What Leaders Really Do

by John P. Kotter

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Harvard Business Review

MAY-JUNE 1990

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Good management controls complexity;effective leadership produces useful change.

What Leaders Really Doby John P. Kotter

Leadership is different from management, butnot for the reasons most people think. Leadershipisn’t mystical and mysterious. It has nothing to dowith having “charisma” or other ex-otic personality traits. It is not theprovince of a chosen few. Nor is lead-ership necessarily better than man-agement or a replacement for it.

Rather, leadership and manage-ment are two distinctive and comple-mentary systems of action. Each hasits own function and characteristic ac-tivities. Both are necessary for success in an increas-ingly complex and volatile business environment.

Most U.S. corporations today are overmanagedand underled. They need to develop their capacity to

DRAWING BY MICHAEL WITTE Copyright

John P. Kotter is professor of organizational behavior atthe Harvard Business School and the author of The Gen-eral Managers (Free Press, 1982), Power and Influence(Free Press, 1985), and The Leadership Factor (Free Press,1988). His most recent book is A Force for Change: HowLeadership Differs from Management (Free Press, 1990).

exercise leadership. Successful corporations don’twait for leaders to come along. They actively seekout people with leadership potential and expose

them to career experiences designed to develop thatpotential. Indeed, with careful selection, nurturing,and encouragement, dozens of people can play im-portant leadership roles in a business organization.

But while improving their ability to lead, compa-nies should remember that strong leadership withweak management is no better, and is sometimesactually worse, than the reverse. The real challengeis to combine strong leadership and strong manage-ment and use each to balance the other.

Leadership complementsmanagement;

it doesn’t replace it.

1990 by the President and Fellows of Harvard College. All rights reserved.

LEADERS

Of course, not everyone can be good at both lead-ing and managing. Some people have the capacityto become excellent managers but not strong lead-ers. Others have great leadership potential but, for a variety of reasons, have great difficulty becomingstrong managers. Smart companies value bothkinds of people and work hard to make them a partof the team.

But when it comes to preparing people for execu-tive jobs, such companies rightly ignore the recentliterature that says people cannot manage and lead.They try to develop leader-managers. Once compa-nies understand the fundamental difference be-tween leadership and management, they can beginto groom their top people to provide both.

The Difference Between Managementand Leadership

Management is about coping with complexity.Its practices and procedures are largely a responseto one of the most significant developments of thetwentieth century: the emergence of large organiza-tions. Without good management, complex enter-prises tend to become chaotic in ways that threatentheir very existence. Good management brings adegree of order and consistency to key dimensionslike the quality and profitability of products.

Leadership, by contrast, is about coping withchange. Part of the reason it has become so impor-tant in recent years is that the business world hasbecome more competitive and more volatile. Fastertechnological change, greater international compe-tition, the deregulation of markets, overcapacity incapital-intensive industries, an unstable oil cartel,raiders with junk bonds, and the changing demo-graphics of the work force are among the many fac-tors that have contributed to this shift. The net re-sult is that doing what was done yesterday, or doingit 5% better, is no longer a formula for success. Ma-jor changes are more and more necessary to surviveand compete effectively in this new environment.More change always demands more leadership.

Consider a simple military analogy: a peacetimearmy can usually survive with good administrationand management up and down the hierarchy, cou-pled with good leadership concentrated at the verytop. A wartime army, however, needs competentleadership at all levels. No one yet has figured outhow to manage people effectively into battle; theymust be led.

These different functions – coping with complexi-ty and coping with change – shape the characteristicactivities of management and leadership. Each sys-tem of action involves deciding what needs to be

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done, creating networks of people and relationshipsthat can accomplish an agenda, and then trying toensure that those people actually do the job. But eachaccomplishes these three tasks in different ways.

Companies manage complexity first by planningand budgeting – setting targets or goals for the fu-ture (typically for the next month or year), estab-lishing detailed steps for achieving those targets,and then allocating resources to accomplish thoseplans. By contrast, leading an organization to con-structive change begins by setting a direction – de-veloping a vision of the future (often the distant future) along with strategies for producing thechanges needed to achieve that vision.

Management develops the capacity to achieve itsplan by organizing and staffing – creating an organi-zational structure and set of jobs for accomplishingplan requirements, staffing the jobs with qualifiedindividuals, communicating the plan to those peo-ple, delegating responsibility for carrying out theplan, and devising systems to monitor implementa-tion. The equivalent leadership activity, however,is aligning people. This means communicating thenew direction to those who can create coalitionsthat understand the vision and are committed to itsachievement.

Finally, management ensures plan accomplish-ment by controlling and problem solving – moni-toring results versus the plan in some detail, bothformally and informally, by means of reports, meet-ings, and other tools; identifying deviations; andthen planning and organizing to solve the prob-lems. But for leadership, achieving a vision requiresmotivating and inspiring – keeping people movingin the right direction, despite major obstacles tochange, by appealing to basic but often untappedhuman needs, values, and emotions.

A closer examination of each of these activitieswill help clarify the skills leaders need.

Setting a Direction vs. Planning andBudgeting

Since the function of leadership is to producechange, setting the direction of that change is fun-damental to leadership.

Setting direction is never the same as planning oreven long-term planning, although people oftenconfuse the two. Planning is a management process,deductive in nature and designed to produce orderlyresults, not change. Setting a direction is more in-ductive. Leaders gather a broad range of data andlook for patterns, relationships, and linkages thathelp explain things. What’s more, the direction-set-ting aspect of leadership does not produce plans; it

HARVARD BUSINESS REVIEW May-June 1990

creates vision and strategies. These describe a busi-ness, technology, or corporate culture in terms ofwhat it should become over the long term and artic-ulate a feasible way of achieving this goal.

Most discussions of vision have a tendency to de-generate into the mystical. The implication is thata vision is something mysterious that mere mor-tals, even talented ones, could never hope to have.But developing good business direction isn’t magic.It is a tough, sometimes exhausting process of gath-ering and analyzing information. People who artic-ulate such visions aren’t magicians but broadbasedstrategic thinkers who are willing to take risks.

Nor do visions and strategies have to be brilliant-ly innovative; in fact, some of the best are not. Ef-fective business visions regularly have an almostmundane quality, usually consisting of ideas thatare already well known. The particular combina-tion or patterning of the ideas may be new, butsometimes even that is not the case.

For example, when CEO Jan Carlzon articulatedhis vision to make Scandinavian Airline Systems(SAS) the best airline in the world for the frequentbusiness traveler, he was not saying anything thateveryone in the airline industry didn’t alreadyknow. Business travelers fly more consistently thanother market segments and are generally willing topay higher fares. Thus focusing on business cus-tomers offers an airline the possibility of high mar-gins, steady business, and considerable growth. Butin an industry known more for bureaucracy than vi-sion, no company had ever put these simple ideastogether and dedicated itself to implementingthem. SAS did, and it worked.

What’s crucial about a vision is not its originalitybut how well it serves the interests of importantconstituencies – customers, stockholders, employ-ees – and how easily it can be translated into a real-istic competitive strategy. Bad visions tend to ig-nore the legitimate needs and rights of importantconstituencies – favoring, say, employees over cus-tomers or stockholders. Or they are strategicallyunsound. When a company that has never been bet-ter than a weak competitor in an industry suddenlystarts talking about becoming number one, that is a pipe dream, not a vision.

One of the most frequent mistakes that overman-aged and underled corporations make is to embrace“long-term planning” as a panacea for their lack ofdirection and inability to adapt to an increasinglycompetitive and dynamic business environment.But such an approach misinterprets the nature ofdirection setting and can never work.

Long-term planning is always time consuming.Whenever something unexpected happens, plans

HARVARD BUSINESS REVIEW May-June 1990

have to be redone. In a dynamic business environ-ment, the unexpected often becomes the norm, andlong-term planning can become an extraordinarilyburdensome activity. This is why most successfulcorporations limit the time frame of their planningactivities. Indeed, some even consider “long-termplanning” a contradiction in terms.

In a company without direction, even short-termplanning can become a black hole capable of ab-sorbing an infinite amount of time and energy.With no vision and strategy to provide constraintsaround the planning process or to guide it, everyeventuality deserves a plan. Under these circum-stances, contingency planning can go on forever,draining time and attention from far more essentialactivities, yet without ever providing the clearsense of direction that a company desperatelyneeds. After awhile, managers inevitably becomecynical about all this, and the planning process candegenerate into a highly politicized game.

Planning works best not as a substitute for direc-tion setting but as a complement to it. A competentplanning process serves as a useful reality check ondirection-setting activities. Likewise, a competentdirection-setting process provides a focus in whichplanning can then be realistically carried out. Ithelps clarify what kind of planning is essential andwhat kind is irrelevant.

Aligning People vs. Organizing andStaffing

A central feature of modern organizations is in-terdependence, where no one has complete autono-my, where most employees are tied to many othersby their work, technology, management systems,and hierarchy. These linkages present a specialchallenge when organizations attempt to change.Unless many individuals line up and move togetherin the same direction, people will tend to fall allover one another. To executives who are overedu-cated in management and undereducated in leader-ship, the idea of getting people moving in the samedirection appears to be an organizational problem.What executives need to do, however, is not orga-nize people but align them.

Managers “organize” to create human systemsthat can implement plans as precisely and efficient-ly as possible. Typically, this requires a number ofpotentially complex decisions. A company mustchoose a structure of jobs and reporting relation-ships, staff it with individuals suited to the jobs,provide training for those who need it, communi-cate plans to the work force, and decide how muchauthority to delegate and to whom. Economic in-

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Setting Direction: Lou Gerstner at American Express

When Lou Gerstner became president of the Travel

Related Services (TRS) arm at American Express in1979, the unit was facing one of its biggest challengesin AmEx’s 130-year history. Hundreds of banks wereoffering or planning to introduce credit cards throughVisa and MasterCard that would compete with theAmerican Express card. And more thantwo dozen financial service firms werecoming into the traveler’s checks busi-ness. In a mature marketplace, this in-crease in competition usually reducesmargins and prohibits growth.

But that was not how Gerstnersaw the business. Before joiningAmerican Express, he had spentfive years as a consultant to TRS,analyzing the money-losing traveldivision and the increasingly compet-itive card operation. Gerstner and histeam asked fundamental questionsabout the economics, market, and com-petition and developed a deep under-standing of the business. In the process,he began to craft a vision of TRS thatlooked nothing like a 130-year-old com-pany in a mature industry.

Gerstner thought TRS had the poten-tial to become a dynamic and growingenterprise, despite the onslaught ofVisa and MasterCard competition fromthousands of banks. The key was to fo-cus on the global marketplace and,specifically, on the relatively affluentcustomer American Express had beentraditionally serving with top-of-the-line products.By further segmenting this market, aggressively de-veloping a broad range of new products and services,and investing to increase productivity and to lowercosts, TRS could provide the best service possible tocustomers who had enough discretionary income tobuy many more services from TRS than they had inthe past.

Within a week of his appointment, Gerstnerbrought together the people running the card orga-nization and questioned all the principles by whichthey conducted their business. In particular, he chal-lenged two widely shared beliefs – that the divisionshould have only one product, the green card, and thatthis product was limited in potential for growth and

innovation.Gerstner also moved quickly to develop a more en-

trepreneurial culture, to hire and train people whowould thrive in it, and to clearly communicate tothem the overall direction. He and other top managersrewarded intelligent risk taking. To make entrepre-

neurship easier, they discouraged unnec-essary bureaucracy. They also upgradedhiring standards and created the TRSGraduate Management Program, whichoffered high-potential young people spe-cial training, an enriched set of experi-ences, and an unusual degree of exposureto people in top management. To encour-age risk taking among all TRS employ-ees, Gerstner also established somethingcalled the Great Performers program torecognize and reward truly exceptionalcustomer service, a central tenet in theorganization’s vision.

These incentives led quickly to newmarkets, products, and services. TRS expanded its overseas presence dramati-

cally. By 1988, AmEx cards were is-sued in 29 currencies (as opposed toonly 11 a decade earlier). The unit al-so focused aggressively on two mar-ket segments that had historically re-

ceived little attention: collegestudents and women. In 1981, TRS

combined its card and travel-service ca-pabilities to offer corporate clients aunified system to monitor and controltravel expenses. And by 1988, AmEx

had grown to become the fifth largest direct-mailmerchant in the United States.

Other new products and services included 90-dayinsurance on all purchases made with the AmEx card,a Platinum American Express card, and a revolvingcredit card known as Optima. In 1988, the companyalso switched to image-processing technology forbilling, producing a more convenient monthly state-ment for customers and reducing billing costs by 25%.

As a result of these innovations, TRS’s net incomeincreased a phenomenal 500% between 1978 and 1987– a compounded annual rate of about 18%. The busi-ness outperformed many so-called high-tech/high-growth companies. With a 1988 return on equity of28%, it also outperformed most low-growth but high-profit businesses.

HARVARD BUSINESS REVIEW May-June 1990

LEADERS

centives also need to be constructed to accomplishthe plan, as well as systems to monitor its imple-mentation. These organizational judgments aremuch like architectural decisions. It’s a question offit within a particular context.

Aligning is different. It is more of a communica-tions challenge than a design problem. First, align-ing invariably involves talking to many more indi-viduals than organizing does. The target populationcan involve not only a manager’s subordinates butalso bosses, peers, staff in other parts of the organi-zation, as well as suppliers, governmental officials,or even customers. Anyone who can help imple-ment the vision and strategies or who can block im-plementation is relevant.

Trying to get people to comprehend a vision of analternative future is also a communications chal-lenge of a completely different magnitude from or-ganizing them to fulfill a short-term plan. It’s muchlike the difference between a football quarterbackattempting to describe to his team the next two orthree plays versus his trying to explain to them a to-tally new approach to the game to be used in thesecond half of the season.

Whether delivered with many words or a fewcarefully chosen symbols, such messages are notnecessarily accepted just because they are under-stood. Another big challenge in leadership efforts iscredibility – getting people to believe the message.Many things contribute to credibility: the trackrecord of the person delivering the message, thecontent of the message itself, the communicator’sreputation for integrity and trustworthiness, andthe consistency between words and deeds.

Finally, aligning leads to empowerment in a waythat organizing rarely does. One of the reasons some

organizations have difficulty adjusting to rapidchanges in markets or technology is that so manypeople in those companies feel relatively powerless.They have learned from experience that even if theycorrectly perceive important external changes andthen initiate appropriate actions, they are vulnera-

Management controls peopby pushing them in the right direction; leadershipmotivates them by satisfying basic human nee

HARVARD BUSINESS REVIEW May-June 1990

ble to someone higher up who does not like whatthey have done. Reprimands can take many differ-ent forms: “That’s against policy” or “We can’t af-ford it” or “Shut up and do as you’re told.”

Alignment helps overcome this problem by em-powering people in at least two ways. First, when aclear sense of direction has been communicatedthroughout an organization, lower level employeescan initiate actions without the same degree of vul-nerability. As long as their behavior is consistentwith the vision, superiors will have more difficultyreprimanding them. Second, because everyone isaiming at the same target, the probability is lessthat one person’s initiative will be stalled when itcomes into conflict with someone else’s.

Motivating People vs. Controlling andProblem Solving

Since change is the function of leadership, beingable to generate highly energized behavior is impor-tant for coping with the inevitable barriers tochange. Just as direction setting identifies an appro-priate path for movement and just as effectivealignment gets people moving down that path, suc-cessful motivation ensures that they will have theenergy to overcome obstacles.

According to the logic of management, controlmechanisms compare system behavior with theplan and take action when a deviation is detected.In a well-managed factory, for example, this meansthe planning process establishes sensible qualitytargets, the organizing process builds an organiza-tion that can achieve those targets, and a controlprocess makes sure that quality lapses are spottedimmediately, not in 30 or 60 days, and corrected.

For some of the same reasons thatcontrol is so central to management,highly motivated or inspired behav-ior is almost irrelevant. Managerialprocesses must be as close as possi-ble to fail-safe and risk-free. Thatmeans they cannot be dependent onthe unusual or hard to obtain. Thewhole purpose of systems and struc-tures is to help normal people whobehave in normal ways to completeroutine jobs successfully, day afterday. It’s not exciting or glamorous.

But that’s management. Leadership is different. Achieving grand visions

always requires an occasional burst of energy. Moti-vation and inspiration energize people, not by push-ing them in the right direction as control mecha-nisms do but by satisfying basic human needs for

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Aligning People: Chuck Trowbridge and Bob Crandall at Eastman Kodak

Eastman Kodak entered the copy business in theearly 1970s, concentrating on technically sophisticat-ed machines that sold, on average, for about $60,000each. Over the next decade, this business grew tonearly $1 billion in revenues. But costs were high,profits were hard to find, and problems were nearlyeverywhere. In 1984, Kodak had to writeoff $40 million in inventory.

Most people at the company knewthere were problems, but they couldn’tagree on how to solve them. So, in hisfirst two months as general manager ofthe new copy products group, establishedin 1984, Chuck Trowbridge met withnearly every key person inside his group,as well as with people elsewhere at Ko-dak who could be important to the copierbusiness. An especially crucial area wasthe engineering and manufacturing orga-nization, headed by Bob Crandall.

Trowbridge and Crandall’s vision forengineering and manufacturing was simple: to become a world-class manu-facturing operation and to create a lessbureaucratic and more decentralized organization. Still, this message was dif-ficult to convey because it was such aradical departure from previous commu-nications, not only in the copy productsgroup but throughout most of Kodak. SoCrandall set up dozens of vehicles to em-phasize the new direction and align peo-ple to it: weekly meetings with his own12 direct reports; monthly “copy product forums” inwhich a different employee from each of his depart-ments would meet with him as a group; discuss recentimprovements and new projects to achieve still betterresults; and quarterly “State of the Department”meetings, where his managers met with everybody intheir own departments.

Once a month, Crandall and all those who reportedto him would also meet with 80 to 100 people fromsome area of his organization to discuss anything theywanted. To align his biggest supplier – the Kodak Ap-

paratus Division, which supplied one-third of theparts used in design and manufacturing – he and hismanagers met with the top management of that groupover lunch every Thursday. More recently, he has cre-ated a format called “business meetings,” where hismanagers meet with 12 to 20 people on a specific top-

ic, such as inventory or master schedul-ing. The goal is to get all of his 1,500 em-ployees in at least one of these focusedbusiness meetings each year.

Trowbridge and Crandall also enlistedwritten communication in their cause. A four-to eight-page “Copy ProductsJournal” was sent to employees once amonth. A program called “Dialog Let-ters” gave employees the opportunity toanonymously ask questions of Crandalland his top managers and be guaranteed a reply. But the most visible, and power-ful, form of written communicationwere the charts. In a main hallway nearthe cafeteria, these huge charts vividlyreported the quality, cost, and deliveryresults for each product, measuredagainst difficult targets. A hundredsmaller versions of these charts werescattered throughout the manufacturingarea, reporting quality levels and costsfor specific work groups.

Results of this intensive alignmentprocess began to appear within sixmonths and still more after a year. Thesesuccesses made the message more credi-

ble and helped get more people on board. Between1984 and 1988, quality on one of the main productlines increased nearly one-hundredfold. Defects perunit went from 30 to 0.3. Over a three-year period,costs on another product line went down nearly 24%.Deliveries on schedule increased from 82% in 1985 to95% in 1987. Inventory levels dropped by over 50%between 1984 and 1988, even though the volume ofproducts was increasing. And productivity, measuredin units per manufacturing employee, more than dou-bled between 1985 and 1988.

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LEADERS

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achievement, a sense of belonging, recognition,self-esteem, a feeling of control over one’s life, andthe ability to live up to one’s ideals. Such feelingstouch us deeply and elicit a powerful response.

Good leaders motivate people in a variety ofways. First, they always articulate the organiza-tion’s vision in a manner that stresses the values ofthe audience they are addressing. This makes thework important to those individuals. Leaders alsoregularly involve people in deciding how to achievethe organization’s vision (or the part most relevantto a particular individual). This gives people a senseof control. Another important motivational tech-nique is to support employee efforts to realize thevision by providing coaching, feedback, and rolemodeling, thereby helping people grow profession-ally and enhancing their self-esteem. Finally, goodleaders recognize and reward success, which notonly gives people a sense of accomplishment but al-so makes them feel like they belong to an organiza-tion that cares about them. When all this is done,the work itself becomes intrinsically motivating.

The more that change characterizes the businessenvironment, the more that leaders must motivatepeople to provide leadership as well. When thisworks, it tends to reproduce leadership across theentire organization, with people occupying multi-ple leadership roles throughout the hierarchy. Thisis highly valuable, because coping with change inany complex business demands initiatives from amultitude of people. Nothing less will work.

Of course, leadership from many sources doesnot necessarily converge. To the contrary, it can

easily conflict. For multiple leadership roles towork together, people’s actions must be carefullycoordinated by mechanisms that differ from thosecoordinating traditional management roles.

Strong networks of informal relationships – thekind found in companies with healthy cultures –help coordinate leadership activities in much thesame way that formal structure coordinates man-agerial activities. The key difference is that infor-mal networks can deal with the greater demands forcoordination associated with nonroutine activities

Despite leadership’s growiimportance, the on-the-jobexperiences of most peoplundermine their ability to

HARVARD BUSINESS REVIEW May-June 1990

and change. The multitude of communicationchannels and the trust among the individuals con-nected by those channels allow for an ongoing pro-cess of accommodation and adaptation. When con-flicts arise among roles, those same relationshipshelp resolve the conflicts. Perhaps most important,this process of dialogue and accommodation canproduce visions that are linked and compatible in-stead of remote and competitive. All this requires agreat deal more communication than is needed tocoordinate managerial roles, but unlike formalstructure, strong informal networks can handle it.

Of course, informal relations of some sort exist inall corporations. But too often these networks areeither very weak – some people are well connectedbut most are not – or they are highly fragmented – astrong network exists inside the marketing groupand inside R&D but not across the two depart-ments. Such networks do not support multipleleadership initiatives well. In fact, extensive infor-mal networks are so important that if they do notexist, creating them has to be the focus of activityearly in a major leadership initiative.

Creating a Culture of LeadershipDespite the increasing importance of leadership

to business success, the on-the-job experiences of most people actually seem to undermine the de-velopment of attributes needed for leadership. Nev-ertheless, some companies have consistentlydemonstrated an ability to develop people into out-standing leader-managers. Recruiting people with

leadership potential is only the firststep. Equally important is managingtheir career patterns. Individualswho are effective in large leadershiproles often share a number of careerexperiences.

Perhaps the most typical and mostimportant is significant challengeearly in a career. Leaders almost al-ways have had opportunities duringtheir twenties and thirties to actual-

ly try to lead, to take a risk, and to learn from bothtriumphs and failures. Such learning seems essen-tial in developing a wide range of leadership skillsand perspectives. It also teaches people somethingabout both the difficulty of leadership and its po-tential for producing change.

Later in their careers, something equally impor-tant happens that has to do with broadening. Peoplewho provide effective leadership in important jobsalways have a chance, before they get into thosejobs, to grow beyond the narrow base that charac-

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Motivating People: Richard Nicolosi at Procter & Gamble

For about 20 years since its founding in 1956, Proc-

ter & Gamble’s paper products division had experi-enced little competition for its high-quality, reason-ably priced, and well-marketed consumer goods. Bythe late 1970s, however, the market position of the di-vision had changed. New competitive thrusts hurtP&G badly. For example, industry ana-lysts estimate that the company’s mar-ket share for disposable diapers fell from75% in the mid-1970s to 52% in 1984.

That year, Richard Nicolosi came topaper products as the associate generalmanager, after three years in P&G’ssmaller and faster moving soft-drinkbusiness. He found a heavily bureau-cratic and centralized organization thatwas overly preoccupied with internalfunctional goals and projects. Almost allinformation about customers camethrough highly quantitative market re-search. The technical people were re-warded for cost savings, the commercialpeople focused on volume and share, andthe two groups were nearly at war witheach other.

During the late summer of 1984, topmanagement announced that Nicolosiwould become the head of paper prod-ucts in October, and by August he wasunofficially running the division. Imme-diately he began to stress the need for the division to become more creative and market driven, instead of just tryingto be a low-cost producer. “I had to make it veryclear,” Nicolosi later reported, “that the rules of thegame had changed.”

The new direction included a much greater stress on teamwork and multiple leadership roles. Nicolosipushed a strategy of using groups to manage the divi-sion and its specific products. In October, he and histeam designated themselves as the paper division“board” and began meeting first monthly and thenweekly. In November, they established “categoryteams” to manage their major brand groups (like dia-pers, tissues, towels) and started pushing responsibili-ty down to these teams. “Shun the incremental,” Ni-colosi stressed, “and go for the leap.”

In December, Nicolosi selectively involved himselfin more detail in certain activities. He met with theadvertising agency and got to know key creative peo-

ple. He asked the marketing manager of diapers to re-port directly to him, eliminating a layer in the hierar-chy. He talked more to the people who were workingon new product-development projects.

In January 1985, the board announced a new organi-zational structure that included not only category

teams but also new-brand businessteams. By the spring, the board wasready to plan an important motivationalevent to communicate the new paperproducts vision to as many people aspossible. On June 4, 1985, all the Cincin-nati-based personnel in paper plus salesdistrict managers and paper plant man-agers – several thousand people in all –met in the local Masonic Temple. Ni-colosi and other board members de-scribed their vision of an organizationwhere “each of us is a leader.” The eventwas videotaped, and an edited versionwas sent to all sales offices and plants foreveryone to see.

All these activities helped create anentrepreneurial environment wherelarge numbers of people were motivatedto realize the new vision. Most innova-tions came from people dealing with newproducts. Ultra Pampers, first introducedin February 1985, took the market shareof the entire Pampers product line from40% to 58% and profitability from break-even to positive. And within only a fewmonths of the introduction of Luvs

Delux in May 1987, market share for the overall brandgrew by 150%.

Other employee initiatives were oriented more toward a functional area, and some came from thebottom of the hierarchy. In the spring of 1986, a few of the division’s secretaries, feeling empowered by the new culture, developed a Secretaries network.This association established subcommittees on train-ing, on rewards and recognition, and on the “secre-tary of the future.” Echoing the sentiments of manyof her peers, one paper products secretary said: “Idon’t see why we too can’t contribute to the division’snew direction.”

By the end of 1988, revenues at the paper productsdivision were up 40% over a four-year period. Profitswere up 68%. And this happened despite the fact thatthe competition continued to get tougher.

HARVARD BUSINESS REVIEW May-June 1990

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LEADERS

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terizes most managerial careers. This is usually theresult of lateral career moves or of early promotionsto unusually broad job assignments. Sometimesother vehicles help, like special task-force assign-ments or a lengthy general management course.

Whatever the case, the breadth of knowledge devel-oped in this way seems to be helpful in all aspects ofleadership. So does the network of relationshipsthat is often acquired both inside and outside thecompany. When enough people get opportunitieslike this, the relationships that are built also helpcreate the strong informal networks needed to sup-port multiple leadership initiatives.

Corporations that do a better-than-average job ofdeveloping leaders put an emphasis on creatingchallenging opportunities for relatively young em-ployees. In many businesses, decentralization is thekey. By definition, it pushes responsibility lower in an organization and in the processcreates more challenging jobs at lower levels. Johnson & Johnson,3M, Hewlett-Packard, General Elec-tric, and many other well-knowncompanies have used that approachquite successfully. Some of thosesame companies also create as manysmall units as possible so there are a lot of challenging lower level general manage-ment jobs available.

Sometimes these businesses develop additionalchallenging opportunities by stressing growththrough new products or services. Over the years,3M has had a policy that at least 25% of its revenueshould come from products introduced within thelast five years. That encourages small new ventures,which in turn offer hundreds of opportunities to testand stretch young people with leadership potential.

Such practices can, almost by themselves, preparepeople for small- and medium-sized leadership jobs.But developing people for important leadership posi-tions requires more work on the part of senior exec-utives, often over a long period of time. That workbegins with efforts to spot people with great leader-

One way to develop leadership is to createchallenging opportunities young employees.

Insticente

HARVARD BUSINESS REVIEW May-June 1990

ship potential early in their careers and to identifywhat will be needed to stretch and develop them.

Again, there is nothing magic about this process.The methods successful companies use are surpris-ingly straightforward. They go out of their way to

make young employees and people atlower levels in their organizationsvisible to senior management. Seniormanagers then judge for themselveswho has potential and what the de-velopment needs of those people are.Executives also discuss their tenta-tive conclusions among themselvesto draw more accurate judgments.

Armed with a clear sense of whohas considerable leadership poten-

tial and what skills they need to develop, execu-tives in these companies then spend time planningfor that development. Sometimes that is done aspart of a formal succession planning or high-poten-tial development process; often it is more informal.In either case, the key ingredient appears to be anintelligent assessment of what feasible develop-ment opportunities fit each candidate’s needs.

To encourage managers to participate in these ac-tivities, well-led businesses tend to recognize and reward people who successfully develop leaders. Thisis rarely done as part of a formal compensation orbonus formula, simply because it is so difficult to

measure such achievements with precision. But itdoes become a factor in decisions about promotion,especially to the most senior levels, and that seems tomake a big difference. When told that future promo-tions will depend to some degree on their ability tonurture leaders, even people who say that leadershipcannot be developed somehow find ways to do it.

Such strategies help create a corporate culturewhere people value strong leadership and strive tocreate it. Just as we need more people to provideleadership in the complex organizations that domi-nate our world today, we also need more people todevelop the cultures that will create that leader-ship. Institutionalizing a leadership-centered cul-ture is the ultimate act of leadership.

or

utionalizing a leadership-red culture is the ultimate

act of leadership.

11

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