Leadership P. 10

Long-term research conducted with companies such as ABB and Lufthansa has helped the authors identify four organizational energy zones that, harnessed properly, can provide a powerful boost for achieving strategic goals. The researchers offer insight on selecting the type best suited to a company's culture and its leaders' personal style. They find that analytical approaches to management are increasingly incorporating a greater understanding of the major role that emotions play in corporate behavior. Today's challenge for leaders, the authors say, is to ensure that the company's vision and strategy capture employees' excitement, engage their intellect and fill them with urgency for action taking. First, they show that companies operating in what they call the aggression zone (responding to a threat) or the passion zone (responding to an exciting goal) are more likely to be successful. Companies in the low-energy comfort zone coast dangerously on past success, and those in the resignation zone have nearly given up. Second, they describe two strategies for unleashing organizational energy and the circumstances that indicate which to use. Finally, they point out ways to avoid common energy traps. Without a high level of energy, the authors contend, a company cannot achieve radical productivity improvements, grow fast or create major innovations. The researchers give examples of enlightened managers who are focusing on unleashing that energy and are leading their companies to outstanding performance.

Evolving a global approach to corporate distress is a difficult challenge, says the author, in part because codes vary internationally, reflecting fundamental differences in approaches to bankruptcy and attitudes about financial recovery. The U.S. approach favors rehabilitation as the way to serve creditors and restore value, whereas European nations lean toward liquidation. The author, who has worked with troubled companies in a variety of roles, describes how practitioners abroad are developing new, integrated approaches. Under the "light touch" approach, for example, a court-appointed administrator comes to agreement with the incumbent management team on operating protocols and delegates limited authority to it under administrator supervision. Thus, a more flexible, pragmatic approach is evolving that could represent a breakthrough for the global business community. To capitalize on such trends, the author, there are two additional strategies that could help establish common ground between the European and U.S. systems. The first is early intervention, which could make a difference in Europe and in relatively simple cases of corporate distress. However, in more complex situations, especially those that involve a bankruptcy filing in one or more national jurisdictions, a technique that is increasingly popular in the United States could be useful -- the retention of a "chief restructuring officer." Reporting to the board of directors rather than to a company's existing management team, a CRO is charged with developing and executing a plan to restructure the company's finances and/or operations. According to the author, the involvement of a CRO might well increase the likelihood of successful outcomes when rehabilitation is attempted with Europe-based companies, in part because many European practitioners lack experience in restructuring. With the various regulatory and attitudinal changes taking place across Europe, the author contends that a viable common-ground approach that seeks to maximize enterprise value is evolving -- to the benefit of companies, creditors and economies.

Leadership consists of opposing strengths, but most leaders overdevelop one strength.

Many companies have embraced the notion that to operate effectively in today's economy, it is necessary to become a knowledge-based organization. But few truly understand what that means or how to carry out the changes required to bring it about. Perhaps the most common misunderstanding is the view that the more a company's products or services have knowledge at their core, the more the organization is, by definition, knowledge based. But products and services are only what are visible or tangible to customers -- they're the tip of the iceberg. Like the iceberg, most of what enables a company to produce anything lies below the surface, hidden within the so-called invisible assets of the organization -- its knowledge about what it does, how it does it and why. In the course of working with more than 30 companies over the past eight years, the author found that a knowledge-based organization is made up of four elements. Each one forms a basis for evaluating the degree to which knowledge is an integral part of the organization and the way it competes. Executives who understand how the four elements interact will be able to start changing their companies to take advantage of the intellectual assets hidden below the surface.

A trend toward fewer managerial layers may be a response to technological and environmental change.

Dispelling the notion that today's business milieu is one of unremitting change, Huy and Mintzberg urge managers to realize that we perceive our environment to be in constant flux because we tend to notice only those things that do change. While conceding that some important changes have taken place in recent decades, they point out that stability and continuity actually form the basis of our experience, providing the contextual meaning of change. And because many things remain stable, change has to be managed with a profound appreciation of stability. Accordingly, there are times when change is sensibly resisted; for example, when an organization should simply continue to pursue a perfectly good strategy. Having acquired in-depth familiarity with many organizational-change situations (some gleaned from their experiences as consultants or when working in managerial capacities, others as part of research projects to track the strategies actually used by companies over many decades), the authors present a framework in which pragmatic, coherent approaches to thinking about change can be explored. Although a lot of attention is focused on the type of change that is imposed dramatically from the top, Huy and Mintzberg believe that this view should be tempered by the realization that effective organizational change often emerges inadvertently (organic change) or develops in a more orderly fashion (systematic change). Because dramatic change alone can be just drama, systematic change by itself can be deadening, and organic change without the other two can be chaotic, the authors argue that they must be combined or, more often, sequenced and paced over time, creating a rhythm of change. When functioning in a kind of dynamic symbiosis, dramatic change can instead provide impetus, systematic change can instill order, and organic change can generate enthusiasm. The authors illustrate their framework with older and newer examples, saying that this highlights another crucial point: The problem with change is the present. Today's obsession with change tends to blind managers to the fact that the basic processes of change and continuity do not change.

Is energy truly related to performance or learning in organizations? And how is it created?

Organizations, like people, have essential natures & #8212; defined by their formative experiences, their beliefs, their knowledge bases and their core competences & #8212; which may remain tacit and unquestioned until some event, such as a new strategy or a radical shift in the environment, makes an old identity obsolete. A disruption in a strongly anchored identity can be fatal, unless managers can align their company’s identity better with current business conditions. Hamid Bouchikhi, of France’s ESSEC Business School and John R. Kimberly of the University of Pennsylvania’s Wharton School note that while the “identity trap” threatens every organization, escaping a restrictive identity is possible. They identify two ways enterprises do this successfully & #8212; through evolution (a gradual change in their strategic and organizational layers) and revolution (a change that bursts up through companies’ outer layers). Through field-based and clinical research in a variety of industries and companies, including Moulinex, Polaroid, Groupe Danone and Aventis, the authors have developed an “identity audit” to help managers learn to recognize the conflicts and initiate identity change to make their companies more adaptive. By regularly assessing how well their identity fits with current business conditions, companies can rethink their identity before it becomes obsolete.

Why do motivated managers often fail to follow through? Because motivation is not enough. Superficial and dependent on incentives, motivation gives up in the face of serious obstacles. For purposeful action taking at work, managers must engage a more powerful attribute, their willpower. The best already do, crossing a personal Rubicon to deep commitment. How that happens is the subject of studies by professors from the London Business School and the University of St. Gallen. The researchers find that managers commit for highly individual reasons but that five strategies can help enterprises create the right environment. The companies studied included large ones such as ConocoPhillips and Lufthansa and small ones such as Micro Mobility Systems of Switzerland. The managers who achieved their apparently impossible goals had in common an intense inner struggle to commit. Once their willpower was engaged, they were able to deal with setbacks and persevere. The best way to build persistent organizational commitment is bottom-up, on the foundation of personal ownership of and commitment to specific initiatives and goals. In the world of mobile employees, frontline entrepreneurship and constant, unavoidable organizational restructuring, corporate leaders must develop that kind of commitment if they want to see action and follow-through in their companies.

Companies have much to gain by actively touting their human resources successes. So why don't they?