Are current organisational and leadership dilemmas any less fraught than they were in the past? Getting the right organization ownership and leadership capability are top priorities for today’s CEO, says Mark Goodridge.
Imagine yourself having just taken on the job of Chief Executive of a business. The phones are ringing and everyone wants to give you advice. You listen to the Chairman, non-executive directors, bankers, brokers, financiers, analysts, consultants and to your executives. How do you make sense of it all? Everyone seems to have a predictable, but different set of concerns.
The basic question facing all newly appointed Chief Executives is: “How can I best create more value, financial value, social value or service value than my predecessor?” This question is a constant. In response, the Chief Executive has always had and will always have a small number of big cards to play. Let’s look at four of the most challenging. Each of these cards can be seen as great wheels that have turned over time. Some times new spokes get added, at other times some get taken away. Yet the fundamental dilemmas remain:
- Which form of ownership works best?
- Should I go for a portfolio of interests or focus on just one?
- How can I best organise the business?
- What is the leadership capability I need?
1. Ownership
The current debate is how does private equity add more value than public equity? Does a private equity owner liberate the management so that they achieve unimaginable performance under the public equity regime of forecasts, reporting cycles, analysts and bureaucratic corporate governance? Does the really thin corporate centre of private equity firms provide sufficient direction and steerage to allow the entrepreneurial juices to flow or is it more to do with the financial construction of the deals that improves the profit line? Or is it down to incentives? Make the upside sufficiently fantastic and fantastic performance will be achieved. Beyond all the hype, this wheel is starting to turn. Take Blackstone, for example. It has one of the world’s largest private equity arms with $24 billion in over 300 transactions and is now proposing an initial public offering that will start to put it back into the public equity market. This is for the understandable reason of allowing partners to realise some of their investment but does this mean that in time they become a publicly-owned conglomerate and how will this be different from the ownership structure that private equity has often distanced itself from?
2. Portfolio or focus
We live in a revolving business world where the benefits of integrating businesses are as accepted as the benefit of disintegration. For example, Cadbury Schweppes are disintegrating into two separate companies. The Board has decided that the synergy between the two do not add sufficient value over the businesses as separate entities. Yet Barclays and ABN Ambro are talking about merging, declaring that the combined synergies will add additional value to the two separate companies. Can both be right?
Another dimension is choosing the value chains in which you operate. Do you focus your resources and thereby extract the highest value or do you need to chase up and down the value chain to find new value. Should I own my key suppliers? Should I own my key customers? What should I in-source and what should I out-source?
3. Organisation
We have all experienced the wheel of organization change.
Organisations go through cycles from synergy and integration to focus and separation (see diagram 1 above). We go through periods of creating global or European wide businesses to deliver cross-national customer propositions of brand, product and service. Back-offices are integrated and common systems applied all in the name of efficiency, only to find that we lose the focus on the local market. Local managers rebel and become sullen in the sight of the centre, mutter about non-value adding overheads and create their own business rebellion that can lead to the recreation of country companies again. This is a big dilemma for the Chief Executive when many are trying to get a balance between global and local. The HSBC Bank does a good job in getting over this message in its advertising.
4. Leadership capability
Leadership talent tops the charts of executive concerns. Executive talent remains elusive. Leadership evolves its focus as the wheel of executive concerns turns. The executive focus shifts according to the pressures on the business and the style and approach of the leader. One day it is procurement, the next supply chain; then operations, customers, cost, innovation, new product development and suchlike, all take their turn. I want them all the Chief Executive cries. But the reality is that effective change requires focus and each time we focus we lose emphasis on another part of the complex equation of management.
Managing the dilemmas
Going back to our newly appointed Chief Executive, what do these four dilemmas tell us about the characteristics of future leaders? How do we find, develop, support and organise those people who can practically manage these dilemmas? Each of these four wheels contain complex dilemmas.
In A Whole New Mind, Daniel Pink sets out a new horizon of the conceptual worker. This is the capability to manage dilemmas within an integrated
picture made up of fragments in tension. Pink says, “The future belongs to creators and empathisers, pattern recognisers and meaning makers.” He sees those with strong ‘right’ brains – i.e. artists, inventors, designers, storytellers, caregivers, consolers and big picture thinkers – as those who will reap the richest rewards from developed societies. We need Executives that can see patterns, spot trends, link the external and the internal and bridge across all the elements of the company.
Pink is not alone, Richard Kilburg in his excellent book on executive coaching builds on what he calls ‘business savvy’ as fundamental to ‘executive wisdom’. Savvy is about seeing the patterns, relating them to everyday life and applying that to new unfamiliar situations.
Effective leadership is both seeing these patterns and effectively communicating them. Leadership requires both ‘sense-making’ and ‘sense-giving’. Work needs to be meaningful, inspiring and worth dedicating effort to.
Yet we’re still not good at engaging our staff. Our leadership and management are still largely failing to genuinely engage people. It has simply not been one of our primary executive concerns. There are of course exceptions. I visit schools regularly and am nearly always impressed by the loyalty and vocational commitment to the job of teaching. Two weeks ago, I met a highly successful graduate accountant who had found his work life devoid of challenge and meaning. This successful accountant took a huge paycut to retrain for a more meaningful career as a teacher. Our century-old motivational model is still rather industrial and based on a crude view that money will largely do all the motivating that we need.
By looking backwards through the timeline of management thought the wheel of concern we have for people against our concern for efficiency of process and systems has been different. We are probably in the closing few years of being preoccupied with systems and processes, and I see the wheel turning into a greater focus on people again. We had Hawthorne Experiments, Maslow, Hertzberg, Employee Involvement, Industrial Participation, Liberation Management – and all these early stages of total quality all tried with varying degrees of success to tap into the human spirit, beyond the formal structure of work and its processes.
Businesses are starting to reawaken to the need to engage people at a much deeper level, talk of employee engagement and values-based organisation. As many of the jobs where labour, skill or knowledge are transacted are moving away from our shores then the added-value we have left is how Pink and Kilburg describe it – the creators, the designers, etc – those that are deeply engaged in their domain. People want to live in a work world where values do mean something, where the work makes sense and the environment is invigorating.
Going forward
In the end it is all about the leaders; developing leaders that can understand and make sense of these changing dilemmas. The most pressing concern for businesses going forward, in ER Consultants opinion, is developing the sustainable organisation of the future. We are searching out new technologies to select and develop those who can make both sense and meaning, but also those who can truly engage the hearts and minds of professionals who are desperate for a higher meaning from their work, than the ‘fantastic pay package = fantastic performance’ equation relies on. This is not to say that reward is not important. It is, but it does not have to be the crude selfish instrument of the game theorists.
Going back to private equity, in our experience, yes the money is attractive. But what is more attractive is the freedom to act, the sense of total accountability, the idea that the buck stops here and you have to manage all these dilemmas yourself rather than with an army of little helpers from head office. The creative and conceptual are more challenging to manage in a conventional sense. Control and obedience don’t come easily, and our ability to assess and select becomes more challenging. Our job is to understand them, capture value from them and create sustainable organisations in the next wave of conceptual workers with a new mind and a new wisdom. How? Refer to the box on ‘The Future Organisation’ below. In the words of Bob Dylan’s song, “This wheel’s on fire!”.
The Future Organisation
- Brilliant organisation development, facilitation and coaching;
- Ever more deep assessment of those who can and can’t;
- Imaginative reward and recognition;
- Creating future organisations that are networked and fluid;
- Building partnership working.
For more information contact: mark.goodridge@erconsultants.co.uk
© er consultants Topics Issue 2, 2007
REFERENCES:
1 A Whole New Mind, Daniel H Pink, 2006, published by Cyan Books
2 Executive Wisdom, Richard R Kilburg, 2006, published by American Psychology Association
