The leadership qualities for successful turnarounds
Successfully turning around ailing companies needs more than financial and strategic expertise, according to research from Harvard Business School's Rosabeth Moss Kanter. Report by John Warner.
"Decline causes people to dislike and avoid one another, hide information and deny responsibility - their actions create an environment that reinforces these tendencies and makes rebuilding confidence more difficult. That's what makes turnarounds so hard and leaders who reverse the cycle so impressive." Professor Rosabeth Moss Kanter.
Background to her research
Professor Kanter has studied turnaround situations in organisations with new leaders, at various stages of progress, in business, government, education, healthcare, media and sport. Among the subjects of her study are Gillette (the toiletries multinational), BBC, Seagate (a data-storage company), Invensys (a UK-based production management and rail conglomerate), Continental Airlines, American baseball teams, international cricket teams and South Africa under the leadership of President Nelson Mandela in the 1990s. All displayed similar patterns of decline, recovery and success.
Leadership competency
Before considering the findings of Professor Kanter's research, it is worth reminding ourselves of how leadership is usually positioned in competency frameworks. This will help give a context to the significance of Professor Kanter's findings and help highlight the level of leadership that she considered. It is not intended to trivialise the inclusion of leadership as a core competency in frameworks. Leadership behaviours can be observed in everyone, but they have a scale of magnitude and strategic significance in their execution.
The majority of competency frameworks include "leadership" as a core competency and it is one of the behaviours frequently considered during individuals' performance reviews. The leadership competency may include behavioural descriptions that are intended to encourage and recognise that employees can, and do, take responsibility for many of their own actions and run their own affairs.
For example, members of a project group may determine the day-to-day flow of work and the priorities within the wider parameters of the project's objective. Or the leader of an autonomous production team may decide, in consultation with others, the allocation of tasks and specific team strategies for achieving quality standards and production targets.
In addition, many employers encourage staff to tap into all areas of experience from both their past employment and from the world beyond the work environment. David Whyte, in his book The heart aroused, talks about allowing people to "bring their whole self to work", so that they can enrich their work and attain a greater sense of fulfilment. Under such encouragement, employees' leadership skills that are often developed as part of a hobby, interest or through domestic commitments may be applied to their work responsibilities.
Organisations with a culture that allows people to draw on external experience, and trusts them enough to fail as well as to succeed, give employees a chance to recognise their potential, test their ability and fulfil their leadership potential. These skills, however, are quite different in magnitude to the leadership capabilities necessary to turn around an ailing country or business organisation.
The other end of the spectrum
The leadership competencies described in many competency frameworks often start at the lowest end of the leadership spectrum. This ranges from taking initiative for actions rather than waiting to be told what to do, taking the lead by being the organisation's authority on a particular aspect of business, to managing and leading a team, department or division, right up to leading a company.
Turning now to Professor Kanter's research, it has concentrated on the relatively few individuals who are appointed to lead sports teams with a losing streak, tough inner-city schools, run-down communities, ailing multinational companies, "tired" institutions, political parties at a low ebb and nations that require a radical reversal in fortunes.
The competencies necessary to be a successful "turnaround leader" for situations like these have been identified during the research. Their echoes may be found in many competency frameworks but, until Professor Kanter's studies in recent years, she believes the importance of leading a "psychological, cultural and institutional turnaround" had largely gone unnoticed.
Matching up?
To preface her presentation, Professor Kanter pointed out that many of the observations that she has made over the years about leadership have become part of accepted wisdom in business circles. However, this should in no way diminish the impact of the conclusions she draws from her studies of winning and losing streaks and of turnarounds in business and elsewhere.
If nothing else, her findings should raise the question of whether an existing competency framework's definition of "leadership" fully captures the whole range of qualities that an organisation might require.
Frequently, the competencies are defined on the basis of leaders who are in place during a "winning streak". But Professor Kanter's work shows that there are particular competencies associated with leaders who have the ability to take an organisation suffering a downturn and re-energise it. Could the existing or newly appointed chief executive restore employees' confidence in themselves and one another as a first step to regaining stakeholder and public confidence and are the distinctive qualities to achieve this psychological turn-around reflected in the competency framework?
Spiral of decline
In the many organisations studied during Professor Kanter's research, a similar pattern of the fundamental dynamics of decline emerged. Common "organisational ailments" were observed and one problem led to another - creating a culture that makes an already bad situation far worse. She identifies four ailments, namely:
Professor Kanter developed a set of typical behaviours that she found associated with these symptoms, analogous to the negative performance indicators - examples of unacceptable behaviour - that feature in many competency frameworks.
Secrecy and denial
Few meetings being held by senior executives. Denial by managers, to external consultants, of involvement in previous decisions, and refusing to agree with the decisions. Because news is invariably bad, communication from managers to staff and peers is kept to a minimum. Meetings postponed due to work pressures. Invisible walls of secrecy between managers that build up through their isolation. People engage in a widespread pretence to ignore what individually they know already - rather than volunteering an opinion that others do not seem to share.
Blame and scorn
Respect among peers declines as a culture of blame grows. Inability to acknowledge any individual who deserves the greatest respect and who would make an outstanding role model. Fear that plots are taking place to exclude one another from shrinking resources. Accusations by one department that another is putting obstacles in its path.
An atmosphere of "blame others before they have a chance to blame you". Strong departments actively scornful of those that are less successful. "Pointing fingers" and deriding colleagues in other parts of the organisation.
Isolation and avoidance
Executives from different operations or locations rarely meet. Lack of coordinated business decisions, leading to waste and duplication. Competition among isolated divisions and a propensity to perform tasks on one's own, rather than cooperate with others. Reluctance to ask pertinent questions during meetings to avoid angry exchanges. Finding it necessary to instruct managers to attend company social events.
Passivity and feelings of helplessness
Passivity in the face of feeling subject to the whims of more senior executives, frustration with slow bureaucratic processes and fatalistic views about having one's own ideas rejected. Reduction in employee initiative resulting from a culture of fear brought about by constant restructuring. Setting low targets to guarantee that goals are successfully achieved - the "timidity of mediocrity", rather than the "arrogance of success".
The accumulation of past and present actions, behaviours and decisions contribute to a seemingly unstoppable spiral of decline - the "losing streak" - from which recovery seems to be impossible. However, as many are aware and Professor Kanter's research has chronicled in detail, it is possible for organisations to recover given deliberate interventions to eliminate these four ailments.
The path back to success
In here ESRC lecture (see the box for more details), Professor Kanter said: "The only way a leader can reverse a decline is to change the momentum and empower people anew, replacing secrecy and denial with dialogue, blame and scorn with respect, avoidance and turf protection with collaboration, and passivity and helplessness with initiative." Although she did not use the word "competency" in her presentation, it is clear that in all the examples she gave of successful turnarounds, the leaders were displaying definable transferable behaviours.
She observed four common remedies being used in reversing decline:
engendering accountability and respect;
sparking collaboration; and
To illustrate these remedies, she drew on examples from some of the leaders she had studied.
1. Promoting dialogue
Following his appointment, Gillette's chair and chief executive officer, Jim Kilts, announced: "If something bothers you, I want open dialogue [about it]." To ensure transparency and debate, Kilts made public his top team's performance data and set up a website where employees could post questions and expect him to reply.
2. Engendering accountability and respect
On becoming South Africa's first democratically elected president, Nelson Mandela had to heal a nation in which racial groups mistrusted and feared one another. The Truth and Reconciliation Commission allowed people to admit responsibility for past sins, largely without fear of retribution, to build forward-looking relationships. When President Mandela wore the previously all-white rugby team's colours at the 1995 championship match with New Zealand, many people in his country cheered this sign of respect.
3. Sparking collaboration
Shortly after appointment at the BBC, Director General Greg Dyke announced a major initiative "One BBC: Making It Happen". It highlighted the need for actions to cut across divisions and encouraged staff to combine forces to gain new business. To avoid losing innovative ideas, he also introduced football-style yellow cards labelled "Cut the Crap: Make It Happen". (In his introduction to the lecture, Greg Dyke produced one of the yellow cards - which went a long way to ensuring the informality of the evening's events.)
To turn around Continental Airlines, chair and chief executive officer Gordon Bethune saw the need to get warring factions united behind a collective definition of success: on-time arrivals of Continental's aircraft. If the airline could move from the bottom to the top industry group in any quarter, Bethune said, everybody in the company would receive the same reward of $65. Not a large sum, but it took just one month for groups to mobilise across divides to raise performance to the top.
4. Inspiring initiative
Chief executive Rick Haythornthwaite of Invensys told his people: "The days of autocracy are over. You have to do it yourself." Following this challenge, a group of top executives walked out of a strategy conference, booked a separate workroom, and later returned with plans for proposed divestitures. A similar approach at the BBC led to a trainee creating a pilot for a new comedy series that became a big hit: The Office.
Conclusion
In the light of the research, and as a result of the behaviours displayed by successful turnaround leaders, there may be grounds for a renewed look at competency frameworks and, in particular, at the definitions of leadership at senior executive level. As Professor Kanter said: "Turnarounds are when leadership matters most. The true test is whether those being led out of decline gain the confidence that produces victories."
Further information
The Heart aroused, David Whyte, the Industrial Society, 1997.
"Leadership and the psychology of turn-arounds", Rosabeth Moss Kanter, Harvard Business Review, June 2003.
How winning streaks and losing streaks begin and end, Rosabeth Moss Kanter, to be published in autumn 2004 by Crown Books (New York) and Random House (London).
For further information about the Economic and Social Research Council and its 14th Annual Lecture, contact Rachel Blackford, Communications and Information Directorate, ESRC, tel: 01793 413000, email: Rachel.Blackford@esrc.ac.uk .
For further information about Professor Kanter's work, contact Doctor Barry Stein, President, Goodmeasure, tel: (+ 00 1) 617 868 8662, email: bastein@goodmeasure.com .
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Rosabeth Moss Kanter, Professor of Business Administration at Harvard Business School, presented her findings on leadership skills at the Economic and Social Research Council's (ESRC's) 14th Annual Lecture held at the Banqueting House, Whitehall, London, on 3 November 2003. Her lecture, The confidence factor: the dynamics of success and decline in business and nations, was introduced by Greg Dyke, Director General of the BBC, and was attended by more than 250 delegates from industry, academia and government. Professor Kanter has been named as one of the "50 most influential business thinkers in the world", and advises major corporations and governments as well as being a prolific author. Her present work focuses on leadership of turnarounds - how winning streaks and losing streaks begin and end - which she is studying in businesses, sports teams, inner-city schools and countries whose economic fortunes have changed. The Economic and Social Research
Council (ESRC) is the UK's largest independent funding agency for research
and postgraduate training relating to social and economic issues. It
invests more than £53 million each year and, at any time, could be
supporting 2,000 researchers within academic institutions and research
policy institutes. |
