Category: Leadership

I blogged earlier about a case called The Layoff on the current Harvard Business Review, where I was one of the invited commentators.  HBR has a weird system now where authors get to "give away" 25 PDF's of their articles. I downloaded two, although I did have some  weird problems where it appeared on Notepad rather PDF.  I thought the best thing to do was to simply offer the remaining 23 copies to readers of Work Matters. Here is the URL they sent:

http://custom.hbsp.com/b01/en/implicit/p.jhtml?login=SUTT022609S&pid=R0903A

Thanks!

Bob

Who would you choose to sail your boat?  Who would you vote for? Who do you want for your boss?

The little test above is from a study summarized in the always wonderful BPS Digest, my vote for the best place in the world to find translations of academic research.  It is from a forthcoming study in Science.  As BPS reports:

"John Antonakis and
Olaf Dalgas presented photos of pairs of competing candidates in the
2002 French parliamentary elections to hundreds of Swiss undergrads,
who had no idea who the politicians were. The students were asked to
indicate which candidate in each pair was the most competent, and for
about 70 per cent of the pairs, the candidate rated as looking most
competent was the candidate who had actually won the election. The
startling implication is that the real-life voters must also have based
their choice of candidate on looks, at least in part."

Then, the researchers asked kids and adults the "who would you choose as the captain" question and "For the pair of candidates shown above, 77 per cent children who rated
this pair, and 67 per cent of adults, chose Laurent Henart, on the
right (the real-life winning candidate), rather than Jean-Jacques Denis
on the left."

This is one of those things we've all suspected, but the evidence still jolts me a bit — although I picked the guy on the left because, as a sailor, I equate messy hair with sailing skill, an irrational bias as well.

P.S. The reference is: J. Antonakis, O. Dalgas (2009). Predicting Elections: Child's Play. Science, 323, in press.

'Truth takes work. If you are going to
tell the truth, then you have to spend some time to get the facts
right.  I’ve worked with some very smart bosses who have bought into
what I think is a leadership myth – that great leaders are always focused
on the “big picture” future and don’t allow themselves to get sucked into
day to day issues.  You can’t tell the truth during “bad times”
unless you are close to the ground and have shifted much of your focus to
the here and now.'

The above quote comes from a CEO I know, and is striking to me. I've been talking to a number of executives lately about how much "transparency" is necessary to communicate to people during tough times like these and the best ways to do it.  This CEO's  comment as is a reminder that, just because someone is a senior executive, does not mean that he or she knows what is happening in the company.  Some are so externally focused and so enamored with giving big speeches, meeting important people like themselves, doing giant deals without getting in the weeds, and serving on boards, that they really have no idea what is happening in their own companies.  Times like these reveal these posers.

I have a soft spot in my heart for Yahoo! After all, it grew out of the Stanford School of Engineering (where I work) and founders Jerry Yang and David Filo have been quite generous to the school.  I have also always been treated nicely by people in the company, especially those in HR and Strategic Data Services.  But as I got to know the company, I kept seeing deeper and deeper evidence of two flaws that, I believe, help explain how they got into their current mess:

1. A lack of a clear strategy.  They would seem to say "yes" to any idea that seemed good, throw it into the mix on their increasingly confusing landing page, and often make remarkably little effort to fit the different "properties" together.   Indeed, I blogged a few months back about Steve Jobs' comment that great companies don't just kill bad ideas, they have to kill a lot of good ideas to because it is only possible to do a small number of good things well and otherwise you end-up with a kind of feature creep (this isn't just in products) where there is so much stuff that –even if it is all good — the human experience of dealing with it becomes confusing and unpleasant.  The one thing I didn't say in my post was that Jobs gave that talk to Yahoo! senior executives. They have made some progress if you look at the their landing page, but I still see lots of evidence of a lack of strategic focus and inability to stop doing good things that don't fit with their strategy — perhaps because they have had a weak strategy.

2. Dysfunctional internal competition.  For years before Yahoo! went into its current steep decline, I heard senior Yahoo ! executives complain about how difficult it was to create cooperation across different Yahoo! "properties" such as mail, search, jobs, auto, and so on.  As a result, there was often poor integration between the properties and lack of information that could have helped everyone.  There were two reasons for this, from what I can tell.  First, the properties had lots of power, and central management did not.  Second, the reward system and culture pitted properties against each other, so there was actually an incentive for property managers to treat each other as competitors.  I had a long cross country flight where I sat next to one property manager who spent much of the time complaining about how he was getting no help at all from several other property managers, even though working together would help them in the long run and the company.  He explained that it had to do with how rewards for were handed it and with the fact that Yahoo! — although it was getting better — had few strong "cross-property" groups for integrating the technologies and actions of people.  He also admitted that, if he just looked at his incentives (except for his stock options, which were underwater anyway), it wasn't really rational for him to help people in other properties.  This was exacerbated in some cases by acquisitions that Yahoo! made that were turned into properties and never quite integrated into the whole.

Although decentralization is sometimes treated by Americans as like motherhood and apple pie, and it  certainly is effective for spurring innovation and allowing effective responses to the quirks of local markets, any good organizational theorist will tell you that centralization is one of the known cures to the above two problems.  This is especially true when there is time pressure, so there is no time to do a massive cultural shift so that peer pressure and a common world view can replace authority to cure the above problems.

This all brings us to the press reports today that Yahoo!'s new CEO Carol Bartz — who is known for leading with a strong hand — is revamping the structure to make it far more centralized. Given Yahoo!'s historic problems, the lack of strategic focus, the lack of a strong internal core to weave together ideas and software from different properties (although they have made progress on the software), and especially, the dysfunctional internal competition, strong centralized management is probably the best answer right now. On the last point, as my mentor Bob Kahn taught me, intervention by a greater power is one of the most effective ways to get people, groups, or businesses to stop fighting and start cooperating.

 Let's see what happens, as Bartz has many challenges facing her, and even if this is exactly the right move, it may not be enough — but I hope so. I would also appreciate other perspectives on Yahoo! and Bartz, as I realize mine is limited to just a few of their problems.

P.S. The weird thing about centralization is that cures some problems, but creates others.  It makes it harder for people to innovate and makes them less responsive to "local" quirks of markets and specialized customers.  Often the only cure for the problems caused by centralization is to decentralize for awhile.  That is one reason why, if you look at the history of companies like HP, they swing back and forth between periods of centralization and decentralization — which looks like wishy-washy confusion to insiders and outsiders (and may be at times).  But it is also  pretty rational solution over the long haul, as the best way to cure the problems created by decentralized is to centralize, and vice-a-versa.

 If Bartz is successful, one prediction is that four or five years down the road, it will be time for decentralization at Yahoo!  I hope they last that long!

Dave sent me a link to this speech. It is a U.S. soldier berating and belittling Iraqi police for their lack of courage — in very strong language, with threats to "beat their asses" because they are "acting like a bunch of fucking women."   The readers on YouTube love this speech. I am less optimistic.  I understand that this makes U.S. soldiers feel better and it is a very frustrating and scary situation that I can't begin to imagine.  The one part I thought was on target — although might have been done better backstage — was when the U.S. officer (I don't know the background of this video) berated one of Iraqi officers for being too "chickenshit" to lead a patrol himself.  It is quite a speech, but I am not sure this kind of stuff actually works.

I wrote earlier in the week about research done by Charles O'Reilly and his colleagues on executive compensation. One of his collaborators is long-time compensation consultant Bud Crystal, who has a an interesting web site called The Crystal Report. Indeed, this is Bud's 50th year in the executive compensation field.  Bud's site is pretty sparse at first glance, but once I started digging in and reading Bud's writings, I was quite taken with his strong point of view, experience, and great stories.

For example, Bud tells an old story in "Stephen O'Byrne: A Serious Thinker About Compensation" that, unfortunately, could happen again in many companies:

The Way Most H.R. Professionals Think

The thinking of so many HR professionals was never made more clear to me than on the day John F. Kennedy was assassinated. I was then a junior corporate compensation executive at General Dynamics Corp., the major aerospace firm, which at that time was headquartered in Manhattan.
A few minutes after the terrible news broke, I received a call from my boss’ boss, the corporate head of H.R. He said: “Quick, call 20 other major companies in New York and see if they are going to give their employees time to go to church this afternoon.” Why I was not fired for insubordination, I will never know, but I shot back: “Algie, I’m not going to do it. What difference does it make what other companies are doing? Make a decision.”

HR people often get more abuse than they deserve because they are so
often put in a position where no one notices them when they do
something right, but they get blamed out of proportion when things go
wrong.  A classic fate of people who have responsibility, but not
enough authority.  So they often are very timid about taking action
because they get punished for doing even the most obviously right
things.  Not all companies create this difficult situation for HR
heads, but too many do.

Check out this CNN video story. If that doesn't work, try here. This guy made about $90,000 bucks in 2007.  He also cuts all his own perks and eats in cafeteria with the rest of his employees.  Rick Wagoner of GM's total compensation in 2007 was about $15,700,000 in 2007 — a year that his company lost almost 40 billion dollars. Can you imagine him cutting his pay below a UAW worker? or even a plant manager? I can't, as I have ranted about here before, he is held cultural hostage in a system that glorifies hierarchy and social standing rather than doing good right — or challenging the wrong thing. I would also note that this is not a purely cultural thing — some U.S. CEOs have voluntarily slashed their pay during bad times. JetBlue CEO Dave Barger, for example, cut his own pay to annualized rate of of $250,000 in mid-2008 when fuel prices shot through the roof, and I don't believe he has raised it yet. I want GM to be saved, but believe that most of the senior management needs to leave — for the good of their workers,the good of the company, and the good of the country.

P.S. I also have a question based on my last post: Have their jets been sold, or are they simply for sale?  

The notion that organizations often make symbolic moves that are meant to increase their legitimacy, without otherwise affecting the organization, is one of the core ideas in a widely applied sociological perspective called "Institutional Theory."  For better or worse, senior executives and their PR people are the
masters of hollow moves that are designed to protect their firm's reputations
without making any actual changes that inconvenience anyone, especially the top dogs. 

One of the most common tricks is to make announcements with much fanfare that you are GOING to do the right thing, but never quite get around to actually doing it.  A remarkable percentage of the changes that firms announce are never actually implemented – there is evidence, for example, from the late 1980's and 1990's that many companies that announced they were going to implement stock buyback plans, but never got around to actually implementing them, still enjoyed increased share prices anyway — so they didn't have to "waste" money buying back all that stock, just promising to do it was enough to impress the market.

The latest example of such creative sleaze can be found in this Economist story on corporate jets, called Deeply Uncool.   Note the ending sentences of the article:

"But not all companies that have put their jets up for sale are
cash-strapped. And according to analysts at JPMorgan, asking prices for
used jets actually rose by 3.4% in the year to November. Jonathan
Breeze, chief executive of Jet Republic, a private-jet operator,
suggests that some announcements that firms are selling their jets are
“elaborate window dressing”. By putting jets up for sale at a high
price that ensures nobody will buy, companies can appear frugal—even as
their bosses continue to fly as usual."

Elaborate window dressing is much of what Institutional Theory is all about, It is brilliant in a sick kind of way, isn't it?  They get the advantages of both keeping and selling their jets at the same time.  Perhaps the old saying "You can't have your cake and eat it to" is not quite right? 

One of the things that organizational researchers like to argue about most is how much leadership matters, how strongly it effects performance and organizational survival in particular.  I've been going through some of the literature lately.  One pattern that is clear is that leaders have the biggest impact on teams and in small organizations, which makes sense because wielding personal influence over people you come into personal contact with constantly is a lot easier than doing so over 100,000 people you don't know and will never meet. 

This reminded me of one of the coolest old studies on leadership influence, a 1984 study of Methodist ministers by Jonathon Smith and his colleagues.  Because ministers get rotated regularly from one church to another, it provided a great setting to see the effects of leaders arriving and leaving on performance.   They tracked 50 United Methodist ministers who had led 132 different churches over a 20-year period.  They found that when ministers with track records of boosting membership, donations, and even property values in past jobs were transferred to a new congregation, they repeated these success in their new congregations.

A study by Jeff Pfeffer and AIison Davis Blake on NBA basketball coaches showed similar effects, where those coaches with better past win-loss records are more likely to turnaround a new team (regardless of the team's past performance).  These studies suggest that people who make the extreme argument that leadership doesn't matter at all are misguided, at least when it comes to small groups and organizations. At the same time, if you look closely as these studies, the impact of leadership changes are not huge, rarely accounting for a 10% change in performance, with most effects being below 5%. 

So leadership is a case where I find people who make the most extreme arguments aren't making an evidence-based case.

P.S. One thing that is also becoming clear from the current scandals is that one or two sleazy leaders can bring down a whole company –as Bernie Madoff and today's scandal at Satyam in India shows.  Such cases, to me, also show that — at least at the extremes — people who argue leaders of big companies don't matter at all are deluding themselves.

P.P.S. Thanks to the Financial Times Management Blog for making this post the pick of the week.

The references to the studies are:

Smith, Jonathon, E., Kenneth P. Carson, & Ralph A. Alexander (1984) Leadership: It can make a
difference Academy of Management Journal. 27:765-776

Pfeffer, Jeffrey & Alison Davis Blake (1986) Administrative succession and organizational performance:
How administrative experience mediates the succession effect. Academy of Management Journal. 29:72-
83.

I just picked-up Notes on Directing: 130 Lessons in Leadership from the Director's Chair, which is based on a little handbook written by the late and great director Frank Hauser and Russell Reich. This book has been out awhile, and I guess I missed it, but once I started reading it, I was inspired.  Perhaps 20 or 30 of the lessons are pertinent only to directing plays, but the rest are fantastically useful for anyone who leads people up-close and face to face — in short anyone who is a boss. to give you just a taste, here is #26, one of the longer ones:

 
26. You perform most of the day

As general, very important note.

As a director, you are there to explain things to people and to tell them what to do (even if it means telling them that they can do whatever they want). Speak clearly. Speak Briefly. Guard against the director's first great vice – rabbiting on, making the same point again and again, getting laughs from your inimitable (and interminable) anecdotes, wasting time.

And guard against the the second great vice, the idiot fill-in phrases: "You know," "I mean," "Sort of…," "Kind of…," "Er, er um…."  These are bad enough in ordinary conversation; coming from someone who may be giving instructions for up to three hours a day, they can be a justification for homicide.