Leadership : Art of Leadership - Human Side of Enterprise (Part One)

Douglas S. Fletcher's extensive hands on management background include profit responsibility at the general management level as well as broad management experience in production, product management, human relations, sales and marketing management. He has been a principal of Performex since it was founded in 1978. His performance management methodologies have been successfully implemented in numerous firms including: American Honda, Bank of America, Carnation-Nestle production facilities, and multiple divisions ( both domestically and internationally ) of Unocal. Performance, process, and networked organizations are his specialty.

View Douglas' website www.performex.com.


Since work patterns are undergoing a slow but steady shift to the knowledge worker, supervision, while lagging behind, nevertheless must change to reflect this new reality. Interactive leadership is a required skill for creating commitment in the emerging network organization. It implies a genuine concern for people. When all rhetoric and preoccupation with leadership traits are boiled down, leadership is just about one thing — establishing an emotional connection with people. Two skill sets foster this. The first is an ability to create a shared vision between what the organization requires and what employees want out of the work experience. The second is the ability to get people working together by resolving conflicts and finding the acceptable middle ground. Underlying both abilities is the skill to communicate effectively. With good communication, employees work in a system of both freedom and control.

A firm’s performance management structure actually creates the conditions for empowering employees, but that empowerment requires leaders to lead well. Leaders get people to follow them because people want to; people are motivated because they feel they are supported and respected. A blend of management and leadership produces better results than either could alone. Strong leadership encourages freedom of creativity within the structural bounds of the performance management system. Leadership coupled with a system of performance and process management is crucial to the long-term success of any organization.

Analogies in nature give a clue to understanding this apparently paradoxical approach. Take the quartz crystal, for example. Its structure is the same around the world, yet no two quartz crystals are identical in color, shape, or size. Nature abhors sameness; it loves creativity, differences, and innovation. Just as it does with people, plants, stars, and even grains of sand, nature gives quartz crystals unlimited opportunities for individuality and creativity within a clearly defined molecular structure.

Organizations need to do the same with their systems to manage and lead people. They need not to tell people how to do their work, but instead provide them with vision, clearly defined boundaries ( business DNA ), and then allow creativity to flow. Organizations must precisely define desired results, delegate authority, and then give people freedom within boundaries to obtain results. Typical top-down organizations tend to stifle rather than promote innovation because they install policies and procedures to produce work in a standardized way. They centralize creativity rather than opening up the creative potential of workers at lower levels. Organizations that balance management - leadership practices release worker creativity and demonstrate that workers truly are an organization’s most valuable asset.

An interest in worker creativity has been around for a long time. In 1982, John Naisbitt in his book Megatrends coined the phrase “high tech- high touch.” It recognized that as automation and technology accelerate, people need more interaction and involvement in their work. Two decades earlier, in 1960, Douglas McGregor wrote The Human Side of Enterprise, a seminal book on the importance of people and the need to recognize them as a human asset. Although Naisbitt, McGregor, and others have been talking about the human side of enterprise for some time, only just now are firms viewing their employees not as replaceable parts in a mechanized organization, but as knowledge workers with a lot to contribute.


As firms become large and complex and attempt to move out of their corridor of crisis, management practices coupled with interactive leadership become increasing important. People often use these terms interchangeably in business, top executives, and the media, but each has its own definition. Distinguishing between the two clarifies how each supports the other.


Managers predict the future; leaders create it. Management is about process; leadership is about people. Management controls results through people; leadership motivates them by satisfying evolving human needs. While there are differences between them, these two concepts and their constellations of abilities are not polar opposites. Firms need both to function. As in the quartz crystal analogy above, firms need both structure and freedom to produce creativity and innovation in today’s network organizations. Both leadership and management skills can be learned, both evolve as the organization itself evolves. Chapter 11 discusses the delegation skills most crucial to any managerial position. Be low is a discussion of the evolution of leadership skills and both are vital to any organization that intends to succeed in the 21st century.


Differing leadership skills, not management techniques, are needed at different stages of a firm’s growth. Chapter 5 summarizes the required skills as an organization evolves through its evolutionary stages. Look again at Figure 8. It depicts the gradual shift from entrepreneurial to alliance-oriented leadership. Interestingly, the style of leadership in the first phase is similar to the leadership style of the last phase. Both phases require highly interactive styles.


The directive leader of the past was a doer. Getting results; i.e. making money and ensuring shareholder value was the requirement for success. These often larger than life titans of industry were directive decision- makers and were operationally savvy. Tomorrow’s leaders are predicted to be of a different cut. They are not as involved in the day-to-day operating details, but rather focus their attention on ensuring “the right people are talking to one another about the right things and have the right tools to what they decide needs doing.”


The shift in leadership for firms going through the corridor of crisis is from a focus on efficiency to one on effectiveness. This means that when an infrastructure of good management controls are in place to align vision and purpose, then attention needs to be paid to how to make the firm more effective, i.e. make sure it’s doing the right things.


That takes leadership. An impressive study created through hundreds of interviews by Anderson Consulting called “The Evolving Role of Executive Leadership” tried to create a profile of the global leader of the future. Their conclusion was that vision, values, and setting priorities top the list, but emerging requirements called for building alliances with other organizations, building partnerships across the company, and treating people with respect.


The leader who fails to recognize the differences between leadership, qualitative Skills, and management, and thus never learns to use them in parallel, may never give the outstanding performance he or she is capable of giving. Simply put, managers typically excel at planning, organizing, delegating, and reviewing. They focus on "what is" and rely on financials, hard numbers, facts, rules, schedules, and experience as the basis of decision-making. Good management controls complexity; effective leadership produces change. Leaders visualize larger possibilities for their organizations, emphasizing "what could be" and relying on the present for help in making future-oriented decisions. They inspire others through their own high commitment to their beliefs, encourage others through coaching-mentoring, and communicate with others constantly, enrolling others in a shared vision. Another way to describe this distinction are that things are managed, but people are led; managers are concerned with doing things efficiently and well while leaders look into the future, doing the right things that enable their firms to be more effective.


Obviously, the ideal is a combination of both, or a management- leader. These individuals are practical and risk takers, analytical and intuitive, planners, and visionaries. In any phase of organization evolution, mana gement- leadership requires high physical contact with people and high participation. It also requires good skills of influencing people. To influence others, management leaders must find a shared vision existing of first, mutual respect, and support for other people’s views.


As we’ve discussed in Section II above, it makes economic sense today to be peoplecentered, with leadership being a key underpinning of commitment, but this was not always the case. It is much easier now to look back and understand that Henry Ford’s notion of mass production was a soul- ignoring efficiency model employing standardized techniques. Alfred Sloan, who took over General Motors in 1923, did for upper management what Ford did on the shop floor. Sloan formalized management techniques into a set of machine- like processes to achieve reliability, decision- making consistency, and control in the management of GM.


An article in The Economist succinctly states, “For Sloan, top managers had three clearly defined jobs: to determine a firm’s strategy, to design its structure, and to select its information and control systems.” People, however, were left out of the design criterion. This business strategy helped companies build multinational organizations, it created global empires, and it established the American model as the one to emulate. While it worked for decades, Jack Welch, chairman of General Electric, argues, “It was right for the 1970’s, a growing handicap in the 1980’s, and it would have been a ticket to the bone-yard in the 1990’s.”


In a series of three HBR articles, Christopher Bartlett of Harvard Business School and Sumantra Ghoshal of London Business School track this change. They document the role shift of top management from being the company’s chief strategist, its structural architect, and the developer of its information and control systems to being the developer of people. The first shift they document is from a top-down functional structure to crossfunctional business processes that attempt to manage the white spaces between functions and divisions. The functional model of management, they argue, fragments companies’ resources and creates vertical communication channels hampering the development of cross- functional relationships. The bottom line is that the whole of the top-down organization is often less than the sum of its functional parts. Furthermore, this model of management kept the responsibility for entrepreneurship with top managers. This shift from functional structure to crossfunctional processes, as described in Chapter 9, facilitated the emergence of the horizontal corporation. The shift is dealing a blow to hierarchy, bureaucracy, and the white spaces of yesterday.


Moving from vertical structures to business processes is a big leap. It is a leap from corporate control systems to letting people make operating decisions. This is the second major tectonic shift Bartlett and Ghoshal chronicle. It is the movement towards the people side of work. This trend has been underway for the last ten years but is forecast to mature in the 21st century. Bartlett and Ghoshal see this shift as a more personalized approach that encourages a diversity of views and stimulates employees to develop their own ideas. They see companies building operating philosophies that replace a top down management style with what they describe as “the individualized corporation,” a corporation built on the pillars of purpose and process but also including a people element. It is a shift from strategy to building corporate purpose, from framing structure to developing organizational processes, and from systems designed to control human nature to ones that create environments that enable people to take initiative, to cooperate, and to learn. The most basic task of post- industrial managers, they argue, is to unleash the human spirit, to recapture those valuable human traits that too long have been suppressed by a machine mentality of organization. Simply put, the shifting role of top management in the 21st century is towards more leadership.


In Chapter 10, we identified questions for which all employees want answers. Figure 16 places these questions into two spheres those related to a concern for people, and therefore falling under the province of leadership, and those related to a concern for production, and falling under the province of management. The bottom category is labeled concern for production, the second and top constellation of questions deal with people as human beings.


As Chapter 10 explains, questions dealing with management and production identify how the firm links individual and team goals to corporate direction. Further, they serve as a framework for defining accountability, assessing performance, measuring results, providing performance feedback, addressing corrective action, uncovering personal development needs, and linking performance to the organization’s pay and reward system. Those questions answered through leadership show just how crucial emotional conditions, clear communication, mutual respect, and motivation are to employees’ job satisfaction. Figure 12.1 demonstrates the need for a management- leadership balance between the needs of businesses and of the people who work in them.

To describe the importance of leadership in the traditional management centered organization McGregor articulated his Theory Y. It urges an integration of company and individual goals in a shared vision of purpose. McGregor says leaders need to “seek that degree of integration in which the individual can achieve his goals best by directing his efforts towards the success of the organization.” Therefore, the first requirement of a leader is getting this alignment. It starts with a clear vision of the firm’s purpose. A leader is the drum major, the conductor of an orchestra, the person who keeps a vision out in front of employees. People want to be about good things. They want to believe that the work they do has some meaning, some purpose beyond just giving them a paycheck. Leaders help to remind people what they are about. In the process, they answer the most basic question - where am I going? - while relying on management’s structural answer to the question where are we going? 

Global firms who make Fortune’s list of the 100 most admired companies are people centered and answer these questions well. Almost all admired companies address the human side of enterprise. If companies expect truly exceptional results, their leaders must be willing to embark on a journey to secure an alignment between individual aspirations and company goals. As Figure 16 depicts, getting such alignment starts with clarifying purpose from two very different points of view.


Leaders’ most common failing is not understanding how they must use management and leadership together. When called upon to be a manager- leader, executives often assume that “the challenges of leadership are rational and tactical, rather than emotional and conversational.” They act as a manager and assume that if they just pull the right levers the organization will move in the right direction. The technique may have worked for them in the past, but it becomes a liability as the firm matures. Failing leaders also often frame their communications within marketplace logic. Unfortunately, people don’t tend to resonate with marketplace logic; they listen for personal significance and an emotional connection.


A review of the research literature reveals that the underlying theme running through all the discussions around leadership boil down to creating an emotional connection with people. This requirement is in stark contrast to the command-and-control paradigm where managers were told not to get too personal, too involved with their employees, as doing so would reduce their effectiveness. People who become great interactive leaders understand intuitively that running a business is not a series of mechanical tasks but a set of human interactions. For them, leadership is a supremely human activity where an emotional connection is created, trust is fostered, and loyalty is strong. Leaders understand and resonate with the emotional needs and desires of people who follow them.


There is no single set of characteristics that describe a good leader. They come in all sizes and shapes, have different backgrounds and personalities, and emerge when the situation calls for them. In fact, leadership is not the property of an individual but is a complex relationship between leaders, the needs of followers, the organizational purpose, and the external environment.


Like many political and religious leaders, corporate leaders need to emotionally invest in people by supporting, nurturing, coaching, and respecting people’s uniqueness and diversity. One hallmarks of a corporate leader is belonging to a people-oriented company that shuns hiring a huge base of contingent or part-time labor. While contingent and parttime labor may be an economic fad, people-oriented companies realize they cannot build a strong corporate culture when people are just passing through and are not attached psychologically to the company’s goals. They view people as a capital asset. Levi Strauss, Gillette, Southwest Airlines, and PepsiCo use this human-asset approach. Others falling into this category may total only 10% to 12% of all companies in the U.S., but they are out there. Studies from Jeffrey Pfeffer’s book, "The Human Equation: Building Profits by Putting People First", indicates that people–oriented companies do 30 to 40 % better financially than their competitors.10 Companies falling into this group emphasize teamwork, decision- making at lower levels, and developing other leaders, but always on a solid foundation of performance management.




Leaders create a shared vision and an emotional connection with people by communicating. From his classic study, "What Effective General Managers Really Do", originally published in 1982 and updated in 1999, John H. Kotter of the Harvard Business School finds a consistent theme in how leaders communicate. Those who limit their interactions to orderly management meetings and formal reviews of performance often cut themselves off from the very data and relationships they need in order to inspire people.


Leaders need flexible agendas and broad networks of relationships. These networks allow them to have quick and pointed conversations that give them influence well beyond their formal chain of command. Kotter suggests that seemingly wasteful activities like chatting in hallways and having impromptu meetings are, in fact, quiet efficient. This approach sounds a lot like what directive leaders do as described in Chapter 1. This is true, but interactive leaders have a different agenda they have a genuine concern for people, not just for production. Leaders like to stir the pot, rely on personal networks, build small relationships, and create growing pockets of trust. As we exp lained in a previous chapter, for example, General Electric’s Jack Welch spends more than “50 percent of his time on people issues and considers his greatest achievement the care and feeding of talent.” He urges corporate executives to adopt the people-oriented model of managing people. “Above all else…good leaders are open. They go up, down, and around their organization to reach people…It is all about human beings coming to see and accept things through a constant interactive process aimed at consensus.”

For any leader, three communication tools are essential: listening to others, supporting different points of view, and creating dialogue to see how each point of view helps achieve a common goal.


Much of the literature on leadership identifies listening as a key leader characteristic. This listening is empathic. The listener listens to understand from the speaker’s point of view. It is what natural leaders do instinctually and what others can learn. Supporting is a hard concept for some to understand. People usually think that supporting another’s point of view means agreeing with it. This is not the case. Supporting means acknowledging the specific merits of others’ ideas. A mind-set acknowledges that each person is right from his or her point of view. Supporting means accepting differing views and allowing the disparity between opposite points of view to build creative tension so people can constructively differ.


To move people forward, dialogue has to be resolved. When people support each other’s views by constructively differing, they avoid the polarizing effects of arguing, saying “I’m right and you’re wrong.” When people differ, both people need to assume the other person has a valid point, and is right from their point of view. However, through discussion, options for action can be examined against how they help achieve the common goal.


Rather than resolving tension by coming to a decision quickly, this process of communication allows people to experience both sides ( or even more ) of an issue. It teaches people to allow opposite points of view to exist with equal dignity and worth. The energy of the tension opens up the space for mutual respect and dialogue. A culture without such creative tension tends to let economic rationalism rule. A concern for production can then override people and their ideas. However, leaders must keep in mind that the opposite is also true. When companies let an over riding concern for people dominate their thinking they can dangerously let management’s eye off of business. The Levi-Strauss example at the end of this chapter illustrates that when this happens someone else can quietly steal the company’s market share.


Part two looks at the different levels of leaders....

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