Tuesday, September 26, 2006

What Best-In-Class Companies Do To Grow Leaders

There have been numerous Fortune, Forbes, and BusinessWeek stories in the last year citing the importance of growing leaders and the challenges organizations are facing with the coming paucity of leaders due to the demographic shift occuring with the baby boomers retiring and leaving a void.

Paul Reilly of the venerable Korn/Ferry states in the Forbes article linked to above that over 50% of all C-level execs will retire in the next 5 years.

That begs the question: what are organizations doing now to prepare for this difficult challenge? In every crisis, lies opportunity. And, certainly, this immovable fact is good news for the Korn/Ferry's, Monster's, Jobster's, and Recruiting.com's of the world, as it suggests an increasing need from Corporate America for recruiting top talent.

However, the best organizations do not over-rely on recruiting firms to "fix" their lack-of-leadership problem. They look inside and set up processes and programs which ensure that their "Leadership Funnel" is as full as their "sales funnel."

Of course, everyone pays homage to GE, when talking about leadership development. Yet, very few actually do a great job to coach, mentor, and develop top talent.

Here are some quick tips, based on our work with different organizations, on what the best companies do to ensure an adequate supply of leaders for years to come:

  1. Leadership Development happens at multiple levels within the Organization - Not just below the C-Level. We all like short cuts. Yet, we know that, in important areas, we can't take short cuts. Developing an adequate supply of leaders is a long-term investment. The best companies understand that and work at bringing their people along no matter the level of the organization -- from entry-level to the C-Suite.
  2. Assess Where Leaders Are At Today, to Measure Where they will be Tomorrow. You can't improve something, if you don't measure it. Doing a leadership assessment at the front-end of any development program gives you a baseline to measure someone's development -- and hold them accountable if they don't develop. 360s are great as a tool, but the most reliable measurement of a leader's strengths and weaknesses comes from a process called an "Assessment Center" which uses multiple methods (including case studies, work simulations, and behavior-based interviews) to measure someone's leadership performance and potential. One thing that surprised me when I started to "coach" "high-potential" leaders is how many of them were hungry to know where they ranked relative to other leaders out there. Most people work for one company for a long time - sometimes 10, 15, or 20 years. They lose sight of their "market value" relative to other execs. Being able to tell them that they are in the top quartile on "strategic orientation" relative to others is very interesting to them; often raising their confidence levels. By contrast, it can be an eye-opener when they are in the bottom quartile on a number of important leadership dimensions.
  3. Meet with your Boss to discuss the Results of the Assessment and Build an Action Plan. Leadership Development programs fail if the leader's boss is not involved. It's critical to meet with the boss to discuss the strengths and weaknesses that were identified in the assessment. The leader is always interested to have the opportunity to hear how his/her boss sees his/her strengths and weaknesses. This meeting also needs to focus on building a Leadership Development Plan, which the leader and boss buy-in to and endorse.
  4. Track the Leadership Development Action Plan over time. What good is a plan if you don't track it and do what you say you will do. The process of setting up and tracking this action plan forms the basis of the "Leadership Development Program" that the best-in-class companies follow. This program is separate from any performance review process. It is a supplement to that -- not a replacement. In our work, we act as external coaches who come in and meet with the leader once a quarter to review progress over time (usually 2 years). The leader's boss is kept in the loop by receiving updates of the plan on a quarterly basis and then coming back at the 1-year mark and 2-year marks to meet with the leader and external coach. Knowing that you are accountable for progress is a huge stimulant to the leader.
  5. Encourage mentors in your Organization - but don't force them. Mentors are great. Who hasn't had someone take an interest in us at one point in our lives and give us some advice which was really valuable. Yet, a lot of organizations have tried to "assign" mentors to "high-potentials," as part of their leadership development programs. This just doesn't work. It's like fixing up two people on a blind date who have nothing in common or are too busy to meet. The best approach we see is to have the leader and boss discuss some possible mentors (a lot of times the boss will have the best ideas because he/she knows a wider universe of people in the organization who might be interested and a good fit with the leader). Then, the boss should contact the possible mentor, rather than the leader. We've seen successful mentor relationships where the 2 people meet once a year for dinner; others where they meet every couple of months. It's up to the two people. When it works, mentors can have a dramatic impact on "high-potential" leaders.
  6. Discuss Career Path. Many bosses don't make time to sit down and discuss a "high-potential" leader's future career path at that company. However, the ones that do can create tremendous loyalty. People appreciate it (even highly talented people who you might think get tired of all the acclaim they receive) when their boss closes the door and says "let's talk about what you want to accomplish here and how I can help." Ideally, this career vision gets tied into the Leadership Development Plan.

Leadership Development is tough. If it wasn't, we wouldn't be having a "crisis." Recruiting is an answer to a short-term need, but it doesn't address the underlying problem. The best organizations understand that -- buying into it whole-heartedly -- and build systematic processes to ensure their best people know where they need to develop and what their future career path looks like at that company.

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Saturday, September 23, 2006

Before you Pull the Rip Cord: Top Ten Reasons Why It's (Usually) Better for Top Talent to Stay at Larger Companies

After my last post discussing the Top Ten Reasons Why Top Talent Leaves Larger Companies (here if you missed it), several people commented that this was a helpful list which top talent could use as a "litmus test" to decide whether or not to pull the rip cord.

While this is true, I thought it was important to present the other side of the equation before all the highly talented people out there decided to jump ship from Microsoft, Dell, HP, and all the big consulting companies to join the next YouTube, MySpace, etc. The fact is that most highly talented people can get more done as part of a larger organization (with all its imperfections) than at a start-up. This is not a universal statement. Obviously, there are loads of examples where the "best-of-the-best" couldn't take being tethered down in a large bureaucracy, broke away, and -- indeed -- changed the world. Bless the entrepreneurs of the world (I happen to be one too). However, to be fair, before you tender your resignation, please review the following list of reasons why you might be better off where you are:

  1. Picking the next YouTube to join is Tough. If it wasn't, life would be pretty good for the VCs. They would be raking in the returns. Now, despite a previous post of mine in which I expressed a concern that not all people working at VC firms (especially at the junior levels) add tremendous value to their portfolio companies, the fact is that there are some pretty smart GPs out there at VC firms. And yet -- even these veterans of many a start-up occasionally make bad calls. The start-up thing is tough. Are you sure that you're going to be any smarter? Entrepreneurs are inherently optimistic (and, I'll say it again: thank God for that), which makes them not always the best judge. Here's a cautionary tale: George Sheehan left Andersen Consulting (Accenture) at the peak of his career to steer Webvan to a horrible and notorious death. Despite a brief sojourn with Siebel, his career has never recovered and likely never will.
  2. More Money may bring More Problems, but it's still More Money. Large companies, by definition, have more money to throw at new technologies or solving problems. Of course, they don't always do it wisely and there are many an example of them failing to recognize a trend that a smaller competitor capitalizes on. However, you are "top talent." If you figure out what you think your company should be doing, you should be able to persuade the key decision-makers to give you the money and to go out there and get it right. Although Microsoft hasn't always succeeded where it's thrown money at problems, look at what they've done with XBOX. Congrats to Robbie Bach.
  3. First-Mover is not as important as Fast-Follower. Incumbents -- with their money and talent -- can usually take a body-blow and come back much stronger. If you're a talented person working at Google a year ago and you were asked to beef up Google Video vis-a-vis YouTube, what an opportunity. That's what Jennifer Feikin got. And, she's making the most of it. Will it be a challenge to catch YouTube? Sure. But, there's nothing top talent likes more than challenge.
  4. If your boss sucks, you can usually move to a different area. A terrible boss is a killer for most highly talented people, no question. More people quit for this reason more than any other, in my experience. When you talk to them off-the-record afterwards, they describe the past few months as "soul-crushing" and other equally dire terms. However, the good thing about large companies is that you can usually arrange to move to a different area far away from the boss who is driving you nuts. I realize that, if the organization tolerates having this terrible boss, it says a lot about the organization -- and you might not want to be in a different part. But, these days, with a tight supply of talent and a big tent of people filling slots, you might want to not give up on a good thing with the company just because of one person.
  5. The People Who are Most Admired in Business Have Put Down Roots. I have a good friend of mine who has worked for 10 different companies in the last 12 years. Each time, I think he's moved up slightly on the pay-scale and with a little more responsibility and probably a better title. Many people have told me they think he's brilliant. These days, they say to me, you can't be loyal to your company and you need to look out for yourself. I just don't agree. Look at any list of the most admired business people and what do they all have in common: they've all put down roots and transformed that organization. Sometimes it's been a company they started (e.g., Bill Gates) and sometimes not (e.g., Jack Welch). I've yet to see a "career flipper" make the list.
  6. The Start-Up Thing is Tough. At my last company, VoiceGenie, I had the honor of being employee #20 and raising 2 rounds of VC money and building partnerships as VP of Strategy & BusDev. I remember we used to relish the start-up/outsider/raise the pirate flag over our crumby office mentality. And, it was great, learned a lot, and we were ultimately successful -- but it was tough. I'll get together with my former co-workers every now and then and one of us usually says, "I don't know if I could do it again, if you told me I had to go back and do that over." We competed against some great companies like Tellme and BeVocal. I think it's fair to say that everyone working in our industry thought we'd be acquired by late 2001. I still know many fabulous people grinding it out at Tellme and BeVocal and others. And, to them, I say congrats and see point #5 above. However, to everyone else thinking of leaving a big company, I say: you've got to be prepared to go in and grind it out for potentially many years. If you want that, great. However, changing the world in a big company might start looking a little more attractive.
  7. It's easier to find other Top Talent in Large Companies. This is another function of bigger numbers: you're bound to have other smart people that are fun to work with in bigger companies than small. Remember: top talent loves being with other top talent.
  8. Frustrating Bureaucracy can be Fixed. It's not fate that every large company has to have maddening bureaucracy. Hopefully, yours doesn't. If it does, the good news is that it can be fixed. Perhaps you're the person to do. Top talent never shies away from stepping up to clean a big mess. I've ended up talking a lot about HP in these pages in the last few weeks. Although I do not approve of Carly's leadership style, I think it's fair to say that the pre-Carly HP did suffer from frustrating bureaucracy. It appears that she tried to tackle this, with not much success. Hurd has definitely made strides in this respect.
  9. Make your Destiny. Top talent doesn't -- or shouldn't -- sit back and wait for HR or their boss to come to them to discuss their future career path within the organization. They should always be working off their own personal gameplan. It surprises me that only about 15% of hi-po leaders I work with have a more sketched out version of their careers 5 years from now. It's essential to do this if you haven't. You need to make your own destiny.
  10. You can change the World more. The fact is that top talent will change the world wherever they are, but, if all is right with your large organization, you can change the world faster and easier there. Good luck.

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Sunday, September 17, 2006

Top Ten Reasons Why Large Companies Fail to Keep Their Best Talent

Whether it's a high-profile tech company like Yahoo!, or a more established conglomerate like GE or Home Depot, large companies have a hard time keeping their best and brightest in house. Recently, GigaOM discussed the troubles at Yahoo! with a flat stock price, vested options for some of their best people, and the apparent free flow of VC dollars luring away some of their best people to do the start-up thing again. To staunch the exodus, Yahoo! has tried to establish a brickhouse around their best talent.

Yet, Yahoo!, GE, Home Depot, and other large established companies have a tremendous advantage in retaining their top talent and don't. In our business, we see the good and the bad things that large companies do in relation to talent management. Here's our Top Ten list of what large companies do to lose their top talent (and keep an eye out for a future article on the Top Ten Reasons Why It's Usually Better for Top Talent to Stay at these Companies...):

  1. Big Company Bureaucracy. This is probably the #1 reason we hear after the fact from disenchanted employees. However, it's usually a reason that masks the real reason. No one likes rules that make no sense. But, when top talent is complaining along these lines, it's usually a sign that they didn't feel as if they had a say in these rules. They were simply told to follow along and get with the program. No voice in the process and really talented people say "check please."
  2. Failing to Find a Project for the Talent that Ignites Their Passion. Big companies have many moving parts -- by definition. Therefore, they usually don't have people going around to their best and brightest asking them if they're enjoying their current projects or if they want to work on something new that they're really interested in which would help the company. HR people are usually too busy keeping up with other things to get into this. The bosses are also usually tapped out on time and this becomes a "nice to have" rather than "must have" conversation. However, unless you see it as a "must have," say adios to some of your best people. Top talent isn't driven by money and power, but by the opportunity to be a part of something huge, that will change the world, and for which they are really passionate. Big companies usually never spend the time to figure this out with those people.
  3. Poor Annual Performance Reviews. You would be amazed at how many companies do not do a very effective job at annual performance reviews. Or, if they have them, they are rushed through, with a form quickly filled out and sent off to HR, and back to real work. The impression this leaves with the employee is that my boss -- and, therefore, the company -- isn't really interested in my long-term future here. If you're talented enough, why stay? This one leads into #4....
  4. No Discussion around Career Development. Here's a secret for most bosses: most employees don't know what they'll be doing in 5 years. In our experience, about less than 5% of people could tell you if you asked. However, everyone wants to have a discussion with you about their future. Most bosses never engage with their employees about where they want to go in their careers -- even the top talent. This represents a huge opportunity for you and your organization if you do bring it up. Our best clients have separate annual discussions with their employees -- apart from their annual or bi-annual performance review meetings -- to discuss succession planning or career development. If your best people know that you think there's a path for them going forward, they'll be more likely to hang around.
  5. Shifting Whims/Strategic Priorities. I applaud Yahoo!'s plans to build an incubator or "brickhouse" around their talent, by giving them new exciting projects to work on. The challenge for most organizations is not setting up a strategic priority, like establishing an incubator, but sticking with it a year or two from now. Top talent hates to be "jerked around." If you commit to a project that they will be heading up, you've got to give them enough opportunity to deliver what they've promised.
  6. Lack of Accountability and/or telling them how to do their Jobs. Although you can't "jerk around" top talent, it's a mistake to treat top talent leading a project as "untouchable." We're not saying that you need to get into anyone's business or telling them what to do. However, top talent demands accountability from others and doesn't mind being held accountable for their projects. Therefore, have regular touch points with your best people as they work through their projects. They'll appreciate your insights/observations/suggestions -- as long as they don't spillover into preaching.
  7. Top Talent likes other Top Talent. What are the rest of the people around your top talent like? Many organizations keep some people on the payroll that rationally shouldn't be there. You'll get a litany of rationales explaining why when you ask. "It's too hard to find a replacement for him/her...." "Now's not the time...." However, doing exit interviews with the best people leaving big companies you often hear how they were turned off by some of their former "team mates." If you want to keep your best people, make sure they're surrounded by other great people.
  8. The Missing Vision Thing. This might sound obvious, but is the future of your organization exciting? What strategy are you executing? What is the vision you want this talented person to fulfill? Did they have a say/input into this vision? If the answer is no, there's work to do -- and fast.
  9. Lack of Open-Mindedness. The best people want to share their ideas and have them listened to. However, a lot of companies have a vision/strategy which they are trying to execute against -- and, often find opposing voices to this strategy as an annoyance and a sign that someone's not a "team player." If all the best people are leaving and disagreeing with the strategy, you're left with a bunch of "yes" people saying the same things to each other. You've got to be able to listen to others' points of view -- always incorporating the best parts of these new suggestions.
  10. Who's the Boss? If a few people have recently quit at your company who report to the same boss, it's likely not a coincidence. We'll often get asked to come in and "fix" someone who's a great sales person, engineer, or is a founder, but who is driving everyone around them "nuts." We can try, but unfortunately, executive coaching usually only works 33% of the time in these cases. You're better off trying to find another spot for them in the organization -- or, at the very least, not overseeing your high-potential talent that you want to keep.

It's never a one-way street. Top talent has to assume some responsibility as much as the organization. However, with the scarcity of talent -- which will only increase in the next 5 years -- Smart Organizations are ones who get out in front of these ten things, rather than wait for their people to come to them, asking to implement this list.

Next time, we'll cover the Top Ten Reasons Why It's Usually Better for Top Talent to Stay at Larger Companies... who are hopefully following the advice laid out above.

PS. Thanks to Jason for loan of the image above.

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Friday, September 15, 2006

The Problem at HP Wasn't Dunn, but the Board

HP has been in the news for all the wrong reasons in the past 3 weeks. Our focus has gone away from the impressive rise in its stock price since Mark Hurd's appointment as CEO; as quickly as Dell's stock price and corporate reputation has dropped, HP's has risen.

We've previously spoken out on how Hurd's qualities as a leader have -- in many ways -- been the perfect antidote to the erstwhile Carly regime. And, yet, we've had to endure the titilating but disturbing news of the "pretexting" actions carried out down the line from the board's decision to purge a "leak" from within their midst.

The mainstream press commentary on this whole sorry episode has focused primarily on either (1) the disregard for privacy exhibited by the board's actions, (2) whether Dunn should have left sooner, or (3) the lack of a full apology by the board or Hurd to the events. However, little, if any, attention has been paid to the composition of the HP board itself -- the entire group responsible for the actions that have drawn such criticism.

The fact is that the entire HP board deserves an overhaul after this mess. Nell Minow -- corporate goverance critic -- calls the board "dysfunctional" and she's right.

Here's a quick run-down of the players (from HP's site):

Lawrence T. Babbio, Jr.

Director since 2002Mr. Babbio has served since 2000 as vice chairman and president of Verizon Communications, Inc. (formerly Bell Atlantic Corporation). Mr. Babbio was a director of Compaq from 1995 until its merger with HP in May 2002. Mr. Babbio is also a director of ARAMARK Corporation. In 1997, he was elected president and chief operating officer of Network Group and chairman of Global Wireless Group of Bell Atlantic.

Sari M. Baldauf

Director since 2006Ms. Baldauf served as Executive Vice President and General Manager of the Networks business group of Nokia Corporation ("Nokia"), a communications company, from July 1998 until February 2005. She previously held various positions at Nokia since 1983. Ms. Baldauf also serves as a director at SanomaWSOY, F-Secure, the Savonlinna Opera Festival and on the Global Board of the International Youth Foundation.

Patricia C. Dunn

Director since 1998Ms. Dunn was named non-executive chairman of the board of directors of HP in February 2005. A member of HP's board since 1998, she previously served as chairman of the audit committee. Ms. Dunn was elected vice chairman of Barclays Global Investors (BGI) in 2002 and served as its co-chairman, chairman and chief executive officer from 1995 through 2002. As CEO of BGI, she directed its growth into new global markets for the firm's core investment capabilities and expanding its offerings into new product categories. Ms. Dunn advises on strategy and key business issues for BGI. She joined the firm's predecessor organization, Wells Fargo Investment Advisors, in 1978. She also serves on the advisory board of the UC Berkeley Haas School of Business, as well as the conference board's Center for Corporate Governance, and serves as the director and a member of the executive committee of Larkin Street Youth Services in San Francisco.

Richard A. Hackborn

Director since 1992Mr. Hackborn served as HP's chairman of the board of directors from January 2000 to September 2000. Prior to retiring from HP in 1993 after 33 years of service, he held several top management positions at the company. From 1990 until his retirement, he was responsible for HP's PC and personal information product business. His leadership and design engineer background resulted in the integration of HP's early minicomputer and high-frequency test instrumentation businesses. In 1979, Mr. Hackborn served as general manager and then vice president of the printing business, where he was responsible for the development of key HP printing technologies, such as inkjet and laser printing, and for the design and manufacture of non-impact print technologies.

John H. Hammergren

Director since 2005Mr. Hammergren has served as Chairman of McKesson Corporation since July 2002 and President and Chief Executive Officer since April 2001. From July 1999 to April 2001, Mr. Hammergren served as Co-President and Co- Chief Executive Officer.

Mark V. Hurd

Director since 2005Mr. Hurd became chief executive officer and president of HP, and joined HP’s board of directors, effective April 1, 2005. Mr. Hurd served as chief executive officer of NCR Corp. from March 2003 to March 2005, and as president from July 2001 to March 2005. From September 2002 to March 2003, Mr. Hurd was the chief operating officer of NCR, and from July 2000 until March 2003, he was chief operating officer of NCR’s Teradata data-warehousing division. Mr. Hurd also served as executive vice president of NCR from July 2000 through July 2001.

Robert L. Ryan

Director since 2004Mr. Ryan served as senior vice president and chief financial officer of Medtronic, Inc., a medical technology company, from 1993 until his retirement in May 2005. He is a director of UnitedHealth Group.

Lucille S. Salhany

Director since 2002Ms. Salhany founded JHMedia, a consulting company, and has served as its president and chief executive officer from 1997 to 1999 and again since 2002. Ms. Salhany has consulted for such clients as Macy's, NASA and Chris-Craft Industries. From 1999 to 2002, she was president and chief executive officer of LifeFX Networks, Inc. Ms. Salhany was a director of Compaq from 1997 until its merger with HP in 2002. She is also a director of Boston Restaurant Associates and a trustee of The Hillside School and Emerson College.

Robert P. Wayman

Director since 2005Mr. Wayman has served as chief financial officer of HP since 1984 and as executive vice president since 1992. Mr. Wayman served as interim chief executive officer from February 2005 through March 2005, and re-joined HP's board of directors in February 2005. Mr. Wayman had previously served on HP's board from 1993 to 2002. Mr. Wayman is a director of CNF Inc. and Sybase Inc. He also serves as a member of the Kellogg Advisory Board to the Northwestern University School of Business.


Here are some facts about the board today. 33% of the Directors today have career IT/PS experience - 3 of 9. However, all 3 of these people are HP "Insiders" - Hackborn and Wayman used to work for HP and Hurd is, of course, now Chair, CEO, and President. I have nothing against insiders serving on the board, but it would be ideal to have some other points of view on the board from the industry but outside the HP "way." While McKesson, Medtronic, and Verizon are big companies, can the growth strategies from these very different industries be applied within HP's portfolio of industries?

There are 2 former directors from Compaq on HP's board: Ms. Salhany and Mr. Babbio. But, they cannot give industry advice. Being a director is not being an operator and vice-versa; I will trade a boatload of "independent" directors (no matter their pedigree) for a handful of directors who are former operators from successful companies within the same industry any day of the week. The role of directors is to monitor and advise management, but how can you effectively do this if you don't "know" the industry?

And HP is dead wrong to give Mark Hurd the "Chairman" title. Pattie Dunn correctly was dismissed for her role in the scandal, but she served an important role on this board as a "non-executive chair." HP sought to provide a counter-balance to Hurd's new power on the board with his additional title by naming Dick Hackborn as "designated lead independent director."

Dick has been a director with HP since 1992. However, he was the strongest voice who pushed the board to appoint Carly Fiorina as CEO in late 1998. George Anders chronicles Hackborn's choice of Carly in his 2003 book "The Carly Chronicles." Here's a particularly interesting passage from Fast Company:

...Fiorina emerged as one of four finalists for the job. The crucial interview would be with Richard Hackborn, a key director and retired HP executive who had built the company's enormously successful printer business. They met at Chicago's O'Hare Airport, at a restaurant decorated like an imitation speak-easy. Within minutes, they were talking about HP more bluntly and more affectionately than either had expected.

Hackborn guided Fiorina through HP's business challenges that needed fixing: The personal-computing division was acting as if fast-charging rival Dell Computer Corp. didn't exist. The sales force was tripping over itself. The company was losing ground to younger rivals, such as Dell, Lexmark, and Sun Microsystems, which irked Hackborn greatly. "We're in danger of losing everything that made this company great," he said. Fiorina listened carefully and explained her work at Lucent, where she had built an industry-leading sales force. She had come to the lunch regarding Hackborn as the company's Yoda: the elder figure of supreme respect and the true decision maker in the search for HP's new CEO.

Several hours into the meeting, Fiorina began speculating about who should be chairman if she became CEO. She wanted some wise-uncle support early on. Departing CEO Platt had signaled his desire to remain chairman, and she thought he could help. But she quickly realized that Hackborn didn't like that idea. At that moment, an idea popped into her mind. Looking at Hackborn, other people might have seen a wrinkled retiree with sunken eyes and white hair. She saw something different: a special counselor. Rather than get tangled up in a Platt conversation, she looked at Hackborn and said, "Actually, Dick, I think you ought to be chairman."

The idea startled Hackborn. He had been seeking to wind down his commitments to HP. But as he and Fiorina continued talking, he warmed to the idea. When their meeting ended and Fiorina headed toward her plane, she told herself, "I've got him hooked!"

Soon afterward, Hackborn briefed the entire HP board on his chat with Fiorina. "I could see he was dazzled by her," fellow director Patricia C. Dunn recalls. "He was really excited about her vision for the company. She had a feel for the company's strengths and weaknesses. It corresponded with his feel." Hackborn expressed mild concern about Fiorina's lack of a technical background, but that wasn't a top-priority worry for him. "We may be getting one of the top two or three CEOs of our generation," Hackborn declared. "She could be the next Jack Welch."

And, so it goes. Carly's gone, Tom Perkins is gone, George Keyworth is gone, Pattie's going (in January), Mark's getting a promotion, and Dick will assume an elevated role within the board. Would this board still be in tact if HPQ's stock had not jumped 75% since the dawn of Hurd? It doesn't deserve to be, no matter the current success the organization is enjoying. HP's shareholders deserve better.

On the day it was announced that the board would be reshuffled, Tom Perkins -- who has been a strong voice in the HP boardroom, up until he resigned over the "pretexting" earlier this year -- said: "This too shall pass." Alas, Tom, I fear it will; and, in 5 years, HP's board will not be all that different from how it looks today.

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Monday, September 11, 2006

It's All About Me

For those of you who asked, here is a link to the previously mentioned, often discussed, but not so commonly read paper by Chatterjee and Hambrick: http://jacksonleadership.com/pdfs/Narcissistic_CEOs_05-04-06_ASQ.pdf .

Many thanks to Don for so promptly sending it me to share with the Breakout Performance community.

The title says it all: "It's All About Me: Narcissistic CEOs and Their Effects on Company Strategy and Performance." It's been recently submitted for publication in Administrative Science Quarterly.

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Sunday, September 10, 2006

Narcissistic CEOs

My doctoral advisor from a few years back, Don Hambrick, has -- it seems -- struck a nerve with some new research. With Arijit Chatterjee -- a doctoral student at Penn State University -- Don has written a new working paper (I don't believe it's been published yet) titled: It’s All About Me: Narcissistic CEOs and Their Effects on Company Strategy and Performance . Don always has had a gift for naming phenomena with colorful words and picking great paper titles.

I went on Don's and Arijit's websites to try and download the paper to read myself with no luck. However, Don was kind enough to send me a copy. To read it, go here. However, in the blogosphere, reading the actual paper before commenting is not required. At least one person read the paper (I hope): Francesco Guerrera in the Financial Times in an article a few weeks back titled "Forget the salary packages, look at the size of their egos." (For more coverage, see the Forbes article here, and the Economist's take here.)

The authors counted the number of times a CEO used the word "I" in their annual letters to shareholders; they looked at the length of their entries for their "Who's Who" bios; and they looked at the size of their photos in the annual reports. (You have to give Don and Arijit a 10 on originality for their measures.) All 3 positively predicted that these CEOs would take larger strategic risks. Risks can be successful and also not so successful. The point of the research is that bigger egos take bigger risks.

The comments in the blogs have been more negative than positive. Leslie Gaines-Ross called it "CEO Bashing." Richard Edelman also chides the professors and moreso the FT editor for urging CEOs to be bashful. He (and Ms. Gaines-Ross) are essentially saying that CEOs should always swing for the fences -- else, what great things would be accomplished in this world? Ian Griffin is more encouraging of the advice that CEOs should be wary of letting their egos get outsized. He offers up the CEO of BASF, Jurgen Hambrecht, as a better model of a CEO; more "conductor," less "rock star."

I think the flaw in the criticisms is that they equate the suggestion/advice of reigning in the egos as being tantamount to taking no risks. After all, who wants a Churchmouse CEO? I believe Don would be the first to say all CEOs must take risks. That's what they're hired to do: review alternatives and make strategic choices. Every choice or non-choice is a decision and risk. However, you can take risks with a sense of humility. It's the organization and team driving it that is the star -- not you. What's more, Don's research here, as well as research done by his proteges Syd Finkelstein and me have shown that "authentic" (read: humble and easy for others in the organization to relate to) leaders' organizations are more successful (with much less risk of failure) than "celebrity" leaders' organizations.

For every Carly, there will be a Mark Hurd to point to; for every Steve Jobs and Richard Branson (cowboys who went out and created empires), there will be a Michael Eisner and Al Dunlap. Take risks, change the world, but keep eating your lunch in the company cafeteria.

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Sunday, September 03, 2006

Carly's Biggest Shortcoming

Carly Fiorina has taken her lumps. The former head of HP was once touted as the most powerful woman in US business -- and perhaps the world. She was pried loose from Lucent -- back when Lucent was a high-flier, pre-bubble -- to take over HP, at the time, seen as a lumbering Giant in need of some "new economy" fairy dust. She brought glitz, she brought ink, and (see the attached photo) she even brought a little celebrity (that's Gwen Stefani helping make HP digital cameras cool), but in the end her tenure can only be marked as an ignominious failure.

There are many lessons to be leared from her time at HP. However, the most important one is the Power of "Authentic Leadership."

One of the most critical aspects we have found in our research linked to long-term increase in shareholder value is a CEO who embodies "authentic leadership." That is, the people who actually make the organization successful -- often far away from the executive suite -- can relate to their leader(s). With Carly, from Day One, there was a gulf. Whether intentional or not on her part, she oozed self-importance. From her Hilary Clinton-esque wide lapels and power suits to the way she walked the stage at all the big trade shows with her flashy head-mic, you wouldn't expect to run into her at the Mountain View Starbucks. She had the air that she was always running late to meet some head of state or speak at Davos -- as opposed to running the business. This bred enormous disenchantment with the HP employees and - ultimately- the board of directors.

No executive or CEO fails alone. There is blame to be shared -- just as credit should also go to others in times of success. The board is the one who hired Carly; and they made the final decision to let her go. They surely forgot about the importance of "Authentic Leadership" at the time of hiring. Going back to then, they wanted to get a little bit of sizzle into HP's stock; and who couldn't have been impressed by Lucent's success to that point? Carly was able and more than accomplished looking over her CV to that point. How many people, in retrospect of a bad hire, have later said: "He/She looked so good on paper"?

They forgot to delve into whether "authentic leadership" was an issue for Carly. But they didn't when it came time to choose her successor. Mark Hurd is something of an anti-Carly. Quiet, unassuming, from Dayton! He's not the star -- it's the organization, which is to say the employees. I talked to some HP employees a few weeks ago and their relief under the new regime is palpable.

For execs and board members, the message is clear: CEOs better be able to connect with their people, or they won't stay connected to their board.

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