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What Leaders Really Do by John P. Kotter Reprint r0111f

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Page 1: What Leaders Really Do

What Leaders Really Do

by John P. Kotter

Reprint r0111f

Page 2: What Leaders Really Do

Required Reading r0111aBarbara Kellerman

HBR Survey r0111bPersonal Histories:Leaders Remember the Moments and People That Shaped Them

Primal Leadership: The Hidden Driver r0111cof Great PerformanceDaniel Goleman, Richard Boyatzis,and Annie McKee

HBR Roundtable r0111dAll in a Day’s WorkA roundtable with Raymond Gilmartin, Frances Hesselbein,Frederick Smith, Lionel Tiger, Cynthia Tragge-Lakra,and Abraham Zaleznik

What Titans Can Teach Us r0111eRichard S. Tedlow

Best of HBR

What Leaders Really Do r0111fJohn P. Kotter

The Hard Work of Being a Soft Manager r0111gWilliam H. Peace

Leadership in a Combat Zone r0111hWilliam G. Pagonis

Leadership: Sad Facts and Silver Linings r0111jThomas J. Peters

The Work of Leadership r0111kRonald A. Heifetz and Donald L. Laurie

In Closing r0111lFollowership: It’s Personal, TooRobert Goffee and Gareth Jones

December 2001

Page 3: What Leaders Really Do

eadership is different frommanagement, but not for the rea-sons most people think.Leadership

isn’t mystical and mysterious. It hasnothing to do with having “charisma”or other exotic personality traits. It isnot the province of a chosen few. Nor is leadership necessarily better thanmanagement or a replacement for it.

Rather, leadership and managementare two distinctive and complementarysystems of action. Each has its own func-tion and characteristic activities. Bothare necessary for success in an increas-ingly complex and volatile business environment.

Most U.S. corporations today are over-managed and underled. They need todevelop their capacity to exercise lead-ership. Successful corporations don’twait for leaders to come along. They actively seek out people with leadershippotential and expose them to career experiences designed to develop that

Copyright © 2001 by Harvard Business School Publishing Corporation. All rights reserved. 3

B e st o f H B R

The article reprinted here stands on its

own, of course, but it can also be seen

as a crucial contribution to a debate that

began in 1977, when Harvard Business

School professor Abraham Zaleznik

published an HBR article with the

deceptively mild title “Managers and

Leaders: Are They Different?” The piece

caused an uproar in business schools. It argued that the

theoreticians of scientific management, with their organiza-

tional diagrams and time-and-motion studies, were missing

half the picture – the half filled with inspiration, vision, and

the full spectrum of human drives and desires. The study of

leadership hasn’t been the same since.

“What Leaders Really Do,” first published in 1990, deepens

and extends the insights of the 1977 article. Introducing one of

those brand-new ideas that seems obvious once it’s expressed,

retired Harvard Business School professor John Kotter pro-

poses that management and leadership are different but com-

plementary, and that in a changing world, one cannot function

without the other. He then enumerates and contrasts the pri-

mary tasks of the manager and the leader. His key point bears

repeating: Managers promote stability while leaders press for

change, and only organizations that embrace both sides of

that contradiction can thrive in turbulent times.

What LeadersReally Do

1990

by John P. Kotter

L

They don’t make plans; they

don’t solve problems; they

don’t even organize people.

What leaders really do is

prepare organizations for

change and help them cope

as they struggle through it.

Page 4: What Leaders Really Do

4 harvard business review

B E ST O F H B R • What Leaders Real ly Do

potential. Indeed, with careful selection,nurturing, and encouragement, dozensof people can play important leadershiproles in a business organization.

But while improving their ability tolead, companies should remember thatstrong leadership with weak manage-ment is no better, and is sometimes actually worse, than the reverse. Thereal challenge is to combine strong lead-ership and strong management and useeach to balance the other.

Of course, not everyone can be goodat both leading and managing. Somepeople have the capacity to become excellent managers but not strong leaders. Others have great leadership potential but, for a variety of reasons,have great difficulty becoming strongmanagers. Smart companies value bothkinds of people and work hard to makethem a part of the team.

But when it comes to preparing peo-ple for executive jobs, such companiesrightly ignore the recent literature thatsays people cannot manage and lead.They try to develop leader-managers.Once companies understand the funda-mental difference between leadershipand management, they can begin togroom their top people to provide both.

The Difference BetweenManagement and LeadershipManagement is about coping with com-plexity. Its practices and procedures arelargely a response to one of the most sig-nificant developments of the twentiethcentury: the emergence of large organi-zations. Without good management,complex enterprises tend to becomechaotic in ways that threaten their very

existence. Good management brings adegree of order and consistency to keydimensions like the quality and prof-itability of products.

Leadership, by contrast, is about cop-ing with change. Part of the reason ithas become so important in recent yearsis that the business world has becomemore competitive and more volatile.Faster technological change, greater in-ternational competition, the deregula-tion of markets, overcapacity in capital-intensive industries, an unstable oilcartel, raiders with junk bonds, and thechanging demographics of the work-force are among the many factors thathave contributed to this shift. The netresult is that doing what was done yes-terday, or doing it 5% better, is no longera formula for success. Major changes aremore and more necessary to survive andcompete effectively in this new envi-ronment. More change always demandsmore leadership.

Consider a simple military analogy:A peacetime army can usually survivewith good administration and manage-ment up and down the hierarchy, cou-pled with good leadership concentratedat the very top. A wartime army, how-ever, needs competent leadership at alllevels. No one yet has figured out how tomanage people effectively into battle;they must be led.

These two different functions – cop-ing with complexity and coping withchange–shape the characteristic activi-ties of management and leadership.Each system of action involves decidingwhat needs to be done, creating net-works of people and relationships thatcan accomplish an agenda, and then try-ing to ensure that those people actuallydo the job. But each accomplishes thesethree tasks in different ways.

Companies manage complexity firstby planning and budgeting – setting tar-gets or goals for the future (typicallyfor the next month or year), establishingdetailed steps for achieving those tar-gets, and then allocating resources toaccomplish those plans. By contrast,leading an organization to constructivechange begins by setting a direction –developing a vision of the future (oftenthe distant future) along with strategiesfor producing the changes needed toachieve that vision.

Management develops the capacityto achieve its plan by organizing andstaffing–creating an organizational struc-ture and set of jobs for accomplishingplan requirements, staffing the jobs withqualified individuals, communicatingthe plan to those people, delegating re-sponsibility for carrying out the plan,and devising systems to monitor imple-mentation. The equivalent leadershipactivity, however, is aligning people. Thismeans communicating the new direc-tion to those who can create coalitionsthat understand the vision and are com-mitted to its achievement.

Finally, management ensures plan accomplishment by controlling and prob-lem solving – monitoring results versusthe plan in some detail, both formallyand informally, by means of reports,meetings, and other tools; identifyingdeviations; and then planning and or-ganizing to solve the problems. But forleadership, achieving a vision requiresmotivating and inspiring – keeping peo-ple moving in the right direction,despite major obstacles to change, byappealing to basic but often untappedhuman needs, values, and emotions.

A closer examination of each of theseactivities will help clarify the skills lead-ers need.

Management is about coping with

complexity. Leadership, by contrast,

is about coping with change.

Now retired, John P. Kotter was a profes-sor of organizational behavior at HarvardBusiness School in Boston. He is the au-thor of such books as The General Man-agers (Free Press, 1986), The LeadershipFactor (Free Press, 1988), and A Force forChange: How Leadership Differs fromManagement (Free Press, 1990).

Page 5: What Leaders Really Do

BREAKTHROUGH LEADERSHIP december 2001 5

Setting a Direction VersusPlanning and BudgetingSince the function of leadership is toproduce change, setting the direction ofthat change is fundamental to leader-ship. Setting direction is never the sameas planning or even long-term planning,although people often confuse the two.Planning is a management process, de-ductive in nature and designed to pro-duce orderly results, not change. Settinga direction is more inductive. Leadersgather a broad range of data and lookfor patterns, relationships, and linkagesthat help explain things. What’s more,the direction-setting aspect of leader-ship does not produce plans; it createsvision and strategies. These describe abusiness, technology, or corporate cul-ture in terms of what it should becomeover the long term and articulate a fea-sible way of achieving this goal.

Most discussions of vision have a ten-dency to degenerate into the mystical.The implication is that a vision is some-thing mysterious that mere mortals,even talented ones, could never hope tohave. But developing good business di-rection isn’t magic. It is a tough, some-times exhausting process of gatheringand analyzing information. People whoarticulate such visions aren’t magiciansbut broad-based strategic thinkers whoare willing to take risks.

Nor do visions and strategies have tobe brilliantly innovative; in fact, some ofthe best are not. Effective business vi-sions regularly have an almost mundanequality, usually consisting of ideas thatare already well known. The particularcombination or patterning of the ideasmay be new, but sometimes even that isnot the case.

For example, when CEO Jan Carlzonarticulated his vision to make Scandi-navian Airlines System (SAS) the bestairline in the world for the frequentbusiness traveler, he was not saying any-thing that everyone in the airline in-dustry didn’t already know. Businesstravelers fly more consistently than

other market segments and are gen-erally willing to pay higher fares. Thus,focusing on business customers offersan airline the possibility of high mar-gins, steady business, and considerablegrowth. But in an industry known morefor bureaucracy than vision, no com-pany had ever put these simple ideas together and dedicated itself to imple-menting them. SAS did, and it worked.

What’s crucial about a vision is notits originality but how well it serves theinterests of important constituencies –customers, stockholders, employees –and how easily it can be translated intoa realistic competitive strategy. Bad visions tend to ignore the legitimateneeds and rights of important constit-uencies – favoring, say, employees overcustomers or stockholders. Or they arestrategically unsound. When a companythat has never been better than a weakcompetitor in an industry suddenly

starts talking about becoming numberone, that is a pipe dream, not a vision.

One of the most frequent mistakesthat overmanaged and underled corpo-rations make is to embrace long-termplanning as a panacea for their lack ofdirection and inability to adapt to an increasingly competitive and dynamicbusiness environment. But such an approach misinterprets the nature of direction setting and can never work.

Long-term planning is always timeconsuming. Whenever something unex-pected happens, plans have to be re-done. In a dynamic business environ-ment, the unexpected often becomesthe norm, and long-term planning canbecome an extraordinarily burdensomeactivity. That is why most successful cor-porations limit the time frame of theirplanning activities. Indeed, some evenconsider “long-term planning”a contra-diction in terms.IL

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Page 6: What Leaders Really Do

6 harvard business review

B E ST O F H B R • What Leaders Real ly Do

When Lou Gerstner became president of the

Travel Related Services(TRS) arm at American

Express in 1979, the unitwas facing one of its biggest

challenges in AmEx’s 130-yearhistory. Hundreds of banks

were offering or planning to in-troduce credit cards through Visa

and MasterCard that would competewith the American Express card. And more than twodozen financial service firms were coming into thetraveler’s checks business. In a mature marketplace,this increase in competition usually reduces mar-gins and prohibits growth.

But that was not how Gerstner saw the business.Before joining American Express, he had spent fiveyears as a consultant to TRS, analyzing the money-losing travel division and the increasingly competi-tive card operation. Gerstner and his team askedfundamental questions about the economics, mar-ket, and competition and developed a deep under-standing of the business. In the process, he began to craft a vision of TRS that looked nothing like a130-year-old company in a mature industry.

Gerstner thought TRS had the potential to be-come a dynamic and growing enterprise, despitethe onslaught of Visa and MasterCard competitionfrom thousands of banks. The key was to focus onthe global marketplace and, specifically, on the relatively affluent customer American Express hadbeen traditionally serving with top-of-the-lineproducts. By further segmenting this market,aggressively developing a broad range of newproducts and services, and investing to increaseproductivity and to lower costs, TRS could providethe best service possible to customers who hadenough discretionary income to buy many moreservices from TRS than they had in the past.

Within a week of his appointment, Gerstnerbrought together the people running the cardorganization and questioned all the principles bywhich they conducted their business. In particular,he challenged two widely shared beliefs – that thedivision should have only one product, the green

card, and that this product was limited in potentialfor growth and innovation.

Gerstner also moved quickly to develop a moreentrepreneurial culture, to hire and train peoplewho would thrive in it, and to clearly communicateto them the overall direction. He and other topmanagers rewarded intelligent risk taking. To make entrepreneurship easier, they discouraged unnecessary bureaucracy. They also upgraded hir-ing standards and created the TRS Graduate Man-agement Program, which offered high-potentialyoung people special training, an enriched set of experiences, and an unusual degree of exposure topeople in top management. To encourage risk taking among all TRS employees, Gerstner also established something called the Great Performersprogram to recognize and reward truly exceptionalcustomer service, a central tenet in the organiza-tion’s vision.

These incentives led quickly to new markets,products, and services. TRS expanded its overseaspresence dramatically. By 1988, AmEx cards were issued in 29 currencies (as opposed to only 11 adecade earlier). The unit also focused aggressivelyon two market segments that had historically re-ceived little attention: college students and women.In 1981, TRS combined its card and travel-service capabilities to offer corporate clients a unified sys-tem to monitor and control travel expenses. And by1988, AmEx had grown to become the fifth largestdirect-mail merchant in the United States.

Other new products and services included 90-dayinsurance on all purchases made with the AmExcard, a Platinum American Express card, and a re-volving credit card known as Optima. In 1988, thecompany also switched to image-processing tech-nology for billing, producing a more convenientmonthly statement for customers and reducingbilling costs by 25%.

As a result of these innovations, TRS’s net incomeincreased a phenomenal 500% between 1978 and1987 – a compounded annual rate of about 18%.The business outperformed many so-called high-tech/high-growth companies. With a 1988 return on equity of 28%, it also outperformed most low-growth but high-profit businesses.

SETTING A DIRECTION:Lou Gerstner at American Express

Page 7: What Leaders Really Do

In a company without direction, evenshort-term planning can become a blackhole capable of absorbing an infiniteamount of time and energy. With no vi-sion and strategy to provide constraintsaround the planning process or to guideit, every eventuality deserves a plan.Under these circumstances, contingencyplanning can go on forever, drainingtime and attention from far more essen-tial activities, yet without ever providingthe clear sense of direction that a com-pany desperately needs. After awhile,managers inevitably become cynical,and the planning process can degenerateinto a highly politicized game.

Planning works best not as a substi-tute for direction setting but as a com-plement to it. A competent planningprocess serves as a useful reality checkon direction-setting activities. Likewise,a competent direction-setting processprovides a focus in which planning canthen be realistically carried out. It helpsclarify what kind of planning is essentialand what kind is irrelevant.

Aligning People VersusOrganizing and StaffingA central feature of modern organiza-tions is interdependence, where no onehas complete autonomy, where mostemployees are tied to many others bytheir work, technology, managementsystems, and hierarchy. These linkagespresent a special challenge when orga-nizations attempt to change. Unlessmany individuals line up and move to-gether in the same direction, people willtend to fall all over one another. To ex-ecutives who are overeducated in man-agement and undereducated in leader-ship, the idea of getting people movingin the same direction appears to be anorganizational problem. What execu-tives need to do, however, is not orga-nize people but align them.

Managers “organize”to create humansystems that can implement plans asprecisely and efficiently as possible. Typ-ically, this requires a number of poten-

tially complex decisions. A companymust choose a structure of jobs and re-porting relationships, staff it with indi-viduals suited to the jobs, provide train-ing for those who need it, communicateplans to the workforce, and decide howmuch authority to delegate and to whom.Economic incentives also need to beconstructed to accomplish the plan,as well as systems to monitor its im-plementation. These organizationaljudgments are much like architecturaldecisions. It’s a question of fit within a particular context.

Aligning is different. It is more of acommunications challenge than a designproblem. Aligning invariably involvestalking to many more individuals thanorganizing does. The target populationcan involve not only a manager’s subor-dinates but also bosses, peers, staff inother parts of the organization,as well assuppliers,government officials, and evencustomers. Anyone who can help imple-ment the vision and strategies or whocan block implementation is relevant.

Trying to get people to comprehend avision of an alternative future is also a communications challenge of a com-pletely different magnitude from orga-nizing them to fulfill a short-term plan.It’s much like the difference between afootball quarterback attempting to de-scribe to his team the next two or threeplays versus his trying to explain to thema totally new approach to the game to beused in the second half of the season.

Whether delivered with many wordsor a few carefully chosen symbols, suchmessages are not necessarily accepted

just because they are understood. An-other big challenge in leadership effortsis credibility – getting people to believethe message. Many things contribute tocredibility: the track record of the per-son delivering the message, the contentof the message itself, the communica-tor’s reputation for integrity and trust-worthiness, and the consistency be-tween words and deeds.

Finally, aligning leads to empower-ment in a way that organizing rarelydoes. One of the reasons some organi-zations have difficulty adjusting to rapid

changes in markets or technology isthat so many people in those compa-nies feel relatively powerless. They havelearned from experience that even ifthey correctly perceive important ex-ternal changes and then initiate appro-priate actions, they are vulnerable tosomeone higher up who does not likewhat they have done. Reprimands cantake many different forms: “That’sagainst policy,” or “We can’t afford it,”or “Shut up and do as you’re told.”

Alignment helps overcome this prob-lem by empowering people in at leasttwo ways. First, when a clear sense of direction has been communicatedthroughout an organization, lower-levelemployees can initiate actions withoutthe same degree of vulnerability. As longas their behavior is consistent with the vision,superiors will have more difficultyreprimanding them. Second, becauseeveryone is aiming at the same target,the probability is less that one person’sinitiative will be stalled when it comesinto conflict with someone else’s.

The idea of getting people moving in the

same direction appears to be an organizational

problem. But what executives need to do is not

organize people but align them.

BREAKTHROUGH LEADERSHIP december 2001 7

What Leaders Real ly Do • B E ST O F H B R

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8 harvard business review

B E ST O F H B R • What Leaders Real ly Do

Eastman Kodak entered thecopy business in the early

1970s, concentrating ontechnically sophisticatedmachines that sold, onaverage, for about$60,000 each. Over thenext decade, this busi-ness grew to nearly

$1 billion in revenues.But costs were high, prof-

its were hard to find, andproblems were nearly every-

where. In 1984, Kodak had towrite off $40 million in inventory.

Most people at the company knewthere were problems, but they couldn’t agreeon how to solve them. So in his first twomonths as general manager of the new copyproducts group, established in 1984, ChuckTrowbridge met with nearly every key personinside his group, as well as with people else-where at Kodak who could be important to thecopier business. An especially crucial area wasthe engineering and manufacturing organiza-tion, headed by Bob Crandall.

Trowbridge and Crandall’s vision for engi-neering and manufacturing was simple: to become a world-class manufacturing opera-tion and to create a less bureaucratic andmore decentralized organization. Still, thismessage was difficult to convey because it was such a radical departure from previouscommunications, not only in the copy prod-ucts group but throughout most of Kodak. SoCrandall set up dozens of vehicles to empha-size the new direction and align people to it:weekly meetings with his own 12 direct reports;monthly “copy product forums” in which a different employee from each of his depart-ments would meet with him as a group; dis-cussions of recent improvements and newprojects to achieve still better results; andquarterly “State of the Department” meetings,where his managers met with everybody intheir own departments.

Once a month, Crandall and all those whoreported to him would also meet with 80 to 100people from some area of his organization todiscuss anything they wanted. To align hisbiggest supplier– the Kodak Apparatus Division,which supplied one-third of the parts used indesign and manufacturing–he and his man-agers met with the top management of thatgroup over lunch every Thursday. Later, he created a format called “business meetings,”where his managers meet with 12 to 20 peopleon a specific topic, such as inventory or masterscheduling. The goal: to get all of his 1,500 em-ployees in at least one of these focused businessmeetings each year.

Trowbridge and Crandall also enlisted writ-ten communication in their cause. A four- toeight-page “Copy Products Journal” was sent to employees once a month. A program called “Dialog Letters” gave employees the opportu-nity to anonymously ask questions of Crandalland his top managers and be guaranteed areply. But the most visible and powerful writtencommunications were the charts. In a main hallway near the cafeteria, these huge chartsvividly reported the quality, cost, and deliveryresults for each product, measured against difficult targets. A hundred smaller versions of these charts were scattered throughout themanufacturing area, reporting quality levelsand costs for specific work groups.

Results of this intensive alignment processbegan to appear within six months, and stillmore surfaced after a year. These successes madethe message more credible and helped get morepeople on board. Between 1984 and 1988, qualityon one of the main product lines increasednearly 100-fold. Defects per unit went from 30 to 0.3. Over a three-year period, costs on anotherproduct line went down nearly 24%. Deliverieson schedule increased from 82% in 1985 to 95%

in 1987. Inventory levels dropped by over 50%

between 1984 and 1988, even though the volume of products was increasing. And productivity,measured in units per manufacturing employee,more than doubled between 1985 and 1988.

ALIGNING PEOPLE:Chuck Trowbridge and Bob Crandall at Eastman Kodak

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BREAKTHROUGH LEADERSHIP december 2001 9

What Leaders Real ly Do • B E ST O F H B R

Motivating People VersusControlling and Problem SolvingSince change is the function of leader-ship, being able to generate highly en-ergized behavior is important for copingwith the inevitable barriers to change.Just as direction setting identifies an ap-propriate path for movement and just aseffective alignment gets people movingdown that path, successful motivationensures that they will have the energy toovercome obstacles.

According to the logic of manage-ment, control mechanisms compare sys-tem behavior with the plan and take ac-tion when a deviation is detected. In awell-managed factory, for example, thismeans the planning process establishessensible quality targets, the organizingprocess builds an organization that canachieve those targets, and a control pro-cess makes sure that quality lapses arespotted immediately, not in 30 or 60days, and corrected.

For some of the same reasons thatcontrol is so central to management,highly motivated or inspired behavior isalmost irrelevant. Managerial processesmust be as close as possible to fail-safeand risk free. That means they cannot bedependent on the unusual or hard toobtain. The whole purpose of systemsand structures is to help normal peoplewho behave in normal ways to completeroutine jobs successfully, day after day.It’s not exciting or glamorous. But that’smanagement.

Leadership is different. Achievinggrand visions always requires a burst ofenergy. Motivation and inspiration en-ergize people, not by pushing them inthe right direction as control mecha-nisms do but by satisfying basic humanneeds for achievement, a sense of be-longing, recognition, self-esteem, a feel-ing of control over one’s life, and theability to live up to one’s ideals. Suchfeelings touch us deeply and elicit apowerful response.

Good leaders motivate people in avariety of ways. First, they always artic-

ulate the organization’s vision in a man-ner that stresses the values of the audi-ence they are addressing. This makesthe work important to those individu-als. Leaders also regularly involve peo-ple in deciding how to achieve the or-ganization’s vision (or the part mostrelevant to a particular individual). Thisgives people a sense of control. Anotherimportant motivational technique is tosupport employee efforts to realize thevision by providing coaching, feedback,and role modeling, thereby helping peo-ple grow professionally and enhancingtheir self-esteem. Finally, good leadersrecognize and reward success, whichnot only gives people a sense of accom-plishment but also makes them feel likethey belong to an organization thatcares about them. When all this is done,the work itself becomes intrinsicallymotivating.

The more that change characterizesthe business environment, the morethat leaders must motivate people toprovide leadership as well. When thisworks, it tends to reproduce leadershipacross the entire organization, with people occupying multiple leadershiproles throughout the hierarchy. This ishighly valuable, because coping withchange in any complex business de-mands initiatives from a multitude ofpeople. Nothing less will work.

Of course, leadership from manysources does not necessarily converge.To the contrary, it can easily conflict. Formultiple leadership roles to work to-gether, people’s actions must be care-fully coordinated by mechanisms thatdiffer from those coordinating tradi-tional management roles.

Strong networks of informal rela-tionships–the kind found in companieswith healthy cultures – help coordinate

leadership activities in much the sameway that formal structure coordinatesmanagerial activities. The key differenceis that informal networks can deal withthe greater demands for coordinationassociated with nonroutine activitiesand change. The multitude of commu-nication channels and the trust amongthe individuals connected by those chan-nels allow for an ongoing process of ac-commodation and adaptation. Whenconflicts arise among roles, those samerelationships help resolve the conflicts.Perhaps most important, this process ofdialogue and accommodation can pro-duce visions that are linked and com-patible instead of remote and competi-tive. All this requires a great deal morecommunication than is needed to coor-dinate managerial roles, but unlike for-mal structure, strong informal networkscan handle it.

Informal relations of some sort existin all corporations. But too often thesenetworks are either very weak – somepeople are well connected but most arenot – or they are highly fragmented – astrong network exists inside the mar-keting group and inside R&D but notacross the two departments. Such net-works do not support multiple leader-ship initiatives well. In fact, extensiveinformal networks are so important thatif they do not exist, creating them has tobe the focus of activity early in a majorleadership initiative.

Creating a Culture of LeadershipDespite the increasing importance ofleadership to business success, the on-the-job experiences of most people actuallyseem to undermine the development ofthe attributes needed for leadership.Nevertheless, some companies haveconsistently demonstrated an ability to

Motivation and inspiration energize people,

not by pushing them in the right direction but

by satisfying basic human needs.

Page 10: What Leaders Really Do

10 harvard business review

For about 20 years after itsfounding in 1956, Procter &Gamble’s paper productsdivision had experienced

little competition for itshigh-quality, reasonably

priced, and well-marketed consumer goods. By the late

1970s, however, the market posi-tion of the division had changed.

New competitive thrusts hurt P&Gbadly. For example, industry analysts

estimate that the company’s marketshare for disposable diapers fell from 75% in themid-1970s to 52% in 1984.

That year, Richard Nicolosi came to paper prod-ucts as the associate general manager, after threeyears in P&G’s smaller and faster moving soft-drinkbusiness. He found a heavily bureaucratic and cen-tralized organization that was overly preoccupiedwith internal functional goals and projects. Almostall information about customers came throughhighly quantitative market research. The technicalpeople were rewarded for cost savings, the commer-cial people focused on volume and share, and thetwo groups were nearly at war with each other.

During the late summer of 1984, top manage-ment announced that Nicolosi would become thehead of paper products in October, and by Augusthe was unofficially running the division. Immedi-ately he began to stress the need for the division tobecome more creative and market driven, instead ofjust trying to be a low-cost producer.“I had to makeit very clear,” Nicolosi later reported,“that the rulesof the game had changed.”

The new direction included a much greater stresson teamwork and multiple leadership roles. Nicolosipushed a strategy of using groups to manage the di-vision and its specific products. In October, he andhis team designated themselves as the paper division“board” and began meeting first monthly and thenweekly. In November, they established “categoryteams” to manage their major brand groups (like diapers, tissues, towels) and started pushing respon-sibility down to these teams.“Shun the incremental,”Nicolosi stressed,“and go for the leap.”

In December, Nicolosi selectively involved him-self in more detail in certain activities. He met withthe advertising agency and got to know key creativepeople. He asked the marketing manager of diapersto report directly to him, eliminating a layer in thehierarchy. He talked more to the people who wereworking on new product development projects.

In January 1985, the board announced a new organizational structure that included not only cate-gory teams but also new-brand business teams. Bythe spring, the board was ready to plan an importantmotivational event to communicate the new paperproducts vision to as many people as possible. OnJune 4, 1985, all the Cincinnati-based personnel inpaper plus sales district managers and paper plantmanagers – several thousand people in all – met inthe local Masonic Temple. Nicolosi and other boardmembers described their vision of an organizationwhere “each of us is a leader.” The event was video-taped, and an edited version was sent to all sales offices and plants for everyone to see.

All these activities helped create an entrepreneur-ial environment where large numbers of peoplewere motivated to realize the new vision. Most inno-vations came from people dealing with new prod-ucts. Ultra Pampers, first introduced in February1985, took the market share of the entire Pampersproduct line from 40% to 58% and profitability frombreak-even to positive. And within only a few monthsof the introduction of Luvs Delux in May 1987, mar-ket share for the overall brand grew by 150%.

Other employee initiatives were oriented moretoward a functional area, and some came from thebottom of the hierarchy. In the spring of 1986, a fewof the division’s secretaries, feeling empowered bythe new culture, developed a secretaries network.This association established subcommittees on train-ing, on rewards and recognition, and on the “secre-tary of the future.” Echoing the sentiments of manyof her peers, one paper products secretary said: “Idon’t see why we, too, can’t contribute to the divi-sion’s new direction.”

By the end of 1988, revenues at the paper prod-ucts division were up 40% over a four-year period.Profits were up 68%. And this happened despite thefact that the competition continued to get tougher.

MOTIVATING PEOPLE:Richard Nicolosi at Procter & Gamble

B E ST O F H B R • What Leaders Real ly Do

Page 11: What Leaders Really Do

BREAKTHROUGH LEADERSHIP december 2001 11

develop people into outstanding leader-managers. Recruiting people with lead-ership potential is only the first step.Equally important is managing their career patterns. Individuals who are effective in large leadership roles oftenshare a number of career experiences.

Perhaps the most typical and mostimportant is significant challenge earlyin a career. Leaders almost always havehad opportunities during their twentiesand thirties to actually try to lead, totake a risk, and to learn from both tri-umphs and failures.Such learning seemsessential in developing a wide range ofleadership skills and perspectives. Theseopportunities also teach people some-thing about both the difficulty of lead-ership and its potential for producingchange.

Later in their careers, somethingequally important happens that has todo with broadening. People who pro-vide effective leadership in importantjobs always have a chance, before theyget into those jobs, to grow beyond thenarrow base that characterizes mostmanagerial careers. This is usually theresult of lateral career moves or of earlypromotions to unusually broad job as-signments. Sometimes other vehicleshelp, like special task-force assignmentsor a lengthy general managementcourse. Whatever the case, the breadthof knowledge developed in this wayseems to be helpful in all aspects of leadership. So does the network of rela-tionships that is often acquired both in-side and outside the company. Whenenough people get opportunities likethis, the relationships that are built alsohelp create the strong informal net-works needed to support multiple lead-ership initiatives.

Corporations that do a better-than-average job of developing leaders put anemphasis on creating challenging op-portunities for relatively young employ-ees. In many businesses,decentralizationis the key. By definition, it pushes re-

sponsibility lower in an organization andin the process creates more challengingjobs at lower levels. Johnson & Johnson,3M, Hewlett-Packard, General Electric,and many other well-known companieshave used that approach quite success-fully.Some of those same companies alsocreate as many small units as possible sothere are a lot of challenging lower-levelgeneral management jobs available.

Sometimes these businesses developadditional challenging opportunities by

stressing growth through new productsor services. Over the years, 3M has had a policy that at least 25% of its revenueshould come from products introducedwithin the last five years. That encour-ages small new ventures, which in turnoffer hundreds of opportunities to testand stretch young people with leader-ship potential.

Such practices can, almost by them-selves, prepare people for small- andmedium-sized leadership jobs. But de-veloping people for important leadershippositions requires more work on the partof senior executives, often over a long period of time.That work begins with ef-forts to spot people with great leadershippotential early in their careers and toidentify what will be needed to stretchand develop them.

Again, there is nothing magic aboutthis process. The methods successfulcompanies use are surprisingly straight-forward. They go out of their way tomake young employees and people atlower levels in their organizations visi-ble to senior management. Senior man-agers then judge for themselves who haspotential and what the developmentneeds of those people are. Executivesalso discuss their tentative conclusions

among themselves to draw more accu-rate judgments.

Armed with a clear sense of who hasconsiderable leadership potential andwhat skills they need to develop, execu-tives in these companies then spend timeplanning for that development. Some-times that is done as part of a formal succession planning or high-potentialdevelopment process; often it is more in-formal. In either case, the key ingredientappears to be an intelligent assessment

of what feasible development opportu-nities fit each candidate’s needs.

To encourage managers to participatein these activities, well-led businessestend to recognize and reward peoplewho successfully develop leaders. This israrely done as part of a formal compen-sation or bonus formula, simply becauseit is so difficult to measure such achieve-ments with precision.But it does becomea factor in decisions about promotion,especially to the most senior levels, andthat seems to make a big difference.When told that future promotions willdepend to some degree on their ability tonurture leaders, even people who saythat leadership cannot be developedsomehow find ways to do it.

Such strategies help create a corporateculture where people value strong lead-ership and strive to create it. Just as weneed more people to provide leadershipin the complex organizations that domi-nate our world today, we also need morepeople to develop the cultures that willcreate that leadership. Institutionalizinga leadership-centered culture is the ulti-mate act of leadership.

Reprint r0111fTo place an order, call 1-800-988-0886.

Well-led businesses tend to recognize and

reward people who successfully develop leaders.

What Leaders Real ly Do • B E ST O F H B R

Page 12: What Leaders Really Do

ARTICLES

“The Ways Chief Executive Officers Lead”Charles M. Farkas and Suzy WetlauferHarvard Business Review, May–June 1996Product No. 96303

CEOs inspire a variety of sentiments ranging from awe to wrath, but there’s lit-tle debate over their importance in the business world. The authors conducted160 interviews with executives around the world. Instead of finding 160 differ-ent approaches, they found five, each with a singular focus: strategy, people,expertise, controls, or change. Although approaches may vary, all leaders havethree major functions to fulfill in an organization: direction setting, alignment,and motivation.

“The Manager’s Job: Folklore and Fact”Henry MintzbergHarvard Business Review, March–April 1990Product No. 90210In this HBR Classic, Mintzberg uses his and other research to debunk myths ofthe manager’s role. Managerial work involves interpersonal roles, informationalroles, and decisional roles, he notes. These in turn require specific skills – for example, developing peer relationships, carrying out negotiations, motivatingsubordinates, resolving conflicts, establishing information networks and dissem-inating information, making decisions with little or ambiguous information,and allocating resources. These skills are different from, but complementary to, the more concrete ones required of leaders.

BOOKS

Leading Change John P. Kotter Harvard Business School Press, 1996Product No. 7471

Leadership is primarily about coping with change, and this book describes whata change initiative looks like. Kotter identifies eight errors common to transfor-mation efforts and offers an eight-step process for overcoming them and success-fully completing the transformation: establishing a greater sense of urgency,creating the guiding coalition, developing a vision and strategy, communicatingthe change vision, empowering others to act, creating short-term wins, consoli-dating gains and producing even more change, and institutionalizing new approaches in the future.

Exploring Further

To learn more about the ideas in

“What Leaders Really Do,” explore

the related articles and book listed

at right. You may access these

materials on the Harvard Business

School Publishing Web site,

www.hbsp.harvard.edu, or by calling

800-988-0886 (in the United States

and Canada) or 617-783-7500.

12 harvard business review

B E ST O F H B R • What Leaders Real ly Do