Leading to Recovery: Part 1 of 3 - Leadership & Change

Leading to Recovery
Part 1 of 3
Leadership & Change

I’ve been spending a considerable amount of time pondering how we are going to turn the enormous baskets of lemons that have been dumped on our doorsteps into lemonade. To get to the lemonade, I would like to share some thoughts on leadership, the changes we’ve experienced, and reforms that are needed.

Today we face challenges that have not been seen for three generations and probably not in the memories of many here today. Clearly, we will not be able to manage our way out. What we will need is strong leadership – in many places, at many levels.

It is important to understand the distinction between leadership and management. One is not better than the other. Both are essential. We probably all think of ourselves as leaders and we probably are in our own unique situations but most people are better suited to one or the other.

There is one incontrovertible maxim in leadership. You can only lead if you have followers.

There are many reasons to follow but you will only have (loyal) followers if people trust you. Trust is earned. It is given. Trust will only exist if you CONSISTENTLY:
1. Demonstrate integrity. Honor your commitments & promises.
2. Set high – but achievable standards.
3. Listen – seek first to understand then be understood. It is easy. All you have to do is keep your mouth shut.
4. Engage people in creating the future. People will (or are more likely) to accept change they helped create but will predictably resist or outright reject change that is forced upon them.
5. Treat people with respect and trust in their abilities. Support your coworkers. Be there for them when it counts. Encourage them to freely share their thoughts and feedback – encourage constructive dissent - and act to incorporate their views.
6. Publically recognize success as the accomplishments of others. Don’t claim success as your own. Have a sense of humility.
7. Treat people fairly in all things. Be consistent.
8. Accept and do not punish failure – provided one learns from the experience and does not repeat the mistake.
9. Inspire optimism
10. Speak truth to power

We would all follow someone who lived these principles and I believe that we all aspire to these things in our lives whether we are in a position to have followers or not.

We are only successful to the extent that we make those around us successful – up, down, and sideways. This is true whether you are a leader or a manager. So what are the distinctions?

In his book Leading Change, John Kotter, professor of Leadership at the Harvard Business School, describes management and leadership as follows.

“Management is a set of processes that keep a complicated system of people and tech running smoothly. The most important aspects include planning, budgeting, organizing, staffing, controlling, and problem solving. Leadership is a set of processes that creates organizations in the first place or adapts them to significantly changing circumstances. It defines what the future should look like, aligns people with that vision, and inspires them to make it happen despite the obstacles.”

A good friend of mine observed that the positional power of management is given by superiors. The influential power of leadership is given by people above, around, and below. You cannot manage outside your position in an organization but you can lead from anywhere.

Unfortunately management is what is emphasized & institutionalized. Change is a disturbance to the smooth functioning of an organization and is something to be systematically controlled or better yet – squashed. The result is organizations that are over-managed and under-led. That being said – managing change is important otherwise a well structured transformation process can get out of control but for most organizations the bigger challenge is leading change. Successful transformation is 70-90% leadership and 10-30% management. Yet almost everyone thinks about the problem as “managing” change.

Warren Bennis, Professor and chairman of The Leadership Institute at the University of Southern California, makes a harsher, but essentially compatible, distinction in his book On Becoming a Leader. In the following try to focus on what is being said – not how it is being said.

Bennis says that the difference is between those who master the context and those who surrender to it.
· Manager administers, leader innovates
· Manager is a copy, leader is an original
· Manager maintains, leader develops
· Manager focuses on systems & structure, leader focus on people
· Manager relies on control, leader inspires trust
· Manager has a short range view, leader has a long range perspective
· Manager asks how and when, leader asks what and why
· Manager’s eye is always on the bottom line, leader’s is on the horizon
· Manager imitates, leader originates
· Manager accepts the status quo, leader challenges it
· Manager is the classic good soldier, leader is his own person
· Manager does things right, leader does the right things

If you are like me, I’m sure you are uncomfortable with Warren’s judgmental characterization of management. Forcing myself to re-read and examine what he has said I’m more inclined to accept his words as statements of fact rather than indictments.

The truth is that we need both leaders and managers. In fact we need fewer leaders than managers. If everyone were “leading” establishing their vision, setting direction,… we would have chaos. Leaders are not the people who make things happen. Leaders are not good at detailed implementation.

Think of Steve Jobs. He is a very creative and inspiring leader. No one else in the company is like him. Now imagine the disciplined management it takes to transform his vision into and i-phone or and i-pod. However, also recognize that this management comes after setting the vision and leading the needed change.

Now that we are again comfortable with the role of management, and feel power and purpose again coursing through our veins just remember – the manager is the boss and boss spelled backward is double SOB.

Leadership is not easy. Remember, Steve Jobs was kicked out of his own company. In fact this is not uncommon. You can usually tell who the leaders are. They are the ones face down in the mud with arrows in their back.

Leaders create an atmosphere of collaboration. If a leader creates an atmosphere where people are more concerned about failing at what they are doing rather than doing it the leader will not succeed. Fear leads to massive waste. The same can be said for internal competition. A company must have internally focused collaboration and externally focused competition.

Max DePree said in Leadership Is an Art, “The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.”

Peter Drucker identified the following characteristics for the next generation of leaders:
1. Broad education
2. Boundless curiosity – ask endless questions
3. Boundless enthusiasm
4. Contagious optimism
5. Belief in people & teamwork
6. Willingness to take risks
7. Devotion to long-term growth rather than short term profit
8. Commitment to excellence
9. Adaptive capacity – comfortable with ambiguity
10. Empathy
11. Authenticity
12. Integrity
13. Vision

Leaders are needed to lead change as well as to react to unexpected change – to see opportunities, revise the vision, and set the new direction. Based on the changes we’ve seen in the last 12 months there is fertile ground for leadership.

Because leaders are continuously learning and adapting, you can substitute Leaders for learners.

Eric Hoffer of Vanguard Management observed, “In a time of drastic change, it is the learners who inherit the future. The learned find themselves equipped to live in a world that no longer exists.”

Well there are a lot of things that no longer fit our assumptions. It has been said that it is not the things that we don’t know that cause problems. It is the things we know for sure that just ain’t so.

Here are some things that we used to know for sure that just ain’t so:
1. Here is one straight from MBA school - Corporate debt is good for the balance sheet and shareholders – the underlying now untrue assumption being that financing is readily available
2. Home prices will go up forever
3. You can always refinance a mortgage that you can’t afford
4. The market will regulate itself
5. Profit motive will prevent risky investment and behaviors
6. Companies are too big to fail
7. Government oversight is adequate
8. Regulators regulate
9. Auditor reports are reliable (PWC and Satyam)
10. Investment bankers and risk assessment agencies properly assign and manage risk

In response, consumers have drastically altered their buying habits. Here is a short list of what’s in and what’s out
1. Neiman Marcus is out – garage sales are chic
2. Land barges and corporate jets are out – Prius is in
3. Dirty energy is out – alternative energy is in
4. Financing lavish lifestyles is out – living within our means is in
5. Onerous credit card debt is out – paying off debt is in
6. Making loans with no documentation of income & debt is out –bringing mountains a papers to prove every nickel of income or obligation is in
7. Complex un-ratable financial instruments are out – treasuries are in
8. Lavish compensation is out – clawbacks are in
9. Lax oversight and enforcement is out – accountability and regulation is in
10. And one prediction - Onerous credit card rules/interest rates are out – consumer rights will be in
Reality has changed. Our paradigms have drastically shifted.

Drucker says the following, “In a time of change you need to carefully examine “the future that has already happened”. Assess what has occurred that does not fit your current assumptions and thus creates a new reality – a need for a new intellectual framework to win in the new market.

Today’s realities fit neither the assumptions of the Left nor those of the Right. They don’t mesh at all with “what everybody knows.” They differ even more from what everybody, regardless of political persuasion, still believes reality to be. “What is” differs totally from what both the Right and the Left believe “ought to be.” The greatest and most dangerous turbulence today results from the collision between the delusions of the decision makers – whether in governments, in the top managements of businesses, or in union leadership – and the realities.”