The Success Formula

Praise for The Success Formula
Andrew Kakabadses book offers unique insights and practical

suggestions. Success, particularly in turbulent and unpredictable
environments, is driven by value and decisions anchored to value.
A recent parliamentary commission on future of management
identified people, purpose, and potential as drivers of success. This
book offers practical suggestions in all three areas.
Professor Abby Ghobadian, Head of School of Leadership, Organisations
and Behaviour, Henley Business School
In front of the hard leaders are the smart leaders. A world filled with
smart leaders.
Yvon Pesqueux, Professor, Conservatoire National des
Arts et Mtiers, Paris, France
Understanding what makes a successful organisation is vital in
todays fast changing environment The Success Formula explores the
relationship between, values, evidence, strategy and engagement.
Lesley King-Lewis, CEO, Windsor Leadership
Finally we have a book which recognizes that organizations cannot
achieve genuine sustainability unless social value is given equal
weighting to shareholder, other stakeholder and financial value.
If there is a strong values base, diversity of thinking and effective
governance, organizations can build long-lasting success.
Simon Osborne FCIS, Chief Executive ICSA
This book contains a multitude of insights concerning success that

Andrew has derived from interviews with senior managers from over a
100 organizations in 14 countries. It provides much useful advice as to
how to recognize successful organizations and how to determine what
is required to make success a reality.
Dr Chris Pierce, CEO, Global Governance Services Ltd., London
Kakabadses extensive global research shows how few top companies
have a proper engagement with their stakeholders and his evidence
reveals the great and sustainable success arise from so doing. A must
read for the C suite and the Board.
John Board, Dean of Henley Business School
Once again, Dr Kakabadses in depth research draws out governance
and dynamic governance insights, helping us to drive value in our
companies.
Yasmin Allen BCom, FAICD and Company Director, IAG,
Cochlear and Santos Ltd
The evidence-based account, and unparalleled access, of Professor
Kakabadse cuts like a knife to the very heart of this complex and
frequently misunderstood subject. This book is a must read for anybody
attempting to come to terms with organizational success - or failure.
Dr Ian Richardson, Director of Executive Education, Stockholm Business
School, Stockholm University
I read The Success Formula with great interest, and recommend it to
any business manager who seeks to ensure the health and continuity
of the enterprise he/she leads. Andrew Kakabadses guidelines in this
book strike me as convincing and eminently practical.
Andr van Heemstra, Former member of the board of Unilever
This book is about leadership, about sustaining vision and values to
deliver consistent quality, about the humility to respect the team and
the intellectual rigor to challenge its certainties. This is a manual on
how values generate value.
Dr. Ilia Roubanis, Athens
The Success Formula is a refreshing read for those leaders committed to

employee engagement and transformational results. It underlines the
role of the leader in building alignment and delivering results based
on trust, authenticity and a clear Organisational purpose.
John Pollaers, Chairman of the Australian Advanced Manufacturing Council
and Former CEO of Fosters Group and Pacific Brands
There a few books which combine such outstanding academic
knowledge and real world experience on leadership as this one.
Government and business leaders in Europe should use it when
preparing for the challenge to bring back economic growth and social
progress.
Dr Stefan Schepers, Secretary General of the independent tripartite High Level
Group on Innovation Policy Management (20122014)
Andrew and David have produced seriously worthwhile insights and
a global perspective on success. They focus on reality coupled with
sound delivery processes as a basis for successful decisions and thats
just the beginning!
Peter Jollie, Director, Reliance Rail
Kakabadse has produced yet another outstanding work, cutting
through the complexity of leadership to the heart of the issue to
provide an accessible and actionable formula for success.
Robert Galavan, Professor of Strategic Management,
National University of Ireland Maynooth
The Success Formula
The Success Formula

How smart leaders deliver
outstanding value
Andrew Kakabadse
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Andrew Kakabadse, 2015
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Contents
About the author
xi
Acknowledgmentsxiii
List of figures
xix
Forewordxxi
Prefacexxiii
Introductionxxv
1 Understanding value
2 Diversity of thinking
23
3 Discipline 1Evidence
43
4 Discipline 2Mission
61
5 Discipline 3Alignment
75
6 Discipline 4Engagement
95
7 Discipline 5Leadership
113
8 Discipline 6Governance
131
9 Discipline 7Wisdom
151
10 Key questions
177
Notes183
Index187
About the author

Andrew Kakabadse is professor of governance and strategic leadership at Henley Business School, UK, and emeritus professor at Cranfield
School of Management. He teaches and consults in corporations and
governments throughout the world. His research covers boards, top
teams, governments, and policy design. Andrew has published fortytwo books, over 240 articles, and eighteen monographs. His books
include Leading the Board (coauthored with Nada Kakabadse), Bilderberg
People (coauthored with Ian Richardson and Nada Kakabadse), and
How to Make Boards Work which was co-edited by Lutgart Van den Berghe.
In 2011 and 2013, he was named in the Thinkers50 ranking of the
worlds top management thinkers.
More information can be found at Andrews website: http://www.
kakabadse.com.
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Acknowledgments
I would like to acknowledge with deep gratitude the fantastic inputs and
insights of all those who spared time to be interviewed. Thank you to
Paul Achleitner, Chairman, Supervisory Board, Deutsche Bank,
Germany
Achal Agarwal, President, Asia Pacific, Kimberly-Clark, Singapore
Michael Andrew, Global Chairman and CEO, KPMG, Hong Kong
Ilana Atlas, Director, Coca Cola Amatil, and portfolio NED,
Australia
Gihan Attapatu, President, Ball Asia Pacific, Singapore
Jaspal Bindra, Group Executive Director and Chief Executive Officer
Asia, Standard Chartered Bank, Singapore
Ian Blackburne, Chairman, Aristocrat, Australia
Peter Bodin, Chairman, Grant Thornton International, Sweden
Ken Borda, Chairman, Santos, Australia, and Chairman, Aviva Asia,
Hong Kong
Graham Bradley, Chairman, Stockland Corporation, and portfolio
NED, Australia
Alec Brennan, Chairman, EMECO Holdings Limited, Australia
Berndt Brunow, Chairman, Finnish Food and Drink Industries
Federation, and Fazer Group, Finland
Stephen Chipman, CEO, Grant Thornton, LLP, Member firm of
Grant Thornton International Ltd, USA
David Cunningham, President, Asia Pacific, Federal Express,
Singapore
Georges Dabaghi, General Manager, Middle East and CIS countries,
Vubiquiti, UAE
Lord Geoffrey Dear, House of Lords, UK
Bob Dudley, Group CEO, BP, UK
Doug Elix, Chairman, Advance Global Advisory Council, Australia,
and retired Senior Vice President, Group Executive Sales and
Distribution, IBM, USA
Jeff Fettig, Chairman and CEO, Whirlpool, USA
xiv Acknowledgments
Mark Gainsborough, Executive Vice President, Global Commercial

Business, Royal Dutch Shell, Singapore
Stephan Gerlich, Chairman, Bayer Group, Mexico
Chris Gibson-Smith, Chairman, London Stock Exchange, and
Partnership, UK
Rickard Gustafson, CEO, SAS Airlines, Sweden
Stig Gustavsson, Vice Chairman, Konecranes, Sweden
Diane Grady, Director, Macquarie Group, and portfolio NED,
Australia
Russell Higgins, Director, Telstra, and portfolio NED, Australia
Sarah Hillier, Team Manager, Northamptonshire County Council, UK
Jeremy Hunter, President, Henkel Adhesive Technologies, India
Belinda Hutchinson, Director AGL, and portfolio NED, Australia
Mike Jeans, Independent NED (Deputy Chairman), Gemserv, UK
Gunender Kapur, CEO and Managing Director, TPG Wholesale
Private Ltd, India
Graham Kraehe, Chairman, BlueScope Steel, Australia
Sanjiv Lamba, Member of the Executive Board, The Linde Group AG,
Germany
Ronnie Leten, CEO, Atlas Copco, Sweden
Rod Leaver, CEO, Lend Lease, Asia Region, Singapore
Lionel Lim, CEO, CA, Asia Pacific, Singapore
Catherine Livingstone, Chairman, Telstra, and portfolio NED,
Australia
Kevin Lobo, President & CEO, Stryker Corporation, USA
Dave Mackay, Director, Woolworths, Australia, and retired President
& CEO, Kellogg Worldwide, USA
Vadim Makov, Chairman, OMZ Group, Russia
Charlie Mayfield, Chairman, John Lewis Partnership, UK
Alexey Marey, CEO, Alfa Bank, Russia
Trevor Matthews, Chairman Financial Skills Council, and portfolio
NED, Australia
Kevin McCann, Chairman, Macquarie Group, and Origin Energy
Ltd, Australia
Paul McClintock, Chairman, Myer Holdings Limited, Australia
Darshan Mehta, President & CEO, Reliance Brands, Ltd, India
Bruce Morgan, Director, Origin Energy Ltd, and portfolio NED,
Australia
Acknowledgments xv
John Neill, Chairman and Group Chief Executive, Unipart Group, UK

Helen Nugent, Chairman, Funds SA and portfolio NED, Australia
Ren Obermann, CEO, Deutsche Telecom, Germany
Michael Olosky, President, Henkel, Asia Pacific, Singapore
Sir John Parker, Chairman, Anglo American, UK
Jonas Persson, President APAC, Assa Abloy, Asia Pacific, Hong Kong
Madhabi Puri Buch, Director, Agora Advisory, and Greater Pacific
Capital, Singapore
Ed Rapp, President, Construction Industries, Caterpillar, Singapore
Monika Ribar, former CEO, Panalpina Group, Switzerland and portfolio NED.
Diane de Saint Victor, General Counsel & Board Secretary, ABB,
NED, Barclays Bank, Switzerland
Ulf Mark Schneider, CEO, Fresenius Group, Germany
Steve Sargent, CEO, GE Australia & New Zealand, Australia
Nitin Seth, Managing Director and Country Head, India, Fidelity
Worldwide Investment
Ranjit Shahani, President, Novartis Group, India
N Sivaraman, Whole-Time Director, L&T Finance Holdings Limited,
India
Sergey Soldatenkov, Chairman of Board of Directors, Megafon, Russia
Ajay Srinivasan, CEO, Financial Services, Aditya Birla Group, India
Sam Su, Chairman and CEO, Yum! Brands, China
Rajesh Sud, Managing Director and CEO, Max Life Insurance, India
Ashu Suyash, CEO, L&T Investment Management Limited, India
Robert Swannell, Chairman, Marks and Spencer, UK
Kim Taylor, Group Chairman, Asia Pacific, Johnson & Johnson,
Singapore
Shane Tedjarati, President and CEO, Honeywell Global, High Growth
Regions, Singapore
Michael Treschow, Chairman, Unilever, Sweden
Arvind Uppal, Regional President, Asia South, Whirlpool, India
Rajiv Verma, Group CEO, HT Media Ltd, India
Petteri Walldn, Chairman, Nokian Tyres, Finland
Vladimir Yakunin, President, RZD (Russian Railways), Russia
The designations and organization of each interviewee are as offered at

the time of interview. Numerous respondents now hold different
positions in different enterprises.
xvi Acknowledgments
Thank you also to all who have made this book possible.
My heartfelt gratitude goes to Stuart Crainer and Des Dearlove,
outstanding editors and accomplished authors in their own right. You
have really brought this book to life.
My deepest thanks go to my wife, Professor Nada Kakabadse, and
Madeline Fleure, who patiently and with good humor prepared numerous drafts.
Very special thanks to my Heidrick & Struggles colleagues who have
given so generously of their time to make this project happen.
My thanks to the partners and staff of Heidrick & Struggles, who
arranged the interviews and discussions with top executives worldwide
and developed and coordinated the global surveys.
Thank you to
Torrey Foster, Bill Matthews, and Randall Thorne in America
Vicki Hickson, Russell King, Will Moynahan, Andrew Myers, Anabelle
Parsons, and Dave Tullett in the United Kingdom
Tuomo Salonen in Finland
Alain Deniau in France
Christine Stimpel in Germany
Elise Andstrm and Carina Nordgren in Sweden
Christina Atchison, Anna Knuckey, and Thomas Liddle in Australia
Yao Li and Linda Zhang in China
Karen Fifer, Robert Knight, Karen Lau, Richard Meiklejohn, Harry
ONeill, Seth Peterson, and Lily Siu in Hong Kong
Rajiv Inamdar, Neha Jain, Arun Das Mahapatra, Gauri Padmanabhan,
and Puneet Pratap Singh in India and
Stafford Bagot, Karen Choy-Xavier, Charles Moore, Hamish Shaw,
Frazer Wilson, and Alex Yew in Singapore
Acknowledgments xvii
In addition, there are my three Heidrick & Struggles colleagues without

whom this project would never have taken off.
Peter Lever in London championed and supported this project from
the start with his initial thoughts on engagement and alignment. Thank
you, Peter.
My deepest gratitude goes to Steve Mullinjer in Shanghai whose
thoughts on cultural diversity brought an exciting and new dimension
to the original thesis. His support and thoughtful guidance has not
only made this study possible but has enriched it with new insights.
Finally, I wish to convey a very special thank you to David Pumphrey in
Sydney for his facilitation, perseverance, and persuasion in making this
project happen. He guided me through the study and through the writing of the manuscript and ensured that the process ran smoothly. I and
this book have benefited considerably from his generous counsel.
As you can see, this book has been made possible by an extraordinary
level of team work. From those who gave their time for interviews, to
those who organized one meeting after another, to those who managed
the surveys, and to those who were part of the development of the
manuscript, I am grateful for all you have done.
Andrew Kakabadse
List of figures
Figure 2.1 Diversity
40
Figure 6.1 Quality of relationships
100
Figure 6.2 Organizational performance qualities
109
Figure 6.3 Impact of handling awkward or sensitive

discussions at an earlier stage
110
Figure 8.1 Enterprise fault lines
143
Figure 8.2 Input into the development of the

corporate strategy
146
Figure 8.3 Average number of meetings per annum
147
Figure 8.4 Shared view regarding the criteria for

appointments to the Board
148
Figure 8.5 Shared view regarding the criteria for

the appointments to the Executives/
Management Team
148
Figure 9.1 Those involved in determining the strategic

direction of the organization
174
Foreword
Robert Swannell, Chairman, Marks and Spencer, UK
What matters in business?
First, results. Executives and their organizations have to deliver performances that satisfy all the stakeholders involved.
Second, how you behave. What kind of manager and leader are you?
What kind of culture do you help create and nurture in the organization? How do you treat people you work with?
It is tempting, especially reading the media, to regard results as the
be-all and end-all of corporate life and to begin to believe that they exist
in some kind of vacuum. Reality is different. Results and behavior are
inextricably linked.
I dont believe that true sustainable value can be created without values.
If anyone didnt believe that before the recent banking crisis, surely it is
now clear. I spent my working life in banking. Its a simple business at
heart that depends on the trust of depositors and customers to exist
from day to day. Trust depends on values and behaviors that are real
and demonstrated every day, year after year. Businesses without values
dont stand the test of time.
In terms of behavior, as a leader it is worth reminding yourself of how
you would have liked to have been treated earlier in your career. If you
were fortunate, you would have worked as part of a team where you
were given freedom to make things happen and achieve results. Your
role in the success of the team and the organization would have been
acknowledged, perhaps celebrated. Often this does not happen. It
should.
The work of leadership is to build such engagement so that all contribute and their contribution is fairly acknowledged. The leader also must
build trust. As a chairman, this is a vital part of my role. Trust is not an
abstract concept; it is a day-to-day reality and it is built on respecting
xxii Foreword
individuals, listening to their concerns, and distilling and communicating them. The last element is vital. Communication needs to be open
and should be encouraged throughout any organization.
Engagement and trust take time. It is a long-term commitment, but
one that needs to percolate into your daily activities. You must, for
example, spend time on the front line of the business. In the retail
world, this is comparatively easy. You can visit a store. You can feel the
mood of the business and its ethos. But it is not that difficult in any
business. Only by being there on the commercial front line will you
really understand the company, its culture, and its performance.
Results and behaviornot necessarily in that orderlie at the heart of
my view of business. This coincides with the most persuasive themes of
The Success Formula. As Andrew Kakabadse argues, business is not a
complex science governed by a complex algorithm, but a compelling
combination of art and science.
Preface
For more than 60 years, Heidrick & Struggles has helped global organizations secure, build, and strengthen their leadership teams. As the
complexities of leadership have increased, we have continued to explore
the factors that underpin success.
In this recent collaboration with acclaimed top leadership advisor and
business author Professor Andrew Kakabadse of Henley Business
School, we set out to better understand the dynamics of leadership,
diversity, and the power of teams. Our goal in supporting the global
research project that forms the foundation of The Success Formula was to
cut through the clutter and demystify the link between leadership and
sustainable business value in todays fast-paced world.
Accelerated globalization and technology have redefined the leadership
skills to be successful in the global marketplace. Many CEOs find their
skills becoming obsolete as their organizations change in this volatile
and unpredictable landscape. The new normal requires continuous
shifts in people, process, technology, and structure to be competitive.
The skills and abilities leaders once needed to create value in their
organizations are no longer sufficient. New CEO skills are required to
win in this new world. The ability to harness culture and diversity of
thinking to strategy has emerged as a key competitive discipline for
twenty-first-century leaders.
Further questions were advanced and tested for the research. How, for
example, do successful business leaders organize their strategies and
teams to identifyand deliver onfleeting opportunities in an era of
relentless complexity? What matters most? Is it the advantage of crosscultural diversity across the management suite and the boardroom? Is it a
bold strategy communicated robustly across all levels of the organization?
What are the best companies doing and how can we learn from them?
In The Success Formula, Andrew argues that in the new VUCA world (the
military acronym for Volatility, Uncertainty, Complexity, and
xxiv Preface
Ambiguity), strategy works best when leaders create an evidence-based

cultureone in which they are able to transform their vision into their
organizations purpose and encourage diversity of thinking to gain
alignment and engagement. An organization needs to have a culture
with which people are engaged and aligned before their strategy will
deliver real value. And diversity of thinking is the glue that creates a
common culture that encourages adaptive advantage in highly diverse
markets. It provides a new model for globalizing an organization. The
best-led organizations have their eyes open to opportunities, ideas, and
perspectives. They embrace them where once they attempted to railroad
a way through them.
Evidence and reality checking are a vital part of building the organizational coalitions and momentum required to succeed and overcome
obstacles in the twenty-first century. Andrew talks persuasively of the
need for evidence-based leadership.
For senior executives, this means that each and every leader in an organization must be constantly engaged with how the company creates value
in a complex and ambiguous world. Strategy matters, but leaders must
use practical evidence to illuminate reality and be willing to questionand even shatterthe status quo when necessary. The power of evidencebased leadership is its ability to harness multiple stakeholder points of
view to create a dynamic strategy that engages and aligns the organization to create sustained value.
Andrews research is robust and practical. The book explores the seven
disciplines vital to fulfilling the success formula and concludes with a
series of thought-provoking questions that provide a starting point for
CEOs and chairmen to apply the findings in todays fast-paced, complex,
and uncertain world of business.
We hope that The Success Formula helps you approach your organizations challenges and opportunities with renewed vigor and a clearer
sense of purpose. Strong leadership is required. With it, our teams will
be empowered to not only succeed, but change the world.
Steve Mullinjer
Regional Managing Partner, Asia Pacific
Heidrick & Struggles
Introduction
Each and every organizationand individualhas an idea of what
success looks like. It might be a matter of getting through the next
quarter, mere survival. It might be a specific targeta level of profitability, market share, ROI, or some other on offer from the host. It might be
a grand vision of creating a different world.
Over the last five years, I have traveled across the globe interviewing
leaders to gain new insights into the nature of organizational success
and how it is created. In-depth interviews were carried out in over 100
organizations in private, public, and third sectors in fourteen countries.
Insights and quotations from the research interviews are used throughout the book.
Those interviewed were all senior leaders in their organizations, including many CEOs and chairmen. Their companies, from Europe, North
America, Asia, Africa, Australasia, and the Middle East, spanned industries from financial services to fast-food restaurants; airlines to IT; car
making to chemicals; public services to pharmaceuticals; software to
shampoos; heavy machinery to home appliances; telecoms to transportation; mining to banking; cereals to minerals; and retailing to
railways.
The Success Formula is the result.
My researchsupported by the global leadership firm, Heidrick &
Strugglesfound that the starting point for any successful organization (or, indeed, any individual) must be value. Always. Value is the
currency of success. The types of value organizations seek to create and
how they approach doing so lie at the very core of any understanding of
what success looks like and what is required to make it a reality.
Different types of organizations seek to create different sorts of value
whether it is shareholder value, social value, stakeholder value, or financial value. But all organizations must create value to legitimize their
existence and to be regarded by themselves and others as successful.
xxvi Introduction
Creating value, therefore, is the primary purpose of leadership and the

building block of every success story that adorns annual reports, magazine covers, and more.
How do leaders create value? And how do they create value that can be
sustained? The leaders I talked to in my research fell into one of three
broad categories, according to their approach to value creation. Their
approach was typically one of the following:
Replicate: reproduce a previously successful strategy/value
proposition.
Formulate: take a gamble on an unproven strategy/value
proposition.
Evidence-led: Create a value proposition hypothesis and interro
gate it with evidence.
Clearly, the replicate and formulate approaches are flawed. Replicating
what worked elsewhere is a surprisingly commonplace approach. After
all, that is what many consulting firms effectively sell. I have also encountered many executives who have simply applied the same approach,
wisdom, and ideas at a series of organizations; they are corporate groundhogs in search of their next groundhog day. The value this delivers will
inevitably diminish with time as the world and contexts change.
If someone has a track record, it can be persuasivefor recruiters,
colleagues, and others. But what if they are intent on simply doing the
same thing again but in a different context? A track record is obviously
good, but it needs to be combined with a willingness to evolve, develop,
and respond to new contexts.
The formulate category includes executivesand there are manywho
see the creation of strategy to deliver value as a gamble, an intuitive and
somewhat desperate art. They formulate strategy in a glorious vacuum.
Sometimes it works, but good fortune has a knack of petering out fairly
quickly.
Executives willing to wrestle with reality, to interrogate the facts, have a
much better chance of repeating the successful creation of value.
What I discovered in my travels in C-suites worldwide is that smart
leaders create value and deliver success through what I describe as
Introduction xxvii
evidence-led stakeholder engagement: they build the commitment and

passion that delivers value through real evidence rather than neat
consultant-generated strategies, or distant dreams. In these successful
organizations, evidence is not an aberration, but the result of hard
work, persistence, and structure. Reality is robustly and constructively
interrogated and examined. Organizational success is built on a disciplined approach to an array of key issuesfrom mission to diversity.
The insights from my research have a deceptive but refreshing air of
simplicity: success is about delivering value and this is best and most
reliably achieved through engaging with people, markets, and data and
then gathering evidence on that reality and making decisions
accordingly.
Sounds simple. Reality is quite different. Engaging with people within
their context in order to win over their commitment, appreciating the
finer points of competitive advantage, locality by locality, and pulling
all that together through a cleverly thought-out global corporate strategy require a sophisticated level of what I describe as diversity of thinking.
When managers are comfortable with complexity and are able to leverage that defining difference, then leaders can genuinely claim that the
organization delivers value. Value delivery and diversity of thinking are
inextricably linked. They are the two sides of the same coin and both are
required to create organizational riches. The challenge for the leadership of the enterprise is to nurture a mindset of value delivery together
with a diversity of thinking so that true differentiation is realized.
These insights led to the development of the success formula, a simple
but powerful means of getting to the heart of value. It argues that three
elements are critical to value creation: strategy, engagement, and
alignment.
Strategy: the plan for how the organization intends to create value
going forward
Engagement: the extent to which people will voluntarily invest their
efforts beyond the financial or contractual benefits to them and
Alignment: the structures, systems, processes, and protocols necessary
to position the organization to realize its strategy, objectives, and
desired outcomes.
xxviii Introduction
How these elements are configured is the difference between value creation and value destruction. As always, below the simplicity lies a sometimes dauntingly deep vein of complexity, which we will explore. The
Success Formula explains how the three elements work and what organizations and leaders need to do to deliver value.
Value is the lifeblood of organizations and the raison dtre of leaders.
My hope is that The Success Formula will broaden our understanding of
the meaning of success and the vital role played by value and evidence
in making success a reality.
Andrew Kakabadse, September 2014
Chapter 1
Understanding value
What is your definition of success?
I have asked this question of executives throughout the world. Among
them was Georges Dabaghi, general manager of Vubiquity in the
Middle East and for the CIS countries, and formerly with SeaChange,
Lucent Technologies, and AT&T. Vubiquity is the worlds largest
provider of multiplatform video services and Georges has been involved
in telecommunications in the Middle East and Africa for nearly twenty
years. His answer was characteristically thoughtful and explored some
of the issues others raised when the question was posed:
Im tempted to say that success is about meeting goals you set earlier,
but I think there is more to it, a feeling of creating value somehow,
that you created something. I would measure success on more than
one dimension.
There is financial success, which you cannot ignore, whether it is
revenue growth, profitability, or the number of employees you have.
And then you have the non-quantifiable elements of success: employees happiness, your own happiness, how others look at you and
whether you bring value to their businesses and the community they
belong to.
Even though its a very small example, we created our own company
in the UAE [United Arab Emirates] so that all our financial transactions pass through UAE banks, all our food and drinks and hotels
and conference booking, and travel is passing through local entities, which is adding more to GDP, bringing more value and making
the economy here a little bit more prosperous. I see that as success.
Success is also measured by how much you giveto the industry, to
other operators, to people doing menial jobs and so on.
Georges Dabaghis answer to the question of what constitutes success
raises many of the issues we will explore in the pages that follow. Success
2 The Success Formula
is a potent and often troubling cocktail of the short-term and the longterm, money and conscience, the company and the world, and the individual and the organization.
So, what is success? To distill it down, success is the creation of
valueeconomic and social benefits and outcomes that serve a purpose
for the people they are intended to help, in accordance with a set of
values that the organization subscribes to.
Organizational success generally comes from having a clear plan or
strategy to deliver on a mission. But a strategy is not a success until it
delivers its intended value.
I think the most important role for the CEO is to, first, develop a great
leadership team and to develop with that leadership team a clear strategy, Ren Obermann, CEO of Deutsche Telekom, told me.
This involves analyzing the business and its perspectives; understanding the market and changes in the market; understanding technologies
and the key drivers for the business; and then developing a strategy.
Thereafter, the CEO and leadership team provide strategic clarity to the
organization and constantly work on the alignment and execution of
that strategy. All of this in order to generate value to all stakeholders.
Successful organizations create value. Organizations, of course, come
in many shapes and sizes, flavors and colors. This book is predominantly concerned with companies, but the same points apply to all
organizations. The definition of success will vary from organization to
organization, but the need to create value in support of a mission is
universal.
A variety of values
In the case of a company, this might be shareholder value. Asked what
success looks like, Sally Tennant, CEO of Kleinwort Benson Bank, replied:
Creating shareholder value, having a larger client base where youve
delivered and your clients are satisfied. You measure that partly by being
one of the places where people want to come and work. And have a top
quality team so that you could fall under a bus and the place wouldnt
collapse. I dont think its success if its down to an individual.1
Understanding value 3
In the 1990s, the focus of organizations worldwide shifted to generating shareholder value. Suddenly this was seen as the most relevant
measure of a company and leaders success. Its allure has since paled,
but it is clearly a vital ingredient in any consideration of what constitutes corporate success.
Pure financial value also has its place. Chris Gibson-Smith, chairman of
the London Stock Exchange and formerly the chief geologist at BP,
recounted to me how he helped turn a cash negative, one and a half
billion, into the largest single source of cash revenue in the BP group
worldwide. Turning losses into profits, creating financial value where
it didnt previously exist, can be immensely exciting and satisfying. This
is the corporate equivalent of alchemy, the marvelous transition of
losses into profits.
Clearly, companies need to make money to survive and provide value
more generally. But that is not the be-all and end-all of most organizationsor should not be. As Henry Ford observed, A business that
makes nothing but money is a poor kind of business. In my interviews,
it was interesting how little emphasis there was on financial performance. It is necessary but not sufficient, the organizational equivalent of
breathing.
These are enduring themesas old as business itself. Money, price, and
profit are simply indicators of value. They are by-products of value creation. So, too, is quality. As the great management thinker Peter Drucker
observed: Quality in a product or service is not what the supplier puts
in. It is what the customer gets out and is willing to pay for. A product
is not quality because it is hard to make and costs a lot of money, as
manufacturers typically believe. This is incompetence. Customers pay
only for what is of use to them and gives them value. Nothing else
constitutes quality.2
In other words, value is in the eye of the beholder. Value is something
that is created in the mind of another person. It may have a price tag or
it may be something less tangible. Value might be seen in terms of
social value. Increasingly, the companies I encounter throughout the
world have a clear notion of contributing to society more generally.
They want to help make the world a better place, while still making a
profit.
Value is often also seen in terms of the stakeholders involved: the individuals, groups, or organizations with a direct interest in the activities
of a corporation. These include shareholders, customers, suppliers,
employees, investors, and members of the community in the location
where the company operates.
Stakeholder value thinking has been central to research at Harvard
University and many American corporations. In particular, the work of
Michael Jensen has been influential.3 In recent years, thousands of initiatives have been launched and billions of dollars have been spent in the
quest for improving stakeholder engagement to generate value. Yet, the
results are mixed.
Our notions of value are continually evolving. Leading the current
intellectual charge is the familiar form of Michael Porter of Harvard
Business School. The originator of the Five Forces framework now talks
of creating shared value. The debate about what constitutes value is
gathering pace as the next set of challenges facing companies become
clearer. [Companies] remain trapped in an outdated approach to value
creation that has emerged over the past few decades. They continue to
view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and
ignoring the broader influences that determine their longer-term
success, lament Porter and Mark Kramer in their 2011 Harvard Business
Review article Creating shared value.4
Calling on companies to take the lead in bringing business and society
back together, Porter and Kramer argue that the solution lies in the
principle of shared value, which involves creating economic value in a
way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress.
Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the
margin of what companies do but at the center. We believe that it can
give rise to the next major transformation of business thinking.
Delivery failure
Value in its many manifestations is at the center of corporate life.
Different types of organizations will seek to create different sorts of
value, but all organizations must create value to legitimize their existence. Value is truly the currency of success.
So far, so good. But while it is easy to agree that delivering value is the
essential ingredient of success, time and time again it has become
evident that value is not being delivered. In the success formula of many
organizations, the numbers simply dont add up. Value is left on the
factory floor or the boardroom table.
Consider the very basic notion of financial value. If corporate profitability alone is taken as the key measure of value, the reality is
disappointing.
This is brutally exposed in Richard DAvenis 2012 book Strategic
Capitalism. Americas long run profitability was highest during the
1950s and 1960s, reports DAveni. Trouble started in the early 1970s
but the U.S. rebounded until returns peaked somewhere around 1980
in both the services and manufacturing sectors. Since then we have seen
a continuous, long run decline in corporate profitability (return on
assets), even during periods of economic growth. The decline has been
about 3 percentage points in profitability for both sectors from their
peaks of 9 percent in manufacturing and 5 percent in services around
1980. (It is worth noting here that service industries have not been the
saviors anticipated. They havent filled the employment gulf created by
the downsizing of the manufacturing sector. Nor have services generated the same level of return on assets that manufacturing did over the
last 50 years.).5
By this measure, US companies have, on average, been less successful
over time. Increased global competition accounts for some of the
decline, but there are other factors at workincluding value destruction as a result of misguided management. In particular, one pernicious
trend is at work: the tendency to manage companies for the short term
in order to boost the share price, to the detriment of the companys
long-term position.
Value is being unsuccessfully delivered in other areas. We will come to a
variety of examples of this later. First, to better understand how companies have failed to deliver value, which defines success, let us look at
value propositions. They are the starting point of value. Modern
management theory dictates that all organizations should have a clear
and compelling value proposition. In simple terms, a value proposition
is a positioning statement that explains what benefits (value) the organization provides for whom and how it does it uniquely well. The value
proposition is derived from the competitive advantage enjoyed by the
organization.
In his highly influential work prior to his championing of shared value,
Michael Porter argued that there are three generic strategies that
companies can pursue based on their market positioning and competitive advantages. They are either low cost, or differentiation, or focus. In
this view, a company chooses between one of two competitive advantageseither it competes via lower costs than its competitors or it competes
by differentiating itself along dimensions valued by customers to
command a higher price. A company also chooses one of two types of
scopeeither focus, offering its products and services to selected
segments of the market, or industry-wide, offering its products and
services to many segments. Which generic strategy a company adopts
reflects these choices.
As useful as Porters model still is, an organizations strategy should
follow from its value proposition rather than vice versa. This often does
not happen.
Failure to define the value proposition properly is one of the most
common problems in organizations. But there is another, potentially
even more insidious, danger. Too many senior management teamsled
by ambitious CEOscreate a strategy to support a flawed value proposition, or for reasons that have little to do with value creation. Business
history is replete with examples of CEOs who went on an acquisition
spreebuying companies not because they were adding value but
because they were empire building. Value propositions can be left
behind in a headlong rush to pursue imaginary or elusive alternative
sources of value.
Interestingly, too, the very same traits or behaviors that made leaders
successful earlier in their career can derail them. Indeed, what has been
a highly successful strategy for a CEO over many years can unwind in
spectacular fashion if the context changes. The evidence shows that a
CEO who was widely admired for his or her strategy and value proposition thinking can become infamous for the very same strategy and value
proposition at a later time.
Banking without value

When the Royal Bank of Scotland (RBS) acquired NatWest Bank, a
bank three times its size, for 23.6 billion in 2000, for example, its
newly appointed CEO Fred Goodwin was the toast of Londons
Square Mile.
Goodwin had joined RBS in 1998 as deputy CEO to Sir George
Mathewson, who had ambitions to develop it from a regional bank into
an international player. Mathewson led the NatWest deal, but it was
Goodwins diligence and sharp mind that impressed investors and won
them over to cement the deal in the face of fierce competition from its
rival the Bank of Scotland. In January 2001, Goodwin was promoted to
CEO and cut 18,000 jobs by merging parts of RBS and NatWest.
Nicknamed Fred the Shred for his ruthless ability to acquire and
absorb banks, over the next seven years Goodwin presided over RBSs
rise to global prominence as the worlds largest company by assets
(1.9 trillion) and fifth largest bank by stock market valuation. But if
RBSs rise was meteoric, its fall was even more precipitous. In 2008,
during the banking crisis, it was forced into nationalizationbailed out
by the UK tax-payer.
In October 2008, Goodwin officially resigned as CEO. Shortly afterward, RBS announced that its 2008 loss totaled 24.1 billion, the largest annual loss in UK corporate history. Goodwins lack of humility,
reluctance to give up his undeserved bonuses, and failure to show
contrition over his handling of the crisis led to his becoming the
UnitedKingdoms poster boy for the excesses of the banking industry.
His unpopularity contributed to his knighthoodawarded in 2004 for
services to bankingbeing canceled and annulled in February 2012.
Goodwins rise (and eventual fall) should not really have come as a great
surprise. He was simply replicating a previously successful strategy that
had worked for him as RBS expanded. The trouble was that the context
had changed. The same high-risk, aggressive strategy that had made the
RBS Group into a global banking powerhouse, creating massive
increases in shareholder value, led to its failure some eight years later.
Yet, with one or two notable exceptions, how many voices warned of the
dangers?
This is a story repeated many times in corporate history. As contexts

change, highly successful companies and leaders can find themselves
high and dry, stranded, clutching an outdated business model and a
value proposition that makes no sense in the new world order. A predisposition for a perceived value proposition (it has worked before, so it
will work again) blinds the leader to the evidence needed to deliver
value. The success of the past poisons the individuals capacity to be
adaptive to todays circumstances and, as everyone in business knows,
today is always different. Always.
Flaws of the value jungle

At least Fred Goodwin and the like have a track record of delivering
value. Less obvious but more common are CEOs who believe in a flawed
value proposition. In other words, they believe that their strategy will
create value for stakeholders even though their value hypothesis is
untested and there has been no systematic gathering of evidence. These
leaders formulate a value proposition and then move to create a strategy to deliver it. Rather than test the hypothesis and open it up to debate
with stakeholders, they forge on with their unproven value proposition.
Typically, they are selective in soliciting opinions, listening only to
those who agree with them or support their worldview. The results are
usually disastrous.
You might think this sounds highly unusual. But, the reality is that
CEOs and organizations regularly pursue strategies that even if
perfectly executed are misguided because the value proposition is
flawed. Over time, a gap develops between the reality of whats happening on the ground and what the CEO believes is happening. The CEO
goes into denial, choosing to ignore information that does not fit with
his or her value hypothesis. The organization creates capabilities and
delivers products and services that are out of kilter with what customers value. The last person to know is often the CEO, who increasingly
adopts a bunker mentality, refusing to listen to the evidence from the
market.
One senior manager described his experience on being parachuted
into a problem area of a company that had been ignored for many years.
An untested strategy had been failing but until he arrived no one had
done anything about it:
When I arrived at my office there was about a quarter of an inch of
dust on my desk. And that dust was reminiscent of the dust that was
on the company. The people walked around with their heads down.
There was a culture of fear. In my first hour I felt gripped by this
no-can-do culture. I walked around as if I was a ghost. Not a single
person knew who I was or came to say hello. My first interaction was
with the company lawyer, who said: Are you the new guy in charge
of China? You better read this because were about to get sued big
time and I need to brief you. So this was nine oclock. It was a terrible place. I walked around for a while and then went back to my seat
and said, what am I going to do?6
What this manager was experiencing was the result of a strategy that
had not been evidence-tested. Everyone in that part of the business
knew it was failing but the fear culture meant that the message had not
reached the CEO at corporate headquarters.
Indeed, one of the most daunting facts of a CEOs life is how little real
information he or she receives. Peoples default setting is to give the
CEO good news. Bad news rarely percolates through the hierarchy. It
needs to be sought out. If you have ever watched the TV series Undercover
Boss you will have seen this in practice. In each episode a business leader
comes face to face with the day-to-day reality of his or her business on
the front line. In virtually every instance, he or she is dismayed to find
poor processes, inadequate resources, demoralized people, and unhappy
customers. The staggering thing is that it requires a TV program for
business leaders to confront reality.
Testing, testing
More enlightened CEOs, on the other hand, are always testing their
value propositions and value hypotheses with their stakeholders. They
are endlessly curious to understand what stakeholders really value.
They are constantly testing their perceptions against reality. So, they
visit their companys stores, they talk to customers, they mingle on the
factory floor, they call people to thank them, and much more.
Leaders have to constantly hunt down the truth by pursuing evidence.

As Ed Rapp, president of Caterpillars Construction Industries group
headquartered in Singapore, explains:
The biggest risk in this joband I would say any job of leadershipis
isolation and filters. Every time I look at a presentation the question
I ask myself is how many filters has it been through before it got to
me? If you maintain access throughout all levels of the organization
it really does give you the ability to bypass the filters that develop in
a large company.
The worry is if people dont always put reality on the table. What I
keep trying to help people understand is weve got a lot of talented
people and if we put reality on the table Im convinced as a group
we can fix it. If we dont have reality on the table we cant fix what
we cant see. So thats the one challenge I continue to work, getting
people to feel comfortable delivering bad news, feel comfortable
putting tough issues on the table. However, when they put reality on the table, they also need to come with suggested solutions.
Leadership is not just about identifying issues, its also all about
fixing them.
The truth is elusive. Organizations are made up of human beings with
their usual array of concerns, worries, fears, prejudices, and much
more. Understanding and capturing the range of realities and perceptions that people hold in any organization is fraught with difficulties,
but essential if the power of the success formula is to be understood
and exploited. Evidence must be the mechanism to surface these realities and to act as the platform for constructive and continual
dialogue.
Listen to how Mick Davis explained his role as CEO of the global mining
company Xstrata:
In the case of Xstrata, we have 35 to 40 people in our head office
and none of us aspires toor probably has the skills torun any of
our individual operations. We can identify risk, we can interrogate
information, we can ask the right questions and we know how to
evaluate performance. What we dont do is attempt to take on any of
the individual operations management decisions, which means we
find no need to build a bureaucracy.
The trick to managing numerous operations successfully is to narrow down who does what. We have a clearly defined and proscribed
role of the center. In most organizations, there is a blurring of who
takes responsibility and accountability; but, if you want to be an
organization in which your executives have freedom to act, you actually have to give them this freedom. And that means a very, very
small head office in which you dont have people at headquarters
second-guessing what the people who run the various components
of the whole enterprise are doing.7
Note the importance attached by Davis to asking questions, interrogating reality, seeking out the evidence. Get to the truth and then give
people the freedom to execute.
In an interview, Richard Laxer, president and CEO of GE Capital
Europe, Middle East and Africa, explained his approach. My job is to
create a strategy for the business. I spend a lot of time on that and the
only way I can do it is by staying close to whats happening externally
and internally. It cant be a strategy thats developed in a vacuum; it has
to be something that reflects the real world.8 It is perhaps no surprise
that vacuum-packed strategies tend to be vacuous.
The ability of an individual or organization to deliver value can never
be taken for granted. At every stage it needs to be tested and tested
again.
Value creation
To better understand the dynamics at work here, lets take a step back.
If value is the route to success, how do you create value?
This was something I put to all the leaders I interviewed. Their responses
were revealing. Over time, it became clear to me that there are two different approaches to creating value as a leader. One is about perceived value;
the other is about delivered value.
In the course of my research, I noticed that these different ways of going
about creating value indicated two different types, or styles, of leaders.
The creator of perceived value is more likely to be a big picture thinker
who elevates strategy above all else, while the creator of delivered value
is characterized by his or her closeness to customers and other stakeholders. Most leaders have a default setting, leaning toward one or the
other mindset.
Lets take a look at what I mean by perceived value.
Leaders with a predisposition for perceived value start by formulating
a value proposition (actually it is probably best described as a value
hypothesis) and then look for evidence to support their strategy. They
have a preconceived notion of how the organization can create value
and enact a strategy to achieve it. Usually, the strategy emanates from
inside the boardroom and is informed by a value hypothesis that determines the strategy.
Consider the recent history of one of the great success stories of the
first flush of the technology age, Hewlett-Packard. In early 2005, news
emerged of an imminent boardroom reshuffle at HP. The move marked
the beginning of the end for Carly Fiorina, the companys high-profile
and controversial CEO. On February 9, Fiorina stepped down from her
position at the helm of the $80 billion company. In a press statement,
Fiorina declared that her exit was related to differences with the board
over how to execute HPs strategy.
Prior to becoming CEO, Fiorina had been a highly successful executive.
Much of her success had come from her keen intellect, charismatic
charm, and strategic boldness. Yet, the very same attributes that had
brought her success earlier in her career contributed to a lack of judgment that led to her downfall. Her talents blinded Fiorina to the
evidence that her chosen strategy was destined to fail. She didnt listen
to the people around her. The ultimate thing that derailed her career at
HP was her inability to achieve alignment among HP managers in order
to engage the companys workforce with her vision.
A big contributing factor was the companys poor performance in
the months prior to her departure. But underpinning that performance
and creating tension within the company was Fiorinas controversial
merger with Compaq, starting in 2002, which she saw as the key to the
companys future. Fiorina was so convinced that her strategy would
create value for the company and its customers that she forced it through
despite the concerns of board members including Walter Hewlett,
son of the companys cofounder, who strongly opposed the deal.
The claims of synergy failed to materialize and the company lost

considerable value.
Analyzing the case in Fortune at the time, Carol Loomis asked: Did the
famed merger that Fiorina engineered between HP and Compaq
produce value for HPs shareholders? Second, with that merger almost
three years past, is HP in shape to thrive in its brutally competitive
world? The answers are no and doubtful.9
This was a classic case of a CEO with a very clear idea of what she
thought would create value for the company, who failed to truly interrogate the evidence and to take her board with her. More than that,
Fiorina made her perceived value the centerpiece and make-or-break
move of her tenure.
Belief limited
Fiorinas time at HP exemplifies a pattern among CEOs with this
mindset. This type of leader justifies his or her strategy with
perceived valuea belief. This may be no more than an unproven
value hypothesis supported by analysisthat the prescribed value
proposition is attractive and can be achieved in the future. This type
of leadership approach is to formulate a value proposition and then
act on an unproven belief. The process of engagement is to win
support from other key managers and board members, while overriding the views of those who question the efficacy of the strategy.
As a result, a damaging whirl of organizational politics is usually
unleashed.
One senior manager in Australia confided that his CEOs attempts to
achieve a major change of structure and practice in the organization
were pursued without any trial run. The CEOs friends in the top
team and on the board supported his idea and those who attempted
to challenge were browbeaten into submission. The line managers did
not dare say a word and yet they all knew that a new service offering to
the market was going to fail. In this case, it was a vigilant press and
media in Asia and Australia that brought the failing strategy to the
attention of the board. What happened? We, the general managers,
got the blame.
With the perceived value approach, there is a real danger that strategy
will become dogma as senior management will seek to justify its
preconceived view of the world and value creation. Once a bandwagon
is moving, it takes a brave man or woman to stand in its way. In one
case, for example, I encountered a legal services firm which had decided
it should go into employee development. The head partner was
convinced that this was what the market wanted but didnt check with
customers or service deliverers whether that would create value. It
didnt and is a good example of how a strategy-driven approach can
backfire.
What happens next is an all-too-familiar pattern: value creation
becomes uncoupled from reality and from the evidence. Routine and
denial take over and the organization may run on preexisting competence for some time rather than on excellence. But ultimately it is
doomed to failure.
In recent years, no idea has done more damage in this regard than the
slavish pursuit of shareholder value. Even Jack Welch, the celebrated
former CEO of General Electric who consistently delivered on it during
his tenure, described shareholder value as the dumbest idea in the
world.
The preoccupation with shareholder value has contributed to a growing gap between the real market and the expectations market. One of
the most outspoken critics of this process over recent years is Professor
Roger Martin, the former dean of the Rotman School of Management
in Toronto. In his book Fixing the Game, Martin points out that CEOs
and their top teams are often incentivized to focus more on expectations
of success and value than on creating real value through the goods and
services their companies produce.
The real market, Martin explains, is the world in which factories are
built, products are designed and produced, real products and services
are bought and sold, revenues are earned, expenses are paid, and real
dollars of profit show up on the bottom line.
The expectations market is the world in which shares in companies
are traded between investorsin other words, the stock market. In this
market, investors assess the real-market activities of a company today
and, on the basis of that assessment, form expectations as to how the
company is likely to perform in the future. The consensus view of all

investors and potential investors with regard to expectations of future
performance shapes the stock price of the company.
What would lead [a CEO], asks Martin, to do the hard, long-term
work of substantially improving real performance when she can choose
to work on simply raising expectations instead? Even if she has a
performance bonus tied to real-market metrics, the size of that bonus
now typically pales in comparison with the size of her stock-based
incentives. Expectations are where the money is. And of course, improving real-market performance is the hardest and slowest way to increase
expectations from the existing level.10
Delivered value
While some leaders play the expectations markets, others gather
evidence from stakeholders inside and outside to determine the value
the organization is delivering today and can deliver in the future.
A strategy is then put in place to support those findingsand is deliberately exposed to challenges from stakeholders to create engagement.
These are value delivery-driven organizations.
Connecting the dots of reality on a daily and dynamic basis is the foundation to truly delivering value. Alexey Marey, chief executive of Alfa
Bank, one of Russias largest private commercial banks, operating in
the turbulent and rapidly changing Russian and Ukrainian banking
markets, explains:
Historically, we said we would try to create value in peoples lives.
This means different things to various groups of people. We are the
best in internet banking and mobile banking. We are the best in
customer experience, so we care. And thats what we try to promote.
We compete on speed and professionalism. We aim to be smarter
because we give people more freedom. One of our core values is entrepreneurship because we are privately owned and therefore it allows people to not only work by the rules but actually create the
rules. It drives a certain culture within the bank. And the core of
the relationship is your current accountthe account that is used
every day.
Looked at this way, value is not an abstract notion but an inescapable

and common touch point. Companies that are successful over a number
of years find ways to inculcate their values and approach into the acts of
value creation and delivery.
This point was powerfully brought home to me when I was talking with
John Neill, chairman and group chief executive of the Unipart Group of
companies:
The Unipart Way is a philosophy of working underpinned by tools
and techniques which form part of our knowledge management
systems. But to grasp it you generally have to see it in action and
so weve created an experience here in our company including our
company university, a teaching distribution center, factory, and office, which enables employees, current and new ones as well as our
potential clients, to see the Unipart Way in action and that generally
enables them to grasp the power of it. Many then say could you implement the Unipart Way for us? And often the answer is yes.
Gathering and reviewing evidence is central to the Unipart Way. In
particular, this includes:
embedding the Unipart Way, tools, techniques, culture in the offices,
the distribution centers, factories, and in fact anything and everything that is Unipart
promoting a problem-solving philosophy that engages all
emphasizing an evidence-based approach through pertinent data
gathering to improve quality, cost, and waste issues from top to
bottom of the organization
becoming self-reliant, self-confident, and self-sufficient in the tasks
and techniques, in fact, the knowledge base of the Unipart Way, and
acting as a coach to others.
In this way, Unipart combines the hard side of evidence with the soft
side of engagement.
Leaders like John Neill strive to create a culture that constantly interrogates the evidence to test the strategy. These sorts of leaders are driven
by value creation among stakeholders outside of the boardroom and
are focused on proving their strategy every day with the evidence
gathered. This is delivered value.
Equating success
As these two worldviews became clearer from my interviews, I created a
shorthand way to denote each approach. It uses the three elements
described earlierstrategy, engagement, and alignment. What I found
was that the three elements were important to both approaches, but the
way they were combined was significantly different. In some organizations strategy came first and was used to drive engagement and alignment. I denote this as:
STRATEGY (ENGAGEMENT + ALIGNMENT)
In organizations driven by S (E + A), the leadership focus is on creating and then implementing the strategy. Unfortunately, the two other
elements that make up the contextengagement and alignmentare
not factored into the strategy. If their sum is not a positive number,
then strategy alone will not create value as it is simply a multiplier of
their combined values. (This is strategy multiplied.)
What emerged from the research is that strategy is important, but its
not the most important factor. The key to long-term success is getting
the balance between the reality of engagement and the reality of structure and systems alignment, and the very delicate relationship between
engagement and alignment to make things happen now versus strategic thinking, which aims to shape the future.
The research provided surprising results, challenging some key parts of
traditional business school thinking. Since the 1920s, the way business
schools teach has been heavily influenced by the approach of the
Chicago School of Economics, which emphasized the importance of
getting the strategy right to realize competitive advantage.
Such thinking was based on the rationalist philosophy of Sir Francis
Bacon. The essence of rationalism is that once it is clear to all what is
the right strategy then all will fall in line. Yet, my research found that
such rationalism is not the mindset of those leaders who create and
deliver best practice. Getting the strategy right is step one. Step two is
holding the tensions and contextual reality of each organization
between alignment and engagement. What this research shows is a
fundamental shift in leadership emphasis.
We have moved from a world where leadership was about formulating a

value proposition, creating a strategy to support it and then executing on
that strategy, to a world where leadership is about testing a value proposition with stakeholders to create the right balance between alignment and
engagement in order to develop a strategy that can be implemented.
The old leadership model was driven by the belief of the leader. The new
model is driven by evidence, which fosters the belief of the organization
in what the leader and the strategy is trying to do.
To make better sense of this in my interviews I developed a formulanot
in the scientific sense, but more as an aide memoire, a handy reminder; a
constant and simple means of making sense of these organizational
phenomena I was being exposed to.
The predominant success formula described earlierthink of the HP
exampleis when an organization is being led by perceived value. This
is the corporate equivalent of putting the cart before the horse. Strategy
is used to drive engagement and alignment. In other words, strategy
comes first and then the stakeholders are expected to execute on iteven
if they dont agree with it or have not been consulted. The leadership
focus is to get the strategy right. The result is usually resistance, leading
to a reluctant and highly politicized organization that is likely to eventually fracture.
The leadership focus of this poor but commonplace practice can be
summarized as:
STRATEGY (ENGAGEMENT + ALIGNMENT) =
VALUE PROPOSITION
Worse still is a situation where the organization pursues a strategy
based on an unproven value hypothesis and the organization is aligned
behind it. This is the corporate equivalent of lemmings marching off a
cliff in step. It is summarized as:
(STRATEGY ALIGNMENT) + ENGAGEMENT =
VALUE PROPOSITION
When the only objective is to drive cost out of the business, this formula
can work in the short-term, but at a human and cultural cost. (This
could be described as engagement plus.)
One executive confided how the efficiency with which his CEO drove
cost out of the business eventually led to the CEO losing his job and
much more:
He got the strategy right and then we as a team sorted out our roles
and who was responsible for what and then just drove the new structure hard through the organization. Many were traumatized. They
had been there for many years, good and loyal and in many ways
well able to contribute. But they did not fit the new cost consciousness that was needed. Cost was really driven out of the business and
quickly. Many left but we also brought in new hires that had nothing
to do with our history and old culture and the new organization was
built on them. We then faced the very awkward situation of having
to have the CEO leave. He certainly was not the one to build the new
entity. He was just hated even though what he was doing was right.
It took a lot of courage and hard conversations with the chairman
and the board to persuade the CEO to leave. When he went we were
all relieved. Had he stayed he would have destroyed the very entity he
had created.
Best formula
The organizations I encountered that had sustained success over many
years had a different success formula. They were focused around value
delivery. The onus was on achieving engagement and alignment of view.
These two elements, together with the market conditions, constituted
the context within which the organization had to operate and therefore
within which the strategy had to be effective. The strategy was then
added to support and serve the proven value proposition.
In other words, in the best performing companies, the strategy is a
good fit with the context, not the other way round. Rather than
attempting to shape the context to fit the strategy, these organizations
place great store in collecting evidence to understand the context. This
open-mindedness and willingness to consider multiple points of view,
in effect a mindset of diversity of thinking, allows them to maximize
alignment and engagement. Seen in this light, the purpose of collecting evidence is to optimize these two components (alignment and
engagement). The evidence gathered may support or challenge the

value proposition underpinning the strategy. Either way, senior
management should listen to it. If the evidence contradicts the value
proposition, then the strategy has to change. Collecting evidence
becomes the safety catch that prevents an organization from embarking on a disastrous strategy. Fully understanding the context sharpens
the strategy.
The leadership focus of this delivery-based approach can be distilled
down to:
STRATEGY + (ENGAGEMENT ALIGNMENT) =
VALUE DELIVERY
The logic of S + (E A) is this: First achieve consensus about where
value lies, and the organizations capability to deliver it. Then, and only
then, formulate a strategy to deliver that value, and constantly test that
strategy and the assumptions that underpin it with stakeholders and
reality. This is Strategy plus.
Understanding the success formulaS + (E A) = Vand the disciplines
it involves, is the subject of the rest of the book.
Understanding value: In summary

Success is the delivery of value.
Our understanding of what constitutes value is constantly evolving
and differs from organization to organization and from individual
to individual.
There are two general approaches to creating value as a leader:
perceived value and delivered value.
Delivered value demands constant questioning of reality and the
gathering of evidence.
There has been a shift in the best performing companies from getting
strategy right and structure following to a two-step approach of
getting the strategy right and then paying attention to the unique
balance of alignment and engagement in this context.
Best performing companies have a structure preceding strategy to

initiate change.
Strategy+(Engagement Alignment) = Value Delivery
Key questions
In your organization, what really constitutes success?
Is value really delivered?
Are you a leader who pursues your own ideas and convinces others of
their merit?
Are you a leader who is willing to test your ideas through evidence
and see which will survive scrutiny?
What do those around you really think of you?
If you are the chairman, what criteria do you use to evaluate the
strategy and value proposition that emanates from the CEO and the
management team?
If you are the CEO, do you harness the opinions of general management on the strategies you wish to pursue?
If you are a general manager, what do you do when the strategy given
to you from above is unlikely to work?
Chapter 2
Diversity of thinking
The starting point for this book was sustainable success. How can and
how do some organizations repeatedly achieve success? As we have
seen, success is about delivering value. This led to an examination of
value in all its many guises. Creating valueand thereby achieving
successmeans different things to different people at different times
and in different situations.
The more I talked to managers and leaders, the more I began to see that
this simple observation about success had profound implications.
Stakeholders view the organization through different lenses depending
on where they are. If success has multiple meanings and interpretations
depending on where you view the organization from, then how it can
best be pursued will also look different from different angles. Think
about trying to create a three-dimensional map of a landscape that you
wish to navigate. It may not be obvious from the top of a hill that an
area below is covered by marshland, or that there is a deep ravine in the
way. The same is true for an organization trying to create a strategy.
It is only through an understanding of the diversity of viewpoints that
the leadership can hope to see the full picture. By surveying the area
from multiple positions, it is possible to build up a composite view that
combines knowledge on the ground with the view from the hill.
Diversity of viewpointswhat I call diversity of thinkingbecomes a
competitive advantage. Success demands both value delivery and diversity of thinking.
Much of the recent debate about diversity has centered on the best way
to allow different voices to be hearda wholly laudable and important
goal. Typically this is characterized along the lines of gender, race, and
religion. These are useful but limited ways to describe how the world
looks from where an individual is standing. As we shall see later in this
chapter, recent study shows that gender and nationality are at the
bottom of the list of priorities when it comes to diversity. What really
adds value to the conversation is the ability to seek out different
perspectives and points of view, to see the world through the eyes of
others. This is the really critical aspect of diversity in organizational life.
It provides a way of fostering the alignment and engagement necessary
to achieve the success equation.
Clearly, diversity of people is important. But, diversity of thinking is the
essential element. Without it there will be no true diversity. In the same
way as there are people who have one years experience twenty times,
there are culturally diverse teams that look at the world through blinkers. Diversity of thinking is what we need to build in organizations.
The road to diversity

This became clear as my interviews progressed. I began to notice a
pattern. Senior managers talked about the difficulties of aligning the
multiple meanings of success and operational perspectives in a way that
engaged the enthusiasm of their people to execute on the strategy.
Many of these senior managers understood that without the necessary
coalitions and support in place further down the organization, especially at general manager level, they could not deliver the value
proposition.
Managers in the front line, however, had a different concern. Time and
time again they explained how, by overlooking the obstacles they faced
in their part of the business (the marshland or ravines), their strategy
was doomed to fail.
The general managers in particular had important information and
evidence that senior management needed to know about to avoid
making bad decisions. The general managers had a unique point of
view within the organization and they wanted to be heard. They wanted
to have a voice in the conversation.
This diversity of opinion and viewpoint within any organization is the
essence of diversity of thinking and I have come to the conclusion that
it is absolutely vital to the sustained success of any organization. Indeed,
my research suggests that the leaders who achieve sustained success
apply broad interpretations of value, and emphasize the importance of
creating value for stakeholder groups. They encourage and reward
diversity of thinking.
Diversity of thinking 25
Robert Swannell, chairman of the UK retailer Marks and Spencer, is

among the senior business leaders who promotes diversity of thinking.
You have to bring calm and clarity to some really quite intractable
problems. What I have always tried to do is build around me groups of
people who enjoy working with me and each other and that means
giving them the freedom and the acknowledgement of their part in the
success of anything I do. You need a style of leadership that helps people
to be a part of that. This sort of inclusivity is a key component of diversity of thinking.
A way of working
In Shanghai I asked a group of executives what a leader newly appointed
to China needed to know about the Chinese. Some said it was knowledge of the history of China, the Chinese culture, Chinese people, and
the particulars of Shanghai. However, one opinion stood out against
the others. Yes, knowledge of China and the Chinese is interesting
for the dinner table, but to do business here you need to have a mindset
of diversity of thinking. Why? Because understanding your and others
competitive advantage is going to create the critical advantage. Through
embracing diversity, the enterprise is differentiated from others.
These words were repeated across the world by some of the highest
performing leaders I met. It is not knowledge of national culture but
more a positive attitude to diversity of thinking that contributes to the
success formula. A collection of people from across the world can still
offer a blinkered view. Equally, a mono cultural team can offer diversity
of thinking.
Diversity of thinking emerges as much a vital concept as that of alignment and engagement. Indeed, engagement and diversity of thinking
are two sides of the same coin. One cannot function without the other.
The organizations that impressed me most were the ones that had truly
and powerfully embraced diversity of thinking. The more I studied
them, the more I came to realize that diversity of thinking is not just
rhetoric in these organizations, it is a modus operandi. They are successful because they listen to and show respect for diverse points of view.
They use the diversity of thinking as a platform to gather evidence
about external market forces and internal capabilities and adjust the
strategy accordingly.
Truth be told, my research highlights unexpected findings concerning
diversity. Attending to cultural, national, regional, and faith-based
differences does not add a great deal of value to the effective functioning of the organization. This suggests that a great deal of corporate
money is wasted. An initiative to have more women in the senior echelons of a company is meaningless if fundamentally the companys
culture does not embrace diversity of thinking. An open-minded
approach does not work in a narrow-minded organization.
Developing a culture of diversity of thinking enables the organization
to better engage with a wide variety of agendas and interests and integrate them in order to enable the pursuit of the mission of the
enterprise.
Diversity of thinking allows these organizations to see the world
through the eyes of their stakeholdersemployees, customers, suppliers, shareholders, local communitiesand to respond to its ever-changing nature. Diversity of thinking provides them with the eyes and ears
to comprehend and capitalize on their business universe. It is, I believe,
an approach that allows organizations to execute on a global strategy.
Global thinking
The word global is key to any modern understanding of diversity of
thinking. The context for the success formula to be delivered is now
truly global. Organizations are global. Leaders now have to be global
in outlook and experience. In her book, The Culture Map, Inseads Erin
Meyer makes the interesting point that being a global executive was
once the preserve of the chosen few who traveled the world, but now
it is much more generally experiencedglobal managers may never
leave their desks but can be emailing, Skyping, conference calling, and
communicating with people from other cultures. We are all
globalists.
Many of the leaders I interviewed had riveting stories about how their
international assignments, projects, and experiencesnot to mention
the challengeshad shaped their leadership. It is from their diversity of
background and experience that people develop a unique viewpoint,

which fosters diversity of thinking. It is diversity of thinking rather
than gender, race, or faith that is the most powerful and beneficial
element in an organizations ability to sustain success. Through penetrating diversity of thinking, gender, race, and faith are harnessed to
their full potential.
Take Jeff Fettig, chairman and CEO of Whirlpool:
I grew up in a small town in Indiana, and I jokingly tell people that for
18 years Im not sure I ever left the county! Certainly, I was never outside of a two-state radius. And then my first ten years at Whirlpool I
was really travelling, living all over the US and as we began to execute
our globalization strategy, I was in the opening wave of US expats. It
certainly helped me and shaped my thinking, but it also helped the
company as a whole.
Weve always, even way back then, talked about diversity. But, once
you travel and, particularly, live abroad, you are immersed in different cultures and learn that the US is pretty insulated, and doesnt
necessarily always have a good perspective of what happens outside
our country.
So, what did Jeff Fettig learn?
You learn that there are different ways of thinking about thingssome
you may agree with, some you may not agree with, but nevertheless,
they arent necessarily right or wrong, theyre just different. And
thats when you start really understanding diversity. So, for all those
reasons, it was great for me in my career, as a person. It forced me to
demonstrate, without leaving companies, that you could operate in
very different businesses, because our businesses outside the US were
completely different than the businesses inside the US. So, you get,
in a way, multi-company experience, within the company. And it just
so happened that was a critical part of our strategy, so I was fortunate to be where our strategy was being enacted live.
I think theres a great myth that there are all these cultural differences between people. And my view is that there are cultural differences,
but not with peopletheres just cultural differences with cultures,
and people are peopleand that a best practice that works in one
part of the world, will likely work in other parts of the world. Weve
got 25 years of demonstrating that thats true. If you respect cultures
and respect people, then you will do well anywhere in the world.
Diversity plus
Given such role models at the top of most large organizations, it is
surprising that encouraging and enabling diversity is still an issue of
discussion. Even in the second decade of the twenty-first century, many
corporate boards remain astonishingly lacking in diversity.
The debate about diversity tends, inevitably, to become bogged down
in how manyor how fewwomen now sit on boards. This is undeniably important. But, despite all the publicity this issue attracts and
the introduction of quotas in some countries, the figures remain low.
According to research by Heidrick & Struggles in Europe, the proportion of women on European boards is 17 percent. This figure is higher
the further north you move. The lowest proportions are in Portugal
(7 percent) and Poland (8 percent). The more positive news is that the
trend is upward. The proportion of women on European boards has
increased by nearly 70 percent over the last four years. It is also notable
that women are more likely to fill the roles of non executive
directors.1
Age is another area of debate explored by the Heidrick & Struggles
European research. The reality is that the people on company boards
tend to be those who have accumulated years of relevant and useful
experience. In Italy and Spain, around one in six board members are
over seventy. The Heidrick & Struggles research shows that the overall
average age of board directors is 58.3. Chairmen tend to be in their
sixties and CEOs in their early fifties. Over a third of European board
members have some form of CEO experience.
Boards are also becoming more international in their make-up. The
proportion of non national directors on boards is 30 percentup from
23 percent in 2009. Companies are increasingly eager to add board
members with experience and expertise in Asia.
The will to change appears real. In its European research, Heidrick &
Struggles found that a total of 63 percent of its survey respondents
rated a diversity mix as being important for board effectiveness.2 If

boards are to be more alert to the external environment, their make-up
must mirror that environment. You need a diverse board, and what I
mean is diverse in mind. All questions are asked and they need to be
asked from different angles, stated one internationally experienced
chairman of a global multinational.
Of course, it is one thing to be willing to build a more diverse board and
quite another to actually do so. Heidrick & Struggles surveys show that
nearly two-thirds of directors find it difficult to hire well-qualified
ethnic minorities and more than half reported that it was hard to hire
qualified women directors. Nor is there widespread trust in the mechanisms for fostering diversity. The Heidrick & Struggles European
research suggests that among men on boards, only 13 percent support
quotas compared with 41 percent of women directors.
Board members argue strongly that diversity for diversitys sake is
dangerous and likely to be self-defeating. Instead, diversity must be
rooted in meritocracy and the attainment of business goals. The needs
of the business drive diversity.
And more diversity appears to be an unstoppable trend. Boards will
also need to widen their lens beyond executives with operating experience and look for diverse candidates who are in functional roles, former
government or military leaders, who serve not-for-profits or are entrepreneurs, predicts the Heidrick & Struggles report Bringing Asia onto the
Board.3
Components of diversity
My study breaks down diversity of thinking into five components:
A passion for diversity of thinking
The desire to search for something new and escape from routine and
predictability, which inhibit the wish to explore, is the first sign of
possessing a passion for diversity of thinking. Leaders with such a
passion often hold many interests and are able to converse across a
number of subjects. Their presence attracts welcome attention as they
are able to impress others, quite unintentionally, with their range of
knowledge. As one senior Chinese executive said to me, John is an

interesting person to do business with. We do not just talk numbers
and results, but have conversations across many fields. My people have
really taken to him. Its his insights into the Chinese psyche that they
find most attractive.
Ed Rapp of Caterpillar told me of his background:
I hail from a very, very small town in the Midwest with a population
of 700 and I had three older brothers that went into the family business. By the time I got there I decided the business just wasnt big
enough for a fourth and convinced my parents to let me go to college
30 miles down the road at the University of Missouri. I graduated
from there in 1979 and the interviewer from Caterpillar came on
campus and I researched like everybody does for a job interview and
what really intrigued me was Caterpillars global operations. I asked
the guy on the interview, if at Cat it was really possible to experience
the globe. Ive used his quote a thousand times and he said young
man, Caterpillar is a company where if you work hard and apply
yourself you can see the world and you get paid to do it. Thats what
I have been doing for the last 35 years.
But adjusting to global cultures is not as easy as it seems. I went
through three stages of cultural diversity training. Stage one was
why dont you guys just do it my way and this is going to be a lot
easier. It was not a very successful stage. Stage two was to understand
the differences in how people from Northern Europe look at an issue versus someone from Southern Europe or Latin America. But
phase three and I think probably the big benefit of spending as much
time in Europe as I did was understanding that cultural diversity is
good for the business. People will just look at things from a different
angle, they protect you from your blind spots so I think its debate
and discussion based on the knowledge they have in the business
but also the fact that they will just look at things from a different
perspective than maybe I will.
The best leaders are open to new experiences and perspectives. They
have a passion for learning about themselves and discovering the world.
They develop in stages, but they do develop a worldview as well as new
views about themselves.
International exposure
Having international exposure is not pre ordained. Many of the leaders
I talked to had actively sought it out. What I found amazing while
talking to business leaders throughout the world was the global
momentum of their careers. It was not that the careers appeared pre
determined, but once they got moving they appeared to take on a life
of their own. Take Sam Su of Yum! Brands in China. This is how he
explained his career:
My family is from mainland China, but I grew up in Taiwan and
finished all my education up to university level there. I served in the
army for a couple of years; then I came to the United States to study
for an engineering degree at Penn State. After two years, I went back
to Taiwan and worked there. I worked for a petrochemical company
for three years, and then I decided it wasnt the career I wanted, so I
came back to the States and studied at Wharton. I got an MBA there,
and so re-started my career. I was recruited by Procter & Gamble for
their international business. I went to Germany and worked there
for three years to get sort of certified, and became a brand manager.
Then I was sent back to Taiwan. And so I worked for another three
years at Procter as a brand manager and associate. So then in 1989
I decided that was enough.
I joined KFC International, first in Japan. I was interested in what
was happening in Japan and we had a very successful business in
Japan. And then things changed. After six months they had a reorganization and I was asked to move to Hong Kong. So I became the
marketing director of Asia Pacific. And because of the reorganization my territory expanded to include China, so I came to China at
the end of 1989. With my boss as head of Asia Pacific we decided
that China was mismanaged, so we changed the management team.
I became, as a side job, acting general manager of China. The China
GM job became bigger and bigger over time, so I stayed on and
gradually quit the other marketing director responsibility. Along
with that change, my territory of responsibility continued to shrink.
I was at one time the head of North Asia, and then shrunk it to
Greater China. Eventually I shrunk it to only mainland China. But
the fact mattered that the China business was growing so much, I
didnt get paid less, I got paid more. I also got a bigger title, and so
on and forth. So 20-something years later Im still here and Im now

the chairman-CEO of the China region.
For successful leaders, truly global experience is now essential but, like
Sam Su, they have to go looking for it and be able to maximize its
organizational and personal value.
Open communication
I asked Catherine Livingstone, chair of Telstra, about the make-up of
her board:
The first order value is challenge. Theres no one on the board whos
a shrinking violet, thats for sure, and they will challenge from different perspectives. Ive just been through five hours of challenge
and the outcomes are better for it. And because theres a good relationship between the board and management, management doesnt
feel threatened by the challenge and in fact management is happy
to push back and then the outcomes are better. There was one particular issue we discussed today where management put forward a
recommendation on a particularly tricky situation and some of the
board members thought that was the right thing to do and others
didnt. As a result of the challenge weve actually ended up with a better solution, a solution that no one had thought of initially. Well, we
hope its a better solution, but I think the board add value because
they come from different perspectives, different industries; its the
diversity of thinking. So different questions that they ask might not
be challenges, but maybe just questions for further understanding.
But again that leads to evolution of ideas.
Kevin Lobo, chairman and CEO of the Stryker Corporation, was born
in India, grew up in Montreal, and has worked in the United States and
Europe. What knowledge had he acquired along the way?
I learned to be more open-minded by living in different countries,
as well as changing industries. I became more receptive about what
business models are needed to drive success, and you just dont use
the same hammer for every nail. That is a big advantage.
I also adapt to different styles. You become, much more flexible as
a leader, and you become more insightful, to look through style, to
understand what really are the drivers of the business, and which
people can be successful, and you dont have a cookie-cutter view of
talent, when you do your talent assessments.
We have board members with many different backgrounds. It gets
back to open-mindedness, so if someones challenging, I dont start
off with a defensive attitude, ever. The term we use in American
sports is a home game and an away game, and if you havent, been
in away games frequently in your life, then you tend to think youre
right; you tend to be defensive, and more ingrained in your approach. If you have spent a lot of time in away games, in foreign
environments, then you just have a different way of operating, where
youre more prone to listen and be open to different suggestions. It
doesnt mean youre not confident, but theres a different level of
open-mindedness.
For Kevin Lobo, exposure to different cultures and ways of life created
the open-mindedness that induces a positive attitude to challenge. He
continues:
The biggest surprise coming in as a new CEO was how much time
you get to spend with your board, its vitally important, and its been
very rewarding. The board members share their unique perspectives
with me and give me advice about how I could be more effective,
about how we can work together and ultimately how we can increase
shareholder value. I have found that my time with each board member and the entire group has been very, very helpful. So when I am
traveling, Ill drop in and see a board member and I think that time
is extremely important, and frankly, thats helped build trust among
the overall board, knowing that I have those individual relationships, and they can talk to me about something outside of the board
meeting.
The theme of trust was reinforced many times over in this study. Robert
Swannell of Marks and Spencer captures the point admirably:
Trust is a very important component. The people who I was advising
[when I was an investment banker] and the people who worked with
me trusted me in many different ways, either with their particular
personal issues or their concerns for the company. I think in many
ways these experiences set me up for being a chairman, listening, distilling, fostering trust. These are the key qualities you need.
Roberts use of language is indicative of the trust he has generated; note
his expression working with me, not for me.
Vadim Makhov, chairman of the OMZ group, a Russian organization,
is in his early forties. He shoulders the responsibility of upgrading and
repositioning the nuclear and other engineering assets of Russia: a most
sensitive and demanding undertaking. In two-and-a-half years, he has
achieved what his predecessors could not have hoped to realize. Vadim
embraces diversity. His conversation can switch from the management
and leadership of OMZ to global politics to philosophy, and to the
improvement of the quality of life of the Russian citizen. For all this, he
is action-focused. Explains Makhov:
The customer normally gives us the projects which nobody else can
doeven the best competitors. This normally takes three years by
international standards; they want it to be delivered yesterday. So
one of the very big projects weve got was when all of our foreign
competitors simply refused to participate because they say we need
at least one year more. We were the only ones who participated and
now were managing it. During this project, this big customer told
us okay, if you make it you would pass the test so you would earn
money on further projects. You passed a very tough test. In many
other projects its the same.
Talking in Dubai with Georges Dabaghi, the general manager for
Vubiquiti for the Middle East and the CIS countries, I asked which
place he called home.
Thats a difficult question! Ive been wandering for 23 years during which Ive lived in five countries, he replied. I dont know, Im
tempted to say home is where the heart is, but I find also home is
where the mind is. Home has shrunk. Home lives in the internet, in
your mind, and in your heart. As you walk down the street, you have
the world at your fingertips, all these restaurants, all these cultures.
Exposure to different cultures stimulates the learning of how to integrate in different environments. This surfaces a deep instinct about
working with others and gaining their respect. Key to this is open and
frank communication. The message is simple: open up.
Engaging with the center

Diversity of thinking is an important element of the relationship
between the corporate center and its operational centers. The interplay
between the two is often fraught and unproductive. Diversity of thinking requires the presence of open and honest communication.
Positioning for competitive advantage in different localities is necessary but may not be in keeping with the demands, protocols, and processes of the corporate center. However, the targets and KPIs require that
the operating business develop the necessary skills to be differentiated
within its country or region. The operating business may clash with the
systems of the corporate center and the need for consistency of practice
across the enterprise. There is no easy way round this other than managing upward. This is a distinct skill. It requires patience and the time to
develop more intimate relationships with the key corporate directors,
particularly those running support functions.
This is easier said than done. But that takes time and means I am away
from my customers and the key people in the region. How can I do
both, as doing one may lose me business and doing the other alienates
me from the center? one executive asked me as I explained the need to
engage with the center.
Expecting diversity of thinking from those in the region is insufficient.
The corporate center itself needs to exhibit its own diversity of thinking
and display an understanding of the varying contextual demands in
each of the regions and business areas.
David Cunningham, president of Asia Pacific for FedEx, holds the
corporate center of his organization in high regard:
In the case of FedEx Im obviously biased, but I think its an iconic company. There are few places that Im aware of where you have
the opportunity to work with an individual to create an industry in
which you work and is as engaged today and is as passionate today
as he was, you know, 15, 20, 30 years ago.
Regretfully, most senior managers do not share David Cunninghams
experience. My research notes are littered with complaints and concerns
about the lack of diversity of thinking at the center and the blockages
that have to be constantly renegotiated.
The problem, seen from the viewpoint of the general manager, is often
that the center wont listen. He or she is constantly having to explain
the reality on the ground to people at corporate HQ who simply dont
listen. There are two sides to every story, of course. There are examples
where the GM is unable to see the bigger picture or could be achieving
more than they are. But, and this is the point, if successful organizations are those that welcome and encourage diversity of thinking, then
ignoring the point of view of a key layer of senior managers is misguided.
Worse still, it is likely to lead to a disconnect between the people who
are creating the strategy and the people responsible for making it work
on the ground.
Listening first and making managers feel they have been heard is an
integral part of evidence-based leadership. This does not mean that all
evidence and opinion is taken at face value. But it should mean that
that they are taken into account. General managers are prone to the
usual human frailties of ego and arrogance, but they have an unrivalled
perspective on how the strategy will play out in their markets. They
should be included in the conversation, not shut out of it.
One senior general manager told me:
I run probably the highest performing and most cost-efficient part
of the company. In Asia I have fewer people than anywhere else, but
I make more than twice the profit of any other region. I am seen
and sometimes even openly accused of being a renegade. I just do
not fit with the systems and processes of the company. I just do not
need these costs and that is what irritates my vice president and colleagues. When I retire, I foresee one of the VPs coming to my office
to, in their eyes, to put right what I have done wrong. Cost will increase, the business will be run down and then they will blame me.
What keeps me here is my pride and my need to protect my people.
These high performers will be first to go when I leave.
He may or may not be correct in his analysis. But he clearly feels strongly
about the situation. The question for the senior management team is
how to respond. How can his passion be channeled in a productive
way?
Diversity of thinking in organizations is only possible when the culture
of diverse thinking is promulgated from the top of the organization.
When this does not happen, the corporate center is likely to impose
disciplines and protocols that at best provide little value to the businesses and at worst alienate the critical business heads.
Ask the following four questions to the key business heads as a test of
the level of diversity of thinking at the center:
What value does the corporate center provide?
Does the corporate center support your pursuit of competitive
advantage for your business?
Do the processes and procedures of the corporate center support the
doing of business in your area?
Do you as a business head feel part of the top team?
Simple yes or no answers will quickly indicate the level of diversity of
thinking, which stimulates engagement between the corporate center
and the operating businesses.
For Jeremy Hunter, president of the Henkel Group in India, the answers
to the four questions are all a resounding yes. He explains:
I get a huge amount of support ... a huge amount. And it comes in
different ways. So we operate a matrix management system. I sit as
the president of the Henkel group here in India, but I dont have
all the levers that I pull. So, nominally, at least half the people on
our management team report outside of India. Finance reports to
regional finance, supply chain operations reports to regional operations and so on. It clearly works but only if both parts of the matrix
work well together. We get regular visits from people that run the
functions, run the supply chain, run operations, run the different
SBUs. I get a huge amount of support from the regional guys in
terms of investment, in terms of commitment, then thats also been
very strong.
The team
The selection of the right people for the top team is increasingly critical. This must be based on a desire to learn rather than tokenism.
Attracting a team made up of people with diverse skills, experiences,
and outlooks enables the team to avoid group thinking and to make
the right decisions for the business. Diversity of thought is the key.
This was brought home when I was talking to Doug Elix. He recounted
how his cultural antennae had been developed over his career. In Asia
he recalled giving an award to one of his staff for doing an outstanding
job. Routinely, he presented the award in front of the other members of
the team. Afterward, the recipient came to him and asked him not to
do so again. For the recipient, the public recognition was embarrassing. He thought the team should be acknowledged rather than an individual. Leaders have to be sensitive to such cultural and personal
issues.
Elix expanded the point:
To me, when I hear someone talk about cultural diversity, I think of
it not only as diversity of people, employees, managers, board members and so on, but also as diversity of the markets in which you
operate.
Its a globalized world, its highly interconnected, and any mediumsized business is probably never going to be able to say they operate
in a local market and they only have local competitors. There are
going to be global competitors in any sizeable market. So, even if
you dont have designs on going out to markets outside your home
market, you have certainly got to understand how others can behave,
and get yourself competitiveand to be competitive, youve got to
understand how they think and how they manage and how they are
likely to approach a market.
If you go back say 30 to 40 years and consider America. Had they
thought more about Japans mind-set, then the future of their electronics industry may well have been different.
It is one thing for the top man or woman to applaud the diversity in the
enterprise, but the real test is the opinion of the general managers and
key country heads.
Heres the view of Stephan Gerlich who was managing director of Bayer,
India:
I believe that a company like ours does not need to force cultural
diversity, because our company is just a mirror of the society where
we operate. We reflect the society were in, and were catering to that
as a company. And therefore, that cultural diversity within India
is natural. We have people from South India working and living in

north India and that is not obvious because normally family ties
dont make these moves easy.
For many decades we had a very German management in Germany.
With more globalization, naturally you find today a much more diverse management- Bayer AGs CEO is Dutch-American; our CEO
for Bayer crop science is from Ireland; the head of pharma in China
is from India. I mean, an Indian in China, who would have thought
that years ago? This diversity, I think, has come to us very naturally
because of our global setup and access to talent all over the world.
You just have to pick the best man or woman for the job.
Stephan Gerlich epitomizes the quality of diversity in Bayer. As he so
rightly points out, diversity is not only good for business, it makes
business!
Making sense of diversity of thinking

So what do the statistics from the latest, not yet published, research
that I have conducted with Heidrick & Struggles say (Figure 2.1)?
Actually, the stats say much the same as the senior executives I talked
with. Diversity of knowledge, experience, background, and diversity of
contribution are at the top of the list when it comes to what organizations require of their leaders. In order to make sense of the range and
diversity of challenges, developing a global, overarching mindset is vital.
Only then can those who think differently be appreciated and the space
made to attract a diverse group of people. Although important, gender
and nationality are at the bottom of the list.
For the high-performing organization, the message is that it matters
little who you are, or where you have come from. What is critical is to
have developed that necessary diversity of thinking that appreciates the
nature of challenges and dilemmas and the engagement necessary to
work through contrasting agendas.
Diversity of thinking is at the heart of this book and of the success
formula. It is the sense-making part of value creation. There are three
distinct elements to it.
A diverse blend of knowledge/expertise

A diverse range of different experiences/backgrounds
A diversity of contribution
A global mindset
Members who think differently
A diverse group of people
A diverse gender mix
A diverse nationality mix
1
The Executive/Management Team
The Board
Figure 2.1Diversity.
First, diversity of thinking allows an organization to capture multiple experiences, context, and interests.
Second, that data may be used as evidence to understand the opportunities and threats facing the organization if it pursues a given
course or strategy.
Third, the evidence is interrogated (teased out, tested, and challenged) as the basis for strategic decisions.
An important point to recognize here is that evidence may be rejected
or set aside in the interests of the organization, but the process by which
it is collected and considered must be fair and handled with respect. It
is the job of senior managers to decide which pieces of evidence are
relevant and important. If people feel they have been heard, they are far
more likely to engage and align with the strategy.
Diversity of thinking: In summary

Diversity of thinking is fundamental to strategy and execution.
No diversity of thinking = no overview
No overview = no ability to recognize how to work through the
tensions between Engagement Alignment
Diminished understanding of the dynamic between engagement

and alignment leads to comments being seen as criticism and negativity. Good people leave.
No diversity of thinking = no talent pool
No talent pool means there is no effective strategy. If this is the case,
then it matters little what the relationship between Strategy,
Engagement, and Alignment is. All three are deficient.
Key questions
Do you display a diversity of thinking mentality that not only challenges but also excites the others around you?
Do you display a diversity of thinking that gives others the confidence that you will be able to pull together the multiplicity of views
and agendas to maximize competitive advantage?
When your diversity of thinking is challenged, are you willing to give
air time to the views of others?
Chapter 3
Discipline 1Evidence
Key to creating a culture built on diversity of thinking is the role of
evidence. Evidence-led leadership is about encouraging and rewarding
diversity of thinking as a means to engage with different parts of the
organization and create alignment. It recognizes that listening to multiple points of view and responding respectfully is an integral part of
building and sustaining the coalitions required to implement the
strategy.
Evidence-led leadership involves seven distinct disciplines. They can be
categorized as the following:

Evidence
Mission
Alignment
Engagement
Leadership
Governance
Wisdom
Let us begin by looking at evidence. It is worth stressing that none of

these disciplines can be viewed in isolation. All are dynamicallyand
often messilylinked. They exist in a dynamic flux of context and relationships and a host of industry and organizational dynamics. For
example, my research suggests that it is a big mistake to view mission in
isolation from the other disciplines.
Pragmatic science
Im a believer in science, or you can say engineering, approach to
decision-making. Im more a science-based decision-maker. Im not a
passion-based decision-maker, Sam Su, chairman and CEO of Yum!
Brands in China, told me. I asked Sam what he meant by science.
For me the basis is always the consumers. You have to look at the
consumers to see what they want and also look at your competitor to
see what they have done. Then you look at what you have done, and
try to see whether there is any potential gap and how you can do
better.
Sam was not alone among the people I interviewed in pinning his faith
in a more scientific approach, but which was at the same time, not
blindly analytical. Perhaps it could be described as pragmatically scientific: based on facts, focused on delivery.
The starting point of the success formula, and for executives like
Sam Su, is evidence. The importance of evidence was really brought
home to me as I looked at stakeholder value. The leaders who achieve
sustainable success by pursuing long-term value creation do so by
listening to their stakeholders. As the leadership coach, Marshall
Goldsmith puts it: The more successful you become, the more helping
others win is how you win!
These leaders are passionate about maximizing the interests of all the
internal and external stakeholders involved with their organizations.
Displaying respect and concern for all parties, irrespective of any
misalignment of objectives and expectations, is central to the delivery
of value and ensures the long-term future of the company, thanks to
the continuing deep support of stakeholders.
The central difference between the delivered value and the perceived
value mindsets is the attitude toward evidence. The support from my
chairman is tremendous, but he emphasizesI want to see the evidence!
one CEO confided. It was pure evidence, another CEO told me, talking about how his organization developed a new strategy. We had some
fundamental issues. We then formed a group which worked together to
coherently bring the other directors to our point of view and then move
the company in the right direction.
In the most successful organizations, leaders interrogate the evidence.
Factual detail is the fuel of constructive interrogation. Evidence
captures the merit of the case. Evidence draws out the counter arguments, distinguishing assertion from well-balanced argument. A clear
display of point and counterpoint enables leaders to reach a shared
and balanced view.
Discipline 1Evidence 45
Of course, leaders often use different languages to describe what they

mean by, and how they gather, evidence. This is the take from Telstras
Catherine Livingstone when I asked her about evidence:
Its trying to look for the right evidence, look for patterns actually; more patterns rather than evidence. Its a bit more messy than
your description, but its not just letting things happen. Its about
thinking forward. Whats the agenda going to look like? Whats
our program of work for 12 months? Is it base case? Does it move
around? Its about having a view about where were going to spend
our time, is the balance of time right, making sure management
knows what we want to look at and when, so they can organize
themselves.
So, what do we mean by evidence (as opposed to analysis) and why are
so many organizations averse to evidence?
Evidence-averse
It is a paradox that in the age of Big Data and analytics at every corner,
so many important decisions are based on prejudices, preconceptions,
entrenched beliefs, outdated views of the world, and egos.
Strategy formulation is often highly politicizeda factor frequently
driven by consulting firms. In working with organizations throughout
the world, what we see repeatedly is the CEO going through political
machinations trying to find support for his or her strategy where there
is scant evidence to support it. The research shows that there always is
some evidence to partly support the view of the driven CEO. However,
this evidence is never fully tested and remains unchallenged by the very
people who have a strong grasp of what will and will not work, and they
are the general managers below the top team.
Decisions may be (and frequently are) based on one who is championing a strategy rather than analyzing the evidence. Typical behaviors
include trying to disincentivize evidence-based managers. One senior
executive said of a general manager: John is here to confuse us with
evidence. His reaction was to try to undermine and ridicule a manager
for wanting proof. I wonder how many people challenged Fred Goodwin
as he led RBS to ruin? If they did not, why did they not? Even if you are
in the right, you and your ideas need to be constructively challenged.
Leaders of organizations that sustain success over a long period recognize that gathering evidence has two purposes. First, it is a way to understand what is really happening in their markets and in their operations
in order to create a strategy to deliver value; and second, it is a transparent process to build alignment and create engagement to gain traction
for the strategy (issues we will explore further in Chapters 5 and 6).
As we saw in Chapter 1, the success formula is made up of these three
elements. How they are combined determines whether they generate
perceived value or delivered value. How the organizations leaders
approach evidence determines which type of value equation they follow.
Simply put, evidence-based leaders seek out and reward multiple points
of view (diversity of thinking), while proposition-based leaders are selective, filtering out, and punishing dissenting voices and only listening to
evidence that supports their point of view.
Evidence-based leaders gather evidence from stakeholders to create
engagement and alignment, and to adjust the strategy if necessary to
deliver value. Proposition-based leaders prefer to drive the strategy
through the organization using whatever means are necessary, ignoring
or removing naysayers and dissenters. These leaders believe that the end
will justify the means, while the evidence-based leaders understand that
the means is vital to achieving the end.
At the heart of evidence-led leadership is the ability to interrogate
evidence in order to facilitate engagement and alignment. These leaders
seek to understand how the strategy looks from different viewpoints.
Are there obstacles that the leader is not aware of? Does the Chinese
operation face different operational or cultural challenges that mean
the strategy will fail? Is the southern European market more resistant
to the new approach? In interrogating the evidence, the leader also
signals that he or she is prepared to listen to the people on the ground
and consider their perspectives (creating engagement and alignment
with the strategy).
Not all leaders are evidence-led, of course. As referred to in the introduction to this book, my research indicates that leaders fall into one of
three camps: Leaders who
replicate reproduce a previously successful strategy/value proposition.

formulate take a gamble on an unproven strategy/value proposition.
are evidence-led create a value delivery hypothesis and interrogate
it with evidence.
Lets examine each of these styles.
Replicate
Replicate leaders are those who have a model of success, but one that is
based in the past. Unable or unwilling to change, they draw on prescriptions already learned as a way to now carve out the future. What is missing is that sharp insight and analysis of context. Where is the replicate
leader most obvious? At dinner.
Imagine a two-day strategy retreat, bringing together the top team and
the board. On the surface, it has been a success. Day one: key issues were
discussed. The board mingled with the management. Each learned
from the others experiences. However, a feeling pervaded the management team that what was discussed and almost decided would not take
place. The evening dinner is equally enjoyed by all. The main meal is
over and the coffee and the after-dinner drinks are being served. The
CEO starts by thanking everybody for making the day so successful. He
emphasizes his great pleasure at being at the helm of such a great
organization. It is what he says then that shows his true leadership
quality. The stories start, but they are about the past. Successes and
failures merge into one. The humility shown about lessons learned is
equally evident, but someone not mesmerized by the stories would be
able to recognize the pattern because the same pattern runs through all
stories. The message so sensitively hidden is that what worked in the
past will work here. The delivery of that message is enticing, and that is
why replicate leaders go from one key role to the next. They have a
capacity to charm but not the ability to excite with a vision for the
future.
Formulate
In contrast, the formulate leader excites with his or her high IQ. His or
her analysis of the present is astounding, in both its breadth and
detailed accuracy. The case for moving forward acknowledging the
challenges, hurdles, and benefits to be realized is compelling. What

others remark is, What a brain!, What a person!, How fortunate
we are!
Where does one see formulate leaders at their best? Probably informal
in style and willing to attract an audience, formulate leaders are at their
most persuasive at the start of a day over a cup of coffee. An informal
chat in the open coffee area, even of 5-minutes duration, can leave those
close by highly enthusiastic about the future. Plans, aspirations, strategies, and even tactics are integrated into an exciting vision of what is to
come. For the more discerning listener not charmed by intellect and
conversation, one factor is likely to remain undiscussed: whether these
ideas and plans have been tested and what quality of evidence has
emerged to indicate their viability. However, imagine asking about the
evidence available, during these few minutes. Whatever the reply, the
audience is likely to be dismayed by the insensitive nature of the question. In fact their whole morning, even day, could be spoilt by the impertinence of the question, Will it work? So, no one asks and the formulate leader pushes forward in the knowledge that he or she has the full
support of those around.
Evidence-led
Evidence-led leaders are not driven by being their best in the morning
or evening; they question the data all day long. To some, they may seem
cold in style. These leaders interrogate the issues through the data, but
never through the person. They recognize the emotional (soft) evidence
as well as the intellectual (hard) evidence. Stringent, they seek to test
any strategy before it goes live. Evidence is their essence.
Catherine Livingstone describes her experience as a CEO at a previous
company:
It was ultimately evidence that persuaded the managers that we
needed to change. It was getting them to accept emotionally that
what had been good performance in the past was not going to be
good performance in the future. That was a very hard thing. It was
probably easier for me to prosecute the argument because I was new
as the CEO so a lot of things were changing. Had I been the continuing CEO I think it probably would have been a lot tougher.
Uniparts John Neill discussed how to integrate different strands of

evidence. Darshan Mehta, president and CEO of Reliance Brands, goes
one step further and emphasizes the power of evidence as detail.
Evidence without detail is no evidence at all. Says Mehta:
A very execution and detail-orientated mind-set is something that
we tend to lay a lot of focus on. We believe that with a continued
and sincere focus on customer delight rather than on the customer
wallet, one would make a long-term hostage out of a customer who
otherwise is used to flirting with brands. Given the young demography of the Indian consumers, who are still at an early stage of making brand choices, this is a winning long term business strategy at
Reliance Brands.
Knowing the unknowable

One interesting aspect of the importance of evidence is that often leaders are dealing with issues where their knowledge is limited. If you are
CEO of a pharmaceutical company, you are unlikely to be able to have
an especially informed debate with your researchers. Leaders in an array
of technology industries face similar challenges.
Ren Obermann, CEO of Deutsche Telekom, conceded as much when
we spoke:
Its sometimes hard to provide evidence when youre thinking
about product and technology choices for the future, i.e. when you
are part of a technology standardization community, or when you
have to decide about implementing a new mobile operating system
into your roadmap. Of course, you collect as much information
and forecasts as you can about what is there, which problems can
be resolved, what will be the acceptance of this new solution. But
often what you call evidence is actually a lot of projections from
other people/experts. It is not evidence. They are just people trying
to project the future. And you aggregate all of this and you think
then thats the truth.
So yes is the answer to the question of whether evidence is important, get as much as possible, but still, dont ignore your own intuition when taking decisions.
Evident characteristics
The leaders I talked to who had an ability to assemble and maximize
evidence for the greater good shared a number of characteristics:
Belief in evidence
Leaders who are evidence-oriented live that as a way of life. It is their
philosophy. It is what has made them successful. There is nothing
casual or opportunistic in their approach. It is part of their philosophy
of life.
Living and working with evidence so that it makes a powerful difference to the running of the organization needs to become a habit. It is
about practice, practice, practice. As Uniparts John Neill explains:
Weve been building the Unipart Way system for 25 years and on that
journey weve tried many tools and techniques, some of which work,
some of which dont. Some work but they dont work in harmony
with the others. And so to try and synthesize 25 years of development of a body of knowledge is not easy. Its a bit like saying just
explain how Beethovens ninth works. It requires the right instruments, the musical score and dedicated musicians practising with all
of their instruments over many years under great coaches to become
very good individually with each instrument and then collectively as
an orchestra.
One of the most enthusiastic practitioners of evidence-based management I encountered was Sam Su of the China Division of Yum! Brands.
This is how he explained it to me:
Its much easier to deal with facts. But facts can be sometimes biased,
because everybody has their own feelings. So you have to check what
are presented as facts to make sure they are unbiased facts. Thats
not usually easy. When people are passionate about something, it
can be a little more difficult. A passion-based decision is very dangerous. There can be emotional traps.
So I always ask the passionate people to check their gut. Why do they
feel so strongly? Try to find out what is the real reason or what are
their data points. Passion is usually based on some personal experience, and we all somehow feel that whatever I experience matters more
than what I read. If I never experienced it, it will never mean as much to
me as something I experienced. Thats just human nature. So once you
realize that someone may have a strong passion about this, it may still
be able to be broken down into data. What have you observed? Why do
you feel so strongly about that? What did it teach you?
If you find out whats the source of that conviction, that passion,
you generally discover something. And then I say, I know why you
feel this way. And sometimes I just say, okay, if I follow your logic
it doesnt really make sense. I know you feel strongly, but if we do
it your way then there may be undesirable consequences, and sometimes that will make them think twice. But it is for the benefit of
the whole room that it is said and they realize every point of view
has value, and is being properly analyzed. And I will do an analysis
to show people why one option has a better chance for success than
another option.
They start evidence gathering from day one
Leaders convene conversations. They set the stage that enables others
to develop solutions, says Rosabeth Moss Kanter.1 It starts on day one.
The evidence challenge is never clearer than when a leader first takes
over. There are a host of books on making an impact. Leaders are
expected to change the world in 90 days, 100 days, and so on. But changing any organization without evidence to back up the need for changes
is a hopeless task. Evidence is the fuel of change.
Kevin Lobo of the Stryker Corporation offered this advice to any new
leader entering an organization:
If a CEO is coming in from the outside, my advice would be to really take the time to meet individually with every member of the
leadership team and with the board of directors to gain insights on
the strategy and culture of the company. Where are they? How are
things really? Whats working, whats not working? Make sure you
test and ensure that there is alignment, and do that diagnostic in
the first 45 days, and be very thoughtful before forming any opinions or conclusions.
If a person is inside the company, its a little bit different. There, I
would encourage a lot more interaction. First you need to stabilize
your team and then build relationships with the board and its critically important to do it quickly. If I had to do it over again, I would
have done that even faster.
They are comfortable with hard and soft evidence
Evidence falls into two categories: hard numbers and rational evidence
about market trends, HR strategic modeling, etc.; and contextual
evidence (soft) about how things work around here. The best organizations gather both simultaneously. But senior managers can find this
threatening because of the implied criticism of their performance that
may emerge. Evidence must go hand in hand with constructive
criticism.
Says Ulf Mark Schneider, CEO of the German Fresenius Group:
We like open debate, its pretty much no holds barred and I think
that we pride ourselves in having a pretty raucous debate at times,
but we are as unified as possible both to the outside world and also
when it comes to then passing on leadership decisions down the organization.
Robert Swannell of Marks and Spencer concurs:
I get that insight by spending time in the business. I encourage the
non-executives to do that as well. I think in a retail business it is easier than in others because you can actually go to the stores. You visit
people who really understand the customers viewpoint and what
products appeal to them. We talk a great deal about the distinctive
M&S culture, embodied in Plan Asimply put its doing the right
thing and I think this way of operating is embedded in M&S, probably more so than in most other companies.
They emphasize the quality of evidence
The quality of evidence is partly determined by the methodology
adopted, but for leaders it is the accurate capture of reality. John Neill
again:
Yes, methodology is important, but surfacing what is really going
on is vital. The outstanding leaders describe what it takes to capture
quality evidence.
First listen to many people and identify which of those hold the critical perspective. The aim is to compare and contrast different realities. Each of those is true, even if they contradict as each individual
believes that to be their thought and is the basis of their actions.
Many leaders told me do not contradict these realities simply use
what is said to go to step two which is identify the questions to ask
the broader population. How well these questions are formed is
critical to the quality of evidence that emerges.
Step two goes to step three which is test these questions as the wording and the tone indicate whether there has been some real listening.
Now Step four, the methodology to be adopted. At this point the
smart leader should have a view on how to use the evidence that will
emerge to realize his/her particular goals. Is there to be a quantitative
questionnaire with the end results, after statistical crunching, being
numbers? How are these numbers to be positioned? Alternatively is
the methodology more interviews and so how will more soft evidence
determine the reality that is to be shared? There is one final step and
that is to genuinely learn something. The simple manipulation of
data to achieve the ends the leader wants does little for engagement.
To admit to feeling that I have really learned something even if I disagree is a big step forward in winning of hearts and minds.
So, we have a very big logistics business, increasingly, around the
world and we have a growing consulting business. So, were big in
manufacturing, logistics and consulting. We have two world-class
factories, which the City advised us to exit 25 years ago. And were
growing our manufacturing footprint. Were halfway through a
30 million investment program for our two factories. So, the business is doing well. Its well diversified both in terms of clients and
geography and, you know, we know that the next five to ten years
will still be a rollercoaster ride.
The evidence for being evidence-led is overwhelming.
They actively listen
Says Strykers Kevin Lobo:
Youre always going to have conflict and different points of view.
Consensus is a nice ideal, but its rare in life if you have people with
divergent thinking, that youre going to be able to reach consensus.

So you really need to be able to have everyones voice heard, and for
them to feel that theyve been heard, and then be able to move towards making decisions. As long as their voice is heard, and I mean,
really, genuinely heard and listened to, debate the alternative, make
the decision and then were going to march forward.
A transactional mindset will not do. The necessity is to make the time
to fully engage. The matter is one of prioritization. Now the space is
created for a diversity of input to be appreciated.
They use evidence as a platform for independent debate
The reality is that evidence is often uncomfortable to confront. The
issues that derail strategy need to be gathered and made publica delicate exercise.
This is how one chairman explained his approach:
Helping people listen takes time. Listening of itself is a skill and that
skill is not learnt overnight. In the company there was no habit of listening. In fact the habit was of challenge, which of itself was fine, but
the nearest we got to listening was when each person politely waited
for the other to finish before they made their point irrespective of
what the other had said.
It took a bit of a crisis to change things. We had really mismanaged the Bulgaria team and so at our next board dinner, I simply
asked, why had we allowed Bulgaria to go wrong? One of the senior non-executive directors said, but it was them who had allowed
it to go wrong. I responded, it is exactly as you said, them, we allowed a culture of us and them. And I also indicated that the management had warned us. The same colleague immediately sprang
back and said, but none of us thought it was important and even
you (meaning me the chairman) did not push it hard. I agreed with
him and stated that it was my fault, but had we all listened we
would have used our considerable experience and knowledge in a
different way.
My board colleagues agreed and so I simply asked for one very easy
discipline to become a habit. Could we please just summarize what
our colleagues have said before we jump in and as we are summarizing could we please consider whether what we want to say links
with the point our colleague has made. We tried. It caused a few irrational moments and also a few laughs, but slowly it began to sink
in that as a board we were sometimes behaving like an unruly group
of fourteen-year-olds. We are still not the best at listening but at least
we will not have another Bulgaria situation.
And, of course, it needs to be understood that all the evidence in the
world may not sway people from a particular course. A leadership team
can always get it wrong or simply listen to the wrong people. All executives have tales of how they were ignored or overlooked when they had
an important strategic insight. Corporations are made up of human
beings with all the frailties this involves.
Ren Obermann, CEO of Deutsche Telekom, recalls a frustrating debate
around text messaging:
It was one of the most fantastic revenue streams. But some of us
knew it would come to an end at some stage. Some of us saw the
internet revolution coming many years ago, and that IP messaging would eventually replace, or at least cannibalize big time, the
established model. I had controversial discussions with our mobile
managers at the time, trying to convince people to find alternative
models by which we could charge fair and bulk prices, like $5 or so
for as much as you can use packages for IP Messaging like todays
Whatsapp. I said, lets cannibalize ourselves with a much more convenient and price aggressive model before so called over-the-top
players could attack.
The organization constantly pushed back and I did not manage to
get the key people behind it. I guess the reason why I didnt was because I didnt show them that there was a good business future if we
did this. I just told them that customers will eventually walk away
from the established model. But I didnt give them a clear enough
picture as to what could excite our customers even more and how
wed make money from it. Or, alternatively, if there isnt enough
money to be made, face the truth and say this business-model will
be going down the drain over time. We have to aggressively build a
new business-model for messaging services, but the margins will be

much lower and we have to deal with it. Still, this is better than losing it completely.
Evidence facilitates the reaching of an informed view. More than that,
well-considered, detailed evidence acts as the basis for sound teamwork.
Trust in each other as team colleagues is insufficient. Sharing a platform of detail stimulates discussion on the contributions necessary to
effectively execute strategy. Each member of the team has a role to play
in determining the future.
Ren Obermann helpfully outlines what happens when insufficient
attention is given to being evidence-led, project by project. To emphasize the point, evidence-led leaders make that a lifelong habit, and even
then they may falter.
They build an action-focused debating team
In evidence, the debate really is the thing. We look at the difference
between dialogue and debate in Chapter 6. Dialogue is the starting
point for debate.
The big question on my mind at the moment, says Telstras Catherine
Livingstone, is, with large organizations and complexity, how do you
get to the right point in the discussion, or the right point in the level of
detail, so that the board can engage and add value without going into
managements role? If you stay at the top its easy to get comfortable
answers but you may not know what questions you really should be
asking unless you go down. So how, in the material thats presented
and brought to the board, do you manage to enter at that level of detail
so the discussion enters a level where questions can be asked? Now,
when theres a problem of course you do enter that level
automatically.
Boards are like marriages; you can look at something from the outside
and from the inside it can look completely different. So judging from
the outside is really problematic.
Just as with listening, being willing to challenge ideas and strategies
based on evidence needs to become an executive and organizational
habit. As Catherine indicates, that example has to come from the top,
from the chairman, or CEO, or hopefully from both together. A few

years ago, that example would have emanated solely from the CEO,
now the chairman is also key.
They make time for debate
There are also downsides. Evidence gathering can be a slow process and
can be seen as a strategic disadvantage. Leaders may have to accept that
a first-mover advantage is hard to achieve. It is sometimes better to
delay a decision or a move until everyone is on board and all the relevant
evidence gathered.
Ed Rapp of Caterpillar makes the point:
We debate everything from the long term strategy, what are the key
market segments, do we have the right products and solutions, do
we have a competitive manufacturing footprint and supply chain,
are we effectively going to market with our dealers? But, perhaps
the most important question we ask is, are we building a pipeline of
great leaders. As leaders, we have two accountabilities; leave the place
better than we found it and in more capable hands. If we as leaders
do this, the business is sustained over the long haul.
I think the hardest part of any business is making choices. When it
comes to resource allocation the choices you make on where you invest in the business, the choices you make on technologies you select
for future development, the choices you make about the people you
put into key roles, perhaps the most critical choice in resource allocation. Where are you going to make your bets in terms of people,
where are you going to make your bets on technology, where are you
going to make your bets in terms of the capital that you employ in
the business? I think thats probably where we have the most robust
discussion.
The one thing we do as a team fairly well is have a robust discussion
and debate and argue different points of view, but when we break as
a team and go external to the organization we do it as a team. Our
intent is the debate happens behind the door but when we go out to
our organization we adapt and have one voice or the organization
will pick up on it.
A similar view comes from Kevin Lobo who argues that the debate
required to interrogate the evidence requires time:
Our meeting agenda time has changed significantly. We used to have
very little time on our board agendas for open debate, so weve reduced the amount of items by almost 50 percent and allotted more
time for each subject.
This means we actually have time to stop and have different people
voice their opinions. In case of a major decision, well ask each person to give their point of view, and go around the table. If people
arent ready to make a decision, we will have follow-up calls.
It is about being very deliberate and ensuring that everyones heard.
Its an important facilitation exercise and it means being willing to
change your position. Once you demonstrate that the group can
shift direction, then everyone realizes, this process is real; this team,
this company, this leader, is listening to us, and factoring our views.
You just have to walk the talk. Ive been very fortunate that Ive
worked in a lot of good environments where Ive always been able to
voice my opinion, always be heard, and Ive encouraged that of my
team. I expect to be challenged, and if the majority of people are going in a different direction than I am, and I understand the reasons
why, then Im willing to drop my point of view if their points have
merit. And I think thats the key: If the leader never shifts their opinion, then you can talk all you want, talk is cheap.
So the lesson is to allow messages to filter through in order to see the
underlying patterns. However, with that comes commitment. Ed Rapp
emphasizes the commitment to speak as one and position the organization behind the leadership. Kevin Lobo draws attention to another
form of commitment, the willingness to change if the evidence clearly
points to the need to alter course. If other commitments are not
honored, then as Kevin Lobo says, talk is cheap and so is the
outcome.
They seek evidence in a structured way
Evidence-based leaders need to be clear about the proof they seek. What
evidence? From whom? Which stakeholders? It is critical to create a
robust and resilient culture of interrogating the evidence, rather than

interrogating the people who deliver the evidence. That goes to the
heart of their role as leader. Explains Sam Su of Yum! Brands:
We are a group of people and we have a very important journey to
make. And I happen to be the CEO. They want to achieve, they want
to do this thing. And my job is to help them remove any obstacles
and help them come together. So my role is not so much leading,
rather its supporting. Im not a great visionary kind of guy: Im an
analyst. And my job is to see all the different angles and try to integrate them.
Often, these are habits leaders have acquired in other customer-facing
roles. (It is notable that many leaders have had, at one time or another,
direct customer-facing roles.)
One top investment manager explains:
When I was in investment banking, the first thing I did when targeting a publicly listed company was to look at the top guys remuneration in the annual report and find out what was driving him. Was it
return on equity? Was it growth in net income? Was it cash flow? I
set myself a goal that within two meetings Id find the metrics of success of the key decision makers. Now you appreciate whats driving
them.
For the leaders in our study, the leveraging of evidence is key to delivering value.
The discipline of evidence: In summary

Evidence is the starting point of understanding the success formula.
Evidence is the basis for independent thinking and debate.
In order to lead for sustainable success, drawing on evidence must
become a habit.
Good evidence surfaces the true nature of an organizations context;
bad evidence automatically supports a particular view point.
A willingness to gather evidence to truly understand the context
requires humility.
Considerable sensitivity is needed to determine the shape and nature

of good evidence.
Successful evidence-led leaders
believe in the power of evidence;
start evidence gathering from day one;
are comfortable with hard and soft evidence;
emphasize the quality of the evidence;
actively listen;
use evidence as a platform for independent debate;
build an action-focused debating team;
make time for debate; and
seek evidence in a structured way.
Key questions
Do you believe independent thinking and dialogue are necessary
components for leading for sustainable success?
To what extent do you feel that evidence is a critical part of your
leadership contribution?
To what degree have you made the gathering of evidence a habit?
To what degree have you made this habit evident?
Do you use evidence as a platform for stimulating penetrating debate
and discussion?
Do you insist that the evidence be gathered in a structured and disciplined way?
How do you think the general managers in your organization would
respond to the above questions, and would their response be different from that of the top management?
Chapter 4
Discipline 2Mission
In the previous chapter, we saw that how leaders gather and evaluate
evidence determines whether they apply the formula for delivered value
or perceived value. The next discipline to explore is that of mission.
This is critical. A clearly defined mission determines the purpose of the
enterprise. Without that sense of purpose, the organization is exposed
to damaging fractures, political infighting, and a future of decline.
Though often confused, an organizations mission and vision, as we
shall see, are not the same thing. Mission is its ultimate purpose.
Consciously determined, deep-seated values guide the leader through
the tensions and dilemmas of the Engagement Alignment (E A)
element in the success formula. Deeply held values support that mission
and vision realizes that mission. Moving further down toward execution, strategies are the ways to go about realizing the vision.
In value delivery organizations, the mission is a compass always pointing true North. Every strategy should be tested against the organizations mission to clarify the fit.
Heres what Charlie Mayfield, chairman of the John Lewis Partnership,
told me:
John Lewis is a unique organization. Leading successfully here requires interpretation and judgment to be exercised that respects our
mission and founding principles. We have an organizational structure and a governance structure, which reinforce and reflect those
principles. We adhere to them and we abide by them.
The concept behind the partnership is actually very entrepreneurial.
Our founder thought of himself as an entrepreneur, but one who
was particularly interested in the natural world. He was inspired by
nature, and he described himself first and foremost as a naturalist.
He was an avid collector of birds, bees, insects, all sorts of things.
There was something about the inherent balance in nature that he
was seeking to reflect in the organization and indeed within the constitution of the Partnership.
Were global in the sense that we need to be on the ground and make
our products or deliver our services very close to where the patients are,
thats our mission, says Ulf Mark Schneider, CEO of the Fresenius
Group.
Mission-based organizations are dependent on the promulgation and
living of their core values. How to nurture a mission-based culture and
promote high levels of trust and an equally high discretionary adaptability in order to realize operational flexibility are the key themes of this
chapter.
Values and mission are intertwined. For health-care providers, for example, waiting lists and tick boxes may have a part to play, but they are not
the same as creating patient value. In an accident and emergency department, the mission is all about providing reassurance to each individual
patientnever about how many patients are treated in a 24-hour
period.
It is about values. Do leaders live the values? And do they do so in a fastmoving context? The measure of a good leader is his or her ability to
constantly challenge value creation to support the organizations
mission.
Command and liberate

Nowhere more is this true than in the military. The concept of mission
command is instructive here.1 In the early nineteenth century, Napoleon
was the conqueror of Europe. In 1806 he defeated the Prussians at the
battles of Jena and Auerstedt. The vastly bigger armies of the Prussians
were crushed by the flexible and adaptable French forces. The French
used localized force to gain superiority. The Prussians were slow and
cumbersome.
Yet, the Prussians learned and one of the greatest military thinkers Carl
von Clausewitz went on to revolutionize military thinking. Even now,
the British and American military draw on his ideas (even if they may
not always acknowledge their source). Von Clausewitz knew that success
Discipline 2Mission 63
depended on flexibly responding to situations. Failure meant overreliance on detailed planning, which was irrelevant when the enemy was
encounteredWhatever you plan it falls apart when confronted by the
opponents.
The not-so-secret fundamental in mission command is values. It is the
mission and the values people live and not the vision that binds the
organization together. Under mission command principles, the senior
middle-ranking officers are responsible for both strategy and tactics.
Each commander, confident that he has the support of his senior officers, handles his circumstance in the most appropriate way. The topranking officers trust their commanders to adapt to each situation, but
all are bound together by a strong sense of purpose and mission.
In contemporary times, my Cranfield colleague Arnoud Franken has
drawn lessons from the Royal Marines. The Royal Marines are the Royal
Navys 7,500-strong commando-trained amphibious infantry and are
the core component of the United Kingdoms Rapid Reaction Force.
Says Franken:
For senior executives, one of the key lessons from the Royal Marines
approach for planning in the face of uncertainty is that it is not
about gathering and crunching vast amounts of data, using advanced mathematical techniques to create an accurate model of the
world that reduces the inherent uncertainty and to use that as a basis for developing strategy by the executive team. Neither is it about
using traditional planning tools inherited from a bygone linearthinking and efficiency-oriented era that assume the environment
does not change, nor is it about skipping thinking because it is too
difficult and just doing. Instead it is about creating prepared minds
and maintaining flexibility of mind and attitude to achieve a commonly understood desired end-state. It is the planning that matters,
not the plan itself.
Further, in dynamic environments planning cannot be the preserve of
the executive team as they are not able to understand, plan, lead and
manage in detail at the rate of change in the environment. Therefore,
the planning process should not be exclusive but inclusive, drawing
on the knowledge, insights, skills and qualities of people at every
level of the organization.
For Franken, as for many others, involvement and inclusiveness are

fundamental components of engagement.2
Another useful take comes from Chris Zook of Bain & Company who
talks about commanders intent. This is how he explains it:
The origins of commanders intent can be traced right back to the Napoleonic Wars. It came from a situation where a number of military
leaders, including Admiral Nelson, found it very powerful to be able
to have a very simple statement that every one of the commanders
knew and understood.
It was a statement of the strategy and some of the non-negotiable
principles of behavior, because unexpected elements always emerge
during combat, and the more decisions that you can push down to
the front line, the better.
One reason for Nelson winning so many naval engagements was that
he and his band of brothers, the other captains, had a clear set of
principles of behavior. It meant that even under unexpected conditions or when they were unable to see the other ships, they could
anticipate what Nelson would expect them to do.
In business, the analogy is the non-negotiable principles of the business. Many of the most successful and enduring businesses are those
that have actually been able to push decisions closer to the front line,
with fewer layers in the middle. Its because the commanders intent,
the essence of what the business was trying to do, and the key nonnegotiable principles, were so well understood. 3
Adapting to context, being able to respond to confrontation with the
enemy, has clear organizational repercussions. Leaders in my interviews repeatedly spoke about the need for less rigid organizational
forms and the necessity for the gathering of evidence to be close to the
customer.
Take this CEOs description of how the mission of his organization
influences its structure:
Were highly integrated. We are a multidimensional organization.
We operate in much more of a multidimensional world and it really
is a challenge for people when they join the company. We provide an
awful lot of systems, so it is an organization where you need strong

influencing leadership skills to get focus above you, beside you, below you, and get everybody aligned.
How mission impacts the organization

How does a sense of mission and purpose become central to the leadership and functioning of the organization? Here are some lessons learned
from leaders:
Appoint managers and leaders according to their values and not
just their technical skills. In challenging and rapidly changing
markets, decisions based on training and experience do not necessarily produce the optimum results. Believing what is the right thing to
do (which in many ways goes against the argument for evidence but
supports the need for trust) produces the necessary results. When all
the evidence is not available, leaders draw on their values and that in
many ways is their key defence for their decisions in the wider context.
Actions determined through values are powerful when one is faced
with ambiguity. The interpretation and articulations of the values of
the organization need to have a cohesive logic. They sit within what
have been described as the culturally recognized parameters of
acceptable organizational practice. Such values do not lie within
nicely designed charters exhibited to the staff as wish lists. Instead
they are deeply ingrained and determine the actions of leaders when
they are under pressure.
Feel your way through danger: The mission command logic is that
control of context is impossible. For outstanding leaders, the source
of competitive advantage is a combination of mission, strategy, and
tactics. In practice, this is likely to mean shorter decision-making
loops that maintain focus on the market, but are guided in a clear
direction by the ultimate purpose of the enterprise. Discretion is key,
but it is discretion with distinctive parameters.
Make general managers part of the top team: My research points
to the fact that general managers are the heart and soul of the organization. The GMs know quicker than anyone else what will work and
what will not. By the nature of their role, they are or should be part of
the top team, but in many organizations they are not invited to sit
anywhere near the top table. Mission command demands intimacy

between the top team and the general managers. More than anything,
the GMs desire that leaders live their values and do not place them
in the uncomfortable situation of having to implement a strategy
they know will not work.
Surface the dilemmas: The nature of leadership is the working
through of dilemmas. The classic dilemma of being disciplined on
costs and yet investing in people and the organization has no neat
solution. More important is the manner in which each dilemma is
handled context by context. Again, values come into play. Knowing
the values of the top management builds trust at times of difficulty
(or, alternatively, damages confidence even further). To address
dilemmas in isolation is not a wise move. Leaders must surface the
dilemmas and then share them with the general management population to create a team bound together by unwelcome challenges, but
able to work through the dilemmas faced.
Be seen as authentic: One common theme in leadership books of
recent vintage is the need to act authentically. The reality is that most
leaders find this task impossible. There are, of course, exceptions. I
feel totally at ease in my professional environment because fundamentally Im free to go, no one is going to be able to twist my arm.
Im going to do whats right. No one told me that Im free to do what
I think I should be doing, I just took it for granted, one C-suite executive told me with great confidence.
Constant change and pressure works against executives acting
authentically. They simply do not feel they can be themselves. The
changing nature of circumstances requires adaptive behavior. What
was said six months ago may now be contradicted. The loss of two
major orders can wreck the balance sheet.
In interviews, nearly all the leaders I talked with described this
authenticity challenge. All felt themselves to be authentic, but most,
when they were honest, admitted to being seen as inauthentic.
Authenticity is deeply personal but it also rests in the eye of the
beholder. For many the fact that they were seen as inauthentic hurt.
They were striving to lead the organization in the best way they possibly could, but this had led them to make decisions that contradicted
their previous statements.
As one CEO told me, I really feel myself to be an authentic person. I

know I have been criticized for being inauthentic, but when I have a
look at the total picture, I have been told that I am recognized as
authentic even though some of my actions appear to run counter to
that. I always left an open door for conversation and when the chips
were down I was told, we understand, we probably would have done
much the same as you and faced the same criticism and backlash as
you. We respect that. As a leader you accept that backlash and see it
as your responsibility when in fact you are more a victim of
circumstance.
Winning that respect is the crucial leap in leaders being recognized as
authentic rather than as behaving consistently, which, given the fast
changing circumstances, is simply impossible.
The vision thing

It is worth exploring the difference between vision and mission. Too
often they are used almost interchangeably in the organizational world.
In fact, they have very different meanings. In contrast to mission-led
organizations, a vision-led organization depends on the leader whose
vision shapes the future of the enterprise. The difference between the
two is profound. The long-term sustainable future lies with the
mission-based enterprise. If there is a clear sense of mission, the transition from one leader to the next is not too potentially damaging. The
deeply embedded values of the organization and the belief in its continued success sustain the enterprise from one change of leadership to
the next.
In contrast, vision-driven organizations are dangerously dependent on
their leaders to create that vision. By definition the vision-led organization is vulnerable to a poor choice of leader or to a leader who holds a
contrasting vision to his or her predecessor. A leader going in a different direction without having built the necessary capability can be more
damaging than a leader without a vision.
Of course, visions have been around for centuries. In modern times,
think of Martin Luther Kings dream of racial equality or President
Kennedys ambition to put a man on the moon. In the business world,

remember Henry Fords aspiration to produce cars for the masses or
Microsofts hope of putting a computer on every desk and in every
home.
In the 1980s, the leadership researcher Warren Bennis embarked on a
now-famous study of ninety American leaders including former astronaut Neil Armstrong and a tightrope walker. Bennis sought to identify
and codify effective leadership. He offered a view of leadership based on
four factors: vision, meaning, trust, and the deployment of self. Vision
comes first. Indeed, Bennis defined leadership as the capacity to create
a compelling vision and translate it into action and sustain it.4
Without a vision of what you would like to achieve, what you do achieve
is no benchmark of success. Henry Kissinger claimed: Leaders must
invoke an alchemy of great vision. Those leaders who do not are ultimately judged failures, even though they may be popular at the
moment. 5
The meaning of vision

As a starting point, it is useful to explore the real meaning of what a
vision is, and how it should be constructed and used. In their influential book Built to Last, Jim Collins and Jerry Porras view the function of a
leader thus: to catalyze a clear and shared vision of the organization
and to secure commitment to and vigorous pursuit of that vision.
Thevision catalyzes the organization.
Collins and Porras contend that vision has two main components: a
guiding philosophy and a tangible image. The guiding philosophy is a
system of fundamental motivating assumptions, principles, values and
tenets that stems from the organizations core beliefs, values, and
purpose. Making up the tangible image are a mission and a vivid
description. The mission is a clear and compelling goal that serves to
unify an organizations effort. An effective mission must stretch and
challenge the organization, yet be achievable.6
In his influential work on the learning organization, Peter Senge emphasizes that a shared vision is a vehicle for building shared meaning in an
organization, particularly if it is built in a participative way.7 He sees a

vision as representing the organizations guiding aspirations. These are
composed of:
Vision: an image of our desired future
Values: how we expect to travel to where we want to go
Purpose or mission: what the organization is here to do
Goals: milestones we expect to reach before too long.
So, what does a vision mean in the context of creating value? Borrowing
from the definitions above, a value-enhancing vision meets the following criteria:
It acts as a catalystoffering an alternative future that challenges the
status quo and mobilizes commitment.
It offers a tangible picture of a destinationa better place that will
create more value for stakeholders. In this way it provides the bridge
from the present into the future.
It attracts commitment and energizes peopleby creating meaning
between workers lives and their work, by making them feel they are
part of a greater whole.
It establishes a standard of excellence and stimulates improvement.
It emerges from a considered process of thought, connection, and
communication. Visioning is an inclusive process. It is the alchemy
of alignment and engagement.
By its nature, then, a vision cannot emerge fully formed. It is by working
out the fine detailsboth at the level of strategy and at the level of how
each individual will relate to itthat people engage with the vision to
bring it alive. In other words, how we follow the vision in one department or role will be different from how we do it in anothernot least
because each starts from a slightly different place. But both are moving
toward a shared destination.
Collins and Porras treat vision as an entity. Vision belongs to someone,
usually the CEO, and goes with that person when he or she departs. The
vision needs to be embedded into the organization so that when the
successor arrives, the entity displays and lives a clear purpose. That does
not happen by accident and is difficult to achieve. So the alternative is
to use vision as a process and address the challenge of how to go about
creating a shared vision that is, by its nature, engaging.
A study of the process of visioning, carried out with my wife Nada and
Linda Lee-Davis, found that poorly pursued visioning is a key reason
why organizations are unable to realize their objectives.8 The result can
be organizational chaos, with divisions and departments spending
more time in dysfunctional competition with each other, creating a
deeply divided company. Paradoxically, managers are empowered to
develop their own agendas and pursue them with an enviable discipline,
but are insensitive to the vicious spiral that is winding down the organization. Selfish Business Units slowly bleed the corporation to death.
The end result is a culture of in fighting and a short-termist/survivalist
mentality that erodes the companys competitive advantage.
To combat this, my own research identified four steps toward effective
visioning:
Personal conviction to break the downward spiral. Holding a
conviction concerning what needs to be done and how is pivotal to
the whole visioning process. The conviction comes from seeing what
actually can be realized with the organization and the gains that can
be made from a less divisive process that breaks away from a mindset
of division. The conviction equally depends on realistically knowing
what is needed to influence external factors as well as the critical
internal stakeholders. Personal conviction and staying power are
intertwined.
Commitment from the senior team. A divided organization generates continuous mixed messages. For this to change, the leader has
to show how discretionary power can be productively used. A great
deal depends on creating a culture of listening. Making sufficient
room for each person in the team to surface what motivated him or
her and why he or she had such little trust in the organization and
its leadership encourages disclosure and sharing. Allowing enough
room for listening and discussion stimulates diversity of thinking,
which channels energy toward meaningful agreement. The key
objective is buy-in and ownership of the actions that need to be
taken.
Fast feedback. Issues need to be addressed as they arise. Feedback
needs to be given as comment is made. That is a big behavioral leap.
In a divided organization, politeness at meetings and agreement
offered readily act as a prelude to renegotiating all that was agreed on
at the meeting once the meeting is over. Issues are not addressed and
comments are not challenged. The CEO and chairman find themselves being influenced by the last person who saw them. The switch
must be to a situation where all discussion takes place at the meeting. Period. Transparency and equal opportunity to speak become
the norm. Insisting that evidence-determined positive and negative
feedback be offered is the way to create a culture of dialogue. The
culture needs to be accepting of constructive comment without
defensiveness.
Establishing a visioning culture. The sense of partnership in shaping the future, based on fast feedback and personal and team
commitment, needs to be further drilled down into the company
This should be based on a willingness to address concerns that many
may silently have held and to establish a culture of envisioning a
clear way forward based on shared ideals and values. Depending on
the challenges the organization has experienced, the process of creating a visioning culture may need to be broken down into manageable
parts, rather than addressing the big problem at once. Grasping the
low-hanging fruit and the quick wins that arise is a powerful motivation. Soon a common language emerges and this needs to be cultivated throughout the organization. Retrospective reflection is
sustainably reduced and substituted with a wider exploration of new
opportunities.
Mobile missions
How a company understands success and the value it needs to create to
get there is not fixed permanently in place. How an organization understands success changes. Indeed, for many leaders, changing the understanding of what constitutes success is part and parcel of their job.
Listen to what Kevin Lobo of Stryker shared with me:
Weve changed the definition of winning in the company by focusing
metrics on the outside world, so its winning versus the competition,
and we dont have a totem pole inside the company. We have shifted
people across divisions, changed incentives, and created opportunities for multiple divisions to work together for customers.
For a mission-led enterprise such as Stryker, Kevin Lobo uses vision as

more of an operational tool than a distant decorative adornment.
Ed Rapp of Caterpillar observes:
The key thing for me when you get to this level is this, can you create a compelling vision and can you then break it down into pieces
where every person in the organization understands what role they
play? With leadership thats the hardest thing.
As leaders sometimes our eyes are bigger than our stomachs, we take
on a multitude of initiatives instead of asking: what are those few
initiatives that are going to make the biggest difference?
Im looking for leaders who can create that clarity, Im looking for
someone who understands the business and the levers that drive
the value. They can intuitively look at the numbers and know when
theyre right or wrong. They know our business model and the levers
to pull to create value for customers and value for shareholders.
Then there are two accountabilitiesdriving continuous improvement, leaving the place better than we found it, and in more capable
hands. You dont want people who make it more about them than
about the company. If you look at a strong personality in the corporate world often there is a huge vacuum after they leave and so we
are looking for people who are stewards of the business rather than
personalities in the business.
In the final analysis, as Ed Rapps comments suggest, mission is not
personal. It has to extend beyond the agenda of an individual to
vibrantly engage and enhance the organization, the market, the industry, and the world.
The discipline of mission: In summary

Mission-based and vision-led organizations are two different
entities.
Mission-based organizations focus on realizing their ultimate
purpose on a bedrock of values deeply held by the leaders and
members of the enterprise.
Consciously determined, deep-seated values guide the leader through

the tensions and dilemmas of Engagement Alignment.
The nature of these values is critical. Unreflected values promote
prejudice, which blinds individuals and the organization to its own
challenges and problems.
Thought-through values promote inclusiveness and an environment
suitable for innovation, the building of trust, and the spotting of
new opportunities.
Being vision-oriented overexposes the organization to the values and
directional view of one individual, thus making the enterprise
vulnerable.
Key questions
Is yours a mission- or a vision-based organization, and if so, how do
you know?
What are the true and behaved values of your organization irrespective of what is written down?
Do the values of your organization promote inclusiveness, transparency, and a culture of innovation?
Does the CEO promote his or her views and values, which will dissipate once he or she leaves? If not, how will these become embedded
into the fabric of the enterprise?
Do you feel that the values of your organization are consciously
determined, evidence-based, and deep-seated so that managers are
guided through the tensions and dilemmas they face?
Chapter 5
Discipline 3Alignment
When I spoke to Ren Obermann, he was CEO of Deutsche Telekom.
He had been with the company for eighteen years of which he had spent
seven as its head and eleven as a board member. Soon after we spoke,
Obermann announced that he was standing down as CEO. He wanted
to move closer to operational activities than is possible for the CEO of
an international corporation and to take on even more entrepreneurial
activities: I want to go back to having more time for customers, for
product development and for technology, he said.
At the end of 2013, Obermann left the company. It was a notable event:
in this era of growing executive churn, not many CEOs leave on their
own terms, and not many manage their succession so clearly or have
such a compelling idea of their legacy.
Looking back on his tenure, this is what Ren Obermann said:
In the last few years we have found solutions for our key issueswe
show a much stronger performance in the US, are much more
competitive in our home market than several years ago, being recognized for the best network, the best customer service in the industry and we are expanding with a variety of innovative products
and services. As an employer, we have given the topic of diversity
new momentum, which has been recognized and even emulated
beyond the company. Furthermore, we have put a lot of focus on
key values in our company, from customer centricity to respect and
integrity. And the company has a solid financial foundation and
has regained the confidence of the investor community. In short:
this is the right time to prepare to pass the baton and ensure a
smooth transition.
When I spoke with Obermann in his office a few months before his
departure, he told me about the challenges he had faced during his
tenure. Central to them was the issue of alignment. This is how he
explained it:
We are rapidly transforming from the old telco world into the IP
world. That is more than a technological transformation, it changes
everything we do. The company has evolved in its efficiency significantly, so were much more competitive than we used to be seven
or eight years ago. We have established a leadership position in a
number of wireless markets, including Germany. We have developed a much better focus on customer services, proven by a lot of
KPIs, which are objective so its not just my wishful thinking. And
we have integrated the different operations, particularly wireless
and fixed line, and content distribution services, into one face for
the customer.
So we have taken the company from a product-line organization to a
customer-facing organization, with the focus on consumer and also
on business customer needs. We are on the way to driving international scalethough we have not yet established a strong enough
functional integration across borders in order to drive those international scale effects, which are badly needed in an internet world,
where markets are, by definition, without borders.
The challenge really is to find the best alignment of structures and
processes, across bordersfor instance, in product developmentand
to establish a glocal model. There are many activities which need to
be local, but there is a lot which needs to be global. In some areas we
do it already, such as in procurement; in other areas we do it only
partially, such as product development or partnering with internet
companies. For example, weve partnered with Spotify in some markets and in other markets with another music streaming company.
And many more examples like this. So we have not found the glocal
optimum yet. But we are working on it.
Obermann refers to creating structures that deal with the complexity of
markets and finding that challenging balance between global and local
demands. Although he does not directly refer to diversity of thinking,
his comments exemplify diversity of thinking. He is offering models
outlining what is the optimum structure for addressing the tensions
between global and local needs.
Alignment is, first of all, a common view on key market developments, a common view on customer needs, on priorities, and on the
Discipline 3Alignment 77
strategic roadmap. And a very strong common orientation on the

company values.
For us customer delight is the first value. The second value is integrity and respect. And the third value is team together/team apart.
The fourth one is, to create the best place to work and grow. And
the fifth one is, count on me. If you go and talk to senior managers,
and ask them about these values, I believe youd get similar answers.
They may not be exactly and immediately in the right order, but they
would come up with these five values.
So customer delight would be the first. The second, people might feel
has been even overstressed. The third one, team together/team apart,
has improved, because we have much less politics and leakage than
we had five years ago. We are not perfect, we still have some political
behavior here and there, but its not at all on the same level as it used
to be. On create the best place to perform and grow, I think we are
not yet much better than other telcos, even though we try to turn the
pyramid and emphasize the appreciation for engineers and customerfacing people, but still its a pretty hierarchical organization. I think
that needs to be taken care of more. The fifth one, the reliability topic,
I also think has also been embraced well in the organization.
Wrestling with alignment

Ren Obermann candidly describes the real battlefield of aligning a
large international organization. It is a constant struggle, a laborious
wrestling match trying to pin the organizational beast on the ground,
only to see it writhe away once more.
Alignment is one of those curious things. Senior executives tend to talk
about it a great deal. And yet, as a discipline, it is not as zealously
researched as other areas, such as engagement and mission. Alignment
is a vital element in the success formula, perhaps the most vital as it is
so often so lacking.
Alignment refers to the structures, systems, processes, and protocols
necessary to position the organization to realize its strategy, objectives,
and desired outcomes. In effect, alignment is the platform that must be
built to execute strategy.
This is how Kevin Lobo, CEO and president of Stryker Corporation,

describes the process of alignment he has been working on:
The four themes I introduced as CEO were globalization, collaboration, innovation and cost optimization. My four shuns, I call them.
The collaboration one is a massive change and my own team is actually spending more time together. We have more common metrics
and goals that are aligned and that shift is new for our company. Its
going well, but were still in the early days of that process.
Heres how Paul Achleitner from Deutsche Bank describes his process
of alignment:
Deutsche Bank is one of the few European institutions that has the
potential to compete globally with the American banks. In order to
get to that position, it had to transform itself and move forward
from its roots142 years of historyinto a global, Anglo-Saxondriven capital markets environment. It is one of the few institutions
that has successfully integrated a large global investment banking
activity and grown it. That puts cultural strains on the organization
but it is an institution that has the potential to actually compete
in that area and the challenge is to make that happen in a changed
regulatory and political and competitive environment.
To make that happen will require, first of all, creating a culture that
actually values systems and processes and the basics of the plumbing as much as the frontline revenue generators. It requires a culture that actually focuses on clients, as opposed to counterparties,
and it will require an awareness that, in todays societal and political environment, banks need to be seen as prudent guardians of
a stable financial system, rather than innovators of new financial
products.
From these perspectives, three key elements of alignment can be
identified:
One: Alignment of thinking between the key players. In particular,
the thinking of the top team and the board, and that between the board
and the top team, and between the top team and general management
needs to be aligned. It is critical that there is broad agreement on the
nature of the strategy and what is required in terms of structural shape
and investment in particular processes in order to execute that

strategy.
My previous research on top teams and boards highlighted a demanding but universal challenge in delivering value. From a database of
12,500 top teams spanning 21 countries and 5,000 boards spanning
14 countries, over 34 percent of top teams were found to be continually misaligned on the mission, vision, and strategy of the organization. Perhaps not surprisingly, this led to dysfunctional political
behavior being the norm. Further, over 66 percent of top team members
and general managers reported being unable to raise critical concerns
and, through their inaction, allowed the organization to erode.
Similarly, over 80 percent of boards were found to be out of touch with
the reality of the organization, thus making their contribution
peripheral.
Getting this alignment right begins when people are recruited. Research
by the member-based global advisory company, CEB, of C-suite executives found that outside hires take twice as long to ramp up as a leader
promoted from within. Astoundingly, C-suite executives report that
only one out of five executives hired from outside are viewed as high
performers at the end of their first year in-house. And ultimately, of the
40 percent of leaders who are hired from outside each year, nearly half
fail within the first 18 months. CEB studied more than 320 leaders in
36 organizations and found that external leaders fail because they just
dont work well with the people on their teams.
As a result, according to CEB, leading companies and search firms are
changing their hiring criteriafocusing not just on skills and cultural
fit but also on network fit: how well the potential hire will fit with the
way his or her new colleagues work. The research shows that hiring for
this more colleague-centric type of fit can improve performance at the
two-year mark by 30 percent. It has more than twice the impact of
assessing only for general culture fit.
For example, Ingersoll Rand shifted its approach to assessing potential
leaders, focusing not just on qualifications but on four new fit
categoriesknowledge, values, career experience, and leadership
behaviorswhich in combination produced a more complete view of
the executives style and how he or she was likely to approach work.
Ingersoll Rand recognizes that to fit, an executive does not always have
to have the same style as the team. The company has two types of fit:
conformist, same as the in-house team, and complementary, which
might be called for when the purpose of bringing in a new executive is
to spark some productive disruption in the way the current team is
working.
Two: Alignment of structure, namely the actual structural configurations that will achieve particular ends, for example, centralized
versus decentralized, or matrix structures. Organizations are increasingly complex. Forget straight line reporting. The reality in most
organizations is that life is matrixedthere arent straightforward
singular reporting lines any more. In my book Working in Organizations,
I devote an entire chapter to different structural forms, which today
have effectively morphed into variations of matrix structures. Henry
Mintzberg has written extensively on structural configurations,
outlining the strengths and weaknesses of each. In the past, many
large companies went through painful restructuring programs, often
at the recommendation of consulting firms. The aim was to improve
efficiency, but restructuring does not always lead to greater effectiveness. When restructuring fails to integrate thinking on alignment
with the reality of engagement, the efficiency gains are often
illusory.
Three: Alignment of systems, namely the operational systems (HR,
IT, finance, procurement) and protocols, mainly from finance, that
allow the structures to work and facilitate the execution of strategy.
Dave Mackay, former president/CEO and director of Kellogg Worldwide,
speaks of his experience:
When I took over running the US operation, the organizational structure was more driven by the corporate functions than by the business
units. Those business units had been disempowered, the corporate
functions were making more of the calls than they should.
You really need the operators to be running the business and corporate support functions are not there to impose their political will.
So, I had to go about unwinding that structure, creating proper
business units with the right level of authority and accountability. I clearly was not popular with the corporate functions because
they were losing power as a lot of people had to go; there was a fair
amount of change and ultimately we got the business structure to
run and back into a more reasonable role.
Aligned and engaged

Although alignment and engagement are two separate elements of the
success formulaand therefore require two distinct sets of processes
and considerationsthe research shows that the two are interconnected. So if alignment is the logic and structure to execute strategy,
then engagement is the desire, willingness, motivation (or demotivation) to make the structures and processes work.
Yet, typically, these two considerations have been treated separatelyboth
academically and from a consulting perspective. The structural forms
or processes that are implemented will have engagement repercussions.
Yet the debate on the repercussions of alignment rarely occurs inside
organizations as the topic raises distinct sensitivities.
How does one challenge the CEO and tell him or her that his or her
structure is wrong? What to do when KPIs push the organization into
the siloed way of thinking and operating, and yet, cross-functional
teamwork is necessary but cannot easily be measured as an output? How
does one induce a culture of client referral from one department to the
next when the consultants involved are rewarded on the size of contract
achieved? Client referral means sharing the pot and few organizations
have developed the maturity for such a practice. The sensitivities are
understandable. Challenging the boss, challenging the system, and challenging the whole fabric of the organization usually does little to further
ones career. This needs to change if misalignment is to be tackled.
Constructively challenging ingrained views and practices is necessary.
Aligning HP
The business press is full of stories about misguided strategies. Lurking
just below the surface of many of these are the repercussions of mismanaged alignment and engagement. Take the example of Hewlett-Packard
a few years ago.
This is how Fortune described Mark Hurd, the then newly appointed
CEO of HP following the dismissal of Carly Fiorina as CEO:
Hurd gets jazzed by diving into sales numbershe jokes about interrogating the data until it confesses. Fiorina loved the limelight;
Hurd did not want to be on the cover of this magazine. Fiorina owned
Davos, the annual teach-in for Plutocrats in the Swiss Alps; Hurd
skipped this years session citing customer commitments. Fiorina
was always on message; Hurd is sales optimization in a suit.1
The article emphasized the differences of vision and approach between
Hurd and Fiorina. Particularly visible is the alignment Hurd created
between market opportunities and the companys strengths. Hurd
boils down HPs opportunities to three market trends that neatly match
the companys three main units ... no matter how you dress up his
views, he is simply trying to leverage the things HP is already good at,
the story continues. Its as if a new CEO of Procter and Gamble were to
demandwhat else can we do here with toothpaste and diapers?
Hurd dismantled the centralized selling group and reversed the Fiorina
structure, which combined printers and PCs. Despite layoffs, a reduction in R&D spending, the introduction of global promotion schemes,
and a freezing of pension benefits, management and the work force
seemed to be behind Hurd. He also brought in new management talent,
and the results of his endeavors were increased profits and share prices.
Alignment provides a two fold advantage: the reduction of complexity
and greater clarity by clearly displaying the links between initiatives.
The value proposition is clear. From then on, interrogation focuses
more on detail.
Alignment of thinking
As one senior general manager observed: Its never the structure or the
systems; it is the fact that my bosses do not have joined-up thinking.
Why do you think we keep changing the structure every nine months or
so? It is because we cannot agree on how to do our business.
My research supports this view. When the top team does not agree, each
member pulls in a different direction. The mixed messages that ensue
drive general managers further away from the center. The end results
are a structural nightmare with the center being seen as providing no
value, a misaligned organizational quagmire rather than a dynamic
value-adding hub.
Linking back to the formulaS (E + A)which describes poor performance, my research shows a particular pattern in the manner in which
strategy is implemented when there is little alignment of thinking at
the top. The politicization of winning the support of friends, colleagues,
and anyone else predominates.
With sufficient backing, the next step is for structure to follow strategy,
an already established wisdom and seen by many as best practice. My
research shows that this is often not the case. The organization has not
bought into the way forward. Despite this, the strategy is pushed
through structure. Current wisdom has it that the next step is for the
change program to be cascaded down the enterprise. In effect, management and the employees are sold the way forward. Their concerns and
objections, although heard, are little more than a release of the pressure
valve to reduce tension. If the hard sell of the strategy does not work,
then it is a matter of shut-up or shove-off. You do not fit and are damaging to what we are trying to achieve.
Despite the extensive findings scattered in the academic and also the
popular management and strategy literature concerning mergers and
acquisitions that fail, change programs that derail and culture and
value initiatives that do not work, the practice of S (E + A) = V
continues.
Strategy and structure are positioned as the evident way forward.
Instead of feedback, the strategy is sold to the rest of the organization.
Against all the evidence, the current wisdom of get the strategy right,
structure follows strategy, and then sell, or tell, the people in the organization changes that they often know will not work continues with an
astonishing frequency. Managers who once championed change
programs frequently, on reflection many years later, relate to me how
they underestimated the influence of culture and the damaging impact
of poor engagement. I have followed up with some of the managers
who related their disappointing experiences. Many go on to repeat
exactly the same approach to change elsewhere.
Alternative energy
There is an alternative. Jeff Fettig of Whirlpool provides a way forward,
using values:
We have five values: Respect, integrity, diversity & inclusion, teamwork, and spirit of winning. These five core values are very powerful,
very important. Theyre not slogans on the wall, we have a very clear
expectation for each.
For each value, we outline to our employees what Whirlpool expects
of them, and what they should expect from Whirlpool. We then reinforce that through our development systems, by incorporating
it into our assessment process, into our professional development
plans, and as part of our annual performance assessments. Embracing our values is among the top five criteria we use to measure performance. Were big believers in both the what and the how being equally important in our work. A lot of people only care about
the what. At Whirlpool you have to pay attention to both. If you
are really good on results, but dont fully demonstrate our values,
you will not be successful here.
The other thing that supports all this is our performance-management process, which weve honedand continue to honefor the
last 15 years. And its very thorough and its very disciplinedits inescapable at every level of the organization. And, weve got the tools
and the systems weve built up over time to tell us whether were on
the right track or the wrong trackfrom an enterprise level to an
individual level.
Strategy versus Delivery

An important distinction needs to be made herebetween strategy- and
delivery-led organizations.
Strategy-driven organizations are about accountability. But value delivery-led organizations are about taking responsibility (mission-led). To
be clear, strategy remains important. No one is saying that a company
does not need a strategy. But strategy in isolation is dangerous. Every
organization operates within a context. A strategy that is out of kilter

with the contextinternal capabilities and external market conditionsis destined to fail. This is where alignment comes in. To be effective, the organizational capabilities and the market opportunities and
threats should align with the strategy. Otherwise, the strategy is
misdirected.
The point of a strategy is to identify the territory that the organization
wants to occupy in the futurewhether it be in one, three, or five years
time. There is no point in having a strategy that the organization is
totally ill equipped to execute on or where the identified market space
does not exist. Strategy is about ambition. Strategy is about a set of
goals and targets that the organizations stakeholders commit to.
Strategy, though, is not about numbers. It is about intent.
The key question for strategy is: given who we are, where we are, and
what weve got, where can we move to that would place us in a stronger
position?
As Catherine Livingstone of Telstra explains:
I would see strategy as ideally a five-year view. Nowadays it tends to
be if you get a two or three-year view youre doing well. Its not in the
first instance to do with numbers; budget discussion is not a strategy discussion. Strategy discussions should be held in the absence
of detailed numbers. You might scope a strategic ambition; either in
X percent growth terms or saying wed like to go from a $2 billion
company to an $8 billion company over this period, so youre scoping
it in financial terms but youre not saying our revenue will be this and
our expenses and our gross margin ... thats a budget discussion.
A strategy discussion is really looking at the business model, the
shape of the business model, and asking how its going to evolve in
the context of technology but also industry sectors, how theyre going to change, how youre going to maintain a competitive advantage, wheres the proverbial white space, and hopefully how you can
grow and contribute to growth in shareholder value? So the strategy
is all about setting the ambition and deciding on probably the two or
three major moves that you might make over, say, that five-year period, whether you re-orientate the organization or really push hard
on the current trajectory. And then once youve set that, then you
come back and say, okay, thats great, so now what are we going to do
tomorrow, and how are we going to implement that.
Working through politics

Thirty years ago, we were like most other companies. You know, people
like to talk about good things, they like to ignore problems, and everybody tried to avoid controversy, says Jeff Fettig of Whirlpool. On the
political nature of our company, were probably a one or a two on a ten
scale. We just dont believe in it, we dont allow it, we dont accept it.
Creating the right platform of alignment and engagement requires
trust. Trust requires a degree of goodwill and a willingness to put the
company first. The best-managed organizations seem to be able to cut
through the politics because they are built on this sort of platform.
Explains Ed Rapp of Caterpillar:
I dont know how many times through my career Ive had a message
on my phone that started with heads up. Heads up, I was at a meeting and the boss is asking this question or theyre questioning this
direction or...
I think the underpinning of the culture is not one based on gotcha;
that you get ahead at the expense of somebody else. This isnt to say
that in a big company like CAT politics dont play, but there is an
unspoken understanding that the company comes first and is bigger
than any individual.
In other organizations there is no such unspoken understanding.
Indeed, misalignment is routinely manifested in an abundance of
organizational politics.
The true test is to ask the general managers two levels below what is
really going on. Usually the story is quite different from what you hear
at board level. You will often discover that politics is a reality, deeply
embedded in the organization.
The Oxford English Dictionary defines politics thus: Activities concerned
with the acquisition and exercise of authority or government. To some
extent, politics is inevitable. But how can and should it be managed?
My global studies identify seven steps to working through contrasting

demands:
Map the agendasIdentify those critical stakeholders likely to
powerfully impact the organization. In so doing, understand their
objectives and motivation. Consider the reasons for the positions
they have taken. Then consider how open to persuasion each stakeholder is.
A candid view came from one chairman:
I try to get things done by talking to people and try and do it diplomatically. I dont try and go behind closed doors. I think its so much
better to be open, honest, clear, and transparent about your views.
I probably get myself into trouble on that sometimes, but I do think
its the better way to go. But I am political in terms of trying to be
diplomatic, not trying to blow the thing up. When people do try and
blow things up because theyre trying to make a case. Its not quite
making a case, youve actually got to work together, its much better
to get the issues on the table and make it cleardont get people offside, youve still got to work together.
Bring all closeThe maxim of bring your friends close, but your
enemies closer still did not survive the scrutiny of my research. Many
C-suite executives emphasized treating everyone equally. Profess
ionally intimate and open relationships can be crafted. Showing
favoritism erodes relationships. Closeness of relationships nurtures
the necessary comfort to share experiences, doubts, and views. Real
conversation about why deep differences exist can begin.
Shift mindsetAfter opening up relationships, nudging others to
ones own viewpoint is considered the most sensitive and critical
skill of politics. This subtle influence process can be pursued one to
one, in a small group, formally and/or informally, at parties or even
in chance encounters. No one way works best. Sensitively handling
each stakeholder is critical. So, many described the process as
mentally exhausting and time-consuming, but absolutely vital to
undertake.
One senior independent non executive director described how his
chairman induced a fundamental shift of thinking on the board:
He brought us all together, ostensibly as an away day, but it was the

evening chat that made all the difference. He asked us how we found
the board and the organization and what our experiences and recollections of the past into the present are. It would be good to hear
how we all feel about this board and what we are doing, he said. I am
one of the longest serving members on the board and so I had many
stories to tell. I have very good memories of this board. I narrated our
wonderful past and the impact it had on me.
As I spoke it began to dawn on me that the past was holding me back
and that I had to rethink my role and contributing on this board. In
fact as I was talking it came clear to me that the role and contribution of the board had to shift.
Then the second longest serving member spoke. He too painted a
picture of a glorious past and I could see as his tale was woven, a new
realization came about. And so the third longest serving, fourth and
so on spoke, each with a positive view of the history of the board and
each silently reconsidering how to move forward.
It was then that the newest member of the board told her story. She
thanked us for our stories and admired the legacy that she had taken
on, but asked why we have brought the past so much into the present.
For her it was evident that change was needed and the change depended on a shift of thinking before anything else. Through all this
the chairman smiled, nodded, made a few supportive comments and
simply sat back and watched our shift of mindset. This is probably
why I respect this man so much. He said little but aligned us all in a
way that few could do.
Be smart with informationThe eighteenth-century British parliamentarian, Edmond Burke, popularized the phrase economical with
the truth. Most leaders interviewed stated that they did not distort
the truth, but presented information in such a way that it was difficult for others to come up with an alternative argument. In this
waystakeholders are gently led to a particular conclusion. Being
smartwith information was an oft-repeated phrase among my
interviewees.
Network legitimacyMany C-suite executives draw on their influential network to legitimize their view. The opinion of the highly revered
relevant other is powerful. Drawing on the network support

requires investing in energy and time. However, it is worth it when
that support is needed.
Be ruthless/be respectfulDespite all efforts, certain negotiations do
not proceed well. An immovable confrontation looms. One or more
parties may have to leave the organization. Making that break requires
being ruthless. Yet, many of the C-suite executives warned that being
ruthless and disrespectful leads to the loss of valuable friends. The
high performer goes out of his or her way to be utterly respectful to
those who take a contrary position, thanking them for their contribution but emphasizing the damage that would occur to both the
top team and organization if fundamental differences of opinion
continue. The more respectful the C-suite executive, the more likely
others will leave of their own volition, often publicly supportive of
the very person they opposed.
Know yourselfC-suite politics is no game. The future of the enterprise is at stake. Thus, politics is a deeply personal experience. Each
does it his or her own way. Maintaining conversation under adverse
circumstances is of prime importance. We have already seen how
many C-suite executives, through no fault of their own, are accused
of being inconsistent and inauthentic. Many acknowledge the inconstancy and put that down to the volatile nature of changing circumstances. Yet, few feel themselves inauthentic. To minimize such accusations, it is important to know oneself and recognize ones impact
on others.
Understanding politics
Politics is about making the impossible, possible. Politics is about dealing with misaligned complexities and diversities where few are willing
to shift position. Politics is a negotiation that brings together the bright
and dark side of organizational life.
Despite the negative connotation that politics holds, it actually has a
rich intellectual history. Aside from the famous Machiavellian Prince,
modern-day thinking of organizational politics dates back to how
communities in the 1950s in the United States resolved their differences. It became clear to the sociologists that the learning derived from
observing local community-based politics could be applied to organizations. The 1960s and 1970s spawned a rich literature on how to handle
the politics of management. It equally became evident that the managers job is highly political. Then political correctness took over in the
1980s. The surfacing of tensions did not fit well with the corporate
philosophy of in order to realize competitive advantage get the strategy right and then structure follows strategy. It became difficult to
openly examine the unwelcome tensions prevalent in any organization
and their repercussions. Everyone knew what was going on, but nobody
said anything.
A managing director, who wished to remain anonymous, told me his
story. His bank had acquired a number of high-profile businesses but
never really integrated them into a cohesive whole. Separate HR, finance,
and IT systems plagued payments, access to information, and the availability of a rich talent pool. Just simply to be paid expenses was a nightmare. No one wanted things to change, but the excuse was brand identity. If we all merged then we could easily lose the loyalty of long-standing
clients or at least that was the story told, he said.
The politics for turf, promotion, getting the deal, keeping the deal, and
staying as far away as one possibly could from the center dominated the
attention and time of managers.
After a while even the senior management did not bother to pretend.
The manager told me that he once attended a top-level company conference. On the first evening, the two key speakers were two senior VPs from
the corporate center. Both talked glowingly about the organization and
the level of cooperation at the top to integrate systems and bring about
a meaningful corporate brand. One of the two VPs apologized for not
being able to stay for dinner as he had another commitment that evening.
Hardly had he left than the one who remained really opened up. Now
let me tell you the truth, he said. Let me tell you what its like to be
blocked and not be able to do your job because of the politics around
here. The audience sat dismayed. All that they had been told was a myth.
In reality they knew it, but hearing it demotivated them even more.
Sometimes being proficient at politics does not work out. The culture
simply does not want to shift. Frustration with the politics of the
enterprise can lead to a deterioration in discipline and the
relationship between members of the top management team, as

witnessed in the case mentioned above. That really pushes mixed
messages down the line. The success formula of Engagement
Alignment becomes ill balanced. Not knowing what to do with the
negative interactions that now become part of the culture, many CEOs
and top directors give undue attention to structures, processes, and
procedures. That is their way of handling tensions and counterproductive behavior. From all of the studies I have conducted, the overwhelming evidence is that in such organizations, no matter how much
money is spent on alignment, engagement still remains zero and so
the end result is still a zero. The only way to address engagement
concerns is to face up to them and work through them. As one
outstanding global CEO said to me, Life is one part strategy and nine
parts engagement.
Of course, not all interactions and negotiations are political. Many are
straightforward, where normal rules of engagement hold. The trouble is that for the C-suite executive, normality and predictability are
rare. The challenge is to turn the abnormal to extraordinary success.
Aligning polar opposite interests is not a form of Machiavellianism. It
is a core C-suite skill. Working through incompatibilities and irrational
behavior requires high levels of moral worth, sensitivity of style, and a
deeply powerful intellect.
Systems and people together

Integrating alignment and engagement is no simple task. I have already
outlined how the two pull apart from each other. Yet, if the enterprise is
to function effectively and be differentiated from competitors, these
two sides to organizational life must be brought together.
For Kevin Lobo it is all about trust:
We have made two large acquisitions since I became CEO in 2012.
One was getting into the lower priced segment in China, and the
second was getting into very high-end robotic surgery for joint reconstruction. Theres no way we would have been able to make those
moves if there wasnt alignment between the board and management
team on the strategy.
There is always risk associated with deals, so, first making sure our
management team was very aligned, and then secondly, that the board
was engaged was essential to completing those deals. Trust and alignment on the strategic direction; together, that equals engagement. So
part of its trust, and also being clear on what the strategy is, and the
fact that we were able to get that engagement, and facilitate making
those moves, which otherwise wouldnt have happened. There would
have been paralysis, we would have debated them forever, and we
probably wouldnt have pulled the trigger.
For Paul Achleitner of Deutsche Bank, it is creating the structure that
brings about the desired engagement:
They need to coordinate. They need to be aligned at the hip and
whats important is they are actually being measured by the board as
a joint result. So their individual gratifications and bonus structures
are measured as one. So we have deliberately not said this is your
part of the empire and this is his part of the empire because I dont
think that that would be very good. It is a very important element
that there is joint responsibility but then a simple division of labor,
as opposed to a division of responsibilities.
The message from Kevin Lobo and Paul Achleitner is that structure
does not necessary follow strategy. Structure brings about the behaviors that make the strategy work and that is the basis of trust.
The discipline of alignment: In summary

Alignment is the means to an end; it is the means by which resources
are positioned to realize value.
As markets and circumstances are dynamic, considerable thought
needs to be given to the structure and shape of the organization.
Get alignment considerations wrong and the consequences are that
resources are misused and strategic objectives not realized.
Addressing challenges of misalignment requires engaging with leaders who have been disengaged for some time.
Addressing misalignment concerns purely through reorganization
and restructuring has a long track record of failure.
Surfacing engagement concerns is the first step to addressing alignment challenges.
Key questions
As markets are dynamic, what level of scrutiny has been given to
examining how the structures of the organization position resources
to effectively meet external challenges and internal needs?
Do you agree that structures are a means to an end, the means by
which resources are positioned to realize value?
If you agree, then how have you made your organization a dynamic
entity able to adapt to changing conditions and draw on different
structural configurations as external conditions demand?
If you are really honest, would you say structures have become an
end in themselves in your organization?
How would you know whether your organization is aligned or
misaligned?
What are the symptoms and effects of misaligned organizations?
Chapter 6
Discipline 4Engagement
Research repeatedly shows that only a small number of corporate workforces are fully engaged with their work. Most are not.
In my research, where engagement was at its highest, organizations
emerged with familiar operational and opportunity gainshigh
levels of motivation; commitment to the strategy; strong stakeholder
values; sustainability; clear product/service positioning in the market;
better search for top positions; smoother transitions into senior
posts; greater allegiance and effectiveness in the supply chain and
more.
Obvious enough. But the really interesting insight was that organizations where engagement with employees and other stakeholders was
the highest were not those led by charismatic and visionary leaders. The
leaders who achieved superior levels of engagement were often quiet
and unassuming.
In his book Good to Great, Jim Collins makes much the same observation, describing leaders who combine exceptional humility with the will
to succeed as attaining the highest level of leadership, which he calls
Level 5 (see page 126).
Humility is important because without this attribute, listening is
impossible. And listening is a vital prerequisite for engagement of any
sort. A willingness to listen allows leaders to be open to alternatives,
especially when they are already driving through a strategy and there is
an inherent danger of closing down options.
Here, Ciceros view of outstanding leadership built on learning in
vivolearning as you doprovides an interesting historical reference
point. Cicerosoldier, politician, advocate, and philosopherlived
through the turbulent decline of the Roman Republic. Cicero was
deeply concerned about the politics of his day as he readily recognized
the demise of the Roman Empire. Aside from his contribution to
Stoicism and other schools of philosophy, his view on leadership is

most interesting. Cicero observed little learning among his compatriot
leaders. His great contribution was to show that an open mindset is one
that can live in a turbulent context and at the same time stand above
that context so that the individual can reflect on what he or she is doing
at the time of doing. Cicero combined emotionality and rationalism and
argued that discipline over both was the key attribute of leaders.
There were echoes of Ciceros observations among the leaders I interviewed. These, too, are turbulent times. The leaders who achieved the
highest levels of employee and stakeholder engagement emphasized
the need to make decisions based on the facts. They also demonstrated
a curiosity and appetite for reality checking that bordered on the obsessional. They were learning as they were doing.
These leaders saw gathering evidence from stakeholders to make decisions
as a vital part of their job and a means of reaching the right decisions
and building the right strategy. They saw this as important for two
reasons: first, to garner accurate information about the real world; and
second, to make it a transparent process for building commitment and
trust. Collecting alternative points of view was also viewed as essential
for creating value.
This flies in the face of the commonly held belief that engagement
stems from charismatic and visionary leadership. The more I examined
organizational success, the more I felt many of the comfortable assumptions and stereotypes eroding.
Engagement direct
At the heart of the success formula is engagement. Indeed, at the heart
of any organizational or leadership activity is engagement.
Says Stryker Corporations Kevin Lobo:
I think engagement and trust among the executive team and with
the board is critical for success. Its hugely important.
One experienced CEO recalled a difficult conversation with his leadership team to offset a slump in sales:
Discipline 4Engagement 97
On Friday afternoon we called in, say, 50 or 60 leaders and I had two

slides. I said, guys, what Ive got to say is not fun. You have to think
about it over the weekend, only make sure you respect everybody. I
had one slide where I showed why I had to do it. The second was a
slide saying what we were going to tell them what to do. On Monday
I said nothing and yes, they did it. They did the communication.
Doug Elix recounted his first entry into general management and the
realization that engaging people wasand isthe essence of any general
management job:
I had to come to the realization that I couldnt do everything
myself. If the management team were not doing their job, I could
not personally reach enough people to cover for it. So the lesson of
you must be able to do this through a talented and highly motivated management team that carry messages all the way through the
business was quickly learnt.
Getting to people in a large organization of thousands or even a hundred thousand or more, is complex. Large organizations resemble an
organism with a mind of its own as to how it works and pulsates, and
it is very complex to manage. You may think you have command and
control, but thats not how things get done.
So, just the sheer complexity and the multidimensional nature of a
very large organization is the most complex challenge I found. You
know, managing by logic and persuasion rather than authority and
positional power was the thing that I found very challenging, but
very satisfying when you can make it work.
When I spoke with Charlie Mayfield, chairman of the John Lewis
Partnership, he shared the experience of a debut speech:
I remember when I first became chairman I made a speech to the
Partnership Councilmy first speechand I talked about the fact I
wanted the Partnership to be an enterprising Partnership. I explained
that I wanted Partners to feel that they had the opportunity to be enterprising in how they carried out their jobs, because the most satisfied, happy Partners Ive met were the people who felt that they were
able to make a difference, were acknowledged for that and therefore
felt encouraged to continue to make that contribution.
Engagement is a happy by-product of good leadership and value

delivery- and evidence-based strategy. But, even with the other disciplines in place, you need to ensure that people are treated fairly and
openly, and are rewarded for their efforts.
But for all the well-intentioned words of leaders, employees make up
their own minds. Thats the whole point! Engagement is about whether
people will voluntarily go the extra mile when there are no financial or
contractual benefits for them. To elicit engagement requires leaders to
make employees feel there is something about the organization that
makes them want to contribute their best efforts. And thats why
engagement is so difficult to achieve. People have to feel it is worth it.
Far from being warm and fuzzy, the real engagement process is surprisingly cold and calculatedit is based on whether there is evidence that
the leadership and strategy is creating real value in line with the mission.
The opposite is equally true. Has evidence been gathered so that improving the organization through its blockages can be addressed and
progress made?
Blue Ocean value

Current management thinking supports the importance of involving
workers in hard decisions. In their bestseller, Blue Ocean Strategy,
Professors W Chan Kim and Rene Mauborgne posed the question:
Why is it that some companies succeed in achieving sustained high
growth in both revenues and profits?
The answer, they asserted, concerned a companys approach to strategy.
Instead of focusing on staying ahead of the competition, successful
companies set out to make the competition irrelevant, adopting a strategic logic the authors termed value innovation (back to that word value
again).
The key lesson from Blue Ocean Strategy is that value is not set in stone
but is constantly being redefined and reinvented by the most conscientious companies. Rather than simply accepting the assumptions of
others or even their own views about what constitutes value, value innovators are constantly striving to create more value. They view the world
not through a value telescope but through a value kaleidoscope, where

constantly changing patterns offer new opportunities to create value in
an ever-changing world.
In their 2014 article Blue Ocean Leadership, Kim and Mauborgne
apply their ideas to leadership. According to research by Gallup,
70 percent of workers are disengaged from their jobs. If companies
could convert them into engaged employees, then they could achieve a
huge increase in performance and productivity. But most managers
and leaders lack a clear understanding of the changes that would bring
out the best in everyone. To address this, Kim and Mauborgne advocate
that managers systematically ask their customers (the employees) which
leadership acts and activities will inspire employees to give their all. In
this way, the idea is that the leaders can focus on the tasks that will
make a difference.
In their earlier work, Kim and Mauborgne argue that trust plays a vital
part in motivating employees during difficult times. They champion
the concept of fair process.
Fair process is based on the simple human need for intellectual and
emotional recognition, says Kim. There is a difference between a fair
process and a fair outcome. If there is fair process based on engagement, explanation and clarity then painful and difficult goals can be
achieved.1
According to Kim, many companies have lost significant ground in
employee morale and customer service by announcing cost-cutting
without involving their staff in the process. This is a violation of fair
process and undermines trust and morale. In tough times, companies
need the active engagement of their people. There is a need for voluntary co-operation; willingness to go beyond the call of duty has to come
from the heart. Voluntary co-operation is to do with the process. Fair
process is a motivational tool which is critically important, he says.
Transformation requires that companies earn the intellectual and
emotional commitment of their employees. To do so requires a degree
of fairness in making and executing decisions. All of a companys plans
will come to nothing if they are not supported by employees. Fair process is based on the simple human need for intellectual and emotional
recognition. Without fair process it can be difficult for companies even

to achieve something their people generally support.
There are some very basic questions that senior managers need to ask
themselves if they are to embrace fair process. First, says Kim, they
need to ask whether they engage people in decisions that affect them.
Fair process is about engagement. Do they ask for input and allow
people to refute the merit of one anothers ideas? Do they explain why
decisions are made and why some opinions have been overridden? And,
after a decision is made, are the rules clearly stated so that people
understand the new standards, the targets, responsibilities, and
penalties?
Alls fair
Recent research undertaken with colleagues from Heidrick and
Struggles provides some support for Kims perspective of fair process
and engagement (Figure 6.1). Relationships between the chairman and
Between the Chairman and the CEO/MD

Between the Board and the
sub-committees of the Board
Within the Board as a whole
Within the Executive/Management Team

Between the Board and the
Executive/Management Team
Between the Executive/Management Team
General Managers
Across the organization as a whole
1
Average scores ranging from Very poor to Excellent
Figure 6.1 Quality of relationships.
CEO, between the board and management, within the board, and within
the management team usually emerge as those of high quality. However,
relationships between the management team and the general management and those between the top management and the organization as
a whole are identified less positively.
The evidence is clear; fair process as a mechanism to realize engagement
needs to be consistently pursued right through the organization and
the general managers need to be at the center of such initiatives.
Rules of disengagement
Disengagement means demotivated people. Disengagement equates to
an unwillingness to go to work. Disengagement can (and sometimes
does) induce subversive and damaging behavior, not just from employees but also from managers. More likely, disengagement leads to passivity: just tell me what to do and that is all I will do.
Victor Lipman writing in Forbes highlights an interesting statistic. Only
29 percent of employees are fully engaged and 26 percent are disengaged. This means that three quarters of the employees of an organization are not working to their best. Lipman concludes that disengagement results from poor relationships with the immediate
supervisor. 2
Sadly, my own research concurs. Having to deal with a difficult,
obstructive, aggressive, and even undermining boss has a major impact
on anyones emotions, mindset, and desire to contribute. Such continued negativity induces stress and an increasingly commonly experienced condition: burnout. My initial investigation into burnout came
up with a startling conclusion: 93 percent of managers are likely to
burn out 2.3 times in their career. Some face-damaging consequences
loss of job, loss of spouse, loss of the capacity to maintain relationships, and, for the particularly unfortunate, a life of continued
ill-health.
However, my research has come up with another surprising finding. It
is not just the boss who creates disengagement but, as Doug Elix
observes, also the sheer complexity of large organizations. I referred in
Chapter 5 to the tension at the top-team level. Digging deep into my

global statistics reveals the nature of the concern.
VisioningTop team
How many members of the top team report fundamental divisions within their
team concerning the future?
33%
20%
23%
25%
30%
31%
32%
39%
39%
40%
42%
48%
China
Sweden
Japan
Finland
United Kingdom
Austria
Germany
France
United States
Spain
Hong Kong
Ireland
For 20 percent to over 50 percent of the worlds top corporate teams,

strife and tension is the norm. The most common reason for the corporate lack of cohesion is the fact that disagreement exists over the nature
of the strategy being pursued. A more common reason for strategic
tension is concern over how that strategy is implemented.
A German country manager of one major multinational related to me:
It is not so much the global marketing strategy that is the issues, but
more the fact that no one in Chicago will listen to what I have to say
about the buying habits of the German housewife. Just because it works
in America does not mean to say it will work here. Every time I raise the
issue of adapting the strategy, everybody thinks I am challenging the
corporate center.
DialogueTop team
How many managers believe there are issues that should be aired but are too
sensitive to be discussed in the top team and so are not?
36%
47%
49%
50%
58%
61%
62%
67%
68%
77%
80%
France
United Kingdom
Finland
Sweden
Hong Kong
Germany
United States
Austria
Ireland
Japan
China
Holding a different view about the nature of strategy and its implementation is one thing, but raising sensitive issues is quite another matter
and, in fact, a much bigger problem. From 36 percent of top teams in
France to 80 percent of senior managers in China, raising uncomfortable issues emerges as a deep concern.
One senior VP talked about his experience:
It is really difficult to raise certain matters. Many of my colleagues
talk about taking a risk with your job and the career-limiting effect
of challenging the CEO. It is all that, but what I find more difficult
is just discussing uncomfortable topics as, that makes everyone edgy
and unwilling to participate in the conversation. The room is full
of damaging negativity, which makes it difficult at times to find the
right words to say. Yes, to the consequences of raising the unwelcomed
truths, but just simply talking about that truth is more problematic.
Contemplate that last sentence. Talking about the truth is problematic!
How can that be?
So what are boards doing? Creating procedures for risk assessment and
meeting compliance standards does not address the reality of a disengagement that badly impacts on strategy and its execution. My study of
British board directors highlights the fact that many turn up at meetings to examine the numbers and proposals, but not to dig deep into
the heart of the organization to surface the market impact of a disengaged management.
I identified numerous hard and soft measures of board performance.
All board members rated themselves on these measures. I then asked
the top managers who had a working relationship with their boards to
rate their board colleagues on exactly the same measures. The results
show that whatever impact board members think they make, the
management downrates its board colleagues by 40 percent. The level of
respect for the board is limited.
Surprising for some is the fact that US boards fare worse. There are
boards where the chairman, CEO, or president is rarely challenged.
Equally, the level of insight of US external directors into the reality of
how the organization, on whose board they sit, really operates emerges
as even lower than that of UK directors.
The culture of poor relationships with your boss starts at the top.
The greater the level of disengagement, the more individual board
members and managers know what is wrong, what to do to put things
right, and whether things will ever be right.
The ultimate paradox is the greater the inhibition, the greater the
insight to move forward, the greater the paralysis.
Building the capability to hear

The message from my research is that managers and board members do
not wish to hear, cannot hear, or both, but with damaging consequences.
Hearing is not simply a matter of listening. Hearing is the capacity to
digest unwelcome, undesired, or difficult-to-explain information. The
individuals ability to hear depends very much on his or her resilience to
absorbed emotionally challenging input. It can take six months of hard
and intensive coaching work to enable a top team to listen.
Says one chairman:

I do try to read people and I try to understand what their agenda
is and what their objective is, so I do try to do that. I try to do my
homework on what it is that theyre trying to achieve and how I can
accommodate what theyre trying to do? I think Ive become much
better at reading people and I think Im much better at engaging
with people and listening to what they want.
Far better that the chairman or CEO sensitively investigates the nature
of the issues at hand and his or her incapability to listen to unwelcome
messages. Knowing the range of covert agendas and the capacity of each
top-team member to face up to unwelcome truths sets the basis for
engagement.
Foundations of engagement
Value is created through people, not technology; value for customers,
value for employees and the creation of such value laid the foundation
for my companys success, said the chairman of an international IT
company.
Engagement needs to be built on dialogue and trust. It is the leaders
job to create a culture of constructive dialogue; to interrogate the argument; to provide intellectual due diligence; to push and question in
search of the best solution.
Aside from ensuring the success of the proposal, reducing risk, and safeguarding the reputation of the organization, one additional and powerful benefit that accrues from interrogating the argument is commitment. A robust management putting forward a well-prepared case,
which is analyzed in a systematic and logical manner, not only strengthens the case but also elicits a greater commitment from those involved.
Working together to improve proposals enables all concerned to identify with the outcome as well as allowing for recognition of one anothers
strengths and contribution. Well-positioned logic and constructive criticism strengthen relationships, rather than damaging them.
Encouraging criticism requires resilience and robustness. Resilience is
needed to respond positively to comment, even if critical, and recognize
that the contribution is worthwhile. Such resilience is essential in order

to gain from the debate. This requires the building and maintenance of
robust relationships.
Trust is essential to engender transparency and open understanding.
Interrogating the argument without resilience and robustness turns
positive contributions into a defensive nightmare. Certainly one fact is
clear. Examination of any proposal requires the challenging of assumptions and a critique of the logic and consistency of the argument
presented. In the heat of discussion, standing back and recognizing the
benefits to be gained from stretching analysis requires not only a sharp
and logical mind, but also a personal quality of not taking offense and
instinctively assuming that a critique is a cover for personally directed
criticism. So much depends on the quality of dialogue.
Dialogue versus debate

While the terms dialogue and debate are used interchangeably, in fact,
the difference between them is considerable.
Dialogue goes back to ancient Greece, to Socrates in particular. Socrates
philosopher, orator, teacher, and one of the most formidable intellectuals of his daywrote nothing. Plato wrote Socrates. What we have is
Socrates, second hand. Through Plato, Socratic philosophy has influenced generations, particularly in forms of oratory.3 Socrates championed dialogue, not debate, for the purposes of achieving diligent inquiry.
His unique contribution to the art of rhetoric is about reasoning, the
construction of an argument and refutation of the argument being a
collaborative rather than an adversarial experience. In Socratic dialogue,
no one wins, but all are engaged. The search is for the very best argument.
The very best is determined according to circumstance and context.
What is the best supportive case? What are the very best objections?
Learning has to totally encompass the individual and the group, the
essence of Socratic philosophy.
The term dialogue comes from two Greek roots, dia meaning flowing
through and logo meaning the clarifying of assumptions and mental
modes, in keeping with todays commonly made interpretation of logos
being the word, the word of God, or the ultimate statement. Through
dialogue, the champion of an initiative encourages uninhibited
examination, requesting that colleagues adopt counter positions in

order to explore what of the argument put forward could survive. Look
at the world from the other point of view; see if it makes sense! they
challenge. During dialogue, all discussants act as champions of 360
interrogation in order to have the confidence in the components of the
argument that survive discourse. No one loses; everyone wins. The
emphasis is on ceaseless conversation, which can involve negotiation,
compromise, mutual exploration, inquiry, with the cycle repeating itself
many times over.
Sounds simple enough, but not according to Socrates. For Socrates,
dialogue is a state of mind, not a mode of conversation. Such a state of
mind is not easily realized. More common is debate, a particularly
English innovation captured in the very structure of the House of
Commons, the lower chamber of the United Kingdoms Houses of
Parliament. Debate denotes beating down, breaking the argument of
the other side. Debate requires the taking of sides and confrontation.
The side that wins, wins the argument. Winning and not necessarily
emerging with the best case distinguishes debate from dialogue.
Winning can be based on strength of argument. Winning can also be
entirely dependent on undermining the case of the other side or, worse
still, discrediting the other side rather than paying attention to improving ones own case. Debate can also mean bullying. The loudest voice
wins irrespective of the prevailing logic.
Robert Swannell, chairman of Marks and Spencer, captures the nature
of dialogue in action:
The first thing I said when I became chairman of M&S was that I
wanted this to be a very open board where people can talk about failure as easily as they can talk about success. That starts from the top
and starts with the pivotal relationship with the CEO. We have both
encouraged our non executives to speak out, to go into the stores
and to see what is going on. We are lucky with a business like M&S as
it is sufficiently tangible and interesting that you do not have to try
too hard to get people to share, speak and offer their view.
Socrates emphasized it, Robert Swannell promotes it: having dialogue
as a way of life built into the fabric of the enterprise. Understanding the
difference between debate and dialogue is vital if the arguments put
forward are to be truly interrogated, understood, and acted on.
What sort of individual/team are you? One that enters into debate or
one that encourages dialogue? The following questions may help:
Do you prepare for meetings to win your point of view or to meaningfully discuss the issues at hand?
When the argument does not go your way, do you lose face or emerge
as enriched because you have learned how to better deal with the
issue the next time?
Do you push your point of view or try to understand the mindset of
the others and where they are coming from?
Do you make clear propositions or ask more penetrating questions?
How do others really see you, as a fearsome advocate or as someone
open to alternative viewpoints?
If you have emerged more with the first option, you are debate-oriented.
The second option shows those more concerned with dialogue.
Now have your colleagues and those general managers who will genuinely give you feedback ask the very same questions of you. See if comparable results emerge. If not, its time to rethink your approach to
engagement.
Finally engaged
The thing about engagement is that it is fundamentally easily measured. You can tell when you walk through the door of a companys
office whether the people there are engaged or not. You can tell around
a boardroom table. You can tell around a coffee machine.
David Cunningham, president of Asia Pacific at FedEx, equates highquality engagement with a diversity of thinking and approach in
order to make strategy work. The latest research Heidrick & Struggles
and I have conducted totally supports Cunninghams perspective
(Figure 6.2). Engagement, strategy, and diversity of thinking and
approach emerge as the three most critical organizational performance qualities.
Says David Cunningham:
I cant tell you the number of times that members of the board are
engaged. A board member and I will be having a coffee. Were talking
Engagement
Diversity of Thought - Board level

Diversity of Thought - Executive/Management
Team level
Strategy Development Qualities
Strategic Direction Qualities

1
High performing
Fairly high performing
3
Average Scores
(1 = Low, 5 = High)
Average performing
Figure 6.2 Organizational performance qualities.

about particular issues, or he is asking me whats going on with the
business. What are the challenges? Whenever theyre in a region or in
a city they will engage with the management team there. It motivates
us and helps them be knowledgeable.
Sam Su of Yum! Brands in China talked about collaboration.
Collaboration for Sam appeared to be partly cooperation, partly feeling
comfortable to speak out, and also partly feeling encouraged to come
up with something new and different, but focused. This is what a truly
engaged manager sounds like:
The word I use is actually not collaboration. The word I use is
integration. So its not just cooperating. Its easy just to cooperate. Its much more than this. Its actually a much higher level of
skills than the willingness to cooperate actively. I always believe
you must have a mindset, a right attitude, but you have to acquire
the skills to do it. You have to have the correct mindset, but the
more challenging one is the set of skills that I call integration. So
I do try to teach the integration skills. Integration skills mean you
really learn, you listen, you seek. You have got to be able to ask
questions, get people to tell you what they think and you have got
to listen very, very attentively, and be able to truly understand.

Then you have to be able to communicate what you think. Then
we had to go through that final process of trying to sort of synergize everything and making it into something thats truly useful.
It requires a lot of maturity and experience, but I think it can be
learned. So I try to role model these behaviors.
My research with Heidrick and Struggles captures the benefit of
addressing engagement concerns at the earlier stage (Figure 6.3).
The message is, better relationships at the top means being better
able to deal with risk, restructuring, succession planning, and meeting targets as well as enhancing competitive edge. The survey also
shows that a better performance from employees improves customer
focus.
Now the E of the (E A) is better balanced against the A.
Greater strategic alignment

Better relationships between the Board
and the Executive/Management Team
Improved capacity to consider and adapt
to risk and innovation
Better discussions concerning sustaining a
competitive edge
Better relationships among members
of the Board
Better performance from the
organizations employees
Better discussions concerning
restructuring
Better discussions concerning
succession planning
Improved customer focus
Improved ability to meet financial targets
Improved capacity to undertake
mergers/acquisitions
1
Figure 6.3 Impact of handling awkward or sensitive discussions at an

earlier stage.
The discipline of engagement: In summary

Respect the inhibition that arises from disengagement. Raising and
dealing with uncomfortable issues are some of the greatest challenges leaders face.
Addressing engagement concerns is as vital as restructuring and
getting the processes and systems right.
Addressing challenges of engagement is a sensitive affair and for this
reason, many leaders sidestep this responsibility.
Addressing engagement concerns requires the gathering of sometimes damning and damaging evidence
Most change programs fail because issues of engagement have been
ignored.
In fact, disengagement is normality.
Dialogue is the route to effective engagement.
Key questions
Have you felt inhibited in raising/dealing with uncomfortable issues?
If so, why and under what circumstances?
Do you feel that your team members and/or general managers find it
difficult to raise relevant/critical but uncomfortable concerns?
If yes, what are the consequences of not addressing these concerns?
Chapter 7
Discipline 5Leadership
Lou Gerstner was one of the business heroes of the 1980s and 1990s. He
was the former management consultant who became CEO of IBM when
it was at its lowest ebb and led its transformation into a twenty-firstcentury corporation. Popular business mythology has Gerstner down
as a charismatic change agent. Former IBM vice president Doug Elix
recalls it as more than that:
People talk about what Lou Gerstner did and attribute many things
to him. Like, he was the guy that saw the service business, he was the
guy that saw the value of software and completely restructured the
company. But it was much more than that. He was the guy who realized the style of leadership and the caliber of executives that should
run the company in a rapidly changing IT industry, and his great
skill was to make the majority of the leaders people with enquiring
minds, open to feedback, good listeners and able to face reality and
act on it.
We went from a very closed, hierarchical management culture to one
that was market driven and client focused. The market had to speak,
the management had to listen, the customer had to speak, the management had to listen, and he appointed people who felt the same
way, and all of a sudden there was this wonderful relief of wow, weve
got an open management system here.
Lou Gerstners contribution to IBM was not just his brilliant strategic
insights but also his insistence that the companys managers face up to
reality. Instead of ignoring the evidence, Gerstner forced them to
confront it and embrace an alternative future.
In one famous example, Gerstner was watching a series of presentations by senior IBM managers that had become a ritualized form of
denial. Once a year managers gathered at the companys headquarters
in Armonk, New York, to present a sanitized view of the business. Bad
news was routinely excluded from the slides because they thought that
executives at HQ did not have the stomach for it. Sitting in the darkened room, Gerstner listened to the first presentation, before halting
the proceedings. Calling for the lights to be switched on, he told the
managers present that things had to change. In a passionate plea he
said that IBM was sleepwalking off the edge of a cliff, and that there
was too much at stake to allow that to happen. The jobs and livelihoods of the companys thousands of employees were too important to
ignore. Within hours, the message had reached every IBM office in the
world. Gerstner meant business. He wanted the truthand he wanted
it now.
The leadership challenge

How do leaders create sustainable value? In Chapter 3, we looked at the
characteristics of a particular style of leadership that I call evidence-led
leadership. These leaders deliberately gather evidence from multiple
stakeholders to ensure the organization benefits from diversity of
thinking. They also proactively seek to nurture and develop other
evidence-based leaders. This is important because it creates an evidencebased culture that is less susceptible to hubris. Interrogating the data
becomes an instinct. But it is also a habit that can be nurtured over
time. How can that instinct be enhanced?
The leaders I talked to displayed three key qualities:
smartness, a high-level ability to model and conceptualize
profound moral consciousness and
persuasive advocacy to turn arguments in their favor.
It was the way these qualities were combined that made the difference.
High IQ
Of these three, high IQ emerges as a profound influence on a managers
leadership style. Explaining reality by integrating the different demands,
pressures, and forces that the organization faces, but in a way that
makes sense to all, acts as the basis for respect and trust. The leaders
may or may not be liked but the trust of others in their capacity to find
pathways through demanding circumstances emerges as fundamental
to ensuring loyal followership. Making sense of complexity, sometimes
Discipline 5Leadership 115
even making complexity look easy, is a phenomenal attribute of

intelligence.
Doug Elix used the word sophistication to describe the leadership skills
required in the higher echelons of a major organization. I asked him
about the step up to a senior leadership position:
I would say it was a huge step up in sophistication rather than mental ability. Once you have 100,000 people, there are always going to
be several dimensions to how the management system will work. Its
not a clear hierarchical command and control system anymore.
Its the realization of a different thought model, and a different
structure of how things should work, an acceptance of building
linkages that previously you didnt think youd have to worry about,
and learning how to make it work. I use the word sophistication. Ive
always thought of it that way, but really its the ability to think differently.
Chris Gibson-Smith, originally a geologist, now chairman of the
London Stock Exchange, emphasizes that the development of IQ capacity and the thirst for knowledge need to start at an early age:
Business fulfilled my personal wanderlust. I spent several winters in
the Canadian Arctic, I spent a summer on the edge of the Greenland
ice cap, I spent time in the Borneo jungles.
I think the most interesting thing that I learnt from business myself
was its relevance to the world society, and how human civilization
is operating, why it has the shape it does, what the origins of wealth
are, how humans have to behave to generate wealth between themselves; and so for me, the most important element of the curriculum
was macroeconomics and microeconomics. Microeconomics truly
did explain the intricacies of high performance efficiency within
firms in a structured way that was to me wonderful. And macroeconomics told me about my society and I had to be completely opaque
to that point, and I had never even stepped into those roles of
thinking.
Breadth of mind, resilience, wanting to know the truth, and a natural
curiosity are all elements of the success formula.
In flight change
When I spoke to him, Rickard Gustafson, CEO of the airline SAS, was
particularly interesting because of how he was using the power of
evidence to bring about necessary and radical changes in the organization. It is a truism that change to deliver value is part and parcel of the
leaders job. But what is less explored is the fact that evidence is a vital
propellant of change.
SAS was in a bad way when Gustafson took over in February 2011. In
2009, the airline made a loss of over 3 billion Swedish Krones. In 2010,
it lost close to 3 billion Swedish Krones. In 2011, it lost a further
1.5 billion Swedish Krones. Gustafson had worked at Andersen Consul
ting and GE Capital and had been CEO of the insurance group Codan.
But he was a newcomer to the airline industry. Tough times demanded
tough decisions. This is how he described the starting point of the
process of change at SAS:
When I embarked on this journey, I thought that theres only one
thing that I can do, and that is to make sure that on every occasion
we are extremely transparent, to not just our people, but also our
unions, about the state of the business. And I made that my kind of
trademark.
The challenge Gustafson faced was considerable. His way forward was
based on transparency and the sharing of evidence.
I have 37 different unions to negotiate with. I told them that I want
to meet them on a very frequent basis to ensure that they have the
same information as I share with my board of directors. We all need
to have the same version of the reality.
Ive had big union meetings when I presented the state of the business. After the presentation, I pointed to the board employee representatives in the room and asked them to please confirm to their
colleagues that this is exactly the same information as I presented
to the board yesterday. They couldnt hide. They acknowledged that
this was the message, and this was probably the truth.
So that was the reason we were able to create the sense of transparency
and trust that was the basis for this massive change. People understood
that we had come to a kind of road end. Either we transform this business to market-based conditions, or it will be game over. That was a real
threat. But it took me a year of constant communication to really make
sure that this was obvious to all stakeholders.
Yet, convincing those closest to you can be as much of a challenge as
dealing with those that oppose you.
And the challenge was also to convince my executive colleagues,
my legal counsel, and to some extent my board to be this open and
transparent. Were a public listed company so theres only so much
information you can share without getting into some sort of grey
zone. But I said, if were going to win this, we have to take a bet. We
got people to sign non-disclosure agreements and that worked. We
did not have any leakage. The reason why the board was concerned
about this open book strategy was that some of them have been
on the board for a few years, and leakage had been a constant issue.
Basically, some of them said that the day after a board meeting they
could read all about it in Scandinavian newspapers.
But that didnt happen. I think that the union representatives respect what we have done, they realize that we did it in a decent way,
and that we treated people fairly throughout the process. It is painful and they dont like it, but they respect it.
Respect is central. Gustafson goes on to show that respect, integrity,
and trustworthiness are not only closely interrelated, but also critical
for the continued exercise of high-quality leadership.
The foundation I rest my leadership on is integrity and trustworthiness. The day they can say that they dont trust me, that Im telling them something thats not 100 percent accurate and true, or
that they in any other way can question my integrity. That day I fail
as leader. I think that management in SAS has a history of trying
to outsmart the unions, and the unions have in the past, tried to
outsmart management. This has created a massive lack of trust between the unions and the management. I hope that my transparent
approach has started to bridge that gap.
Integrity for me is not just that you never do anything that is unethical or not legal. But its also that you treat people with respect,
you never lie, you never fabricate data to force a story. You should
know that if we have a conversation, and you tell me that now
Rickard, I want you to keep this between us, you can rest assured
that the information shared wont come out.
Gustafson makes a compelling case for ethics to be core to the business
school curriculum.
Moral consciousness
I teach ethics in business on a number of business school programs
worldwide. I could teach ethics in one or two ways: I could emphasize
what is required ethical practice and what leaders in organizations
should do, or examine the ethical dilemmas faced by leaders. So I
asked my various student groups which of the two approaches they
would desire. The response from my various audiences has been overwhelmingly in favor of examining the nature and impact of ethical
dilemmas.
As one talented, mature MBA student in Germany said to me: We have
been preached at on ethics programs consistently, but none of that is
useful. I know what I should do. I do not need anyone else to tell me.
What I find difficult is doing what is right in circumstances that are just
wrong. A sense of moral consciousness requires insight into ones own
integrity and an understanding of how to behave in a context that
stretches the moral worth of the individual. Navigating your way
through contrasting agendas requires moral worth and also sensitive
conversations. It is worth noting that conversations can range widely
without damaging engagement. Even over issues of ethics and morals
realizing engagement is key.
Persuasive advocacy
My research highlights the fact that the leaders who display compelling
advocacy are not the most assertive, or the most glamorous. They are
the ones who seem to have a feel for what is going on.
For John Parker, chairman of Anglo-American, persuasion, advocacy, and
winning hearts and minds are all rolled into one. The powerful advocate
gets close to others and shows that he/she feels what others go through.
The old adage walk the talk and talk the walk still holds particular relevance for outstanding leaders. Heres what John Parker observed:
Ive seen some highly intelligent managers in general management
who believe they have assessed a situation from afar, instead of getting down there, sniffing the air, looking people in the eyes, getting
an emotional feel of whats going on. And this is where the guy with
strong emotional intelligence wants to be engaged in the dialogue
with those on the ground, whereas someone may look at a bunch of
figures and say, oh, I know whats wrong here, this is what weve got
to do here. And the reality is they will not be in a position to capture
the hearts and minds of those within their business where things
have to change. Unless you go down on the ground, you cant spot
the good people; you cant spot the weaker links.
So I think engagement and kicking the tires, and the ability to be
seen to kick the tires. A top manager goes out and gets engaged with
the people, goes and eats with the miners in the canteen when he
goes to Brazil or Chile or whateverand that visible presence and engagement of the leader makes a huge impact. And I think that leaders sometimes underestimate the impact they can make by actually
being there, and not on a regular basis, but doing it regularlyI dont
mean every month, but being in Brazil every year, or Chile every year,
whatever, and just doing the check on the ground relative to what
your reports and your reviews are telling you.
As John Parker emphasizes, persuasive advocacy is impactful only when
one is embroiled in context. Being with and a part of the people is
primary, even if only for a short time. Soft data can be powerfully
impactful. Once the attention of the critical stakeholders has been won,
effective persuasiveness involves seven steps:

handling criticism
positioning the argument
managing expectations
reworking the argument
fostering a no-shame culture
avoiding personal agendas and pet themes and
zooming in, zooming out
Handling criticism
For some, interrogating the argument is uncomfortable. A critique is
taken as personal criticism, more likely if they are the champions of a
project. In fact, well handled, the converse should be true. Critiques not
only strengthen the argument, but they also attract greater involvement. The more individuals dig deep, the greater the likelihood of
commitment from the board, especially when the going gets tough.
Together with my wife, Nada Kakabadse, we identified in our book,
Leading the Board, the steps to take in handling a critique.
How well sequenced is the argument justifying the case? Accompanying
attention to detail is sequencing. The quality of the evidence may be
impeccable. But, the positioning of evidence requires equal attention.
Sequence the argument, clearly displaying the step-by-step logic of the
case. Even if flaws exist, they should be made transparent. Weaknesses
exist in virtually every case. Highlight these as well as the logic of the
proposal and then support for the proposition put to the board is likely
to be more forthcoming. Appreciation of the totality of the argument
likely guarantees the commitment to proceed.
Positioning the argument
The second step is to position the argument. Dialogue encourages
in-depth, uninhibited exploration, whereas debate induces win/lose
situations, the taking of sides, for and against, so that the most powerful presence in the room carries the case, irrespective of whether that is
the best argument.
How leadership teams work in practice varies. But an evidence-based
proposition with argument is a primary requirement of decision
making.
Additionally, any major project needs championing. Being a champion
is a passionate affair. Strong bonding with the initiative and the people
involved is natural. Hidden beneath clearly thought-through argument
are powerful emotions. Scrutinizing any case requires attention not only
to logic but also to relationships so that the coherent logic underlying
the argument prevails without undermining the passion for success.
In verbalizing the argument, the manner of conversation needs consideration. Is it dialogue or debate? A great deal depends on the depth of
understanding desired by the parties involved. The psychological

contract with each other has to be appreciated as, so often, that determines the quality of outcome of the debate process.
Managing expectations
The third step is to manage expectations. Remember, too, that no CEO
likes surprises.
One of the most important aspects of the leaders role is to set the
context for discussion. How an argument is introduced and the signals
from the leader can make a huge difference. In particular, the leader can
either defuse a highly charged atmosphereor light the fuse.
A positive relationship between chairman and CEO is often crucial.
Words such as openness, trust, respect are used to describe a productive
and fruitful relationship. Yet these words are dyadic, capturing the intimacy of the relationship between the two people. What about the quality of relationships at meetings, where comment and counter comment
are the realities within the setting of a group?
Terms such as robustness and resilience are more appropriate. The relationship between the chairman and CEO is no love-in.
Quality of evidence, structure of argument, and attention to detail are
essential ingredients to gaining approval of the case put to any group.
There is a final consideration and that is the positioning of expectations. How should the case be viewed? How to bring out a positive view
from people in order to achieve desired outcomes requires the leader to
mold the thinking of individuals and the organization as a whole. This
requires a personal and sensitive touch. There are no universals in this.
Reworking the argument
The next step is to rework the argument. Sound discussion is provided
if expectations have been appropriately positioned. Once the interrogation has run its course and further work is necessary from the management team, practical steps to reworking the argument and winning
final approval add a final sense of completion.
There is no shame in reworking the case. Indeed, it is often necessary.
Ultimately all benefit. But, our research shows that many share this
view but few practice it. The majority admit to caution in presenting a
case to the board that may not survive their scrutiny. If the case is poor,
then caution to proceed is understandable. If the relationships between
the chairman and CEO, between board members, and/or between the
board and management are dysfunctional, it is understandable that
caution arises. On the management side, all too often propositions
never reach the board for fear of rejection, not because the case is weak
but because the board is not ready.
Fostering a no-shame culture
Loss of face, loss of credibility, even shamethese are the experiences
described by both management and board directors when proposals
are rejected or returned, as requiring further deliberation. The two who
feel most sensitive are the chairman and CEO. But why? Assuming
that open and transparent deliberation surfaces valuable suggestions
for improvement to the original proposal, why the negative emotions?
Dialogue requires examination of the case from all angles. Identifying
improvements contributes greatly to the longer term sustainability of
the proposal. There is no shame in being asked to improve an already
well-thought-through case. Einstein, one of the outstanding minds of
the twentieth century, did not publish much, but what he did publish
was in academic journals, which required what is called blind peer
review. Unknown fellow academics confidentially critiqued his papers.
The response to Einstein was, revise and resubmityour work is great
but there is room for improvement. Imagine the twentieth century if
Einstein had sulked and saidno, to hell with you, accept what I have
submitted or nothing at all! Perfecting the proposal goes hand in hand
with a robustness and personal resilience to challenge, listening, and
counter challenge. Pushing for open and in-depth conversation leads to
a no-shame culture.
Avoiding personal agendas and pet themes
Nurturing a no-shame culture demands objectivity and impartiality
from board members. What undermines a positive and progressive
approach to conversation is the pursuit of pet themes.
Taking into account the contextual pressures management faces aids
scrutiny of the proposal. Other contextual experiences of board
members, unless directly relevant, should be omitted from the conversation. There is a natural tendency to refer to powerful, personal experiences as the benchmark for determining the merits of a case.
Zooming in, zooming out
We work in an environment where global effectiveness is essential.
But, there is no single program, function, or discipline that provides
you with the capabilities and competencies you need to succeed as a
global leader.
How, then, can you become personally and organizationally effective in
a modern leadership role?
The effective global leader is adeptalmost mechanically soat moving
in and out of contexts, cultures, and characters. I call this zooming in
and out.1 Think of a zoom lens on a camera: it allows the operator to
pull back and see the big picture but it also allows them to zoom in on
the detail. Like a skillful photographer, the best leaders move from big
picture to nitty-gritty detailswitching perspective many times within
the same conversation or meeting.
Indeed, among the hundreds of boards I have studied, I have observed
that the ability to zoom in and out in a measured and skillful way is one
of the characteristics that mark out exceptional leadersbe they chairmen or chief executives. In many cases, they use their zoom lens to
probe and uncover the issues just below the surface that need to be
resolved, separating the personalities from the policies and the cultural
nuances from the business context. In this way, the most effective chairmen or CEOs are able to tease out the real issues and resolve problems
to make things happen.
They do this in three distinct domains: the characters they are dealing
with, the context of the meeting, and the culture in which they are operating. Each of these domains ranges from the big picture level to the
highly granular nitty-gritty level.
Take the character domain, for example. A CEO might look around
the boardroom table and see the bigger picture of the characters
thereviewing them as their job title: the CFO, CTO for Europe, and
global HR director. But when required they can also zoom in to see
them as individualsSusan, David, and Pablo, with all their human

idiosyncratic ways.
How does this work in practice? In contemplating the CTOs negative
response to a proposal, for instance, the CEO zooms in on his character. He remembers that David was overlooked for promotion last year
and is still sore about it. That knowledge may allow the CEO to unlock
Davids response to persuade him to support the idea on the table,
perhaps with a gentle reminder that the project will create a new role of
global CTO that he would be well qualified to fill.
Surprisingly, too, the ability to zoom in and out is not as common as
you might imagine. Many highly competent leaders I have studied have
a weaknessor blind spotin this area.
Most leaders have a default preferred settingthey either lean toward
the zoom out positionoften characterized as big picture thinkers; or
they like to zoom incharacterized as the nitty-gritty guys or dealers in
detail. They are capable of zooming in and out on occasions, but they
do not do so automatically.
But there is a third group of executives with a very different style. These
leaders are highly adept at zooming in and out during the course of a
meetingor any other situation where they exercise their leadership.
Having observed their behavior over many years, I have found that these
individuals are far more effective at getting their desired outcomes from
meetings and other management situations. They make excellent chairmen and chairwomen. They are more effective at creating buy-in and
identifying and fixing problems before they become a block in organizational effectiveness. In short, they reap the profits of zoom.
There are three aspects to this:
zooming in and out of context; from big pictures to budgetsstrategy
to execution
zooming in and out of cultures; regional or national culture to
departmental culture
zooming in and out of characters; learning in vivo, job title to individual
personality.
The ability to zoom in and out of different cultures, contexts, and
characters is key to the effectiveness of evidence-based leaders.
Leadership for a purpose

Real leaders lead for a purpose. They believe in the organization and the
value it creates. They are not simply going through the motions to
collect a monthly paycheck. It is their commitment that attracts and
retains followers.
As Caterpillars Ed Rapp explains from the implementation
perspective:
People stay at CAT and, we say that Caterpillar people have yellow blood. From my perspective, yellow blood is sourced from
three things and thats why people stay. Number one, people like
working for a leader. Now we never take our leadership position
for granted. We know we have to earn it each and every day but
I think people like to wear the Cat logo on their shirt because
theyre proud to work for CAT and like the fact that were a global
leader.
Secondly, and it may sound corny, but most of us do believe that
what we do matters. We build roads, dams, airports, and other infrastructure around the world. You cannot take me to any country
around the world where you can see a higher standard of living without the build-up of basic infrastructure. We say at CAT the road to
progress begins with a road, period. People like being associated with
a company that does something thats real.
Thirdly, its a relationship business and we just happen to sell machines and parts. We meet people around the world and we get reconnected with people that weve worked with before. We form deep
relationships with customers that have lasted generations, dealers
that have been with us for 60 years. So if you were going to leave CAT
it wouldnt be like leaving a job, youd be leaving your friends, your
family.
Jim Collins, author of the 2001 bestseller Good to Great (and coauthor of
the 1994 bestseller Built to Last), has championed something he calls
Level 5 Leadership. The highest level in a hierarchy of executive capabilities, according to Collins, Level 5 is a potent blend of selflessness, humility, and iron will. Those who exhibit it are typically quiet leaders rather
than the larger-than-life figures associated with transforming organizations. In many ways, the managers Ed Rapp describes at Caterpillar.
Humility is a key ingredient. According to Collins, the simple formula
is HumilityWill = Level 5. Level 5 leaders are a study in duality,
notes Collins. Modest and wilful, shy and fearless. They are more
likely to attribute their success to luck than any heroic leadership qualities. They are ambitious for the company rather than for themselves.
They tend to leave a more durable legacy when they step down, but they
are not preoccupied with their legacy; they are preoccupied with doing
their job and that involves creating value. Leaving a legacy is a happy
by-product of doing the job well, and wanting to leave the organization
in better shape than they found it.
Evidence-based leaders place the organization above the individual
leader. As Kevin Lobo, CEO and president of Stryker Corporation, puts
it: My first concern is with the company, not with my legacy.
Caterpillars Ed Rapp makes much the same point:
Caterpillar has been around since 1925 and our general belief is that
we are simply stewards of the business for a period of time. As stewards
we have two accountabilities. Number one, leave the place better than
we found it. In other words every day how do we get better in terms of
the product or operations or whatever it may be. Secondly, make sure
we leave it in more capable hands. When Im gone I hope the response
is I really miss the guy but were doing fine without him. We all have a
pretty good understanding that thats what were here to do. Its not
individual, its not about a personality, its about sustaining a business
over the long term and I think we try to keep that in perspective.
As Rapp indicates, too, the leadership role changes over time. I have
worked for Caterpillar for 35 years but I have worked for five or six
different Caterpillars as we reinvented ourselves over time to adapt to
the world that we compete in.
Ed Rapp, Jim Collins, and Kevin Lobo offer similar messagestake the
holistic view, be guided by your values, and from this understand the
challenges you have to address and the consequences of not doing so.
The evidence-led leader lives and breathes S + (E A) = V.
The good, the bad, and the ugly

Unfortunately, for every example of exceptional leadership, there are
many more instances of leadership failure. James McGregor Burns, the
father of modern leadership theory, described leadership thus:
Leadership over human beings is exercised when persons with certain
motives and purposes mobilize ... resources so as to arouse, engage, and
satisfy the motives of followers. Note the assumption that leadership is
a positive and a good thing, where leaders engage and satisfy.
But is this rose-tinted view of leadership an accurate one? Harvard
University leadership expert Barbara Kellerman thinks not. In her book
Bad Leadership: What It Is, How It Happens, Why It Matters, Kellerman
discusses the dark side of leadership. 2
Using the terms good and bad implies that leadership is black and
white, which is rarely the case. In my experience, a more productive way
to frame this is to talk about effective and ineffective leadership. But
here I will use Kellermans terms to avoid misrepresenting her. History
not only tells us that there are plenty of bad leaders, but also, more
confusingly, that effective leadership and bad leadership are not necessarily incompatible. You can be highly effective and still be a bad leader.
We should acknowledge the fact, argues Kellerman, and seek to understand bad leadership, instead of conveniently ignoring the subject.
Kellermans bad leaders come in seven types: Incompetent; rigid; intemperate; callous; corrupt; insular; and evil. (Bad leaders may inhabit more
than one of these groups.)
Kellerman makes a broader distinction between ineffective and unethical leaders. Ineffective leaders fail to get things done. They are marked
out by missing traits, weak skills, strategies badly conceived, and tactics
badly employed. While ineffective leaders may set admirable objectives,
they lack the means to achieve those objectives.
Ineffective leaders are often complemented by ineffectual followers.
Research has identified the best, most effective followers as those that
think for themselves; self-direct their work; and hold up their end of the
bargain. They continuously work at making themselves integral to the
enterprise, honing their skills and focusing their contributions and
collaborating with their colleagues. By contrast, ineffective followers are

weak and dependent, and do not commit or contribute to the group.
Unethical leaders are those who appear unable to tell the difference
between right and wrong. Good leadership is invariably associated with
ethical leadership. Burns offers three characteristics of ethical leadership:
Ethical leaders put the needs of their followers before their own. Ethical
leaders exemplify private virtues such as courage and honesty. And ethical leaders exercise leadership in the interest of the common good.
Unethical leaders do none of these things. Bad leaders may be ineffective, unethical, or a mixture of both.
So why is it important to consider the nature of bad leaders? For one
thing, Kellerman believes that by knowing what constitutes bad leadership and followership we can seek to avoid them.
Bad leadership can be corrected. Not by changing human nature
though. Nor by burying our heads in the sand and avoiding the issue.
Neither will it change without also changing bad followership.
Notwithstanding these caveats, there is action that can be taken. Leaders
can, Kellerman suggests, limit their tenure; share power; avoid believing
the hype about their abilities; stay in touch with reality; compensate for
weaknesses; retain a sensible work-life balance; remember the organizations purpose; keep psychologically and physically healthy; be creative;
keep appetites under control; and set some time aside for regular
contemplation.
With regard to their relationship with followers, leaders can also establish a culture of openness; appoint an intermediary like an ombudsman;
encourage strong independent advisors; disseminate reliable and
complete information; and establish a system of checks and balances.
Such measures will never eradicate bad leaders entirely. But they can go
a long way toward it.
By identifying these two broad categories of bad leadership, Kellerman
raises an interesting question. What constitutes good leadership? There
are many examples of leaders who got things done by persuading their
followers to deliver on a set of unwelcome objectivesbut by terrible
and morally repugnant means.
Clearly, the almost unanimous verdict on this type of leadership is that

it is totally undesired. Therefore good leadership must be about more
than effective leadership. The extra element appears to be the ethical
component. Good leaders must be both effective and ethical.
Leadership can be misused. It can end badly. But, it is vital in achieving
anything in any organization. Understanding and implementing the
other disciplines requires and demands leadership.
The discipline of leadership: In summary

Know what sort of leader you are and how your style and mindset
will shape the future.
Displaying the IQ capability to address the challenges being faced is
first and foremost.
Moral consciousness is a critical factor in leading for sustainable
value.
Read context sensitively and accurately.
Persuasive accuracy is fundamental for compelling leadership.
Key questions
As a leader, how would you describe your style and mindset?
What do you think others say about you? And do they say it to you or
behind your back?
How would you describe your moral and ethical consciousness?
How accurately and sensitively do you read and work within
context?
Do you agree that persuasive advocacy is fundamental for compelling leadership?
Do you practice that or, alternatively, are you a persuasive
personality?
Ultimately, what is your leadership purpose and what do others see
your purpose as being?
What kind of a person for you is a bad leader and do you display any
of these traits?
Chapter 8
Discipline 6Governance
Governance is the engine oil of the success formula. Without it the
engine will grind to an inglorious and abrupt halt. But, governance is
not simply a straightforward administrative exercise. Getting the
balance right with governance is a big challenge and should not be
underestimated.
Once again independence and diversity of thinking are key. Governance
is not a matter of simple compliance and time-consuming box ticking.
When independently minded non executive directors bring diverse
points of view to the boardroom, then compliance takes care of itself.
On the other hand, when these two critical aspects are missing, no
amount of box ticking will create effective governance. The reason is
that governance has two vital dimensions: monitoring and mentoring.
It is only when both of these roles are fulfilled that the governance role
of the board is effective.
Monitoring is all about the controls, protocols, and procedures that
provide early warning signals and enable the board to take action to
prevent wrongdoing or bad decisions.
The other side to governance is that of mentoring. Diversity of thinking
bridges the divide between compliance and independence. It translates
form into substance. By bringing different points of view to bear, the
board is able to challenge, nurture, and guide the management team.
As Sir John Parker, chairman of Anglo American, explains:
As the chairman of the board, you have built up a strong relationship with your board collectively and individually. And, secondly, I
think if you do your job well as the chairman, you will have ensured
that they and the next layer of management, in particular, have got
to know each other.
It allows that layer of management to get to know the directors informally. And the other great bridge is that you rely on your chief
executive, who, after all, is very much part of your board, to be giv-
ing the same missionary messages to the next layer of management

so that the cascading of the message is very, very important to
strengthen the linkage.
For Sir John Parker, mentoring predominates.
When I asked Jeff Fettig of Whirlpool about the role of the board, heres
what he said:
Its crystal clear. First and foremost: pick the right CEO. Second:
oversight and strategy. Third: monitor operations. Fourth: audit
controls. And fifth: strong governance. We look for successful people
who know how to do those things. Thats why, in my opinion, its experienced business people who know how to do those things best.
The strong emphasis on monitoring is clear, but is that sufficient?
Jeff Fettig continues:
So, with that as a starting pointvery strong talent, great experience,
great diversity of thought and everything else. I would say our board
has got a great respect for each other, and great respect for the management teams that they deal with, and vice versa.
Our board has got the right mix of both, on one side, supportive,
when it countskey word: when it countsand provocative, when
its needed. They do both, and I think they do it very well. And so, a
board, in a way, is like a management team, which is like a leaderyou
never know how good they are until youre facing tough issues. And
weve had enough of them, and I can tell you, our boards pretty good,
because theyve always given great wisdom and guidance when weve
faced tough issues which has been a huge support to me.
Sir John Parker and Jeff Fettig jointly emphasize the need to balance
mentoring with monitoring according to the needs and challenges
facing the board and the enterprise.
Governance as we know it
In the wake of the corporate scandals of the early years of the century
and the financial crisis, a host of regulations, standards, initiatives,
programs, and much more have emergedfrom Sarbanes-Oxley to the
OECDs updated Principles of Corporate Governance.
Discipline 6Governance 133
At their best, the new regulations provide a vital check on the actions
of executives to prevent the sorts of excesses that we have seen in
recent years. At their worst, they can resemble a never-ending and
largely futile round of box ticking that distracts the board from its
other vital function of providing strategic input, leadership experience, and guidance to help the executive team create value and sustain
success.
It is important to pay attention to corporate governance but it must
not be allowed to dominate the agenda to the detriment of the board
not spending enough time on the business, noted one interviewee in
my research. The burden of compliance and reporting is becoming too
time-consuming, lamented another.
The lament of being overburdened is echoed quite openly in many
management teams and covertly in boardrooms. Together with my
wife, Nada, I took a walk through the corporate collapses and scandals
from the 1970s onward. Two themes clearly emerged, which apply to
the vast majority of organizations. The corporate governance formalities and protocols were often exemplary. Yet, misjudged and mistimed
investments, and poorly thought-through acquisitions and corruption including offering of favors, gifts, and briberies, still took place.
What is amazing, and that was our second finding, is that board
members knew. Individual directors may not have had the information concerning any single situation, but their understanding of the
circumstances was sufficiently insightful to ask the pertinent questions: Why are we doing this? Why is this happening? Instead,
silence.
As mentioned, crucial to the discipline of governance is the relationship
between monitoring and mentoring. Instead of being seen as two sides
of the same coin, monitoring and mentoring have intellectually been
positioned as far apart from each other. Why? In the 1920s, America
witnessed a dramatic revolution in terms of wealth creation and ownership. The talented men and women who had made industrial modern
America became rich. They stood back from their own business entities,
dropping their identity as owner-managers and adopting the status of
investors. The question of trust arose. Did these investors sufficiently
trust the very managers with whom they had worked? Would these
managers make best use of their wealth?
The Harvard Business Review took up the debate and one of the most
influential papers written was on the nature of the relationship between
the owner and the corporation. The classic 1932 Adolf Berle and
Gardiner Means book, The Modern Corporation and Private Property,
outlined the notion of agency theory, which has dominated governance
thinking ever since.1 Basically, the investor did not trust his managers
and so an intervening agent was introduced into the corporate hierarchy in order to monitor and control the activities of corporate executives. This has been the basis of agency theory. The board is supposedly
the investors/shareholders agent and its job is to control the management of the company, as the managers cannot be trusted. Monitoring
has become a particular US-oriented, deeply seated practice. In some
organizations, this means that board members are kept away from
managers in case they become corrupted. Astonishing, really.
I recently ran a session on Board Governance Practice at Henley
Business School. One of the attendees recalled his frustration of sitting
on an American board:
They [meaning the management and the CEO] really pushed me
to do all the governance and compliance stuff. I questioned how it
would help, especially now that we are using our Asian base to penetrate China. I said to them, do you really know what it is like operating in China? Do you really know how much of our governance procedures have no meaning in China? Should we not be talking about
the reality of doing business in China and the role and responsibility
of the board in this situation today? What I got was a push back,
polite, but firm, Your job is to sit on the board and make sure we
keep to the straight and narrow from the data we provide you. Do
not interfere with management. No one said it, but I could feel what
all were thinking including my board colleagues, and that was how
could you as an American understand the rules of engagement in the
relationship between the board and the management.
The director resigned shortly after but later contacted me and told me
of the embarrassment the company faced in China. We needed to get
involved. We should have been facilitating the management through
these very stormy waters. The case being made is for mentoring, but
the reality was monitoring with no substance.
Monitoring without mentoring means inadequate, unproductive

governance. Perhaps the biggest irony (or is it a sign of diversity of
thinking?) is that Harvard has disagreed with itself publicly for the last
eighty years and will likely continue to do so. Harvard Business School
promoted the 1920s debate on shareholder value and agency theory.
Harvard Law School challenged such thinking through a series of
contributions acknowledging the presence and the power of stakeholders. The term introduced was stewardship, the sensitive and yet tough
strategic facilitation of the management. In effect, Harvard Business
School championed monitoring and it was the jurists who promoted
mentoring. It has taken many decades for Harvard Business School to
acknowledge the value of mentoring in conjunction with compliance
and control. Harvard Law School, however, has not changed its position: Laws aiming at the protection of stakeholders (such as codetermination or restrictive employment law) are therefore normatively
more desirable in the presence of stronger shareholder influence, particularly under concentrated ownership, says another leading academic
in the field, Martin Gelter.2
Why do we not integrate monitoring with mentoring?3 Never stated
but lying deep in the psyche of management is the need to preserve and
promote shareholder value. Herein lies the unspoken logic for the
combination of the roles of CEO, chairman, and president within the
one person. The logic is speed of decision making. Someone who has
the ultimate authority to act quickly, within governance stipulations,
in order to maximize profit, supposedly can best service shareholder
value. Yet, Harvard Law School continues to challenge that thinking.
Professor Lynn Stout of Cornell Law School has drawn attention to the
myth of shareholder value.4 Her thesis is that the mistaken claim that
shareholders own the corporation together with macroeconomic data
stretching back years shows overall investment returns to be declining.
Putting shareholders first harms the investors, the corporations, and
the community at large.
Martin Gelter concurs and, in his seminal discussion paper, states:
The insulation of managers exacerbates the agency problem with
respect to shareholders, which is a legitimate concern. Hence, the
creation of an optimal corporate governance regime should be seen
as an exercise of striking the right balance between the minimization

of agency cost and holdup to the benefit of shareholders. In some
situations, however, the beneficiaries of holdup may be managers
themselves.5
As Martin Gelter emphasizes, it is balance, the balance between mentoring and monitoring that dynamically varies board by board, business by
business.
Toothless tigers
The press and media are filled with scandals that reflect an overemphasis on monitoring and a lack of attention to mentoring. How could the
board have allowed that scandal to happen when, in fact, some of the
best governance brains were members of the board? The financial services industry continues to experience one scandal after another.
The reality is that too many boards are not addressing the governance
and business issues they should be looking at and end up being little
more than toothless tigers with directors more willing to cozy up to one
another than encourage debate. In place of raised voices, there is the quiet
hum of a box-ticking machine on autopilot, desperately trying to avoid
controversy of any kind. On such boards, leaders dont rock the boat.
What is needed is more leaders who are able to create creative conflict.
The new rules on boards introduced by black letter law (well-established
technical rules that are beyond dispute) are partly to blame. They risk
undermining the effective functioning of the political process. For
example, in the United States, Sarbanes-Oxley introduces protocols
determining the behavior of board members. The temptation for board
members anxiously eying their growing responsibilities is to concentrate on the administrative process and spend less time on discussion
and thinking. It is difficult to engage in robust dialogue if you are busy
ticking boxes and looking over your shoulder. Indeed, there is a worrying lack of vigorous debate in many boardrooms.
Differences of opinion are the stuff of which board meetings should be
made. This means recognizing that resolving conflicts of opinion and
interest is integral to what boards do.
Conflict needs to be managed because, as the HP example shows,

when it becomes personal, it often turns toxic. In Americas boardrooms, the shift from club to team is already underway, but has some
way still to go. Research on 760 directors, by James D. Westphal of the
University of Michigan and Ithai Stern of Northwestern University,
found that the route to sitting on numerous boards had more to do
with conformity, flattery, and favors than with activities on behalf of
shareholders.
Black letter law has shifted attention onto performanceor at least
complianceat the expense of esprit de corps. Great teams have both.
Think back to any effective team you were involved with and you will
know that silence is unhealthy.
The board is the ultimate high-performing teamor should be. They
need to meet frequently enough to get to know each other and establish
a sense of shared purpose and comfort with each other that will enable
them to debate without its becoming personal.
Dynamic governance
Companies worldwide increasingly appreciate that effective boards
need to move beyond mere compliance to create a more flexible and
progressive form of governance.
In its research in Europe on governance, Heidrick & Struggles has
coined the phrase dynamic governance to describe what is now required.
It argues that the demand for dynamic governance is based on two main
realizations. First, leadership starts at board level. How and to what end
the board of directors of a company exercises leadership sets the standard for any organization. Second, governance is a means of enabling
and driving business performance. All things being equal, well-governed
companies excel.
This new breed of dynamic governance responds quickly and adaptively
to the changing circumstances of business. It is agile and resilient,
constantly evolving. It is governance on the front foot, rather than
governance characterized by defensiveness and bureaucracy. It is built
on the appreciation that the most effective companies are those that
anticipate whats happening and whats going to happen in the business world. The best companies do not wait to be governed. Instead,
they shape the debate and set the best practice.
The subject of corporate governance has been a major issue within
boards over the past decade. But while some parts of the world have
gone down the compliance route, most notably the United States,
others focus on overall board performance. Heidrick & Struggles has
produced biennial corporate governance reports in Europe since 1999,
and in the Asia Pacific region for the first time in 2014.
Its 2014 Asia Pacific report, entitled Foundations and Building Blocks for
High-Performing Boards, draws on data from 170 publicly listed companies on stock exchanges across six countries in Asia PacificIndia,
China, Hong Kong, Singapore, Australia, and New Zealand. In addition, the research included a survey of 165 board members in those
countries. It notes that: While recognizing that compliance is important, there have been significant improvements made across the Asia
Pacific countries in recent years with regard to performance, although
there is work still to be done, with regulators continuously pushing for
improvements. The debate, however, has shifted from pure governance
to a greater emphasis on the effectiveness of boards. Common culture,
behavior and experience all have an influence on board effectiveness.
The Heidrick & Struggles study identified four capabilities that were
accepted as the foundation of the boards ability to perform. These
were:
1. People: the need to continually review top talent and engage in
succession planning
2. Vision: the importance of having a clear vision and strategy that is
both shared and understood
3. Leadership: the need to promote team dynamics through the leadership of the board and
4. Innovation: the capability of maximizing the capacity of the board
to consider and adapt to risk and innovation.
In addition, the report also identified nine drivers for achieving best
practice levels. Of these, four were core drivers:
balance of skills, knowledge, and expertise

empowered support of committees
regular board evaluations and
identification of board improvement opportunities.
An additional five were supporting drivers:
the balance between executive and non executive directors
regular board meetings
clear criteria for board member replacement
diverse gender and nationality mix and
a representative number of independent directors.
Key to all this is a belief that corporate governance is not an act of
compliance but that there is a spirit of governance. This spirit is inextricably linked to the culture and performance of an organization. The best
companies explore what this spirit really means and what its implications might be. As they think about how the company is governed, they
consider what it means to be well governed and what stakeholders
require. It is not minimal compliance, but maximum engagement and
impact.
For some, this is a frightening prospect. Dynamic governance requires
a more adult conversation between stakeholders and board members,
as well as between board members. The question must be whether
boards are up to this level of debate and willing to invest time in making
it happen.
Dynamic governance demands that boards be more externally focused.
They need to be connected with a broadening range of stakeholders
and society. As Sir Adrian Cadbury argued, corporate governance
should recognize the rights of stakeholders established by law or
through mutual agreement and encourage active cooperation in creating wealth, jobs and the sustainability of financially sound
enterprises.6
This also requires judgment rather than the tame application of a rule
book. It embraces the reality that there are gray areas to governance
and that they need to be navigated with integrity, insight, and
intelligence.
What, then, are the characteristics of dynamic governance? The 2014

Heidrick & Struggles European report, Towards Dynamic Governance,
identifies six characteristics that boards need to develop and foster if
they are to achieve dynamic governance:
Deep business knowledge: Board members must understand the
commercial DNA of the company.
Diversity of thought: The most important attribute consistently
identified as important to board effectiveness is having the right
balance of skills, knowledge, and experience to constructively challenge management.
Engaged leadership: The chairman is the guardian of dynamic
governance. The chairman choreographs a boards activities and
provides leadership.
Strategic alignment and execution: Boards must use their knowledge and experience to help executives develop robust and sustainable strategies.
Capacity to adapt: In changing times, boards must be able to change
direction and to tack with strategic, financial, market, and human
changes.
Top talent: Identifying, developing, and utilizing talented people
lies at the heart of governance. Talent and succession planning need
to top the boardroom agenda and be acted upon.
Of course, compliance is necessary and important. But the route to
excellence in corporate governance lies in understanding and acting on
these six elements to achieve truly dynamic governance.
Making dynamic governance work

The challenge is to implement the recommendations of Heidrick &
Struggles.
As Charlie Mayfield, chairman of the John Lewis Partnership, points out:
Were not just doing the engagement bit for fun, or for the happiness
of Partners; its actually with a very clear commercial purpose. And
the key in the Partnership is to bring those two things together. This
is about one Partnership and one business, and the connection of
those values to everything we do.
Most right-thinking, sensible people, when you share information

with them and you explain the context and you explain the problem youre trying to solve, will engage with you in finding the right
solution.
Mayfield points to the right solution. But what is the right solution?
During another study, I looked at a well-known, global food company,
which had won a number of international awards for its corporate
responsibility practice. At the time, the organization was rethinking
its strategy concerning the sourcing and cultivating of vanilla. Vanilla
is a most fragile plant, but in high demand. At the time, it was sourced
from its native home, Madagascar. The research explored the responsibility practice covering the growing, pricing, and marketing of
vanilla.
At the corporate center, the sense of responsibility and clear governance
procedures were second to none. Corporate sustainability was prompted
hand in hand with human rights and the protection of children. Our
inquiry focused on the adoption and implementation of the social
responsibility policy. Below the corporate center level, the divisional
management displayed a distinct awareness concerning the social
responsibilities of the corporation. Little emphasis was placed on how
CSR was to be practiced.
At the level below that, the buyers of the vanilla pods expressed scant
knowledge of the CSR polices of the corporation. In reality they
focused on price, quality of delivery, and reliability of supply. CSR
held little meaning for them. Their focus was on negotiating the
cheapest price at the lowest cost. The internal quality audit function
scrutinized many areas, but the social responsibilities of the corporation were not among them. Below the buyers were the traders, who
acted as the middlemen between the curers/producers and the buyers.
No knowledge of CSR policies was evident, nor was there any motivation to adopt these policies in their part of the supply chain. Next to
the traders stood the curers, who ran the curing houses for the vanilla
pods. They too expressed no interest in the corporations CSR polices.
In fact, the curers had an antagonistic relationship with the corporation as they felt they were being unfairly squeezed on price. At the
bottom of this supply chain were the farmers who grew the vanilla.
Many lived in poverty. Child labor was common and, in fact, it was
the only way to keep starvation at bay. Where was the board? Certainly
their presence in the governance of fundamental human rights seemed
absent.
This is all too common a story. The board does not know or does not
wish to know the reality of how the corporations affairs are conducted
down the organization and through the supply chain.
My study highlights the fact that instead of attending to such concerns,
the board and the management team often tussle over who owns the
strategy. Does the management own the strategy and the board ticks
off (approves) that strategy? Or does the board own the strategy and the
management implement it? My global studies show this to be an utterly
irrelevant question.
Best practice is that management owns the strategy and the board
owns the culture.
The implications of this single finding are profound. The board needs
to be far closer to the reality of what happens in the organization in
order to provide the stewardship that adds value together with the
support and approval of the management. How many top teams are
willing to accept this? From the individual non executive/external board
director perspective, sensitive stewarding and strategic facilitation take
time. A portfolio of more than four concurrent directorships is
counterproductive.
It is interesting that the Australian ASX has introduced a points system
as a guideline for how many boards an individual can be a member of.
It suggests that two chairing roles, or four or five directorships, should
be the maximum.
Elsewhere, ShareSoc, the United Kingdoms shareholder investor society, now recommends four to five directorships as the limit to the directors portfolio.7 For many directors, this means a reduction of their
portfolio. For management and shareholders, this means paying board
directors considerably more for the time needed to adequately steward
the enterprise.
If these challenges are not addressed, boards will simply fail to provide
the necessary stewardship over the fault lines of the organization.
Enterprise fault lines

A fault line is where what is intended deviates in a different direction.
The reasons could be many. Those at that juncture do not share the
same mindset, or expectations, or objectives, or ways of working. The
outcome? Strategy goes wrong right in front of your eyes.
My research identifies three critical fault lines in todays complex international enterprises. The same applies to public sector bodies and
NGOs. First is the governance fault line, between the board and the top
team. Poor delineation of duties and an attempt by management to
keep the board at a distance means the board is ineffectively utilized. Its
stewardship of the organization is undermined.
Second is the strategy fault line between the top team and general
management. All too often general managers feel that they have not
been consulted, or involved in the strategy design of the enterprise.
Being at the mid-point between the strategy formulation and implementation, the general managers are acutely aware of what works
context by context. Being held accountable for a strategy that is not
theirs, but theirs to implement causes tensions, frictions, and poor
strategy adoption.
BOARD
Governance
TOP TEAM
GENERAL MANAGEMENT
Figure 8.1 Enterprise fault lines.
Strategy
Operations
Deeply concerned about organizational fault lines, Robert Swannell of

Marks and Spencer outlines his approach to bridging these gaps:
We have quite a few breakfasts where the non-executives come and
talk to people of all levels in the business. We want people to really
understand what the Board does and can contribute. I think it always surprises people in the business how in touch the board is with
the day to day life here in M&S. I think that is really valuable. Of
course, I do quite a number of these as well. Hopefully our employees
get a sense that they should trust these people to hold the executive
team to account and to challenge, but also support. I think this open
dialogue also encourages the executive team.
As Robert Swannell aptly indicates, commutation of itself is fine, but its
true value lies in critically enhancing the capabilities for accountability,
responsibility, and challenge: the essences of leading and governing the
enterprise.
Third is the operations fault line between the general management and
the rest of the organization. Conscious that certain strategies are
unworkable, the general managers are still required to put that strategy
into action. The middle management population, aware that their
bosses hold doubts about the viability of strategy, are left bewildered
about why they are being tasked to do something that will fetch little
return. This leads to anger at being positioned to fail.
The case study of vanilla is a typical example of fault lines in action,
except that there were more than three fault lines present. The
boards intimate knowledge of how the organization operates and
where the tension lines exist allows for effective stewardship of the
enterprise.
I undertook a study of governance and board behavior in Russia. To my
surprise, the results indicated a far higher standard of governance and
boardroom contribution than in many of their Western counterparts.
A colleague at the Russian Management Association related that many
Russian corporations are trying desperately hard in a most unfavorable
environment to reach world-class standards on strategy, tactics, and
governance.
This insight was reinforced in my discussion with a particular Russian

oligarch. He owns more than 80 percent of one of the largest companies
in Russia and wishes to introduce world-class governance as part of
fulfilling his ambition of creating a truly world-class company. He
undertook an international search for each board role. Highly experienced, high-performing non executive board directors were appointed,
including a chairman. But there was a difference. Each was paid above
the market rate and expected to work hard. All had to agree that they
would only hold two or three board positions, thus leaving them free to
concentrate on the affairs of the Russian board. One director in particular covered sensitive international locations where potential human
rights questions could arise. He was tasked with identifying the risks
and potential damage to the companys reputation in these locations.
With twelve board meetings a year, each director probably had to work
about sixty days. The international director in question who had to
implement corporate social responsibility requirements probably
worked more than seventy-five days.
This is how the oligarch summed up the situation:
I am the CEO and I am the owner and I pay really well. But these guys
have to work. This board is not a committee. This board is a hardworking unit that adds value to my business. Even though I am a
shareholder, I expect them to scrutinize me in my role of CEO.
Previous studies identify one critical discipline of boards: the clear
delineation of roles and duties. But this clarity is negotiated and renegotiated. Once the chairman and the CEO have clearly divided up their
areas of responsibility according to the challenges at hand and the
strategy being pursued, the same delineation discipline applies to the
relationship between the board and the management. All know what
they are doing and why. The enterprise fault lines are now minimized.
Such delineation is based on a key theme running through this book,
the use of evidence to realize value delivery.
When it comes to gathering evidence, a companys board can often
play an important role. They are a sounding board and also, if they
are working well, a vital provider of a broader view of the world and
the marketplace.
Strategy Input (%)
The
SubThe Board Executive/ committees General
Chairman CEO/MD
as a whole Management
of the
Managers
Team
Board
3.0
0.7
2.9
0.7
44.7
7.5
Undertakes analysis
17.8
50.0
15.3
73.6
17.4
72.4
Formulates it
32.6
83.1
17.5
72.9
12.1
54.5
Debates it
74.8
71.3
86.1
77.1
43.9
47.8
Approves it
84.4
54.4
88.3
22.1
24.2
9.7
Implements it
14.8
80.9
10.9
77.1
7.6
62.2
No involvement
Figure 8.2 Input into the development of the corporate strategy.

As Telstras Catherine Livingstone says:
It amazes me that so many top managers do not use their board as a
dry run to the market. We are safe! We can spot the problems before
they occur! We can give feedback without prejudice! I just wish that
we were better used.
The latest study by Heidrick & Struggles and myself confirms the
trends captured in my interviews (Figure 8.2):
The chairman and the board debate and approve strategy.
The CEO and the executive team formulate, debate, and implement
strategy.
The general managers analyze and implement strategy, but are less
involved in the formation of strategy. The interface between the executive and the general management is confirmed as a fault line.
Perhaps the most interesting is the unclear role of the subcommittees of the board.
Who owns what?

So who should own what? As already emphasized, my research clearly
shows that in high-performing organizations, the top team owns the
strategy and the board owns the culture. The reason? The board has to
steward and mentor the implementation of strategy across the organizations fault lines. The board balances through governance the tensions
between the engagement and alignment elements of the success
formula. From that guidance, the management is freed up to direct the
way forward. Working through such tension requires an intimate
understanding of the people and the way the organization operates.
The latest Heidrick & Struggles survey confirms that in comparison
with average- and poor-performing entities, high-performing
organizations,
have board and top team members that have worked together for
some time
have considerably fewer meetings per year (Figure 8.3)
spend longer times at each meeting and enter into more productive
dialogue and
hold a clear and shared view regarding criteria for appointment to
the board (Figure 8.4) and to the top team (Figure 8.5).
All this requires time. Such time comes at a cost. Board directors need
to be paid according to their contribution. Board directors equally will
need to reduce the spread of their board portfolio and concentrate on
two or three boards rather than four-plus.
70
Number of Meetings
60
50
40
30
20
10
0
Average performing
Number of Board
meetings per annum
High performing
Number of Executive/Management
Team meetings per annum
Figure 8.3 Average number of meetings per annum.
100
90
80
Percentage
70
60
50
40
30
20
10
0
Average performing

Yes
No
High performing
Dont know
Figure 8.4 Shared view regarding the criteria for appointments to the
Board.
100
90
80
Percentage
70
60
50
40
30
20
10
0
Average performing

Yes
No
High performing
Dont know
Figure 8.5 Shared view regarding the criteria for appointments to the
Executives/Management Team.
There is a further impediment to boards owning the culture, and that is
accepted wisdom. In the McKinsey Quarterly, Chinta Bhagat and Conor
Kehoe examine what is on the agenda of high-performing boards.
Strategy is number one whereas organizational health and talent
management emerges as fourth on the list of six key priorities in terms
of board members investment of their time.8 The shift of mindset for
boards to own the culture is substantial.
The discipline of governance: In summary

The top team owns the strategy.
The board owns the culture.
It is mentoring that makes the governance difference. This stewardship requires time, commitment, and consideration of how and with
whom to engage.
Boards underplay mentoring in favor of monitoring. This is
dangerous.
Boards need to mentor strategy execution through the governance
fault lines.
Boards need to dig deeper into the organization.
Key questions
If I were to talk separately and confidentially with your CEO and
chairman, what would each tell me about who owns the strategy, the
top team or the board?
Do you want the board to own the culture?
Are the board directors capable and do they have the time to devote
to owning the culture?
Do you feel that the board is in touch with the reality of the
organization?
What will it take to realize that extra level of engagement between the
board, the management team, and the rest of the organization?
Does the board add value?
If not, why does it not and what would it take for that extra value to
be realized?
In reality how is governance practiced and what do the general
managers and the rest of the organization experience? Is it constraint
and bureaucracy or some tangible, value-adding contribution?
Chapter 9
Discipline 7Wisdom
A well-known prayer, attributed to the American theologian Reinhold
Niebuhr, is apt for CEOs and senior managers:
God, grant me the serenity to accept the things I cannot change,
The courage to change the things I can,
And the wisdom to know the difference.
Wisdom, then, is the final discipline. Often it is hard earned through
years of experience. And unlike so much else in life, it becomes more
potent with age. Wisdom comes from reflection and a willingness to
keep on learning.
Socrates has been called the father of wisdom. A famous story tells of
Socrates visiting the Oracle of Delphi. When the Oracle is asked who is
the wisest of them all, she replies that Socrates is. Astounded, Socrates
relates how many other people have greater knowledge and wisdom
than he and how by comparison he cannot meet their standards. Such
is the fundamental quality of wisdom: humility and a lack of
arrogance.
We do not know what Socrates wrote (or even if he wrote at all) as none
of his work survived. Rather, Plato wrote about his beloved master and,
later, Aristotle, who was the pupil of Plato. Building on Socrates, Aristotle
wrote about phronesis, practical wisdom or, more tellingly, the wisdom
that drives practice. In the Aristotelian interpretation, wisdom is knowledge, both factual and rational, and also knowing how to live and
succeeding in living well. In fact, Socrates rounded off the notion of
wisdom in his famous phrase an unreflected life is not worth living.
Evidence-led wisdom
Reflection is often in scant evidence in modern corporations. So, too, is
regard for the truth. The denial of deteriorating performancevalue
destructionis, as you will now appreciate, astonishingly commonplace. This is what happened at IBM in the 1980s. This was a fantastic
example of a company behaving without practical wisdom.
To find out more about what actually happened at IBM over this period,
and how the company bounced back and re-created itself, I spoke with
Doug Elix, now retired after a long and successful career with Big Blue,
where he was vice president of Executive Sales and Distribution.
Decades later, it is easy to forget that IBM very nearly collapsed. It was
only the timely intervention of Lou Gerstner that turned the company
around. When we spoke, I asked Doug about what went wrong and
the real lessons that should be learnedand were learnedby Big
Blue:
We became a captive of an approach to the market that had been
successful for so long that we felt it would never end, and would be
forever productive and profitable. We failed to act on a fundamental shift in the marketplacethe PC and the client server era, where
Microsoft and others were born and became giants.
Instead of adjusting to the trend and transforming the company, we
fought it, stuck to our old mainframes, leaving the company completely over-structured for the business that was left. It was basically
an unwillingness to act on a fundamental shift in the industry.
What perhaps is the most interesting aspect of the IBM story is that
there were plenty of people in the company voicing concerns. The
evidence was there in front of their eyes and they desperately sought to
bring it to the attention of their colleagues. They could see the edge
of the precipice and were telling people about its imminent approach.
The alternative opinion was there, but was not heard. I put this to
Doug Elix:
There were those who spoke out, but their views were not accepted.
In many cases it was seen as being disruptive and not following the
company line.
In fact, IBM had written strategic papers on it. The company had recognized trends. A classic example was the IP network trend. IBM stuck to
its own network architecture while the whole world was moving to
Discipline 7Wisdom 153
Internet protocol standards. Voices inside IBM were saying the company
had to change or it would lose out, but other senior voices were saying
no, they dont know what theyre doing, well stay with our own. The
company fell behind as a result.
There were a couple of times in IBM that happened, Elix explains.
One was the client server era, from which Microsoft and Intel became
the chief beneficiaries, and the second was the IP network era where
Cisco became the notable beneficiary. Had we reacted promptly some of
that market cap could have been ours.
Listening to former IBMers, I wondered what form this debate about
the companys future had taken. What kind of data and analysis was at
work? Or was it fueled by opinions? The evidence used was data-based,
but it was flawed, because it omitted to count any downside. It acknowledged huge potential opportunities but assumed that the companys
existing business would be unaffected.
Disruptive wisdom
The IBM case is a reminder of Professor Clay Christensens notion of
disruptive innovation. Christensens work over many years has looked
at why so many well-managed companies struggle to deal with radical
innovation in their markets. These companies often fail, he suggests,
because the very management practices that have allowed them to
become industry leaders also make it extremely difficult for them to
develop the disruptive technologies that ultimately steal away their
markets.
Christensen and Joseph Bower coined the idea of disruptive technologies. They noted: One of the most consistent patterns in business is
the failure of leading companies to stay at the top of their industries
when technologies or markets change.
For example, Goodyear and Firestone entered the radial tire market
late; Sears gave way to Wall-Mart; Xerox let Canon create the small
copier market; and Bucyrus-Erie allowed Caterpillar and Deere to take
over the mechanical excavator market. But the most striking example
of this phenomenon is the computer industry.
IBM dominated the mainframe market but was slow to respond to the
emergence of minicomputers, which were technologically much simpler
than mainframes. Digital Equipment (remember them?) dominated
the minicomputer market but in turn missed the personal computer
(PC) market.
These observations led Christensen and Bower to pose the question:
Why is it that companies like these invest aggressivelyand success
fullyin the technologies necessary to retain their current customers
but fail to make certain other technological investments that customers of the future will demand?
In answering this question, Christensen and Bower argue that bureaucracy, arrogance, jaded executives, poor planning, and short-term investment horizons all play a part. But there is a more fundamental reason:
there is a basic paradox at workand it is that paradox that gives rise to
the innovators dilemma in the title of Christensens 1997 book.
At the heart of this paradox is the insight that leading companies
succumb to one of the most popular, and valuable, management
dogmas. They stay close to their customers.
When a new technology is first introduced, although it may be cheaper,
it typically will not be as good as the existingor incumbenttechnology. This is not surprising as the new technology has yet to be refined
and perfected. At this point, if the companies that supply the existing
technology ask their customers whether they want the new technology,
the answer will almost always be no. It is less reliable and less attractive.
Furthermore, the company is already earning good margins from its
existing technological innovations and has little incentive to invest in
new technologies, which will eventually compete with their existing
products and earn lower margins. As a consequence, incumbent companies have no incentive to develop the new technology that will in time
disrupt their markets.
Over time, however, the new technology is refined so that it offers many
of the same benefits at a lower price. At this point, the customers who
used to prefer the incumbent technology want the new technology and
desert their former supplier. This, in essence, is the innovators dilemma:
do you develop new technologies that your customers dont think they
want and which will earn you lower profits? Or do you continue to
invest in improving products that your best customers love?
This dilemma is played out in industry after industry. What Christensens
model suggests is that the danger to an incumbent company usually
comes when an inferior, cheaper product enters the bottom of the
market. Over time, that cheaper technology evolves and moves up the
value chain to displace the incumbent technology.
The computer industry is a good illustration of this process at work.
My own research suggests that another aspect to the innovators
dilemma lies in the unwillingness of senior managers to confront the
changes that are about to impact on their markets. On the surface,
these managers are unwilling to embrace new technologies and other
innovations that will erode their margins with their best customers,
and look as if they fail to believe the evidence that change is about to
engulf them even when it is staring them in the face. They look as if
they are in denial, hoping that their own business model will be unaffected by changes elsewhere in their industry or other industries.
Recent study shows a different picture. Rather than denial, both the
management team and the board are acutely aware of their circumstances. Their challenge is how to shift capabilities and expertise and
still keep customers and shareholders content.
We would have had to have made no profit for almost five years while
we repositioned our people, the organization and our expertise. We
would have had to become a new organization while our customers
wanted us as we were and our shareholders as demanding as ever. How
do you do that, become something that you are not and still keep all on
side? Yes you have to see the world as it is, but just sometimes what that
tells you is you will die. Certain changes are just too great! one chairman reflected to me on a change challenge that defeated him.
The wisdom of leading through discontinuity is to see the world as it is
and sometimes also recognize the unpalatable truth that the stretch in
resources and investment is too great. The chairman continued,
So we did the next best thing. We ran the business down humanely,
protecting our shareholders as we could, finding jobs for our people
whenever we could and being honest with our customers.
Telescopic thinking
Critically for IBM, it learned its lessons and embedded the learning in
the organization. Big Blue switched from a value telescope pointed at
the past, to a value kaleidoscope trained on the future. The starting
point was to see the world as it truly is, with all its changing patterns.
The next time it was impelled to change, it moved decisively. Doug Elix
explains:
Having almost died, the very next mega trend facing IBM was the
Internet, new ways of deploying computing infrastructure, new
types of software and servers, and so on.
We recognized this is as another life threatening change, and needed
to restructure ourselves to do things differently. We invented the
term e-business, which not many people remember, and went about
transforming all of our hardware, software and service offerings to
accommodate the market. This time we ended up as a large beneficiary of the market shift.
Big Blue did it yet again about five years later when it realized how
important services were. The company bit the bullet and created IBM
Global Serviceswhich now generates revenues of $57 billion (2013).
And it did it without having to face a cataclysmic event.
Reflective wisdom
It may seem incredibly distant, but I believe the idea of wisdom and the
Socratic tradition applies as much to a modern twenty-first-century
corporation. Many of the leaders in my research were reflective people,
continually dedicated to learning more.
Im still learning, Sam Su of Yum! Brands told me. Every day in China
managing a business is always a huge amount of learning. I mean from
day one coming to China, I realized that I had to learn how to manage a
joint venture, learn to recruit people in a difficult environment, and I
had to understand and accept and actually get support for the whole
idea. But in general anybody who comes to China will realize that this is
probably the most testing, challenging job for any general manager.
To understand, accept, and get support is what Sam Su considers to be

vital for a leader operating in China. These three qualities are fundamental to sustainable value delivery. But Sam Sus comments also imply
wisdom, a quiet reflective activity important for rethinking how to
operate in adverse or new situations.
Maturing wisdom
A sense of reflection and the wisdom accumulated through experience
was strongly present when I spoke with Stephen Chipman, CEO of
Grant Thornton LLP (the US member firm of Grant Thornton
International). He is a member of the global networks board and runs
its American practice, which accounts for around a third of its revenues,
clients, and people.
Chipman started his career with Grant Thornton at its office in
Plymouth in the United Kingdom where he trained as a chartered
accountant. He wanted the opportunity to live and work overseas and
moved to the United States with Grant Thornton in the mid-1980s on
a two-year assignment, which was extended. He then spent four years in
Hong Kong, responsible for building and developing the firms Asia
Pacific platform. After another period in the United States, he led the
development of the firms China practice. At the end of that assignment, he moved to Chicago to take on the role of American CEO.
Talking in his office, Stephen Chipman guided me through his process
of learning:
Moving to Texas in the mid-1980s was a big shock. It was a shock
how different things were in the United States and how, at the time,
very insular the United States was, in terms of lots of peoples views
and their understanding of the UK and other parts of the world.
So, there was that level.
Then at a personal level, building relationships, understanding peoples points of view, their mindset around various issues, their approach to technical aspects of the job, their view of an accountantall
of that was very different from the view of an accountant in the
UK. And then on the professional level, understanding how the
organization worked, understanding how people interacted within

the organization, the competitive nature of doing business here in
the United States, the work ethic, the results-orientated nature of
the culture, the speed and energy in the way people approached
worknot to say there isnt speed and energy in other countries,
but it was a different type of dynamic here in the United States.
Stephen Chipman emphasizes that the transition to truly appreciating
context takes time, is not easy, and is not possible unless each person
has an open mindset to understand what it really takes, to make things
happen around here.
So, all of that was coming at me at the same time and it was quite
overwhelming. It took a lot longer to sort out and sort through
than I realized. The same thing happened to me when I went to
China. The longer that you are in a culture, the more you realize
you dont know. So, you know, after three months you think youve
got it figured out and after six months you start to realize, well,
maybe you dont have it figured out and after two years, you realize
you knew nothing and you now know less than you did when you
started.
That happened to me when I moved to the States and it happened to
me when I moved to China. The longer youre around a culture thats
not your birth culture, the more you realize how little you know.
Obviously, the Chinese and American cultures were extremely different and they were different experiences. In terms of commonalities, I would say the recognition, I call it the new baby syndrome,
that once you recognise the fact that youre newborn all over again
and youve just got to start absorbing everything thats around you
because youre learning it all from scratch all over again; that was a
common feature.
Another common feature was the recognition that it all becomes a
lot easiernot easy, but easierwhen you realize that theres not a
right or a wrong, but things can be done differently and thats okay
and you dont have to constantly evaluate whether its the right way
or the wrong way. Once you accept that its just done differently, that
acceptance opens the door to a much more productive and rewarding experience.
Suspending being judgmental about new experiences considerably

helps to appreciate understanding and respecting difference. In effect,
Chipman stresses the diversity of thinking necessary to be able to appreciate working in new realities. However, this is easier said than done:
Initially, I kept trying to force what I knew coming out of the UK into
what needed to be accomplished in the US. Take a simple example:
financial reporting. Because I was a young staff person, that was a lot
of what I was doing. Rather than coming to grips with the fact that it
was a totally different approach to financial reporting in the US and it
was a totally different way of looking at financial statements, putting
information in them, writing the notes to the statements, I kept trying
to link what Id learned in the UK and force it into the US system. I
think, that was, actually, a little bit of a metaphor for the whole experience: you keep trying to translate, rather than to say, well, I had this
interesting experience in my prior life and I now need to put that to
one side; draw on it but not try and squeeze all that into here.
The other thing was I found it very difficult early on to accept other
peoples opinions on issues that I felt they were ill-informed about.
I was younger too, but it was difficult for me to maintain a level of
patience and acceptance of that so I found myself getting into some
fairly heated debates with people, where I was getting very frustrated
because I felt they were very full of opinions and it was not based on
facts. I dont think that was very productive.
I learned to be more tolerant and to recognize that people come from
different backgrounds and they gain different perspectives as part of
their background.
Recall Cicero. His point is made time and again. Learning in vivo makes
that crucial difference, but what Chipman adds is that this can only be
achieved through a mindset of humility and tolerance:
All of this was a big learning and part of a maturing process. I was
still in my early to mid-20s, finding out who I was. When I moved to
Asia, some of the biggest learnings there were around this issue of
acceptance that things can be done differently.
Stephen Chipman provided for an illuminating interview. His career
was interesting, but what was fascinating was how he had made sense of
his experiences and learned from them. There was a real sense that his
experiences had led him to better understand himself. He had acquired
wisdom through experience.
Capturing wisdom today

The helpful guide, coach, and councillor are in great demand today. Its
important and well-rewarded work. Needing someone to talk through
the challenges being faced, having available the kind guiding hand, and
reflecting and commenting in a nonjudgmental way command a high
level of remuneration. Wisdom is important work. The process of
wisdom is gentle and slow but deeply penetrating, forcing the seekers to
deeply reflect on their actions and their reasons for action. In their
seminal work on Aristotle meets positive psychology, Barry Schwartz
and Ken Sharpe argue that wisdom is the master virtue of solving
problems of specificity, relevance and conflict that enviably arise whenever character strengths must be translated into action in concrete
situations.1
When confronted with dilemmas the only viable lever to draw upon is
wisdom. Yet, the very same authors argue that despite its deep relevance,
practical wisdom is increasingly difficult to develop and exercise. The
demand to solve problems immediately even when they are unsolvable
rather than patiently working through issues, engaging others, and
bringing them with you is central to the problem-solving process. How
can a paradox be solved? A paradox can only be worked through, sometimes painfully, with those relevant others. Resilience and commitment
to see things through are as much a part of wisdom as is reflection.
Learning wisdom
I asked Whirlpool CEO Jeff Fettig what he enjoyed most about his
numerous international postings and assignments. Just learning, he
replied, going on to describe the joys and challenges of living in Italy,
and elsewhere. You have to want to learn.
A friend of mine, the dean of an international business school, came
out of a dispiriting meeting with corporate clients and remarked: If
only I could bottle wisdom, this would be the richest and most famous
business school of all. The reason for his comment was his frustration
of dealing with clients who seemingly changed their mind and position
constantly, but blamed others for not coming up with the solution they
demanded. The dean wanted to capture how to handle and deal with
irrational behavior.
Evidence shows that this is not possible. My studies of chairmen identify that the older the chairman, the more capable he or she is of leading
the board. The recent Heidrick and Struggles Asia Pacific Board report
concurs. Those that stand out are ones who neither issue commands
nor impose their will, but are able to surface the real issues, and especially negativities that damage the functioning of the board. Such chairmen are proficient in working through complexity, but a complexity
that does not deal with just rationally multivariate problems, but also
involves the stewardship of emotions and damaging conflicts. Sense
making combined with sense giving provides the ability to integrate the
past, present, and futureand thus evolve the powerful capacity for
sense breaking.2 Sense breaking allows people to let go of the past, to set
aside the habits of yesterday, and entices the full participation of all
concerned. Such is the essence of shaping consensus in the boardroom
through guiding toward desired outcomes by addressing the challenges
of business and organization as well as overcoming negativities and
undermining emotions.
Why someone older? Because such people are able to control their ego,
have less need to project their personality, and are more able to win
others over in demanding circumstances. They have seen it all before,
but their sensibilities are still open to newness.
Neuro wise
Research in neuroscience has found that with age, older people develop
a skill of bilateralization. They are able to use both sides of their brains
instead of just one. So while young adults rely on the right frontal lobe,
older adults use the right and the left. Moreover, research in neuroscience by Barbara Strauch reveals that the amount of myelin, the fatty
(80 percent lipid, 20 percent protein) substance that insulates nerve
fibers, continues to increase well into middle age (peaking at the age of
fifty and in some cases when people are in their sixties), which boosts
brain cells processing capacity.3 The increase in myelin seems to boost
the brains ability by up to 3,000 percent, suggesting that brain biology
is behind a persons becoming a wise middle-aged adult and that older
people are much better at controlling and balancing their emotions as
the maturer brain is less dopamine-dependent, making older people
less impulsive and less controlled by emotion. The neuroscientist who
led the trial said this increase in myelin can boost our brains ability by
up to 3,000 percent, and is the brain biology behind becoming a wise
middle-aged adult.4
At the International Congress of the Royal College of Psychiatrists, it
has been observed that older people are able to draw on extra brain
reserves, which enables them to get to the point of an argument faster
than a younger person, and are able to analyze situations more accurately and solve problems.5 Research shows that the amount of myelin
increases in the parts of the brain we use the most, the frontal lobes,
which control emotion, risk taking and decision making, as well as
the temporal lobes, which are responsible for language, music, and
mood.
The good news and bad news here relates to two types of cognition: fluid
and crystallized. Until their forties, people are likely to have a mindset
that neuroscientists call fluid. This means that their cognition is fluid;
their mind can act like water flowing anywhere. They can deal with problems, recall peoples names, handle numbers, communicate, and so on.
They are transactionally competent but that does not mean that things
run smoothly. At this point, individuals may begin to appreciate wisdom.
Crystallized cognition means that faced with a challenge, people are
able to identify the interfaces, people, emotions, cultures, strategic
thinking, and the diversity of thinking that they need, and then have
the leadership skill to pull it together. The crystallized cognition capacity begins to really show itself around the age of sixty. Specifically, older
people show a greater capacity to reason and work through social
dilemmas and conflicts. Relative to young and middle-aged people,
older people make more use of higher-order reasoning, which results
in their being able to adopt multiple perspectives. Knowing how to
engage, or, in contrast, how not to alienate other people allows for
compromise and the ability to recognize what can really be achieved

situation by situation. Social reasoning improves with age despite a
decline in fluid intelligence. The dream for any organization must be
to take the wisdom of the seventy-five-year-old and put it into the
forty-year-old.
Interestingly, other studies have found that middle-aged people outperform younger ones. For example, a study of 118 pilots aged forty to
sixty-nine showed that the older participants outperformed their
younger colleagues when avoiding traffic collisions using simulators.
Recent research results suggest that it might be advisable to assign key
social roles involving legal decisions, counseling, and intergroup negotiations to older individuals. Moreover, as crystallized intelligence may
continue to improve with age, many people continue to gain expertise
and skills in particular areas throughout life.
Hence, our results add to this body of knowledge that older chairmen
have inherent strengths associated with aging. Older chairmen deal
better with matters where doubt and deliberation are required, such as
handling of sensitive strategic issues or individual egos, as well as
exploring how things can be other than the way they are, such as how
conditions in an organization or society could be made better. Moreover,
they are better in using their faculty of opinion in judging matters relating to what is right and wrong for a board, a company, and/or society as
a whole.6
Dilemmas and wisdom

In conversation with a globally renowned chairman, the latter remarked
on the nature of the greatest challenges he had faced: The board is the
meeting place of dilemmas. The management may take action on these
dilemmas but it is the board that has to find the pathway through these
difficult situations.
The chairmen of boards all over the world have made this admission.
What is a dilemma? A dilemma is a no-win situation. Whichever way
you look at things, you are wrong. The reconciliation of dilemmas
requires great wisdom in order to find ways through which chairmen
can minimize damage and reputational harm while still maintaining

engagement with critical stakeholders.
Dilemmas always have ethical connotations: what is the right thing and
what is the wrong thing to do under various circumstances? Ethics
comes from the Greek term ethikos, meaning custom or usage. The way
through an unacceptable common practice is to reflect and consider
alterative pathways, which requires not only an IQ of considerable
weight but also strength of character, a mindset of commitment and
irreproachable personal standards.
Commonly, the terms ethics and morals are used interchangeably. This
is understandable as both are concerned with appropriate conduct,
rules, and outcomes. In effect, the difference between them is our sense
of right and wrong; what is termed ethical or unethical is derived from
our sense of morality. So though the two are intertwined, being
concerned with rules, conduct, and outcomes, it is critical that each
individual develops his or her own moral platform, which acts as the
basis for his or her actions.
Decisions about ethics and morals require the making of choices, drawing on logic, deductive thinking, and irrational thinking, as well as
emotions, all of which determine choiceshow people feel about their
circumstances. Although peoples choice-making behavior varies from
individual to individual, how they fundamentally think and feel has
two distinct patterns.
One form is known as teleology, where the individuals pattern of thinking and feeling is determined by how others think and the predominate
emotions that determine opinion in any situation. The other is deontological, characterized by an independence of mind and character and an
individuals pursuing of what he or she considers is right, irrespective
of the consequence.
The teleological individual overplays engagement and underscores
alignment. The deontological person is exactly the opposite, almost to
the point of being impervious to engagement. These are two contrasting mindsets. Under pressure, the first may feel embarrassmentwhat
will others think of me? The second does not easily relate to embarrassment but is more likely to be concerned with rightsam I being treated
with respect? In a crisis when both revert to type, they probably cannot
even agree whether it is day or night.
There by the grace of God, go I, said a senior banker to me. He was
confidentially discussing the activities of his bank prior to the global
financial crisis of 2008:
Yes, we knew that many of these financial instruments were risky,
but everybody was flooding the market with them and we were all
making money. After a while that felt normal even though all of us
knew that what we were doing was screwing investors and ordinary
people who were using their life savings to provide an income for
their future.
The notion of being driven by others has its roots in ancient Greece. A
teleological-minded individual is considered ethical or unethical
according to the norms and shared views of current circumstances. If
you think badly of me I am unlikely to do it, said the banker, but if I get
the praise I might do that very same thing twice over.
The great German philosopher, Emmanuelle Kant was the champion
of the deontological theory of ethics. According to Kant, certain universal principles dominate the whole of life and these stand above the
demands of context, circumstances, families, and individuals. So Kant
promoted the notion of absolute virtue. Deontological philosophy
denotes a deep moral sense and requires considerable strength or character to fulfill duties. Under teleological philosophy, the ends justify
the means, especially if the community is to benefit. Under deontological philosophy, it is impossible for the ends to justify the means, for the
only right and moral way forward is to do what is right; even if nobody
wins, at least the right actions were taken.
Three dilemmas
Wisdom is continually tested in organizations. Here are three dilemmas
I have encountered commonly in one form or another. Depending on
the teleological or deontological orientation of the person concerned,
each dilemma is likely to be handled differently.
The sensitivity dilemma

As previously highlighted, tension, disagreement, and inhibition are
the norm in many organizations, and the reality is that any senior
manager has to face up to that or otherwise allow the slow erosion of
his or her enterprise to take place before his or her eyes. The dilemma of
sensitivities is how to negotiate difference of vision, strategy, and tactics
and emerge with an aligned management.
Those differences are not shallow; champions of one direction or
another have usually thought through their case and have substantial
detail supporting their position. In fact, the top team is a forum of
often reasonably well-constructed alternative logics. Due to the nature
of the contrasting arguments, finding a way through is not easy and yet,
the longer such tensions reign, the more likely personal animosity will
take over from logic. Holding a different view from your colleague can,
after a while, make you the bad guy. Personal animosities must be
substituted with commitment to the team and the greater whole so
that it becomes much easier to deal with the conflicting issues facing
the top team and the board. Ultimately, sacrifices have to be made and
compromises reached. It is creating the environment for compromise
to be accepted as the way forward and not trying to involve contrasting
perspectives head on that works.
One chairman I talked to highlighted the trauma he experienced in
dealing with the sensitivity dilemma:
It really stretched me because I had built such a good relationship
with my board colleagues and the management team. I spent a great
deal of time on supporting and coaching the CEO. As two people we
got on really well, but as two leaders we held different mind-sets. I
allowed my personal feelings and liking of the CEO to get in the way.
I should have acted sooner, but in a sense I forgave what the CEO
could not achieve and spent an increasing amount of time coaching
him through the challenges he faced in his role. It was clear to others and eventually it became clear to me, that I had to let him go. I
found that most difficult. It was painful for me to face my colleagues
as some felt I had betrayed the CEO and others that I should have
acted sooner. Time has gone by, but on certain days my mind still
drifts back to that time and that board and I still feel the dilemma of
facing the people I seem to have let down.
Leaders who are naturals at engagement are so because they feel their
context. They are part of their context and so work within that context.
They are teleological in their philosophy and these sentiments run deep.
Breaking boundaries and relationships that have been built for some
time is hurtful hence, the dilemma between maintaining relationships and doing the right thing. Someone less contextually sensitive
and more deontological in their orientation will not experience these
emotional depths, but will find realizing engagement a sizably equal
challenge.
The timing dilemma
Clay Christensens thesis is that timing for fundamental shifts is critical: when the top manager can see that a market is going to dramatically change but neither shareholders, press, media nor even customers
recognize that change, then trying to change becomes impossible. The
individual who makes those changes in preparation for dramatic
market ruptures displays considerable strength of character, but will
feel isolated. How come I can see what I need to do but no one else
can? one executive complained. Others have usually seen what needs
to be done but feel too deeply inhibited to even discuss the subject, for
by doing so, they would be committed to act.
The way through such a dilemma must be to force the passive parties to
at least admit to what they know and what they are prepared to do. The
individual change agent may still be isolated, but at least the debate is
public.
At a workshop for top executives, while discussing how to lead through
strategic discontinuities, one consulting partner commented somewhat hopefully: There must be a technique to this. Surely we can study
timing and what it takes to act strategically so that we can make the
jump between the strategy that is dying and the strategy that will move
us forward.
If only it was that simple. One is dealing with different mindsets. There
is the CEO and other members of the top team who have to implement
strategy and, irrespective of the potential long-term gains, each has to
meet short-term targets. And then there are the board directors who are
at best part-timers and, of course, the investors, shareholders, and
customers. How can a technique align all these different parties so that
management can switch from one strategy to the next in many ways,
ahead of customer expectations?
One generally taciturn CEO explained how he solved this dilemma:
It is not technique. It is trust. The trust that has been built over time
not in me as CEO, but in my judgement as a person. That trust has
many angles. Yes, it is about people being able to relate to me. And
yes, it is about how I have managed to focus the team and at the
same time engage with them as people. But most of all, it is a trust
in my intelligence. It is the trust that I can see what will happen in
the markets but that I can also make the compelling case to all the
different stakeholders. You see, many of my team can also see when
to have a shift strategy ahead of the time, but how then to make the
compelling case and deal with the backlash of why are we giving up
on an established income stream is the real issue. I have to say my IQ
and my engagement sensitivity are the real components of that trust.
Once built up that trust is defended at all costs and that in an odd
way is the problem. Having established that trust and my key colleagues knowing I can make the compelling case, I become hindered
by the fact that I should not break that trust. My spontaneity is undermined and so is the necessary timing of when to shift!
So we are back to IQ, that smart business intelligence that makes all the
difference in working out what to do next. Teleological and deontological
individuals as much lack or have, and have developed, the IQ needed to do
the job. Smart intelligence and ethical reasoning are not neatly coupled.
The transparency dilemma
The third dilemma is perhaps the most problematic of all. It is about
transparency and what constitutes good business practice. There are
many aspects to this dilemma, but one (extreme) example illustrates
the challenge.
At a seminar for the board of directors of a world-renowned company,
the board secretary approached me after dinner on the second day: I
have a real dilemma and I do not know what to do. With barely a pause,
he continued:
We operate in many difficult parts of the world, Chile, Romania,
Turkey, Peru and so on. We are a mineral resources company, we deal
with governments, our public position is that we do not bribe but, in

fact, our profits are based on bribery.
We have got used to that but our new CEO has just changed things,
he has publically stated that any manager caught bribing will face
the legal consequences of their actions but with no financial or any
other support from us. Since that statement was made I have been inundated with phone calls from country heads. What am I supposed
to do? They ask. If I do not bribe I do not make profits, the company
loses and in turn I lose my job. Yet if I do bribe and I am caught I am
abandoned despite being a good and loyal servant for the company.
So what am I supposed to do?
These words were echoed by the company secretary. So what to do? We
talked but it became obvious that this was a no-win situation and, as
the legal guardian of the company, the company secretary knew he was
totally implicated for essentially being of a sympathetic disposition.
Weeks later the company secretary resigned much to the dismay of the
country managers who now knew they had lost their only friend at the
top management table.
The company secretary was deontological; the country managers, teleological; and the CEO, as it turned out, was deontological about everybody else but teleological about himself. He applied different standards
to others than he did to himself and his friends. Not an uncommon
situation. Whatever the personal orientation of the individual, the challenge of the role may force the person to compromise his or her own
moral consciousness. The CEO later admitted to me, What else could
I do? I know the reality of our organization and the way we do business,
but I also have to be concerned about our reputation and our public
image. I concluded that reputation and public image have to be
defended at all costs. Country managers may despise me, but they will
come and go. Reputation and image may come many times but have
the very unfortunate habit of going only once and that is for ever. The
CEOs dilemma was how to win and maintain trust under these
circumstances.
This is not an isolated incident. We all know that. The question is
whether organizations can find the wisdom and candor to own the
problem and manage it. This is a critical challenge of engagement.
Working wisdom
The three dilemmas discussed above represent thorny issues. They
would not be dilemmas if they did not. By their nature they are hard to
manage, requiring a blend of pragmatism and judgment, guided by a
moral compass. This is not the realm of black and white answers but of
the exercise of wisdom. One of the most interesting (and comforting)
aspects of wisdom is that it may actually increase with age. Yet companies often view age narrowlyan aging board may be seen as a sign of
weakness rather than wisdom.
Jeff Fettig, the Whirlpool CEO, spoke expressly of wisdom. He was
especially proud of the makeup of the companys board. Im very
proud of where we are today. We have four decades, from an age and
experience standpoint, on our boardwe have one member in his seventies, we have two or three in the 60s, we have two or three in the 50s, and
weve got two in their mid-forties, he explained.
I asked, in response, what the differences were between the seventyyear-old and the forty-year-old in terms of their contribution. He
replied:
Well, I would say: wisdom, subject-matter expertise ... both are
important. Wisdom is the ability to face a particularly difficult
situation, or an opportunity, and cut through all the ramifications and complications and offer the logic that, basically, says,
do the right thing. And, sometimes the right decision is a hard
decision. Sometimes the right decision has consequences. Sometimes the right decision might be personally hard on me, or our
people, but at the end of the day, its when your wise, savvy people whove been through all the ups and downs come through
and put their arms round you and say, you know, this is the right
thing to do, we support what youre doingthat means more than
anything else.
The combination of sharp rational deduction and recognizing that
non rational behavior is simply a form of contextually rational action
not understood by all, supported by a deep moral consciousness that
guides action, is the basis for working with wisdom to positive
effect.
Four steps to practical wisdom emerged from my studies:

Stand back
The ability to stand back and think is a rare one in the action-focused
C-suite. The best leaders, however, have the ability to control the urge to
act, especially when pressurized by others and circumstances. To do so
requires a high level of personal discipline as the leader has to resist all
emotions of context in order to rationalize what is wrong and how to
move forward.
To some extent this is a cultural issue. Leaders can create a culture
where it is acceptable to stand back so that people can be clear about
what to do and why.
Hold back
Sometimes leaders must raise their hand and say, hold on, lets slow
down and rethink the current situation. They must have the ability to
make others open up about their feelings concerning the current situation and the courage to surface the unspeakable truth.
Sam Su of Yum! Brands told me there was courage in this approach. It
seemed an unusual word so I asked what he meant by courage:
The courage is having the commitment to yourself that you will do
what is right for the shareholders. And to me thats been the basis.
That has to be the most important thing. I always tell my people that
if I can leave behind one thing to this organization, to this team, they
can forget everything else, but just remember one thing: to have the
courage and skills to do what is right.
You cannot just have the courage. You also have to have the skills.
And a lot of people have the skills and no courage; or courage and no
skills, and sometimes neither. I think the best people are the people
who have both. Have commitment, are willing to do the right thing
no matter how difficult it is, but at the same time acquire the skills
to do the right thing.
Doing the right thing takes a degree of self-confidence, the courage of
your own convictions. One executive told me:
Very early on, I made the decision that I was not going to be a corporate soldier. I want to be able to do what is right. And to me it
wasnt that difficult. I just made a decision that I can leave any time:
I can leave this organization; I can quit this job at any point. And so
once I realized that, Im okay. I just told myself I can find a job. Im
sure I can find a job to feed myself and family, and so at that point I
said I will not shy away from any debate, any discussion, any challenge. But if I feel right and somebody else disagrees with that, thats
their right. I fully respect that, and its up to me, so I have to really
ask myself how come I dont have the skills, to get them to see what
I see. Because I always believed that if you are reasonable people, and
you have the same perspective, generally you come to the same conclusion. So those are my beliefs.
Feedback
Feedback provides the ability to use evidence to make sense of the
current situation in preparation for the future.
Darshan Mehta, president and CEO, of Reliance Brands in India, talked
to me about this. He highlighted one critical success factor that has led
to Reliance Brands becoming one of the most successful fashion retail
companies in Indiaconstantly raising the bar on performance through
critical feedback. The real value of feedback is sense-making. Everyone
needs to understand the nature of the current challenges and how to
move forward. This is how Darshan Mehta put it:
We work with more than 40 global brands. It is an immense learning process for people who are constantly willing to learn. We are
ceaselessly pushing people to break out of their comfort zones and
to unlearn and thats a big challenge. Not everyone can take critical
feedback as a tool to reset the bar on performance! As a result, Reliance Brands may not be in the running for the Best Employer of the
Year Award but it is certainly the single most sought after organization to build ones career in fashion retail.
Feedback is about the ability to build commitment, through dialogue
and evidence, to move forward. Once the evidence, which makes sense
of the current situation, has been examined, positioning that evidence
to build engagement and commitment to act is the challenge. Evidence
needs to be positioned in a way that will enable other parties to hear
and acknowledge the substance of the message. The rational exercise of
gathering evidence requires the contextual sensitivity of knowing how

people will respond to the message being presented. What are the
contextual triggers that help people listen? What experiences and examples can be called upon so that those listening can experience the reality
of the message? What switches people on?
My research has identified that executives can be assessed in terms of
their rationalization capacity and also their capability to position
messages. Different audiences need messages positioned slightly differently through the use of stories, examples, and the personal experiences
of those listening so that the message is understood and owned. The
unique blending of a deductive process and emotional awareness makes
for a true communicator. The charismatic presenter who calls on drama
and powerful strap lines does not necessarily help the audience to
become part of the message being promoted. All may be enthralled at
the meeting, but left cold days later. The quiet, introverted leader can
make a powerful engagement impact. Effective communication is about
what happens after the meeting rather than the feel-good factor during
the meeting.
My latest research with Heidrick & Struggles highlights the fact that in
determining the strategic direction of an organization, the general
managers and other critical stakeholders are at the bottom of the list
(Figure 9.1). What the results scream out is that the damaging practice
of strategy first, structure follows strategy, sell the message or shut up
is the norm in so many organizations.
The case for shifting mindset is compelling.
Never go back
The past is history. Wise leaders have the ability to shape a pathway that
shows how to move forward and negates the desire to return to the
past. To never go back to the way things were is the true sign of having
balanced the needs for engagement and alignment. The evidence that
balances what may be required in terms of organization, structure,
processes, producers, costs, and the engagement needs of the rest of the
organization is at the very heart of this book.
Listen to the story of Rajiv Verma, CEO of HT Media in India, outlining
the development of the Hindustan Times:
Remain focused to meet the challenges ahead

Use appropriate information/data
which is readily available
Understand the nature of the strategic options
facing the organization
Utilize hard rather than soft evidence
Understand the implications of
implementing the wrong strategy
Take time to ensure that the strategic direction is fully
understood by all concerned
Readily engage with parts of the organization
Allow others to have a constructive input rather than
one or a few people getting their own way
Effectively utilize the right balance of skills, knowledge
and experience of those developing the strategy
Allocate enough time in meetings to
discuss strategic issues
Give General Managers the opportunity to
feedback their views
Actively engage with external stakeholders/shareholders
1
Average scores ranging from Never to Always
Figure 9.1 Those involved in determining the strategic direction of

the organization.
In the early 2000s, we were short on resources and low on liquidity; today arguably, we are among the most valuable media companies in India. We pioneered the move to inject private equity into
the company. It wasnt common for media companies to accept external funding at the time. This provided us with capital, eventually helped us take the company public, and created resources for a
turnaround.
Subsequently, we launched our flagship newspaper in Mumbai
where the market was dominated by a large rival. We were a Delhibased company in peoples eyes and it was a complete act of courage.
Analysts thought we wouldnt be successful given our meagre war
chest. Sure, we didnt have resources to waste, but we did have the
will to win, to take on formidable competitors.
My team and I were newcomers to the media business, and had little
idea as to what worked and what didnt in the industry. Yet, today,
our Mumbai foray has been hugely successful. It has made our competition, which we also fight in Delhi, more honest. It has restored
the equilibrium in both markets.
My most significant learning was that it was possible to transform a

company tottering at the edge of a precipice into a stable, thriving,
successful one. Id read about it in business books. Id imagined it.
But I had never effected a transformation, a turnaround, and my experience taught me that it could be done. It taught me that leadership
models work, that core values are important.
We transformed the company by building teams, creating a shared
vision, and making sure everyone delivered. Our success was made
possible by the complete trust and support of all stakeholders.
Rajiv Verma, who won against all odds, captures the heart of this book.
The considered, sensitive, and effective balancing of engagement with
alignment can turn around the most vulnerable of strategies.
Yes, there is a sense of excitement! In the words of so many of the others
quoted earlier, there is impressive passion and professionalism. These
people care. They care about their organizations. They care about doing
something worthwhile. They care about contributing. Most of all, they
care about delivering value. That, they know, is the measure of success.
Always. They live the success formula, S + (E A) = V.
The discipline of wisdom:

In summary
Learning needs to be a lifelong habit.
It is normal for leaders to continuously face dilemmas; the issue is
how they address such concerns.
Exercising wisdom can be painful, and so, being resolute, learningoriented, and humble is an important component of making wisdom
work.
Learning with age facilitates wisdom.
Part of wisdom is coming to terms with ones ethical orientation.
Working through dilemmas is fundamental to leadership. If that is
too difficult, do not lead.
Wisdom is critical to finding the pathway between E A context by
context.
Key questions

Is learning for you a built-in habit?

Do you face dilemmas, and, if so, what is their nature?
Do you feel it is normal for you to repeatedly face dilemmas?
Do you feel it is unfair that you have to face unpleasant and emotionally stretching dilemmas?
Do you almost feel what I have done to deserve this?
When forced to compromise your values, are you distressed and
uncomfortable?
If you cannot compromise your values or position, do you resign,
irrespective of the consequences for you?
Chapter10
Key questions
The overriding conclusion about leaders who are able to sustain success
over a long period is that they never take value creation for granted.
Even if a strategy or business model has been successful in the past, or
seems tailor-made for the future, these leaders continually check their
perceptions against those of others and against reality. They know that
this is the best protection against organizational hubris.
In the 1980s, IBM was almost destroyed by hubris. What saved Big
Blueand has enabled it to flourish once moreis its changing to an
evidence-based culture. By constantly taking soundings from its stakeholdersemployees, customers, suppliers, and othersIBM developed
a radar for big shifts in its industry, navigating dangers and successfully
identifying opportunities for growth. Big Blue learned to renew itself.
At the heart of the organizations that sustain success is a continual
process of gathering and interrogating evidence and an appreciation
for diversity of thinking that creates engagement and alignment to
support the strategy.
So how does an organization become evidence-led? It is not a destination, rather a journey without end. The following questions, based on
hundreds of hours of interviews, are designed to help organizations
and leaders setting out on that journey.
Questions for the CEO

1. Do you have an evidence-led mindset?
How would you describe your mindset? Can you tell the difference
between critique and criticism and are you comfortable with critique?
Are you more of the replicate, formulate, or evidence-led leader? Once
you have an idea, do you pursue that idea through gathering and interrogating evidence in order to see how much of the idea, once scrutinized, will survive?
Do you, once you are clear on the strategy to pursue, negotiate for
support of your strategy within the top team and board? Are you
convinced of the value proposition that you are trying to pursue and
feel that this is sufficient reason to move forward. Alternatively, are you
more concerned with the value that is to be delivered? And if so, what
effort do you make to determine what value will be delivered from the
strategy/idea that you have initiated?
Whatever your conclusion, do the others agree?
What sort of feedback have you received, and from whom, concerning
you as a leader and the nature of your mindset?
2. Do you know and feel the difference between strategy and
strategizing?
On the basis that strategy is the resource allocated to a decision made,
strategizing is the shaping of thinking behind the ultimate decision
that is reached. Certain top executives can tell the difference intellectually, but emotionally they may experience the cut and thrust of strategizing as an encroachment on their right to make strategic decisions. If
this is the case with you, it is likely that you are a leader who emotionally links forming the strategy with the value proposition you are
convinced is the right one to pursue. You are unlikely to draw heavily
on scrutinizing evidence that will determine the real value that will be
delivered.
3. Have you created a culture of innovation?
Does the general management, in particular, feel comfortable to try out
new ideas? Are you accepting of failure as long as learning has taken
place? Are you able to facilitate and mentor such a culture by drawing
heavily on the discipline of evidence to guide you?
4. How do you really handle critiques of your ideas/projects?
No matter what you hear on the day, do you later find out that others
did not dare to tell you that your ideas/projects were suspect and prone
to failure? Alternatively, do you insist that all key projects/programs are
vetted through an independent evidence-gathering process and that
the outcomes are owned by the critical stakeholders involved? In effect,
have you nurtured a culture of diversity of thinking?
Key questions 179
5. Let me ask the question once again, have you prompted diversity of thinking?
Why do I ask the question twice? Because diversity of thinking is integral to value delivery. Without diversity of thinking, your organization
is likely to be undifferentiated and also probably not constructively
criticized.
6. What is your personal habit for gathering evidence?
Do you rely on more formal channels of feedback such as surveys, questionnaires, or discussion in formal groups? Alternatively, in order to
gain a clear idea of what is really happening in the place, do you walk
around, having evolved a spread of relationships where people feel
comfortable to let you know of their opinion of reality? To what extent
do you go out of your way to gage the opinion of the general managers
and to what extent do you make them feel comfortable to have them let
you know what is really happening as opposed to their offering what
they feel you want to hear? How do you handle conflicting evidence?
Are you able to see the wood for the trees and are you sensitive enough
to detect the true impact of strategy execution?
Strategies do not fail simply because they are poorly thought through.
Most fail on execution. Let me repeat what an outstanding global leader
said to me: Life is one part strategy and nine parts execution. So much
is dependent on the extent to which you are able to capture the reality
of strategy execution in your organization. Having an evidential mindset
is particularly pertinent when you are attempting to reach a view of
whether to leverage first-mover advantage. The fact that you are first
in the market does not always mean that you will gain the greatest
advantage. Who is likely to have a view on when to enter the market?
The general managers whose role it is to execute strategy.
So, coming back to your personal habit of gathering evidence as the
mechanism to identify what to do when, how strong is this habit?
7. When and how do you know you have reached alignment of
thinking and engagement with critical stakeholders?
It is evident that it is difficult to gather all information to make critical
decisions. A balance has to be struck between knowing when you have
sufficient evidence to justify putting resources behind a decision and
having the confidence that critical stakeholders, especially general

managers, are truly engaged and will, with vigor, execute that decision.
The balance is between IQ, namely knowing how to put forward that
compelling case, and EQ, namely feeling confident of others support
for you and the decisions made by you.
Questions for the chairman

1. What is your habit for discerning the DNA, the heart, of the
organization so that you appreciate what is the essence of the
company and what makes it, or could make it, great?
On the basis that the chairman is the guardian of the enterprise, it is
imperative that he or she and the board appreciate the nature of the
enterprises competitive advantage/differentiation. With that insight,
they can more favorably influence critical external stakeholders, shareholders, the press, and the media.
2. Are you clear about the absolutes, where the boundaries should
be drawn, and where discretion is to be exercised?
Depending on your view of the DNA of the organization, your responsibility is to clearly delineate the boundaries of the chairmans role and that
of the CEO, and the boards role and that of the management team. Such
boundaries are dependent on who does what to realize competitive advantage. In reality, my research shows that these deeper levels of engagement
are the experience of only about 33 percent of boards and top teams.
3. How able are you to put forward the compelling case of what
makes this company great?
How do you balance your IQ capacity for rationalization with your
political and sensitivity skills to gain the necessary buy-in from the
management about the value of the enterprise and the political skills to
weave through the contrasting agendas different stakeholders pursue?
The management may be polite but are they wary of you?
4. How do you gain the permission to dig deep in the
organization?
The evidence underlying this book strongly shows that control and
monitoring mechanisms act as the basis for minimizing risk and
Key questions 181
preventing harm to the enterprise, but do not provide that extra stimulus for the organization to excel. It is the subtle balance between monitoring and mentoring that has management and other stakeholders
acknowledging that the board provides value. Effective mentoring
requires intimacy of understanding of what is happening in the organization. This book challenges the current belief that for the board to be
independent, it has to maintain a distance between itself and the
management of the organization. It is the general managers who are
likely to offer the greatest insight concerning what is happening in the
enterprise and which strategies/projects are likely to succeed or fail.
The chairmans and the boards insight concerning the true sentiments
of the general managers will determine how the governance of the
enterprise and the balance between mentoring and monitoring is to be
pursued. So what is your real access to the general managers in your
company?
5. Have you nurtured a culture of diversity of thinking on the
board?
You will really know this only from the exuberance of free and open
communication from the board that spreads right through the
organization.
Notes
Chapter 1
1 Crainer, Stuart (2011), Leading with purpose, Business Strategy Review, Autumn.
2 Drucker, Peter (1985), Innovation and Entrepreneurship. New York: Harper & Row.
3 Value Maximization, stakeholder theory, and the corporate objective function, working paper -01-01
HBS October 2001.
4 Porter, Michael and Kramer, Mark (January 2011), Creating shared value, Harvard Business Review, 89:
6277.
5 DAveni, Richard (2012), Strategic Capitalism. New York: McGraw Hill.
6 All quotations are from research interviews unless otherwise stated.
7 Crainer, Stuart (2011), Mining success, Business Strategy Review, Autumn.
8 Dearlove, Des (2012), Builders not bankers, Business Strategy Review, Autumn.
9 Loomis, Carol (2005), Why Carlys big bet is failing, Fortune, February 7.
10 Quoted in Denning, Steve (2011), The dumbest idea in the world, Forbes.com, November 28.
Chapter 2
1 European Board Survey 2014 (2014), Heidrick & Struggles Europe.
2 European Board Survey 2014 (2014), Heidrick & Struggles Europe.
3 Ha, Julia and OBrien, Anne Lim (2011), Heidrick & Struggles Governance Letter, Q3.
Chapter 3
1 Kanter, Rosabeth Moss (2014), tweet from@rosabethKanter, August 14.
Chapter 4
1 Yardley, Ivan, Kakabadse, Andrew and Neal, Derrick (2012), From Battlefield to Boardroom. Basingstoke:
Palgrave Macmillan.
2 Franken, Arnoud, Paton, Chris and Rogers, Simon (2010), How the UKs Royal Marines plan in the face
of uncertainty, Harvard Business Review website http://www.hrb.com, November.
184 Notes
3 Zook, Chris (2013), Interview, http://www.thinkers50.com

4 Bennis, Warren (1989), On Becoming a Leader. Reading, MA: Addison Wesley.
5 Sidey, Hugh (1980), The task of the leader, Time, October 20, p. 39.
6 Collins, James C. and Porras, Jerry I. (1996), Built to Last: Successful Habits of Visionary Companies. New York:
HarperBusiness.
7 Senge, Peter, Roberts, Charlotte, Ross, Richard B., Smith, Bryan J. and Kleiner, Art (1994), The Fifth
Discipline Fieldbook: Strategies and Tools for Building a Learning Organization. London: Nicholas Brealey
Publishing.
8 Kakabadse, A., Kakabadse, N. and Lee-Davis, L. (2005), Visioning the Pathway: A Leadership Process
Model, European Management Journal, 23(2): 227302.
Chapter 5
1 Lashinsky, A. (April 17, 2006), The Hurd Way: How a Sales-Obsessed CEO Rebooted HP, Fortune,
153(7): 838.
Chapter 6
1 Kim, W. Chan, and Mauborgne, Rene (2014), Blue Ocean Leadership, May, https://hbr.org/2014/07/
from-blue-ocean-strategy-to-blue-ocean-leadership/(Accessed: 20.07.2014).
2 Victor Lipman, (2013), Why are so many employees disengaged, Forbes, January 18, p. 1.
3 For further information on dialogue, Plato and Socrates, read: Kakabadse, N. and Kakabadse, A. (2003),
Polylogue as a platform for governance: integrating people, the planet, profit and posterity, Corporate
Governance: The International Journal of Business in Society, 3(1): 538.
Chapter 7
1 There is an article by Rosabeth Moss Kanter which also uses this terminology. Managing Yourself:
Zoom In, Zoom Out, Harvard Business Review, March 2011.
2 Kellerman, Barbara (2004), Bad Leadership. Boston, MA: Harvard Business School Press.
Chapter 8
1 Berle, Adolf A. and Means, Gardiner C. (1932), The Modern Corporation and Private Property. New York:
Harcourt, Brace & World.
2 Gelter, Martin (2008), The Dark Side of Shareholder Influence: Toward A Holdup Theory Of Stake
holders in Comparative Corporate Governance, Economics, and Business Fellows John M. Olin
Centre For Law, Discussion Paper Series, Discussion Paper No. 1707/2008, Cambridge: Harvard Law School.
Notes 185
3 Grechenig, Kristoffel and Martin, Gelter (2008), The Transatlantic Divergence in Legal Thought:
American Law and Economics vs. German Doctrinalism, Hastings International and Comparative Law
Review, 31: 295360.
4 Stout, Lynn A. (2013), The Shareholder Value Myth, Harvard Law School Forum on Corporate
Governance and Financial Regulation, January 26, http://www.blog.law.harvard.edu/corpgov/2012/
06/26/the-sharholder-value-myth/.
5 Grechenig, Kristoffel and Martin, Gelter (2008), The Transatlantic Divergence in Legal Thought:
American Law and Economics vs. German Doctrinalism, International and Comparative Law Review, 31:
pp. 295360.
6 Kakabadse, Andrew and Kakabadse, Nada (2008), Leading the Board. Palgrave, p. 182.
7 ShareSoc (2013), Chair and Non-Executive Director Guidelines, January.
8 Bhagat, C. and Kehoe, C. (2014), High-performing bars: Whats on their agenda?, McKinsey Quarterly,
April, pp. 15.
Chapter 9
1 Schwartz, Barry and Sharpe, Kenneth E. (2005), Practical Wisdom: Aristotle Meets Positive Psychology,
Journal of Happiness Studies, 119.
2 Kakabadse, N. K., Knyght, R. and Kakabadse, A. (2013), High-performing chairman: the older the
better, in Kakabadse, A. and Van den Berghe, L. (eds), How to Make Boards Work: An International Overview.
Basingstoke: Palgrave Macmillan, p. 352.
3 Strauch, B. (2010), The Secret Life of the Grown Up Brain: The Surprising Talents of the Middle-Aged Mind.
London: Viking.
4 Power, Marianne (2010), The midlife brain surge that means we DO grow wiser as we get older, Mail
on Line, July 27, http://www.dailymail.co.uk/health/article-1297847/The-midlife-brain-surge-meansDO-grow-wiser-older.html.
5 Jeste, D. (2010), Why the wise man takes up juggling in old age, Hastings International and Comparative
Law Review, 31(1), http://ssrn.com/abstract=1161168 (Accessed: 20.07.2014)..
6 Kakabadse, N., Knyght, R. and Kakabadse, A. (2013), High-Performing Chairman: the Older the Better,
in Kakabadse, A. and Van den Berghe, L. (eds), How to Make Boards Work: An International Overview.
London: Palgrave, pp. 34259.
Index
Achleitner, Paul 78, 92
action-focused debating team 567
agency theory 135
alignment xxvii, 1719, 43, 757
closeness of relationships 87
vs. engagement 81
of Hewlett-Packard, case example 812
information and 88
integrating engagement with 912
key elements of 7881
meaning of 77
network support 889
personal experience, role of 89
position in success formula 77
process of 78
repercussions of 81
being ruthless and disrespectful for 89
shift of thinking 878
of strategy and structure 823
of structures 80
of systems 801
of thinking 823
of thinking between the key players 789
working through politics 869
see also engagement
alternative energy 84
Aristotle151
Armstrong, Neil 68
banking and values 78
being driven, notion of 165
Bennis, Warren 68
Berle, Adolf
The Modern Corporation and Private
Property 134
Bhagat, Chinta 148
bilateralization161
black letter law 1367
Blue Ocean Leadership 99
Bower, Joseph 1534
brains processing capacity 1613
Burke, Edmond 88
Burns, James McGregor 127
Cadbury, Sir Adrian 139
CEO, questions for 17780
chairman, questions for 1801
Chipman, Stephen 1579
Christensen, Clay 1534, 167
Cicero, M. T. 956, 159
Clausewitz, Carl von 623
closeness of relationships 87
collaboration109
Collins, Jim 689, 126
Good to Great95
commanders intent 64
commitment 70, 95
competitive advantages 6
conformist80
contextual evidence 52
see also evidence
corporate center and diversity of thinking 357
corporate governance 138
corporate sustainability 141
crystallized cognition 162
CSR polices 141
C-suite executives 79
culture fit 7980
culture of us and them54
Cunningham, David 35, 1089
Dabaghi, Georges 12, 33
DAveni, Richard
Strategic Capitalism5
Lee-Davis, Linda 70
Davis, Mick 1011
delivered value 11, 1516, 44
delivery-led organizations 846
deontological philosophy 1645
dilemmas and wisdom 1639
disengagement 101, 104
see also engagement
disruptive innovation 153
disruptive technologies 153
disruptive wisdom 1535
diversity & inclusion 84
diversity of contribution 39
diversity of knowledge 39
diversity of thinking xxvii, 223
components of 2939
international exposure and 312
as an issue of discussion 289
modus operandi 256
need for 3940
open communication and 324
passion for 2930
in relationship between corporate center
andits operational centers 357
road to 245
team for 379
see also global thinking
Drucker, Peter 3
dynamic governance 13742
characteristics to achieve 140
188 Index
Elix, Doug 38, 97, 113, 115, 152, 156

engagement xxvii, 1719, 43, 81, 968
benefit of addressing 110
as a by-product of good leadership and value
delivery98
dialogue vs. debate 1068
fair process and 99101
foundations of 1056
individuals ability to hear in 1045
need for dialogue in 1034
process of 13
trust, significance in 1056
see also alignment; disengagement
ethical leaders 128
ethics164
evidence101
action-focused debating team
for debating 567
belief in 501
characteristics of 509
collection timing of 512
contextual52
culture of interrogating 589
debating on 578
in developing knowledge 49
importance and purposes of 459
leveraging of 59
as platform for independent debate 546
quality of 523
rational52
without detail, impact of 49
evidence-based managers 45
evidence-led, approach xxvi
evidence-led leaders 46, 489, 114, 126, 1778
successful60
evidence-led leadership 43
evidence-led stakeholder engagement xxvixxvii
evidence-led wisdom 1513
expectations market 14
fair outcome 99
fair process 99101
feedback 701, 1723
Fettig, Jeff 27, 84, 86, 132, 160
financial value xxv, 5
Fiorina, Carly 12
Ford, Henry 3, 68
formulate, approach xxvi
formulate leader 478
Franken, Arnoud 634
front line managers 24
Gelter, Martin 1356
general managers 24
Gerlich, Stephan 389
Gerstner, Lou 11314, 152
Gibson-Smith, Chris 3, 115
global cultures 30
global managers 26
global thinking 268
see also diversity of thinking
goals69
Goldsmith, Marshall 44
Goodwin, Fred 78, 45
governance 43, 131
black letter law and 1367
and board behavior in Russia,
study1445
board governance practice 134
companys board, role in 1468
criteria for appointments
to board 148
to executives/management team 148
critical fault lines of enterprises
and1436
delineation of roles and duties 145
dimensions of 131
drivers for achieving best practice
levels1389
dynamic13742
Harvard Law School vs. Harvard Business
School135
principles of corporate 1316
spirit of 139
Gustafson, Rickard 11618
Heidrick & Struggles xxv, 29, 38, 108,
110, 1378, 161
capabilities as foundation of boards ability
toperform 138
companys board, role in governance 1468
comparison with average- and poorperforming entities, high-performing
organizations147
Towards Dynamic Governance140
Foundations and Building Blocks for
High-Performing Boards138
strategic direction of an
organization1734
Hewlett, Walter 12
high-quality leadership, qualities of
avoiding personal agendas and pet
themes1223
fostering a no-shame culture 122
handling criticism 120
integrity117
managing expectations 121
moral consciousness 118
persuasive advocacy 11819
positioning the argument 1201
reworking the argument 1212
transparency and sharing
of evidence 11617
trustworthiness117
zooming-in, zooming-out 1234
HP-Compaq merger 1213
Index 189
humility95
Hunter, Jeremy 37
ineffective leaders 127
innovation138
integrity84
international exposure 312
Jensen, Michael 4
Kakabadse, Nada 70
Kant, Emmanuelle 165
Kanter, Rosabeth Moss 51
Kehoe, Conor 148
Kellerman, Barbara 127
key performance indicators (KPIs) 35, 76, 81
Kim, W. Chan
Blue Ocean Strategy989
King, Martin Luther 67
Kissinger, Henry 68
Kramer, Mark 4
Laxer, Richard 11
leadership 43, 138
correcting bad 128
high IQ 11415
instances of leadership failure 1279
purpose and 1256
qualities (see high-quality leadership,
qualities of)
sophistication and 115
learning95
process of 1578
wisdom1601
listening95
Livingstone, Catherine 32, 45, 48, 567, 85, 146
Lobo, Kevin 323, 51, 53, 58, 712, 78, 912,
96, 126
Mackay, Dave 80
Makhov, Vadim 33
management politics 8991
Marey, Alexey 15
market share xxv
Martin, Roger 1415
Fixing the Game14
Mathewson, Sir George 7
maturing wisdom 15760
Mauborgne, Rene
Blue Ocean Strategy989
Mayfield, Charlie 612, 97, 1401
Means, Gardiner
The Modern Corporation and Private
Property134
Mehta, Darshan 49, 172
mentoring 1312, 135
Meyer, Erin 26
The Culture Map26
mission 43, 69
command principles 625
difference between vision and 678
led enterprises 712
lessons learned from leaders 657
organizational impact 657
in value delivery organizations 61
see also vision
mission-based organizations 62
monitoring 131, 135
moral consciousness 118
morals164
myelin161
Napoleon62
NatWest Bank 7
Neill, John 16, 50
Niebuhr, Reinhold 151
non-negotiable principles of behavior 64
nudging others 87
Obermann, Ren 49, 556, 757
open communication 324
organizational chaos 70
organizational performance qualities 109
organizational success xxvii, 2
ownership133
Parker, John 11819, 1312
perceived value 1113, 44
performance-management process 84
personal conviction 70
persuasive advocacy 11819
planning process 63
Plato151
politics
defined86
understanding organizational 8991
Porras, Jerry 689
Porter, Michael 4, 6
profitabilityxxv
proposition-based leaders 46
Prussians62
quality of relationship 100, 121
Rand, Ingersoll 7980
Rapp, Ed 10, 30, 578, 72, 86, 1256
rational evidence 52
see also evidence
real market 14
reflective wisdom 1567
relationships100
in alignment 87
between corporate center and its operational
centers357
culture of poor 104
within management team 101, 104
190 Index
positioning an argument in 120

see also engagement
replicate, approach xxvi, 47
respect84
Russian banking market 15
Sam Su 312, 434, 50, 59, 109,
1567, 171
Schneider, Ulf Mark 52, 62
Selfish Business Units 70
Senge, Peter 68
senior managers 24
sensitivity dilemma 1667
shareholder value xxv, 14, 135
shift of thinking 878
social reasoning 163
social value xxv
Socrates151
spirit of winning 84
stakeholder value xxv, 44
stakeholder value thinking 4
stewardship135
Stout, Lynn 135
strategic tension 102
strategizing178
strategy xxvii, 1719
formulation45
vs. strategizing 178
strategy-driven organizations 846
Strauch, Barbara 161
success91
best formula for 1920
combination of strategy, engagement and
alignment for 1720
definition of 12
importance of evidence 44
leadership focus 1719
strategy+(engagementalignment) = value
delivery 20, 126, 175
Swannell, Robert 25, 334, 52, 107, 144
teamwork84
teleological individual 164
telescopic thinking 156
Tennant, Sally 2
timing dilemma 1678
tokenism37
transactional mindset 54
transparency dilemma 1689
trust86
two-day strategy retreat 47
Ukrainian banking market 15

UKs Rapid Reaction Force 63
unethical leaders 128
Unipart Way 16
value creation xxvii, 1113
value delivery xxvii
value-enhancing vision 69
value for stakeholder groups 245
value innovation 98
value organizations xxv
value proposition hypothesis xxvi
value propositions 6
as delivered value 1516
flawed89
as perceived value 1315
testing911
values 24, 69
banking and 78
unsuccessfull delivery of 56
vanilla cultivation, case study of 141, 144
Verma, Rajiv 173, 175
vision138
driven organizations 678
meaning of 6871
shared69
steps towards effective visioning 701
value-enhancing69
see also mission
visioning culture 71, 102
voluntary co-operation 99
wealth creation 133
Welch, Jack 14
willingness 95, 99
wisdom43
dilemmas and 1639
disruptive1535
evidence-led1513
learning1601
maturing15760
in neuroscience 1613
present times 160
reflective1567
steps to practical 1714
telescopic thinking 156
working1705
Working in Organizations80
working wisdom 1705
Zook, Chris 64

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Praise for The Success Formula

Andrew Kakabadses book offers unique insights and practical

This book contains a multitude of insights concerning success that

The Success Formula is a refreshing read for those leaders committed to

The Success Formula

Design by Fiona Pike, Pike Design, Winchester

About the author

Mark Gainsborough, Executive Vice President, Global Commercial

John Neill, Chairman and Group Chief Executive, Unipart Group, UK

The designations and organization of each interviewee are as offered at

In addition, there are my three Heidrick & Struggles colleagues without

Figure 6.1 Quality of relationships

Figure 6.2 Organizational performance qualities

Figure 6.3 Impact of handling awkward or sensitive

Figure 8.1 Enterprise fault lines

Figure 8.2 Input into the development of the

Figure 8.3 Average number of meetings per annum

Figure 8.4 Shared view regarding the criteria for

Figure 8.5 Shared view regarding the criteria for

Figure 9.1 Those involved in determining the strategic

Ambiguity), strategy works best when leaders create an evidence-based

Creating value, therefore, is the primary purpose of leadership and the

evidence-led stakeholder engagement: they build the commitment and

2 The Success Formula

4 The Success Formula

6 The Success Formula

Banking without value

8 The Success Formula

This is a story repeated many times in corporate history. As contexts

Flaws of the value jungle

10 The Success Formula

Leaders have to constantly hunt down the truth by pursuing evidence.

12 The Success Formula

The claims of synergy failed to materialize and the company lost

14 The Success Formula

company is likely to perform in the future. The consensus view of all

16 The Success Formula

Looked at this way, value is not an abstract notion but an inescapable

18 The Success Formula

We have moved from a world where leadership was about formulating a

20 The Success Formula

engagement). The evidence gathered may support or challenge the

Understanding value: In summary

Best performing companies have a structure preceding strategy to

24 The Success Formula

The road to diversity

Robert Swannell, chairman of the UK retailer Marks and Spencer, is

26 The Success Formula

background and experience that people develop a unique viewpoint,

28 The Success Formula

rated a diversity mix as being important for board effectiveness.2 If

30 The Success Formula

knowledge. As one senior Chinese executive said to me, John is an

32 The Success Formula

on and forth. So 20-something years later Im still here and Im now

34 The Success Formula

Engaging with the center

36 The Success Formula

38 The Success Formula

is natural. We have people from South India working and living in

Making sense of diversity of thinking

40 The Success Formula

A diverse blend of knowledge/expertise

Figure 6.1 Quality of relationships

Figure 6.2 Organizational performance qualities

Figure 8.1 Enterprise fault lines

Figure 8.3 Average number of meetings per annum