Leadership, Innovation and Organisational Performance?

Andrew Andrew Μ. Μ. Pettigrew, OBE, FBA, PhDPettigrew, OBE, FBA, PhD

Professor of Strategy and OrganisationProfessor of Strategy and Organisation

SaSaïd Business Schoolïd Business School

University of OxfordUniversity of Oxford

Andrew.pettigrew@sbs.ox.ac.ukAndrew.pettigrew@sbs.ox.ac.uk

Presentation to Stavanger Innovation SummitPresentation to Stavanger Innovation Summit

1515thth June 2009 June 2009

Our journey…Our journey…

• The Contrary PositionThe Contrary Position

• Leadership, Complementary Innovation & Leadership, Complementary Innovation & PerformancePerformance

• Leadership, Innovation and Performance in BPLeadership, Innovation and Performance in BP

• Key Messages for Leaders and Leading ChangeKey Messages for Leaders and Leading Change

The contrary position…The contrary position…

• Performance is largely shaped by external conditions –

economic, market and technological factors.

• Leaders are faced by many internal constraints. Leaders

as pawns not potentates.

• People attribute and thereby exaggerate leader effects to

make sense of complex, confusing events.

• Leaders magnify followers attributions by managing

impressions.

• Luck and chance are key determinants of performance.

New Forms of Organization:New Forms of Organization:4 Themes4 Themes

• Greater Permeability of Organization Boundaries, the

development of networks, webs, co-operative relations, alliances

and clusters

• Compressing the structural and cultural features of hierarchy

through delayering, downsizing, and building more co-operative

forms of managerial style

• Associated drives to develop more creative, agile, learning forms

(competition as an innovation contest)

• The Linguistic turn from organization to organizing

The primary questionsThe primary questions

?ProgressHow far have new organisational forms been implemented?

Performance ?What are the performance effects??

Process ?What are the managerial processes?

Research methodResearch method• Four surveys in:

• UK

• Continental Western

Europe

• Japan

• USA

• 18 Case studies in

• 8 UK

• 10 Continental

Western Europe

Progress and performance questions

Process questions

Three dimensions of changeThree dimensions of change

changingchanging

structuresstructures

changingchanging

processesprocesses

changingchanging

boundariesboundaries

The multiple indicatorsThe multiple indicators

processes

Horizontal & vertical

communication

Invest in I.T.

Practice Practice new HRnew HR

boundaries

Outsource Downscope

Developstrategicalliances

structuresDecentralise

Project formsof organizing

Delayer

The Innovating OrganizationThe Innovating Organization

(Eds) Andrew Pettigrew and Evelyn Fenton(Eds) Andrew Pettigrew and Evelyn Fenton

London, Sage, 2000London, Sage, 2000

Innovative Forms of Organizing: Innovative Forms of Organizing: An International PerspectiveAn International Perspective

((Eds) Andrew Pettigrew et al.Eds) Andrew Pettigrew et al.

London, Sage, 2003London, Sage, 2003

Key OutputsKey Outputs

Dualities in changingDualities in changing

• Living with hierarchies Living with hierarchies andand networks networks

• Greater performance accountability upwards Greater performance accountability upwards andand greater horizontal integration sidewaysgreater horizontal integration sideways

• Empowering Empowering andand holding the ring holding the ring

• Centralising strategy Centralising strategy andand decentralising decentralising operationsoperations

• Standardising Standardising andand customising customising

• Discipline to identify knowledge Discipline to identify knowledge andand the good the good

citizenship to share knowledgecitizenship to share knowledge

• Balancing continuity Balancing continuity andand change “to change the world change “to change the world

one must live with it”one must live with it”

• Continuous innovation requires platforms of relative Continuous innovation requires platforms of relative

stabilitystability

• Delivering a complementary Delivering a complementary andand contextually contextually

appropriate set of innovations (not latest fad)appropriate set of innovations (not latest fad)

Dualities in changingDualities in changing

benefitsbenefits

of complementary of complementary innovations?innovations?

What are theWhat are the

Strategic complementaritiesStrategic complementarities

• ““Doing Doing moremore of one thing increases the of one thing increases the

returns of doing returns of doing moremore of another of another” ”

Milgrom and Roberts, 1995Milgrom and Roberts, 1995

• Investing in one practice makes more Investing in one practice makes more

profitable investing in another, setting off a profitable investing in another, setting off a

potential virtual circle of high performancepotential virtual circle of high performance

Two key propositionsTwo key propositions

The Positive Proposition:The Positive Proposition:

• Changing only a few of the system Changing only a few of the system

elements at a time may not come close elements at a time may not come close

at all to achieving all the benefits that are at all to achieving all the benefits that are

available through a fully co-ordinated available through a fully co-ordinated

movemove

The Negative Proposition:The Negative Proposition:

• Partial moves may drive down Partial moves may drive down

performanceperformance

Systemic change: Systemic change: Europe, Japan and US, 1992-1997Europe, Japan and US, 1992-1997

The 3 DimensionsThe 3 Dimensions

StructureStructure

ProcessesProcesses

BoundariesBoundaries

The 4 SystemsThe 4 Systems

System 1 (S+P+B)System 1 (S+P+B)

System 2 (S+P)System 2 (S+P)

System 3 (P+B)System 3 (P+B)

System 4 (S+B)System 4 (S+B)

EuropeEurope

30.3%30.3%

74.9%74.9%

44.9%44.9%

EuropeEurope

13.0%13.0%

25.1%25.1%

34.2%34.2%

16.4%16.4%

• Very few companies adopting whole system of change

JapanJapan

6.2%6.2%

53.7%53.7%

30.7%30.7%

JapanJapan

1.2%1.2%

4.7%4.7%

18.7%18.7%

1.6%1.6%

USUS

16.5%16.5%

82.3%82.3%

57.0%57.0%

USUS

8.9%8.9%

12.7%12.7%

46.8%46.8%

11.4%11.4%

One symbol, + or -, indicates weak positive or negative significance; two symbols, ++ or --, indicate strong positive or negative significance.

Systemic change and performance: Systemic change and performance: Summary of regression resultsSummary of regression results

The 4 SystemsThe 4 Systems

System 1 (S+P+B)System 1 (S+P+B)

System 2 (S+P)System 2 (S+P)

System 3 (P+B)System 3 (P+B)

System 4 (S+B)System 4 (S+B)

Pooled Sample of Pooled Sample of

Western FirmsWestern Firms

++++

--

--

UKUK

++

----

--

USUS

++

----

• The adoption of a full set of changes (System 1) increases the probability of improving corporate

performance

• The adoption of partial systems (System 2 and System 3) is likely to reduce performance

Performance gains require doing

many practices together

Performance effects depend

upon whole system

thinking and action

BP:Complementary Innovations & BP:Complementary Innovations & Performance 1990 – 1999Performance 1990 – 1999

19901990 19911991 19921992 19931993 19941994 19951995 19961996 19971997 19981998 19991999

H O R TO NH O R TO N S I M O NS I M O N B R O W N EB R O W N E

Leading and Complementary Leading and Complementary InnovationsInnovations

Key Messages::

• For LeadersFor Leaders

• For Leading ChangeFor Leading Change

Key Messages (1)Key Messages (1)

1.1. Leader Qualities of Holistic Thinking Leader Qualities of Holistic Thinking andand Holistic Action Holistic Action

2.2. Beware of Attempts to Improve Performance throughBeware of Attempts to Improve Performance through

Singular ChangesSingular Changes

3.3. Building the Complementary ChangesBuilding the Complementary Changes

The Integrated Systems of Mutually Reinforcing ElementsThe Integrated Systems of Mutually Reinforcing Elements

4.4. This Approach Points to the Importance of:This Approach Points to the Importance of:

Strong, Aware and Engaged Central DirectionStrong, Aware and Engaged Central Direction Bottom Up Approaches are Handicapped in DeliveringBottom Up Approaches are Handicapped in Delivering Complementary ChangeComplementary Change

Key Messages (2)Key Messages (2)

5.5. Be Prepared for the Dangers of Transitions and the Perils Be Prepared for the Dangers of Transitions and the Perils of the 'J' Curve of the 'J' Curve

Performance

Extent of Change

Things May Get Worse Before They Get Better

Need For Strong Leaders To Survive Transition Processes

Key Messages (3)Key Messages (3)6.6. Partial Changes may be Politically and Emotionally Easier Partial Changes may be Politically and Emotionally Easier

to Contemplate, but Encourage Long Term Declinesto Contemplate, but Encourage Long Term Declines

7.7. Beware of Complementary Traps: Sticking With the Old Beware of Complementary Traps: Sticking With the Old

System that WorksSystem that Works

8.8. Learning is Crucial, But it is Also a Challenge Learning is Crucial, But it is Also a Challenge

Complements May Be:Complements May Be:

9.9. Building the Complements and the Capabilities that Underpin Building the Complements and the Capabilities that Underpin

them Takes Time and Couragethem Takes Time and Courage

• Hard to Understand• Hard to Implement• Hard to Imitate

Key Messages (4)Key Messages (4)

10.10. Building Complements Requires CustomizationBuilding Complements Requires Customization

11.11. The Virtual Cycle of Complementary Change Needs to The Virtual Cycle of Complementary Change Needs to

Stay In MotionStay In Motion

Leading Change is a Continuous ProcessLeading Change is a Continuous Process

12.12. The Crucial Importance of: The Crucial Importance of: Duration of Leader in Post

Careful Management of Leader Succession

Leading Continuity and Change

The Importance of Inter-Generational Leader Effects