How Great Leaders Think
Page 4
See the Appendix for the Leadership Orientations instrument to measure your frame preferences.
NOTES
1. Morran, C. “JCPenney Ends Ron Johnson Experiment, Sends CEO Packing.” Consumerist, Apr. 8, 2013. http://consumerist.com/2013/04/08/jcpenney-ends-ron-johnson-experiment-sends-ceo-packing/.
2. Macke, J. “Ron Johnson’s JCPenney: Anatomy of a Retail Failure.” Breakout (blog), Yahoo Finance, Apr. 9, 2013. http://finance.yahoo.com/blogs/breakout/ron-johnson-jcpenney-anatomy-retail-failure-114635276.html.
3. Heisler, Y. “Former Apple Retail Guru Ron Johnson Shown the Door at JC Penney.” iOnApple (blog), Network World, Apr. 9, 2013. http://www.networkworld.com/community/blog/former-apple-retail-guru-ron-johnson-shown-door-jc-penney.
4. Phillips, C. B., quoted in Denning, S. “J.C.Penney: Was Ron Johnson’s Strategy Wrong?” Forbes, Apr. 9, 2013. http://www.forbes.com/sites/stevedenning/2013/04/09/j-c-penney-was-ron-johnsons-strategy-wrong/.
5. Quoted in Tuttle, B. “The 5 Big Mistakes That Led to Ron Johnson’s Ouster at JC Penney.” Time, Apr. 9, 2013. http://business.time.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnsons-ouster-at-jc-penney/.
6. Ibid.
7. Bhasin, K. “Ron Johnson’s Desperate Broadcasts to J.C. Penney Workers Fell Flat as Company Faltered.” May 28, 2013. http://www.huffingtonpost.com/2013/05/28/ron-johnson-broadcasts_n_3348431.html.
8. Gerstner, L. Who Says Elephants Can’t Dance? Leading a Great Enterprise Through Dramatic Change. New York: HarperBusiness, 2003, p. 16.
9. Morris, B. “He’s Smart. He’s Not Nice. He’s Saving Big Blue.” Fortune, Apr. 14, 1997. http://money.cnn.com/magazines/fortune/fortune_archive/1997/04/14/224974/index.htm.
10. Gerstner, Who Says, p. 68.
11. Ibid., p. 72.
12. Ibid., p. 182.
13. Bolman, L. G., and Deal, T. E. The Wizard and the Warrior: Leading with Passion and Power. San Francisco: Jossey-Bass, 2005, p. 180.
14. Ibid., p. 182.
15. Ibid., p. 183.
16. Barbaro, M. “Home Depot to Investors: Mea Culpa.” New York Times, May 23, 2007, p. C1. http://www.nytimes.com/2007/05/23/business/23depot.html.
17. Goran Carstedt, quoted in Hampden-Turner, C. Creating Corporate Culture: From Discord to Harmony. Reading, Mass.: Addison-Wesley, 1992, p. 167. Carstedt led the turnaround of Volvo’s French division in the 1980s.
18. Simon, H. A., and Chase, W. G. “Skill in Chess.” American Scientist, 1973, 61, 394–403.
19. Shermer, M. The Believing Brain: From Ghosts and Gods to Politics and Conspiracies—How We Construct Beliefs and Reinforce Them as Truths. New York: St. Martin’s Griffin, 2012, p. 5.
20. Gladwell, M. Blink: The Power of Thinking Without Thinking. New York: Little, Brown, 2005.
21. Rocco, M. “Ten of the Worst CEOs Ever,” accessed Feb. 16, 2014, http://www.foxbusiness.com/business-leaders/slideshow/2012/11/20/ten-worst-ceos/#slide=1. Portfolio.com (now Upstart Business Journal) asked a panel of professors at top business schools to rate the worst CEOs of all time: “Portfolio’s Worst American CEOs of All Time,” CNBC, accessed Feb. 16, 2014, http://www.cnbc.com/id/30502091/page/5.
22. McCall, M. W., Lombardo, M. M., and Morrison, A. M. Lessons of Experience: How Successful Executives Develop on the Job. New York: Free Press, 1988, p. 122.
23. Klein, A. “A Gate-Crasher’s Change of Heart.” Breaking News Blog, Washington Post, July 13, 2007. http://www.washingtonpost.com/wp-dyn/content/article/2007/07/12/AR2007071202356.html.
24. Ibid.
25. We first published these ideas in our book Modern Approaches to Understanding and Managing Organizations. San Francisco: Jossey-Bass, 1984.
26. Hubbard, D. W. How to Measure Anything: Finding the Value of Intangibles in Business. Hoboken, NJ: Wiley, 2010, p. 35.
27. Blanchard, K., and Barrett, C. Lead with LUV: A Different Way to Create Real Success. Upper Saddle River, NJ: FT Press, 2010, p. 7.
28. Pfeffer, J. Power: Why Some People Have It and Others Don’t. New York: Harper Business, 2010, p. 5.
29. Logan, D., King, J., and Fischer-Wright, H. Tribal Leadership: Leveraging Natural Groups to Build a Thriving Organization. New York: HarperBusiness, 2011, p. 4.
30. Studies linking reframing to leadership effectiveness include Bensimon, E. M. “The Meaning of ‘Good Presidential Leadership’: A Frame Analysis.” Review of Higher Education, 1989, 12, 107–123; Bensimon, E. M. “Viewing the Presidency: Perceptual Congruence Between Presidents and Leaders on Their Campuses.” Leadership Quarterly, 1990, 1, 71–90; Dunford, R. W., and Palmer, I. C. “Claims About Frames: Practitioners’ Assessment of the Utility of Reframing.” Journal of Management Education, 1995, 19, 96–105; Wimpelberg, R. K. “Managerial Images and School Effectiveness.” Administrators’ Notebook, 1987, 32, 1–4.
Part 2
Structural Leadership
Structural leaders succeed less through inspiration than through their ability to design a workable social architecture of strategy, roles, and coordination for the times. Great structural leaders share several characteristics:
They do their homework.
They insist on clear goals.
They rethink the relationship of structure, strategy, and environment.
They focus on detail and implementation.
They experiment.
Chapter 2
Getting Organized
Some leaders pay little attention to structure, either because they don’t understand it or because they don’t see it as very interesting or important. In Chapter One, when we profiled Lou Gerstner’s remarkable turnaround at IBM, we highlighted his symbolic moves to reinvigorate the culture. But it was his strategic and restructuring diligence that initially pulled IBM out of its downward spiral.
Social architecture has been a fundamental underpinning for many other successful leaders, such as McDonald’s CEO Jim Skinner, Amazon founder Jeff Bezos, and Xerox CEO Ursula Burns. Using a mantra of “freedom within a framework,” Skinner worked to tighten and loosen McDonald’s structure at the same time, because he saw the need to respond to two distinct challenges: ensuring that all restaurants conform to McDonald’s high standards, while giving units around the world flexibility to adapt to local taste. At Amazon, Bezos delivers customer satisfaction through metrics, technology, and finely tuned systems. Burns reorganized Xerox to merge its historic strengths in technology and hardware with a new push into back-office services. Leaders savvy about structure reason that even in the smallest work situation, people need to know what they’re supposed to do, how to work with one another, and who is in charge of what. Otherwise, confusion, finger-pointing, and conflict undermine even the noblest of intentions.
As a leader, you continually choose how to decode the circumstances you face. You can choose to emphasize or ignore structure, to make it central or unimportant. In this chapter, we’ll make the case for why structure is essential at the levels of strategic design and execution. We’ll start by challenging two common misconceptions: that formal arrangements and bureaucracy are the same, and that there is one best form of social architecture that fits all circumstances. Three cases will help illustrate the two main points. We move to the elements of structure and then to the contingencies, or contextual factors, that determine its contour.
STRUCTURE AT UNITED PARCEL SERVICE (UPS)
Ideas about structure in organization have inherited some misleading baggage. One fallacy is the equating of structure with rigid top-down policies and rules, bureaucracy that impedes work and frustrates workers. In fact, when strategy, rules, policies, control, and measurement are right for an organization’s circumstances, people become more productive and satisfied. United Parcel Service provides a familiar example.
The main purpose at UPS—“Big Brown”—is to deliver packages on time to make customers happy. In the early days, UPS delivery workers were “scampering messenger boys”1 who carried packages to department stores. In recent years, compu
ter technology has replaced employee discretion, and every step from pickup to delivery is highly routinized. Every movement of drivers at UPS is studied, refined, and programmed: “In God we trust; everything else we measure.”2 Detailed instructions specify where and in what order to place packages on delivery trucks. Drivers follow computer-generated routes (which minimize mileage and left turns to save time and gas). The number of steps to your door is premeasured by GPS. If a driver sees you while walking briskly to the door with your parcel, you’ll get a friendly greeting. Look carefully and you’ll notice that the driver carries an electronic locking device. That’s part of the delivery routine: get out of the truck, retrieve package, lock truck, place package in designated place, jauntily return to truck, unlocking door en route. Given that they’re on such a tight leash, you might expect demoralized employees. But the technology makes the job more predictable, helps drivers be productive, and keeps customers satisfied. As one driver remarked with a smile, “We’re happy robots.”
McDONALD’S AND HARVARD: A STRUCTURAL ODD COUPLE
A second misunderstanding about structure is that there is one best way to organize. There is no shortage of consultants hawking proprietary models. But the most effective social architecture—hierarchy of authority, division of labor, and coordination of work—depends on how leaders assess the situation. Consider two contrasting examples.
McDonald’s, the company that made the Big Mac a household word, has been enormously successful. Since Ray Kroc started to take McDonald’s across America in the 1950s, the company has become an almost unstoppable growth engine, dominating the worldwide fast-food business. McDonald’s has a relatively small staff at its world headquarters near Chicago; most of its employees are salted across the world in more than thirty-one thousand local outlets. Despite its size and geographic reach, McDonald’s holds things together in a centralized organization in which most major decisions are made at the top.
Managers and employees of individual restaurants have limited discretion. Much of their work is controlled by technology; machines time french fries and measure soft drinks. The parent company uses powerful systems to ensure that customers get what they expect. A Big Mac tastes about the same whether purchased in New York, Beijing, or Moscow. Guaranteed standard quality inevitably limits the discretion of people who own and work in individual outlets. Cooks are not expected to develop creative new versions of the Big Mac or Quarter Pounder.
All that tight structure might sound oppressive, but a major miscue in the 1990s resulted from trying to loosen up. Responding to pressure from some frustrated franchisees, McDonald’s in 1993 stopped sending out inspectors to grade restaurants on service, food, and ambience. When left to police themselves, some restaurants slipped badly. Customers noticed, and the company’s image sagged. Ten years later, a new CEO brought the inspectors back to correct lagging standards. But even as it centralized quality control, the company also gave regional managers more leeway to align offerings with their local market in response to globalization and a desire to serve customers better. So a burger will taste pretty much the same wherever you buy it, but you can also get breakfast porridge at McDonald’s outlets in England, veggie burgers in India, and burgers-on-wheels home delivery in traffic-choked cities such as Cairo and Taipei.
On the other end of the spectrum, Harvard University is at or near the top of almost every list of the world’s best universities. Like McDonald’s, it has a small administrative group at the top, but in most other respects, the two organizations diverge dramatically. Harvard is more geographically concentrated than McDonald’s, but it is significantly more decentralized. The bulk of Harvard’s activities occur within a few square miles of Boston and Cambridge, Massachusetts. Most employees are housed in the university’s several schools: Harvard College (the undergraduate school), the graduate faculty of arts and sciences, and various professional schools. Each school has its own dean and its own endowment, and, in accordance with Harvard’s philosophy of “every tub on its own bottom,” each largely controls its own destiny. Schools have fiscal autonomy, and individual professors have almost unlimited discretion over courses they teach, research they do, and university activities they pursue, if any. Faculty meetings are often sparsely attended. If a dean or a department head wants a faculty member to chair a committee or offer a new course, the request is more often a humble entreaty than an authoritative command.
The contrast between McDonald’s and Harvard is particularly strong at the level of service delivery. No one expects individual personality to influence the quality of McDonald’s burgers. But everyone expects each Harvard course to be the unique creation of an individual professor. Two schools might offer courses with the same title but different content and widely divergent teaching styles. Efforts to develop standardized core curricula founder on the autonomy of individual professors.
In early 2000, President Larry Summers ran into the predictable challenges of trying to tighten up a professional organization. In attempting to achieve greater control over a fractious faculty, he inadvertently set off one bomb after another. In one case, he suggested that superstar African American studies professor Cornell West redirect his scholarly efforts. Summers gave his advice to West in private, but West’s pique soon made the front page of the New York Times. Summers’s profuse public apologies failed to deter the offended professor from decamping to Princeton. Summers resigned under duress in 2006 after the shortest tenure for a Harvard president since a long-forgotten incumbent died in office in 1862.
The examples of McDonald’s and Harvard illustrate the central idea of the structural lens: no organization can perform very well without strategies, roles, relationships, and coordination that are workable and appropriate for its circumstances. The right structure helps ensure that individuals know what they’re supposed to do and how they’re expected to work with others to get it done.
A basic leadership responsibility is to shape structure to fit the situation. In doing that, leaders always face three key questions: What are my strategies and circumstances? How do I allocate responsibilities across different people and units? And, once I’ve done that, how do I integrate diverse efforts in pursuit of common goals? We’ll explore these basic questions and describe options leaders consider when designing an arrangement that will work.
ELEMENTS OF SOCIAL ARCHITECTURE
Every structure is designed and crafted using a particular configuration of basic elements. One is the hierarchy of authority, or chain of command, typically with three levels: executive, managerial, and operational. Authority for making decisions can be concentrated at any of the three levels. A second element is the division of labor. Executives, for example, monitor the environment, set long-range strategy, and keep their eye on the bottom line. Managers set goals and objectives, supervise workers, and check short-term results. Workers at the operational level perform basic tasks.
Managers also have to decide how to group individuals into work units. They can choose among six basic options:
Functional groups based on knowledge or skill, as in the case of a university’s academic departments or the classic industrial units of research, engineering, manufacturing, marketing, and finance.
Units created on the basis of time, as by shift (day, swing, or graveyard shifts).
Groups organized by product: detergent versus bar soap, wide-body versus narrow-body aircraft, smartphones versus tablets.
Groups established around customers or clients, as in hospital wards created around patient type (pediatrics, intensive care, or maternity), computer sales departments organized by customer (corporate, government, education, individual), or schools targeting students in particular age groups.
Groupings around place or geography, such as McDonald’s retail outlets in different countries or neighborhood schools in different parts of a city.
Grouping by process: a complete flow of work, as with “the order fulfillment process. This process, as in UPS, flows from i
nitiation by a customer order, through the functions, to delivery to the customer.”3
Once authority is established and roles and responsibilities defined, structural design needs to provide ways to link the parts together. The challenge is to develop an appropriate mix of vertical and lateral coordination.
Those at higher levels provide vertical coordination by exercising authority, setting policy and strategy, and establishing planning and control systems.
Lateral coordination happens through a variety of formal and informal roles, meetings, and groups. Individuals in coordinating roles have diplomatic license to span boundaries across specialized groups and areas. Matrix structures cross business and product lines. Digital technology provides rich channels of informal communication.
CONTEXTUAL FACTORS
Tinkering with structural arrangements requires a clear understanding of your situation. In developing the right social architecture to fit specific conditions, every organization needs to respond to basic contextual factors, outlined in Exhibit 2.1.
Size and Age
Young and small organizations often have loose structures and weak systems. McDonald’s began as a single hamburger stand in San Bernardino, California, owned and managed by the McDonald brothers. Their stand was phenomenally successful, but the brothers had little interest in expansion. The concept only took off when Ray Kroc arrived on the scene. Kroc had traveled extensively and knew the restaurant business. When he first saw the McDonald’s stand, he immediately envisioned a chain of identical restaurants across America. Once Kroc bought franchise rights, he adopted a top-down approach. At the original outlet, the brothers could change the rules whenever they wanted. Under Kroc, restaurant managers’ discretion was limited by the rule that every restaurant had to be a clone of the original.4