Where Did I or They Go Wrong?

May 21, 2009

Waiting for a plane in Kiev, Ukraine, I picked up the Harvard Business Review from January 2009. Although I do not typically read this magazine, because it is so alien to my way of thinking, I did so because I was bored.As I should have predicted, I became quite intellectually disturbed reading some passages and wondering, am I on the wrong track or is "the establishment," as represented by Harvard, on an old, outdated track?For example, page 21 on what it means to be a leader: "Leaders on the front line must anticipate merely what comes after current projects wrap up. People at the next level of leadership should be looking several years into the future. And those at the C suite must focus on a horizon some ten years distant."Well, being proactive requires anticipating the future, granted. Predicting the future is a necessary variable, but not sufficient in itself to make one a successful leader. The variables have to also be sufficient to produce the desired results, in this case to lead the company to success.Michael Kami, who was the chief strategic planner for Xerox forty years ago, has said-and I agree with him-that planning is not good enough. In today's increasingly turbulent environment it is almost impossible to anticipate what will happen ten years hence.How many companies predicted the oil crisis of the last century or the credit crisis of this century, in spite of all the prediction models, and the millions of dollars spent on them.We live in what Peter Drucker called an era of discontinuity, and who can predict discontinuities? We can predict the future better if it is more or less like the past, but discontinuities are very difficult to predict with any workable benefit.So what to do? Kami already said it: Predict less and work more on making your company more flexible so it can easily change directions as conditions change.Now, what does it mean to be flexible?Eliminate hierarchies like some present gurus recommend? No, I say, because then you destroy accountability.Have no fixed strategy or budgets? Thank God, at least the well-meaning gurus have not got there yet. Obviously not.So what then?Create, nurture, feed, and reinforce a culture of mutual trust and respect so change is not threatening.It is easier to turn on a dime when there are no suspicions of hidden interests and agendas. It is easier to learn from each other's differences in opinion, and thus make better decisions, rather than have disrespect for each other's contributions and suffer from the maladies of "think tanks" where people cannot stand each other.Creating and nurturing the right culture is what leaders do especially in the turbulent environment in which we live where flexibility is essential for success.A leader is not the pointing finger. HE or SHE is the thumb, the finger that works with all other fingers to create a hand.In my book, The Ideal Executive: Why You Cannot Be One and What to Do About It, I claimed that the difference between a manager and a mismanager is whether he/she has a zero in the PAEI code. If so, he is a mismanager. If not, he/she is a manager but not necessarily a leader.A leader must have two of the PAEI roles in capital letters, and it is imperative that one of them be (I). What the other role should be depends on the task. For marketing, it is (E). For accounting, (A). For a CEO it depends where the organization is on the life cycle.We are all leaders as long as we are sensitive to those we lead and the environment in which we operate; as long as the style is functional to the task at hand at the time it is needed. So may I strongly disagree with HBR : predicting the future is not sufficient to make a person a leader.And here is more:HBR, page 23 says: "The main thing...from day one, the new leader must put shareholders' interests first...and promote value creation."Sounds right. This is the cornerstone of microeconomic theory and Milton Friedman, the Noble Prize winner in economics, had it as a religion: The main responsibility of management is to the stockholders.How wrong.That is managing by earnings per share rather than managing for earnings per share. There is a big difference in that one word; the difference is on what management focuses.Our mind is like a camera. Do you focus on the mountains behind and have the person close to you somewhat blurred, or do you focus on the person in front of you and have the mountains far away somewhat blurred?When you focus on stockholders value creation you defocus your attention on the market, on your customers.That is why CFOs, without any marketing or sales experience, who become CEOs predictably and repeatedly lead their companies over the cliff. They are not watching the road. They are watching the dials....Management should focus on clients, on increasing repeat sales, which is an indication of client satisfaction. They should focus on post-purchase service. On pre-purchase market needs creation.It is the market that produces revenue. Without revenue, no matter how much you cut costs, you are heading "south."It is so easy to miss this point. When you focus on increasing stockholders' value you might focus exclusively on the cost reduction side of the P&L and ignore that the market is slipping away, like what happened to the car industry in the US. It has been led for far too long by financial geniuses who focused on stockholders more and on clients not enough.Your first and most important stakeholder is the client. Your organization exists first and above all to satisfy the changing needs of the market.Focus on that and if you do well there, at a cost you can afford, stockholder value will follow.Manage for the stockholders, not by the stockholders.Oh well. It is not strange I can never get HBR to publish any of my thoughts. We just belong on different planets, I guess.Sincerely,Ichak Kalderon Adizes, PhD.

Written by
Dr. Ichak Adizes