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ExcellenceL E A D E R S H I P

THE MAGAZINE OF LEADERSHIP DEVELOPMENT, MANAGERIAL EFFECTIVENESS, AND ORGANIZATIONAL PRODUCTIVITY

DECEMBER 2011

Alan MulallyCEO Ford Motor Company

“Leadership Excellence is an exceptionalway to learn and then apply the best and latest ideas in the field of leadership.”

—WARREN BENNIS, AUTHOR ANDUSC PROFESSOR OF MANAGEMENT

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“We’ve met and exceeded the goals we setfor ourselves three years ago.We haveachieved consistent annual growth of 20 per-cent in the bottom line.We’ve almost doubledprofitability in the business.”

—John Doumani, Managing Director,Fonterrra Australia New Zealand

“. . . we were able to move quickly to optimizethe value of an acquisition. . . .We went fromidentifying the acquisition to closing it—includ-ing raising over a billion dollars of financingfrom the outside market—in three months.We went from separate entities to full integra-tion in six months.”

—Bob Gamgort, CEO, Pinnacle Foods

➣ Aligning teams to accelerate performance➣ Coaching executives to lead more effectively➣ Developing capabilities to optimize talent

Since 1989, clients have told us thatwe excel in three areas:

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ST R AT E G I E S , I N C .

• TEAM BY TEAM • TIER BY TIER • FUNCTION BY FUNCTION

BUILDING HORIZONTAL, HIGH-PERFORMING ORGANIZATIONS

ExcellenceL E A D E R S H I P

THE MAGAZINE OF LEADERSHIP DEVELOPMENT, MANAGERIAL EFFECTIVENESS, AND ORGANIZATIONAL PRODUCTIVITY

VOL. 28 NO. 12 THE GLOBAL LEADERSHIP DEVELOPMENT RESOURCE DECEMBER 2011

MIKE NOBLE

Managers into CoachesTry using five ways. . . . .13

RITA SMITH

Strategic LearningMake your learning prosyour business partners. .14

JOY STROUD RUHMANN

Clarify, Align, EngageYou thus create a healthy,sustainable culture . . . . .14

GREGG THOMPSON

Inclusive CoachingIt’s everyone’s business. . .15

JACK L. GROPPEL

Leadership ActivityModel movement . . . . . .16

BILL SIMON

Restore ConfidenceHire proven leaders. . . . . .17

HOWARD M. GUTTMAN

Great Team PlayersBuild a high-performanceculture on three pillars. . .18

NOEL TICHY ANDWARREN BENNIS

Leader JudgmentYour calls can make a bigdifference in results . . . .18

STEPHEN R. COVEY

Third AlternativeCreate new options. . . . .19

JIM COLLINS

Building to Last. . . . . .20

ALAN MULALLY

The Road AheadLead your team to abetter future. . . . . . . . . . . 3

JP DONLON

Six LessonsAll leaders can learnfrom Alan Mulally. . . . . .4

TRISH GORMAN

Making a ProfitYes, but how well areyou performing? . . . . . . . 5

MICHAEL FULLAN

Intrinsic MotivationAs a leader, how do youget people to change?. . . .6

KEN BLANCHARD

Leaders by DesignDesign LD experiences . .7

SCOTT DAVIS

Trade Wins and WoesWe face three majorthreats to prosperity. . . . .8

FAISAL HOQUE

Transformative GrowthUsing anoperations blueprint . . . . 9

JIM CLEMMER

Peak PerformanceFive failure factors. . . . . 10

JAMES CERRUTI

Sustainability. . . . . . . .11

TOM DANIEL

Leaders Who Coach . .12

Three Wise Leaders

These leaders are on an important mission,dressed in their finest clothes and all

serious (even the camel), as they deliver aspecial gift: sustainable performance.

ILIKE THE 11 CRITERIA USED BYChief Executive magazine in

evaluating CEO of the Yearfinalists: courage, leadership, vision, impact,customer and shareholder value created, innova-tiveness, personal character/higher purpose,respect/beacon of excellence/reputation, degree ofdifficulty, sustained performance, and employeeengagement/leadership development. For thisreason, I feature editor JP Donlon’s selec-tion, Ford CEO Alan Mulally, in this issue.

Top Companies for LeadersIBM, General Mills and Procter &

Gamble head the 2011 list of GlobalTop Companies for Leaders—a studyconducted by Aon Hewitt, in part-nership with the RBL Group andFortune magazine. Winners wereselected and ranked based on strengthof leadership practices and culture,examples of global leader development,alignment of business and leadershipstrategy, business performance, andcompany reputation. All companies articulat-ed a clear business case for investing inleadership. Nearly 85 percent say their lead-ers can explain how the investment in lead-ership affects financial performance, and 92percent say their stakeholders understandhow their leadership strategy creates value.Top companies have metrics to evaluate theeffectiveness of LD programs. All compa-nies evaluate their succession management;92 percent measure their LD processes; 84percent assess their high potential programs;and 92 percent measure the strength of theirleadership pipeline and ability to retain leaders.

Keep High-PotentialsOne-in-four employers is ineffective in re-

taining high-potentials, according to a surveyby AMA Enterprise. While more than halfare considered somewhat effective at keepingtheir HPs, only 18 percent are very effective.“Management succession and future leader-ship are paramount concerns,” said SandiEdwards, SVP for AMA Enterprise. “Yettheir efforts to hold onto to their best peopleoften fail. Focus your high-potentials pro-gram on LD. Talented, motivated individu-als need to be developed in several ways,including: mentoring or coaching, training,

stretch assignments, action projects, cross-functional teaming, and job rotation. Suchprograms should align with the businessneeds, and the desired behaviors should bemeasured.” Organizations measure the suc-cess of their HP programs in several ways:positive business results attributed to partici-pants, 46 percent; reactions of participants, 43percent; observed behavior changes of partici-pants, 42 percent; improved performance ofparticipants, 41 percent. “If a HP program isdesigned and executed properly, the out-comes should boost retention and enhanceperformance,” says Edwards. “Transparencyshould be the watch word. When selectioncriteria are a secret, eligibility is ambiguous,

or HPs are left to wonder whathappens next. This is why manyorganizations find it hard to holdonto their high-value talent.” EmailArlene Bein abein@amanet.org.

Growing and Developing TalentAs leaders climb the ranks, their

ability to develop and grow talentdecreases, according to a PDI NinthHouse Pulse on Leaders study. And

yet the building talent competency becomesmore critical at leadership levels—it is oneof the core competencies a leader must pos-sess. “Developing talent is a priority task forleaders,” said Cori Hill, director, LDSolutions, PDI Ninth House. “And yetsenior executives are falling short in thisarea; in fact, first-level leaders rank higherthan senior executives in developing tal-ent.” PDI Ninth House recommends placinghigh importance on developing talent andemploying coaching methods to foster thiscompetency among leaders. This entailsexecutives developing their coaching skillsand building coaching skills within theirteams. Asking for and providing feedback,incorporating stretch assignments, lookingfor development opportunities, and holdingdevelopment discussions are coaching ele-ments that executives should use whendeveloping talent. “Coaching methodsshow employees that executives value theirdevelopment,” Hill said. “This helps thoseemployees become more engaged and lesslikely to leave, which ultimately strengthensan organization.” Visit www.pdinh.com oremail knolan@webershandwick.com. LE

Chief Executive selects Alan Mulally.

by Ken Shelton

Volume 28 Issue 12

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Leader of the YearE . D . I . T . O . R ’ S N . O . T . E

2 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

Editor since 1984

JP Donlon

pelled us through the recession, evenas two of our major competitors tookfederal bailouts.

Going forward, one big threat is notfailure, but success. Ford has seenturnarounds before—only to drift backto former habits. It’s not due to hubrisso much as a reversion to the mean.Having engineered a turnaround, wecan’t afford to take a well-deservedvictory lap. We must focus on the chal-lenges ahead—and turn an organiza-tion that’s been geared toward recoveryto one focused on profitable growth.

Innovation Is Key to GrowthWe are moving from saving and

transforming the company into an erawhere we are now growing the busi-ness worldwide. The future has been

established by the big decisions thatwe have made to refocus and trans-form Ford. The important, big decisionwas to focus on the Ford brand andfocus on a complete family of vehiclesmade available all around the world,where every vehicle is best in class interms of quality, value, fuel efficiency,safety and smart design, like SYNC andMyFord. Going forward, we’re well-po-sitioned in most of the markets aroundthe world. So the real key now is tostay absolutely laser-focused on this.

We could have acted like a car com-pany, introduced an outstanding newelectric vehicle, and called it a day. Butwe’re more than a car company, we’re atechnology company. We expect that onefourth of all vehicles sold by 2020could be electric or hybrid.

Part of our go-to-market strategy isto use social networks and the Internetto advance Ford products internation-ally as we did with the Ford Fiesta inthe U.S.—moving from paid media to

The Road Ahead

THE MOST IMPORTANT

leadership qualityfor a CEO is having a

compelling vision and then finding away to make that happen.

In the early 1980s, when I was aBoeing chief engineer for the design ofthe 777, I presented to Boeing’s boardthe business case for the new airplane.Former Ford CEO Don Petersen, aBoeing board director, later asked meto meet with Ford’s Team Taurus asthe team was preparing to design thenew 1982 Taurus. I invited the entireTeam Taurus to Seattle for three days.We compared notes on technology, onprocess, and being market-driven andcustomer-oriented. So in 2005, whenBill Ford called asking me to come toFord, I checked in with Don. It feltlike I was coming home.

Leading Teams and OrganizationsI don’t think I’m a much different

leader now at Ford than I was atBoeing. I’ve been leading teams andorganizations for a long time. I’vebeen associated with large-scale sys-tem integration innovation, whether it’sa commercial airplane with four mil-lion parts or a sophisticated automo-bile with 10,000 parts—they both takea lot of talented people and many dif-ferent disciplines to come together tocreate these fabulous products.

It’s all about getting people to worktogether on the team. What’s our plan?What’s the status against the plan?What areas need special attention?Bringing this together is something Ifeel comfortable doing.

I’m excited for everybody associat-ed with Ford that we are now deliver-ing not only strong, great products,but also a strong business in additionto contributing to a better world. Aseveryone knows, when I came herefive years ago, Ford was in seriousdifficulty; and yet, even during theGreat Recession, we not only avoidedbankruptcy and a federal bailout butturned Ford once again into America’stop selling automaker. Over the pastfive years, the leadership team at Fordorchestrated a turnaround that pro-

earned media to social media. Weembraced social media as a way toleverage the Ford brand and promoteour new products to key demographicgroups. Rather than the usual push-marketing approach, we deployed theFord Fiesta movement to open aninteractive dialogue with real cus-tomers about the launch of the car.Later, we switched focus from buzzand exposure toward pre-orders andsales having earned the right to closethe sale because of the early dialogue.In this way, Ford took social media toa new level as a marketing vehicle.

Increasingly, marketing is moreabout a conversation, because infor-mation now is ubiquitous. Everybodywants to know and has access to allthe information about vehicles. So forus, marketing is about starting thatconversation and making the dataavailable so everybody can see whatoptions are available from Ford. It’sexciting to see their response whenthey have this brand awareness.

It’s not only about having greatproducts, but also running a healthy,strong business for the long term. It’simportant to make a reasonable returnfor everybody in this business in orderto have the ability to continue to investin the future. Those that do that willget a chance to go forward. For thosethat don’t, things won’t work out so well.

For me, creating a culture of innova-tion starts with innovation that has apurpose. It begins with the point ofview of the customer. What does thecustomer really want? What will theyreally value? Clearly, we all want safeand efficient transportation. We alsowant the highest quality; we want it tobe the most fuel-efficient. We also wantall the latest safety technology and thebest value. And finally, we want smartdesign that works for us. Innovationand technology must serve these pil-lars of what customers really want.

Consider the things that we havedone about safety. For example, thecross-channel alert allowing blind spotmonitoring, the collision-avoidance—the roll stability control—these fea-tures plus SYNC and MyFord, handson the wheel, eyes on the road, voice-activated, technology seamlessly con-nected to our digital world—all ofthose features not only increase safety,but make us even better drivers.

What’s in Ford’s Future?In the future, expect to see continu-

ous improvement of the internal com-bustion engine, both diesel and petrol.We’ll see more turbo-charging and

by Alan Mulally

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 3

PERFORMANCE TURNAROUND

L e a d i n t o a b e t t e r f u t u r e .

direct fuel injection, which enable us touse smaller and lighter weight engines,and provide the performance capabili-ty and the fuel efficiency that we alltreasure. Expect to see more light-weight materials, more integrated elec-tronics, more uses of alternate fuels,like cellulosic and biofuels. We’ll seemore natural gas in our cars as well asmore electrification. It will expandfrom hybrids with more powerful bat-teries to all-electric vehicles.

As we develop fuel cell technologyand develop the infrastructure for elec-tricity and for hydrogen, we’ll seehydrogen vehicles where we take inhydrogen, combined with platinum,creating electricity for the battery withwater coming out of the tailpipe. We’veannounced that we’ll be electrifying theentire Focus platform—that’s a globalplatform that we offer worldwide. So,off the same production line, we couldhave a petrol, a diesel, a hybrid, a plug-in hybrid with a bigger battery, and anall-electric vehicle.

The world is moving toward perfor-mance-based compensation. Compen-sation must be tied to creating a profitable,growing business—because then every-body benefits. Clearly, the compensa-tion here rewards all of the leadershipteam based on the team creating valuefor the shareholders and for all the par-ticipants whether they are hourly orsalaried. Compensation is aligned to avalue creation for everybody. Todaywe’re providing great jobs and greatcareers for everybody. And that’s whateverybody cares about.

At all times, I try to be good-natured.Someone might think I was a bit shortwith him; but if I am, I soon apologizebecause anger isn’t effective leadershipbehavior. I treasure working togetherwith talented people, holding ourselvesaccountable, and working our waythrough whatever problem arises.Working together is the most essentialbehavior for a high-performance team.

I’m proud of the fact that I help cre-ate quality products—commercial air-planes or the best cars and trucks—thatmove people and families around ourworld safely and efficiently. I love con-tributing to making life easier, safer,and more efficient, but also I like creat-ing fantastic jobs and careers for manypeople around our world. A stronggrowing business can do this as wellas contribute to a better world byusing fewer resources. LE

Alan Mulally is President and CEO of Ford Motor Company.He was chosen by his peers as Chief Executive’s CEO of theYear 2011.

ACTION: Engineer a turnaround at your company.

by JP Donlon Alan inherited difficult circumstances,even more difficult than he thoughtwhen he took the job, and handled thejob with grace and courage. What’smore, he single-handedly revivedrespect for the auto industry in theU.S. —William R. Nuti, CEO, NCR

He created a will to win among his peo-ple and through his personal leader-ship, modeling certain behaviors thatshowed passion, courage and tenacity.He excited and energized the base, andthat’s important when you’re dealingwith a demoralized situation. —FredHassan, chairman, Bausch & Lomb

He took the hand that he was dealt,and managed to take those resourcesand give them a new sense of purpose.He reframed the situation from one ofloss and bereavement in who they wereto a sense of excitement about whothey are and who they’ll be. —JeffreySonnenfeld, Senior Associate Dean, Yale

School of Management

The foresight he showed in theface of incredible difficulty, thecourage he showed in makingsome tough decisions on popu-lar brands, the global mindsethe showed, and the statesman-

ship he showed when two major com-petitors were on the public dole showshe was thinking for the good of thecountry, company and industry. —JamesTurley, CEO, Ernst & Young

The turnaround of Ford is an amazingsuccess story, due largely to his talents,leadership, and courage. It’s a turn-around of an icon. It comes down tothe degree of difficulty—what wasaccomplished in tough times—thatspeaks volumes about his leadership.—Hugh Grant, CEO, Monsanto

Mulally has created a leadership tem-plate for all of us to follow going for-ward for what growing a business lookslike. —Christine Jacobs, CEO, Theragenics

Alan rallied the Ford team to supportthe “One Ford” vision and make thetough, but necessary decisions. Theend result is that Ford has deliveredmarket-leading performance. —DanGlaser, group president and COO, Marsh

IT TOOK TREMENDOUSleadership for Alan

Mulally to orchestrate aturnaround at Ford. Here are six keys:

1. Display courage in the face of adver-sity. When he arrived on the job in Sept.2006, Mulally realized that the Fordline-up was in disarray and that trans-formation would take time. He tookheat for mortgaging all of Ford’s assetsfor $23.6 billion to protect the companyfrom “unexpected events.” When theGreat Recession hit, GM and Chrysleraccepted government bailouts. Fordtoughed it out. It’s now a badge of honor.

2. Focus is everything. Ford had dis-sipated its effort across too many non-core nameplates (a house of brands). Thedecision to sell Jaguar, Land Rover, andAston Martin, fold Mercury and concen-trate on the Ford brand—the One Fordstrategy—allowed everyone to directtheir energies to what mattered.

3. Simplify. To let people knowwhat he expected, Mulally hadplastic cards distributed toeveryone, headlined One Fordwith four expected behaviors onone side and a revised defini-tion of the company on theother (One Team. One Plan. One Goal.).

4. Use the Outsider Advantage. Eveninsiders, when they step outside the box,can start to see the business as outsiders.Mulally insisted on a weekly BusinessPlan Review System where it was harderto hide unpleasant truths. Executiveswere held accountable for their perfor-mance against data that gave the teama snapshot of where everything stood.

5. Reward transparency and collabo-ration. Early on, Mulally asked seniormanagers to report on how businesswas going. He clapped his hands whenone courageous person reported a delayin the launch of a vehicle. Once rivals,executives began sharing sensitiveinformation and helping one another.

6. Stay inventive. In an industry slowto embrace cutting-edge technology, Fordintroduced MyFord Touch, a redesign inthe way drivers interact with vehicles.Premium technology was made avail-able to non-premium products. LE

JP Donlon is editor of Chief Executive magazine. ChiefExecutive.net.

Six LessonsAll leaders can learn.

LEADERSHIP LESSONS LEADERSHIP PRAISE

4 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

Peer PraiseCEOs laud Alan Mulally.

or alignment issues, then propose meekhalf-measures designed to cloak inde-cisiveness and dodge problems.

American companies didn’t alwaysbuild leaders’ compensation aroundprofits and stock performance. Until theearly 1980s, managers’ salaries wereoften tied to the number of employeesor the volume of sales they oversaw,not the profits they produced. Thatwas a rotten system, because it encour-aged managers to buy businesses tojack up revenue and headcount withlittle regard to the bottom line. It dis-couraged managers from consideringthe cost of capital. A self-serving bosswith allies on his board of directorscould borrow money to make acquisi-tions and boost his salary while pro-ducing no benefit for investors. Notsurprisingly, conglomerates came torule the investing landscape, and thestock market languished.

Then came the maximizing sharehold-er value movement. Corporate raiderssaw that they could buy bloated con-glomerates, sell off money-losing divi-sions for cash, shove the company’sself-serving managers into retirement,

and end the day with a small, profit-minded company that could generatebigger dividends for its owners. Thenew owners tied the salaries of anysurviving manager or CEO to profits.

Soon shareholders demanded account-ability by tying managers’ salary toprofits or stock-market performance.This was good for shareholders, atfirst, but the movement has produceda raging hangover. The obsession withprofits and stock-market performance hasled to a crippling short-term mindset.If a boss knows his salary is tied to thisyear’s profits or stock performance, he orshe prefers a meek cost-cutting campaignor share-repurchase program to boost EPS10 percent right away over a risky/costlyplunge into R&D that may or may notproduce a breakthrough product and atripling of profits in five years.

Four Performance GaugesSo what yardsticks should you use

to measure a manager’s performance?I’ve got four suggestions:

1. Let the customers pick the salary.

Making a Profit

WHAT’S THE BEST WAYto track how well

a leader is running abusiness? If your mind turned first toprofitability or stock-market performance,you’re thinking like most managersand shareholders. And you’re wrong.There are much better barometers.

I’m not saying you should ignoreprofitability. Measures like net income,operating earnings, return on investedcapital and margin expansion have theirplace. But if we tie the annual salaryof a CEO or a division manager to thisyear’s profits, it’s a mistake. As tools togauge how well a boss and his or herteam are doing at their jobs, these prof-itability metrics are surprisingly weak.Sometimes they’re even misleading.

For one, the profit lens looks back.The visionary decisions you make thisyear may not show up in the bottomline for years. Conversely, your com-pany or division may perform nicelyfor a few years before the problemsdrip down to the bottom line. And ifthe incentive is to hide the problems—instead of administering tough medi-cine to fix them—you end up workingagainst long-term health. If you onlylook at profits during that time, youmay never suspect anything is wrong.

What about stock-market perfor-mance? Giving bosses stock optionswas supposed to solve the problemwith the lag time for profits, becausestock-market values tend to reflect acompany’s future prospects. Theproblem is that there’s so much noisein the stock market that bosses mayget windfalls in years when they donothing right and be punished in theyears when they do everything right.

In the wrong circumstances, stock-based compensation can invite corrup-tion—and discourage good execs frommaking tough decisions. Most man-agers know which threats and prob-lems their firms face, and what to doabout them. Alas, they’re all too awarethat admitting those problems andinstituting the fixes could mean a hitto the company’s share price and theirpersonal balance sheets. So they grumblevaguely about inertia or communications

Base managers’ bonuses on improve-ments in customer satisfaction and loyal-ty. The science of measuring customersatisfaction has advanced considerably.If more customers respond very likelyto the question Would you recommendus to your friends? the boss deserves araise. Or tie their salary to their successat boosting customer retention, since thecost of acquiring a new customer ishigh. And think beyond sales. Rewardmanagers for increasing customers’engagement with the firm online andtheir identification with the brand.

2. Consider the shopping-mall bonus.A boss’s job is to figure out how a companycan out-position its rivals. Free-marketcustomers have choices, and compa-nies reside in a mega-massive, virtualshopping mall. So reward or punishbosses when they succeed or fail atmoving the company into the mall’sprime locations. If they make the jumpfrom a boutique cart to a proper store-front, the boss deserves a bonus.

3. Let your employees decide. Culturecan be the elusive special sauce that dis-tinguishes real winners from also-rans.Think of how Motley Fool built a rec-ognized brand among financial-advicewebsites, or how Zappos.com’s zeal-otry for customer service won it a $1.2billion buyout from Amazon.com. Thewar for talent shouldn’t be left to HR.Bosses are most responsible for recruit-ing high performers, since they set thetone, allocate resources, create opportu-nities and celebrate progress to moti-vate recruits. So use an employee engage-ment metric to let employees be heard.Or base a portion of the boss’s salary onsales per employee, minus their salaries andthe cost of acquiring and training new hires.Add a bonus when the spread improves.

4. Look at your heart-of-hearts metric.Bosses know in their heart what the realmeasure of operating success should be.Hospitals might focus on reducing re-admissions. Labor-intensive companiesmight look at the spread between their mostand least productive workers. Companieswith high costs to acquire customersshould measure customer retention.

Such metrics are honest—and hard tofudge. Few bosses would willingly seetheir bonuses tied to them. But if you’rea shareholder who seeks better resultsfrom your leaders, or you’re a boss andwant a better way to gauge your perfor-mance, you need new and nuanced waysto measure how you’re doing (and tiesalaries and bonuses to that measure). LE

Trish Gorman is dean of the Jack Welch Management Institute and co-author with Jay Barney of What I Didn’t Learn in Business School:How Strategy Works in the Real World. Visit www.jwmi.com.

ACTION: Use these four performance gauges.

by Trish Gorman

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 5

PERFORMANCE COMPENSATION

But how are you really doing?

leaders who are change savvy knowthat they can’t succeed without the col-lective commitment and ingenuity ofthe group. This collectivity is seen notas a nuisance but rather as a necessity.Galvanizing motivation is the essentialtask of the change leader.

The resolute leader who is change-savvy helps people try new thingsunder relatively non-threatening condi-tions, and listens to and learns fromtheir reactions. He or she kick-starts thechange process, often acting as the ini-tial ignition. But the process will nevergo anywhere unless the leader figuresout how to develop ownership within thegroup, and I use the word group advis-edly because the driver of sustainabili-ty is the peer culture. At the beginningof a given change process the leader iskey to get things going, but successfulchange eventually must revolvearound collective ownership.

Finding Effective MotivatorsWhat motivates people? Daniel Pink

provides us with the foundation whenhe identifies three sources of motivation:

biological drive, extrinsicrewards (incentives andpunishment), and intrinsicrewards (things that makeus feel good just by doingthem). One example of anincentive/punishmentmotivator is merit or per-formance pay. Rewardsand punishment have aplace under conditions ofseriously limited capacity,

such as where few people have thenecessary skills and often do not showup for work, as is the case with teach-ers in some developing countries.

But if you want substantial and con-tinuous improvement, extrinsic motiva-tors have limited effectiveness. Pinkreports on several experiments, all ofwhich led to the same conclusion. Heobserves that the rewards “crowdedout the intrinsic desire to do somethinggood.” Extrinsic rewards, in otherwords, narrows the reasons for doingsomething and makes it unlikely thatthe reason for the effort is coming frominside people. Pink summarizes thefindings as the “seven deadly flaws” of

Intrinsic Motivation

YOU CAN’T MAKE PEO-ple change, and

rewards and punish-ment either don’t work or are shortlived—the only thing that works ispeople’s intrinsic motivation, and youhave to get at this indirectly.

The big change problem is how toget people to put in the energy toimprove a situation when a lot of themdon’t want to do it. How do you getpeople to change their minds? How doyou motivate the masses?

Machiavelli had it right 500 yearsago. When people contemplate newideas, he observed, they are “generallyincredulous, never really trusting newthings unless they have tested them byexperience.” Grasping change involvesgiving people new experiences that theyend up finding intrinsically fulfilling.

Realized effectiveness is what moti-vates people to do more. It is notinspiring visions, moral exhortation, ormounds of irrefutable evidence thatconvince people tochange—it is the actualexperience of being moreeffective that spurs themto repeat and build on thebehavior. People can getfantastically excited andinspired, as many didwhen Barack Obama waselected president of theU.S. in 2008. But change isonly a mirage unless peo-ple actually experience the reality ofimprovement. If that happens, they’llexpect and do even more. Motivatedpeople get better implementation, butthe reverse can be more powerful.Helping people accomplish something thatthey have never accomplished before causesmotivation to increase deeply. Such newlyfound motivation is tantamount to pas-sionate commitment that is contagious.

There is often a tension between res-olute leaders and group development.The former are determined to get onwith it, and thus can become impatientwith those who are hesitant to get in-volved. Grasping change reconcilesthis potential conflict because those

carrot-and-stick incentive systems; theycan: 1) extinguish intrinsic motivation;2) diminish performance; 3) crush cre-ativity; 4) crowd out good behaviour; 5) encourage cheating, shortcuts, andunethical behaviour; 6) become addic-tive; and 7) foster short-term thinking.

So, we know what doesn’t work. Butthe mere act of inviting people to engage inactivities for their intrinsic satisfaction willnot, by itself, do the trick either. The ques-tion then becomes: under what conditionswill intrinsic rewards flourish?

Four core ingredients are essential forintrinsic motivation: 1) the work mustcarry with it a strong sense of purpose,since once their basic needs are met, themost people want to do is something ofvalue—something meaningful; 2) peo-ple find that getting better at somethingimportant (increased capacity) is intrin-sically satisfying; 3) there needs to be adegree of autonomy so that people canexercise judgment in making headway;and 4) being well connected to others inthe pursuit of significant goals—cama-raderie in relation to accomplishing pur-pose. This collective capacity is crucialfor deep, sustainable success.

To bring intrinsic satisfaction to thefore, change leaders must help create theexperiences that turn out to be motivatingbecause people find them emotionallymeaningful relative to their values andtheir ability to fulfill them. It is not thatthe task becomes simplified but becomesdirectionally clear to the point that enabl-ing the new experiences will furtherincrease clarity, skill, accomplishmentthrough action, and the ownership thatcomes from intrinsic motivation.

When Jamie McCracken becamedirector of education of the OttawaCatholic District School Board inOntario, Canada in 2003, he took over asystem that was “clenched,” then setout to unleash the energy and commitmentof the group. With input from the mass-es, he identified three core priorities:student success, staff success, and steward-ship of resources. He also stated that thesethree goals would remain the same forall seven years of his tenure. He com-mitted to stay the course. Still, that isjust talk. To succeed, McCracken had tohelp make these goals a part of people’severyday experiences. So we arrive atthe real question: How do you galvanizemotivation when you have the directionright but people are skeptical of whether itwill happen—or that it is a good idea?

We have developed such a process—motion leadership. It proactively shapesand trusts the ready-fire-aim process.Ready is directional; it identifies somecore goals as priorities. But rather than

by Michael Fullan

6 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

CHANGE MOTIVATION

H o w d o y o u g e t p e o p l e t o c h a n g e ?

• Involve CEOs as models for leader-ship development. If CEOs want to seepositive results, they need to getinvolved in their leadership developmentstrategy. When people see that the CEOapplies and practices the encouragedbehaviors, they understand that thesebehaviors are tied to the business strategy.• Mix it up. Make the most of the

generational mix in your workforce.By including people of all ages intraining, you’ll enrich the learningexperience. Different generations havemuch to teach each other.• Train people with their teams. Too

often people are taken away from theirteams to receive training. People gooff, learn new things and come back totheir workplaces all fired up. Theproblem is, the other team membersdidn’t share the experience and can’tsupport that enthusiasm. By trainingpeople together, you reap the benefitsof synergy and shared excitement.• Consider the context of the people

you’re training. How do the peoplemake contact with each other? Do theysee each other face-to-face every day,or do they mostly interact by phone,email or text message? Design learning

to match the methods peo-ple use to work together. Ifthey are primarily workingvirtually, learning needs tobe adapted to that context.• Use technology to teach

content. In the past, train-ers spent too much facetime teaching content. Withthe advent of new technol-ogy, they can teach beforebringing people together.

This leaves more face-to-face time tofocus on applying the content, practic-ing new skills and answering ques-tions. After people leave the trainingevent, technology can help reinforcethe learning.• Focus on behavior change. Too often

companies spend too much time find-ing and peddling the hot new manage-ment concept. But how many diets doyou need to lose weight? Only one ifyou stick to it. How many LD pro-grams do you need to make a positivedifference?—only one, if you stick to it.

Leaders are sometimes born, but theycan be developed. By designing learningexperiences to develop leaders, you’llunleash the power and potential ofyour people and make the businessobjectives much easier to attain. LE

Ken Blanchard is a best-selling author, speaker and chief spiri-tual officer of The Ken Blanchard Companies. He can bereached at editor@CLOmedia.com.

ACTION: Exercise your leadership influence.

I’M OFTEN ASKEDwhether people are

born leaders or if leader-ship can be taught and developed. Whilesome people are natural-born leaders,every person can develop leadershipcapacity, since leadership is moreabout influence than position.

When I ask an audience, “How manyof you are leaders?” few people put ahand up because they think leadershipis about having a position of authorityin an organization.

When I ask them who has had themost influence in their lives, they usu-ally talk about family members orclose friends (rarely about leaders inpositions of authority).

Why does a mother, father or closefamily friend often have the mostimpact on a person’s life?It’s because leadership is aninfluence process. Anytimepeople attempt to influencethe thinking, beliefs ordevelopment of others,they are leading. That’swhy it’s so important torecognize that everyone—from the seasoned CEO tothe new hire—can benefitfrom effective leadershipdevelopment.

Leadership is not something you doto people—it is something you do withthem. As a manager or an individualcontributor, your ability to leaddepends more on the quality of yourrelationships than on your positionalpower. By effectively relating to peopleover time, you are leading. Whetheryou’re a manager who wants to influ-ence your direct report or vice versa,you need to learn how to communicatewith that person in a way that createspositive results. That’s leadership.

I’m glad more organizations areappointing CLOs because the wordlearning implies a behavioral change.CLOs play a vital role in aligningbehavior with business objectives.Once you understand that anyone canbe a leader and that leadership is aninfluence process, your leadership devel-opment program can come to life.

Here are six ideas to get started.

Leaders by DesignLeadership is more about influence.

by Ken Blanchard

COMPETENCY DEVELOPMENTforcing the ideas, motional leadershiptrusts the process, knowing that an effec-tive change leader can greatly influencewhat happens. The process generatesintrinsic commitment and collective identi-ty, both of which are powerful steeringand sustaining forces. Leaders shouldstill have aspirational visions, but theyneed to pursue them by activating andaligning the needs of individuals andthe group. Forcing the process is coun-terproductive. Effective change leadersactivate, enable, and mobilize humanand moral purpose and enact them.

Motion leadership causes positivemovement. It creates a process and a set of conditions that foster moral willand skill, as well as technical expertise.It builds these aspects into the cultureby increasing the odds that peers willinfluence peers with respect to moralwill and technical expertise. Motionleadership increases intrinsic motivationand group identity that results in col-lective ownership and commitment tokeep going. Motion leadership generatesnew energy within the group to reachnew heights, which is achievablebecause individuals, the group, and its leaders want more, and know that itcan be had.

But what if you still get resistance?If you do many of the right things, mostresistance will disappear, either becauseyou tap into individual intrinsic motiva-tion or peers pressure and support eachother to move in the new direction.

Effective leaders combine resolutemoral purpose and impressive empathy.Effective leaders have resolute purpose;they persist against obstacles and set-backs. But the best leaders also haveimpressive empathy for those who are inthe way. To understand where peopleare coming from is the first step towarddeveloping a new relationship. Whenleaders demonstrate such a stance, theylearn more about different points of viewand can work to find common ground.

Since few change situations comewith shared consensus, leaders mustbuild consensus by taking action, devel-oping relationships, and problem solving.When leaders have a good vision, areresolute, tap into people’s intrinsic mo-tivation, and practice impressive empathy,most resistance dissipates. You canthen take firm action with the remain-ing problems. Most peers will supportyour action. Leadership is about havinggood ideas and building trusted relation-ships with diverse groups. LE

Michael Fullan is Professor Emeritus, University of Toronto,and author of Change Leader: Learning to Do What MattersMost (Jossey-Bass). Visit www.michaelfullan.ca.

ACTION: Tap into people’s intrinsic motivation.

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 7

move thousands of people and suppliesthrough some of the world’s most dan-gerous terrain, under extreme conditions.Even Sun Tzu would be impressed.

But US TRANSCOM and the rest ofthe military do have challenges. Theyhave to do more with less. How? Byasking hard questions about the supplychain: Should we try another design?Should we partner with others to manageour supply chain? Change often yieldslower costs and better performance, whileenabling you to focus on what you do best.UPS partners with the U.S. military onvarious logistics programs.• Merck entrusted their supply chain

to us so they could focus on what theydo best—find innovative ways to bringmedicines and vaccines to patients.

As a global logistics business, wehelp many partners extend supply chainsacross borders or export to new markets.

One way we can do better is bystreamlining export controls. For exam-ple, the Pentagon has proposed a sensi-ble solution to balance the needs fornational security and economic growth:higher fences around fewer products. If wemodernize U.S. export controls, overthe next eight years, our nation couldenhance real GDP by $64 billion. Andwe’d create 160,000 manufacturing jobs.

Let’s clear away the barriers to ex-ports, shift global commerce into highgear, and create more jobs here at home.

2. Energy security. About 60 percentof the oil we consume is imported. Inthe 1970s, it was half that—about 30percent. Why is that a problem? The moreoil we import, the greater the risk toglobal stability and trade. The U.S. mil-itary dedicates vast resources to secur-ing and protecting energy supplies.That’s why the Pentagon has a newOperational Energy Strategy to use less oiland more alternative sources of energy.

We’ve been working on a similar

Trade Wins and Woes

SOON AFTER THE FALLof the Twin Towers

and the attack on thePentagon on 9/11/2001, our formerCEO, Jim Kelly, said: “Those of us herein the U.S. and worldwide, who haveflourished under a free market system,have a deep moral obligation to keepglobal commerce moving forward.”

Many people thought terrorists mighttake down our economy, but that didn’thappen. Global commerce moved for-ward. I view that as a great victory.

Still, the world remains a dangerousplace. New threats and crises emerge.Our federal deficit is large, growing,and unsustainable. U.S. military bud-gets are under pressure, and futuredefense cuts could be drastic. We needstronger economic growth. Unemploy-ment is high—about 9 percent. Con-sumer confidence is down, and fearhas returned to financial markets.

Worldwide, while millions of peoplemove into the middle class, millions ofothers remain in poverty. Terrorismoften takes root in economic despair.

To remain secure and prosperous,we need something for the long term:something to improve our security with-out big federal budget outlays; some-thing to forge ties between nations andpeoples, and something to increase jobsand raise living standards. That some-thing is increased global trade.

Cordell Hull was Secretary of Stateunder Franklin Roosevelt for 11 years.After World War II, he started a projectto prevent future devastation—theUnited Nations. Hull said, “Wheretrade crosses borders, armies do not.” Iadd: Where trade crosses borders, millionsof people can see a better future.

Overcoming Three ObstaclesWe can create more trade and pros-

perity by overcoming three obstacles:1. Better logistics. Ancient Chinese

military leader Sun Tzu said, “The linebetween disorder and order lies in logis-tics.” Today, logistics is even more vital.• To learn about better logistics, go toScott Air Force Base and meet GeneralDuncan McNabb and his team. They

effort for years at UPS. We have a say-ing: In God we trust. Everything else wemeasure. We go to great lengths to trackour fuel use and its emissions. Then wereport on the results. Why? Accounta-bility and transparency are importantprinciples for performance. We’re mak-ing progress. Last year our package vol-ume went up, but our fuel consumed perpackage went down by more than 3 per-cent. Move more, consume less fuel.

We did it by deploying the rightvehicle on the right routes. By improv-ing teamwork and by using technologylike smart routing and telematics.

Last year, technology enabled UPS toavoid driving 63 million miles (252,000trips to the International Space Station).

Another principle of sustainability isexperimentation. In our fleet, we have arolling lab of about 2,000 alternativefuel vehicles. We test and deploy manytechnologies—from propane to hydro-gen fuel cells to electric. Replacing ourdiesel long-haul vehicles with LNGtrucks reduces oil consumption by 95percent and greenhouse gas emissionsby 25 percent. Plus, operating costs godown. And natural gas is plentiful herein the USA. A win-win-win for all of us.

3. Protectionism. Last year, when Ivisited Asia, leaders in several Asiancountries asked me how they could geta closer trading relationship with theU.S. Sadly, when it comes to trade, ourcountry is AWOL. This absence of leader-ship is puzzling. No other country hasinvested more than the U.S. to secureand protect the lanes of global com-merce. When it comes to reducing tar-iffs and barriers to trade, our nation is apioneer. The U.S. has 17 free trade agree-ments in all, but none in the past four years.

What the world needs is a globaltrade framework. Countries with tradeagreements have strong economic growth.The U.S. has a network of allies withgrowing economies. But we shouldconvert more alliances into more robusttrading partnerships. When it comes totrade, we are becoming weaklings. Ourmarch to economic growth and securitymust involve less protectionism and moreglobal trade. As a nation, we must keepimproving logistics and lowering barri-ers to global commerce. We must solvethe persistent challenge of energy secu-rity. And we need more global trade.

We can overcome our challenges.But we must have the desire and courage todo so. Each of us must rise to the chal-lenge. Together, we can do it. LE

Scott Davis is Chairman and CEO of UPS. This article is adaptedfrom his address delivered at the National Defense Transporta-tion Association Forum, Phoenix, Ariz., Sept. 12, 2011.

ACTION: Overcome obstacles to high performance.

by Scott Davis

8 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

PERFORMANCE OBSTACLES

W e f a c e t h r e e t h r e a t s t o p r o s p e r i t y .

familiar myopia that often occurs.• Leaders often have limited ability to

guide and oversee operations becauseof inconsistent access to key information.• Board of Directors and Investors

have a limited view of operations, lack-ing the perspective or information need-ed to know how to guide enterprises.

Operating managers are tasked withgrowing the business and reporting clearsailing up the lines of management. It’stricky navigation, especially when costcontainment is driving so many decisionstoday. Lowering costs is important, butit must be factored into astrategy. Today, four newand emerging operatingchallenges must beaddressed: 1) accuratelyevaluating growth potential,while balancing organicversus inorganic growth; 2) developing sustainableprocesses to reach or exceedrevenue growth goals, cutcosts to preserve recurringdividends, and protect top- and bot-tom-lines for enterprises; 3) imple-menting strategies for buildingsustainable brand recognition, and bril-liant management teams; and 4) demon-strating progressive, demonstrable,repeatable results to leaders, boards, andinvestors that will sustain the firm.

Establishing specific objectives andapplying reliable performance indica-tors are keys to a manageable process.Every enterprise should be using trans-parent operating blueprints that connectthe dots between financial reporting andactual operations in order to accuratelyrepresent such information.

An operating blueprint provides twostrategic enablers: 1) 360-degree Enter-prise Models (business, process, organi-zation, technology), facilitate asking“what-if” questions and test scenariosthat help vet problems and issues earlyand visualizing the end-to-end busi-ness goals and execution strategiesbefore beginning costly and often irre-versible strategy implementations; and2) Impact Analyses and Scenarios, withwhich to alter factors, create multipleoutput scenarios, evaluate the end-to-end impact of each scenario, andarrive at the optimal solution.

An operating blueprint allows owners

Transformative Growth

THE GLOBAL TRANSFOR-mation underway

represents extraordinaryrisk. Business strategies that embracenew socio-economic models and cou-ple powerful new technologies aretransforming the way we do businessand the nature of the marketplace.Yesterday’s economic and businessmodels are inadequate to ensuretomorrow’s success. It is time to moveforward. Only new thinking will do.

Transformation is a proactive processthat begins with a passionate need toeffect a larger change in the environ-ment. It is nearly identical for everyorganization: introduce a new goal,add the variable (exogenic factor), andtransform it into creativity and inno-vation. Transformation might encom-pass a single, large-scale revamping,but it is usually myriad changes—somelarge, some small; some planned, oth-ers unanticipated—all in a pixilationwith influence that spreads. An essen-tial driver is thinking differently aboutestablished ways and means; revisitingeconomic, business, social models.

Transformation is not a silver bullet.It only rarely produces permanentresults. Instead, it is the result of care-ful, deliberative, strategic planningand progressive cost-benefit analysisthat considers tactical issues and fol-lows the evolution. Once activated bythe exogenic factor, it opens the gatesto transformation, creativity, and inno-vation. Once released, creativity andinnovation can produce both an antici-pated and unanticipated sustainableimpact on the institutional model, cul-ture, and world in transformative ways.

Progress can’t be achieved by doingthe same things we’ve always done andexpecting different results. Unless new,progressive models are employed, truetransformation can’t occur. Yet leadersoften place the emphasis on financialanalysis, quarterly reports and balancesheets. This is insufficient for under-standing, tracking, and governing theperformance in volatile markets, since:• Operating managers often work in

relative isolation from the market andits operating functions, producing the

and managers to work together based onconverged intelligence of marketopportunities, execution capabilities,and business model differentiations.No contractor would build a housewithout blueprints—and an enterpriseoperational structure and processes areno different. Methods of guesstimationmust be replaced with precise metricsthat provide verifiable outcomes.

Properly implemented, operating blue-prints enable enterprises to: 1) maximizeROI at an earlier stage in the fundinglifecycle of each initiative, and collec-tively across the organization; 2) boosttransparency between strategy, fundingmodel, and execution model; 3) priori-tize and guide improved performance,value, and sustainable growth.

In times of market volatility, successis driven by recognizing major challengesand identifying the strategic imperatives

to address them. Thisrequires new structures,creating and sharing newkinds of business knowl-edge, understanding andapplying emerging socio-economic models, anddeveloping repeatable,reusable transformationalprocesses enabled by acces-sible technologies. Oper-ating blueprints provide

the basis for a predictive, sustainableplan for managing these challengesand opportunities for growth and futuresuccess.

Why do businesses fail? In some cases,the product or service is no longerneeded; but the secret reason is thereluctance or inability to adapt to change.Why is change so essential?• Change is the key factor in progress

and in achieving goals.• Innovation is the vital ingredient in

the individual or institution’s ability tomake effective and practical use ofchange. It is the great what if factor indecision-making and the entity’s raisond’etre to move forward and stay up onthe turbulent and changing times.• Sustainability is the manifestation

of health and growth, but also diversi-ty: indeed, it is made up in large partof change and innovation.

Achieving these three goals dependson transforming from outdated meth-ods to new, more productive ways ofconducting business to produce newideas, profound change, dynamic innova-tion, and sustainable opportunities. LE

Faisal Hoque is an entrepreneur, thought leader, founder/CEOof BTM Corporation, author of The Power of Convergence andThriving in Uncertain Times. Visit www.btmcorporation.com.

ACTION: Try using an operating blueprint.

by Faisal Hoque

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 9

PERFORMANCE GROWTH

A r c h i t e c t i t w i t h o p e r a t i n g b l u e p r i n t s .

From Bolt-On to Built-inI see differences between a narrow,

piecemeal bolt-on approach to changeand a systemic or integrated approach.Bolt-on is the route to failure. Built-in isthe path to success.

Bolt-On Programs• Training/change programs delegat-

ed to internal/external experts/specialists.• Departmental initiatives (like HR, IT,

financial, marketing, customer service)planned and managed independently.• Regularly renewing and re-launch-

ing change and improvement pro-grams as previous ones die out.• Electronic monologues push out an

ever growing amount of top down anddepartmental data and emails.• Vision/mission statements and core

values have high snicker factor, low use.• Crisis management to fix the prob-

lem or figure out who to blame.• Measurements and performance

discussions are painful distractionsfrom “getting my work done.”

• Processes and systemsare internally focused,fragmented, and managedby specialists and experts.

Built-In Culture Change• OB change led by line

managers.• Integration, interdepen-

dence, and interconnec-tions across departments,programs, and initiatives.

• Discipline of follow through and fol-low up with two-way accountability,learning, and continuous improvement.• Electronic tools support the many

lively dialogues/conversations up,down, and across the organization.• Vision, mission, values guide decisions

for strategy, planning, hiring, coach-ing, recognition, training, promotions.• Tracing root causes to the bigger

systemic issues.• Frequent and transparent measure-

ments and feedback guide collectivelearning, decision making, and change.• Processes and systems serve exter-

nal customers with integrated supportfor frontline teams across a chain ofinternal partnerships.

Peak Performance

THREE OF EVERY FOURefforts to improve

customer service, quality,safety, productivity, innovation, employeeengagement, structure, or technologiesstart with good intentions, big budgetsand staff—but don’t get lasting results.

Why? McKinsy & Co. concludes,“More than 70 percent of failures aredriven by poor organizational health, asmanifest in negative employee attitudesand unproductive management behavior.”

Leadership and culture are the criti-cal X factors. Soft leadership and cul-ture boosts or blocks strategy, structure,and change initiatives. Culture is theway we do things around here—when theboss isn’t around. Culture heavily influ-ences what’s acceptable and unaccept-able behavior. Those influences can beincredibly subtle and little recognized.

In working with senior manage-ment, I’ve seen the strategic, the tactical,and the totally lost. Many managersattempt LD/OD or culturechange by delivering pro-grams. That’s one reasonfor the high failure rate.

Too many change initia-tives have a limited scopeand are disconnected. Inmisguided attempts tohold individuals andgroups accountable, man-agers perpetuate an out-dated view of theorganization as clusters of groups anddepartments. They often fail to graspan organization as a living organismwith both independent and highly inter-dependent components. They also dolittle more than pay lip service to cul-ture and soft issues like morale, values,team spirit, engagement, and pride.

Five fatal failure factors are inter-twined roots of the problem: 1) partial/piecemeal plans/programs; 2) poorassessment of systems/processes andperceptions/attitudes; 3) leadershiplip service: behaviors undefined andunder-developed; 4) not buildingcause and capacity for continuouschange; and 5) weak implementationframework, plan, and infrastructure.

Transformation PathwaysEvery organization has a culture,

either by design or by default. Designinga peak performance culture comes frombalancing the discipline of systems, pro-cesses, and technology management on abase of effective people leadership. High-performers pull together the intangibleleadership issues that define their uniquecharacter and rally people around adeep sense of purpose made tangiblethrough management processes andsystems that translate ideals into action.

Here are six key pathways to culturaltransformation. Strategic leaders guideeveryone toward understanding, align-ing, and integrating these critical areas.

1. Focus/context: Bring alive the vision,values, and purpose/mission at thecenter of culture to eliminate the snickerfactor that comes from rarely used state-ments on walls and on web sites.

2. Customers/partners: Focus every-one on external customer needs and expec-tations. Strengthen internal partnershipsacross teams/departments. Extend theservice/quality chain to external partners.

3. Strategy and direction: Align strat-egy, structure, and roles up, down, andacross. Set three to five annual strategicimperatives to focus daily operations andstrategic change/improvement efforts.Cascade a goal deployment system fordisciplined follow up down all levels.

4. Measures and rewards: Balance lead-ing indicators like operational and customerservice or quality with lagging indicatorssuch as financial measures. Create a feed-back-rich culture for continuous learning.Align reward/recognition programs/prac-tices with desired behaviors. Keep improv-ing by reviewing, celebrating, refocusing.

5. Processes and systems: Streamlineprocesses at local/tactical, cross-functional/departmental, and strategic/org levels.Align key support systems (HR, IT,financial, controls, planning) to reducefrustration and boost performance.

6. Learning and development: Delivereffective education/communications strate-gies, systems, and practices. Assess andclose skill development gaps. Buildstrong departmental, project, and cross-functional teams. Close gaps in learn-ing, knowledge management, andinnovation. Create a planning process/infrastructure to support transformation.

This integrated framework keeps cul-ture transformation efforts from fallingvictim to the Fatal Five Failure Factors.This creates a leader led and designedculture for peak performance. LE

Jim Clemmer is a speaker, author, and Leadership Guru. Visit www.JimClemmer.com.

ACTION: Embed peak performance in your culture.

by Jim Clemmer

1 0 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

PERFORMANCE CULTURE

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reputation building demands both oper-ational excellence and compelling storytelling. So, we set out to measure theESG standing of 100 prominent compa-nies, in a way that compares real withperceived performance.

The ratings of actual performance wereprovided by CRD Analytics, supplier ofdata for the NASDAQ Sustainability Index.For the perception ratings, we conductedour own survey to obtain the views ofthe core constituencies who are mostattentive to sustainability performance.The perception survey concentrated oninvestment professionals, purchasing/supply management professionals, andgraduating university students.

By comparing companies on thesetwo dimensions, we identi-fied several true Leaderswho scored high in bothactual and perceived sustain-ability performance. Theseleadership teams excel inboth the operational andcommunications dimensionsof sustainability. Othercompanies may excel onone dimension or the other,but not both (Promoters hadhigh perception/low scores, whileChallengers trailed in perception butdid well in performance). Laggards,trailed on both dimensions.

Five Shared TraitsFive traits were shared by Leaders:1. Sustainability is an integral part of

business strategy (not just a complianceissue). Nestlé has focused its strategyaround “creating shared value,” whichcombines adherence to key operatingprinciples and achievement of targetedsocietal improvements in the commu-nities. Nestlé found ways to collaboratewith local leaders to improve nutrition,water quality, and rural development.Success in such efforts is seen as crucialto Nestlé’s future success and integral tobusiness strategy and corporate reputation.

2. Responsibility is taken for theimpact of internal operations, and ofassociated entities such as supply chainpartners. ABB takes responsibility inthree areas: 1) raising environmental per-formance/lowering impacts; 2) improvingmanagement of health, safety, social, envi-ronmental and security risks; and 3)improving sustainability performance in itssupply chain and acquired companies.

The ABB Supplier Code of Conduct(SCC) defines standards for companieswishing to sell to ABB and requiressuppliers to be responsible for the sus-tainability performance of subcontractors.

3. GRI standards for reporting are im-

Sustainability

THE CRITERIA THATdefine leadership

have evolved—fromexcellence in R&D and new product devel-opment, to operational excellence, processreengineering, core competencies, andinnovation. Today the framing of lead-ership is shifting again—to a conceptthat encompasses the best practicesfrom all the antecedents: sustainability.

This is not surprising, given theintense competition for resources.

The move towards sustainability isnot simply the pursuit of a worthy cause,nor mollifying the concerns of a particularNGO or shareholder group. Rather, it isrecognition that those who can make effi-cient and responsible use of naturalresources and human capital are more like-ly to be the destination of choice for talentand investment. It is a virtuous circle:the organization does well by doing good.

More leaders recognize that organi-zational reputation, defined by bothdeeds and rhetoric, is a key measure ofcompetitiveness—and sustainability isa key criteria for judging the quality ofcompanies and their leaders amonginvestors, supply chain partners, andtalented young people entering theworkforce. These stakeholders areinfluenced to a greater degree thancustomers, for whom purchase deci-sions are focused more on features,benefits, and value than on a compa-ny’s long-term sustainability.

The concept of sustainability extendsbeyond environmental impact. Today,sustainability assessments includeenvironmental and social practices andrelated governance (ESG). AcceptedESG benchmarks such as the GlobalReporting Initiative (GRI) standardsare emerging to assist those who seeksustainability leadership. However, lead-ers wonder where to focus invest-ments or how to integrate sustainabilityinto strategy and brand communications.

Examining SustainabilityThis year we conducted a global study

to shed light on how well firms at thetop of major industries are respondingto the new leadership challenge. Thepremise is that best-practice corporate

plemented, and the issues they highlightare understood by all stakeholders.Leaders excel at meeting these standardsfully and transparently, even those thatmay not seem relevant. BMW has qual-ity and thoroughness in sustainabilityreporting. Its top ranking for seven yearsrunning in the Dow Jones SustainabilityIndex is testimony to its leadership. Thestory is told eloquently, with reportingbroken into three focus areas: productresponsibility (97 percent product recycla-bility designed in); environmental protection(identifying measures for protection atearly stages of investment), and society(road safety, education, and health).

4. Sustainability is integrated intothe brand and client value propositions.

IBM decided early to inte-grate sustainability into itsbrand and customer valuepropositions. It used itsSmarter Planet theme tocommunicate how IBMhelps clients enhance theirperformance in ways thatfoster sustainability. RecentIBM ads focus on outcomesand social benefit, ratherthan products and services.

5. Operational initiatives and relatedcommunications are focused on careful-ly selected themes tied to the core of thebusiness. Complementary communicationsto key stakeholder groups are used toget the word out. Cisco Systems con-centrates on demonstrating leadershipon two issues, closely linked to its busi-ness and brand. Socially, Cisco is focusedon education—helping people world-wide develop and use IT skills. Theenvironmental theme is Energy-wise—helping customers reduce greenhouseemissions and create smart buildings.

Embrace SustainabilityTop companies have embraced sus-

tainability reporting and practices—andnot merely a reporting exercise, thoughfull and transparent disclosure is essen-tial. Rather, they have integrated sustain-ability themes into their corporate stories,mission, vision and values and in manycases, directly into their brand and cus-tomer value propositions. They know thatsustainability encompasses social and gov-ernance factors as well as the environment.

Companies that display leadershipin this emerging field are positioned toexcel. They’re taking the high ground bybuilding sustainability into the businessand by informing others of their efforts. LE

James Cerruti is the author of the Sustainability LeadershipReport; measuring perception vs. reality. To download thereport, visit www.sustainabilityleadershipreport.com.

ACTION: Integrate your sustainability initiatives.

by James Cerruti

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LEADERSHIP SUSTAINABILITY

It’s the leadership frontier.

low transformational leaders because of thepersonal growth they experience in return,growth in their knowledge and skills,and in their sense of purpose.

Putting Coach Model into PlayOrganizations that adopt a leader as

coach philosophy help leaders attackthe people-related areas of their job. But,from a practical perspective, how doesit work? Who plays coach? Is it thesupervisor? Yes, but not exclusively.

All leaders should learn how to coach,because even project managers oftenplay an important boss role. In fact,they are in an even stronger position to coachthan supervisors, since they interactwith individuals more regularly andhave more coachable moments that arenon-predictable, on-the-job timeswhere coaching is most effective.

Because it is difficult to schedule orplan for a coachable moment, organiza-

tions should invest in coaching trainingthat promotes continuous insight anddevelopment. The training should bepractical, involve blended learningapproaches, and take place over time.

The core of a successful coachingtraining program includes:• In a pre-work meeting, a participant

meets with his or her manager (who,ideally already is well versed in coach-ing) to confirm targeted results. An on-line coaching portal can be set up thatincludes overviews of the tools andcourse content that will be presented.• At an in-person training workshop, par-

ticipants learn coaching techniques andpractice new skills. The workshop canalso be broken up into two-hour eventsand spread over a time with on-the-jobassignments between training modules.• During the program, participants coach

direct and indirect reports, applyingwhat they learn. Online tools and videoscan be used to provide ongoing sup-port for typical coaching challenges.

Leaders Who Coach

PRESSURE ON LEADERSis high, as they are

challenged to delivermore and be more. Leaders often mustfulfill dual roles as the boss and individ-ual contributor while demonstratingexpertise across a range of areas fromadministrative to technical to functional.

What suffers are soft responsibilities—the people and relationship areas.It’s easy to get caught up in the tangi-ble areas, since that’s where perfor-mance measurement usually startsand ends. Plus there are emails toopen, meetings to attend, and docu-ments to review. However, leaders whodon’t build true connections with theiremployees won’t understand what drivesand motivates them. Without establish-ing rapport, leaders can’t give mean-ingful, useful feedback and coachingthat change behaviors in positive ways.

Start thinking about leadership morebroadly and consider helping yourleaders become more transformationalby teaching them how to lead as coaches.

Leadership MaturityTo understand how a leader as coach

approach works, let’s look at the dif-ferent levels of leadership maturity. Atthe lowest level, leaders serve a trans-actional influence role. An employeedoes something for the leader, and theemployee receives a tangible item inreturn (or, promise of something tangi-ble). Transactional leadership tends tobe a command/control model—youdo this, and you will get that in return.

Mature forms of leadership use moreabstract influence. At mid-levels of matu-rity, leaders rely more on relationshipsto influence others; at the highest levelsof maturity, we see transformationalleaders who appeal to an employee’svalues, not just his or her pocketbook.At this level, leaders interact and coachemployees so powerfully that employ-ees choose to follow or invest in theleader and his or her projects, ulti-mately creating highly engaged andmore productive employees. The leaderas coach clearly operates at a transfor-mational level, transforming the peoplearound him or her. People choose to fol-

• After the program, participants meetwith their managers to discuss progressand next steps about how they coach.• Throughout the year, participants con-

tinue to coach direct reports. Account-ability for coaching should be created andaccess to follow-up materials ensured.Such material is designed to teach lead-ers how and when to give constructive,high-impact feedback. It builds the coach-ing framework into a leader’s responsi-bilities and creates a culture of coaching.

Managers who develop a coachingleadership style learn how to: engagepeople in critical conversations; buildtrust; help people find motivating workthat aligns with both development andorganizational needs; help people selecthigh-leverage development activities;and provide meaningful feedback.

As coaching becomes a more activepart of a leader’s management style,employee engagement and productivityincrease. A 2007 Bersin study foundthat organizations that are effective attraining managers to coach employeeshave higher employee productivity, employ-ee engagement and financial performance.Also, organizations who rate them-selves as good or excellent in coachinghave a higher business impact thanorganizations with no coaching process.

Four Coaching PrinciplesMany leaders don’t know how to

coach or how to start the developmentconversation. Many employees getdefensive when receiving feedback,and thus leaders shy away from it. Yetwe all know that feedback is critical togetting people to change and grow. Acoaching framework has four principles:

1. Be a little pushy. Challenge yourtalent to be more and to have a greaterimpact. If leaders have a positive rela-tionship with their employees, they’llappreciate the additional challenge.

2. Carve out coaching time. Leaderswill always have long to-do lists, andso they must make coaching a priori-ty—blocking time every week to thinkabout ways they can proactively chal-lenge and coach their staff and aboutwhat worked well and what didn’tfrom the past week—and how they willcoach in the coming week.

3. Identify coachable moments. Attimes, individuals are more open tobeing coached. Learning when to coach isas important as how to coach. An exam-ple might be the car ride back to theoffice following a visit with a frustratedclient. Simply asking, “what do youthink worked” and “what will you dodifferently next time” can drive greatcoaching discussions.

by Tom Daniel

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PEOPLE COACHING

H o w c a n y o u b e s t d e v e l o p t h e m ?

at every performance managementevaluation, assignment, and promotion.

3. Teach coaching skills and put themto practice. Coaching does not necessar-ily come naturally to managers. In fact,before they become managers, peopleare generally rewarded for their skillsand ability to get tasks done on theirown or in small teams. Becoming amanager can represent a difficult shiftin what managers do and how they allocatetheir time. Core coaching skills—such aslistening, questioning, observing, build-ing rapport, constructive analysis andfeedback, empathy, supportive encour-agement and holding others account-able—are all skills that can be enhancedor taught in various ways. Whether it isin workshops, mentoring relationships,or modeling strong coaches, managerscan improve their coaching skills—andthen put their skills to use. This meansallocating time to practice these skillswhen coachable moments occur—and cre-ating coachable moments or situations.When you delegate tasks or responsibil-ities, you create a coaching opportunity.

4. Give a manager a coach. To trans-form managers into coaches, give them thechance to experience coaching first hand.

Having a manager coachedby another executiveachieves two things: 1) itenables the manager toexperience the benefits ofcoaching and become morecommitted to coaching asa method for developingothers; and 2) it provides amodel of how to providecoaching for others. If youdon’t have skilled coaches,

consider hiring external coaches towork with your key managers.

5. Reward the best coaches with thebest jobs. Managers who demonstratethe strongest coaching skills are likelyto be the strongest performers. Placingthese managers in key roles and credit-ing these assignments, at least in part,to their excellent coaching skills willsend a strong message to others: coach-ing is a critical skill for all managers.

Take these five steps to accelerate thetransformation of managers into coach-es and become a coaching organization.The benefits include enhanced collabora-tion and stronger performance. Usually,your strongest managers are also yourstrongest coaches. When managers areaware of these outcomes, they’ll bemotivated to begin their transformation.LE

Mike Noble is a Managing Partner at Camden ConsultingGroup, providing executive coaching and training services.Visit www.camdenconsulting.com.

ACTION: Turn your managers into coaches.

FOR MANAGERS TO BECOMEleaders, they must de-

velop the ability to coachothers. As John Wooden, Sports IllustratedCoach of the 20th Century, said: Knowledgeis not enough to get desired results. You musthave the more elusive ability to teach and tomotivate. This defines a leader; if you can’tteach and you can’t motivate, you can’t lead.

Coaching is a core skill for any and allmanagers. Coaching and collaboration arethe most effective ways for managers tolead. If managers aren’t skilled at coach-ing their people, they likely won’t achievesustainable long-term positive results.

Coaching requires both skill andtime. First, you need to understandwhat coaching is and why it is important.Coaching is the act of helping others toperform better. It may be focused oncorrecting poor perfor-mance, improving skills, ordeveloping new skills.Good coaching by man-agers will accelerate thedevelopment of employeesand lift their organizationsto higher achievement.

Not all managers coach,for one of three major rea-sons: 1) they don’t see thevalue or importance ofcoaching; 2) they don’t possess coach-ing skills; or 3) they lack the time. Toovercome these barriers and transformmanagers into coaches, do five things:

1. Build the personal case for coaching.You can’t force coaching on managerswho don’t see its relevance. To buildthe case, you need to address the what’s-in-it-for-me element. When you pointout that the strongest and most successfulleaders are also excellent coaches, they’llwant to become an effective coach.

2. Establish some firm expectations.Make it clear that coaching is a primaryresponsibility of managers and prerequi-site to creating a coaching organization.If you don’t establish firm expectations,you won’t get desired results. Coachingshould be a key element in your cultureand part of every manager’s job. Coach-ing requires skill and time. Enable man-agers to develop their coaching skillsand allocate time to learn and applytheir skills. Make it a topic of discussion

Managers into CoachesUse five ways to transform them.

by Mike Noble

COMPETENCY COACHING4. Don’t tell, ask. Effective coacheslearn how to ask employees questionsvs. simply advising or telling themhow to do things. Knowledge workersdepend on their thinking skills and acoaching approach that challengesthem to think about their job in differ-ent ways can be a powerful influencetool. If they are challenged to generatealternative solutions, they learn to beproblem solvers versus simply imple-menters of others’ ideas.

Let’s apply these four principles to apractical situation. When Jennifer mess-es up in a new business presentation,she feels terrible. While, Steve, her boss,is tempted to go over the failed meet-ing in detail with Jennifer, he doesn’t.Instead Steve asks Jennifer insightfulquestions that allow Jennifer to talkabout the situation and assess for her-self what could be done better. We callthis a development conversation. WhenJennifer and Steve go into a future newbusiness meeting, Steve should remindJennifer of two things they learned lasttime. The process sparks real changeand helps employees develop the skillsthey need to adjust behaviors and grow.

Leader as coach models and frame-works provide far reaching benefits.First, a coached employee understandsthe growth and development obtainedand sees how his or her value to theorganization is increasing. Employeesfeel more important, are more confi-dent in their skills and have higher jobsatisfaction. They also learn to findsolutions to problems instead of firstseeking help. Often they find a newfound freedom to be more innovative.

The employee benefits also impactthe coach and the employer who seeimproved results and outcomes fromthe employees they are investing in.Typically the coach and employee havebetter alignment and thus improvedproductivity. It also helps the coachbecome more knowledgeable andinsightful as a manager and improvehis or her team’s performance whichincreases the visibility of the coach.

Organizations see improved engage-ment from staff going through thecoaching and those providing thecoaching. Companies thrive on continu-ous improvement, and it starts withdeveloping employees through effec-tive leadership coaching practices thathelp them step up to new roles andnew challenges. Organizations cangrow and improve only when theirpeople resources grow and improve. LE

Tom Daniel, Ph.D., is SVP at PDI Ninth House. Visitwww.pdinh.com.

ACTION: Develop leader coaching competencies.

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 1 3

are clear. The SLA model includes toolsto help understand how the businesstracks its money flow and ultimate net profit.Stakeholder analysis tools help LPsidentify what aspects of the businessare of interest to people having a vest-ed interest in learning the outcomes.

2. Building the case for learning. Cre-ate a customer-centered value propositionfor the learning function and an annu-al, business-focused learning plan. LPs usethe language of business to create busi-ness cases for investments in learning.

3. Engaging leaders in key learningactivities. This step engages leaders inthe critical learning activities to ensurelearning solutions are highly relevant.The three most critical touch-points are:1) governing the learning function; 2) designing and developing effectivelearning solutions; and 3) engagingleaders as teachers. The SLA modelinstructs how to create and run gover-nance boards and advisory councilsand includes a blueprint to plan andimplement a Rapid Design Team sessionthat engages leaders in co-designinglearning solutions with LPs. The sessionbegins with the business goal and cre-ates a map of what the learner needs toknow, believe, and do to achieve the goal.

Learning vendors participateand provide real-time pro-posals. Ultimately, the leadersselect the learning vendorand co-design, along withLPs, the learning solution.The last touch point, engag-ing leaders as teachers, presentsa unique approach known asVisiting Executives.

4. Communicating yourbusiness results. This step provides atemplate for creating a strategic com-munication plan for the learning func-tion. In addition, the importance ofusing the language of business in tar-geted communication is demonstrated.Templates and examples of externalcommunication are presented to buildthe reputation of the learning solutions.

Strategic learning alignment is a pro-cess. The SLA model is an integrated,repeatable system using the languageand tools of business. Alignment enablesleaders to easily answer the question, Isyour company’s investment in learningviewed as a cyclical expense or a strategictool for growth? Leaders see ROI fromtheir investment in learning. The learn-ing function becomes a strategic part-ner for business growth. LE

Rita Mehegan Smith is VP of Enterprise Learning for IngersollRand and Dean for the Ingersoll Rand University (IRU). EmailRita_Smith@irco.com or Kathy_Warner@irco.com.

ACTION: Make LPs your business partners.

Strategic Learning

LEADERSHIP TODAY IS Afull-contact sport, as

people’s plates are over-flowing, and leaders are doing morewith less daily. To create a healthy, sus-tainable organization, they need to cre-ate a culture where others are motivatedto give their discretionary energy.

Productivity and success depend onhealthy leaders and employees who are notcaught up in disruptive behaviors suchas blame, victim thinking, excessivecontrol, silo mentality, and internalcompetition. When such behaviors sur-face, you need to take proactive stepsto pinpoint the cause and what mustbe done to turn the culture around.

Leaders of healthy, sustainable orga-nizations excel in three activities: 1)clarify goals and expectations; 2) helpemployees to see how their responsibil-ities align with and support these goalsand expectations; and 3) engage them inmaking the goals/expectations a reality.

1. Clarify goals and expectations. Ifyou are not clear on what you wantyour culture to be and where the orga-nization is headed, only good fortunewill get you there (not an effective planfor sustainability). If you work long andhard enough, you might achieve yourgoals. But working smart is more effec-tive—it takes a deliberate approachfocused on what you want to create, whatcore values will drive your success and howyou’ll get there. So, examine where youare in your cultural evolution. Is yourculture healthy—or suffering from lim-iting values (blame, manipulation, hier-archy, exploitation, insecurity)? You canmeasure what’s occurring in your cul-ture. And, what can be measured can beactively managed. So, identify the valuesdriving your culture, clarify what youwant, and make necessary changes.Use the cultural values assessment to tar-get your OD and LD activities onissues and areas that will provide themost positive ROI. You may need toinvest in your leadership team, or tar-get specific divisions or departments. Ifyou are not clear on your strategic ini-tiatives, how will you and your peopleknow what to do to ensure you get there?So, define where you want to go and whatyou must achieve to get there. Your plan-ning needs to be dynamic, and you

Make training a business partner.

IS YOUR INVESTMENT INlearning viewed as a

cyclical expense or astrategic tool for growth? The reces-sion and global competition have leftleaders with neither time nor resourcesto waste on low-impact learning. Bus-iness is mandating learning be laserfocused on critical issues, solve realproblems, and be delivered faster andwith minimal disruption of work. Thisrequires learning professionals (LPs)to align with strategy and leadership.CEOs and CLOs cite alignment oflearning with business as a top priority.However, both groups agree there is alarge gap. Strategically aligned learn-ing provides clear impact and isviewed as a strategic tool for growth.

To close this alignment gap, LPsmust become bilingual in learning andbusiness. Can your LPs readi-ly answer these questions:How does the company makemoney? What is the company’sbusiness model? How is the com-pany performing against finan-cial metrics? What are the keymarket drivers impacting thecompany? What are the compa-ny’s key strategic priorities?

Learning functions exist todrive business results. LPs are busi-ness people first, with an adult learn-ing specialty. By using the languageand tools of the business, they cancreate powerful strategic alignmentbetween learning and business. The keyis systematic use of a repeatable oper-ating model—the Strategic LearningAlignment model. The SLA modeloffers a roadmap and resources tocreate sustainable alignment. Leadersmay serve in a teaching role. Whilethis moves learning and business closertogether, it is just one tactic. Using theentire, integrated system of tools inthe SLA model accelerates powerfulalignment of learning and business.

The SLA model contains four steps:1. Knowing your business. In this

step, tools such as the Business ModelCanvas, (www.businessmodelgeneration.com),help LPs map key levers that drive thebusiness. Concepts like customer seg-mentation, channels, and revenue streams

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Clarify, Align, Engage

COMPETENCY LEARNING PERFORMANCE CULTURE

by Joy Stroud Ruhmannby Rita Smith

You can create a healthy culture.

straightforward but doesn’t come with-out investment on your part. You needto be involved every step of the way.Here are seven things do:

1. Encourage everyone to invite an-other employee to coach them. Anyonecan coach anyone else. Yes, some won’tget invited; their feelings will be hurt.These people should thank you. Since weneed to earn the right to coach others, thisis valuable, albeit painful, feedback.

2. Dive into the process yourself.Invite someone to coach you, and insistthat all senior leaders do the same.

3. Anyone can coach anyone. A goodcoach is a good coach. Don’t wasteHR’s time in the futile pursuit of goodmatches or chemistry.

4. Ask people to take on only onecoaching assignment at a time. Thisensures that each person receives thefull attention of the coach and spreadsthe coaching load and opportunities.Nothing absolves leaders from beingcoach-like with all team members.

5. Provide these guidelines: Coachingpairs should meet in person or via tele-phone for 30 to 60 minutes (time forgreat coaching to happen) every two tothree weeks (to keep the momentum

going) for four to six months(enough time to developnew performance standardsand create new habits).

6. At the end of coachingengagements, encourage peo-ple to invite a different mem-ber to coach them. Higherperformance is always pos-sible, and a good coachwon’t rest until it is found.

7. Equip everyone withthe skills and approaches to coach at ahigh level. This should only take one ortwo days. Sadly, most coach trainingprograms focus too much on interper-sonal skills. Ensure your people partici-pate in highly experiential training thatprovides them opportunities to practicereal coaching and receive direct feedback.Ensure they are equipped to: ask ques-tions that pierce through closely heldassumptions and mental models; con-structively confront unhelpful behaviors,practices, and attitudes; affirm strengths,talents, and abilities; and share freshperspectives, no matter how radical.

Most people, even top performers,are leaving their best at the door daily.They’re not bringing their best talentsand energy to their work. Help themdo this. Give them a coach! LE

Gregg Thompson is a facilitator, coach, author, speaker andpresident of Bluepoint Leadership Development and its Leaderas Coach Workshop. Visit www.bluepointleadership.com.

ACTION: Make coaching everyone’s business.

HOW MIGHT YOU LIGHTup your organization

with one bold move? Whatcourageous decision could create a culture ofpersonal accountability and high performance?Make coaching everyone’s business!

Nothing compares to coaching whenit comes to helping people perform attheir best and accelerate their careers.Coaching is focused on the individual,not on the organization and its process-es. Even mediocre coaching can pro-duce remarkable results. Individualsbecome energized (or re-energized)about their work, take full ownershipof their performance and their careers,find and rejuvenate long-lost talentsand make major shifts in their contri-bution levels. Speak to anyone who hasgreatly increased their performance,and I guarantee that you’llfind a coach involved.

What would happen ifeveryone had a personalcoach? The results would beastounding. However, sincecoaching is an expensive, time-intensive process, it’s impracti-cal to provide everyone withan external coach. Manyorganizations are equippingtheir managers to be skilledcoaches. The problem is that today,managers face many demands on theirtime. Even the most well-meaning andcommitted managers can only coach aportion of their team members.

Why can’t everyone be a coach?They can. Coaching is not the exclusivedomain of senior leaders and externalprofessionals. Everyone can coach. Everyperson can sit with other people andchallenge them to lift their game, en-courage them to see new possibilities,confront them with their own potential,affirm their many talents, and remindthem of how great it feels to do extraor-dinary work. The problem is that mostleaders still see coaching as advising oth-ers, providing feedback, teaching skills andsolving problems. These managerial prac-tices do not constitute coaching. Whenwell-coached, people will solve theirown problems, seize their own oppor-tunities, and chart their own futures.

How does this work? The process is

Inclusive CoachingIt’s now everyone’s business.

by Gregg Thompson

COMPETENCY COACHINGneed to track progress against goals.2. Align values and goals to contri-

butions. Ensure all employees knowhow they can contribute to success. Ifyou fail to execute your plans, youwaste the time, energy and resourcesyou invest in planning. The key to effec-tive execution is aligning actual activities—what each employee is responsiblefor doing—with the strategic plan. Em-ployees who deal most directly withcustomers need to have a clear under-standing of how they can contribute tosuccess. They need to be vested in thevalues and see a link between what theydo and where the organization is headed.Since they most directly impact yourcustomers, they must be aligned withand fully supportive of the plans. So,make alignment a top priority. Defineyour core values based on how youmust treat all stakeholders—customers,employees, directors and vendors—tocreate positive outcomes for all parties.

Include employees in defining val-ues. When their values are aligned withthe organization’s values, great thingscan happen. Successful organizationsdefine their core values as behavioralexpectations and infuse the expecta-tions for these behaviors into theiremployee feedback process, proactivelymeeting with employees regularly toprovide positive feedback and take cor-rective action as needed. They engageemployees in active and open conversa-tions where employees (not managers)define how what they are responsiblefor will positively contribute to thegoals and initiatives. This affords man-agers and employees clarity as to whatthey are responsible for achieving. Thisclarity of responsibilities and goals iscrucial to alignment, resulting in goalachievement and strategy execution.

3. Ensure full employee engagement.This starts by ensuring that all employ-ees feel that their work contributes toorganizational success. Today, successrequires frequent feedback and course correc-tion. The more employees feel valued,the more they’ll be engaged when theyparticipate in progress meetings withmanagers, especially when they have avoice in the feedback process. Leadersand managers must make this happen.As a leader, your job is to get things donethrough others by focusing more on whatyou are responsible for managing throughothers than on what is on your own plate.

Leaders of healthy cultures focus onexecution and results. LE

Joy Stroud Ruhmann, president of Level Up Leadership, worksto implement cultural transformation and strategy executionmanagement. Visit www.levelupleadership.com.

ACTION: Create a healthy performance culture.

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 1 5

since it was thought to restrict range ofmotion and limit agility. Today teamsand athletes have specialized strengthcoaches because strength improves perfor-mance. Even chess champions train toimprove how they solve problems andhandle the pressure. Chess is a greatmetaphor for business. Sitting for along time, responding to decisionsmade by your opponent, and creativelysolving a cognitive problem are part ofeffectively leading a business. Chesschampions realize that they must be fitand healthy to perform at the highestlevel. Business leaders need to focus oncreating a culture of health themselves!

A culture of health exists when peopleknow and act and engage in healthybehaviors. Employees know it when theysee it, when their company and its lead-

ership support a culture of health. Aculture of health can remove barriers byproviding permission to behave inhealthy ways. Employees in this pro-health culture tend to eat better, be moreactive, take recovery breaks, improvesocial connections, and perform athigher levels. The business case for cre-ating a culture of health must start withtop leaders—not just to lower healthcare costs, but to improve performance(Health Igniting PerformanceTM).

While health and performance are multi-dimensional—mental, emotional, andphysical—I address the physical dimen-sion here. The old think of health andperformance believed in keeping yourphysical capacity and energy personal.Physical activity was expected to hap-pen outside of work. But, regular physi-cal activity isn’t happening, anytime.People are in non-stop meetings or con-ference calls and exhausted by end ofday. They go home with little energy,and are not connecting at deep inter-personal levels, not exercising, eatingand sleeping poorly. Then they are

Leadership Activity

LEADERS ARE IN Aunique position to

change views on inac-tivity and obesity—and behavior thatcontributes to them. For decades, thebusiness perspective on these issuesrevolved around lowering health carecosts. Now we need a new story.

Why? Employees are saying: “I oftensit in long meetings or conference calls.” “Iam overscheduled/overcommitted.” “I believemultitasking is the only way to survive.” “Ifeel that I am on a treadmill, going likecrazy but going nowhere.” It doesn’t helpthat they’re often being served donutsand cookies. Non-stop and sedentarybehavior is called linearity—and it isnot biologically sustainable. If yourpeople are in this boat, they may beheaded for a crisis, where obesitycould be the least of your problems.

What’s the breaking point? Considerthis: Every year you ask your peopleto do more. Since you must increaseshareholder/stakeholder value, yourcompany must be more productive byincreasing revenues, cutting costs, de-veloping new solutions, gaining newcustomers, retaining old customers.How are your employees responding?To see what’s happened, let’s beginwith a high-level perspective—say10,000 feet—then we’ll take a 5,000 footperspective, and end with ground levelaction steps that you can use.

10,000 FeetWhen employees are asked to do

more, the default response is they needmore time. Yet, time is finite. And if youneed more time to do a job, you musttake that time from something else.The sacrifice becomes health, family,and other forms of personally valuedtime. This is what initially led to pre-senteeism—a term that describes a highlevel of disengagement. Are we in awork cycle that will correct itself overtime? Perhaps, but we can’t afford towait. Look at the lessons learned in thehigh-performance and stressful arenaof world-class sport competition.

Forty years ago, athletes in certainsports were told not to strength train,

expected to simply start the workdayagain. Engagement is down; resentmentup. This energy depletion cycle is notbiologically sustainable!

To change the paradigm, new thinkleaders are creating a culture of health.They have the business case in mind toimprove performance, and there’s nodenying that the body is business relevant!

Companies like GlaxoSmithKline,Allstate, and New Balance are chang-ing their culture with energy managementprinciples. It’s as simple as saying, “We’regoing to operate differently so that ourpeople and teams can perform at high-er levels, and at the same time helpimprove their health, behaviors andhappiness.” It works and it’s doable!

5,000 FeetFrom the 5,000 foot level on down to

the ground, here are steps you andyour leadership team can take:

First realize that energy is finite inpeople. Why else would we need tosleep and eat? We need recovery, notonly to live, but to thrive and be pro-ductive. Historically, in sport and busi-ness, recovery has often been viewed asa sign of weakness. But sport now seesthat stress is the stimulus for growth, andthat recovery is when growth occurs. Withno recovery, there is no growth. Businessneeds to apply this principle—perfor-mance goes up, not down, with recovery.

Second, people must learn how toincrease their physical, mental and emo-tional capacity in order to meet the de-mands placed on them year after year.

Third, get your people moving to in-crease performance. Sedentary lifestyles,generated by the way we do business,are not the future! The American Collegeof Sports Medicine has identified fivecauses of inactivity: 1) fear of discomfort—people perceive that exercise is uncom-fortable; 2) convenience/modernization—email, texting, e-readers, PDAs, Droids,Streaming; 3) sedentary recreation—Xbox,video games, surfing the net; 4) disease—diabetes, heart disease, hypertension;and 5) injury—often from a lack of pre-paredness for activity or from weak-ness from inactivity.

As a leader, you must change yourstory—and the story of your organiza-tion. Companies change their stories allthe time, with new products, services,software applications. It’s as simple asdefining who you want to be as a leader inthis arena, and what you want your organi-zation to be. It must matter. If it matters,leaders must enact this change—to notonly improve the health, performanceand happiness of their employees butthe success of the organization.

by Jack L. Groppel

1 6 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

PERFORMANCE ACTIVITY

I m p r o v e p e o p l e ’ s p e r f o r m a n c e .

years of war, you are ready to be a partof our renewal. I’m confident in you.

When I signed up to serve, I knewcombat was a possibility. But for mostof you, combat was a reality. You haveseen your peers go on third, fourth, andfifth tours. Yet you still answered thecall of duty. You are why I know we’llbe okay. You can lead us to a better day.

All About JobsThis work of economic renewal is all

about jobs. We act like job creation is abig mystery. But we know how to cre-ate jobs—you hire someone. Peoplewith capital employ others in a produc-tive way. Now is not the time to retreat—itis time to tackle our problems head on.

I run Walmart U.S.—founded by aveteran—and we’re tackling America’sjob problem. Walmart opened morethan 100 new stores this year, and hiredmore than 15,000 people. And we cre-ate more jobs by buying local products.

We’ve announced new growth plansfor next year—more stores, more jobs.I’m proud of the jobs we create. Theseare good jobs and good careers. Insideour stores every day, the Americandream comes to life. Last year, we pro-

moted more than 140,000hourly associates. Morethan 200,000 of Walmart’semployees have been withthe company more than 10years. And if you work forWalmart and your spousein the military gets trans-ferred, we guarantee you ajob in your new location!

We hire veterans. Theyhave a record of perfor-

mance under pressure; they’re educat-ed and technologically savvy; they’requick learners and team players. Wedon’t hire them because they are greatretailers. We hire them because they areproven leaders. Today, many are storemanagers, responsible for 400 associatesand a multi-million dollar business. Theyare leaders with discipline, training,sense of purpose, and passion for ser-vice. We’re not waiting on governmentor anyone else. Frankly, if your busi-ness plan involves waiting on other peo-ple—I wish you all the best.

As leaders, we can promote Americanexports, because more exports mean morejobs; we can reform our corporate taxcode to broaden the tax base, lower therate, and unleash job creators; and worktogether to bring back manufacturing. LE

Bill Simon is CEO of Walmart US. This article is adapted fromhis speech at the American Legion National Convention,August 31, 2011. Visit careerswithamission.com.

ACTION: Restore confidence in your company.

WE VIEW AMERICAthrough our cus-

tomers’ eyes. So, I havea unique perspective on how we getthis country back on track—and therole military veterans can play.

When I was 22 years old, a newensign in the US Navy, I reported forduty on the USS Moosbrugger inCharleston, South Carolina. The cap-tain was Don Dyer. I was nervous.Now, Captain Dyer was a salty old seacaptain. When I presented him withmy orders, I was expecting a lecture.Instead, he sat me down, looked me inthe eye, and said: “I trust you. Yourcountry is counting on you. While youmight make mistakes, we’re all in thistogether. Now, go do your job.”

What a feeling of confidence he gaveme—a feeling that hasstayed with me and hasbeen one of the enduringgifts from my service. Thatconfidence—in ourselves,in each other, in what wecan all do together—iswhat America needs now.

State of the CountryOn the last day of each

month, around 11 p.m., acrowd starts to gather outside ourstores. Young mothers and familiesstart to shop. They fill their carts full offood and formula and diapers, waitinguntil checkout, until midnight, whentheir electronic food stamps hit their cards.The only reason they shop for food andformula at midnight is to have some-thing to feed their kids in the morning.

Our customers are working hard fortheir families. But this economy is notworking for them. They feel like theirleaders aren’t listening to them. We hearpeople say it’s a bad time for America.But our veterans have seen bad.

Our problems are not acts of God orwar—they are man-made. And we cansolve them. Who do I mean by We? Imean We, the people. I mean We, thebusiness community, and I mean We,Walmart. I also mean: We, the veterans.Everyone is hoping the cavalry will ridein and save the day. But you don’t needto wait—you are the cavalry! After 10

Restore ConfidenceIt’s the key to economic recovery.

by Bill Simon

LEADERSHIP CONFIDENCEGround LevelWhat can you start doing today? You

can do three things immediately:1. Avoid linearity through motion.

People (all biological systems) are design-ed to oscillate up and down (e.g., EEG,EKG, sleep cycles, glucose cycles aftereating). Nothing in life is linear, excepthow we work. Non-stop meetings andconference calls have to be run differ-ently. People need to regain some con-trol of the calendar. When you sit in along meeting with no recovery break,your brain starts shutting down, and itdoesn’t matter if you work out daily.

Solution: Become an Organizationin Motion™, where people are movingat frequent intervals, every 30 minutes.Within 10 seconds, there is hyper-oxy-genation to the brain, just before thebrain auto regulates itself to not over-saturate with oxygen. This is why youfeel clearer in thought when you take ashort, vigorous break. Meetings can con-tinue, but people must get up and move.Even better is to disengage from themeeting for two minutes, climb a flightof stairs, and give the heart rate a popand increase the pulse of your life!

2. Introduce healthy snacks that canimprove energy. High sugar and highfat snacks have a negative effect. Shiftto nutritious foods (containing fiber,protein and some fat). If people feelyou’re making the change because youcare about them and their health, theywill soon support your efforts.

Solution: When people take theirrecovery breaks, offer low-to-moderateglycemic snacks (or snacks that create alower rise in blood glucose) such asfruit smoothies, nuts, vegetables, rawfruit like apples or grapes. People willlearn that health is on your radar screenand that they belong to a culture ofhealth that they can be proud of.

3. Integrate movement into meetings.Meeting for long hours is not the bestway to solve problems. Where wereyou when you had your best ideas?You were likely exercising, showering, orsleeping. Einstein developed the theory ofrelativity while bikeriding.

Solution: Have MOTION meetings.If you have four or fewer participants,have a walking meeting. If it is a largergroup, bring activity breaks into themeeting at 30-minute intervals tostretch and stimulate the heart rate.

As a leader, be a model of healthyactivity—and reap the performance ben-efits—it’s the right thing to do! LE

Jack L. Groppel, Ph.D., is Co-Founder, Human PerformanceInstitute. Visit www.hpinstitute.com.

ACTION: Increase activity to boost performance.

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 1 7

ership for moving the total game along.• When this new mind-set permeates an

organization, a sense of ownership beginsto take hold. Managers become embold-ened and begin to think criticallyabout feedback from customers andsubordinates. They take responsibilityfor their function, and for the perfor-mance of the entire organization.• Not every player moves to high-perfor-

mance straightaway. Some are too con-cerned with individual contributionsand how they can vault their career tofocus on the total team. In these cases,managers must give direct, unalloyedfeedback to holdouts on their atti-tudes. If they are capable of achievinghigh-performance, they’ll be receptiveto frank direction and guidancetoward this new way of thinking.• No matter how dedicated an individual

or team is to the principles and habits ofhigh performance, there is always the dan-ger of backsliding into bad behaviors andold patterns. On a great team, siloedthinking is out. In doing business,some conflict is bound to arise, evenon a great team. When it does, it isdealt with quickly and directly.

3. Embrace accountability. At the endof a quarter, a big financial shortfall in

one business unit caught themanagement team of a food-service company off guard.The CEO learned that thehead of the unit had beenaware of the problems formonths but had not takenany action. Two of his teammembers had also knownwhat was going on, but theyremained silent as the situa-

tion spiraled out of control—a classiccase of the “it’s not my job” syndrome.

Leaders who embrace the principles ofhigh-performance horizontal teams reorienttheir thinking and assume accountabil-ity for their performance, and for thatof their peers, leader, and organization.

Each of these pillars represents a stepin the direction of high-performancedecision-making and problem-solving.The goal is a transparent horizontal orga-nization, where every team member is astakeholder who holds peers accountable—and expects his colleagues to do thesame, no matter their title. Buildingexceptional teams requires patienceand perseverance. But they’ll transformthe DNA of an organization for thebetter, with proof on the bottom line.LE

Howard M. Guttman is principal of Guttman DevelopmentStrategies and author of Coach Yourself to Win: 7 Steps toBreakthrough Performance on the Job and in Your Life(McGraw-Hill). Visit www.coachyourselftowin.com.

ACTION: Build performance on these pillars.

Great Team Players

MAKING JUDGMENT CALLS IS THEessence of leadership. Long-term

success (sustainability) is the sole mark-er of good judgment. Good leaders sortthe important from the trivial, and focuson getting the important calls right.They make the tough calls, and see totheir execution. They manage relation-ships with key constituencies, andalign and mobilize team members.

Each leader makes thousands ofjudgment calls—some trivial, somemonumental. The measure of their suc-cess is the sum of all of their judgmentcalls. How many good ones did wemake? Did we make good ones aboutthe things that really mattered? Ourjudgment determines the quality of ourlives. In leadership, the importance andconsequences of judgment calls are magni-fied exponentially by their increasing impacton the lives of others (the cumulativeeffect of leaders’ judgment calls candetermines team success or failure).

In the face of ambiguity, uncertainty,conflicting demands, and time pressure,leaders must make decisions and takeeffective actions to assure the survivaland success of their organizations. Thisis how leaders add value—they exer-cise good judgment, make smart calls,and ensure that they are well executed.

Consider these four principles:1. Judgment is the core, the nucleus,

of leadership. With good judgment, lit-tle else matters; without it, nothing elsematters. Take any leader, a U.S. presi-dent, a Fortune 500 CEO, a big-leaguecoach, wartime general. Chances areyou remember them for their best orworst judgment call. Leadership is, atits marrow, the chronicle of judgmentcalls; this is the leader’s biography.

2. In decision making, the only thingthat counts is winning or losing: theresults. Long-term success is the sole mark-er of good judgment. It’s not “The opera-tion was a success, but the patientdied.” It’s not “He acted brilliantly, butthe outcome was poor.” Judgment issuccessful only when the outcome achieves

They have a unique mindset.

TEAMS ARE THE BUILD-ing blocks of orga-

nizations. In tightlyknit, high-performance teams, indi-viduals work as one unit to improvetheir function, and the organization’sperformance. That requires change inhow players view themselves, theirleaders, and organization. This newmind-set is built on three pillars:

1. Think like a director. Membersof great teams think like members ofa board of directors. They keep theireye on the overarching goal: theresults the company needs to achieveto stay on top of the competition.They’re interested in the health of thecompany first, before any one area orfunction. Knowing that time ismoney, they put a premium on swift,effective action. They are committedto maximizing ROI withevery decision. Issues gethandled in the moment anddon’t get tabled. People don’tlet issues go unresolved. Ifprogress is being impeded, iftwo leaders are letting some-thing fester, a team memberwill address the issue. Whenthis hyper-efficient mind-setcascades down to second-tiermanagement, energy kicks into over-drive. Every player steps up andbegins taking action and implement-ing plans to stay ahead of changes inthe market and customer demands.

2. Put team first, function second.Like a board of directors, members ofhigh-performing teams are focusedon business results rather than beingemotionally invested in any singlebusiness unit or function. They areteam members first, functional repssecond. Such players don’t look forthe biggest budget handout, unless asolid business case can be made forthe resources. They contribute theirtechnical expertise across functions whenit is needed. And they do not hesitate toweigh in on the performance of otherfunctions when they sense problems.

One CEO who applied the high-per-formance team model noted: People stilloversee their functions, but they’re awareof the interdependencies and take own-

1 8 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

Leader JudgmentIt can determine success or failure.

PERFORMANCE TEAM COMPETENCY JUDGMENT

by Howard M. Guttman

by Noel Tichy and Warren Bennis

engagement, and discovery.If you’re a 3rd Alternative leader, you

look for solutions that provide peoplewith a huge emotional payoff and cre-ate for the firm new, exponential value.

Most leaders treat a conflict as atransaction. It’s about dividing up thepie. You can either accommodate orconfront your opponent. You can giveaway the pie or you can fight over it,and there are techniques and tricks togain an advantage. But divide it as youwill—in the end, it’s the same pie.

By contrast, the 3rd Alternative is totransform the situation. It’s about mak-ing a new pie that’s bigger and better—perhaps exponentially bigger and better.Where conflict resolution is transaction-al, the 3rd Alternative is transformational.

When you are caught up in a con-flict at work, you tend to fall into thedefensive mind-set. The natural,unthinking response to a challenge isto fight or flee. This is what animals doout of instinct; they have only the 2Alternatives. But mature human beingscan choose a 3rd Alternative.

Remember the first paradigm of syn-ergy: “I See Myself.” I have the powerto stand outside myself and think

about my thoughts andfeelings. I can examine myown motives: “Why am Icaught up in this? Am Ibeing egocentric? Do I needattention or affirmation?Do I feel my status is beingthreatened? Or am I gen-uinely concerned about thisissue?” If I’m sure of myown self-worth, if I feelconfident about my own

contribution and capability, I don’tneed to defend myself against you. Ican express myself candidly to you.

But I also need to remember the sec-ond paradigm of synergy: “I See You.”That means I have profound respectfor you. I value your ideas, experience,perspective, and feelings.

So, I practice the third paradigm ofsynergy: “I Seek You Out.” I’m fascinated—not threatened—by the gap betweenus. You defuse negative energy fast whensay, “You see things differently. I need to lis-ten to you.” And mean it.

If you practice these paradigms, you’llarrive at a 3rd Alternative that makes theconflict irrelevant: “Let’s look for some-thing better than either of us hasthought of.” Everybody wins, everybodyis energized. Often you won’t evenremember what the fight was about. LE

Stephen R. Covey is author of The 3rd Alternative. Visitwww.ThridAlternative.com.

ACTION: Practice the 3rd Alternative response.

WE LIVE IN A TIMEwhen walls are

falling. We are seeingthe rise of the borderless economy.With technology, we are seeing the endof the artificial walls that imprison thehuman mind. But the most challengingwalls remain: the walls between peo-ple. These walls are mostly invisible,but they form barriers to trust, com-munication, and the incalculable costto organizations when sales and mar-keting don’t get along, when there ismistrust between labor and manage-ment, or when people feel they can’tbe open and honest, resulting in officepolitics, backbiting, and micromanaging.

The key to tearing down these wallsis the internal strength to think we, notme. When we listen to understand,when we deeply believe in3rd Alternatives—that thereis truly something betterjust waiting to be created—marvelous things happen.

The workplace is full ofwalls: between teams,departments, divisions, andfunctions; between creativetypes and accountants,between executives andworkers, between organiza-tions and customers. It’s only naturalto want to defend our walls, and that’swhy we have conflict. The defensive 2-Alternative mind-set is the problem.

An organization is full of conflictbecause it has a job to do, and creative,thoughtful, talented people have dif-ferent insights into how to do that job.Those insights may be contradictory,baffling, quirky, and inconsistent; theycan also be useful or even brilliant.

Some organizations tolerate conflict;some are conflict-averse; some are abu-sive. But most managers try to manageconflict. They try to avert, control andresolve conflict because they live by thepremise that conflict is to be avoided ifpossible, controlled if unavoidable, and re-solved quickly so harmony can reign again.

The problem is not that conflict exists,but that we have the wrong paradigmabout it. The 2-Alternative response toconflict is fight or flight, while the syn-ergistic response is welcome, delight,

Third AlternativeIt can bring down the walls.

by Stephen R. Covey

COMPETENCY CONFLICTthe espoused goals. Enthusiasm, goodintentions, and hard work may help,but without good results, they don’tcount. Peter Drucker got it right in 1954in The Practice of Management when hewrote: “The ultimate test of manage-ment is business performance. Achieve-ment, rather than knowledge, remains,of necessity, both proof and aim.”

3. The judgment calls that leadersmake can’t be viewed as single, point-in-time events. For a leader, the momentof making the call comes in the middle of aprocess that begins with the leader recogniz-ing the need for a judgment and continuesthrough successful execution. A leader hasgood judgment when he or she repeated-ly makes judgment calls that turn outwell because the leader has mastered aprocess that unfolds in three phases:• Time. What happens before the

leader makes the decision or the call?What does the leader do as he or shemakes the decision that helps it turnout to be the right one? What must theleader oversee to make sure the callproduces the desired results?• Domain. The elements of the process,

the attention that must be paid to each,and the time over which the judgmentunfolds varies with its subject matter.The most important calls are found inthree critical domains: judgments aboutpeople, judgments about strategy, andjudgments in time of crisis.• Constituencies. Leaders make the calls,

but they do it in relation to the worldaround them. A leader’s relationshipsare the sources of information neededto make good calls. They also providethe means for executing calls, interactwith various constituencies, and man-age the relationships to make good calls—and help others in the firm to make them.

4. To make good calls, leaders needfour types of knowledge:• Self-knowledge. How do you learn?

Do you face reality? Do you watch andlisten? Are you willing to improve?• Social network knowledge. Do you

know how to build a strong team andteach your team to make better judgments?• Organizational knowledge. Do you

know how to draw on the strengths ofothers in the organization? Can youcreate broad-scale processes for teach-ing them to make smart judgments?• Contextual knowledge. Do you know

how to create smart interactions withother stakeholders, such as customers,suppliers, government, stockholders,competitors, and interest groups?

Judgment is the essence of leadership. LE

Noel Tichy and Warren Bennis are coauthors of Judgment.Visit www.noeltichy.com or www.warrenbennis.com.

ACTION: Cultivate these four types of knowledge.

L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 1 9

out, seeing products and market oppor-tunities as vehicles for building a greatcompany, not the other way around.As products, technologies, and marketsblast through their life cycles, clock-building styles of leadership will becomeeven more important.

2. Build your company around a coreideology. The visionary company wasguided more by a core ideology—corevalues and a sense of purpose beyondjust making money. A deeply held coreideology gives a company both a strongsense of identity and a thread of continuitythat holds the organization together inthe face of change. We found an almostreligious fervor in visionary companies.3M’s dedication to innovation, P&G’scommitment to product excellence,Nordstrom’s ideal of heroic customerservice, HP’s belief in respect for theindividual—those were sacred tenets,to be pursued zealously and preservedas a guiding force for generations.

3. Build a cult-like culture. Architectsof visionary companies don’t just trustin good intentions or values statements;they build cult-like cultures around theircore ideologies. Walt Disney created an

entire language to reinforce his compa-ny’s ideology. Disneyland employeesare cast members. Customers are guests.Jobs are parts in a performance. Disneyrequired that all new employees gothrough a Disney Traditions orientationcourse, in which they learn the compa-ny’s business is “to make people happy.”

4. Homegrow your management. Wefound only four cases in our visionarycompanies in which an outsider washired as chief executive—and that inonly 2 of the 18 companies! In contrast,our less successful comparison compa-nies were six times more likely to go out-side for a CEO to stimulate change andprogress. As great companies grow up,we see continuity and order in manage-ment tenure and succession. Insiderspreserve the core values, understand-ing them on a gut level in a way thatoutsiders usually cannot. Yet insiderscan also be change agents, building onthe core values while moving the com-pany in exciting new directions. BobGalvin spent years learning from his

Building to Last

IN THIS ERA OF DRAMAT-ic change, we’re hit

from all sides with lop-sided perspectives that urge us to holdnothing sacred, to re-engineer and dyna-mite everything, to fight chaos with chaos,to battle a crazy world with total, unfet-tered craziness. Everybody knows thatthe transformations facing us—social,political, technological, economic—render obsolete the lessons of the past.

Well, I submit that everybody iswrong. The real question is, what isthe proper response to change? Wecertainly need new and improvedbusiness practices and organizationalforms, but in a turbulent era, attentionto timeless fundamentals is even moreimportant than it is in stable times.

To identify those timeless fundamen-tals, Jerry Porras studied the founding,growth, and development of excep-tional companies that have stood thetest of time. By studying companiesthat have prospered over the longterm, we were able to uncover six time-less fundamentals that enable organiza-tions to endure and thrive.

1. Make the company itself the ulti-mate product—be a clock builder, not atime teller. Imagine you met a remark-able person who could look at the sunor the stars and, amazingly, state theexact time and date. Wouldn’t it beeven more amazing if, instead of tell-ing the time, that person built a clockthat could tell the time forever, evenafter he or she were dead and gone?

Having a great idea or being a charismat-ic visionary leader is time telling; buildinga company that can prosper far beyondthe tenure of any leader and throughmultiple product life cycles is clock build-ing. Those who build visionary companiestend to be clock builders. Their primaryaccomplishment is not the implemen-tation of a great idea, the expression ofa charismatic personality, or the accu-mulation of wealth—it is the companyitself and what it stands for.

Shifting from time telling (being agreat visionary) to clock building (creat-ing a great organization) requires turn-ing the world upside down and inside

father, Paul Galvin, founder of Motorola,before becoming CEO. Bob Galvin thenkept Motorola’s core ideology intactand simultaneously revolutionized thecompany. At the moment he began thatrevolution, Bob Galvin also began suc-cession planning for the next genera-tion of leadership—a full quarter of acentury before he would pass the reins—to maintain a lineage of homegrownleaders to preserve Motorola’s core val-ues. At our comparison companies, wefrequently saw management gaps—often due to egocentric leaders who simplycouldn’t conceive of the organizationwithout themselves at the helm.

5. Stimulate progress through BHAGs,experimentation, and continuous im-provement. To build a visionary company,you need to counterbalance its fixedcore ideology with a relentless drive forprogress. While core ideology providescontinuity, stability, and cohesion, thedrive for progress promotes change,improvement, innovation, and renewal.One way to bring the drive for progressto life is through BHAGs (Big Hairy Aud-acious Goals). The point is not to find theright BHAGs but to create BHAGs soclear, compelling, and imaginative thatthey fuel progress. A second way is tocreate an environment that encouragespeople to experiment and learn—to trya lot of stuff and keep what works. In avisionary company, continuous improve-ment is a way of life, not a manage-ment fad. The critical question is notHow can we do well? or How can we meetthe competition? but How can we do bet-ter tomorrow than we did today? Thechallenge is to build for the long termwhile doing well today.

6. Embrace the genius of the ‘and’.Clock-build your company so that itpreserves a passionately held core ideologyand simultaneously stimulates progress ineverything but that ideology. Preserve thecore and stimulate progress. A trulyvisionary company embraces both endsof a continuum: continuity and change,conservatism and progressiveness, sta-bility and revolution, predictability andchaos, heritage and renewal, fundamen-tals and craziness. And, and, and.

Great companies of the 21st centurywill change within the context of theircore ideologies while also adhering to afew timeless fundamentals. By beingclear about their core valves and guid-ing purpose—about what should notchange—companies can feel liberatedto experiment with everything else. LE

Jim Collins is the best-selling author of Built to Last. Visit www.JimCollins.com

ACTION: Build around a core ideology.

by Jim Collins

2 0 D e c e m b e r 2 0 1 1 w w w . L e a d e r E x c e l . c o m

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