ww ww ww .. LL ee aa dd ee rr EE xx cc ee ll .. cc oo mm

ExcellenceL E A D E R S H I P

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

FALL 2011

Ethical Work Climatesby Maribeth KuenziEthical Work Climatesby Maribeth Kuenzi Organization Status

by John J. SumanthOrganization Statusby John J. Sumanth

Ethics, Trust & Transparencyby Rita KirkEthics, Trust & Transparencyby Rita Kirk

ExcellenceL E A D E R S H I P

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

TOM DANIEL

Leaders Who Coach . .12

MIKE NOBLE

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

RITA KIRK

Ethics, Trust &TransparencyLeaders play akey role . . . . . . . . . . . . . .14

GREGG THOMPSON

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

MARIBETH KUENZI

Ethical Work ClimatesConsider four keydesign elements. . . . . . . .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 Alternative . . . .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 DesignLeadership is aboutinfluence . . . . . . . . . . . . . .7

SCOTT DAVIS

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

FAISAL HOQUE

Transformative GrowthUsing anoperations blueprint . . . . 9

JOHN J. SUMANTH

Organization StatusIt influences the hiring process. . . . . . . . . 10

JAMES CERRUTI

Sustainability. . . . . . . .11

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.

VOL. 28 NO. 12 SMU COX SCHOOL OF BUSINESS EDITION FALL 2011

SOME YEARS AGO SINGER AMYGrant popularized “Grown

Up Christmas List.” The lyricsspeak of the adult’s request for Santa Clausto bring the gifts of peace, healing, love, andjustice “for a world in need”. However, businessleaders don’t need to wait for Santa Claus todeliver transformative gifts. They can useexpanded sources of learning to give meaning-ful gifts to others in their communities whilegiving the gift of an expanded leadership pipelineto their organizations.

Here are three ideas for a Christmas list thatbusiness leaders can use to benefit theircommunities and organizations:

1. Social Entrepreneurship Pro-jects. Business projects are commonin management development programs.They enable participants to prac-tice teamwork skills, exerciseenterprise level thinking, expandnetworks, and demonstrate execu-tive presence. Project outcomesresult in cost savings, new rev-enue opportunities, or other tangi-ble benefits to the sponsoringcompanies. However, projects thatfocus on social entrepreneurship canachieve the same learning goals and pro-vide similar tangible benefits to the commu-nity (especially when participant groups arefrom different business units, geographiesor even companies where it is difficult toidentify a project in which the participantsshare a common interest). For example, oneSMU Cox program for participants fromdifferent companies asked project teams toidentify a social entrepreneurship opportunity,develop a business case, vet it with a groupof social venture capitalists, and present itto their company sponsors. These projectsresulted in outcomes such as a catalog ofgreen products for non-profits to offer asfund raisers in lieu of candy or cookies, aweb portal for young Hispanic women toaccess educational opportunities, and anon-line tool for donors to assess the effec-tiveness of various charitable opportunities.The social venture capitalists to whom theseprojects were presented were so impressedby the teams’ assessments of these potentialbusinesses that they included one project intheir annual exposition of new social ventureopportunities.

2. Community service-based team build-ing activities. Remember “rocks and ropes,”artificial team-building activities such ascompleting obstacle courses and construct-ing rafts? The North Texas Food Bank hasinstituted structured team-building activitiesaround packing cartons and backpacks offood stuffs for delivery to seniors and schoolchildren. Led by professional facilitators,executive participants exercise strategicplanning and teamwork skills to completethese needed tasks, and outcomes directlybenefit the food bank and its needy clients.Some organizations also collaborate withHabitat for Humanity to provide structuredteam-building experiences for work teamsthat construct houses together.

3. Use of community service in individualdevelopment plans. Volunteerleadership positions in local non-profits provide opportunities todevelop leadership skills instrategic planning, financial plan-ning, outcome measurement andaccountability, organizationaland people development, gover-nance and board structure, moti-vation and communication, andothers in an environment of lowrisk to the volunteer’s employer.It is analogous to GE’s practice of

assigning high potentials to small operations(“popcorn stands”) to test their manage-ment skills before placing them in mission-critical business units. Also, organizationssuch as the Boys and Girls Clubs, Scouts,and others enable volunteer executives tomentor young people and develop coachingskills which they then can apply on the job.

For example, a program at SMU Cox con-nects Hispanic executive participants withstudents affiliated with the Hispanic CollegeFund. Students can identify executive rolemodels and receive career guidance andcounseling. And executives can exercise newcoaching tools and techniques and gain con-fidence in them before using them at work.Many people serve their communities inthese ways as volunteers. What’s new is theintentional use of community service todevelop executives (leadership development).

Community-based experiences provideopportunities to expand the leadership pipelineand the organization’s visibility. And SantaClaus need not deliver these gifts. LE

Frank Lloyd, Ph.D., is Associate Dean of Executive Education at SMU Cox School of Business

B e n e f i t y o u r c o m m u n i t y a n d c o m p a n y .

by Frank Lloyd

Volume 28 Issue 12

Leadership Excellence (ISSN 8756-2308) is published monthly by Executive ExcellencePublishing, LLC (dba Leadership Excellence), 1806 North 1120 West, Provo, UT 84604.

Editorial Purpose:Our mission is to promote personal and organi-zational leadership based on constructive values,sound ethics, and timeless principles.

Basic Annual Rate:US $99 one year (12 issues)

Corporate Bulk Rates (to same address)Ask about logo and custom editions and foreign bulk rates.

Article Reprints:For reprints of 100 or more, please contact theeditorial department at 801-375-4060 or email CustomerService@LeaderExcel.com. Permission PDF US: $50.

Internet Address: www.LeaderExcel.com

Submissions & Correspondence:All correspondence, articles, letters, andrequests to reprint articles should be sent to:Editorial Department, Executive Excellence,1806 North 1120 West, Provo, Utah 84604;801-375-4060, or editorial@LeaderExcel.com.

Customer Service/Circulation:For information on products and services call 1-877-250-1983 or email: CustomerService@LeaderExcel.com.

Executive Excellence Publishing:Ken Shelton, CEO, Editor-in-ChiefSean Beck, Circulation Manager

Contributing Editors:Chip Bell, Warren Bennis, Dianna Booher, Kevin Cashman, Marshall Goldsmith, HowardGuttman, Jim Kouzes, Jim Loehr, Tom Peters,Norm Smallwood

The table of contents art is a detail from TThhrreeeeWWiissee MMeenn iinn aa BBooaatt (image cropped) © JamesChristensen, and is courtesy of the artist andart print publisher Greenwich Workshop.

For additional information on artwork byJames Christensen, please contact:Greenwich Workshop151 Main StreetSaymour, CT 064831-800-243-4246www.greenwichworkshop.com

Full view of table of contents art.

Copyright © 2011 Executive Excellence Publishing.No part of this publication may be reproduced ortransmitted without written permission from the

publisher. Quotations must be credited.

Leader’s Christmas ListE . D . I . T . O . R ’ S N . O . T . E

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

SMU COX EXECUTIVEEDUCATION

IS NOW ACCEPTINGREGISTRATION FOR

PROFESSORIALDEVELOPMENT

CERTIFICATE PROGRAMS.FOR THE FULL LIST OF

COURSES AVAILABLE ANDCOURSE DATES

Visit us atexed.cox.smu.edu

or call 214-768-3335.

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 .

tomers, shareholders and job seekers).Status is a key signal of an organiza-tion’s products, jobs, strategies, andpotential for growth. Status plays a bigrole in shaping individuals’ percep-tions of the organization, particularlywhen it comes to evaluating its attrac-tiveness as a potential employer. Highstatus can serve to legitimize an orga-nization’s selectivity, making it morelikely that demanding hiring methodsare accepted by job applicants.

Many organizations strive to be rec-ognized as a best employer (Fortune’s 100Best Companies to Work For), to lever-age their status to attract the best talent.

Demanding selection proceduressuch as cognitive ability tests maywork to the advantage of high-statusorganizations, perpetuating the impres-sion among applicants that they hireonly the best. High status organizationsthat administer valid selection tests mayovercome, or minimize, applicants’negative perceptions of such tests.

For instance, Google, Toyota, andGeneral Electric (GE) are perceived bythe people as high-status employers,and also are known for the diligenceand rigor they exhibit in selecting newemployees. Google is celebrated for itsintense, multi-day, multi-interview hir-ing process, while GE is renowned forusing rigorous, systematic staffing pract-ices to build a competitive advantage.

Hewlett-Packard (HP) required for-mer CEO Carly Fiorina totake a 900-question test aspart of the application pro-cedure, despite her trackrecord of success at LucentTechnologies. To many,Fiorina’s credentials andhigh status made HP’s hir-ing demands appear out-landish. Yet, she compliedand even defended thesetests: “[HP’s] executive

team had gone through an extensivepsychological testing process. TheBoard had decided that all CEO candi-dates should go through the sameprocess, so I agreed,” said Fiorina.

High status organizations have a hir-ing advantage, and should use theirstatus to embrace selection processesthat are more rigorous, and valid.

IInnddiivviidduuaall CCaarreeeerr SSttaattuussAn applicant’s personal status may

also affect their perceptions of validselection tests. Applicants who haveattained status as proven performers orrising stars develop high status, in part,because they create a unique personalbrand that differentiates them in the

Organization Status

IN A KNOWLEDGE-BASEDeconomy, human capi-

tal is the basis of com-petitive advantage. Leaders seek thebest way to hire the best workers.

Yet, despite a stated goal to recruitthe best people, many hiring processesare not the best ways to reach this goal.

Managers knowingly fill positions,even at the highest levels, using ineffec-tive selection methods. Top executivesrely primarily on interviews, resumes,and references when collecting infor-mation about candidates in the pool.Seldom do they use the more sophisti-cated and valuable selection toolsavailable, such as individual assess-ments, assessment centers, and tests.

Cognitive ability tests and measuresof conscientiousness are more validpredictors of future job performancethan interviews. So why do so manyorganizations continue hiring peoplewith the least valid selection methods?

Applicants may believe many validselection tests are unrelated to the job,and not representative oftheir ability to perform.Hiring managers mayworry that using selectiontests will alienate valuablepotential hires. As a result,highly valid selection meth-ods, such as cognitive abili-ty tests, that may helplocate better-qualified appli-cants, may be underutilizedbecause they simultaneous-ly repel those applicants.

Our research indicates that organiza-tional and individual candidate status canaffect the effectiveness of using valid selec-tion tests and gaining the best employees.

Status is an organization’s or anindividual’s position within a socialstructure, resulting in differences inrespect and prominence. An organiza-tion’s status (or reputation) may changethe way applicants think about selec-tion systems; an individual’s status mayaffect organizational use of the method.

OOrrggaanniizzaattiioonnaall SSttaattuussAn organization’s status reflects its

success in fulfilling the expectations ofmultiple stakeholders (employees, cus-

labor market. Individuals with greatercareer notoriety are rewarded more andpromoted faster, because they are per-ceived as being worthy of trust withminimal monitoring. Given the oppor-tunities, responsibilities, and benefitsthat high-status individuals earn, theymay expect to be treated with moredeference during the hiring process.

We define individual career status asyour beliefs about your career accom-plishments and status. People of highsocial status expect to be treated favor-ably in social/economic interactions.Although an individual’s career statusmay be related to job level or numberof promotions earned in a career, con-ceptually it is possible for individualsin middle management or lower-leveljobs to perceive a high level of individ-ual career status based on unique expe-riences and accomplishments.

Applicants who have a strong trackrecord of performance tend to believethat organizations should look to theiraccomplishments, rather than a cognitiveability test, to predict their performance.They’re more likely to view cognitiveability tests as unjust. In fact, they mayfeel insulted by them. And unfavorableperceptions of justice and disrespectcan trigger “hot” emotions such asanger, resentment, or moral outrage.

Individuals’ perceptions of individ-ual status may be related to whether ornot they believe good job alternativesexist for people with their qualificationsand abilities. Multiple job opportunitiesimply that an individual has desirableabilities that organizations seek.

Individuals in lower-level jobs mayperceive a high career status based ontheir experiences and accomplishments.Although they occupy lower-status posi-tions in firms, younger workers oftenharbor aggrandized expectations for theircareers and relationships. Their expec-tations of entitlement may be inflated,potentially limiting firms’ ability to usedemanding selection practices.

Leaders should attend to their repu-tation and brand when designing selec-tion tools. High-status employers canboost their attractiveness to job candi-dates by implementing the most validand reliable predictors of success. Em-ployers of lesser stature can combinerigorous selection tools with brand-ori-ented communication that emphasizestheir employment features and benefitsmost comparable to high-status firms.Hence they may tip the balance in theirfavor in the battle for high status talent. LE

John J. Sumanth is an Assistant Professor at the SMU CoxSchool of Business. Visit www.SMU.edu.

ACTION: Boost your status to hire the best.

by John J. Sumanth

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

PEOPLE HIRING

It affects the hiring of talent.

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

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 1

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

1 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

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

beyond the ability to perform specifictasks. Understanding and embracingan ethical culture ensures that compli-ance is not a legal obligation, but a code ofmoral behavior.

Obviously, leaders play a key role.Leaders are visible not only within theorganization but within the communi-ty as well. As such, leaders must berole models who others want to follow.Some people refer to this as the burdenof leadership while others see this as thebenefit of leadership. Boards and govern-ing bodies must ensure that the leadersthey hire are clear about ethical behav-iors. That means having a clear policyon compliance issues and a ZeroTolerance Policy to enforce standards.Leaders must continually reinforce themessage of ethical behavior and expec-tations in speeches, in routine businessmeetings and in personal conduct.

Since ethical behavior is important,there must be strong responses to abuses.Organizations should provide a mech-anism for reporting violations and payattention to whistleblowers. Those whoreveal unethical practices that othersignore or conceal are at risk. The recentscandal at Penn State provides a tragicexample of what happens when anorganization does not act to respondfully to allegations. If you encouragepeople to speak up when they sensethat something is out of balance, thenyou must take charges seriously andtreat those who speak up with the dig-nity they deserve (not subject them torecriminations or other forms of pun-ishment). Kathleen Edmond, ChiefEthics Officer for Best Buy, suggestedthat leaders need to quiet and preparethemselves to listen so that coworkerscan bring things to them to consider.Ensuring compliance with ethical stan-dards is one vital act of leadership. Itsignals whether leaders truly believe the

Ethics, Trust & Transparency

ONE YEAR FROM THE2012 Presidential

election, voters clamorfor responses to their frustrations.From the Tea Party movement to theOccupy Wall Street protests, people aredisturbed that their concerns are beingignored, causing them to lose faith ingovernment and business. Trust ingovernment is at an all time low (only15 percent of us think that our govern-ment leaders do the right thing “alwaysor most of the time”). Another poll showsthat public confidence in the U.S. bank-ing system is at an all time low, (only35 percent of us say that we are confi-dent that our banking system is stable).

Dallas business and governmentleaders provided insight into theseissues in November at the Maguire Con-ference Center for Ethics & Public Responsi-bility with the Cox School of Business.

The annual Edelman Trust Barometerstudy (www.edelman.com/trust)shows that three dynamics affect thetrust factor—transparency, engagement,and profit with purpose. Those groupsthat earned high trust also had accom-panying benefits. The public tends togravitate toward those organizationswhen choosing products to purchase,or deciding where to invest. And, thepublic tends to give the organizationthe benefit of the doubt when thingsgo wrong. Mathew Harrington, CEOof Edelman, notes, “When trust existsthere is the ability to move forward, tomake progress. Conversely, distrusterodes confidence to invest in long-term value creation, making our eco-nomic malaise self-fulfilling.” Leaderscan be proactive in developing a groupworthy of the public’s trust.

The first step in developing a trustedorganization is to develop an ethicalinternal culture. Judy Nadler, SeniorFellow in Government Ethics at SantaClara University’s Markkula Centerfor Applied Ethics, noted, “the respon-sibility for an ethical organization restswith each individual in the organiza-tion, not simply the ‘leaders.’ ” One ofthe most important decisions an orga-nization makes is who they hire and whatthe organization expects from them

values or merely give them lip service.Every organization has moments of

crisis. Discuss them, prepare for them,and plan for such inevitabilities. To notso do, said Mike Boone, FoundingPartner of Haynes and Boone, is an actof “arrogance” by leaders who think”we are not vulnerable to such prob-lems.” Planning responses enables anorganization to move swiftly and judi-ciously through an event—and mayeven help to prevent certain problemsfrom arising. When the difficult timesconfront an organization, it is criticalthat procedures are followed to mini-mize the damage on the organization.

Organizations do not usually getinto trouble overnight. Even those withwell-defined standards may find thatthey become diluted over time. Part ofthe planning process is to have clearlydefined standards that everyone under-stands and then develop reinforcementmessages that are heard loudly andoften. Best Buy’s Kathleen Edmondnoted: “Compliance can be an effort;ethics is beyond compliance.” It’s howan organization expects its members tobehave. The basic rule: Keep It Simple!The Roman Empire operated with lawsrecoded on just 12 tablets while theGenerally Accepted Accounting Principlesoccupy three volumes with over 4,500pages. You can’t expect to write a rulefor every conceivable situation, norshould that be your goal. Such rules-based codes of conduct are invitationsto find the loopholes rather than beaccountable for good decision-making.Arthur Athens, Director of the StockdaleCenter for Ethical Leadership at theU.S. Naval Academy, said: We can’tanticipate future circumstances where ourjudgment is called into question. We canonly prepare for those situations by dailyreaffirming our values and applying them.

Trust is a bedrock guiding principle.“Trust is not a superficial veneer to bemanipulated, rather it is a benefit to beearned,” said Harrington. One way todo that is to learn to be transparent.Terry Smith, President and CEO of theFederal Home Loan Bank of Dallas,claims that “for America to continue tobe the home of the most dynamic andresilient financial system in the world,we must restore basic market confi-dence in the information that marketparticipants require to make decisions.That can only be done if financial trans-parency is a driving force behind theactivities of corporations, investors, mar-ket makers and every market participant.”

Current law requires that organiza-tions make certain disclosures, but AllanSloan, Senior Editor for Fortune, sees a

by Rita Kirk

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

LEADERSHIP TRUST

B u s i n e s s , g o v e r n m e n t , a n d c a s e f o r v o t e r c o n c e r n .

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 COACHINGdistinction between transparency anddisclosure: “Disclosure is when you buryinformation in widely separated placesin a 400-word document of small type.Transparency is when you tell peoplewhat they need to know in simpleterms in readable type on the cover of adocument or in the first few pages.Disclosure is a legal obligation. Trans-parency is an ethical obligation.”

Nowhere is transparency neededmore than in the conduct of the public’sbusiness. Elected leaders who devotetheir time and effort to public serviceare prone to personal attack merelybecause they have chosen to enter poli-tics. Don W. Fox, Acting Director of theU.S. Office of Government Ethics, stat-ed that government protects us. As anexample, he argued that citizens in thiscountry rarely think of the safety ofmeals served at restaurants. Yet theactions of a few often taint the reputa-tions of everyone in public office.

John Allison, Distinguished Chair ofPractice at Wake Forest Univ. and CEOof BB&T Corp., a large financial ser-vices holding company, affirmed thatcapitalism is a good thing and thatmaking money honestly is honorable.“Never be sorry for making a profit.”BB&T’s success was built on core valuesthat enabled it to ride out the financialcrisis. Doug Levy, CEO of imc2, says:“Capitalism lifts people from poverty,increases lifespan, and raises happi-ness. When business is practiced in amore conscious and purpose-centric way,it produces greater benefits for employ-ees, customers, society and investors.”

The conference offered lessons toleaders who seek to build trusted orga-nizations: Create an internal culturethat emphasizes ethics and transparen-cy rather than compliance and disclo-sure. This means hiring the rightpeople, making them aware of the corevalues, and articulating the expectationthat those values should governemployee actions. Do not punish themfor adhering to core values or for rais-ing awareness of situations where theymay be compromised. Hold leadersaccountable for upholding core valuesas role models. And put plans in placeto handle the inevitable situationswhere people fall short. These stepswill help you build trust capital. Trustedorganizations benefit investors, cus-tomers, employees, and society. Evenwhen things go wrong, stakeholderswill reciprocate, giving trusted firmsthe benefit of the doubt. LE

Rita Kirk, Director, Cary M. Maguire Center for Ethics &Public Responsibility, SMU.

ACTION: Cultivate an ethical culture.

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

result from weak internal norms.But formal internal ethical controls

may not fare much better than formalexternal controls in ensuring ethicalaction. Formal rules-based ethics programsare not as effective as less formal values-based programs in generating sustainableethical outcomes. A rules-based approachfocuses primarily on compliance issues:preventing, detecting, and punishingviolations of rules. As a result, rules-based programs tend to motivate indi-viduals to simply avoid punishment.

In contrast, a values-based approachseeks to create and define organization-al values and encourage employees tohold and act upon ethical aspirations.These programs seek to construct anenvironment where employees areencouraged to be aware of ethical

issues. Values-based programs try tohave employees care about ethics andshared values through words and con-sistent actions, rather than through fearof doing something wrong.

Convincing evidence backs up theseobservations. Since 1999, the Ethics Re-source Center (ERC) has conducted theNational Business Ethics Survey. Resultsshow that firms are implementing moreformal programs in response to externalregulatory pressures. However, man-agers and employees do not expectpositive outcomes of these programs toimprove. And, informal issues of ethi-cal climate exert an even stronger influ-ence on outcomes than formal ethicsand compliance programs.

EEtthhiiccaall WWoorrkk CClliimmaatteessWork climates reveal employees’

perceptions of ‘’how things are donearound here.’’ They capture what itfeels like to work there—the prevailingweather of the workplace. Climatereflects employee perceptions of the

Ethical Work Climates

ON THE AFTERNOONof July 30, 2002, it

was blistering hot inWashington, DC, with a relentless sunpushing temperatures to 97.8 degrees.Earlier that day, President George W.Bush turned up the heat on the manage-ment team of every major U.S. publiccorporation by signing into law theSarbanes– Oxley Act (SOX), a set of sweep-ing reforms and regulations aimed atcleaning up corporate corruption andimproving corporate accountabilityand ethics in order to restore investorconfidence in corporate America.

SOX addresses the question of in-dependent internal auditor functions;establishes punitive accountability forkey executives, including financial andcriminal consequences based on accu-racy and ethical behavior; and providesdetailed requirements on internalfinancial controls, and demands thatthe controls be tested and validatedwith little tolerance. SOX also address-es the ethics of top executives by requir-ing that a public company disclosewhether they have adopted a code ofethics for executive officers and seniorfinancial officers, or why it has not.

SOX was hailed as a monumentalstep forward in improving corporateaccountability and ethics. However,not all reviews of SOX were positive,nor were all results. Criticism emergedthat SOX had been adopted hastily,without adequate consideration by aCongress panicked about the possibilitythat high-profile cases had weakenedinvestor confidence and that in spite ofthe focus on ethics and accountability,corporate misdeeds continued.

Some also question whether SOX ishaving the desired positive impact withindividual employees and investors. Clear-ly, creating and maintaining ethicalorganizations depends on more thanexternal regulatory pressures and formalprograms. Ethical organizational cli-mates and cultures are needed as well.

External regulation plays a vitalrole in enhancing public confidence inbusiness, but formal regulation is insuffi-cient. Indeed, most corporate misdeeds

policies, practices, and procedures thatthe organization rewards, supports,and expects. Employee perceptions oftheir work environment drive their atti-tudes and actions. Work climates areassociated with employee satisfactionand commitment, absenteeism andturnover, theft, performance, customersatisfaction and ethics. Aligning thework climate with a firm’s strategiesprovides a powerful means for gainingcompetitive advantage.

Enron serves as the poster child forthe power of an unethical corporateenvironment. As Loren Steffy noted inthe Houston Chronicle, ‘’Enron wasn’tjust Jeff Skilling. Nor, for that matter,was it just Ken Lay or Andrew Fastowor any of the others whose names arenow so notoriously tainted by the scan-dal. It wasn’t even just the hundred orso unindicted co-conspirators whodrew prosecutorial scrutiny but werenever charged with crimes. All of themwere simply key ingredients in a farlarger stew of ethical and moral failure.Enron was a laboratory of temptation,deception and hubris—a companywhere the fraud permeated the veryculture of the place. It was encouraged.It was nurtured. It was rewarded.’’

CChhaalllleennggee ffoorr MMaannaaggeerrssThese climate types constitute a

powerful force. The ethical climate hasbeen linked to key outcomes, such asreduced unethical and political behav-ior, reduced deviance, improvedemployee workplace citizenship andimproved managerial follow-throughwith ethics programs.

Just as fostering ethical employeesrequires major managerial effort, fos-tering ethical climates also requiresmanagerial attention. Managers canplay an important role in ensuring thatethical work climates evolve in positiveways. They do so in two steps, utilizingboth effective assessment techniquesand appropriate training procedures.

Few good survey tools exist to assessethical climate across multiple dimen-sions, but the Ethical Climate Index (ECI),a 36-item index, provides the best mea-sure of the ethical work climate.

Once the ethical landscape has beenassessed, a training program can bedesigned to meet the needs of the orga-nization. For any training program tosucceed, its purpose must be clear.Depending on the result of the assess-ment, the purpose of the training maybe to: Increase the moral sensitivity ofemployees; educate them in formingmoral judgments; enhance moral moti-vation; or assist employees in develop-

by Maribeth Kuenzi

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

ETHICS CLIMATE

C o n s i d e r f o u r k e y d e s i g n e l e m e n t s .

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.

AAllll AAbboouutt JJoobbssThis 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.

SSttaattee ooff tthhee CCoouunnttrryyOn 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 CONFIDENCEing strong moral character.In designing, creating and implement-

ing effective ethics training programs,you need to consider four elements:

1. Trainee characteristics. Managersseeking to improve ethics need to focuson the raw materials of any ethics initia-tive (individual employees), and considerthese in planning the initiative.

2. Training design. The appropriateformat must be developed, includingdiscussions of moral dilemmas, per-sonal reflection, experiential activitiesand behavior modeling (role play).

3. Transfer of trained skills. Developways trainees can apply the knowledge,skills and abilities provided by the train-ing back on their jobs, and reinforce thethings learned post-training.

4. Evaluation. Post-training oppor-tunities should allow managers toassess and reward ethical performance.

FFoouurr LLeessssoonnss LLeeaarrnneeddHere are four lessons learned: 1) for-

mal ethical control systems—bothexternal and internal—matter; 2) infor-mal ethical control systems like ethicalclimate matter even more; 3) ethical cli-mate can be measured, and managed;and 4) participation is critical.

It is one thing to implement a set ofethics initiatives aimed at improvingethical climate. It is another to create asituation in which employees receivethe practical experience needed toapply that training when it matters most.

In the end, it’s a question of leader-ship. Leaders serve as role models; infact, the behavior of a supervisor can exert amore powerful influence on ethical behaviorthan an employee’s own personal ethical val-ues. Leaders set the stage for all thingsethical. They recognize ethical eventsas ethical dilemmas (moral sensitivity).They make judgments as to the correctcourse of action (moral judgment).They impart values—their own andthose of the organization—to others(moral motivation). And, when theypossess adequate courage and convic-tion, they provide a vital role model infollowing through on ethically correctcourses of action (moral character). Indoing so, they create the ethical climate.

In matters of ethics, leadership mat-ters. As Joseph Gangloff, deputy direc-tor of the U.S. Office of GovernmentEthics, noted, ‘’An organization withleadership that supports its ethics pro-gram is likely to be more transparent,accountable, and efficient.” LE

Maribeth Kuenzi is an Assistant Professor at the SMU CoxSchool of Business. Visit www.SMU.edu.

ACTION: Create an ethical climate at work.

L e a d e r s h i p E x c e l l e n c e F a l l 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

PERFORMANCE SUSTAINABILITY

Focus on timeless principles.

1806 N. 1120 W . Provo, Utah 84604

C H A N G E S E R V I C E R E Q U E S T E D

ExcellenceL E A D E R S H I P