LEADERSHIP: OLD RULES INTO NEW RULES

Leadership is a multi-faceted practice. It has numerous prongs, tumblers, enablers and generators. Recently in a bout of 'Jack bashing', Fortune Magazine (the company that originally enshrined Monsieur Welch as 'Manager of the Century' in 1999) has decided to take issue with his era and the spotlight his own leadership practices are currently enjoying.

To be fair to Fortune, they admit that Welch extended our paradigm of leadership in the 80's and 90's, and if at the helm today, may be leading the very revolution that Fortune is here writing about. However, in the best traditions of 'debunking' this disclaimer is provided as an afterthought, nestled deep in the article, farther than most business 'voyeurs' will go.

I can't resist entering this fray! Over the years we've guided numerous clients as they've sought to adapt or adopt key learnings from the 'GE Playbook' so to speak. Equally, I know many clients who've applied many of Fortune's 'new rules' and so can speak to this on the basis of 'theory in action'. So, let's take a look...

JACK RULE #1 (I prefer this to 'old rule', which is just a cheap rhetorical 'dig' in this case): BIG DOGS RULE.

ALLEGED NEW RULE #1: AGILE IS BEST, BIG CAN BITE.

The Sensei Perspective: Be agile, leverage your size to the hilt. The aim has to be agility, the ability to respond...to opportunity, to inspiration, to threats, to new openings, to glimpsed 'blue oceans' whatever.

The problem with size is unnecessary complexity, the almost inevitable multiplication of bureaucracy (that arcane practice designed to frustrate people who want to get things done), and the insulating of people from each other (we are flanked by our own hordes and kept away from peers and internal partners).

If, like GE, you can go to war on bureaucracy, simplify and prune ruthlessly, get people interacting with each other to generate action (not endless debate), and use size (a la Welch) to 'take more swings' (the only and ultimate justification for size -- the magnitude and audacity of what you can attempt), hallelujah! Then indeed, as the 90's 'saw' went, you've put a small company soul into a big company body.

However, by Jack's own confession, if size doesn't gear you up to take bigger swings FAST, then you have all the disadvantages of size and none of its blessings.

Big is only better when there is extraordinary leadership -- then scale of investments, R&D, partnerships, reach, can be wonderful. Absent that, if banking on mediocre leadership (which is also playing the odds): beware of genus gargantua, and go for a size and structure that impels rather than inhibits enterprise.

Also by 'extraordinary leadership', I don't mean just at the top. I mean throughout. Otherwise, the final indictment of large companies, is that we spend our most gifted leaders' time on managing the complexity of the organisation and trying to harness it, rather than the bulk of that time in creating unprecedented value in the market and channeling talent and passion.

A leadership factory like GE which is really almost a conglomerate of independent businesses pulls it off (largely)...but that's a tough league to aim for.

JACK RULE #2: BE 1 OR 2 IN THE MARKET (OTHERWISE BUY, SELL OR FIX)

ALLEGED NEW RULE #2: CREATE NEW VALUE

The Sensei Perspective: Create new value where you can lead the market. The original rationale for Welch's perspective here was that to be a truly winning enterprise focus on where you can lead, dominate, and truly WIN. Don't diffuse focus by being in lots of businesses where you have neither the competencies or the passion (what Jim Collins would call your 'hedgehog'). Put your energy, and your money, and your imagination, where you really believe you can win BIG!

We have seen the market littered with examples of companies that are unfocused in the businesses they are in, or even within the businesses in terms of the brands they invest in, or the models of cars or computers that they churn out and market. Invariably the 20/80 rule applies. When you can find the 20% that delivers 80% of your profitable growth, focus there. If even there, you don't believe you have either the drive or a differentiating advantage that would let you take market leadership, why not deploy that passion where that WILL be possible?

Actually, this rule is just poorly stated. The chief charge is that GE had an internal re-engineering (gaining efficiencies) or else acquisitions-based strategy to growth. But hey, hard to argue that for those times and those needs that didn't work! Nevertheless, it didn't focus nearly as much as Jeff Immelt and co. are today on game-changing innovation.

If we take that on board, what we're saying is pick businesses where you think you can win for sure. But in evaluating whether you can win, base that not just on today's business for that company, but also in terms of what it could create and innovate.

So could Cirque du Soleil be 1 or 2? Not in yesterday's circus, but ABSOLUTELY in the circus of the future it brought into being. Could Starbucks have reigned in the coffee business of yesterday? Probably not. But it could in a world of jazzy beverages in a bustling cafe atmosphere.

So in making the judgment of winning niches, or even winning markets, we may have to look at the emergent potentialities not just the current ones and then determine if we have the passion/capability/profit trifecta right to really go for it.

JACK RULE #3: SHAREHOLDERS RULE

ALLEGED NEW RULE #3: CUSTOMER IS KING

Sensei Perspective: When customers win, shareholders eventually rule. There are all kinds of tricks to help share prices temporarily surge. As Hamel and Pralahad pointed out, the red pencil approach is (if you look at the business as value produced over costs) to reduce the denominator. That's much easier than finding ways to grow the numerator.

However research clearly showed that the surplus cash generated by downsizing/rightsizing was rarely re-invested back into those very companies. Instead it went to companies with real growth strategies. As the always refreshingly provocative Tom Peters put it: 'You can't shrink your way to greatness.'

If shareholder value is about meeting quarterly forecasts, then indeed this 'old rule' is dangerous. But if it's about creating long term wealth for the business and its investors, the only real source for that anyway is the customers that make up your market. So there's no tension between the two rules really. Peter Drucker with wry astuteness observed: 'The purpose of a business is to create a customer.'

As for this 'customer is king' business, it's essentially correct, but hardly the most apt image. A business is justified by its customers. But that can't be the exclusive focus because to look after the customer we have to look after a lot of other things with equal commitment. It's part of an overall gestalt. Customers don't know what vistas are out there. Customers can't be served until internal customer service glistens and internal partnerships thrive. Until supply chain delivers and is optimised, and finance ensures we are 'fit for growth', we can't serve the customer very well at all.

So the customer ISN'T 'king', in the sense of being the ultimate dictator. The customer is more our lover. Sure over time, lovers want consistency, reliability, trustworthiness. But they also want passion, surprise, engagement, excitement. Where did this silly 'king' thing come from? I remember someone writing we had to create 'waves of lust' in the customer. Yes, ideally towards US, our business, our service, our team, our processes, our spirit, AND our relationship with THEM.

JACK RULE #4: LEAN AND MEAN

ALLEGED NEW RULE #4: LOOK OUT, NOT IN

Sensei Perspective: Remove the internal barriers to looking out and generating action from that vision. It can hardly be the case that Welch's mania for dismantling bureaucracy, for taking unnecessary 'work out' of the system, of tackling demotivators and barriers to peak performance, was misguided. And anyone who thinks most businesses have transcended these problems as if they were curious relics of a bygone age, hasn't spend 30 seconds in a modern-day business. We have made progress in jargon for sure, our practices are still as primeval as ever.

And this isn't just large businesses. 20 person shops are still rife with this. This is because 'size' is just one of the problems; the real problem is our unwillingness to take on our emotional immaturity and the fact that our psyche is still awaiting an evolutionary movement to the modern era. Our technology may be 21st century, our mentality is still 19th century. And it's both 'mindset' and 'heartset' actually here that are culprits.

We often advise our clients to go hunting for 'passion killers' as we wrote a few newsletters back. These are the corporate norms and interactions that deaden our spirit. They tend to be pernicious and pervasive. So indeed, they have to be rooted out. As situational leadership theorists have long told us (with special kudos to Ken Blanchard for making this so much more accessible to so many people), the aim is to move a corporate team from fighting inside to focusing outside. That is a paradigm shift that requires that the internal lack of trust, dysfunctional processes, and insanely perpetuated mind-numbing proceduralism and proliferation of 'busy work' gets taken on and taken down.

Looking out and acting upon what we discover is indeed the key. But before you can run the marathon out there, you may first have to wrestle with some habits in here. And though the aim may be the marathon, without working on being 'lean and mean', it will be a painful and quite possibly fruitless aspiration.

WELCH RULE #5: RANK PLAYERS, GO WITH THE A'S

ALLEGED NEW RULE #5: HIRE PASSIONATE PEOPLE

Sensei Perspective: Hire passionate people and continue to differentiate them on merit. This has got to be the silliest revision of the lot. So if you hire passionate people, you shouldn't grade them thereafter? And it's not just passion, it's talent. We want talented people with a passion for winning, and for the things we value in our company. Welch again pioneered evaluating people based on both delivery and living the values (the famous GE matrix).

Absolutely, look for passion, look for 'cool', but also a bit more. I was at a Conference with Mr. Welch and he was asked what he looked for when interviewing. And he said (I'm paraphrasing), look for smart people, with lots of energy, who get their kicks out of coaching their people to win. If they can't give you specific examples of how they grew their people and helped them score big, watch out! And they should get their biggest sense of pride out of recounting this.

To me, this doesn't sound like Jack didn't or doesn't 'get passion'. Talent and passion are 'potential' though, they are not guarantors of performance. They are great indicators that focused on the right goals, supported and challenged by good leaders and peers, fairly compensated for what they deliver and encouraged to take meaningful risks, the ROI for such 'leadership' towards the talented/passionate person will be far greater than towards a 'skilled' (but not really talented) and fairly humdrum (relative to that job opportunity) contender.

So if you hire indiscriminately and just grade afterwards, of course that's outmoded. But nobody is claiming that. It can indeed be argued that we need to spend more energy on getting the right people in and unleashing their talent than we've done in the past with our fixation on 'industry experience' and 'CVs'.

No argument there. But after that, we still have to identify and nurture the superstars, and encourage and coach those who can join them.

WELCH RULE # 6: HIRE CHARISMATIC CEO'S

ALLEGED NEW RULE # 6: HIRE COURAGEOUS CEO'S

Sensei Perspective: Hire courageous CEO's with soul and purpose, vision and daring, empathy and enthusiasm. This is really a non-debate that has become inflamed into a cottage industry almost.

If you define 'charismatic' as megalomaniacal, self-absorbed, ego-motivated, eager for acolytes, of course we don't want such CEO's. If you even define it solely as 'personal charm or magnetism', then it makes being a leader seem like just a personality cult.

But a leader can be 'magnetic' for a variety of reasons. Winston Churchill suffered from many of the vices mentioned above, arguably so did FDR, but they were compelling leaders. They raised us above ourselves. Their magnetism came from their vision, their courage, their belief in what people could do when fully and fervently committed.

For me, that's a pretty captivating collection. The Jim Collins statement is about a 'post-charismatic' leader. This is someone to me who can wield charisma, but has moved beyond it to some extent. Nobody can hold you permanently spellbound. Charisma gets attention, but something else has to keep it.

Collins says 'humility with passion'. For some reason, commentators only have picked up on the humility part. I put it this way: a leader who is committed to both results and culture, not their own personal heroism in making these manifest.

The empty charismatics produce followers not other leaders. Say what you like about Jack Welch, but GE has produced more CEO's of other companies than the Harvard Business School. And when you can mention Immelt, Nardelli and McNerney (current CEO's of GE, Home Depot and 3M respectively) just off the top of your consciousness, we can hardly say that Jack didn't 'get' the need to develop more than empty charisma in his team. All of these guys are currently involved in very gutsy turnarounds and re-inventions of their venerable companies.

Frankly, I think Mother Teresa and the Dalai Lama respectively were and are wildly charismatic, though they've never pounded a pulpit visibly, or made a habit of yelling at the top of their lungs. What we find 'magnetic' is actually a combination of personal originality and authenticity, courage, the ability to communicate and connect, and to embody and enliven the vision you claim to stand for.

WELCH RULE #7: ADMIRE MY MIGHT

ALLEGED NEW RULE #7: ADMIRE MY SOUL

Sensei Perspective: I will use my might to advance my soul. When hospitals are built for the needy, or money needed to combat AIDS, we need both material might (resources) as well as soul (dedication, commitment, energy, sacrifice).

We want to admire might for its potential to add value. Also as Jack has pointed out, great companies, winning and profitable companies, usually want to give back to their communities, their people. They have the self-confidence to invest, to want to make a difference. Their people, also growing, feeling hopefully both prosperous and fulfilled, are more likely to want to share with their families, friends and communities. The most spiritual in the world tell us that all change is first personal, then local, only then does it ripple outwards. Otherwise it's just empty evangelism and posing.

The soul of a company, what it is committed to doing and being, its desire to make a positive difference in the world's fortunes and challenges, is far more likely to flow when they are further up the corporate version of Maslow's 'hierarchy of needs'.

I fully agree, there are people with virtually nothing, who give enormously of themselves, their scant resources. We owe them our gratitude, our deepest respect, and if we have it in us, we owe it to them to be truly inspired by their example. There are also companies who believe they are part of an interdependent society and won't wait for glory, or even outrageous profits, to commit themselves. They are beacons for everyone.

Moreover, soul here means more than charitable endeavors. It means standing for something that's worth it in terms of your vision and core purpose, beyond just making money. It's about nudging if not influencing the world we live in.

All that agreed, if as Stephen Covey reminds us, our aim is to expand our circle of influence so that it more closely approximates our circle of concern, then I would argue we admire the mighty when they (like say Bill Gates and Warren Buffet, to some extent these days, Bill Clinton) flex their might and make an impact far beyond what might otherwise be possible.

Admire might because it provides lessons in achievement and hopefully also because of its potential to make things 'right'.

SUMMING UP: Welch was mostly right as we've argued. Many of these 'new rules' are what you do 'next' once you've internalised and hopefully institutionalised the earlier GE practises.

However, fascinatingly, I think the essence of the Welch message hasn't been adequately captured either by the inventory of 'old rules' or by this roll-out of 'new ones'.

The Welch revolution coincided with the Drucker/Peters/Covey/Blanchard revolution. Management grudgingly rediscovered 'people'!

The Welch hymnal is about harnessing the talent of people and getting them to deliver, and to deliver where you can win BIG. It's about 'living the talk', relentless focus (not 200 initiatives, about 10 key ones), and winning daily through winning execution.

The 'new rules' are about taking that forward. It's what Fortune conceded in the smaller print. If we can add agility, innovative value, external orientation, inviting in and fostering passion, expressing courage and soul, to the enablers that earlier era provided (helping people to deliver essentially) -- then we will pay both a marvelous tribute to where we've come from as well as pave the way to where we should now be heading!

Omar Khan,
Senior Partner, Sensei International
Phone: 1 (212) 295 2191, Fax: 1 (212) 295 2121
e mail: omar@sensei-international.com

Omar Khan is a globally acknowledged leadership development innovator and success coach. He is a sought after change catalyst and a pioneer in transformational learning. He is the author of the acclaimed book SYNERGY as well as the newly released and much awaited, TIMELESS LEADERSHIP.