature ones.

With more than enough management but insufficient leadership, one would logically expect to see the following: 1) a strong emphasis on shorter time frames, details, and eliminating risks, with relatively little focus on the long term, the big picture, and strategies that take calculated risks; 2) a strong focus on specialization, fitting people to jobs, and compliance to rules, without much focus on integration, alignment, and commitment; 3) a strong focus on containment, control, and predictability, with insufficient emphasis on expansion, empowerment, and inspiration. Taken together, it is logical to expect this to produce a firm that is somewhat rigid, not very innovative, and thus incapable of dealing with important changes in its market, competitive, or technological environment. Under these circumstances, one would predict that performance would deteriorate over time, although slowly if the firm is large and has a strong market position. Customers would be served less well because innovative products and lower prices from innovative manufacturing would be rare. As performance sinks, the cash squeeze would logically be felt more by investors who get meager or no returns and by employees who eventually are forced to make more sacrifices, including the ultimate sacrifice of their jobs.

This scenario should sound familiar to nearly everyone. Since 1970, literally hundreds of firms have had experiences that are consistent with it. No one can measure the overall impact of all this. But in the United States this problem has surely contributed to the fact that real wages were basically flat from 1973 to 1989, that stock prices when adjusted for inflation were less in late 1988 than in 1969, and that consumers have turned increasingly to less expensive or innovative foreign goods, leaving the country with a crippling trade deficit. And recent evidence suggests that the problem is still a long way from solved.

During 1988, senior executives in a dozen successful U.S. corporations were asked to rate all the people in their managerial hierarchies on the dimensions of both leadership and management. The scale they were given ranged from "weak" to "strong", and their responses were grouped into four categories: people who are weak at providing leadership but strong at management, those who are strong at leadership but not at management, those who are relatively strong at both, and those who do not do either well. The executives were then asked if the specific mix of talent their companies had in each of these four categories was what they needed to prosper over the next five to ten years. They could respond: we have about what we need; we have too few people in this category; or we have too many people like this.

Half of those polled reported having too many people who provide little if any management or leadership. Executives in professional service businesses such as investment banking and consulting were particularly likely to say this. The other half reported having very few people in this category, which, as one would expect, they said was just fine.

Nearly half reported having too few people who provide strong leadership but weak management. However, those who answered this way typically noted that such people were very valuable as long as they could work closely with others who were strong at management. Most of the remaining respondents reported having about the right number of people in this category for future needs, sometimes commenting that this "right number" was "very few." These respondents tended to be pessimistic about strong leaders/weak managers; they felt such people usually created more problems than they solved.

Nearly two-thirds of those surveyed said they had too many people who are strong at management but not at leadership. Some even reported having "far too many." The other third split their responses between "too few" and "about right." Those saying too few usually worked for professional service firms.

Over 95 percent reported having too few people who are strong at both leadership and management. Everyone thought they had some people like that: not super humans who provide outstanding management and excellent leadership but mortals who are moderately strong on one of the two dimensions, and strong or very strong on the other. But the respondents felt they needed more, often many more, to do well over the next decade.

This survey is interesting, not because it proves anything by itself, but because the results are so consistent with a variety of other evidence, some of which will be presented in later chapters. As a whole, the data strongly suggests that most firms today have insufficient leadership, and that many corporations are "over-managed" and "under-led."

An even larger survey conducted a few years earlier provides some insight as to why this leadership problem exists. Nearly 80 percent of the 1,000 executives responding to that survey questionnaire said they felt their firms did less than a very good job of recruiting, developing, retaining, and motivating people with leadership potential. These same executives also reported that their companies were not successful in this regard because of a large number of inappropriate practices. For example, 82 percent of the respondents said that "the quality of career planning discussions in their firms" was less than adequate to support the objective of attracting, retaining, and motivating a sufficient number of people who could help with the leadership challenges. Seventy-seven percent said the same thing about "the developmental job opportunities available" and "the information available to high potentials on job openings in the company." Fully 93 percent indicated that "the way managers are rewarded for developing subordinates" with leadership potential was less than adequate to support the need for spotting high-potential people, identifying their development needs, and then meeting those needs. Eighty-seven percent reported the same problem with "the number and type of lateral transfers made for developmental reasons across divisions." Seventy-nine percent said the same thing about "the mentoring, role modeling, and coaching provided," 75 percent about "the way feedback is given to subordinates regarding developmental progress," 69 percent about "the way responsibilities are added to the current job of high potentials for development purposes," 66 percent about "formal succession planning reviews," 65 percent about "the firm's participation in outside management training programs," and 60 percent about "the opportunities offered to people to give them exposure to higher levels of management."

Equally interesting is what was not said. Those surveyed did not say their firms had insufficient leadership because there are not enough people on earth with leadership potential. Instead, they put the blame on themselves for not finding, retaining, developing, or supporting people with such potential. Some of those surveyed readily admitted that their firms often scared off such individuals, while others believed that they took talented young people with leadership potential and systematically turned them into cautious managers. These rather critical results would not be particularly surprising if they came from a disenfranchised group of lower- or middle-level managers. But this was not a survey of those groups. It was a poll of senior executives.

There are probably a variety of reasons why so many firms do not appear to have the practices needed to attract, develop, retain, and motivate enough people with leadership potential. But the most basic reason is simply this: until recently, most organizations did not need that many people to handle their leadership challenges.

Modern business organizations are the product of the last century. They were created, for the most part, by strong entrepreneurial leaders like Andrew Carnegie, Pierre Du Pont, and Edward Filene. As these enterprises grew and became more complex, that which we now call management was invented to make them function on time and on budget. As the most successful of these enterprises became larger, more geographically dispersed, and more technologically complicated, especially after World War II, they demanded many more people who could help provide that management.

A huge educational system emerged in response to this need, offering seminars, undergraduate degrees in management, and MBAs. But the favorable economic climate for U.S. businesses after World War II allowed such a degree of stability that most firms didn't need much leadership — until the 1970s. Then suddenly, after twenty-five to thirty years of relatively easy growth, especially in the United States, the business world became more competitive, more volatile, and tougher. A combination of faster technological change, greater international competition, market deregulation, overcapacity in capital-intensive industries, an unstable oil cartel, raiders with junk bonds, and a demographically changing workforce all contributed to this shift. The net result is that doing what was done yesterday, or doing it 5 percent better, is no longer a formula for success. Major changes are more and more necessary to survive and compete effectively in this new environment. More change always demands more leadership. But firms are having difficulty adapting their practices to this new reality.

Examples of this shift can be found nearly everywhere. Consider the case of a small- to medium-sized plant owned by a successful U.S. firm like Honeywell. In 1970, this facility employed 100 people, was 20 years old, and produced control systems for manufacturing settings. Although the facility made nearly two dozen products, one of these accounted for half the volume. That product, relatively unique in the marketplace, was protected by a number of patents. Although the plant's products were sold in over fifty countries, U.S. sales accounted for 70 percent of total volume. In the U.S. market, the plant's main product line held a 34 percent market share in its specific niche; the number two competitor controlled about 24 percent.

An examination of the demands placed on the plant manager back in 1970 reveals the following. First and foremost, he was expected to meet monthly, quarterly, and yearly targets for production, costs, and a number of other quantifiable measures. These targets were established after some negotiation by his boss and were based heavily on historical data. To meet these targets, he allocated his time over the course of the year in roughly the following way:

* 5-10% — working with his staff to produce the monthly, quarterly, and yearly plans to meet the targets

* 20-30% — working with his staff to make sure he had the appropriate organization in place to implement the plans, which in turn involved hiring, firing, performance appraisals, coaching, etc.

* 40-50% — having daily production meetings, weekly budget review meetings, and the like to spot deviations from plan as quickly as possible and to solve them

20-25% — all other activities, such as assisting the sales force by meeting an important customer, or deciding if a new technology should be used in one part of the manufacturing process

In other words, he spent the vast majority (75 to 80 percent) of his time managing the plant, with a heavy emphasis on the control aspects of management.

If a visitor to this plant in 1970 returned fifteen years later, he would have found a very different facility. In 1985, the plant had more engineers and technicians and fewer foremen and middle managers. Although the number of employees was almost the same, the output was double the 1970 levels. The plant's product line was much more volatile; products introduced within the past five years accounted for nearly 35 percent of its volume versus 15 percent in 1970. The products themselves were more technologically complex, and the technology was changing faster than it had fifteen years earlier. The plant's products were being sold in even more countries, and a greater volume was sold outside the United States. Worldwide market share for the plant's niche was about 14 percent, versus 29 percent in the United States, and its number one competitor, with nearly 22 percent of the world market, was now a Japanese company.

In this environment, the demands placed on the 1985 plant manager were in some ways similar, but in many ways different, from those found in 1970. The head of this facility in 1985 was still being asked to meet certain quantifiable targets on a monthly, quarterly, and yearly basis. That, in turn, still required producing plans, maintaining an organization, and many controlling efforts to keep things "on track." But the targets themselves were more complex and volatile due to market conditions; thus the process of achieving them was more complicated. More importantly, in addition to all these activities, there was a whole new dimension to the job, one that was time-consuming and difficult, yet essential.

In 1985, the plant manager was being asked to match his Japanese rival by finding a way to increase certain quality measures not by 1 or 5 or 10 percent, but by 100 percent. He was also asked to help the corporate manufacturing staff evaluate a number of options for moving some production out of the country, to find a way to incorporate a completely new technology into the heart of the manufacturing process, to reduce the time required to introduce new products by 50 percent, and to shrink inventories by at least a third. All of this, in turn, required much more from his staff — in terms of time, energy, creativity, and the willingness to make sacrifices and take risks. That created a huge challenge: to somehow get his people energized and committed to helping with the big cost and quality and technology issues. And all of this created change, far more than in 1970, which in turn was bumping up against a corporate bureaucracy designed for a more stable environment. It also led to the sorts of uncertainties that threatened vested interests.

The 1985 plant manager coped with these demands by allocating his time in the following way:

* 30-50% — engaging in the same types of planning, organizing, and controlling activities as did his predecessor fifteen years earlier, but using a less authoritarian style and delegating more (i.e., managing)

* 50-60% — a) trying to establish a clear sense of direction for the changes needed in quality, costs, inventories, technologies, and new product introductions, b) trying to communicate that direction to all his people and to get them to believe that the changes are necessary, and, c) finally, trying to energize and motivate his people to overcome all the bureaucratic, political, and resource barriers to change (i.e., leading)

* 0-10% — participating in other activities

By almost all standards, the plant manager's job in 1985 was more difficult than it was in 1970, primarily because the firm's business environment was more difficult. In 1985, this person not only had to manage the plant by planning, budgeting, organizing, staffing, and controlling, he also had to provide substantial leadership on dozens of critical business issues. And he was not alone in this respect.

In 1970, in a business environment that was both favorable and changing relatively slowly, sufficient leadership could be supplied by the CEO and several other people. By 1985, in a much tougher and rapidly changing environment, hundreds of individuals, both above and below the plant manager level, were also needed to provide leadership for developing and implementing new marketing programs, new approaches to financing the business, new MIS systems, new labor relations practices, and much more. Doing all this well required skills and strategies that most people did not need in the relatively benign 1950s, 1960s, and early 1970s. It required more than technical and managerial ability. Some of these people had these new skills, but many did not.

This story is interesting because the type of environmental changes involved are not at all unusual. These same kinds of changes can be found in a wide variety of industries and in a large number of countries in addition to the United States.

A simple military analogy sums all this up well. A peacetime army can usually survive with good administration and management up and down the hierarchy, coupled with good leadership concentrated at the very top. A wartime army, however, needs competent leadership at all levels. No one yet has figured out how to manage people effectively into battle. From 1946 into the 1970s, the world economy was, for the most part, at peace. It is no longer. But precious few corporations now have the leadership necessary to win the battles they face in this economic war.

There are a number of reasons why firms, even some very good ones, have had difficulty adapting to the new business environment. The most obvious relates to the inherent difficulty of the task. All available evidence suggests that finding people with leadership potential and then nurturing that potential is much tougher than finding people with managerial potential and then developing those skills.

Experts have been of limited help, even though a few predicted the environmental changes before the fact, usually in the mid to late-1960s. The biggest recommendation to evolve from this work has been a vague notion that we need to manage differently in the future. Individuals have stressed long-term planning, matrix structures, motivational systems and much more. As we shall see later in this book, none of the ideas have worked well, and for reasons that are predictable in light of the real difference between management and leadership.

Starting in the early 1980s some people reacted to all this by emphasizing leadership. What is needed to cope with major change, they argued correctly, is not management, but something else. Their descriptions of this "something else" were often vague. But worse yet, most suggested that this other thing — leadership — was needed instead of management. That is, they offered a prescription that was not only wrong, but dangerous.

Strong leadership with weak management is no better, and sometimes actually worse, than the reverse. In such a situation 1) an emphasis on long-term vision but little short-term planning and budgeting, plus 2) a strong group culture without much specialization, structure, and rules, plus 3) inspired people who are not inclined to use control systems and problem-solving disciplines, all conspire to create a situation that can eventually get out of control, even wildly out of control. Under such circumstances, as many small entrepreneurial firms have learned the hard way, critical deadlines, budgets, and promises can go unmet, threatening the very existence of the organization.

The most extreme, and dangerous, examples of this phenomenon are of the Jim Jones variety. In such cases, a charismatic person emerges when a group of people are experiencing considerable pain. This person is not a good manager and, in fact, does not like good managers because they are too rational and controlling. The charismatic has a flawed vision, one that does not try to create real value for both the group and its key outside constituencies. But the lack of a rational management process — that is as powerful as the leadership — means the bad vision is not publicly discussed and discredited. The strong charisma creates commitment and great motivation to move in the direction of the vision. Eventually, this movement leads to tragedy; followers trample other people and then walk off a cliff.

Seeking out, canonizing, and turning over the reigns of power to this type of charismatic non-manager is never the solution to a leadership crisis. But to move beyond this seductively dangerous prescription will require a much clearer sense of what leadership really means in complex organizations, what it looks like, and where it comes from. Given the inherent complexity of the subject matter and the barriers prohibiting rigorous empirical work on such a broad topic, satisfying such a purpose is an extraordinarily difficult task. Nevertheless, that task sets the agenda for this book, and the comparative analysis of leadership vis-à-vis the more clearly understood process of management will be the primary vehicle for achieving that agenda.

Copyright © 1990 by John P. Kotter

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Table of Contents

Contents

Preface

I Introduction

1. Management and Leadership

2. Leadership in Action

II The Process of Leadership

3. Establishing Direction

4. Aligning People

5. Motivating and Inspiring

III The Structure of Leadership

6. Multiple Roles

7. Thick Informal Networks

IV The Origins of Leadership

8. Heredity and Childhood

9. Career Experiences

10. Corporate Culture

Postscript

Appendix: The Research

Notes

Bibliography

Index

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First Chapter

Chapter 1: Management and Leadership The word leadership is used in two very different ways in every day conversation. Sometimes it refers to a process that helps direct and mobilize people and/or their ideas; we say, for example, that Fred is providing leadership on the such and such project. At other times it refers to a group of people in formal positions where leadership, in the first sense of the word, is expected; we say that the leadership of the firm is made up of ten people, including George, Alice, etc.

In this book, I will use the word almost exclusively in the first sense. The second usage contributes greatly to the confusion surrounding this subject because it subtly suggests that everyone in a leadership position actually provides leadership. This is obviously not true; some such people lead well, some lead poorly, and some do not lead at all. Since most of the people who are in positions of leadership today are called managers, the second usage also suggests that leadership and management are the same thing, or at least closely related. They are not.

Leadership is an ageless topic. That which we call management is largely the product of the last 100 years, a response to one of the most significant developments of the twentieth century: the emergence of large numbers of complex organizations. Modern management was invented, in a sense, to help the new railroads, steel mills, and auto companies achieve what legendary entrepreneurs created them for. Without such management, these complex enterprises tended to become chaotic in ways that threatened their very existence. Good management brought a degree of order and consistency to key dimensions like the quality and profitability of products.

In the past century, literally thousands of managers, consultants, and management educators have developed and refined the processes which make up the core of modern management. These processes, summarized briefly, involve:

1. Planning and budgeting -- setting targets or goals for the future, typically for the next month or year; establishing detailed steps for achieving those targets, steps that might include timetables and guidelines; and then allocating resources to accomplish those plans

2. Organizing and staffing -- establishing an organizational structure and set of jobs for accomplishing plan requirements, staffing the jobs with qualified individuals, communicating the plan to those people, delegating responsibility for carrying out the plan, and establishing systems to monitor implementation

3. Controlling and problem solving -- monitoring results versus plan in some detail, both formally and informally, by means of reports, meetings, etc.; identifying deviations, which are usually called "problems"; and then planning and organizing to solve the problems

These processes produce a degree of consistency and order. Unfortunately, as we have witnessed all too frequently in the last half century, they can produce order on dimensions as meaningless as the size of the typeface on executive memoranda. But that was never the intent of the pioneers who invented modern management. They were trying to produce consistent results on key dimensions expected by customers, stockholders, employees, and other organizational constituencies, despite the complexity caused by large size, modern technologies, and geographic dispersion. They created management to help keep a complex organization on time and on budget. That has been, and still is, its primary function.

Leadership is very different. It does not produce consistency and order, as the word itself implies; it produces movement. Throughout the ages, individuals who have been seen as leaders have created change, sometimes for the better and sometimes not. They have done so in a variety of ways, though their actions often seem to boil down to establishing where a group of people should go, getting them lined up in that direction and committed to movement, and then energizing them to overcome the inevitable obstacles they will encounter along the way.

What constitutes good leadership has been a subject of debate for centuries. In general, we usually label leadership "good" or "effective" when it moves people to a place in which both they and those who depend upon them are genuinely better off, and when it does so without trampling on the rights of others. The function implicit in this belief is constructive or adaptive change.

Leadership within a complex organization achieves this function through three subprocesses which, as we will see in further detail later on in this book, can briefly be described as such:

1. Establishing direction -- developing a vision of the future, often the distant future, along with strategies for producing the changes needed to achieve that vision

2. Aligning people -- communicating the direction to those whose cooperation may be needed so as to create coalitions that understand the vision and that are committed to its achievement

3. Motivating and inspiring -- keeping people moving in the right direction despite major political, bureaucratic, and resource barriers to change by appealing to very basic, but often untapped, human needs, values, and emotions

Management and leadership, so defined, are clearly in some ways similar. They both involve deciding what needs to be done, creating networks of people and relationships that can accomplish an agenda, and then trying to ensure that those people actually get the job done. They are both, in this sense, complete action systems; neither is simply one aspect of the other. People who think of management as being only the implementation part of leadership ignore the fact that leadership has its own implementation processes: aligning people to new directions and then inspiring them to make it happen. Similarly, people who think of leadership as only part of the implementation aspect of management (the motivational part) ignore the direction-setting aspect of leadership.

But despite some similarities, differences exist which make management and leadership very distinct. The planning and budgeting processes of management tend to focus on time frames ranging from a few months to a few years, on details, on eliminating risks, and on instrumental rationality. By contrast, as shown in the chapters that follow, that part of the leadership process which establishes a direction often focuses on longer time frames, the big picture, strategies that take calculated risks, and people's values. In a similar way, organizing and staffing tend to focus on specialization, getting the right person into or trained for the right job, and compliance; while aligning people tends to focus on integration, getting the whole group lined up in the right direction, and commitment. Controlling and problem solving usually focus on containment, control, and predictability; while motivating and inspiring focus on empowerment, expansion, and creating that occasional surprise that energizes people.

But even more fundamentally, leadership and management differ in terms of their primary function. The first can produce useful change, the second can create orderly results which keep something working efficiently. This does not mean that management is never associated with change; in tandem with effective leadership, it can help produce a more orderly change process. Nor does this mean that leadership is never associated with order; to the contrary, in tandem with effective management, an effective leadership process can help produce the changes necessary to bring a chaotic situation under control. But leadership by itself never keeps an operation on time and on budget year after year. And management by itself never creates significant useful change.

Taken together, all of these differences in function and form create the potential for conflict. Strong leadership, for example, can disrupt an orderly planning system and undermine the management hierarchy, while strong management can discourage the risk taking and enthusiasm needed for leadership. Examples of such conflict have been reported many times over the years, usually between individuals who personify only one of the two sets of processes: "pure managers" fighting it out with "pure leaders."

But despite this potential for conflict, the only logical conclusion one can draw is that they are both needed if organizations are to prosper. To be successful, organizations not only must consistently meet their current commitments to customers, stockholders, employees, and others, they must also identify and adapt to the changing needs of these key constituencies over time. To do so, they must not only plan, budget, organize, staff, control, and problem solve in a competent, systematic, and rational manner so as to achieve the results expected on a daily basis, they also must establish, and reestablish, when necessary, an appropriate direction for the future, align people to it, and motivate employees to create change even when painful sacrifices are required.

Indeed, any combination other than strong management and strong leadership has the potential for producing highly unsatisfactory results. When both are weak or nonexistent, it is like a rudderless ship with a hole in the hull. But adding just one of the two does not necessarily make the situation much better. Strong management without much leadership can turn bureaucratic and stifling, producing order for order's sake. Strong leadership without much management can become messianic and cult-like, producing change for change's sake -- even if movement is in a totally insane direction. The latter is more often found in political movements than in corporations, although it does occur sometimes in relatively small, entrepreneurial businesses. The former, however, is all too often seen in corporations today, especially in large and mature ones.

With more than enough management but insufficient leadership, one would logically expect to see the following: 1) a strong emphasis on shorter time frames, details, and eliminating risks, with relatively little focus on the long term, the big picture, and strategies that take calculated risks; 2) a strong focus on specialization, fitting people to jobs, and compliance to rules, without much focus on integration, alignment, and commitment; 3) a strong focus on containment, control, and predictability, with insufficient emphasis on expansion, empowerment, and inspiration. Taken together, it is logical to expect this to produce a firm that is somewhat rigid, not very innovative, and thus incapable of dealing with important changes in its market, competitive, or technological environment. Under these circumstances, one would predict that performance would deteriorate over time, although slowly if the firm is large and has a strong market position. Customers would be served less well because innovative products and lower prices from innovative manufacturing would be rare. As performance sinks, the cash squeeze would logically be felt more by investors who get meager or no returns and by employees who eventually are forced to make more sacrifices, including the ultimate sacrifice of their jobs.

This scenario should sound familiar to nearly everyone. Since 1970, literally hundreds of firms have had experiences that are consistent with it. No one can measure the overall impact of all this. But in the United States this problem has surely contributed to the fact that real wages were basically flat from 1973 to 1989, that stock prices when adjusted for inflation were less in late 1988 than in 1969, and that consumers have turned increasingly to less expensive or innovative foreign goods, leaving the country with a crippling trade deficit. And recent evidence suggests that the problem is still a long way from solved.

During 1988, senior executives in a dozen successful U.S. corporations were asked to rate all the people in their managerial hierarchies on the dimensions of both leadership and management. The scale they were given ranged from "weak" to "strong", and their responses were grouped into four categories: people who are weak at providing leadership but strong at management, those who are strong at leadership but not at management, those who are relatively strong at both, and those who do not do either well. The executives were then asked if the specific mix of talent their companies had in each of these four categories was what they needed to prosper over the next five to ten years. They could respond: we have about what we need; we have too few people in this category; or we have too many people like this.

Half of those polled reported having too many people who provide little if any management or leadership. Executives in professional service businesses such as investment banking and consulting were particularly likely to say this. The other half reported having very few people in this category, which, as one would expect, they said was just fine.

Nearly half reported having too few people who provide strong leadership but weak management. However, those who answered this way typically noted that such people were very valuable as long as they could work closely with others who were strong at management. Most of the remaining respondents reported having about the right number of people in this category for future needs, sometimes commenting that this "right number" was "very few." These respondents tended to be pessimistic about strong leaders/weak managers; they felt such people usually created more problems than they solved.

Nearly two-thirds of those surveyed said they had too many people who are strong at management but not at leadership. Some even reported having "far too many." The other third split their responses between "too few" and "about right." Those saying too few usually worked for professional service firms.

Over 95 percent reported having too few people who are strong at both leadership and management. Everyone thought they had some people like that: not super humans who provide outstanding management and excellent leadership but mortals who are moderately strong on one of the two dimensions, and strong or very strong on the other. But the respondents felt they needed more, often many more, to do well over the next decade.

This survey is interesting, not because it proves anything by itself, but because the results are so consistent with a variety of other evidence, some of which will be presented in later chapters. As a whole, the data strongly suggests that most firms today have insufficient leadership, and that many corporations are "over-managed" and "under-led."

An even larger survey conducted a few years earlier provides some insight as to why this leadership problem exists. Nearly 80 percent of the 1,000 executives responding to that survey questionnaire said they felt their firms did less than a very good job of recruiting, developing, retaining, and motivating people with leadership potential. These same executives also reported that their companies were not successful in this regard because of a large number of inappropriate practices. For example, 82 percent of the respondents said that "the quality of career planning discussions in their firms" was less than adequate to support the objective of attracting, retaining, and motivating a sufficient number of people who could help with the leadership challenges. Seventy-seven percent said the same thing about "the developmental job opportunities available" and "the information available to high potentials on job openings in the company." Fully 93 percent indicated that "the way managers are rewarded for developing subordinates" with leadership potential was less than adequate to support the need for spotting high-potential people, identifying their development needs, and then meeting those needs. Eighty-seven percent reported the same problem with "the number and type of lateral transfers made for developmental reasons across divisions." Seventy-nine percent said the same thing about "the mentoring, role modeling, and coaching provided," 75 percent about "the way feedback is given to subordinates regarding developmental progress," 69 percent about "the way responsibilities are added to the current job of high potentials for development purposes," 66 percent about "formal succession planning reviews," 65 p ercent about "the firm's participation in outside management training programs," and 60 percent about "the opportunities offered to people to give them exposure to higher levels of management."

Equally interesting is what was not said. Those surveyed did not say their firms had insufficient leadership because there are not enough people on earth with leadership potential. Instead, they put the blame on themselves for not finding, retaining, developing, or supporting people with such potential. Some of those surveyed readily admitted that their firms often scared off such individuals, while others believed that they took talented young people with leadership potential and systematically turned them into cautious managers. These rather critical results would not be particularly surprising if they came from a disenfranchised group of lower- or middle-level managers. But this was not a survey of those groups. It was a poll of senior executives.

There are probably a variety of reasons why so many firms do not appear to have the practices needed to attract, develop, retain, and motivate enough people with leadership potential. But the most basic reason is simply this: until recently, most organizations did not need that many people to handle their leadership challenges.

Modern business organizations are the product of the last century. They were created, for the most part, by strong entrepreneurial leaders like Andrew Carnegie, Pierre Du Pont, and Edward Filene. As these enterprises grew and became more complex, that which we now call management was invented to make them function on time and on budget. As the most successful of these enterprises became larger, more geographically dispersed, and more technologically complicated, especially after World War II, they demanded many more people who could help provide that management.

A huge educational system emerged in response to this need, offering seminars, undergraduate degrees in management, and MBAs. But the favorable economic climate for U.S. businesses after World War II allowed such a degree of stability that most firms didn't need much leadership -- until the 1970s. Then suddenly, after twenty-five to thirty years of relatively easy growth, especially in the United States, the business world became more competitive, more volatile, and tougher. A combination of faster technological change, greater international competition, market deregulation, overcapacity in capital-intensive industries, an unstable oil cartel, raiders with junk bonds, and a demographically changing workforce all contributed to this shift. The net result is that doing what was done yesterday, or doing it 5 percent better, is no longer a formula for success. Major changes are more and more necessary to survive and compete effectively in this new environment. More change always demands more leadership. But firms are having difficulty adapting their practices to this new reality.

Examples of this shift can be found nearly everywhere. Consider the case of a small- to medium-sized plant owned by a successful U.S. firm like Honeywell. In 1970, this facility employed 100 people, was 20 years old, and produced control systems for manufacturing settings. Although the facility made nearly two dozen products, one of these accounted for half the volume. That product, relatively unique in the marketplace, was protected by a number of patents. Although the plant's products were sold in over fifty countries, U.S. sales accounted for 70 percent of total volume. In the U.S. market, the plant's main product line held a 34 percent market share in its specific niche; the number two competitor controlled about 24 percent.

An examination of the demands placed on the plant manager back in 1970 reveals the following. First and foremost, he was expected to meet monthly, quarterly, and yearly targets for production, costs, and a number of other quantifiable measures. These targets were established after some negotiation by his boss and were based heavily on historical data. To meet these targets, he allocated his time over the course of the year in roughly the following way:

* 5-10% -- working with his staff to produce the monthly, quarterly, and yearly plans to meet the targets

* 20-30% -- working with his staff to make sure he had the appropriate organization in place to implement the plans, which in turn involved hiring, firing, performance appraisals, coaching, etc.

* 40-50% -- having daily production meetings, weekly budget review meetings, and the like to spot deviations from plan as quickly as possible and to solve them

20-25% -- all other activities, such as assisting the sales force by meeting an important customer, or deciding if a new technology should be used in one part of the manufacturing process

In other words, he spent the vast majority (75 to 80 percent) of his time managing the plant, with a heavy emphasis on the control aspects of management.

If a visitor to this plant in 1970 returned fifteen years later, he would have found a very different facility. In 1985, the plant had more engineers and technicians and fewer foremen and middle managers. Although the number of employees was almost the same, the output was double the 1970 levels. The plant's product line was much more volatile; products introduced within the past five years accounted for nearly 35 percent of its volume versus 15 percent in 1970. The products themselves were more technologically complex, and the technology was changing faster than it had fifteen years earlier. The plant's products were being sold in even more countries, and a greater volume was sold outside the United States. Worldwide market share for the plant's niche was about 14 percent, versus 29 percent in the United States, and its number one competitor, with nearly 22 percent of the world market, was now a Japanese company.

In this environment, the demands placed on the 1985 plant manager were in some ways similar, but in many ways different, from those found in 1970. The head of this facility in 1985 was still being asked to meet certain quantifiable targets on a monthly, quarterly, and yearly basis. That, in turn, still required producing plans, maintaining an organization, and many controlling efforts to keep things "on track." But the targets themselves were more complex and volatile due to market conditions; thus the process of achieving them was more complicated. More importantly, in addition to all these activities, there was a whole new dimension to the job, one that was time-consuming and difficult, yet essential.

In 1985, the plant manager was being asked to match his Japanese rival by finding a way to increase certain quality measures not by 1 or 5 or 10 percent, but by 100 percent. He was also asked to help the corporate manufacturing staff evaluate a number of options for moving some production out of the country, to find a way to incorporate a completely new technology into the heart of the manufacturing process, to reduce the time required to introduce new products by 50 percent, and to shrink inventories by at least a third. All of this, in turn, required much more from his staff -- in terms of time, energy, creativity, and the willingness to make sacrifices and take risks. That created a huge challenge: to somehow get his people energized and committed to helping with the big cost and quality and technology issues. And all of this created change, far more than in 1970, which in turn was bumping up against a corporate bureaucracy designed for a more stable environment. It also led to the sorts of uncertainties that threatened vested interests.

The 1985 plant manager coped with these demands by allocating his time in the following way:

* 30-50% -- engaging in the same types of planning, organizing, and controlling activities as did his predecessor fifteen years earlier, but using a less authoritarian style and delegating more (i.e., managing)

* 50-60% -- a) trying to establish a clear sense of direction for the changes needed in quality, costs, inventories, technologies, and new product introductions, b) trying to communicate that direction to all his people and to get them to believe that the changes are necessary, and, c) finally, trying to energize and motivate his people to overcome all the bureaucratic, political, and resource barriers to change (i.e., leading)

* 0-10% -- participating in other activities

By almost all standards, the plant manager's job in 1985 was more difficult than it was in 1970, primarily because the firm's business environment was more difficult. In 1985, this person not only had to manage the plant by planning, budgeting, organizing, staffing, and controlling, he also had to provide substantial leadership on dozens of critical business issues. And he was not alone in this respect.

In 1970, in a business environment that was both favorable and changing relatively slowly, sufficient leadership could be supplied by the CEO and several other people. By 1985, in a much tougher and rapidly changing environment, hundreds of individuals, both above and below the plant manager level, were also needed to provide leadership for developing and implementing new marketing programs, new approaches to financing the business, new MIS systems, new labor relations practices, and much more. Doing all this well required skills and strategies that most people did not need in the relatively benign 1950s, 1960s, and early 1970s. It required more than technical and managerial ability. Some of these people had these new skills, but many did not.

This story is interesting because the type of environmental changes involved are not at all unusual. These same kinds of changes can be found in a wide variety of industries and in a large number of countries in addition to the United States.

A simple military analogy sums all this up well. A peacetime army can usually survive with good administration and management up and down the hierarchy, coupled with good leadership concentrated at the very top. A wartime army, however, needs competent leadership at all levels. No one yet has figured out how to manage people effectively into battle. From 1946 into the 1970s, the world economy was, for the most part, at peace. It is no longer. But precious few corporations now have the leadership necessary to win the battles they face in this economic war.

There are a number of reasons why firms, even some very good ones, have had difficulty adapting to the new business environment. The most obvious relates to the inherent difficulty of the task. All available evidence suggests that finding people with leadership potential and then nurturing that potential is much tougher than finding people with managerial potential and then developing those skills.

Experts have been of limited help, even though a few predicted the environmental changes before the fact, usually in the mid to late-1960s. The biggest recommendation to evolve from this work has been a vague notion that we need to manage differently in the future. Individuals have stressed long-term planning, matrix structures, motivational systems and much more. As we shall see later in this book, none of the ideas have worked well, and for reasons that are predictable in light of the real difference between management and leadership.

Starting in the early 1980s some people reacted to all this by emphasizing leadership. What is needed to cope with major change, they argued correctly, is not management, but something else. Their descriptions of this "something else" were often vague. But worse yet, most suggested that this other thing -- leadership -- was needed instead of management. That is, they offered a prescription that was not only wrong, but dangerous.

Strong leadership with weak management is no better, and sometimes actually worse, than the reverse. In such a situation 1) an emphasis on long-term vision but little short-term planning and budgeting, plus 2) a strong group culture without much specialization, structure, and rules, plus 3) inspired people who are not inclined to use control systems and problem-solving disciplines, all conspire to create a situation that can eventually get out of control, even wildly out of control. Under such circumstances, as many small entrepreneurial firms have learned the hard way, critical deadlines, budgets, and promises can go unmet, threatening the very existence of the organization.

The most extreme, and dangerous, examples of this phenomenon are of the Jim Jones variety. In such cases, a charismatic person emerges when a group of people are experiencing considerable pain. This person is not a good manager and, in fact, does not like good managers because they are too rational and controlling. The charismatic has a flawed vision, one that does not try to create real value for both the group and its key outside constituencies. But the lack of a rational management process -- that is as powerful as the leadership -- means the bad vision is not publicly discussed and discredited. The strong charisma creates commitment and great motivation to move in the direction of the vision. Eventually, this movement leads to tragedy; followers trample other people and then walk off a cliff.

Seeking out, canonizing, and turning over the reigns of power to this type of charismatic non-manager is never the solution to a leadership crisis. But to move beyond this seductively dangerous prescription will require a much clearer sense of what leadership really means in complex organizations, what it looks like, and where it comes from. Given the inherent complexity of the subject matter and the barriers prohibiting rigorous empirical work on such a broad topic, satisfying such a purpose is an extraordinarily difficult task. Nevertheless, that task sets the agenda for this book, and the comparative analysis of leadership vis-à-vis the more clearly understood process of management will be the primary vehicle for achieving that agenda.

Copyright © 1990 by John P. Kotter

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