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Wednesday, January 27, 2010

Leaders of the Pack

Here is some interesting and thought provoking comment from Forbes magazine ahead of the World Economic Forum in Davos:

'One of the issues being raised at the World Economic Forum in Davos this week is how to build effective institutions. It's a great topic, especially since so many of the world's major institutions are viewed as political, bureaucratic, unresponsive, costly and generally "ineffective."

But no organization ever starts out that way, and most leaders don't intentionally think about how to make their institutions less effective. So it's important for world leaders at Davos to get to the root of what causes organizational arteriosclerosis to set in--and how to prevent it from happening.

Institutions are living organisms that grow, develop, mutate and evolve over time. Some of this evolution is purposefully aimed at achieving specific goals, but much of it is unplanned as the organization reacts to environmental stimuli, competitive forces, political pressures, changing managerial priorities and technological innovations.

The result of this unplanned evolution is "complexity creep," the tendency for organizations to add units and layers; broaden its scope and mission; proliferate products and services; develop disconnected and inefficient processes; and reinforce unproductive patterns of behavior--all of which contribute to the gradual degradation of institutional effectiveness.

All organizations are subject to these forces over time. But some are fortunate to have leaders with the courage and skill to rein in the complexity creep and refocus the organization on getting things done more simply and with greater effectiveness.

When Jim Wolfensohn became president of the World Bank in 1995 he launched a series of initiatives challenging the complexity and lack of focus that built up in previous years. Relentlessly over the next decade Wolfensohn pushed the Bank's managers and stakeholders to focus on poverty reduction; simplify lending and internal administrative processes; create knowledge networks for leveraging the Bank's technical skills and experiences; improve management disciplines; increase transparency; and fight corruption.

His personal energy, along with his willingness to fight and make tough decisions, transformed the Bank from a bloated, ineffective and increasingly irrelevant institution to one that continues to play a key role on the world stage.

Unfortunately not every organization is blessed with leaders who instinctively know how to fight against complexity. In fact many people would say that a large number of today's leaders, many of whom are at Davos, are caretakers at best (and undertakers at worst)--and that there is a dearth of transformative leaders both in the public sector and corporations.

But it doesn't have to be that way. Every leader--be it a CEO or a middle manager--has the potential to push back against complexity and make the organization more effective. The starting point is to declare that the war against complexity is an intentional, ongoing and highly visible part of the leadership job--a "core competency" that is just as critical as strategic planning, budgeting and operations management.

So here's what the participants at Davos can do to build effective institutions--starting with their own:

Listen to your customers: To sharpen your institutional focus, get out and talk to the people who use your services or buy your products and encourage your team to do the same. Then come back and connect the dots between what your customers need and what you are actually providing. Most of the time you'll find that there are activities, initiatives, products and services that don't add value and should be eliminated or reshaped. At the World Bank Wolfensohn and his team created a "village immersion" program where senior staffers lived in poverty-stricken areas for weeks at a time. These experiences led the Bank to recalibrate many programs around villagers' needs instead of the needs of government bureaucrats.

Build internal and external networks. It is important to encourage your people to break through the constraints of organizational structure and systematically connect with partners, both inside and outside of the institution. At the World Bank Wolfensohn launched networks for all of the key professional groups (economists, agronomists, education specialists) and appointed senior people with clout and credibility to lead them. Sharing project information and experience across the Bank's different geographic units, and reaching out to experts around the world, accelerated progress on many initiatives, prevented the same mistakes from being made over and over and increased the capabilities of the Bank's staff.

Streamline processes. Over time, in any institution, people can get locked into doing things in complex ways that no longer make sense, take too much time or have too many steps. And since most people only see their own piece of the process, they rarely initiate process improvements. Therefore you and your team need to build the capabilities and forums for end-to-end process simplification and make it an ongoing part of the way the organization evolves. At the World Bank Wolfensohn funded a small group of business process improvement experts who worked with staff to streamline core processes such as lending, project approval and project evaluation, as well as internal processes such as performance management and budgeting. Over time they not only made it easier to get things done but also built the capabilities to continue process simplification on an ongoing basis.

If we really want to build effective institutions, the hard truth is that we will first need to build effective, transformative leaders who are willing to make it happen. Rather than just debate the question, perhaps the participants at Davos can decide if they want to step up to the challenge.'

Building a Leadership Community of High Commitment and High Performance

If the leaders of the financial institutions implicated in the economic crisis had had the aspirations, the higher moral purpose, or the savvy to build resilient organisations capable of sustained advantage, could we have avoided the financial crisis? Harvard’s Michael Beer thinks so. Leaders of high commitment, high performance organisations (HCHP) make principled choices. He argues in High Commitment High Performance: How to Build A Resilient Organization for Sustained Advantage, “These choices begin with their definition of firm purpose—a desire to make a positive contribution to customers, employees, and society.” If a leader’s “primary goal is to acquire money and power, building an HCHP organisation will be beyond their reach.”

To build enduring HCHP organisations, leaders must stick to the firm’s why: purpose and guiding values, strategy, risk profile, and basic for motivating, organising, and managing people. “In times of crisis, when capital markets may demand expedient decisions that could take the firm off the HCHP path, commitment to principles enables CEOs to go against conventional wisdom in decisions about strategy, debt, growth rate, acquisitions, and layoffs.”

These circumstances often create conflicting demands between people and profits that leaders must learn to integrate. This does not call for heroic leaders—single-minded and single-handed leaders—but leaders who are willing to listen and engage others in a collective action learning process. In a crisis we often look for saviours, but instead, writes Ron Heifetz in Leadership Without Easy Answers, “we should be calling for leadership that will challenge us to face problems for which there are no simple, painless solutions.”

Heroic leadership isn’t about listening or collective learning. “Most important,” writes Beer, “heroic leadership fails to perform the central function of leadership—engaging employees authentically in a process of organisational learning and development from which they as leaders also learn.” Leading the creation of a HCHP organisation is “not about aligning the company with the leader’s ideas. It is about enabling leaders and their people to learn together about the problems they face and the actions they must take.”

Surviving and thriving in this crucible of conflicting demands is no easy task. It requires that leaders strengthen and develop their internal resources. They must learn to enter the fundamental state of leadership when faced with challenges—a state that demands that they dig deep into their values and purpose. That fundamental state of leadership requires leaders to move from comfort with activities to focus on results, from self-absorption to commitment to mission and higher purpose, from focus on self to focus on others, from being internally closed to being externally open, and from hiding the truth to embracing the truth.

In general, underperforming companies have not developed leaders throughout their organisations. Beer suggests that this is because “most managers had come up through their home function, business unit, or region, and never acquired the broader general management perspective needed to understand and manage cross-boundary activities….In many of the companies, ineffective senior teams did not spend time developing common values and perspective about what constituted good leadership.”

Again, the primary responsibility to learn to lead from where you are lies with you.