MEASURING LEADERSHIP

I recently did a keynote at the annual conference of The Leadership Trust in the UK. One of my fellow speakers presented a talk on how and what to measure when we seek to assess leadership effectiveness. It stirred quite a debate and the ire of some of the delegates. However in stirring thought, my fellow speaker did a fantastic job.

Other than making a few general comments during a panel discussion, I didn't enter the debate there. That wasn't my role. That said, enough important points emerged that I felt it would be be more than worth it to explore these issues in our monthly newsletter.

Let me therefore take you through the evolution of the argument he sketched and discuss the points as they arise.

DEFINING LEADERSHIP

First a definition of leadership was proposed which said essentially 'Leadership is realizing the maximum value of people's potential.' I should say that 'value' here, for this speaker, meant economic value, objective value. So, put another way, leadership is getting the most out of people (in objective, profit and growth-based terms). This is why our speaker was not very impressed by the UK football (soccer for Americans) team, given that they performed well on occasion, but only by being paid £100,000 per week or some other obscene sum. He contrasted their performance with the Irish team who recently beat them, who were 'turned on' it seemed by more than their paycheck. Hence they produced 'more' with 'less' in his terms.

One has to be cautious, because interpreted in another way, the definition can seem like a more holistic statement than the one he was making. Taken that way it could almost be interpreted as 'Helping people be all they can be.' But the speaker meant for his definition to be read literally, not figuratively. He meant it relative to corporate productive value, not personal value.

This contrasts intriguingly with The Leadership Trust's own definition of leadership (I'm paraphrasing slightly): 'Leadership is using our personal power to win the hearts and minds of people to achieve a common purpose.' Notice that this is more value-laden. It implies that HOW we achieve the common purpose matters as much as the achieving of it. Leadership, by implication, is the path we take to the summit, not just scaling the peak.

Sensei's own definition, and an offshoot of our company vision is: 'Leadership is making personal and organisational possibility REAL.' We are suggesting it is not enough that leadership 'adds value', but that it continually pushes the envelope, and makes new strides and stimulates breakthroughs both at the personal and the organisational level.

However, all three definitions agree, that achievement MATTERS. Leadership is not just a feel-good tap dance, it isn't just a set of empathic gyrations. It has to translate into measurable growth and value.

WILL THE REAL LEADER PLEASE STAND UP?

We were next shown a series of slides and asked to vote on the relative merits of various leaders. The first one was relatively incendiary, but interesting. Hitler vs. Churchill.

Hitler got some votes, there were some abstentions, and certainly the majority went for Churchill. The point was made however, that but for the second World War, Churchill made all kinds of dubious and imbalanced decisions. Moreover, in terms of getting productivity and objective 'value' out of people, Hitler certainly was effective!

It didn't fly with the audience though. Most felt that taken literally, 'getting value' out of people at the expense of invading other countries and a Holocaust, disqualified this from the kind of leadership we're interested in. Certainly such focused and almost maniacal achievement can be an aspect of leadership, but it's far from the whole story. On this interpretation, if 'getting value out of people' were all that leadership was about, the Pharaohs of Egypt did that quite successfully, albeit by enslaving people and killing off a large number of them. But certainly they got all the 'potential' out of them in an objective sense!

Great leaders aren't great at every juncture. The Churchill we all admire is the one who showed up when his country and arguably human civilization faced an extraordinary test. He helped rally and galvanize and catalyze in a way that lifted people above themselves. Someone who had met both said: 'When you left after meeting Hitler, you felt he could do anything.' When you left after meeting Churchill, you felt YOU could do anything.'

The next set of slides were Margaret Thatcher, John Major and Tony Blair. We were again asked to vote. Fascinatingly, irrespective of antipathy for her politics by many, the votes for Maggie were overwhelming. Why? Everyone said they knew who she was, what she believed in, and what she was fighting for. Certainly her success had something very important to do with it. She was effective. But beyond that, she also stirred the entrepreneurial spirit of her nation.

John Major, perhaps unjustly, got no votes. I suspect this had as much to do with his lack of charisma as anything else. Mr. Major made perhaps an inadequate impact to register much with people. About 10-15% of this leadership-savvy audience went for Mr. Blair. His numbers have certainly dipped recently because people wonder if there's any genuine conviction there, or whether he billows with the wind.

This demonstration was fascinating because it highlighted that popularity is not necessarily what wins our respect in the leadership arena. Results certainly matter, but so do leadership vision, resolve, character, tenacity.

BUSINESS LEADERS

Then came the business comparison, which sparked considerable controversy. Slides were shown of Jack Welch, Bill Gates and Rick Wagoner (chief of GM). We weren't asked to vote but simply to weigh in as to the leadership mettle of each one.

While there was some waffle re Mr. Welch, eventually the verdict seemed to be that he had the 'real stuff'. The concern was his tenure as 'Neutron Jack', when so many people were sacked at GE. The discussion was whether that's a great leader, even though he was unambiguously effective in driving profitability and growth. We had a mature audience however, who didn't go down the primrose path of ethical prudery here. They recognized that a re-invention of the company sometimes requires the 'edge' to take painful, even emotionally horrifying decisions.

Anyone who has listened to Jack talk about this period, knows how harrowing he found it. In Jack's own words: 'Anyone who finds it easy to do, shouldn't be a leader. But anyone who can't do it, shouldn't be a leader either.'

But leaders also change and evolve. And Jack himself moved on from that period to being one of the most energized corporate coaches of leadership potential we have on record. In terms of valuing and maximizing human capital, we've yet to see his equal.

Re Rick Wagoner, the case was more straightforward. Despite windbag pomposities about leading 'economically, socially and environmentally' and being 'a good corporate citizen', GM shares have achieved virtual Junk Bond status. GM has lost 42% of its value since 2002. GM's corporate pronouncements sound eerily like the 'prosperity' statements that used to emanate from the former Soviet Union, which published news in a paper named with unintended irony, PRAVDA (truth). Hype certainly ISN'T leadership.

However, the problem is NOT that Rick Wagoner and GM want to lead in more than economic terms. The problem is that they talk a better game than they lead. Leadership is finally about what you do, not what you say. That's the disconnect that indicts GM, not the fact that they're looking at a broader canvas.

GM was rightly contrasted with Toyota. Toyota is less of a family concern than it once was, but its ownership is not what makes it compelling. Rather what makes it compelling is its market capitalization of $127 billion roughly, and its 19% growth over the same period, 2002 to 2005.

Toyota lives, breathes and eats total quality management. And the interesting demonstration of why it thrives with this 'dated' approach is that it has consistently used it for years! TQM has had to be re-branded only because more people waved its flag than actually did anything with it. More recent iterations, that are organized slightly differently, like Six Sigma, do add enhancements to it, but the core approach and discipline is the same. We heard later in the Conference from the UK Food Distribution Company 3663, who continues to grow and succeed, and has been doing TQM consistently and passionately for over 11 years. They haven't had to switch to another 'fad du jour', because they've taken concerted and tangible action.

While that 11 years is a flash in the pan by Toyota standards, it makes an important case. Whether TQM, or the world-nudging innovation that should transcend it, or the customer connection that should justify all of it -- any or all of it matters only if it is a sustained badge of faith, not a temporary flirtation. While leadership is flexibility at times, as Maggie's and Jack's cases both demonstrate, it is also resolve and follow-through. That's how possibility becomes real and potential gets maximized.

The other Toyota 'secret' is its commitment to what it calls 'employee relations', built solidly on trust and mutual respect. Respect tops the chart, in culture after culture, across countries around the world, as the one non-negotiable relative to getting people engaged with a business and team. It's amazing how little energy we sometimes devote to a value whose ROI given its zero literal cost is just astronomical.

THE CURIOUS CASE OF BILL GATES...AND TESCO

So far, so interesting. However the biggest split arose over Mr. Gates. As the richest man in the world, presiding over what was for many years the most valuable company in the world (now trumped by GE), most people felt that Mr. Gates had established his bona fides. Moreover, his humanitarian concern for say seeking to eradicate malaria, has also won him kudos and personal admiration.

However, our speaker presented another perspective. Over the same period he was reviewing, 2002 to now, Microsoft has lost 16% of its market value (down from $326 billion to $271 billion). Moreover, they've had to pay $775 million to settle a suit with IBM, the EU recently voted that their business practises were 'monopolistic'. In other words, the EU view is that we don't want rivals being eliminated in so wholescale a manner, we like competition, and we don't think using size and current ubiquity in the way you are, is a social or even economic net benefit to our society.

It may be that the bureaucrats in Brussels are wrong however. It could be that rivals need to create products so compelling that IT Directors will undertake the costs to shift away from Microsoft. It could be that Microsoft has to see the rationale in market terms of moving away from 'domination' as a strategy to 'customer success'. Worthy of debate.

Equally though it should be pointed out that while some of the collapse in market value was the result of various lawsuits and anti-trust challenges, as well as the resurgence of rivals like Apple, this is also the period following the collapse of the tech bubble, which doubtless has also contributed.

The audience though had it spot on. They pointed out that leaders change (as we pointed out above) and have more than one facet. We aren't looking for perfect exemplars, but people we can learn from in certain key arenas. You could admire the Bill Gates who built Microsoft, and the human being who cares about malaria, while being dubious about the penchant for quasi-monopoly that seems to have obsessed Microsoft after it became the outrageous success it did. Similarly you may admire the growth-fostering Jack Welch of the 90's much more than you do the 'take no prisoners' Welch of the 80's.

Tesco also came up. Most of the audience admired Tesco because they do what they do better than others. There was a concern expressed by our speaker whether Tesco too was so eager to eliminate its rivals that we wouldn't have any competition left. And with its clout, Tesco could literally intimidate and drive farmers to the wall in search of lower prices for its customer base. The point being raised was, 'Are these the leadership practises we want as a society?'

Interesting, but then to take the challenge seriously, we have to look beyond the initial definition of 'maximizing the value of people's potential'. Tesco is certainly doing that. And whether there should be social intervention if Sainsbury's and others remain bland and unspirited is unclear. Only when and if Tesco takes actions that materially delimit current or future rivals from establishing or re-establishing themselves, would the interventionist drum beats have greater credence.

Moreover, as was pointed out, when a Tesco opened in an impoverished part of Leeds, it actually raised living standards, provided fresher produce, gave people jobs, and even helped to revitalize the overall neighborhood. How do we vote approvingly for those benefits, and vote for malaria treatment (courtesy of Mr. Gates) and then seek to derail the enterprises that provide the fuel for these opportunities?

CORPORATE SOCIAL RESPONSIBILITY

This leads us to a very interesting conundrum. Is there corporate social responsibility? Should there be? And what is it's real source?

At the Tesco and Microsoft level, we may want to let these companies dominate, if they are dominating due to extraordinary strategy, innovation and execution, and not courtesy of business practises that present barriers to entry that would stifle competition. If we don't like what they are doing, then we have to shake off our personal complacency, and vote with our buying decisions.

There is an argument being promulgated, by the magazine THE ECONOMIST, as well as by our speaker that day (and quite a few others) that corporate social responsibility is a bit of a nonsense. Looked at sceptically, companies are willing to take social issues into consideration because 'social costs' translate into 'economic costs'. So when we as a society were okay with Nike using child labour, all the exhortations in the world didn't stop it. As it became a bad business move to continue to do that, as the tarnishing of image became translatable into a dip in profits and company viability with its target niche, there was a shift.

In other words, values reside in people. As we express those values and reflect them in our economic allegiances and buying decisions, companies become more ethical and socially responsible.

That said, I worry when we say economic value is all that matters. At some level it is. But it is a dangerous fiction to state that's ALL that drives leaders or companies.

By extension, at some level, everything we do we do to survive. But that is hardly a comprehensive description of human motivation.

In some sense, male/female relationships may ultimately be all about sex. But that's not their Alpha and Omega.

At some level, marriage may be a way to deal with loneliness and to procreate. But there is a deeper well there too.

To some extent it's Maslow all over again. It's oxygen to a fire, necessary but not sufficient.

Good business sense is the bedrock. But I have many clients who do unsung acts of altruism that they have never advertised to anyone. From tsunami relief, to sponsoring orphanages in countries they operate in, to donating medicines. Does that help their brand and therefore possibly their business? Yes. But is that ALL that's motivating them? No. Unlike the Nike case, would anyone blame them for not doing it? No.

The real ad they're taking out is with their own team. So, yes, the excitement and motivation of their team to be part of a company and team that cares for the country and society in which it operates, is likely to translate in an indirect way to the bottom-line. That's the bottom of the hierarchy of needs, and without that, there isn't a business. However, as with all sustained (rather than spasmodic) generosity and altruism, the overall sense of corporate priorities, the type of strategies the company will undertake, the product decisions it will consider, all get influenced. Rarely is a careful cost/benefit analysis done of the 'road not taken' for each of these decision points once such values are enshrined and being consistently acted upon. So, clearly that's not all that's driving it.

From Ben&Jerry's to Body Shop, from Johnson&Johnson to Semco in Brazil, we see this dynamic as 'business value' but ALSO (not 'instead of') personal values combine to make decisions that allow a company to do good while also doing well.

SO HOW DO WE KNOW A COMPANY IS WELL LEAD?

Our speaker answered the above question as follows: Increased Quality, Reduced Cost, Increased Prices, Improved Quality as translated into profit, market share, share price, etc.

Some of the audience demurred. They wondered if every high growth company is therefore, by his definition, well lead?

And so we get to the nub. It is fascinating that success over time has to matter. But equally most companies with performances sustained over more than one business cycle seem to have taken their leadership culture seriously.

While our speaker said he didn't know what people meant by 'culture change', most great companies DO know what they mean. They mean the way we enroll and coach and focus people, how strategies are lived into, how we collaboratively produce results. All these can be seen, heard and felt throughout any organization. Culture is finally how we consistently behave. It is our values and priorities in action.

In fact if Microsoft kept growing, or Tesco did, while engaging in monopolistic practise, our speaker said he wouldn't approve of what that would betoken for us as a society. Therefore he IS applying a sense of 'value'. He may say that's foundational to there being a competitive economy, but it's still a value. Our sense of the society we want IS a value, it's not intrinsic to organisations wanting to optimise objective value in terms of quantity, cost, prices and quality.

Leadership, I suspect, therefore needs more expansive measures. Leadership is likely to be about 'adding value' in some sense for sure (making possibility REAL), but it is through people in a way that genuinely serves customers and our marketplace and even society to some extent. Yet I agree, all that should be good business, if we also do our job as ethical consumers and customers in partnership with the companies that respond to us and serve us.

In fact, many other things are measured re companies. They include innovation (3M has famously required a certain percentage of profits to come from recent innovations), an evaluation of the companies that are the best to work for (there are fascinating correlations between this measure and business success -- paradoxically you get the business benefit as a byproduct when this is a genuine evangel, not if you do this as a 'technique' to produce it), customer identification with your brand or service (what are being called 'love marks', the intermarriage between relevance and affection from consumers and customers towards your brands), etc.

Essentially this empties out where balanced scorecards began. Profit and growth are 'lag' indicators, they are the rear view mirror, they tell us how we have done. Even quality is a snapshot of past decisions.

We also need 'lead indicators'. And that is where leadership, culture, processes, customer innovation and empathy, all come in. They tell us how we are likely to do.

SELLING LEADERSHIP DEVELOPMENT

In the final panel discussion, we ended up discussing therefore how to sell CEO's on the need for leadership development.

Some of us opined that there is usually excessive enthusiasm for such ventures. And we actually have to rein in the runaway exuberance, trying to get CEO's to consider what they really want to achieve and what the specific measurable ROI would be of the exercise.

I agree and disagree. I fully agree that selling 'leadership development' like some disembodied commodity is a mistake. We have to instead discover where human performance needs stirring in the business. Where can we raise the bar? Where can human beings aligned produce more in your business than they currently are atomistically? That's where we need better leadership -- customized and adapted to those realities.

But not all improved leadership has an immediate ROI. Again, leadership is both a lag as well as a lead indicator. How do you immediately measure the value of an attractive workplace? How do we measure the value upon inception of a new IT system? How shall we measure within just a few weeks or even months the value of time spent in discussing, debating, building alignment? What value can we place in real-time on more trusting relationships, the types that anchor eventual audacity and underwrite superb adventures of imagination and initiative in the future? What is the value of honesty that lets people know unambiguously both how they are valued and where they need to improve? What about the habits of the mind and heart that take years to internalise and express habitually enough to produce the breakthroughs from past paradigms that we so eagerly await?

Value certainly matters. And we should sell and frankly buy leadership development finally by appeal to value. But 'value' means more than economic value. And it means more than value that is readily visible today.

In all of human history the search finally for objective measures for human motivation have proven to be a mirage. We need such measures as scaffolding, but it's not where the flying buttresses have come from.

Business is today searching for its soul. Life and business are finally about the cathedral of human possibility. Leaders help us to be architects. In that vein, yes they must count the costs, get more out of resources, safeguard quality. And yes, leaders must get more out of people. But they also have to ensure we put more INTO people too. They have to ensure we dream the dreams, and imagine the currently unimaginable, and enable us in concert to believe enough and care enough so that we act to make all of that real.

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