Excellence

L E A D E R S H I P
THE MAGAZINE OF LEADERSHIP DEVELOPMENT, MANAGERIAL EFFECTIVENESS, AND ORGANIZATIONAL PRODUCTIVITY

FALL 2011

Ethical Work Climates

by Maribeth Kuenzi

Organization Status
by John J. Sumanth

Ethics, Trust & Transparency

by Rita Kirk
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Excellence
L E A D E R S H I P
SMU COX SCHOOL OF BUSINESS EDITION

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

FA L L 2 0 11

ALAN MULALLY

TOM DANIEL

The Road Ahead

Lead your team to a better future. . . . . . . . . . . 3

Leaders Who Coach . .12

MIKE NOBLE

JP DONLON

Managers into Coaches

Try using five ways. . . . .13

Six Lessons
All leaders can learn from Alan Mulally. . . . . .4

RITA KIRK

TRISH GORMAN

Ethics, Trust & Transparency

Leaders play a key role . . . . . . . . . . . . . .14

Making a Profit
Yes, but how well are you performing? . . . . . . . 5

GREGG THOMPSON

MICHAEL FULLAN

Inclusive Coaching
Its everyones business. . .15

Intrinsic Motivation
As a leader, how do you get people to change?. . . .6

MARIBETH KUENZI

Ethical Work Climates

Consider four key design elements. . . . . . . .16

KEN BLANCHARD

Leaders by Design
Leadership is about influence . . . . . . . . . . . . . .7

BILL SIMON

Restore Confidence
Hire proven leaders. . . . . .17

SCOTT DAVIS

Trade Wins and Woes

We face three major threats to prosperity. . . . .8

HOWARD M. GUTTMAN

Great Team Players

Build a high-performance culture on three pillars. . .18

FAISAL HOQUE

Transformative Growth
Using an operations blueprint . . . . 9

NOEL TICHY AND WARREN BENNIS

JOHN J. SUMANTH

Three Wise Leaders

These leaders are on an important mission, dressed in their finest clothes and all serious (even the camel), as they deliver a special gift: sustainable performance.

Leader Judgment
Your calls can make a big difference in results . . . .18

Organization Status
It influences the hiring process. . . . . . . . . 10

STEPHEN R. COVEY

Third Alternative . . . .19

JIM COLLINS

JAMES CERRUTI

Sustainability. . . . . . . .11

Building to Last. . . . . .20

Volume 28 Issue 12

E . D . I . T . O . R S

N . O . T . E

Leaders Christmas List

Benefit your community and company.
2. Community service-based team building activities. Remember rocks and ropes, artificial team-building activities such as OME YEARS AGO SINGER AMY completing obstacle courses and constructGrant popularized Grown ing rafts? The North Texas Food Bank has Up Christmas List. The lyrics instituted structured team-building activities around packing cartons and backpacks of speak of the adults request for Santa Claus to bring the gifts of peace, healing, love, and food stuffs for delivery to seniors and school justice for a world in need. However, business children. Led by professional facilitators, leaders dont need to wait for Santa Claus to executive participants exercise strategic planning and teamwork skills to complete deliver transformative gifts. They can use these needed tasks, and outcomes directly expanded sources of learning to give meaningful gifts to others in their communities while benefit the food bank and its needy clients. giving the gift of an expanded leadership pipeline Some organizations also collaborate with Habitat for Humanity to provide structured to their organizations. Here are three ideas for a Christmas list that team-building experiences for work teams that construct houses together. business leaders can use to benefit their communities and organizations: 3. Use of community service in individual development plans. Volunteer 1. Social Entrepreneurship Proleadership positions in local nonjects. Business projects are common SMU COX EXECUTIVE EDUCATION profits provide opportunities to in management development programs. IS NOW ACCEPTING develop leadership skills in They enable participants to pracREGISTRATION FOR strategic planning, financial plantice teamwork skills, exercise PROFESSORIAL DEVELOPMENT ning, outcome measurement and enterprise level thinking, expand ERTIFICATE PROGRAMS networks, and demonstrate execu- CFOR THE FULL LIST OF . accountability, organizational and people development, govertive presence. Project outcomes COURSES AVAILABLE AND COURSE DATES nance and board structure, motiresult in cost savings, new revvation and communication, and enue opportunities, or other tangiVisit us at others in an environment of low ble benefits to the sponsoring exed.cox.smu.edu companies. However, projects that or call 214-768-3335. risk to the volunteers employer. It is analogous to GEs practice of focus on social entrepreneurship can assigning high potentials to small operations achieve the same learning goals and provide similar tangible benefits to the commu- (popcorn stands) to test their managenity (especially when participant groups are ment skills before placing them in missioncritical business units. Also, organizations from different business units, geographies such as the Boys and Girls Clubs, Scouts, or even companies where it is difficult to and others enable volunteer executives to identify a project in which the participants share a common interest). For example, one mentor young people and develop coaching skills which they then can apply on the job. SMU Cox program for participants from For example, a program at SMU Cox condifferent companies asked project teams to nects Hispanic executive participants with identify a social entrepreneurship opportunity, develop a business case, vet it with a group students affiliated with the Hispanic College Fund. Students can identify executive role of social venture capitalists, and present it models and receive career guidance and to their company sponsors. These projects counseling. And executives can exercise new resulted in outcomes such as a catalog of coaching tools and techniques and gain congreen products for non-profits to offer as fidence in them before using them at work. fund raisers in lieu of candy or cookies, a Many people serve their communities in web portal for young Hispanic women to these ways as volunteers. Whats new is the access educational opportunities, and an on-line tool for donors to assess the effecintentional use of community service to tiveness of various charitable opportunities. develop executives (leadership development). The social venture capitalists to whom these Community-based experiences provide projects were presented were so impressed opportunities to expand the leadership pipeline by the teams assessments of these potential and the organizations visibility. And Santa businesses that they included one project in Claus need not deliver these gifts. LE their annual exposition of new social venture Frank Lloyd, Ph.D., is Associate Dean of Executive Education at SMU Cox School of Business opportunities.

Leadership Excellence (ISSN 8756-2308) is published monthly by Executive Excellence Publishing, LLC (dba Leadership Excellence), 1806 North 1120 West, Provo, UT 84604. Editorial Purpose: Our mission is to promote personal and organizational 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 the editorial 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, and requests 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-Chief Sean Beck, Circulation Manager Contributing Editors: Chip Bell, Warren Bennis, Dianna Booher, Kevin Cashman, Marshall Goldsmith, Howard Guttman, Jim Kouzes, Jim Loehr, Tom Peters, Norm Smallwood The table of contents art is a detail from T h r e e W i s e M e n i n a B o a t (image cropped) James Christensen, and is courtesy of the artist and art print publisher Greenwich Workshop. For additional information on artwork by James Christensen, please contact: Greenwich Workshop 151 Main Street Saymour, CT 06483 1-800-243-4246 www.greenwichworkshop.com Full view of table of contents art.

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Copyright 2011 Executive Excellence Publishing. No part of this publication may be reproduced or transmitted without written permission from the publisher. Quotations must be credited.

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PERFORMANCE

TURNAROUND

The Road Ahead

Lead into a better future.
pelled us through the recession, even as two of our major competitors took federal bailouts. Going forward, one big threat is not HE MOST IMPORTANT failure, but success. Ford has seen leadership quality turnarounds beforeonly to drift back for a CEO is having a to former habits. Its not due to hubris compelling vision and then finding a so much as a reversion to the mean. way to make that happen. Having engineered a turnaround, we In the early 1980s, when I was a Boeing chief engineer for the design of cant afford to take a well-deserved the 777, I presented to Boeings board victory lap. We must focus on the chalthe business case for the new airplane. lenges aheadand turn an organization thats been geared toward recovery Former Ford CEO Don Petersen, a Boeing board director, later asked me to one focused on profitable growth. to meet with Fords Team Taurus as the team was preparing to design the Innovation Is Key to Growth new 1982 Taurus. I invited the entire We are moving from saving and Team Taurus to Seattle for three days. transforming the company into an era We compared notes on technology, on where we are now growing the busiprocess, and being market-driven and ness worldwide. The future has been customer-oriented. So in 2005, when Bill Ford called asking me to come to Ford, I checked in with Don. It felt like I was coming home.

by Alan Mulally

Leading Teams and Organizations

I dont think Im a much different leader now at Ford than I was at Boeing. Ive been leading teams and organizations for a long time. Ive been associated with large-scale system integration innovation, whether its a commercial airplane with four million parts or a sophisticated automobile with 10,000 partsthey both take a lot of talented people and many different disciplines to come together to create these fabulous products. Its all about getting people to work together on the team. Whats our plan? Whats the status against the plan? What areas need special attention? Bringing this together is something I feel comfortable doing. Im excited for everybody associated with Ford that we are now delivering not only strong, great products, but also a strong business in addition to contributing to a better world. As everyone knows, when I came here five years ago, Ford was in serious difficulty; and yet, even during the Great Recession, we not only avoided bankruptcy and a federal bailout but turned Ford once again into Americas top selling automaker. Over the past five years, the leadership team at Ford orchestrated a turnaround that proL e a d e r s h i p E x c e l l e n c e

established by the big decisions that we have made to refocus and transform Ford. The important, big decision was to focus on the Ford brand and focus on a complete family of vehicles made available all around the world, where every vehicle is best in class in terms of quality, value, fuel efficiency, safety and smart design, like SYNC and MyFord. Going forward, were well-positioned in most of the markets around the world. So the real key now is to stay absolutely laser-focused on this. We could have acted like a car company, introduced an outstanding new electric vehicle, and called it a day. But were more than a car company, were a technology company. We expect that one fourth of all vehicles sold by 2020 could be electric or hybrid. Part of our go-to-market strategy is to use social networks and the Internet to advance Ford products internationally as we did with the Ford Fiesta in the U.S.moving from paid media to

earned media to social media. We embraced social media as a way to leverage the Ford brand and promote our new products to key demographic groups. Rather than the usual pushmarketing approach, we deployed the Ford Fiesta movement to open an interactive dialogue with real customers about the launch of the car. Later, we switched focus from buzz and exposure toward pre-orders and sales having earned the right to close the sale because of the early dialogue. In this way, Ford took social media to a new level as a marketing vehicle. Increasingly, marketing is more about a conversation, because information now is ubiquitous. Everybody wants to know and has access to all the information about vehicles. So for us, marketing is about starting that conversation and making the data available so everybody can see what options are available from Ford. Its exciting to see their response when they have this brand awareness. Its not only about having great products, but also running a healthy, strong business for the long term. Its important to make a reasonable return for everybody in this business in order to have the ability to continue to invest in the future. Those that do that will get a chance to go forward. For those that dont, things wont work out so well. For me, creating a culture of innovation starts with innovation that has a purpose. It begins with the point of view of the customer. What does the customer really want? What will they really value? Clearly, we all want safe and efficient transportation. We also want the highest quality; we want it to be the most fuel-efficient. We also want all the latest safety technology and the best value. And finally, we want smart design that works for us. Innovation and technology must serve these pillars of what customers really want. Consider the things that we have done about safety. For example, the cross-channel alert allowing blind spot monitoring, the collision-avoidance the roll stability controlthese features plus SYNC and MyFord, hands on the wheel, eyes on the road, voiceactivated, technology seamlessly connected to our digital worldall of those features not only increase safety, but make us even better drivers.

Whats in Fords Future?

In the future, expect to see continuous improvement of the internal combustion engine, both diesel and petrol. Well see more turbo-charging and
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direct fuel injection, which enable us to use smaller and lighter weight engines, and provide the performance capability and the fuel efficiency that we all treasure. Expect to see more lightweight materials, more integrated electronics, more uses of alternate fuels, like cellulosic and biofuels. Well see more natural gas in our cars as well as more electrification. It will expand from hybrids with more powerful batteries to all-electric vehicles. As we develop fuel cell technology and develop the infrastructure for electricity and for hydrogen, well see hydrogen vehicles where we take in hydrogen, combined with platinum, creating electricity for the battery with water coming out of the tailpipe. Weve announced that well be electrifying the entire Focus platformthats a global platform that we offer worldwide. So, off the same production line, we could have a petrol, a diesel, a hybrid, a plugin hybrid with a bigger battery, and an all-electric vehicle. The world is moving toward performance-based compensation. Compensation must be tied to creating a profitable, growing businessbecause then everybody benefits. Clearly, the compensation here rewards all of the leadership team based on the team creating value for the shareholders and for all the participants whether they are hourly or salaried. Compensation is aligned to a value creation for everybody. Today were providing great jobs and great careers for everybody. And thats what everybody cares about. At all times, I try to be good-natured. Someone might think I was a bit short with him; but if I am, I soon apologize because anger isnt effective leadership behavior. I treasure working together with talented people, holding ourselves accountable, and working our way through whatever problem arises. Working together is the most essential behavior for a high-performance team. Im proud of the fact that I help create quality productscommercial airplanes or the best cars and trucksthat move people and families around our world safely and efficiently. I love contributing to making life easier, safer, and more efficient, but also I like creating fantastic jobs and careers for many people around our world. A strong growing business can do this as well as contribute to a better world by using fewer resources. LE
Alan Mulally is President and CEO of Ford Motor Company. He was chosen by his peers as Chief Executives CEO of the Year 2011.

LEADERSHIP

LESSONS

LEADERSHIP

PRAISE

Six Lessons
All leaders can learn.
by JP Donlon

Peer Praise
CEOs laud Alan Mulally.
Alan inherited difficult circumstances, even more difficult than he thought when he took the job, and handled the job with grace and courage. Whats more, he single-handedly revived respect for the auto industry in the U.S. William R. Nuti, CEO, NCR He created a will to win among his people and through his personal leadership, modeling certain behaviors that showed passion, courage and tenacity. He excited and energized the base, and thats important when youre dealing with a demoralized situation. Fred Hassan, chairman, Bausch & Lomb He took the hand that he was dealt, and managed to take those resources and give them a new sense of purpose. He reframed the situation from one of loss and bereavement in who they were to a sense of excitement about who they are and who theyll be. Jeffrey Sonnenfeld, Senior Associate Dean, Yale School of Management The foresight he showed in the face of incredible difficulty, the courage he showed in making some tough decisions on popular brands, the global mindset he showed, and the statesmanship he showed when two major competitors were on the public dole shows he was thinking for the good of the country, company and industry. James Turley, CEO, Ernst & Young The turnaround of Ford is an amazing success story, due largely to his talents, leadership, and courage. Its a turnaround of an icon. It comes down to the degree of difficultywhat was accomplished in tough timesthat speaks volumes about his leadership. Hugh Grant, CEO, Monsanto Mulally has created a leadership template for all of us to follow going forward for what growing a business looks like. Christine Jacobs, CEO, Theragenics Alan rallied the Ford team to support the One Ford vision and make the tough, but necessary decisions. The end result is that Ford has delivered market-leading performance. Dan Glaser, group president and COO, Marsh
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leadership for Alan Mulally to orchestrate a turnaround at Ford. Here are six keys: 1. Display courage in the face of adversity. When he arrived on the job in Sept. 2006, Mulally realized that the Ford line-up was in disarray and that transformation would take time. He took heat for mortgaging all of Fords assets for $23.6 billion to protect the company from unexpected events. When the Great Recession hit, GM and Chrysler accepted government bailouts. Ford toughed it out. Its now a badge of honor. 2. Focus is everything. Ford had dissipated its effort across too many noncore nameplates (a house of brands). The decision to sell Jaguar, Land Rover, and Aston Martin, fold Mercury and concentrate on the Ford brandthe One Ford strategyallowed everyone to direct their energies to what mattered. 3. Simplify. To let people know what he expected, Mulally had plastic cards distributed to everyone, headlined One Ford with four expected behaviors on one side and a revised definition of the company on the other (One Team. One Plan. One Goal.). 4. Use the Outsider Advantage. Even insiders, when they step outside the box, can start to see the business as outsiders. Mulally insisted on a weekly Business Plan Review System where it was harder to hide unpleasant truths. Executives were held accountable for their performance against data that gave the team a snapshot of where everything stood. 5. Reward transparency and collaboration. Early on, Mulally asked senior managers to report on how business was going. He clapped his hands when one courageous person reported a delay in the launch of a vehicle. Once rivals, executives began sharing sensitive information and helping one another. 6. Stay inventive. In an industry slow to embrace cutting-edge technology, Ford introduced MyFord Touch, a redesign in the way drivers interact with vehicles. Premium technology was made available to non-premium products. LE
JP Donlon is editor of Chief Executive magazine. ChiefExecutive.net.

T TOOK TREMENDOUS

ACTION: Engineer a turnaround at your company.

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PERFORMANCE

COMPENSATION

Making a Profit
But how are you really doing?
by Trish Gorman
HATS THE BEST WAY to track how well a leader is running a business? If your mind turned first to profitability or stock-market performance, youre thinking like most managers and shareholders. And youre wrong. There are much better barometers. Im not saying you should ignore profitability. Measures like net income, operating earnings, return on invested capital and margin expansion have their place. But if we tie the annual salary of a CEO or a division manager to this years profits, its a mistake. As tools to gauge how well a boss and his or her team are doing at their jobs, these profitability metrics are surprisingly weak. Sometimes theyre even misleading. For one, the profit lens looks back. The visionary decisions you make this year may not show up in the bottom line for years. Conversely, your company or division may perform nicely for a few years before the problems drip down to the bottom line. And if the incentive is to hide the problems instead of administering tough medicine to fix themyou end up working against long-term health. If you only look at profits during that time, you may never suspect anything is wrong. What about stock-market performance? Giving bosses stock options was supposed to solve the problem with the lag time for profits, because stock-market values tend to reflect a companys future prospects. The problem is that theres so much noise in the stock market that bosses may get windfalls in years when they do nothing right and be punished in the years when they do everything right. In the wrong circumstances, stockbased compensation can invite corruptionand discourage good execs from making tough decisions. Most managers know which threats and problems their firms face, and what to do about them. Alas, theyre all too aware that admitting those problems and instituting the fixes could mean a hit to the companys share price and their personal balance sheets. So they grumble vaguely about inertia or communications

or alignment issues, then propose meek half-measures designed to cloak indecisiveness and dodge problems. American companies didnt always build leaders compensation around profits and stock performance. Until the early 1980s, managers salaries were often tied to the number of employees or the volume of sales they oversaw, not the profits they produced. That was a rotten system, because it encouraged managers to buy businesses to jack up revenue and headcount with little regard to the bottom line. It discouraged managers from considering the cost of capital. A self-serving boss with allies on his board of directors could borrow money to make acquisitions and boost his salary while producing no benefit for investors. Not surprisingly, conglomerates came to rule the investing landscape, and the stock market languished. Then came the maximizing shareholder value movement. Corporate raiders saw that they could buy bloated conglomerates, sell off money-losing divisions for cash, shove the companys self-serving managers into retirement,

and end the day with a small, profitminded company that could generate bigger dividends for its owners. The new owners tied the salaries of any surviving manager or CEO to profits. Soon shareholders demanded accountability by tying managers salary to profits or stock-market performance. This was good for shareholders, at first, but the movement has produced a raging hangover. The obsession with profits and stock-market performance has led to a crippling short-term mindset. If a boss knows his salary is tied to this years profits or stock performance, he or she prefers a meek cost-cutting campaign or share-repurchase program to boost EPS 10 percent right away over a risky/costly plunge into R&D that may or may not produce a breakthrough product and a tripling of profits in five years.

Four Performance Gauges

So what yardsticks should you use to measure a managers performance? Ive got four suggestions: 1. Let the customers pick the salary.

Base managers bonuses on improvements in customer satisfaction and loyalty. The science of measuring customer satisfaction has advanced considerably. If more customers respond very likely to the question Would you recommend us to your friends? the boss deserves a raise. Or tie their salary to their success at boosting customer retention, since the cost of acquiring a new customer is high. And think beyond sales. Reward managers for increasing customers engagement with the firm online and their identification with the brand. 2. Consider the shopping-mall bonus. A bosss job is to figure out how a company can out-position its rivals. Free-market customers have choices, and companies reside in a mega-massive, virtual shopping mall. So reward or punish bosses when they succeed or fail at moving the company into the malls prime locations. If they make the jump from a boutique cart to a proper storefront, the boss deserves a bonus. 3. Let your employees decide. Culture can be the elusive special sauce that distinguishes real winners from also-rans. Think of how Motley Fool built a recognized brand among financial-advice websites, or how Zappos.coms zealotry for customer service won it a $1.2 billion buyout from Amazon.com. The war for talent shouldnt be left to HR. Bosses are most responsible for recruiting high performers, since they set the tone, allocate resources, create opportunities and celebrate progress to motivate recruits. So use an employee engagement metric to let employees be heard. Or base a portion of the bosss salary on sales per employee, minus their salaries and the 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 real measure of operating success should be. Hospitals might focus on reducing readmissions. Labor-intensive companies might look at the spread between their most and least productive workers. Companies with high costs to acquire customers should measure customer retention. Such metrics are honestand hard to fudge. Few bosses would willingly see their bonuses tied to them. But if youre a shareholder who seeks better results from your leaders, or youre a boss and want a better way to gauge your performance, you need new and nuanced ways to measure how youre doing (and tie salaries and bonuses to that measure). LE
Trish Gorman is dean of the Jack Welch Management Institute and coauthor with Jay Barney of What I Didnt Learn in Business School: How Strategy Works in the Real World. Visit www.jwmi.com.

ACTION: Use these four performance gauges.

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CHANGE

MOTIVATION

Intrinsic Motivation
How do you get people to change?
leaders who are change savvy know that they cant succeed without the collective commitment and ingenuity of the group. This collectivity is seen not as a nuisance but rather as a necessity. Galvanizing motivation is the essential task of the change leader. The resolute leader who is changesavvy helps people try new things under relatively non-threatening conditions, and listens to and learns from their reactions. He or she kick-starts the change process, often acting as the initial ignition. But the process will never go anywhere unless the leader figures out how to develop ownership within the group, and I use the word group advisedly because the driver of sustainability is the peer culture. At the beginning of a given change process the leader is key to get things going, but successful change eventually must revolve around collective ownership.

by Michael Fullan
OU CANT MAKE PEOple change, and rewards and punishment either dont work or are short livedthe only thing that works is peoples intrinsic motivation, and you have to get at this indirectly. The big change problem is how to get people to put in the energy to improve a situation when a lot of them dont want to do it. How do you get people to change their minds? How do you motivate the masses? Machiavelli had it right 500 years ago. When people contemplate new ideas, he observed, they are generally incredulous, never really trusting new things unless they have tested them by experience. Grasping change involves giving people new experiences that they end up finding intrinsically fulfilling. Realized effectiveness is what motivates people to do more. It is not inspiring visions, moral exhortation, or mounds of irrefutable evidence that convince people to changeit is the actual experience of being more effective that spurs them to repeat and build on the behavior. People can get fantastically excited and inspired, as many did when Barack Obama was elected president of the U.S. in 2008. But change is only a mirage unless people actually experience the reality of improvement. If that happens, theyll expect and do even more. Motivated people get better implementation, but the reverse can be more powerful. Helping people accomplish something that they have never accomplished before causes motivation to increase deeply. Such newly found motivation is tantamount to passionate commitment that is contagious. There is often a tension between resolute leaders and group development. The former are determined to get on with it, and thus can become impatient with those who are hesitant to get involved. Grasping change reconciles this potential conflict because those

Finding Effective Motivators

What motivates people? Daniel Pink provides us with the foundation when he identifies three sources of motivation: biological drive, extrinsic rewards (incentives and punishment), and intrinsic rewards (things that make us feel good just by doing them). One example of an incentive/punishment motivator is merit or performance pay. Rewards and punishment have a place under conditions of seriously limited capacity, such as where few people have the necessary skills and often do not show up for work, as is the case with teachers in some developing countries. But if you want substantial and continuous improvement, extrinsic motivators have limited effectiveness. Pink reports on several experiments, all of which led to the same conclusion. He observes that the rewards crowded out the intrinsic desire to do something good. Extrinsic rewards, in other words, narrows the reasons for doing something and makes it unlikely that the reason for the effort is coming from inside people. Pink summarizes the findings as the seven deadly flaws of

carrot-and-stick incentive systems; they can: 1) extinguish intrinsic motivation; 2) diminish performance; 3) crush creativity; 4) crowd out good behaviour; 5) encourage cheating, shortcuts, and unethical behaviour; 6) become addictive; and 7) foster short-term thinking. So, we know what doesnt work. But the mere act of inviting people to engage in activities for their intrinsic satisfaction will not, by itself, do the trick either. The question then becomes: under what conditions will intrinsic rewards flourish? Four core ingredients are essential for intrinsic motivation: 1) the work must carry with it a strong sense of purpose, since once their basic needs are met, the most people want to do is something of valuesomething meaningful; 2) people find that getting better at something important (increased capacity) is intrinsically satisfying; 3) there needs to be a degree of autonomy so that people can exercise judgment in making headway; and 4) being well connected to others in the pursuit of significant goalscamaraderie in relation to accomplishing purpose. This collective capacity is crucial for deep, sustainable success. To bring intrinsic satisfaction to the fore, change leaders must help create the experiences that turn out to be motivating because people find them emotionally meaningful relative to their values and their ability to fulfill them. It is not that the task becomes simplified but becomes directionally clear to the point that enabling the new experiences will further increase clarity, skill, accomplishment through action, and the ownership that comes from intrinsic motivation. When Jamie McCracken became director of education of the Ottawa Catholic District School Board in Ontario, Canada in 2003, he took over a system that was clenched, then set out to unleash the energy and commitment of the group. With input from the masses, he identified three core priorities: student success, staff success, and stewardship of resources. He also stated that these three goals would remain the same for all seven years of his tenure. He committed to stay the course. Still, that is just talk. To succeed, McCracken had to help make these goals a part of peoples everyday experiences. So we arrive at the real question: How do you galvanize motivation when you have the direction right but people are skeptical of whether it will happenor that it is a good idea? We have developed such a process motion leadership. It proactively shapes and trusts the ready-fire-aim process. Ready is directional; it identifies some core goals as priorities. But rather than
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forcing the ideas, motional leadership trusts the process, knowing that an effective change leader can greatly influence what happens. The process generates intrinsic commitment and collective identity, both of which are powerful steering and sustaining forces. Leaders should still have aspirational visions, but they need to pursue them by activating and aligning the needs of individuals and the group. Forcing the process is counterproductive. Effective change leaders activate, enable, and mobilize human and moral purpose and enact them. Motion leadership causes positive movement. It creates a process and a set of conditions that foster moral will and skill, as well as technical expertise. It builds these aspects into the culture by increasing the odds that peers will influence peers with respect to moral will and technical expertise. Motion leadership increases intrinsic motivation and group identity that results in collective ownership and commitment to keep going. Motion leadership generates new energy within the group to reach new heights, which is achievable because individuals, the group, and its leaders want more, and know that it can be had. But what if you still get resistance? If you do many of the right things, most resistance will disappear, either because you tap into individual intrinsic motivation or peers pressure and support each other to move in the new direction. Effective leaders combine resolute moral purpose and impressive empathy. Effective leaders have resolute purpose; they persist against obstacles and setbacks. But the best leaders also have impressive empathy for those who are in the way. To understand where people are coming from is the first step toward developing a new relationship. When leaders demonstrate such a stance, they learn more about different points of view and can work to find common ground. Since few change situations come with shared consensus, leaders must build consensus by taking action, developing relationships, and problem solving. When leaders have a good vision, are resolute, tap into peoples intrinsic motivation, and practice impressive empathy, most resistance dissipates. You can then take firm action with the remaining problems. Most peers will support your action. Leadership is about having good ideas and building trusted relationships with diverse groups. LE
Michael Fullan is Professor Emeritus, University of Toronto, and author of Change Leader: Learning to Do What Matters Most (Jossey-Bass). Visit www.michaelfullan.ca.

ACTION: Tap into peoples intrinsic motivation.

Involve CEOs as models for leadership development. If CEOs want to see positive results, they need to get involved in their leadership development Leadership is more about influence. strategy. When people see that the CEO applies and practices the encouraged behaviors, they understand that these behaviors are tied to the business strategy. by Ken Blanchard Mix it up. Make the most of the generational mix in your workforce. By including people of all ages in M OFTEN ASKED training, youll enrich the learning whether people are experience. Different generations have born leaders or if leadermuch to teach each other. ship can be taught and developed. While some people are natural-born leaders, Train people with their teams. Too every person can develop leadership often people are taken away from their capacity, since leadership is more teams to receive training. People go about influence than position. off, learn new things and come back to When I ask an audience, How many their workplaces all fired up. The problem is, the other team members of you are leaders? few people put a didnt share the experience and cant hand up because they think leadership support that enthusiasm. By training is about having a position of authority people together, you reap the benefits in an organization. of synergy and shared excitement. When I ask them who has had the most influence in their lives, they usu Consider the context of the people ally talk about family members or youre training. How do the people close friends (rarely about leaders in make contact with each other? Do they positions of authority). see each other face-to-face every day, Why does a mother, father or close or do they mostly interact by phone, family friend often have the most email or text message? Design learning impact on a persons life? to match the methods peoIts because leadership is an ple use to work together. If they are primarily working influence process. Anytime virtually, learning needs to people attempt to influence be adapted to that context. the thinking, beliefs or development of others, Use technology to teach they are leading. Thats content. In the past, trainwhy its so important to ers spent too much face recognize that everyone time teaching content. With the advent of new technolfrom the seasoned CEO to ogy, they can teach before the new hirecan benefit bringing people together. from effective leadership This leaves more face-to-face time to development. Leadership is not something you do focus on applying the content, practicto peopleit is something you do with ing new skills and answering questions. After people leave the training them. As a manager or an individual event, technology can help reinforce contributor, your ability to lead the learning. depends more on the quality of your relationships than on your positional Focus on behavior change. Too often power. By effectively relating to people companies spend too much time findover time, you are leading. Whether ing and peddling the hot new manageyoure a manager who wants to influment concept. But how many diets do ence your direct report or vice versa, you need to lose weight? Only one if you need to learn how to communicate you stick to it. How many LD prowith that person in a way that creates grams do you need to make a positive positive results. Thats leadership. difference?only one, if you stick to it. Im glad more organizations are Leaders are sometimes born, but they appointing CLOs because the word can be developed. By designing learning experiences to develop leaders, youll learning implies a behavioral change. unleash the power and potential of CLOs play a vital role in aligning your people and make the business behavior with business objectives. Once you understand that anyone can objectives much easier to attain. LE be a leader and that leadership is an Ken Blanchard is a best-selling author, speaker and chief spiriinfluence process, your leadership devel- tual officer of The Ken Blanchard Companies. He can be reached at editor@CLOmedia.com. opment program can come to life. Here are six ideas to get started. ACTION: Exercise your leadership influence.

COMPETENCY

DEVELOPMENT

Leaders by Design

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PERFORMANCE

OBSTACLES

Trade Wins and Woes

We face three threats to prosperity.
move thousands of people and supplies through some of the worlds most dangerous terrain, under extreme conditions. Even Sun Tzu would be impressed. But US TRANSCOM and the rest of the military do have challenges. They have to do more with less. How? By asking hard questions about the supply chain: Should we try another design? Should we partner with others to manage our supply chain? Change often yields lower costs and better performance, while enabling you to focus on what you do best. UPS partners with the U.S. military on various logistics programs. Merck entrusted their supply chain to us so they could focus on what they do bestfind innovative ways to bring medicines and vaccines to patients. As a global logistics business, we help many partners extend supply chains across borders or export to new markets.

by Scott Davis

of the Twin Towers and the attack on the Pentagon on 9/11/2001, our former CEO, Jim Kelly, said: Those of us here in the U.S. and worldwide, who have flourished under a free market system, have a deep moral obligation to keep global commerce moving forward. Many people thought terrorists might take down our economy, but that didnt happen. Global commerce moved forward. I view that as a great victory. Still, the world remains a dangerous place. New threats and crises emerge. Our federal deficit is large, growing, and unsustainable. U.S. military budgets are under pressure, and future defense cuts could be drastic. We need stronger economic growth. Unemployment is highabout 9 percent. Consumer confidence is down, and fear has returned to financial markets. Worldwide, while millions of people move into the middle class, millions of others remain in poverty. Terrorism often takes root in economic despair. To remain secure and prosperous, we need something for the long term: something to improve our security without big federal budget outlays; something to forge ties between nations and peoples, and something to increase jobs and raise living standards. That something is increased global trade. Cordell Hull was Secretary of State under Franklin Roosevelt for 11 years. After World War II, he started a project to prevent future devastationthe United Nations. Hull said, Where trade crosses borders, armies do not. I add: Where trade crosses borders, millions of people can see a better future.

OON AFTER THE FALL

One way we can do better is by streamlining export controls. For example, the Pentagon has proposed a sensible solution to balance the needs for national security and economic growth: higher fences around fewer products. If we modernize U.S. export controls, over the next eight years, our nation could enhance real GDP by $64 billion. And wed create 160,000 manufacturing jobs. Lets clear away the barriers to exports, shift global commerce into high gear, and create more jobs here at home. 2. Energy security. About 60 percent of the oil we consume is imported. In Overcoming Three Obstacles the 1970s, it was half thatabout 30 We can create more trade and pros- percent. Why is that a problem? The more perity by overcoming three obstacles: oil we import, the greater the risk to global stability and trade. The U.S. mil1. Better logistics. Ancient Chinese military leader Sun Tzu said, The line itary dedicates vast resources to securbetween disorder and order lies in logis- ing and protecting energy supplies. tics. Today, logistics is even more vital. Thats why the Pentagon has a new To learn about better logistics, go to Operational Energy Strategy to use less oil Scott Air Force Base and meet General and more alternative sources of energy. Duncan McNabb and his team. They Weve been working on a similar
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effort for years at UPS. We have a saying: In God we trust. Everything else we measure. We go to great lengths to track our fuel use and its emissions. Then we report on the results. Why? Accountability and transparency are important principles for performance. Were making progress. Last year our package volume went up, but our fuel consumed per package went down by more than 3 percent. Move more, consume less fuel. We did it by deploying the right vehicle on the right routes. By improving teamwork and by using technology like smart routing and telematics. Last year, technology enabled UPS to avoid driving 63 million miles (252,000 trips to the International Space Station). Another principle of sustainability is experimentation. In our fleet, we have a rolling lab of about 2,000 alternative fuel vehicles. We test and deploy many technologiesfrom propane to hydrogen fuel cells to electric. Replacing our diesel long-haul vehicles with LNG trucks reduces oil consumption by 95 percent and greenhouse gas emissions by 25 percent. Plus, operating costs go down. And natural gas is plentiful here in the USA. A win-win-win for all of us. 3. Protectionism. Last year, when I visited Asia, leaders in several Asian countries asked me how they could get a closer trading relationship with the U.S. Sadly, when it comes to trade, our country is AWOL. This absence of leadership is puzzling. No other country has invested more than the U.S. to secure and protect the lanes of global commerce. When it comes to reducing tariffs and barriers to trade, our nation is a pioneer. The U.S. has 17 free trade agreements in all, but none in the past four years. What the world needs is a global trade framework. Countries with trade agreements have strong economic growth. The U.S. has a network of allies with growing economies. But we should convert more alliances into more robust trading partnerships. When it comes to trade, we are becoming weaklings. Our march to economic growth and security must involve less protectionism and more global trade. As a nation, we must keep improving logistics and lowering barriers to global commerce. We must solve the persistent challenge of energy security. And we need more global trade. We can overcome our challenges. But we must have the desire and courage to do so. Each of us must rise to the challenge. Together, we can do it. LE
Scott Davis is Chairman and CEO of UPS. This article is adapted from his address delivered at the National Defense Transportation Association Forum, Phoenix, Ariz., Sept. 12, 2011.

ACTION: Overcome obstacles to high performance.

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GROWTH

Transformative Growth
Architect it with operating blueprints.
by Faisal Hoque
HE GLOBAL TRANSFORmation underway represents extraordinary risk. Business strategies that embrace new socio-economic models and couple powerful new technologies are transforming the way we do business and the nature of the marketplace. Yesterdays economic and business models are inadequate to ensure tomorrows success. It is time to move forward. Only new thinking will do. Transformation is a proactive process that begins with a passionate need to effect a larger change in the environment. It is nearly identical for every organization: introduce a new goal, add the variable (exogenic factor), and transform it into creativity and innovation. Transformation might encompass a single, large-scale revamping, but it is usually myriad changessome large, some small; some planned, others unanticipatedall in a pixilation with influence that spreads. An essential driver is thinking differently about established ways and means; revisiting economic, business, social models. Transformation is not a silver bullet. It only rarely produces permanent results. Instead, it is the result of careful, deliberative, strategic planning and progressive cost-benefit analysis that considers tactical issues and follows the evolution. Once activated by the exogenic factor, it opens the gates to transformation, creativity, and innovation. Once released, creativity and innovation can produce both an anticipated and unanticipated sustainable impact on the institutional model, culture, and world in transformative ways. Progress cant be achieved by doing the same things weve always done and expecting different results. Unless new, progressive models are employed, true transformation cant occur. Yet leaders often place the emphasis on financial analysis, quarterly reports and balance sheets. This is insufficient for understanding, tracking, and governing the performance in volatile markets, since: Operating managers often work in relative isolation from the market and its operating functions, producing the

familiar myopia that often occurs. Leaders often have limited ability to guide and oversee operations because of inconsistent access to key information. Board of Directors and Investors have a limited view of operations, lacking the perspective or information needed to know how to guide enterprises. Operating managers are tasked with growing the business and reporting clear sailing up the lines of management. Its tricky navigation, especially when cost containment is driving so many decisions today. Lowering costs is important, but it must be factored into a strategy. Today, four new and emerging operating challenges must be addressed: 1) accurately evaluating growth potential, while balancing organic versus inorganic growth; 2) developing sustainable processes to reach or exceed revenue growth goals, cut costs to preserve recurring dividends, and protect top- and bottom-lines for enterprises; 3) implementing strategies for building sustainable brand recognition, and brilliant management teams; and 4) demonstrating progressive, demonstrable, repeatable results to leaders, boards, and investors that will sustain the firm. Establishing specific objectives and applying reliable performance indicators are keys to a manageable process. Every enterprise should be using transparent operating blueprints that connect the dots between financial reporting and actual operations in order to accurately represent such information. An operating blueprint provides two strategic enablers: 1) 360-degree Enterprise Models (business, process, organization, technology), facilitate asking what-if questions and test scenarios that help vet problems and issues early and visualizing the end-to-end business goals and execution strategies before beginning costly and often irreversible strategy implementations; and 2) Impact Analyses and Scenarios, with which to alter factors, create multiple output scenarios, evaluate the end-toend impact of each scenario, and arrive at the optimal solution. An operating blueprint allows owners

and managers to work together based on converged intelligence of market opportunities, execution capabilities, and business model differentiations. No contractor would build a house without blueprintsand an enterprise operational structure and processes are no different. Methods of guesstimation must be replaced with precise metrics that provide verifiable outcomes. Properly implemented, operating blueprints enable enterprises to: 1) maximize ROI at an earlier stage in the funding lifecycle of each initiative, and collectively across the organization; 2) boost transparency between strategy, funding model, and execution model; 3) prioritize and guide improved performance, value, and sustainable growth. In times of market volatility, success is driven by recognizing major challenges and identifying the strategic imperatives to address them. This requires new structures, creating and sharing new kinds of business knowledge, understanding and applying emerging socioeconomic models, and developing repeatable, reusable transformational processes enabled by accessible technologies. Operating blueprints provide the basis for a predictive, sustainable plan for managing these challenges and opportunities for growth and future success. Why do businesses fail? In some cases, the product or service is no longer needed; but the secret reason is the reluctance 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 institutions ability to make effective and practical use of change. It is the great what if factor in decision-making and the entitys raison detre to move forward and stay up on the turbulent and changing times. Sustainability is the manifestation of health and growth, but also diversity: indeed, it is made up in large part of change and innovation. Achieving these three goals depends on transforming from outdated methods to new, more productive ways of conducting business to produce new ideas, profound change, dynamic innovation, and sustainable opportunities. LE
Faisal Hoque is an entrepreneur, thought leader, founder/CEO of BTM Corporation, author of The Power of Convergence and Thriving in Uncertain Times. Visit www.btmcorporation.com.

ACTION: Try using an operating blueprint.

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HIRING

Organization Status
It affects the hiring of talent.
by John J. Sumanth

N A KNOWLEDGE-BASED economy, human capital is the basis of competitive advantage. Leaders seek the best way to hire the best workers. Yet, despite a stated goal to recruit the best people, many hiring processes are not the best ways to reach this goal. Managers knowingly fill positions, even at the highest levels, using ineffective selection methods. Top executives rely primarily on interviews, resumes, and references when collecting information about candidates in the pool. Seldom do they use the more sophisticated and valuable selection tools available, such as individual assessments, assessment centers, and tests. Cognitive ability tests and measures of conscientiousness are more valid predictors of future job performance than interviews. So why do so many organizations continue hiring people with the least valid selection methods? Applicants may believe many valid selection tests are unrelated to the job, and not representative of their ability to perform. Hiring managers may worry that using selection tests will alienate valuable potential hires. As a result, highly valid selection methods, such as cognitive ability tests, that may help locate better-qualified applicants, may be underutilized because they simultaneously repel those applicants. Our research indicates that organizational and individual candidate status can affect the effectiveness of using valid selection tests and gaining the best employees. Status is an organizations or an individuals position within a social structure, resulting in differences in respect and prominence. An organizations status (or reputation) may change Individual Career Status the way applicants think about selection systems; an individuals status may An applicants personal status may affect organizational use of the method. also affect their perceptions of valid selection tests. Applicants who have Organizational Status attained status as proven performers or An organizations status reflects its rising stars develop high status, in part, success in fulfilling the expectations of because they create a unique personal multiple stakeholders (employees, cus- brand that differentiates them in the

tomers, shareholders and job seekers). Status is a key signal of an organizations products, jobs, strategies, and potential for growth. Status plays a big role in shaping individuals perceptions of the organization, particularly when it comes to evaluating its attractiveness as a potential employer. High status can serve to legitimize an organizations selectivity, making it more likely that demanding hiring methods are accepted by job applicants. Many organizations strive to be recognized as a best employer (Fortunes 100 Best Companies to Work For), to leverage their status to attract the best talent. Demanding selection procedures such as cognitive ability tests may work to the advantage of high-status organizations, perpetuating the impression among applicants that they hire only the best. High status organizations that administer valid selection tests may overcome, or minimize, applicants negative perceptions of such tests. For instance, Google, Toyota, and General Electric (GE) are perceived by the people as high-status employers, and also are known for the diligence and rigor they exhibit in selecting new employees. Google is celebrated for its intense, multi-day, multi-interview hiring process, while GE is renowned for using rigorous, systematic staffing practices to build a competitive advantage. Hewlett-Packard (HP) required former CEO Carly Fiorina to take a 900-question test as part of the application procedure, despite her track record of success at Lucent Technologies. To many, Fiorinas credentials and high status made HPs hiring demands appear outlandish. Yet, she complied and even defended these tests: [HPs] executive team had gone through an extensive psychological testing process. The Board had decided that all CEO candidates should go through the same process, so I agreed, said Fiorina. High status organizations have a hiring advantage, and should use their status to embrace selection processes that are more rigorous, and valid.

labor market. Individuals with greater career notoriety are rewarded more and promoted faster, because they are perceived as being worthy of trust with minimal monitoring. Given the opportunities, responsibilities, and benefits that high-status individuals earn, they may expect to be treated with more deference during the hiring process. We define individual career status as your beliefs about your career accomplishments and status. People of high social status expect to be treated favorably in social/economic interactions. Although an individuals career status may be related to job level or number of promotions earned in a career, conceptually it is possible for individuals in middle management or lower-level jobs to perceive a high level of individual career status based on unique experiences and accomplishments. Applicants who have a strong track record of performance tend to believe that organizations should look to their accomplishments, rather than a cognitive ability test, to predict their performance. Theyre more likely to view cognitive ability tests as unjust. In fact, they may feel insulted by them. And unfavorable perceptions of justice and disrespect can trigger hot emotions such as anger, resentment, or moral outrage. Individuals perceptions of individual status may be related to whether or not they believe good job alternatives exist for people with their qualifications and abilities. Multiple job opportunities imply that an individual has desirable abilities that organizations seek. Individuals in lower-level jobs may perceive a high career status based on their experiences and accomplishments. Although they occupy lower-status positions in firms, younger workers often harbor aggrandized expectations for their careers and relationships. Their expectations of entitlement may be inflated, potentially limiting firms ability to use demanding selection practices. Leaders should attend to their reputation and brand when designing selection tools. High-status employers can boost their attractiveness to job candidates by implementing the most valid and reliable predictors of success. Employers of lesser stature can combine rigorous selection tools with brand-oriented communication that emphasizes their employment features and benefits most comparable to high-status firms. Hence they may tip the balance in their favor in the battle for high status talent. LE
John J. Sumanth is an Assistant Professor at the SMU Cox School of Business. Visit www.SMU.edu.

ACTION: Boost your status to hire the best.

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reputation building demands both operational excellence and compelling story telling. So, we set out to measure the ESG standing of 100 prominent companies, in a way that compares real with Its the leadership frontier. perceived performance. The ratings of actual performance were provided by CRD Analytics, supplier of data for the NASDAQ Sustainability Index. by James Cerruti For the perception ratings, we conducted our own survey to obtain the views of the core constituencies who are most HE CRITERIA THAT attentive to sustainability performance. define leadership The perception survey concentrated on have evolvedfrom excellence in R&D and new product devel- investment professionals, purchasing/ supply management professionals, and opment, to operational excellence, process graduating university students. reengineering, core competencies, and By comparing companies on these innovation. Today the framing of leadtwo dimensions, we identiership is shifting againto a concept fied several true Leaders that encompasses the best practices from all the antecedents: sustainability. who scored high in both This is not surprising, given the actual and perceived sustainintense competition for resources. ability performance. These The move towards sustainability is leadership teams excel in not simply the pursuit of a worthy cause, both the operational and nor mollifying the concerns of a particular communications dimensions of sustainability. Other NGO or shareholder group. Rather, it is recognition that those who can make effi- companies may excel on one dimension or the other, cient and responsible use of natural resources and human capital are more like- but not both (Promoters had ly to be the destination of choice for talent high perception/low scores, while and investment. It is a virtuous circle: Challengers trailed in perception but did well in performance). Laggards, the organization does well by doing good. More leaders recognize that organi- trailed on both dimensions. zational reputation, defined by both deeds and rhetoric, is a key measure of Five Shared Traits competitivenessand sustainability is Five traits were shared by Leaders: a key criteria for judging the quality of 1. Sustainability is an integral part of companies and their leaders among business strategy (not just a compliance investors, supply chain partners, and issue). Nestl has focused its strategy talented young people entering the around creating shared value, which workforce. These stakeholders are combines adherence to key operating influenced to a greater degree than principles and achievement of targeted customers, for whom purchase decisocietal improvements in the commusions are focused more on features, nities. Nestl found ways to collaborate benefits, and value than on a compawith local leaders to improve nutrition, nys long-term sustainability. water quality, and rural development. The concept of sustainability extends Success in such efforts is seen as crucial beyond environmental impact. Today, to Nestls future success and integral to sustainability assessments include business strategy and corporate reputation. environmental and social practices and 2. Responsibility is taken for the related governance (ESG). Accepted impact of internal operations, and of ESG benchmarks such as the Global associated entities such as supply chain Reporting Initiative (GRI) standards partners. ABB takes responsibility in are emerging to assist those who seek three areas: 1) raising environmental persustainability leadership. However, lead- formance/lowering impacts; 2) improving ers wonder where to focus investmanagement of health, safety, social, enviments or how to integrate sustainability ronmental and security risks; and 3) into strategy and brand communications. improving sustainability performance in its supply chain and acquired companies. Examining Sustainability The ABB Supplier Code of Conduct This year we conducted a global study (SCC) defines standards for companies wishing to sell to ABB and requires to shed light on how well firms at the suppliers to be responsible for the sustop of major industries are responding to the new leadership challenge. The tainability performance of subcontractors. premise is that best-practice corporate 3. GRI standards for reporting are im-

LEADERSHIP

SUSTAINABILITY

Sustainability

plemented, and the issues they highlight are understood by all stakeholders. Leaders excel at meeting these standards fully and transparently, even those that may not seem relevant. BMW has quality and thoroughness in sustainability reporting. Its top ranking for seven years running in the Dow Jones Sustainability Index is testimony to its leadership. The story is told eloquently, with reporting broken into three focus areas: product responsibility (97 percent product recyclability designed in); environmental protection (identifying measures for protection at early stages of investment), and society (road safety, education, and health). 4. Sustainability is integrated into the brand and client value propositions. IBM decided early to integrate sustainability into its brand and customer value propositions. It used its Smarter Planet theme to communicate how IBM helps clients enhance their performance in ways that foster sustainability. Recent IBM ads focus on outcomes and social benefit, rather than products and services. 5. Operational initiatives and related communications are focused on carefully selected themes tied to the core of the business. Complementary communications to key stakeholder groups are used to get the word out. Cisco Systems concentrates on demonstrating leadership on two issues, closely linked to its business and brand. Socially, Cisco is focused on educationhelping people worldwide develop and use IT skills. The environmental theme is Energy-wise helping customers reduce greenhouse emissions and create smart buildings.

Embrace Sustainability
Top companies have embraced sustainability reporting and practicesand not merely a reporting exercise, though full and transparent disclosure is essential. Rather, they have integrated sustainability themes into their corporate stories, mission, vision and values and in many cases, directly into their brand and customer value propositions. They know that sustainability encompasses social and governance factors as well as the environment. Companies that display leadership in this emerging field are positioned to excel. Theyre taking the high ground by building sustainability into the business and by informing others of their efforts. LE
James Cerruti is the author of the Sustainability Leadership Report; measuring perception vs. reality. To download the report, visit www.sustainabilityleadershipreport.com.

ACTION: Integrate your sustainability initiatives.

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 After the program, participants meet with their managers to discuss progress and next steps about how they coach. Throughout the year, participants continue to coach direct reports. Accountability for coaching should be created and How can you best develop them? access to follow-up materials ensured. Such material is designed to teach leadlow transformational leaders because of the ers how and when to give constructive, by Tom Daniel personal growth they experience in return, high-impact feedback. It builds the coachgrowth in their knowledge and skills, ing framework into a leaders responsiand in their sense of purpose. bilities and creates a culture of coaching. RESSURE ON LEADERS is high, as they are Managers who develop a coaching Putting Coach Model into Play challenged to deliver leadership style learn how to: engage more and be more. Leaders often must Organizations that adopt a leader as people in critical conversations; build fulfill dual roles as the boss and individtrust; help people find motivating work coach philosophy help leaders attack the people-related areas of their job. But, that aligns with both development and ual contributor while demonstrating expertise across a range of areas from from a practical perspective, how does organizational needs; help people select high-leverage development activities; it work? Who plays coach? Is it the administrative to technical to functional. and provide meaningful feedback. supervisor? Yes, but not exclusively. What suffers are soft responsibilities As coaching becomes a more active the people and relationship areas. All leaders should learn how to coach, part of a leaders management style, Its easy to get caught up in the tangi- because even project managers often ble areas, since thats where perforplay an important boss role. In fact, employee engagement and productivity mance measurement usually starts they are in an even stronger position to coach increase. A 2007 Bersin study found and ends. Plus there are emails to that organizations that are effective at than supervisors, since they interact open, meetings to attend, and docutraining managers to coach employees with individuals more regularly and ments to review. However, leaders who have more coachable moments that are have higher employee productivity, employnon-predictable, on-the-job times dont build true connections with their ee engagement and financial performance. where coaching is most effective. Also, organizations who rate thememployees wont understand what drives Because it is difficult to schedule or selves as good or excellent in coaching and motivates them. Without establishplan for a coachable moment, organizaing rapport, leaders cant give meanhave a higher business impact than ingful, useful feedback and coaching organizations with no coaching process. that change behaviors in positive ways. Four Coaching Principles Start thinking about leadership more broadly and consider helping your Many leaders dont know how to leaders become more transformational coach or how to start the development conversation. Many employees get by teaching them how to lead as coaches. defensive when receiving feedback, Leadership Maturity and thus leaders shy away from it. Yet we all know that feedback is critical to To understand how a leader as coach getting people to change and grow. A approach works, lets look at the different levels of leadership maturity. At tions should invest in coaching training coaching framework has four principles: the lowest level, leaders serve a trans- that promotes continuous insight and 1. Be a little pushy. Challenge your development. The training should be talent to be more and to have a greater actional influence role. An employee impact. If leaders have a positive reladoes something for the leader, and the practical, involve blended learning approaches, and take place over time. tionship with their employees, theyll employee receives a tangible item in appreciate the additional challenge. return (or, promise of something tangiThe core of a successful coaching ble). Transactional leadership tends to training program includes: 2. Carve out coaching time. Leaders be a command/control modelyou In a pre-work meeting, a participant will always have long to-do lists, and do this, and you will get that in return. meets with his or her manager (who, so they must make coaching a prioriMature forms of leadership use more ideally already is well versed in coach- tyblocking time every week to think abstract influence. At mid-levels of matu- ing) to confirm targeted results. An on- about ways they can proactively challenge and coach their staff and about rity, leaders rely more on relationships line coaching portal can be set up that what worked well and what didnt to influence others; at the highest levels includes overviews of the tools and from the past weekand how they will course content that will be presented. of maturity, we see transformational At an in-person training workshop, par- coach in the coming week. leaders who appeal to an employees values, not just his or her pocketbook. ticipants learn coaching techniques and 3. Identify coachable moments. At At this level, leaders interact and coach practice new skills. The workshop can times, individuals are more open to employees so powerfully that employ- also be broken up into two-hour events being coached. Learning when to coach is and spread over a time with on-the-job as important as how to coach. An examees choose to follow or invest in the assignments between training modules. ple might be the car ride back to the leader and his or her projects, ulti During the program, participants coach office following a visit with a frustrated mately creating highly engaged and more productive employees. The leader direct and indirect reports, applying client. Simply asking, what do you what they learn. Online tools and videos think worked and what will you do as coach clearly operates at a transfordifferently next time can drive great mational level, transforming the people can be used to provide ongoing supcoaching discussions. port for typical coaching challenges. around him or her. People choose to fol-

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4. Dont tell, ask. Effective coaches learn how to ask employees questions vs. simply advising or telling them how to do things. Knowledge workers depend on their thinking skills and a coaching approach that challenges them to think about their job in different ways can be a powerful influence tool. If they are challenged to generate alternative solutions, they learn to be problem solvers versus simply implementers of others ideas. Lets apply these four principles to a practical situation. When Jennifer messes up in a new business presentation, she feels terrible. While, Steve, her boss, is tempted to go over the failed meeting in detail with Jennifer, he doesnt. Instead Steve asks Jennifer insightful questions that allow Jennifer to talk about the situation and assess for herself what could be done better. We call this a development conversation. When Jennifer and Steve go into a future new business meeting, Steve should remind Jennifer of two things they learned last time. The process sparks real change and helps employees develop the skills they need to adjust behaviors and grow. Leader as coach models and frameworks provide far reaching benefits. First, a coached employee understands the growth and development obtained and sees how his or her value to the organization is increasing. Employees feel more important, are more confident in their skills and have higher job satisfaction. They also learn to find solutions to problems instead of first seeking help. Often they find a new found freedom to be more innovative. The employee benefits also impact the coach and the employer who see improved results and outcomes from the employees they are investing in. Typically the coach and employee have better alignment and thus improved productivity. It also helps the coach become more knowledgeable and insightful as a manager and improve his or her teams performance which increases the visibility of the coach. Organizations see improved engagement from staff going through the coaching and those providing the coaching. Companies thrive on continuous improvement, and it starts with developing employees through effective leadership coaching practices that help them step up to new roles and new challenges. Organizations can grow and improve only when their people resources grow and improve. LE
Tom Daniel, Ph.D., is SVP at PDI Ninth House. Visit www.pdinh.com.

COMPETENCY

COACHING

Managers into Coaches

Use five ways to transform them.
by Mike Noble

ACTION: Develop leader coaching competencies.

leaders, they must develop the ability to coach others. As John Wooden, Sports Illustrated Coach of the 20th Century, said: Knowledge is not enough to get desired results. You must have the more elusive ability to teach and to motivate. This defines a leader; if you cant teach and you cant motivate, you cant lead. Coaching is a core skill for any and all managers. Coaching and collaboration are the most effective ways for managers to lead. If managers arent skilled at coaching their people, they likely wont achieve sustainable long-term positive results. Coaching requires both skill and time. First, you need to understand what coaching is and why it is important. Coaching is the act of helping others to perform better. It may be focused on correcting poor performance, improving skills, or developing new skills. Good coaching by managers will accelerate the development of employees and lift their organizations to higher achievement. Not all managers coach, for one of three major reasons: 1) they dont see the value or importance of coaching; 2) they dont possess coaching skills; or 3) they lack the time. To overcome these barriers and transform managers into coaches, do five things: 1. Build the personal case for coaching. You cant force coaching on managers who dont see its relevance. To build the case, you need to address the whatsin-it-for-me element. When you point out that the strongest and most successful leaders are also excellent coaches, theyll want to become an effective coach. 2. Establish some firm expectations. Make it clear that coaching is a primary responsibility of managers and prerequisite to creating a coaching organization. If you dont establish firm expectations, you wont get desired results. Coaching should be a key element in your culture and part of every managers job. Coaching requires skill and time. Enable managers to develop their coaching skills and allocate time to learn and apply their skills. Make it a topic of discussion

OR MANAGERS TO BECOME

at every performance management evaluation, assignment, and promotion. 3. Teach coaching skills and put them to practice. Coaching does not necessarily come naturally to managers. In fact, before they become managers, people are generally rewarded for their skills and ability to get tasks done on their own or in small teams. Becoming a manager can represent a difficult shift in what managers do and how they allocate their time. Core coaching skillssuch as listening, questioning, observing, building rapport, constructive analysis and feedback, empathy, supportive encouragement and holding others accountableare all skills that can be enhanced or taught in various ways. Whether it is in workshops, mentoring relationships, or modeling strong coaches, managers can improve their coaching skillsand then put their skills to use. This means allocating time to practice these skills when coachable moments occurand creating coachable moments or situations. When you delegate tasks or responsibilities, you create a coaching opportunity. 4. Give a manager a coach. To transform managers into coaches, give them the chance to experience coaching first hand. Having a manager coached by another executive achieves two things: 1) it enables the manager to experience the benefits of coaching and become more committed to coaching as a method for developing others; and 2) it provides a model of how to provide coaching for others. If you dont have skilled coaches, consider hiring external coaches to work with your key managers. 5. Reward the best coaches with the best jobs. Managers who demonstrate the strongest coaching skills are likely to be the strongest performers. Placing these managers in key roles and crediting these assignments, at least in part, to their excellent coaching skills will send a strong message to others: coaching is a critical skill for all managers. Take these five steps to accelerate the transformation of managers into coaches and become a coaching organization. The benefits include enhanced collaboration and stronger performance. Usually, your strongest managers are also your strongest coaches. When managers are aware of these outcomes, theyll be motivated to begin their transformation.LE
Mike Noble is a Managing Partner at Camden Consulting Group, providing executive coaching and training services. Visit www.camdenconsulting.com.

ACTION: Turn your managers into coaches.

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LEADERSHIP

TRUST

Ethics, Trust & Transparency

Business, government, and case for voter concern.
beyond the ability to perform specific tasks. Understanding and embracing an ethical culture ensures that compliance is not a legal obligation, but a code of NE YEAR FROM THE moral behavior. 2012 Presidential election, voters clamor Obviously, leaders play a key role. Leaders are visible not only within the for responses to their frustrations. organization but within the communiFrom the Tea Party movement to the Occupy Wall Street protests, people are ty as well. As such, leaders must be disturbed that their concerns are being role models who others want to follow. Some people refer to this as the burden ignored, causing them to lose faith in government and business. Trust in of leadership while others see this as the government is at an all time low (only benefit of leadership. Boards and govern15 percent of us think that our govern- ing bodies must ensure that the leaders ment leaders do the right thing always they hire are clear about ethical behavor most of the time). Another poll shows iors. That means having a clear policy that public confidence in the U.S. bank- on compliance issues and a Zero ing system is at an all time low, (only Tolerance Policy to enforce standards. 35 percent of us say that we are confi- Leaders must continually reinforce the dent that our banking system is stable). message of ethical behavior and expecDallas business and government tations in speeches, in routine business leaders provided insight into these meetings and in personal conduct. issues in November at the Maguire Conference Center for Ethics & Public Responsibility with the Cox School of Business. The annual Edelman Trust Barometer study (www.edelman.com/trust) shows that three dynamics affect the trust factortransparency, engagement, and profit with purpose. Those groups that earned high trust also had accompanying benefits. The public tends to gravitate toward those organizations when choosing products to purchase, Since ethical behavior is important, or deciding where to invest. And, the there must be strong responses to abuses. public tends to give the organization Organizations should provide a mechthe benefit of the doubt when things anism for reporting violations and pay go wrong. Mathew Harrington, CEO attention to whistleblowers. Those who of Edelman, notes, When trust exists reveal unethical practices that others there is the ability to move forward, to ignore or conceal are at risk. The recent make progress. Conversely, distrust scandal at Penn State provides a tragic erodes confidence to invest in longexample of what happens when an term value creation, making our ecoorganization does not act to respond nomic malaise self-fulfilling. Leaders fully to allegations. If you encourage can be proactive in developing a group people to speak up when they sense that something is out of balance, then worthy of the publics trust. The first step in developing a trusted you must take charges seriously and treat those who speak up with the digorganization is to develop an ethical nity they deserve (not subject them to internal culture. Judy Nadler, Senior Fellow in Government Ethics at Santa recriminations or other forms of punishment). Kathleen Edmond, Chief Clara Universitys Markkula Center for Applied Ethics, noted, the respon- Ethics Officer for Best Buy, suggested sibility for an ethical organization rests that leaders need to quiet and prepare themselves to listen so that coworkers with each individual in the organization, not simply the leaders. One of can bring things to them to consider. the most important decisions an orga- Ensuring compliance with ethical stannization makes is who they hire and what dards is one vital act of leadership. It signals whether leaders truly believe the the organization expects from them

by Rita Kirk

values or merely give them lip service. Every organization has moments of crisis. Discuss them, prepare for them, and plan for such inevitabilities. To not so do, said Mike Boone, Founding Partner of Haynes and Boone, is an act of arrogance by leaders who think we are not vulnerable to such problems. Planning responses enables an organization to move swiftly and judiciously through an eventand may even help to prevent certain problems from arising. When the difficult times confront an organization, it is critical that procedures are followed to minimize the damage on the organization. Organizations do not usually get into trouble overnight. Even those with well-defined standards may find that they become diluted over time. Part of the planning process is to have clearly defined standards that everyone understands and then develop reinforcement messages that are heard loudly and often. Best Buys Kathleen Edmond noted: Compliance can be an effort; ethics is beyond compliance. Its how an organization expects its members to behave. The basic rule: Keep It Simple! The Roman Empire operated with laws recoded on just 12 tablets while the Generally Accepted Accounting Principles occupy three volumes with over 4,500 pages. You cant expect to write a rule for every conceivable situation, nor should that be your goal. Such rulesbased codes of conduct are invitations to find the loopholes rather than be accountable for good decision-making. Arthur Athens, Director of the Stockdale Center for Ethical Leadership at the U.S. Naval Academy, said: We cant anticipate future circumstances where our judgment is called into question. We can only prepare for those situations by daily reaffirming our values and applying them. Trust is a bedrock guiding principle. Trust is not a superficial veneer to be manipulated, rather it is a benefit to be earned, said Harrington. One way to do that is to learn to be transparent. Terry Smith, President and CEO of the Federal Home Loan Bank of Dallas, claims that for America to continue to be the home of the most dynamic and resilient financial system in the world, we must restore basic market confidence in the information that market participants require to make decisions. That can only be done if financial transparency is a driving force behind the activities of corporations, investors, market makers and every market participant. Current law requires that organizations make certain disclosures, but Allan Sloan, Senior Editor for Fortune, sees a
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distinction between transparency and disclosure: Disclosure is when you bury information in widely separated places in a 400-word document of small type. Transparency is when you tell people what they need to know in simple terms in readable type on the cover of a document or in the first few pages. Disclosure is a legal obligation. Transparency is an ethical obligation. Nowhere is transparency needed more than in the conduct of the publics business. Elected leaders who devote their time and effort to public service are prone to personal attack merely because they have chosen to enter politics. Don W. Fox, Acting Director of the U.S. Office of Government Ethics, stated that government protects us. As an example, he argued that citizens in this country rarely think of the safety of meals served at restaurants. Yet the actions of a few often taint the reputations of everyone in public office. John Allison, Distinguished Chair of Practice at Wake Forest Univ. and CEO of BB&T Corp., a large financial services holding company, affirmed that capitalism is a good thing and that making money honestly is honorable. Never be sorry for making a profit. BB&Ts success was built on core values that enabled it to ride out the financial crisis. Doug Levy, CEO of imc2, says: Capitalism lifts people from poverty, increases lifespan, and raises happiness. When business is practiced in a more conscious and purpose-centric way, it produces greater benefits for employees, customers, society and investors. The conference offered lessons to leaders who seek to build trusted organizations: Create an internal culture that emphasizes ethics and transparency rather than compliance and disclosure. This means hiring the right people, making them aware of the core values, and articulating the expectation that those values should govern employee actions. Do not punish them for adhering to core values or for raising awareness of situations where they may be compromised. Hold leaders accountable for upholding core values as role models. And put plans in place to handle the inevitable situations where people fall short. These steps will help you build trust capital. Trusted organizations benefit investors, customers, employees, and society. Even when things go wrong, stakeholders will reciprocate, giving trusted firms the benefit of the doubt. LE
Rita Kirk, Director, Cary M. Maguire Center for Ethics & Public Responsibility, SMU.

COMPETENCY

COACHING

Inclusive Coaching
Its now everyones business.
by Gregg Thompson

ACTION: Cultivate an ethical culture.

up your organization with one bold move? What courageous decision could create a culture of personal accountability and high performance? Make coaching everyones business! Nothing compares to coaching when it comes to helping people perform at their best and accelerate their careers. Coaching is focused on the individual, not on the organization and its processes. Even mediocre coaching can produce remarkable results. Individuals become energized (or re-energized) about their work, take full ownership of their performance and their careers, find and rejuvenate long-lost talents and make major shifts in their contribution levels. Speak to anyone who has greatly increased their performance, and I guarantee that youll find a coach involved. What would happen if everyone had a personal coach? The results would be astounding. However, since coaching is an expensive, timeintensive process, its impractical to provide everyone with an external coach. Many organizations are equipping their managers to be skilled coaches. The problem is that today, managers face many demands on their time. Even the most well-meaning and committed managers can only coach a portion of their team members. Why cant everyone be a coach? They can. Coaching is not the exclusive domain of senior leaders and external professionals. Everyone can coach. Every person can sit with other people and challenge them to lift their game, encourage them to see new possibilities, confront them with their own potential, affirm their many talents, and remind them of how great it feels to do extraordinary work. The problem is that most leaders still see coaching as advising others, providing feedback, teaching skills and solving problems. These managerial practices do not constitute coaching. When well-coached, people will solve their own problems, seize their own opportunities, and chart their own futures. How does this work? The process is

OW MIGHT YOU LIGHT

straightforward but doesnt come without investment on your part. You need to be involved every step of the way. Here are seven things do: 1. Encourage everyone to invite another employee to coach them. Anyone can coach anyone else. Yes, some wont get invited; their feelings will be hurt. These people should thank you. Since we need to earn the right to coach others, this is valuable, albeit painful, feedback. 2. Dive into the process yourself. Invite someone to coach you, and insist that all senior leaders do the same. 3. Anyone can coach anyone. A good coach is a good coach. Dont waste HRs time in the futile pursuit of good matches or chemistry. 4. Ask people to take on only one coaching assignment at a time. This ensures that each person receives the full attention of the coach and spreads the coaching load and opportunities. Nothing absolves leaders from being coach-like with all team members. 5. Provide these guidelines: Coaching pairs should meet in person or via telephone for 30 to 60 minutes (time for great coaching to happen) every two to three weeks (to keep the momentum going) for four to six months (enough time to develop new performance standards and create new habits). 6. At the end of coaching engagements, encourage people to invite a different member to coach them. Higher performance is always possible, and a good coach wont rest until it is found. 7. Equip everyone with the skills and approaches to coach at a high level. This should only take one or two days. Sadly, most coach training programs focus too much on interpersonal skills. Ensure your people participate in highly experiential training that provides them opportunities to practice real coaching and receive direct feedback. Ensure they are equipped to: ask questions that pierce through closely held assumptions and mental models; constructively confront unhelpful behaviors, practices, and attitudes; affirm strengths, talents, and abilities; and share fresh perspectives, no matter how radical. Most people, even top performers, are leaving their best at the door daily. Theyre not bringing their best talents and energy to their work. Help them do this. Give them a coach! LE
Gregg Thompson is a facilitator, coach, author, speaker and president of Bluepoint Leadership Development and its Leader as Coach Workshop. Visit www.bluepointleadership.com.

ACTION: Make coaching everyones business.

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ETHICS

CLIMATE

Ethical Work Climates

Consider four key design elements.
result from weak internal norms. But formal internal ethical controls may not fare much better than formal external controls in ensuring ethical N THE AFTERNOON of July 30, 2002, it action. Formal rules-based ethics programs was blistering hot in are not as effective as less formal valuesWashington, DC, with a relentless sun based programs in generating sustainable pushing temperatures to 97.8 degrees. ethical outcomes. A rules-based approach Earlier that day, President George W. focuses primarily on compliance issues: Bush turned up the heat on the manage- preventing, detecting, and punishing violations of rules. As a result, rulesment team of every major U.S. public based programs tend to motivate indicorporation by signing into law the Sarbanes Oxley Act (SOX), a set of sweep- viduals to simply avoid punishment. ing reforms and regulations aimed at In contrast, a values-based approach cleaning up corporate corruption and seeks to create and define organizationimproving corporate accountability al values and encourage employees to and ethics in order to restore investor hold and act upon ethical aspirations. confidence in corporate America. These programs seek to construct an environment where employees are SOX addresses the question of inencouraged to be aware of ethical dependent internal auditor functions; establishes punitive accountability for key executives, including financial and criminal consequences based on accuracy and ethical behavior; and provides detailed requirements on internal financial controls, and demands that the controls be tested and validated with little tolerance. SOX also addresses the ethics of top executives by requiring that a public company disclose whether they have adopted a code of ethics for executive officers and senior issues. Values-based programs try to financial officers, or why it has not. have employees care about ethics and SOX was hailed as a monumental shared values through words and constep forward in improving corporate sistent actions, rather than through fear accountability and ethics. However, of doing something wrong. not all reviews of SOX were positive, Convincing evidence backs up these nor were all results. Criticism emerged observations. Since 1999, the Ethics Rethat SOX had been adopted hastily, source Center (ERC) has conducted the without adequate consideration by a National Business Ethics Survey. Results Congress panicked about the possibility show that firms are implementing more that high-profile cases had weakened formal programs in response to external investor confidence and that in spite of regulatory pressures. However, manthe focus on ethics and accountability, agers and employees do not expect corporate misdeeds continued. positive outcomes of these programs to Some also question whether SOX is improve. And, informal issues of ethihaving the desired positive impact with cal climate exert an even stronger influindividual employees and investors. Clear- ence on outcomes than formal ethics and compliance programs. ly, creating and maintaining ethical organizations depends on more than E t h i c a l Wo r k C l i m a t e s external regulatory pressures and formal programs. Ethical organizational cliWork climates reveal employees perceptions of how things are done mates and cultures are needed as well. around here. They capture what it External regulation plays a vital role in enhancing public confidence in feels like to work therethe prevailing business, but formal regulation is insuffi- weather of the workplace. Climate cient. Indeed, most corporate misdeeds reflects employee perceptions of the

by Maribeth Kuenzi

policies, practices, and procedures that the organization rewards, supports, and expects. Employee perceptions of their work environment drive their attitudes and actions. Work climates are associated with employee satisfaction and commitment, absenteeism and turnover, theft, performance, customer satisfaction and ethics. Aligning the work climate with a firms strategies provides a powerful means for gaining competitive advantage. Enron serves as the poster child for the power of an unethical corporate environment. As Loren Steffy noted in the Houston Chronicle, Enron wasnt just Jeff Skilling. Nor, for that matter, was it just Ken Lay or Andrew Fastow or any of the others whose names are now so notoriously tainted by the scandal. It wasnt even just the hundred or so unindicted co-conspirators who drew prosecutorial scrutiny but were never charged with crimes. All of them were simply key ingredients in a far larger stew of ethical and moral failure. Enron was a laboratory of temptation, deception and hubrisa company where the fraud permeated the very culture of the place. It was encouraged. It was nurtured. It was rewarded.

Challenge for Managers

These climate types constitute a powerful force. The ethical climate has been linked to key outcomes, such as reduced unethical and political behavior, reduced deviance, improved employee workplace citizenship and improved managerial follow-through with ethics programs. Just as fostering ethical employees requires major managerial effort, fostering ethical climates also requires managerial attention. Managers can play an important role in ensuring that ethical work climates evolve in positive ways. They do so in two steps, utilizing both effective assessment techniques and appropriate training procedures. Few good survey tools exist to assess ethical climate across multiple dimensions, but the Ethical Climate Index (ECI), a 36-item index, provides the best measure of the ethical work climate. Once the ethical landscape has been assessed, a training program can be designed to meet the needs of the organization. For any training program to succeed, its purpose must be clear. Depending on the result of the assessment, the purpose of the training may be to: Increase the moral sensitivity of employees; educate them in forming moral judgments; enhance moral motivation; or assist employees in developw w w. L e a d e r E x c e l . c o m

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ing strong moral character. In designing, creating and implementing effective ethics training programs, you need to consider four elements: 1. Trainee characteristics. Managers seeking to improve ethics need to focus on the raw materials of any ethics initiative (individual employees), and consider these in planning the initiative. 2. Training design. The appropriate format must be developed, including discussions of moral dilemmas, personal reflection, experiential activities and behavior modeling (role play). 3. Transfer of trained skills. Develop ways trainees can apply the knowledge, skills and abilities provided by the training back on their jobs, and reinforce the things learned post-training. 4. Evaluation. Post-training opportunities should allow managers to assess and reward ethical performance.

LEADERSHIP

CONFIDENCE

Restore Confidence
Its the key to economic recovery.
by Bill Simon

years of war, you are ready to be a part of our renewal. Im confident in you. When I signed up to serve, I knew combat was a possibility. But for most of you, combat was a reality. You have seen your peers go on third, fourth, and fifth tours. Yet you still answered the call of duty. You are why I know well be okay. You can lead us to a better day.

AMERICA through our customers eyes. So, I have a unique perspective on how we get this country back on trackand the role military veterans can play. When I was 22 years old, a new ensign in the US Navy, I reported for duty on the USS Moosbrugger in Charleston, South Carolina. The captain was Don Dyer. I was nervous. Now, Captain Dyer was a salty old sea captain. When I presented him with Four Lessons Learned my orders, I was expecting a lecture. Here are four lessons learned: 1) for- Instead, he sat me down, looked me in the eye, and said: I trust you. Your mal ethical control systemsboth external and internalmatter; 2) infor- country is counting on you. While you mal ethical control systems like ethical might make mistakes, were all in this climate matter even more; 3) ethical cli- together. Now, go do your job. mate can be measured, and managed; What a feeling of confidence he gave and 4) participation is critical. mea feeling that has It is one thing to implement a set of stayed with me and has ethics initiatives aimed at improving been one of the enduring ethical climate. It is another to create a gifts from my service. That situation in which employees receive confidencein ourselves, the practical experience needed to in each other, in what we apply that training when it matters most. can all do togetheris what America needs now. In the end, its a question of leadership. Leaders serve as role models; in fact, the behavior of a supervisor can exert a State of the Countr y more powerful influence on ethical behavior On the last day of each than an employees own personal ethical val- month, around 11 p.m., a ues. Leaders set the stage for all things crowd starts to gather outside our stores. Young mothers and families ethical. They recognize ethical events as ethical dilemmas (moral sensitivity). start to shop. They fill their carts full of They make judgments as to the correct food and formula and diapers, waiting until checkout, until midnight, when course of action (moral judgment). their electronic food stamps hit their cards. They impart valuestheir own and those of the organizationto others The only reason they shop for food and (moral motivation). And, when they formula at midnight is to have somepossess adequate courage and convic- thing to feed their kids in the morning. tion, they provide a vital role model in Our customers are working hard for their families. But this economy is not following through on ethically correct working for them. They feel like their courses of action (moral character). In doing so, they create the ethical climate. leaders arent listening to them. We hear In matters of ethics, leadership mat- people say its a bad time for America. ters. As Joseph Gangloff, deputy direc- But our veterans have seen bad. tor of the U.S. Office of Government Our problems are not acts of God or Ethics, noted, An organization with warthey are man-made. And we can leadership that supports its ethics pro- solve them. Who do I mean by We? I gram is likely to be more transparent, mean We, the people. I mean We, the accountable, and efficient. LE business community, and I mean We, Walmart. I also mean: We, the veterans. Maribeth Kuenzi is an Assistant Professor at the SMU Cox Everyone is hoping the cavalry will ride School of Business. Visit www.SMU.edu. in and save the day. But you dont need to waityou are the cavalry! After 10 ACTION: Create an ethical climate at work.
E VIEW

All About Jobs

This work of economic renewal is all about jobs. We act like job creation is a big mystery. But we know how to create jobsyou hire someone. People with capital employ others in a productive way. Now is not the time to retreatit is time to tackle our problems head on. I run Walmart U.S.founded by a veteranand were tackling Americas job problem. Walmart opened more than 100 new stores this year, and hired more than 15,000 people. And we create more jobs by buying local products. Weve announced new growth plans for next yearmore stores, more jobs. Im proud of the jobs we create. These are good jobs and good careers. Inside our stores every day, the American dream comes to life. Last year, we promoted more than 140,000 hourly associates. More than 200,000 of Walmarts employees have been with the company more than 10 years. And if you work for Walmart and your spouse in the military gets transferred, we guarantee you a job in your new location! We hire veterans. They have a record of performance under pressure; theyre educated and technologically savvy; theyre quick learners and team players. We dont hire them because they are great retailers. We hire them because they are proven leaders. Today, many are store managers, responsible for 400 associates and a multi-million dollar business. They are leaders with discipline, training, sense of purpose, and passion for service. Were not waiting on government or anyone else. Frankly, if your business plan involves waiting on other peopleI wish you all the best. As leaders, we can promote American exports, because more exports mean more jobs; we can reform our corporate tax code to broaden the tax base, lower the rate, and unleash job creators; and work together to bring back manufacturing. LE
Bill Simon is CEO of Walmart US. This article is adapted from his speech at the American Legion National Convention, August 31, 2011. Visit careerswithamission.com.

ACTION: Restore confidence in your company.

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ership for moving the total game along. When this new mind-set permeates an organization, a sense of ownership begins to take hold. Managers become emboldThey have a unique mindset. ened and begin to think critically about feedback from customers and subordinates. They take responsibility by Howard M. Guttman for their function, and for the performance of the entire organization. Not every player moves to high-performance straightaway. Some are too conEAMS ARE THE BUILDing blocks of orga- cerned with individual contributions nizations. In tightly and how they can vault their career to knit, high-performance teams, indifocus on the total team. In these cases, viduals work as one unit to improve managers must give direct, unalloyed their function, and the organizations feedback to holdouts on their attiperformance. That requires change in tudes. If they are capable of achieving high-performance, theyll be receptive how players view themselves, their to frank direction and guidance leaders, and organization. This new toward this new way of thinking. mind-set is built on three pillars: 1. Think like a director. Members No matter how dedicated an individual of great teams think like members of or team is to the principles and habits of a board of directors. They keep their high performance, there is always the daneye on the overarching goal: the ger of backsliding into bad behaviors and results the company needs to achieve old patterns. On a great team, siloed to stay on top of the competition. thinking is out. In doing business, Theyre interested in the health of the some conflict is bound to arise, even company first, before any one area or on a great team. When it does, it is function. Knowing that time is dealt with quickly and directly. money, they put a premium on swift, 3. Embrace accountability. At the end effective action. They are committed of a quarter, a big financial shortfall in to maximizing ROI with one business unit caught the every decision. Issues get management team of a foodhandled in the moment and service company off guard. dont get tabled. People dont The CEO learned that the let issues go unresolved. If head of the unit had been progress is being impeded, if aware of the problems for two leaders are letting somemonths but had not taken thing fester, a team member any action. Two of his team will address the issue. When members had also known this hyper-efficient mind-set what was going on, but they cascades down to second-tier remained silent as the situamanagement, energy kicks into overtion spiraled out of controla classic drive. Every player steps up and case of the its not my job syndrome. begins taking action and implementLeaders who embrace the principles of ing plans to stay ahead of changes in high-performance horizontal teams reorient the market and customer demands. their thinking and assume accountability for their performance, and for that 2. Put team first, function second. Like a board of directors, members of of their peers, leader, and organization. high-performing teams are focused Each of these pillars represents a step on business results rather than being in the direction of high-performance emotionally invested in any single decision-making and problem-solving. business unit or function. They are The goal is a transparent horizontal orgateam members first, functional reps nization, where every team member is a second. Such players dont look for stakeholder who holds peers accountable the biggest budget handout, unless a and expects his colleagues to do the solid business case can be made for same, no matter their title. Building the resources. They contribute their exceptional teams requires patience technical expertise across functions when and perseverance. But theyll transform the DNA of an organization for the it is needed. And they do not hesitate to better, with proof on the bottom line.LE weigh in on the performance of other functions when they sense problems. Howard M. Guttman is principal of Guttman Development One CEO who applied the high-per- Strategies and author of Coach Yourself to Win: 7 Steps to formance team model noted: People still Breakthrough Performance on the Job and in Your Life oversee their functions, but theyre aware (McGraw-Hill). Visit www.coachyourselftowin.com. of the interdependencies and take ownACTION: Build performance on these pillars.

PERFORMANCE

TEAM

COMPETENCY

JUDGMENT

Great Team Players

Leader Judgment
It can determine success or failure.

by Noel Tichy and Warren Bennis

AKING JUDGMENT CALLS IS THE

essence of leadership. Long-term success (sustainability) is the sole marker of good judgment. Good leaders sort the important from the trivial, and focus on getting the important calls right. They make the tough calls, and see to their execution. They manage relationships with key constituencies, and align and mobilize team members. Each leader makes thousands of judgment callssome trivial, some monumental. The measure of their success is the sum of all of their judgment calls. How many good ones did we make? Did we make good ones about the things that really mattered? Our judgment determines the quality of our lives. In leadership, the importance and consequences of judgment calls are magnified exponentially by their increasing impact on the lives of others (the cumulative effect of leaders judgment calls can determines team success or failure). In the face of ambiguity, uncertainty, conflicting demands, and time pressure, leaders must make decisions and take effective actions to assure the survival and success of their organizations. This is how leaders add valuethey exercise 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, little else matters; without it, nothing else matters. Take any leader, a U.S. president, a Fortune 500 CEO, a big-league coach, wartime general. Chances are you remember them for their best or worst judgment call. Leadership is, at its marrow, the chronicle of judgment calls; this is the leaders biography. 2. In decision making, the only thing that counts is winning or losing: the results. Long-term success is the sole marker of good judgment. Its not The operation was a success, but the patient died. Its not He acted brilliantly, but the outcome was poor. Judgment is successful only when the outcome achieves
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the espoused goals. Enthusiasm, good intentions, and hard work may help, but without good results, they dont count. Peter Drucker got it right in 1954 in The Practice of Management when he wrote: The ultimate test of management is business performance. Achievement, rather than knowledge, remains, of necessity, both proof and aim. 3. The judgment calls that leaders make cant be viewed as single, pointin-time events. For a leader, the moment of making the call comes in the middle of a process that begins with the leader recognizing the need for a judgment and continues through successful execution. A leader has good judgment when he or she repeatedly makes judgment calls that turn out well because the leader has mastered a process 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 she makes the decision that helps it turn out to be the right one? What must the leader oversee to make sure the call produces the desired results? Domain. The elements of the process, the attention that must be paid to each, and the time over which the judgment unfolds varies with its subject matter. The most important calls are found in three critical domains: judgments about people, judgments about strategy, and judgments in time of crisis. Constituencies. Leaders make the calls, but they do it in relation to the world around them. A leaders relationships are the sources of information needed to make good calls. They also provide the means for executing calls, interact with various constituencies, and manage the relationships to make good calls and help others in the firm to make them. 4. To make good calls, leaders need four types of knowledge: Self-knowledge. How do you learn? Do you face reality? Do you watch and listen? Are you willing to improve? Social network knowledge. Do you know how to build a strong team and teach your team to make better judgments? Organizational knowledge. Do you know how to draw on the strengths of others in the organization? Can you create broad-scale processes for teaching them to make smart judgments? Contextual knowledge. Do you know how to create smart interactions with other 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.

COMPETENCY

CONFLICT

Third Alternative
It can bring down the walls.
by Stephen R. Covey

ACTION: Cultivate these four types of knowledge.

when walls are falling. We are seeing the rise of the borderless economy. With technology, we are seeing the end of the artificial walls that imprison the human mind. But the most challenging walls remain: the walls between people. These walls are mostly invisible, but they form barriers to trust, communication, and the incalculable cost to organizations when sales and marketing dont get along, when there is mistrust between labor and management, or when people feel they cant be open and honest, resulting in office politics, backbiting, and micromanaging. The key to tearing down these walls is the internal strength to think we, not me. When we listen to understand, when we deeply believe in 3rd Alternativesthat there is truly something better just waiting to be created marvelous things happen. The workplace is full of walls: between teams, departments, divisions, and functions; between creative types and accountants, between executives and workers, between organizations and customers. Its only natural to want to defend our walls, and thats why we have conflict. The defensive 2Alternative mind-set is the problem. An organization is full of conflict because it has a job to do, and creative, thoughtful, talented people have different insights into how to do that job. Those insights may be contradictory, baffling, quirky, and inconsistent; they can also be useful or even brilliant. Some organizations tolerate conflict; some are conflict-averse; some are abusive. But most managers try to manage conflict. They try to avert, control and resolve conflict because they live by the premise that conflict is to be avoided if possible, controlled if unavoidable, and resolved quickly so harmony can reign again. The problem is not that conflict exists, but that we have the wrong paradigm about it. The 2-Alternative response to conflict is fight or flight, while the synergistic response is welcome, delight,

E LIVE IN A TIME

engagement, and discovery. If youre a 3rd Alternative leader, you look for solutions that provide people with a huge emotional payoff and create for the firm new, exponential value. Most leaders treat a conflict as a transaction. Its about dividing up the pie. You can either accommodate or confront your opponent. You can give away the pie or you can fight over it, and there are techniques and tricks to gain an advantage. But divide it as you willin the end, its the same pie. By contrast, the 3rd Alternative is to transform the situation. Its about making a new pie thats bigger and better perhaps exponentially bigger and better. Where conflict resolution is transactional, the 3rd Alternative is transformational. When you are caught up in a conflict at work, you tend to fall into the defensive mind-set. The natural, unthinking response to a challenge is to fight or flee. This is what animals do out of instinct; they have only the 2 Alternatives. But mature human beings can choose a 3rd Alternative. Remember the first paradigm of synergy: I See Myself. I have the power to stand outside myself and think about my thoughts and feelings. I can examine my own motives: Why am I caught up in this? Am I being egocentric? Do I need attention or affirmation? Do I feel my status is being threatened? Or am I genuinely concerned about this issue? If Im sure of my own self-worth, if I feel confident about my own contribution and capability, I dont need to defend myself against you. I can express myself candidly to you. But I also need to remember the second paradigm of synergy: I See You. That means I have profound respect for you. I value your ideas, experience, perspective, and feelings. So, I practice the third paradigm of synergy: I Seek You Out. Im fascinated not threatenedby the gap between us. You defuse negative energy fast when say, You see things differently. I need to listen to you. And mean it. If you practice these paradigms, youll arrive at a 3rd Alternative that makes the conflict irrelevant: Lets look for something better than either of us has thought of. Everybody wins, everybody is energized. Often you wont even remember what the fight was about. LE
Stephen R. Covey is author of The 3rd Alternative. Visit www.ThridAlternative.com.

ACTION: Practice the 3rd Alternative response.

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out, seeing products and market opportunities as vehicles for building a great company, not the other way around. As products, technologies, and markets blast through their life cycles, clockbuilding styles of leadership will become Focus on timeless principles. even more important. 2. Build your company around a core ideology. The visionary company was guided more by a core ideologycore by Jim Collins values and a sense of purpose beyond just making money. A deeply held core N THIS ERA OF DRAMAT- ideology gives a company both a strong ic change, were hit sense of identity and a thread of continuity from all sides with lop- that holds the organization together in sided perspectives that urge us to hold the face of change. We found an almost religious fervor in visionary companies. nothing sacred, to re-engineer and dynamite everything, to fight chaos with chaos, 3Ms dedication to innovation, P&Gs commitment to product excellence, to battle a crazy world with total, unfetNordstroms ideal of heroic customer tered craziness. Everybody knows that the transformations facing ussocial, service, HPs belief in respect for the individualthose were sacred tenets, political, technological, economic render obsolete the lessons of the past. to be pursued zealously and preserved as a guiding force for generations. Well, I submit that everybody is wrong. The real question is, what is 3. Build a cult-like culture. Architects the proper response to change? We of visionary companies dont just trust certainly need new and improved in good intentions or values statements; business practices and organizational they build cult-like cultures around their forms, but in a turbulent era, attention core ideologies. Walt Disney created an to timeless fundamentals is even more important than it is in stable times. To identify those timeless fundamentals, Jerry Porras studied the founding, growth, and development of exceptional companies that have stood the test of time. By studying companies that have prospered over the long term, we were able to uncover six timeless fundamentals that enable organizations to endure and thrive. 1. Make the company itself the ulti- entire language to reinforce his compamate productbe a clock builder, not a nys ideology. Disneyland employees time teller. Imagine you met a remark- are cast members. Customers are guests. able person who could look at the sun Jobs are parts in a performance. Disney or the stars and, amazingly, state the required that all new employees go exact time and date. Wouldnt it be through a Disney Traditions orientation even more amazing if, instead of tellcourse, in which they learn the compaing the time, that person built a clock nys business is to make people happy. that could tell the time forever, even 4. Homegrow your management. We after he or she were dead and gone? found only four cases in our visionary Having a great idea or being a charismat- companies in which an outsider was ic visionary leader is time telling; building hired as chief executiveand that in a company that can prosper far beyond only 2 of the 18 companies! In contrast, our less successful comparison compathe tenure of any leader and through multiple product life cycles is clock build- nies were six times more likely to go outing. Those who build visionary companies side for a CEO to stimulate change and tend to be clock builders. Their primary progress. As great companies grow up, accomplishment is not the implemen- we see continuity and order in managetation of a great idea, the expression of ment tenure and succession. Insiders a charismatic personality, or the accu- preserve the core values, understandmulation of wealthit is the company ing them on a gut level in a way that itself and what it stands for. outsiders usually cannot. Yet insiders Shifting from time telling (being a can also be change agents, building on great visionary) to clock building (creat- the core values while moving the coming a great organization) requires turn- pany in exciting new directions. Bob ing the world upside down and inside Galvin spent years learning from his

PERFORMANCE

SUSTAINABILITY

Building to Last

father, Paul Galvin, founder of Motorola, before becoming CEO. Bob Galvin then kept Motorolas core ideology intact and simultaneously revolutionized the company. At the moment he began that revolution, Bob Galvin also began succession planning for the next generation of leadershipa full quarter of a century before he would pass the reins to maintain a lineage of homegrown leaders to preserve Motorolas core values. At our comparison companies, we frequently saw management gaps often due to egocentric leaders who simply couldnt conceive of the organization without themselves at the helm. 5. Stimulate progress through BHAGs, experimentation, and continuous improvement. To build a visionary company, you need to counterbalance its fixed core ideology with a relentless drive for progress. While core ideology provides continuity, stability, and cohesion, the drive for progress promotes change, improvement, innovation, and renewal. One way to bring the drive for progress to life is through BHAGs (Big Hairy Audacious Goals). The point is not to find the right BHAGs but to create BHAGs so clear, compelling, and imaginative that they fuel progress. A second way is to create an environment that encourages people to experiment and learnto try a lot of stuff and keep what works. In a visionary company, continuous improvement is a way of life, not a management fad. The critical question is not How can we do well? or How can we meet the competition? but How can we do better tomorrow than we did today? The challenge is to build for the long term while doing well today. 6. Embrace the genius of the and. Clock-build your company so that it preserves a passionately held core ideology and simultaneously stimulates progress in everything but that ideology. Preserve the core and stimulate progress. A truly visionary company embraces both ends of a continuum: continuity and change, conservatism and progressiveness, stability and revolution, predictability and chaos, heritage and renewal, fundamentals and craziness. And, and, and. Great companies of the 21st century will change within the context of their core ideologies while also adhering to a few timeless fundamentals. By being clear about their core valves and guiding purposeabout what should not changecompanies can feel liberated to 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.

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