Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change (29 page)

Superb execution is more about values and commitments. At American Express we knew we provided the best customer service in the industry—not because our training manuals said it was important but because our people on the firing line, those who talked to customers all day, believed it. They knew it was a critical component of our success.

The wonderful sales force at The Home Depot who eagerly seek to help you when you visit their stores have a clear understanding of their role in making the company successful. Their behavior emanates from conviction and belief, not from procedures.

On the other hand, too many companies send conflicting signals to their employees. “We want the highest quality in the industry,”

says the CEO in January. “We need to cut expenses by 15 percent across the board,” says the CFO in March. How do the people facing the customer in this enterprise behave the next time a conflict arises over an important customer need?

Mixed signals can be pervasive and difficult. For example, IBM, 234 / LOUIS V. GERSTNER, JR.

I’m sure, always preached the importance of teamwork, yet everyone’s pay was based on individual unit performance. We said we value customers above all else, but no one in the field could make a pricing decision without a sign-off from the finance staff.

If you want to out-execute your competitors, you must communicate clear strategies and values, reinforce those values in everything the company does, and allow people the freedom to act, trusting they will execute consistent with the values.

High-Performance Culture

Superb execution is not just about doing the right things. It is about doing the right things faster, better, more often, and more productively than your competitors do. This is hard work. It calls for a commitment from employees that goes way beyond the normal company-employee relationship. It is all about what I call a high-performance culture.

High-performance cultures are harder to define than to recognize.

Once you enter a successful culture, you feel it immediately. The company executives are true leaders and self-starters. Employees are committed to the success of the organization. The products are first-rate. Everyone cares about quality. Losing to a competitor—whether it be a big fight or a small one—is a blow that makes people angry. Mediocrity is not tolerated. Excellence is praised, cherished, and rewarded.

In short, businesses with high-performance cultures are winners, and no person of substance would work anywhere else.

25

Leadership Is Personal

I
deliberately left the subject of personal leadership to last because it is, in my opinion, the most important element of institutional transformation. I mentioned in the chapters on culture that at the end of the day great institutions are the length and shadow of individuals. Great institutions are not managed; they are led. They are not administered; they are driven to ever-increasing levels of accomplishment by individuals who are passionate about winning.

The best leaders create high-performance cultures. They set demanding goals, measure results, and hold people accountable. They are change agents, constantly driving their institutions to adapt and advance faster than their competitors do.

Personal leadership is about visibility—with all members of the institution. Great CEOs roll up their sleeves and tackle problems personally. They don’t hide behind staff. They never simply preside over the work of others. They are visible every day with customers, suppliers, and business partners.

Personal leadership is about being both strategic and operational.

Show me a business executive who doesn’t completely understand the financial underpinnings of his or her business and I’ll show you a company whose stock you ought to sell short.

236 / LOUIS V. GERSTNER, JR.

Personal leadership is about communication, openness, and a willingness to speak often and honestly, and with respect for the intelligence of the reader or listener. Leaders don’t hide behind corporate double-speak. They don’t leave to others the delivery of bad news. They treat every employee as someone who deserves to understand what’s going on in the enterprise.

Most of all, personal leadership is about passion. When I think about all the great CEOs I have known—among them Sam Walton of Wal-Mart, Jack Welch of General Electric, Juergen Schrempp of DaimlerChrysler, and Andy Grove of Intel—I know that the common thread among them is that they were or are all passionate about winning. They want to win every day, every hour. They urge their colleagues to win. They loathe losing. And they demand corrections when they don’t win. It’s not a cold, distant, intellectual exercise.

It’s
personal
. They care a lot about what they do, what they represent, and how they compete.

Passion. As a student going through Harvard Business School, I would never have guessed that passion would be the single most important element of personal leadership. I don’t recall the word ever being spoken during my classroom time at Harvard.

In fact I know I was not sensitive to its role in leadership because of an incident that has stuck in my mind for thirty-seven years. I was interviewing for jobs toward the end of my last year at Harvard.

I had narrowed down my search to two companies: McKinsey and Procter & Gamble, the consumer packaged-goods company. At that time, consulting and consumer marketing were considered the two hottest areas in America for MBAs.

The incident took place during my last interview with a very high-level executive at P&G’s headquarters in Cincinnati, Ohio. I was an impressionable 23-year-old and had probably never met an executive as senior as this person.

As the interview progressed, I think he sensed my uncertainty (indeed, I was leaning at that time toward consulting). He said some WHO SAYS ELEPHANTS CAN’T DANCE? / 237

thing I have never forgotten: “Lou, let’s suppose it’s Friday night and you are about to leave the office when you get the latest Nielsen report (market-share data for consumer packaged-goods companies).

It indicates that you have lost two-tenths of a point of share in the last month in Kentucky. Would you cancel all of your activities for the next day, Saturday, and come to the office to work the problem?”

I remember being startled by the question, and though I didn’t give him a definitive answer at the time, the response running through my head was no. I wound up at McKinsey, convincing myself perhaps that I was better off in an environment where the requirements were more “intellectual” and that I would perhaps find it hard to get excited about decimal-point market-share loss of a toothpaste brand.

How wrong I was. As I’ve stated earlier, a decade later I was frustrated with the detachment and lack of accountability of a consultant. I longed for the opportunity to be responsible for making things happen and
winning, winning, winning
. That senior executive at Procter & Gamble was describing the passion that drives successful executives.

Passion Is for Everyone

All great business executives—CEOs and their subordinates—have passion and show it, live it, and love it. Now, don’t get me wrong.

I’m not talking about superficial rah-rah optimism or backslapping and glad-handing. Remember my description of personal leadership.

It starts with the hard work of strategy, culture, and communications.

It includes measurement, accountability, visibility, and active participation in all aspects of the enterprise. Without that, passion is simply a cheerleader doing flips on the sideline while the team gets crushed, 63-0 (maybe 8-0 for those of you who follow soccer).

The passion exhibited by true leaders is not a substitute for good 238 / LOUIS V. GERSTNER, JR.

thinking or good people or good execution. Rather, it is the electricity that courses through a well-made machine that makes it run, makes it hum, makes it want to run harder and better.

Exhibiting this kind of passion is a part of every top-notch executive’s management style. Who wants to work for a pessimist? Who wants to work for a manager who always sees the glass as half empty? Who wants to work for a manager who is always pointing out the weaknesses in your company or institution? Who wants to work for someone who criticizes and finds fault much quicker than finding excitement or promise? We all love to work for winners and be part of winning. I believe managers at all levels of a company should strive to develop the emotional side of their leadership skills.

I wrote about and listed IBM’s Leadership Competencies in the section on culture. One of them was “passion for the business.”

When IBM’s Board of Directors considered who would succeed me, passion was high on their list of necessary attributes. Sam Palmisano, my successor, is an extraordinary executive—a man of many talents.

However, he would never have had my recommendation, despite these many talents, if he didn’t have a deep passion for IBM, for what it stands for, for what it can be, for what it can do. He has an emotional, 24-hour-a-day attachment to winning and to achieving ever-increasing levels of success.

W H A T I T T A K E S T O R U N I B M

Energy

• Enormous personal energy

• Stamina

• Strong bias for action

Organizational Leadership

• Strategic sense

• Ability to motivate and energize others

WHO SAYS ELEPHANTS CAN’T DANCE? / 239

• Infectious enthusiasm to maximize the organization’s potential

• Builds strong team

• Gets the best from others

Marketplace Leadership

• Outstanding oral communications

• CEO-level presence and participation in the industry and with customers

Personal Qualities

• Smart

• Self-confident, but knows what he/she doesn’t know

• Listens

• Makes hard decisions—in business and with people

• Passion that is visible

• Maniacal customer focus

• Instinctive drive for speed/impact

Integrity

I want to close this chapter on personal leadership with a few comments about integrity. All of the great leaders I have known may be tough (in fact, all of them were tough-minded, which is very different from some people’s description of “tough”). However, all of them were, at the same time, fair. Fairness or even-handedness is critical for successful leadership. Playing favorites, excusing some while others hang for the same offense, destroys the morale and respect of colleagues.

This concept sounds simple, but is very hard to carry out every day. I could not begin to count the number of times during my decade at IBM when an executive would appeal to me for an exception to our principles or policies. “John didn’t make his numbers this year, but he

240 / LOUIS V. GERSTNER, JR.

tried very hard. I think we should still pay him a good bonus so that he stays motivated and doesn’t leave.” “Susan got an offer from a competitor and I know that if we match it we will upset the compensation scheme in the finance function, but we have to make an exception to keep her.” “I know it looks like Carl was involved in a sexual-harassment incident and we have fired others in similar circumstances in the past, but Carl is too critical to the success of Project X.

He’s very apologetic and will never do it again. So let’s just slap him hard but not fire him.”

In hundreds of such conversations, there were always two sides to the story; there was always a seemingly good reason to bend the rules and make exceptions. And, examined one by one, in every case the executive can talk himself or herself into making an exception.

Cumulatively, however, if an executive demonstrates that exceptions are part of the game, then his or her leadership will erode as the trust of colleagues evaporates. Cultures in which it is easier to ask forgiveness than permission disintegrate over time. Leaders who don’t demand uniform and fair adherence to good principles and policies lose their effectiveness.

Postscript

This chapter originally ended here. However, with all the news of corporate malfeasance that has emerged in mid-2002, I need to add a postscript. My preceding comments deal with the inevitable challenges that all leaders face to maintain an environment of fairness and principled judgment. I did not think it was necessary here to deal with dishonesty and law-breaking, or with lying and stealing.

No one should be entrusted to lead any business or institution unless he or she has impeccable personal integrity. What’s more, top-rung executives have to ensure that the organizations they lead are committed to a strict code of conduct. This is not merely good corpo

WHO SAYS ELEPHANTS CAN’T DANCE? / 241

rate hygiene. It requires management discipline and putting in place checks and balances to ensure compliance.

If any of these allegations about certain executives turns out to be true, this is simply unacceptable behavior by bad people. I’m ashamed of them and embarrassed by them. They are, however, a very small subset of the corporate world. I believe the vast majority of our business leaders are good, hard-working people who live up to the standards of integrity that we expect of all those whom we entrust with power and authority.

26

Elephants
Can
Dance

F
or much of my business career, it has been dogma that small is beautiful and big is bad. The prevailing wisdom has been that small companies are fast, entrepreneurial, responsive, and effective. Large companies are slow, bureaucratic, unresponsive, and ineffective.

This is pure nonsense. I have never seen a small company that did not want to become a big company. I have never seen a small company that didn’t look with envy on the research and marketing budgets of larger competitors or on the size and reach of their sales forces. Of course, in public, small companies put forth David v.

Goliath bravado, but in private they say, “I wish I could work with the resources those big *!#@* have!”

Big matters. Size can be leveraged. Breadth and depth allow for greater investment, greater risk taking, and longer patience for future payoff.