Interviews with two of the world’s most respectedexecutivesshow how they havecombined
charismatic leadership with architectural skill to build high-energy corporations.
Charisma
in Action:
The TransformationalAbilities
Of Virgin’sRichardBranso
And ABB’sPercyBarnevik
MANFRED F. R. KETS DE VRIES
hange has become a mantra for corporate
success. The word leaps out of the pages
of the business press: We have to do it and do it
fast to get the rewards we want.
Balanced against this urgency
is a
weighty body of literature affirming that as
individuals people are profoundly resistant to
change. Psychologically and socially, we are
more comfortable
with the status quo.
Change is anxiety-provoking.
We avoid it,
and avoidance behavior can become deeply
ingrained. What’s more, “repetition compulsion”-repeating
past behavior despite the
suffering attached to it-is a well-observed
human tendency. We are often more comfortable with the dysfunctional
devils we
know than with the more sanguine spirits we
don’t, and we deploy complicated patterns of
resistance to avoid rocking the emotional and
psychological boat.
Given all this, how does the process of
change ever get under way? How is our resistance to change weakened? After all, people
can and do change, in both major and relatively insignificant ways.
As a collection of individuals, people in
C
an organization have to be mentally prepared
for the fact that change is inevitable. This is
self-evident, but easier said than done. Managing employee resistance-and
there will be
a lot of resistance-is
the first challenge for
those leading the change process. If they fail
at this, the whole exercise will fail.
Awareness of the need for change is at its
sharpest when the organization
is under
stress from both internal and external pressures. Outside pressures may come from
competitors,
declining profits, decreasing
market share, scarcity of resources, deregulation, technological development,
and problems with suppliers and customers. If these
are coupled with internal pressures-ineffective leadership, poor morale, high turnover,
labor problems, highly politicized behaviorthe growing malaise will reach an unendurable point. Daily frustrations increase; dissatisfaction spreads from person to person,
gradually awakening a universal recognition
that something needs to be done.
It is at this point, however, that the danger of stalling in the change process is most
acute; employees’ defensive routines and
WINTER
1998
7
resistance strengthen in proportion
to the
threats they face. What the organization
needs now is the intervention of an effective
change agent-and
this should ideally be the
CEO, somebody with established power and
authority who is in a position to drive the process through the organization.
THE ORGANIZATIONAL
ARCHITECT
What sort of person does the leader need to
be to act as an effective agent of change? The
answer appears to be someone who can combine the characteristics of a charismatic with
an architectural role-a visionary who can
build a solid construction on his or her vision.
Charismatic leaders are by definition
agents of change. A wealth of literature exists
to describe the special characteristics that earn
them the label of charismatic and equip them
with this ability. To summarize: They display
dissatisfaction with the status quo; they are
restless and energetic; they are action oriented; their discontent pushes them into
searching for new opportunities;
they are
entrepreneurial, impatient, and gifted at articulating a strategic vision, making the big picture seem within reach of their followers.
They are also very gifted at building alliances
and making people feel special.
Leaders like this stand out like beacons in
the business world (as they do in the worlds
of politics, art, and sport) as much for their
rarity as for their brilliance. Because of this,
they attract a great deal of attention.
Of
course, we cannot all become charismatic
leaders. If it is not in our disposition, no
amount of emulation will transform us. But
we can draw on our observation of their skills
and actions and learn something about how
to identify challenges, formulate a strategic
vision, align others behind it, and otherwise
improve our leadership abilities. It is in the
interests of organizational
change-which
requires exceptional performance and commitment from everybody involved in the process-to do so.
In order to move the change process forward, such leaders know that every individual
8
ORGANIZATIONAL
DYNAA4ICS
should be empowered to consider him- or herself as a crucial player. If employees are
inspired, empowered, and free to act, they will
stretch themselves to make exceptional efforts,
demonstrate a high degree of commitment,
and be willing to take risks. Performing in this
way will simultaneously drive the change process and reinforce the new basis of the organization. The blueprint for the change process is
drawn from the leader’s ideals and a shared
vision. The bricks and mortar are communications, trust, and reward.
Let’s look more closely at two people who
are rarely out of the public eye and whose
reputations have been built on their ability to
sustain change and innovation in their organizations-Richard
Branson of Virgin and
Percy Barnevik, until recently, CEO of ABB,
now head of Investor, a holding company
that has ABB in its portfolio. (Barnevik has
remained in the Chairman’s position at ABB.)
Nearly every press report and personal commentary attaches the adjective “charismatic”
to their names and both are widely acknowledged as brilliant organizational architects.
Following are background notes on both
individuals along with exerpts from interviews
with them.
RICHARD
BRANSON
AND VIRGIN
In the summer of 1967,
the
headmaster
of
Stowe, an exclusive
private boys’ school,
confronted
a student
who
had
decided
to drop out of the
institution
to pursue
nonacademic interests.
“Richard,”
the headmaster said, “you will
end up either in prison
or a millionaire!”
Both
prophecies
proved correct. Early in his career, Richard
Branson spent one night in jail after being
caught in a tax evasion scheme, an incident
that embarrassed him greatly-and
yet now,
according to Forbes, he is one of the richest
people in the world. His company, Virgin, has
become a household name.
Not only are the Virgin Group’s products
and services trendy and highly visible, Branson is also a genius at promoting his company
through his daring personal exploits. He is a
master of the media. Rarely a week goes by
without finding mention in the press of Virgin or its flamboyant
chairman. Branson is
regularly cited as a role model by young people who wish to seek successful business
careers without compromising their personal
ethics. He is a unique combination of energy,
originality, shrewdness, and last but not least,
luck. Against many odds, through sheer perseverance, he has been extremely successful
in his business ventures. And at the same
time, he seems to be a truly happy man.
Branson’s personal philosophy is, “Life is
short, one has to make the most of it. Do
things that you like. If your work and your
hobby are the same, you will work long hours
because you are motivated.” Much of this philosophy is reflected in the way he sees his role
as an organizational
architect. Although he
never had a traditional management education, his philosophy
of management
has
proved highly effective: His sprawling business empire is an impressive achievement.
He is still motivated
by a good challenge. Having built his empire, Branson continues to lead the Virgin Group in a daring
drive for expansion, taking on one established industry after the other. He loves to
THE BRANSON
PHILOSOPHY
shake up what he calls “fat and complacent
business sectors.”
The Virgin Group’s core businesses
include retail operations (a chain of megastores in Australia, Britain and Ireland, continental Europe, Hong Kong, Japan, North
America, and South Korea), hotels, communications (video games, book publishing, radio
and television production), and an airline. His
flagship company, Virgin Atlantic Airways,
has regular flights to New York, Los Angeles,
San Francisco, Orlando, Tokyo, Hong Kong,
Dublin, and Athens. Branson reluctantly sold
Virgin Music, the crown jewel of his empire,
to Thorn EM1 in 1992. Recent successful ventures include Virgin Cola and Virgin Direct
Personal Financial Services.
In many ways, Branson has designed a
model company for the 21st century. His
statement that “People are our greatest asset”
was not made just to impress the public. His
business maxim-staff
first, customers second, and shareholders third-is something in
which he really believes. He is of the opinion
that his employees should be given top priority. Therefore, he has created a friendly,
egalitarian,
non-hierarchical,
family-like
atmosphere in all of his companies, an ambience in which people have fun and enjoy
themselves. A central point of his corporate
philosophy is “small is beautiful.”
Branson
likes to preserve a creative, entrepreneurial
atmosphere within Virgin.
Following
are excerpts from a recent
interview with Branson.
OF MANAGEMENT
KETS DE VRIES: What do you see as Vivgin’s key success factors? What makes your
company different from others?
BRANSON: I’m absolutely certain that it’s a question of the kind of people you have, and the
way you motivate them. I’m sure that’s what makes any company successful. If you can
motivate your people, use their creative potential, you can get through bad times and
you can enjoy the good times together. If you fail to motivate your people, your company
is doomed....If your employees are happy and smiling and enjoying their work, they will
perform well. Consequently, the customers wiIl enjoy their experience with your company. If your employees are sad and miserable and not having a good time, the customers
will be equally miserable.
WINTER
1998 9
Could you say something
architecture?
about
the way you design
your organization,
its
Well, our record company [now divested], I suppose, would have been the best example. My
philosophy was always that if there were 50 people in a building, I would go there and ask
to see the deputy managing director, the deputy sales manager, and the deputy marketing
manager. I would say: “You are now the managing director, the sales manager, the marketing manager, or the press officer of a new company.” And I would put them into a new
building. Then again, when that company got to a certain size, say 50 people, I would do the
same thing again. So we actually set up about 25 or 30 small record companies. Cumulatively, they became the biggest independent record company in the world.
What can you say about your reward systems? You once said that you were in the
business of making millionaires.
Yes, I suppose that we have made maybe 15 or 20 multimillionaires through this structure.
We like to reward our key performers for their creative contribution.
When you look at creative, high performing
organizations,
they seem to have a
number of characteristics in common. What do you think they are?
Obviously, speed is something that we are better at than most other companies. We don’t
have formal board meetings, committees, etc. If someone has an idea, they can pick up the
phone and talk to me. I can vote “done, let’s do it.” Or better still, they can just go ahead and
do it. They know that they are not going to get a mouthful from me if they make a mistake.
Rules and regulations are not our forte. Analyzing things to death is not our kind of thing.
We very rarely sit back and analyze what we do.
Some people argue that the way you run your company is almost like a venture
capital firm. Basically, anybody with a crazy idea gets a hearing.
I hope that “crazy idea” part is not too true. But to an extent, the statement is valid.... It’s a
fair comment.
What do you see as your weaknesses? Do you have any characteristics
the way of your work?
that get in
I suspect not being able to say no. Hopefully, I am getting better at it now. But there are so
many wonderful ideas. I do love new projects; I love new ideas. We are in a position where
almost anybody and everybody who has got an idea likes to bring it to us. There aren’t many
companies like us, who have got, in a sense, a certain amount of entrepreneurial flair, companies that seem accessible to the public. Therefore, in any one day we receive hundreds of
requests of all sorts. And some of them are very good ones.
My weaknesses really go back to the fact that I have spread myself too thin. In a purely
business sense, I suspect that if I just wanted to maximize profits, I should have stayed more
focused on one area and really concentrated on that one area. That’s the conventional way,
and I’m sure that’s what most business schools teach. Perhaps it’s right. But it wouldn’t have
been half as much fun.
I must admit that I feel very much alive when I set out to achieve something. On reflection, it’s really more the fight than the actual achieving. I love people and I just love new creative challenges. Some people ask, why keep battling on when you can take it easy? My reason, basically, is that I’m very fortunate to be in the position I am. I’ve learned a great deal
and I’ve had great fun doing so. I’m in a unique position of being able to do almost anything
10
ORGANIZATIONAL
DYNAMICS
I like and achieve almost anything I wish. I don’t want to waste the position that I find
myself in. I know that at age 80 or 90 I would kick myself if I just frittered away this second
half of my life. I really do believe that fighting competition is exciting. And it’s good for business. I think that Virgin can get in there and it can compete with the biggest and improve
them-and
hopefully survive along side them, have fun, and pay the bills at the same time.
Basically, I admire anyone who takes on either the establishment or something like a mountain and succeeds or fails.
I sometimes wake up at night and lie there and think, “Is it all a dream?” Because it has
been pretty good to date. It just seems almost too much for one man in one lifetime. So, if I
am to reflect, I have been very fortunate to have so many wonderful experiences. Every day
is fascinating. Every day, I am learning something new.
When you leave Virgin, what kind of enduring
How do you want to be remembered?
mark do you want to leave behind?
I think that it would be nice if Virgin can be remembered as a company that challenged the
established way of doing things, and that built up a number of companies that were world
leaders in their own fields. That doesn’t necessarily mean being the biggest companies, but
the best in that particular field. I also would like that the staff of Virgin would have very
happy memories of the time that they spent working here.
PERCY BARNEVIK
\
AND ABB
Percy Barnevik surprised the business
community
in 1987
by announcing
the
creation
of
the
world’s largest crossborder merger since
Royal Dutch joined
Shell in 1907. In
record time, Barnevik
combined
ASEA, a
Swedish engineering
group, with Brown
Boveri, a Swiss competitor, and by adding 70 more companies in
Europe and the U.S. created a $30 billion giant
with a portfolio covering global markets for
electric power generation and transmission
equipment, high speed trains, automation and
robotics, and environmental control systems.
This merger triggered a much needed
restructuring
of the whole power industry,
which had been characterized by fragmentation and over-capacity.
To many business
analysts, the new company
became the
model merger for the new Europe. Since
then, ABB has been a whirlwind
of acquisitions, restructuring, and growth. In the past
five years, the com.pany has been involved in
more than 100 acquisitions and joint ventures, which have added 100,000 employees
to its payroll. It has become not only the
principal supplier to the world’s electricity
industry,
but also the world leader in
robotics, process automation
systems, locomotives, and air pollution
control equipment. With Barnevik’s leadership, two rather
sleepy engineering firms were transformed
into the world’s top engineering giant.
Barnevik presented to the world a new
vision of a Europe without
frontiers:
a
Europe where there would be room for a
decentralized, transnational company operating freely across borders. Having conquered that territory, he went on to explore
other continents. As a global citizen, he recognized a window of opportunity
in environmental control systems, high speed rail
transportation,
robotics, and energy in other
parts of the world.
To make his global empire
work,
Barnevik championed
the concept of multidomesticity (giving a new meaning to the
phrase “think global, act local”), leveraging
WINTER
1998
11
core technologies and global economies of
scale without eroding local market presence.
He made it clear that although the new giant
was a transnational company, it would operate like a local employer with deep roots in
the individual countries.
Just as Alfred Sloan of General Motors
was the master architect of what used to be
the “modern corporation,” a model that held
up for many decades, Percy Barnevik has
become the designer of a new prototype of
organization
more in line with the postindustrial age. He recognized the kind of corporation that would be viable in the 1990s
and beyond, and he has gone further than
any other company president in creating an
organization that combines global scale and
world class technology with deep roots in the
local community. In shaping ABB, Barnevik
has become one of the worlds leading industrialists.
To translate his vision into reality,
Barnevik created a master matrix. In one
dimension, ABB is a global network where
business area managers around the world
make decisions on product strategy and performance without regard to national boundaries. In the other dimension of the matrix are
a large number of traditionally
organized
national companies deeply entrenched
in
their respective home markets.
Simultaneously,
Barnevik designed the
flattest, most decentralized of organizations.
He pushed authority,
responsibility,
and
accountability deep down the organization,
never allowing
more than five people
between the CEO and the shop floor. The
seriousness of his commitment to this principle is reflected in the size of the ABB profit
centers, typically made up of about 50 people.
A corps of 250 global executives leads more
than 200,000 employees.
THE BARNEVIK
PHILOSOPHY
KETS DE VRIES-MR
Barnevik,
of your global organization?
Since the merger, ABB has followed a policy of relentless expansion and cost cutting.
From the beginning,
Barnevik stated his
intention of making ABB the lowest cost competitor in the industry. In addition, ABB has
also pioneered innovative ways of managing
cross-border operations. Barnevik foresaw
that in a borderless world one of the great
prizes would
be to break protectionist
national power markets. And ABB has acted
accordingly, opening markets in Europe, the
U.S., and Asia. The company has also become
a major investor in the former Comecon
countries.
Barnevik has been the catalyst in making
ABB into the kind of company it currently is.
His hallmarks have been action and speed.
He has successfully put together an extremely
complex corporate jigsaw puzzle originally
dominated by four different national cultures:
Swiss, Swedish, American, and German. To
do so, he has created an organization built on
internal contradictions:
a company that is
multinational without having a national identity, simultaneously
global and local, large
and small, centralized and decentralized.
Barnevik’s leadership style has inspired
many executives around the globe. His photograph has graced the pages of such influential business magazines as Fortulze, Business
Week, and Forbes. Numerous business analysts
and professors of management have written
lengthy case studies on the ways he has transformed and runs ABB.
What is Barnevik’s philosophy of leadership? What kind of corporate culture is he trying to establish? Where is he taking the company? What kind of person is he? What drives
him? What made him the way he is? Answers
to some of these questions may go a long way
to help us understand what effective leadership is all about.
OF MANAGEMENT
could you say something
about the architecture
BARNEVIK-The fundamental organizational design that ABB is known for is its extreme
decentralization. This obsession with decentralization has been a theme throughout my
12
ORGANIZATIONAL
DYNAMICS
whole career. I’ve seen the deficiencies of the big corporation, the dangers of bureaucracy,
the effects of the ivory tower where people sit in their rooms, far away from their customers. I’ve seen the lack of engagement, the absence of the creative, entrepreneurial
spirit. I’m sure you’ve heard the story of the person coming into a big office who asked,
“How many people are working here?” and got the answer, “Half of them.” This may be
a worn out joke, but there’s truth behind it.
What I have tried to do is recreate small company dynamism and creativity by building 5,000 profit centers and 1,300 legal entities. I have also made an effort to reduce the layers. I am fully aware, however, of the pros and cons of doing so. Fewer layers mean bigger spans of control and fewer jobs to which one can be promoted. But the advantages lie
in communication and feedback, or as I call it, “quickback.” When you are in the process
of change, rapid communication is indispensable. We try to make an environment where
you can have creative, entrepreneurial people, where you can feel engaged.
You say that the values representedin youv “policy bible” provide the “glue” that
keepsthe people in your organization together It’s very nice to say this, but how
do you get people to internalize those values?
There are many different ways we can do that. I would say that the most important thing
of all, overshadowing everything else, is to live that way yourself. If you say people development is important, and then don’t develop your own people, you lose credibility. If you
talk about speed in action and you procrastinate on certain difficult decisions, you are not
believable. So I think that I and the members of the executive committee, and further
down, must “walk the talk” as the Americans say. That’s the single most important thing.
We must always check that we are living up to what we say.
Whatgets you excited at work?
A lot of things. I know I am competitive. Beating the competition for a big project gets me
excited; so does breaking into a new industry where we weren’t previously. But what
really gives me the greatest satisfaction is seeing young people whom I have promoted
succeed. Then you have created something that will outlast an individual transaction. At
the same time, I have had some of my biggest disappointments when people fail.
I want my people to constantly test their imagination, their ability to move further. To
create this change mentality, this creative spirit, you have to show them that the environment, the competitors, the customers are changing. In order to survive we have to change.
You know the expression, “When you are through changing, you are through!”
What do you plan to do to continue to nurture the creative spirit in the
company?
To continue this momentum, it is important that people in an organization have something to be proud of. It is important that our people can feel pride in something beyond
the numbers. For example, if you look at our company now, we have been pioneering
investments in Eastern Europe, spearheading East-West integration, I don’t want to claim
that we knew more than anyone else, but I was absolutely convinced that Eastern Europe
would open up. Many of our people are proud of participating in that process. The same
can be said about our work in the environmental field. I would like to create and develop
an image of us as helping to improve the world environment. For example, transferring
sustainable technology to China or India, where they have a tremendous need to clean up
their coal-fired power plants.
WmR
1998
13
Our employees can look at work like that and see that we contribute something beyond
mere shareholder value. Internally, we can pride ourselves on certain environmental
improvements without being too bombastic or boastful about them. This is particularly relevant for attracting young people to the company. They are by and large not just happy to
work for a big company with high profits; they also like to see a purpose that goes beyond
numbers. It is important that a company can be perceived as changing the world in a positive way.
I believe that there is a tremendous potential in our people that is not exploited. Take for
example the workers. They use only 5 to 10 percent of their brain capacity standing at a
machine. Then they go home. There they administer; they organize for the children; they
build a summer house. All of a sudden, they seem to be able to do an enormous amount of
things. They’re using 90 to 95 percent of their brain. Now, why can’t we move these people
into bigger tasks?
We are now experimenting with cutting out a whole layer of clerical supervision to give
teams of workers bigger responsibility. I think there is a huge potential here that we haven’t
tapped yet. The obstacles to tapping it go back to the roots of the way we run industrial organizations. It all comes out of the Frederick Taylor system: managers do the thinking and the
workers do the working. This attitude has to be changed. One doesn’t need a blue collar or
a white collar union. We are all in the same boat.
When you open that vista up, all of a sudden there is a whole new avenue for exploiting
and developing human potential. Future leaders should be able to stimulate and develop
this extra capacity inside their companies to be really successful. However, this type of fundamental change in industrial organizations will take a long time to implement, maybe a
generation. Those who start early will also reap the benefits early.
Given your reputation of always being overprepared, do people in the company
question some of your ideas? Do they dare to disagree?
It’s a difficult question to answer because all executives say, “Oh sure, others disagree.” Even
the worst dictators tend to say something like that. Now, I appreciate that my characteristics are sometimes a little bit dominant. At times I can overwhelm people. I’m aware of the
risk, sitting in my position, of not getting enough feedback and not having a sufficiently
open attitude. Of course, it’s comfortable, whatever position you are in, to have people agree
with you. The temptation is always there.
In this organization, for people who know me well, there is absolutely no problem about
saying, “You’re wrong. I disagree.“ But of course in an organization this size, there are many
people who don’t know me that well. In the Latin countries especially, and maybe in Germany, there is a tendency to be a little cautious so as not to offend the top guy. It’s difficult
to make people really speak their mind and tell you things openly, particularly unpleasant
things.
I can only say that I am aware of the problem, that I work at it. With new people whom
I don’t know well, I go out of my way to try to build their confidence so that they don’t
worry about that aspect of the conversation. How successful I am in doing that is another
matter.
In our organization, with all these different cultures and our global presence, we really
have no choice but to create an attitude and an atmosphere where people can speak their
minds. When people don’t come out with real objections to certain decisions, it can be catastrophic for us.... But once a decision is taken, we demand that people stand behind it
14
ORGANIZATIONAL
DYNAMICS
whether they like it or not. We don’t want them to sabotage it. But before decisions are
taken, people must speak their minds!
Of course, the worst thing you can do when you are trying to create an open atmosphere
is to interrupt someone, to be degrading, to show your disapproval. You rather have to do
the opposite. You have to say “that’s a very interesting point,” or something of that sort. You
have to bear in mind all the time that you must encourage dissenters. You must demonstrate
that willingness. Even when someone goes against you, it should not rebound on them in
any way. People shouldn’t get the impression that doing so is bad for their career.
What drives you?
What gives me a sense of reward is to create something, to make some kind of lasting
impact. Things like penetrating new countries, developing and commercializing new technologies, creating new opportunities. I don’t work for the money and the prestige and all
that. I guess it’s like a person designing a house. People want to build something, create
something that is worthwhile. That’s what it all boils down to.
ACCENTUATE
YOUR CHARISMA
What guidelines for managing change in an
organization can we draw from these observation and examples? To answer that questions, let’s look first at how these two individuals have functioned
as charismatic
leaders, then at their actions as organizational architects.
Envisioning
The preeminent requirement of any leader’s
role is to formulate and communicate a vision,
aligning the workforce behind it. Why is a
clearly defined and communicated vision so
important for corporate change? To begin to
answer this, it is useful to go back to basics to
consider the nature of our need to work. Most
social systems in developed countries provide
adequate support for those who cannot or do
not work-so what lies behind our impulse to
accomplish a given or self-generated task? An
attempt to answer this question was one motivation behind Stud Terkel’s great book of the
197Os, Working. In his introduction he writes:
This book, being about work, is, by its
very nature, about violence-to
the
spirit as well as to the body....It is about
a search, too, for daily meaning as well
as daily bread, for recognition as well as
cash, for astonishment rather than torpor; in short, for a sort of life rather
than a Monday through Friday sort of
dying. Perhaps immortality, too, is part
of the quest.
These terms link indivisibly the practical
needs of working (making a living, feeding,
clothing, and keeping oneself warm) and the
psychological-even
spiritual-needs
that
people require work to answer. In fact, if the
performance needs of the organization are
made to match the psychological needs of the
individual-if
the organization
structures
itself as an enabling and holding environment, seizing opportunity
and unlocking
potential both as an internal dynamic (cultural,
psychological, individual) and as a business
strategy-ordinary
people
will behave
extraordinarily. Make this equation work, and
the change process and rewards should follow-and
the key to making this equation
work is vision.
Most well-known politicians are masters of
envisioning, expressing a general dissatisfaction with the status quo and presenting a
viable alternative. Through language, similes,
metaphors, and ceremonies, they create captivating,
magnetic imagery;
they build
alliances, inspire others, and make their vision
reality. For example, Mahatma Gandhi had a
vision of an independent
India where
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1998
15
Manfred Kets de Vries holds the Raoul de
Vitry d’Avaucourt Chair of Human Resource
Management
at INSEAD,
France.
He
received an economics degree from the University of Amsterdam and an MBA and DBA
from the Harvard Business School. He has
held professorships at McGill University, the
Ecole des Hautes Etudes Commerciales,
Montreal, and the Harvard Business School.
Kets de Vries’ research interests include
leadership,
cross-cultural
management,
career dynamics,
organizational
stress,
entrepreneurship/family
business, and the
dynamics of corporate transformation
and
change. Kets de Vries is the author, coauthor, or editor of numerous books, including Power
and the Corporate
Mind
(1975/1985),
The Irrational Executive: Psychoanalytic
Explorations
in Management
(1984),
The
Neurotic
Organization
(1984/1990),
Unstable at the Top (1988),
Prisoners of Leadership (1989), Handbook
of Character Studies (1991), Organizations
on the Couch (1991), Leaders, Fools and
lmposters (1993), and Family Business:
Human Dilemmas in the Family Firm. His
book Life and Death on the Executive Fast
Lane received the Critics’ Choice Award for
1995-1996.
He has conducted
executive
development seminars for numerous organizations in Europe, the U.S., and Asia and
serves as a consultant
in organizational
design/transformation
and strategic human
resource management
at many of the top
European and U.S. corporations.
16
ORGANIZATIONAL
DYNAMICS
Moslems and Hindus would live together in
peace. Martin Luther King had a vision of
harmony between blacks and whites. As President of the United States, John F. Kennedy
had a specific vision of placing a man on the
Moon by the end of the 1960s. M&hail Gorbachev had a vision of a more open Soviet
society. Then there were the darker visions of
leaders such as Adolph Hitler and Josef Stalin.
In the world of business, the first Henry
Ford wanted to build a car for the masses, his
particular interest being in helping the farmer
(his father being a farmer). Ingmar Kamprad
of IKEA founded a company to make affordable furniture for the common man, and Bill
Gates has changed the way people work by
making it necessary for everyone to be computer literate.
As in the political sphere, if people are to be
motivated, if they are to commit themselves
to a vision, the mission statement needs to be
emotionally engaging. It should stretch the
mind of all the company’s employees. It
should play on the imagination and stimulate
creativity. It is important for leaders to make
their vision exciting. It must be inspirational,
create a sense of pride, and go beyond the
bottom line.
Consider how Richard Branson fosters
entrepreneurship.
He looks for people with
innovative
ideas who will start new businesses, people who want to be the best at
whatever they are doing, whether it is entertainment, communications,
airlines, hotels,
store management, financial services, or beverages; people who have a strong desire to
beat the competition. As for Percy Barnevik,
he wants to create the worlds number one
engineering group.
As these two examples show, to talk about
increasing shareholders’ wealth or profit maximization is not enough. Money is important
but not an end in itself. Barnevik and Branson
recognize that people like to be proud of
something and feel that they have made a
meaningful contribution to the world.
A leader’s wish to engage in good works,
to look beyond the bottom line, is a very effective way of motivating and challenging people to work. Thus Percy Barnevik says that he
is motivated by a desire to create a better
world by generating employment
(particularly in Eastern Europe, where he is the
largest investor), and to improve environmental conditions by providing clean energy
and transportation.
For Branson, too, social
concern is an important part of corporate philosophy. On many occasions he has put his
money where his mouth is. Two instances,
among many, come to mind: Virgin’s production of low-priced
Mates condoms,
in
response to the AIDS crisis, and Branson’s
bidding for the national lottery franchise in
the UK with a promise to donate all profits to
charity (a bid that was unsuccessful).
Empowering
A differentiating
factor of effective leaders is
their ability to get the best out of people.
They are good at building alliances and creating the commitment
that will involve others in their vision. They possess great teambuilding skills, treating their employees as
competent, responsible human beings. They
help their employees understand
the business and build trust by sharing sensitive
information
about the company’s performance. They allow them to experiment, to
play, to make mistakes.
They want to foster a sense of ownership
among their people. They believe strongly
that strategic awareness should not be limited
to the top echelons of the organization but
spread throughout
it. This means pushing
authority, responsibility, and accountability
far down the reporting line and flattening
hierarchical structures.
People often talk about empowerment
in
this context. Effective leaders make empowerment seem deceptively simple. They know
how to express expectations of high performance. They also realize that the kind of commitment that makes this possible requires a
strong show of confidence. In most instances,
empowered employees will do their utmost
to perform to those expectations. Enhancing
people’s self-esteem will make many perform
beyond expectations.
To get the kind of commitment that makes
that possible, a strong show of confidence is
needed. And in most instances, empowered
employees will do their utmost to oblige.
Enhancing people’s self-esteem will make
many perform beyond expectations. Empowerment is a term Napoleon Bonaparte, who
declared that every French soldier carried a
marshal’s baton in his knapsack, might have
felt at home with.
Energizing
In every organization, there is an enormous
amount of free-floating aggressive and affectionate energy. Effective leaders know how to
channel this energy in the right direction. It is
important
for aggressive energy to be
directed externally. Employees should fight
the competition, not each other. It helps to
have an enemy to focus on while enacting a
mission; it concentrates the mind. “Enemies”
help to shape organizational identity and successful companies watch their competitors
very closely. Percy Barnevik
constantly
reminds his people of enemies such as
Siemens, General Electric, Alcatel-Ahlstrom,
and others, while Richard Branson is masterly
in his use of David and Goliath imagery,
pitching constantly against powerful adversaries like British Airways, Coca Cola, or EMI.
As for affectionate energy, that too has to
be used appropriately. Every leader, at whatever level, is to some extent a kind of psychiatric social worker, a container of the emotions of his or her subordinates. He or she
provides a sense of security, inspires trust and
confidence, and creates a safe holding environment.
The way he or she goes about creating this
environment
distinguishes
effective from
ineffective leaders. Empathy is critical to the
management
of energy in organizations.
Remember, a CEO is seldom derailed by his
or her ignorance of the latest marketing,
financial, or production techniques, but frequently by a lack of interpersonal skills, a failure to get the best out of the people who do
possess such essential information. Emotional
intelligence is also a sine qua non for generativity, or the ability to get pleasure from helpWINTER
1998
17
ing the next generation by, for example,
assuming the role of mentor and coach. When
leaders lack this quality and are envious of
others, they stifle organizational learning and
endanger the organization’s future.
BUILD YOUR ARCHITECTURAL
SKILLS
The most effective leaders recognize that the
art of leadership comes in building the kind of
environment
where people can be creative
and become completely involved in what
they are doing. Branson and Barnevik have
created organizational structures where people have a sense of control and a feeling of
ownership over what they are doing. The
envisioning,
empowering,
and energizing
facets of charismatic leadership need the concrete consolidation of the leader’s architectural skills. While these charismatic qualities
address people’s inner theater-the
why of
work-the
architectural concerns (organizational design, and control and reward systems) deal with the external world-the
way
they work.
Organizational
Design
There is a certain dilemma involved in creating an exciting working environment. Larger
size means more possibilities, but size can
become a serious impediment
to performance. Economies of scale are not without
serious diseconomies of size. When organizational units become too big, employees
become less involved.
Effective leaders minimize the negative
aspects of large organizations
by eagerly
embracing the concept that small is beautiful.
These leaders go to great lengths to create a
small business atmosphere in their large corporations. They also realize that hierarchical
organizations have had their day. Hierarchical structures are out, flat structures are in,
encouraging lateral rather than vertical communication. Decentralization and operational
autonomy are sine qua nons for high performance organizations.
18
ORGANIZATIONAL
DYNAMICS
Percy Barnevik’s aim for ABB is “to be centralized and decentralized,
big and small,
global and local.” Consequently, he has created a company made up of 5,000 profit centers. Richard Branson spins a new business off
an existing one as soon as there are more than
50 people working for it. Branson applies his
philosophy religiously: His organization, like
ABB, exists as a number of small autonomous
units run by self-managed teams made up of
individuals who do not have to be continually
prodded to do things.
Both Barnevik and Branson look for the
kinds of people who set their own standards
and rewards, who are eager to learn and
know how to adapt, and who possess a high
tolerance for ambiguity. Moreover, they go to
great lengths to change the mind-set of those
people who were not really committed in the
past, but were merely going through the
motions.
Critical to the design of these organizations
is their customer-centeredness.
Employees
are constantly reminded that only customers
can help them to tenure in their organization.
The innovative way in which Richard Branson runs Virgin Atlantic is a good example.
Every effort is made to surprise the customer
in a positive way. First class (“upper class”)
passengers on Virgin Atlantic have free access
to a four-hole putting green at the Virgin
Clubhouse and receive an in-flight aromatic
relaxation massage. Car service at both ends
of the trip is included in the price of the ticket.
Branson has also been known to personally
meet flights that arrive late or experience
other difficulties,
In creative, high performance
organizations like Virgin and ABB, customers are not
merely an abstraction. All structures and procedures are directed toward providing the
best customer service. Again, small business
size enhances the possibility of contact and
improves the feedback loop. In ABB’s 1994
annual report, Percy Barnevik accounts for
his company’s performance record in terms
of size:
Our strategy of delegating responsibility to many small profit centers is a
winning one. It puts our people close to
customers and lets them see how their
decisions and attention to customer
needs contribute to ABB’s growth. This,
in turn, frees up rich human resources
of initiative and energy. We want to
achieve management by motivation
and goals instead of by instruction and
directives....Adopt the right priorities:
Customer first, ABB Group second,
own profit center third.
Product life cycles are forever shrinking,
and speed to market has become increasingly
important.
Too many companies
have
invented great products, only to lose out in the
process of market introduction. One of the key
success factors in Richard Branson’s organization has been his ability to move fast. As he
says himself, “I can have an idea in the morning in the bath tub, and have it implemented
in the evening.” Speed also has an essential
place in Percy Barnevik’s management philosophy. In his policy bible, he states that “it is
better to be roughly right than exactly right
with respect to speed.” He has made it very
clear that it is permissible to make mistakes
due to speed. At ABB, failure to act because of
a reluctance to make decisions is unacceptable
and will lead to dismissal.
Control Systems
Barnevik and Branson know that change is
not easy. Their experience implies the need
for a structure free from the stifling costs of
bureaucratic
controls
and
hierarchical
authority. Rules and regulations are minimized; it should be possible to bend them;
nothing is written in stone. ABB has a sophisticated global matrix structure with enormous fluidity between business area managers and
country
managers.
Virgin
resembles a keiretsu organization-a
structure
of loosely linked companies continuously
dividing and reproducing
(quite mystifying
to outsiders) where employees have the possibility to rewrite
their job definitions
depending
on the kind of new challenges
they are prepared to undertake.
Until recently, designing an organization
of this type would have been impossible.
Being simultaneously big and small, breaking
up a large company into a number of small,
loosely connected companies while maintaining cohesiveness has only become feasible
with the revolution in information
technology. Sophisticated information systems have
become a major force pulling geographically
dispersed employees together. It is now possible for top executives to decentralize without the fear of losing control. Naturally, success in these new structures requires a high
degree of literacy in modern information and
communication technology.
Branson and Barnevik also realize that
there are two kinds of glue that will make
their loosely structured organizations function effectively. Sophisticated information
systems form one kind. The other is a set of
shared common values. Effective leaders
(implicitly or explicitly) want each organizational participant to share certain values specific to their corporation,
values that go
beyond their national cultures,
At ABB, these key values are summarized
in a “policy bible.” At Virgin, they are more
subtly instilled.
Everyone,
however,
is
expected to be familiar with the corporate
culture of their organization.
New recruits
are indoctrinated
in these values. The values
are reaffirmed in workshops, seminars, and
meetings. People are expected to internalize
these values and behave accordingly, with a
positive pay-off: the internalization
of corporate values means a greatly reduced need
for external controls. To make this work, the
selection of individuals who embrace these
values becomes crucial. Having high barriers to entry can prevent many headaches
later on.
Freedom from excessive control does not
mean, however, that employees are not held
accountable for their performance. Accountability is driven deep down the organization. It is impossible to be part of a winning
institution without distinguishing
between
excellent and mediocre work. Thus constructive feedback about performance is an
essential and pervasive part of the culture of
WINTER
199.3
19
ABB and Virgin. There is compassion,
there is a limit to excuses.
but
Reward Systems
Barnevik and Branson also realize that
today’s high performers are like frogs in a
wheelbarrow: They can jump out at any time.
Imaginative
human resource management
systems have to be found to keep them committed to the organization. Apart from giving
these people the opportunity to spread their
wings, the company needs to reward their
performance with attractive material benefits
that go beyond salary increases. Sharing corporate success in the form of stock options,
bonuses, or some other profit-sharing plan is
an effective way to reward such people.
Share-ownership can play an important part
in retaining the best people.
Richard Branson has said that he is in the
business of making millionaires. He makes it
quite clear that he does not want his high performers to leave Virgin to start their own companies elsewhere. He ensures that his key
players have the possibility of becoming millionaires under the Virgin umbrella. Of
course, this way of rewarding employees can
only increase a sense of ownership.
CHANGE
AND AFTER
As I wrote at the beginning of this article, the
first major challenge for a company in the
process of change is to motivate people to
function effectively in an unpredictable environment and, at the same time, manage an
opposing dynamic of resistance. A second,
ongoing challenge is to prove that the organization can build on the skills used in the
change process (the ability to analyze a situation, to adapt to the altered logic of a company, and alter behavior to fit a new operating environment)
and integrate them into
20
ORGANIZATIONAL
DYNAMICS
the continuously
changing culture of the
organization.
A leader has to be able to give followers a
good reason to get out of bed in the morning,
and to do that the leader has to have a good
reason himself. What is a major motivating
force in Richard Branson’s behavior?
I think fun should be a motivator for
all businesses. I think the reason we’ve
been successful is that we’ve had this
great bunch of people around. We’ve
done things differently
and that’s
made life more fun and enjoyable
than if we’d taken a slightly more conservative approach. I‘ve been determined to have a good time (Newsweek,
13 June 1994, p.33).
Branson and Barnevik realize that life is
not a rehearsal; on the contrary, it is the real
thing. They want to live it to the fullest. Both
executives have recognized a basic need existing in every human being-the
drive to do
new things; the pleasure of exploration.
Unfortunately,
in many companies, for many
employees, this basic need lies dormant.
Many executives behave like organizational
sleepwalkers. Their liveliness is no longer on
the job.
Branson and Barnevik, however, subscribe
to the dictum that the challenge of life is to die
young-as
late as possible. And they do not
want to have that experience alone. They
want their employees to accompany them on
an enterprise that is as much about discovery
of themselves as about profit margins-a
sort
of life in which immortality, in terms of a lasting legacy, is a definite part of the quest.
To order reprints, call 800-644-2464 (ref. number
8930). For photocopy permission, see page 2.
SELECTED BIBLIOGRAPHY
More information about Richard Branson and
Percy Barnevik can be obtained from two case
studies I have written about them: Percy
Barnevik and ABB and Branson’s Virgin: The Coming of Age of a Counter-Cultural Enterprise. Two
videos (Percy Barnevik and ABB and Virgin:
Entrepreneurship in Action) containing additional
material are also available that provide excellent
footage of these two leaders. On the tape these
two executives share their insights on the way
they run their businesses. In addition, two
books have been written about Richard Branson: Richard Branson: Virgin King by Tim Jackson
(London: HarperCollins, 1994) and Richard Branson, The Inside Story by Mick Brown (London:
Michael Joseph, 1988).
Articles and books on change and corporate transformation
are too numerous to cite
here. An interesting angle, however, is found in
the book Discontinuous Change by David Nadler,
Robert Shaw, Elise Walton, and associates (San
Francisco: Jossey-Bass, 1995). This book is a collection of essays on the dynamics of organizational transformation. The book by Noel Tichy
and Stratford Sherman, Control Your Destiny or
Someone Else Will: How Jack Welch is Making GE
the World’s Most Competitive Enterprise, gives an
informative account of the transformation process at GE. I have just co-authored an article on
the change process entitled “Transforming the
Mind-set of the Organization: An Owner’s
Manual” (Manfred F. R. Kets de Vries and
Katharina Balazs, INSEAD Working Paper,
96/81iENT) in which we integrate individual
and corporate change processes, conceptualizing the different stages both individuals and
organizations have to go through to make the
change process work.
A very good description of the successful
habits of highly successful companies is done by
James Collins and Jerry Porris in their book Built
to Last (New York: Random House, 1994). They
address the issue of what makes exceptional
companies different from others. Although they
deemphasize the role of transformational leadership, they stress the importance of “distributed” leadership (leadership throughout the
organization) as a factor in truly outstanding
companies.
Finally, insights into the psychodynamics of
leadership can be found in my book Life and
Death in the Executive Fast Lane (San Francisco:
Jossey-Bass,1995). In these essays I describe concepts that help to explain the “inner theater” of
executives and the qualities that make for global
executives.
Studs Terkel’s book Working is published by
Pantheon Books, New York (1974).
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