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He who will not apply new remedies must expect old evils.
At a conference exploring the future of leadership, a well-known executive revealed in a few words why his style of leadership has no future. "What values inform your decisions?" I had just asked a group of seasoned business leaders, consultants, and scholars. "Just one," he replied tersely. "Shareholder value!"
The answer provoked a storm of protest from others convened around the horseshoe-shaped table in Manhattan's elegant St. Regis Hotel, under the auspices of the Economist magazine. First to react was the normally mild-mannered Charles Handy, an English author and business philosopher. Handy, who has witnessed again and again the disasters precipitated by executives who put earnings-per-share above other corporate values, disposed of this statement with one eloquent word: "Rubbish!"
His objection was immediately echoed by a chorus of other voices, some choked with emotion. They talked about employee participation, customer satisfaction, community obligations, and our collective stewardship of the future. Our gentle and professional moderator, Harvard Business School's professor emeritus Abe Zaleznik, could only lean back and smile at the mini-riot my question had provoked.
The mere fact that such a formidable group had gathered to debate the future of leadership is a portent of changing times. The conference aimed to explore how leaders from all walks of life should respond to the planetwide social and economic upheavals that were rocking their organizations, markets, personal lives, and comfortable worldviews. We had several themes: What willthe world demand of leaders in the years ahead? What kind of people can best master these challenges? And who will be flattened by the juggernaut of change, which heeds not good intentions, impeccable credentials, or past accomplishments?
Like the dozens of leadership seminars and symposia I lead or attend each year, this one began with high hopes of finding some illumination to help leaders navigate the treacherous waters of our transitional age. But like too many of them, it ended by generating more heat than light. The St. Regis conferees came, as always, in pursuit of professional insight, personal validation and encouragement, practical guidance, peace of mind. Frequently these guiding beacons are obscured by our own egos, prejudices, and preconceptions--the "rubbish" that Charles Handy mentioned.
I also see the proliferation of leadership talkfests as symptomatic of management's never-ending search for solutions "out there"--from expert consultants, technological fixes, public relations spin doctors, or market manipulations. More and more--especially after absorbing some of the wisdom of aikido--I'm drawn to the conclusion that leaders must look inward for answers to many of the problems that seem so intractable, so hard to get a fix on amid the high seas of threat and change.
What do leaders find when they look inside themselves? That varies greatly, but for a start, let me repeat my apparently highly charged question to you: what values inform your decisions? How you answer will say a lot not only about the way you've lived to this point in your career but also about the likelihood of that career extending very far into the next century. In the days ahead, the kind of macho one-line answer offered by our friend at the St. Regis simply won't suffice.
The Many Faces of Leadership Failure
If clear answers to the demands of modern leadership are elusive, the need for them is staring us full in the face. Today's leaders are failing on many fronts. They are failing their organizations and their colleagues, who look to them for inspiration and stability. They are failing society at large when they exert power in ways that betray the ideal of business prosperity for the benefit of all. They are failing themselves, their families, and their communities when their best energies go disproportionately toward their working lives. And ultimately they are failing their shareholders, who gain most in the long run when companies aim for sustained growth rather than short-term market surges.
The symptoms of contemporary leadership failure are especially well documented in this country, and data are starting to appear in all of the other industrialized nations as well. For his book, White-Collar Blues: Management Loyalties in an Age of Corporate Restructuring, Charles Heckscher, chairman of the Labor Studies and Employment Relations Department at Rutgers University, interviewed some 250 middle managers at eight giant U.S. corporations, including GM, Dow, Du Pont, and my old alma mater, AT&T. Their perceptions of modern corporate life paint a gloomy picture of the American workplace. Although these managers professed great loyalty to their organizations and leaders--even to the point of subordinating their own well-being to that of the group--that dedication is seldom reciprocated. The result is a pervasive insecurity and inordinately high levels of stress.
In a 1994 global corporate leadership study, Dr. Douglas Ready, executive director of the International Consortium for Executive Research, in cooperation with Gemini Consulting, observed that a "growing gulf" has appeared between a typical organization's need for flexible, resourceful, innovative leaders and the organization's ability to produce them. This gulf is measured by such ominous forces as decreasing trust between leaders and constituents, reduced attention to customer concerns, and creeping organizational atheroclerosis--a "hardening of the attitudes" that prevents creative new ideas from circulating.
My own observations confirm Dr. Ready's findings. Particularly in corporate downsizings, I often see a yawning gap between executives' perception of fairness and that of the workers, and a resulting loss of confidence in the leader-constituent "contract." Both add up to a clear vote of no confidence in the company's future. To illustrate, just look at a few realities:
- The salaries of top executives compared with the way their companies perform. William Agee's lucrative 1995 departure from Morrison Knudsen, the once-great engineering and construction firm, shows how wide this gulf can be and how oblivious to it many leaders are. While his company's losses compounded, Agee not only increased his multimillion-dollar compensation package, he also moved the corporate headquarters from Boise, Idaho, to California's Monterey Peninsula to enjoy its leisurely lifestyle. Even if Morrison Knudsen's stock had been riding high, this self-serving move would have been hard for constituents to swallow. Enraged stockholders finally forced Agee's removal in 1995, then won class-action and other lawsuits against the company, resulting in big changes in corporate governance and operations.
- Leaders who air dirty linen in public, then send the laundry bill to constituents. If you think dissing a rival is dangerous in South Central L.A., try doing it at Disneyland. I refer to the flap between Disney Studios chairman Jeffrey Katzenberg and top boss Michael Eisner over the latter's perceived lack of respect. Instead of resolving personal squabbles to the interest of stakeholders in their billion-dollar-a-year business, Katzenberg jumped ship to form DreamWorks SKG with entertainment moguls Steven Spielberg and David Geffen--a potentially damaging competitor for Disney. That Katzenberg reportedly walked away with a $50 million bonus, simply for not showing up at work the next day, did little to calm Disney stakeholders.
- Leader hypocrisy and use of official disinformation. Harried leaders often feel pressured to put a happy face on a dire outlook. A case in point: throughout the late 1980s and early 1990s, the retail giant K mart lost increasingly big chunks of market share to its aggressive archrival, Wal-Mart. Instead of revitalizing its core sales function, K mart's leaders went shopping for other speciality businesses--office supplies, electronics, and sporting goods--while touting "breakthrough" store concepts that somehow never materialized. By 1994 harsh reality had forced them to spin off many of these ill-conceived ventures--but not before they'd lost most of their customers to Wal-Mart and left their shareholders to handle the cleanup on aisle five.
- Isolated leaders: a formula for disaster. An increasingly common symptom of the insulation of leaders and the hubris it can spawn is white-collar crime at the highest levels. A notorious example is the Barings Bank scandal. At England's oldest merchant bank, atrophied leadership allowed one rogue trader, twenty-eight-year-old Nick Leeson, to literally--and fraudulently--bet the bank on high-risk Asian futures. When those securities finally went south in 1995 and losses soared to over a billion, they took the centuries-old institution with them. While aggressive leadership isn't necessarily equivalent to banditry, white-collar crime is one way that some deeply frustrated, ambitious, and gravely misled people occasionally try to make their mark when all else fails. But the real problem is the isolation of leaders from the gritty day-to-day work of the enterprise.
- Leaders who prize image over substance. Despite increased competition and uncertainty, too many leaders think that if they avoid risks and keep dissenters quiet, they won't be criticized by stakeholders--until the next big wave swamps the boat. These dolittle skippers fly colorful flags and spout hollow slogans. Meanwhile, the firm's value and integrity sink out of sight, threatening to take with them jobs, vendors, and other community interests. One such leader was Robert Brennan, owner of First Jersey Securities. Brennan nurtured his public persona as a latter-day Horatio Alger, decorating an aggressive penny-stock investment business with an array of flashy good works, from making generous political contributions to donating horses for New York's budget-strapped mounted police. Using inspiration speeches--in person, on videos, even on T-shirts--he hawked his self-improvement program to employees and customers alike: encouraging self-confidence, courage, honesty, responsibility, impatience with one's own shortcomings, determination, and enthusiasm. The problem was that Brennan took little of his own good medicine. He ruthlessly punished salesmen who questioned his questionable methods, which, as revealed by an SEC lawsuit, included securities fraud and market manipulation. Eventually the balloon burst and his company was forced by a federal court to pay $71.5 million to the thousands of small investors it had bilked.