Smart Leadership, Part 1

• Author: Eric Jackson
• Posted: April 10, 2007
• Category: Talent Management, Business Matters
• Tags: No Tags
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In last week’s post, The “SMART Organization” Defined I mentioned that I would draw this excerpt from the book, Why Smart Executives Fail to a close with a description of the first of the Three Pillars of a “Smart Organization”: Smart Leadership. Here is the first of this two part conclusion:
 
Smart Leadership
 
The first commonality we found across Smart Organizations was that they possessed “Smart Leadership” at the Executive Team and Board levels. The “smart” label doesn’t reflect their collective IQ (although all would have scored highly). Instead, what made their teams and boards “smart” was a combination of certain individual skill-sets that each officer and director possessed, none of these organizations had “Imperial CEOs” with thousands of faceless followers. Rather, they had teams, boards, and leaders throughout the organization who were the stars of the show. These officers and directors had skill-sets, knowledge, attitudes and behaviors that were in place in “Smart Organizations” but were conspicuously absent in successful companies who later headed towards failure.

Skill-set 1: Breeding “Proactive Paranoia”

Several years ago, Andy Grove popularized the notion that “only the paranoid survive.” While this phrase is now almost a Business School cliché, it is truly an embedded value we found in our sample of “Smart Organizations.” Executives and directors from these firms believed that their market leadership was truly only a quarter away from slipping from their grasp. They maintained a healthy respect for all their competitors and never got too caught up in their success. Wal-Mart execs religiously track Target’s and other retailers’ moves, often visiting their stores at least once a month.

By contrast, “Not-so-Smart Organizations” cavalierly disregarded the potential threat of competitors. Instead, they saw their market leadership as permanent and, perhaps because of this, often began spending lavishly on themselves and their corporate offices. Wal-Mart still requires all of its senior executives to share hotel rooms on corporate trips. And, if you have been to their Bentonville Home Office, you know that they don’t waste an inch of space, stuffing cubicles together as tightly as they stuff product on Wal-Mart floor space. Sam Walton would be proud.

Skill-set 2: “We Work for the Shareholders/Investors” Mentality

None of the “Smart Organization” officers and directors we studied breathed a whiff of entitlement - even when they founded the company. They didn’t believe the company owed them anything. They saw it as a privilege to work for the organization and felt a deep responsibility to the shareholders (or investors in the case of pre-IPO firms). They were very circumspect in spending company resources. To see an example of this type of attitude in action, read the Founders’ letter to shareholders contained within Google’s IPO filing with the SEC (ridiculed at the time for sounding too idealistic with its founders stating the ethos of the company was “don’t be evil”).ii Even after a successful secondary offering raising hundreds of millions of dollars, Google’s founders purchased a used Qantas Boeing plane for their corporate travels (and did so personally), rather than a fleet of smaller more expensive planes.iii

By contrast, executives at “Not-so-Smart Organizations” often blurred the lines between their personal interests and the corporate interests. Robert J. O’Connell, CEO of MassMutual Financial Group, was recently dismissed after the board learned that the top female executive with whom he had had an office affair had overseen a $30M padding of his supplemental retirement account and bought a Florida condominium from the company at a discounted price.iv

Skill-set 3: The Executive Team and Board Have the Answers, Not Just the CEO

Instead of providing all the answers, CEOs at “Smart Organizations” consult frequently with members of their team and board. This is not to say that the CEOs still do not play a lead role in charting strategy. However, each officer and director is comfortable speaking up and challenging the CEO’s opinion. And, as important, the CEO knows that he/she doesn’t have all the answers.

Michael Dell puts it this way: “to assume that a CEO knows every single thing about every aspect of a company… I mean you take a guy like Jeff Immelt, Jeff’s a great guy, a really smart guy. Can he know every single thing about all aspects of GE’s business? Sorry. It ain’t gonna happen. So, I think you got to have a system of processes and controls, and it’s his responsibility, just as it is mine, to sit down with the teams on a regular basis and understand. ‘Well, let’s talk about your business, what are you doing, what’s the control environment?’ We rely on our teams to give us assurances.” Together, the brainstorming and debate leads to better decisions. In “Not-so-Smart Organizations,” you are much more likely to find the prototypical “Imperial CEO” providing the answers and believing they are absolutely right.

Skill-set 4: Preventing Groupthink

“Smart Organizations” are never cults, where people are too afraid to speak up. You never hear the phrase, “you’re either with us or against us.” And, you certainly do not find key dissenters forced out of the organization. “Smart Organizations” prevent “groupthink” from setting in at the Top Team or Board levels. Michael Dell is famous for asking at meetings, “What could go wrong? What are we not thinking of?” In “Not-so-Smart Organizations,” CEOs “take out” those who are not being supportive. In the case of Philip Purcell at Morgan Stanley, he simply eliminated the jobs of two key Morgan executives (Vikram Pandit and John Havens) who he didn’t see as onside with him when outsiders started to complain about Purcell’s performance.

In the last post in this series I’ll close with a discussion of the remaining skill-sets and a suggestion as to what you can do to build your own “Smart Organization.”