During
the last half of the 20th century, business leadership became an elite
profession, dominated by managers who ruled their enterprises from the top
down. Influenced by two World Wars and the Depression, organizational
hierarchies were structured along military lines, with multi-layered structures
to establish control through rules and processes. People climbed the ranks in
search of power, status, money and perquisites, as described in William H.
Whyte’s 1956 classic, The Organization Man, and Sloan Wilson’s 1955
novel, The Man in the Gray Flannel Suit.
In
the last quarter of the twentieth century the stock market became increasingly
short-term, causing corporate leaders to concentrate on quarterly earnings,
often to the exclusion of long-term growth. In the past decade it all blew up,
from the ethical scandals exposed by Enron and WorldCom to the Wall Street
meltdown. As a result, people lost trust in business leaders to build
sustainable institutions instead of serving themselves and short-term
shareholders.
What
happened? The hierarchical model simply doesn’t work anymore. The
craftsman-apprentice model has been replaced by learning organizations, filled
with knowledge workers who don’t respond to “top down” leadership. Seeking
opportunities to lead, young people are unwilling to spend ten years waiting in
line. Most important, people are searching for genuine satisfaction and meaning
from their work, not just money. For example, Medtronic’s 38,000 employees are motivated by the
company’s mission of “restoring people to full life and health.”
In
response to these changes, a new generation of leaders is reshaping the
best-led global companies. Authentic leaders focused on customers are replacing
hierarchical leaders that focus on serving short-term shareholders. Typical of
these leaders is Unilever CEO Paul Polman, who recently told the Financial Times, “I don’t
work for the shareholder. I work for consumers and my customers.”
In
the 21st century the most successful leaders will focus on sustaining superior
performance by aligning people around mission and values and empowering leaders
at all levels, while concentrating on serving customers and collaborating throughout
the organization.
Aligning: The leader’s most
difficult task is to align people around the organization’s mission and shared
values, which is far more challenging than making short-term numbers. Gaining
alignment is especially difficult in far-flung global organizations where local
employees may be more loyal to native cultures than their employers, especially
regarding business practices.
Traditional
leaders thought they could solve this problem with rulebooks, training programs
and compliance systems, and were shocked when people deviated. Aligned
employees commit to the mission and values of the organization, and want to be
part of something greater than themselves. Johnson & Johnson is a classic
case of an aligned organization that uses its famed Credo
to guide global employees in their actions.
Empowering: Hierarchical
leaders delegate limited amounts of power in order to retain control. In
contrast, 21st century leaders empower leaders at all levels, combined with
sophisticated accountability systems to ensure commitments are met.
Front-line
leaders without direct reports are especially needed. Here’s an empowered
leader who sets standards of excellence for other employees that I met at
Medtronic’s heart valve facility. A Laotian immigrant, she told me, “I make
heart valves that save people’s life. I do my own quality control, because if
one of the valves I make fails, someone will die. At Medtronic 99.9 percent
quality is very good, but I couldn’t live with causing someone’s death. My
satisfaction comes from the 5,000 people alive today because of heart valves I
made.”
Serving: As Polman points
out, the leader’s first obligation is not to shareholders, but rather to
customers. CEOs who spend too much time listening to Wall Street risk ignoring
their most important stakeholder — their customers. Any organization that
doesn’t provide its customers with superior value relative to competitors will
find itself going out of business. Employees are much more motivated by serving
customers than they are by getting stock prices up, and that’s what leads to
innovation and superior customer service. Satisfied customers and motivated
employees are key to sustaining revenue growth and, ultimately, shareholder
value.
Collaborating: The challenges
businesses face these days are too complex to be solved by individuals or even
single organizations. Collaboration — within the organization and with
customers, suppliers, and even competitors — is required to achieve lasting
solutions. Leaders must foster this collaborative spirit, eliminating internal
politics and focusing on internal cooperation. After becoming CEO of IBM, Sam
Palmisano transformed IBM’s long-standing bureaucracy into an “integrated global
network,” shifting to “leading by values” and breaking down silos that
kept people from collaborating.
The
ultimate measure of effectiveness for leaders is the ability to sustain
superior results over an extended period of time. Organizations filled with
aligned, empowered and collaborative employees focused on serving customers
will outperform hierarchical organizations every time. Top-down leaders may
achieve near-term results, but only authentic leaders can galvanize the entire
organization to sustain long-term performance.
We
need them to rebuild the trust that has been lost in capitalism.
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