Editor’s note: This is a powerful, inspiring, and enlightening guest post by Elizabeth Haas Edersheim, Ph.D. on great management lessons.
I think Elizabeth’s essence revolves around the idea that she is a “student of management”, so I’ve asked Elizabeth to boil down her best insights as a lifelong student of management.
But first, let me give some more background on Elizabeth so you can fully appreciate what she’s bringing to the table.
Elizabeth has studied, written about, and advised organizations for over 30 years.
Elizabeth holds a PhD from the Massachusetts Institute of Technology’s Sloan School of Management, and she is the author of McKinsey’s Marvin Bower:Vision, Leadership, and the Creation of Management Consulting and The Definitive Drucker: Challenges For Tomorrow’s Executives — Final Advice From the Father of Modern Management.
Elizabeth is a former partner with McKinsey & Company. Following that, she founded New York Consulting Partners, and currently she works with senior executives, with clients ranging from fast-moving young firms, to the largest global non-profits, to Fortune 100 companies.
Her latest venture is ThEME (The Elements of Management Effectiveness). ThEME is an interactive app that helps guide the way to creating agile and effective businesses and nonprofits. It puts the wisdom and practical experience of great management thinkers and practitioners at your fingertips — both the leaders of the past as well as today’s pathfinders. It helps managers highlight individual and organizational strengths as well as challenges, and its integrated framework helps users dig below the surface of issues and spark discussions. It’s powerful stuff.
Without further ado, here’s Elizabeth …
Peter F. Drucker devoted his life to it, and Marvin Bower built McKinsey & Company around it: the principle that organizations are central to every aspect of our lives, and that improving their management is a calling of great value. I’ve spent 35 years as a student, observer, practitioner, and advisor of management—at McKinsey and then my own consultancy, as the authorized biographer of both Bower and Drucker, and as the architect of ThEME, a framework for understanding and improving the elements of management effectiveness.
I’ve learned that organizations are the engines of our society and our lives as individuals. We are born in organizations, supplied by organizations, informed by organizations, educated by organizations, employed by organizations, and ultimately buried by them. Along the way, organizations fulfill our wants and needs, entertain us, help us socialize, govern us, and sometimes frustrate and torment us. Organizations also offer the vehicles and the means for us to contribute our talents to society.
I have also learned several fundamental lessons about effective management. Though much has changed over the past 35 years, as I continue to advise CEOs and their leadership teams, I find that the lessons I’ve learned still apply, many of them more than ever.
Lesson 1: Every Enterprise Requires an Organization-wide Commitment to Common Goals and Shared Values.
Drucker said, “Without such commitment there is no enterprise. There is only a mob.” Without common goals and shared values, procedures and processes are ineffectual; without broad commitment, it is impossible to mobilize people. And the commitment must go beyond what the organization is currently doing; it must embrace a sense of the broader possibilities. The goals must be bold but they must also be within reach. Creating this commitment is a management responsibility. Jim Collins describes the most effective leaders as ambitious first and foremost for the cause, the organization, the work—not themselves—with an iron will to do whatever it takes to realize that ambition.
Once established, values must be lived to stay alive. But as Marvin Bower demonstrated, that is not always easy. He sold his stock to his partners, at a huge financial loss, to reinforce the McKinsey value that the consultancy must remain independent and the Firm must therefore be owned by its partners to ensure that no other agenda drives or informs its leaders’ decisions. When Goldman Sachs went public, Marvin commented that Gus Levy (Goldman’s former CEO) would never have done that. It was not consistent with the firm’s values.
Failure to define clear goals is a recipe for disaster. Mark Fuller, one of the founders of Monitor Consulting, recently reflected on the U.S. failure in Vietnam: “The United States won every battle, but lost the war. Most military historians of the Vietnam War agree on the reason for the defeat: the U.S. military had no strategic doctrine, no clear definition of victory. The same may be said of Iraq.”
“No clear definition of victory.” Without it, how do you know when—or if—you’ve won? How do you know why you’re fighting in the first place? With no clear definition of victory, how do you allocate your resources? Deploy your people? How long do you stick with it, and how do you know when you’ve reached your goal?
Today, Teach for All is pushing the power of shared goals and values to a new level. They are creating a network of independent, international organizations with a shared vision — enlisting their nations’ future leaders to address educational needs. The effort will test whether disparate organizations with shared values can learn from each other and collectively contribute more.
Lesson 2: The Effective CEO Stakes Out a Small Number of High-priority Responsibilities, and is an Active Listener
What makes the CEO’s job big is not an unmanageable number of tasks but rather the two huge responsibilities that fall on every CEO:
- Responsibility and accountability for the performance of the company and the livelihood of all the employees
- Responsibility for the organization as a member of the larger community, with a longer-term view of the impact of its actions.
Given these two responsibilities, the CEO, in Peter Drucker’s words, must “be concentrated, focused, and limited.” The effective CEO:
- Manages his/her time by prioritizing tasks well—and by not doing many things. When Alan Mullaly, Ford’s CEO, was asked to meet with the mayor of Detroit to discuss the city’s economic plan, he responded, “Right now I am focused on Ford. That is the best thing for Detroit.”
- Limits her/his contributions to what she/he is uniquely capable of doing, while fully leveraging and building the strengths of others. As Lou Gerstner pointed out repeatedly when he was leading IBM, “Success requires trust.” He spent his time focusing on how best to leverage strengths of IBM’s people to build a sustainable organization.
ssmart choices about strategic issues, leaving routine decision-making to others, and not making unnecessary decisions. Before making decisions, Chester Bernard, president of AT&T from 1927 through 1938, always would ask: Does this decision need to be made? Does it need to be made now? Am I the only one who can make it? What do I need to know and whose opinion do I need to hear?
swell, learns from it, and constantly integrates the learning into his/her thinking. This may be the most critical skill for a CEO. It broadens the field of vision and helps the CEO balance competing viewpoints in creating tomorrow. For example, when Frances Hesselbein took over and transformed the Girl Scouts of America, she heard some leaders say they wanted to start a program for younger girls, and she heard others
Lack of listening may be the shortfall that most often causes leaders to fail. When Margaret Thatcher stopped listening to the British people, she was no longer effective as a leader and fell out of favor.
As Edgar Schein, a pioneer in organization design, said, “Culture is the other side of leadership.” The CEO’s greatest job is to create a culture—and to motivate others to create a culture—that emphasizes listening, a focus on what is most important, and a concerned with longer-term impacts of the organization’s actions.
Lesson 3. Don’t Be Myopic About Facts, Assumptions, or the Organization’s Potential
Ted Levitt, the recognized father of marketing, may have been the first one to use the word “myopia” within a management context, to indicate that focusing too hard on the facts of what is in front of your face may make management short-sighted and keep leaders from thinking outside the box or seeing the full context of their decisions. For instance, Levitt talked about the railroads being myopic by not recognizing that they were in the transportation business.
With similar concern for an overly narrow focus, Peter Drucker believed that no decision should be made without a dissenting opinion. Dissent, he believed, would surface issues, identify hidden assumptions, and create an internal dialog that made for a better decision and a higher level of commitment to it. Drucker often told of a time when Alfred Sloan, the man who built General Motors, refused to make a decision about adding dealerships because everyone was in agreement about it. When a dissenting opinion was voiced at the next meeting and the resulting issues investigated, it turned out that Sloan was right to have delayed the decision; GM was able to increase discipline and grow its existing dealers. Sloan rarely made a decision by counting noses or taking a vote. Instead he created a full understanding of the issues among everyone involved— a process that requires dissent and dissection. It is an excellent antidote to myopia.
In 1964, Marvin Bower said, “Today, many more leaders fail by finding the right answer to the wrong problem, rather than by finding a wrong answer to the right problem.” That sort of myopia is as common now as it was then—not only in traditional businesses but in not-for-profits and academia. Recently I spoke with Andy Grove, who is involved in Parkinson’s disease research, about his frustration with the myopia of medical research organizations. He was passionate about the need to redefine how research labs interact. Currently, it’s each lab for itself, creating a collective myopia about the potential of leveraging resources across labs. Even the minutest details are not currently standardized, so that research results cannot be shared across organizations and labs, or even across patients. Andy then showed me a pegboard he had designed, with help from Intel, so that progression of the disease could be uniformly measured before decisions were made. It is one way to increase the effectiveness of the research, which is currently being overlooked due to a myopic focus on efficiency. Grove went so far as to say that in medical research, strategic planning often spoils strategic thinking, causing managers to confuse real vision with the manipulation of numbers.
Gary Hamel is currently writing about the biases that come from too-narrow focuses and hubris. He argues, “Companies need new decision-making processes that capture a variety of views, exploit the organization’s collective wisdom, and are free of position-influenced biases.”
Capturing the fuller context of problems
Lesson 4: Investing in People Is at the Core of Effectiveness
Effective leaders are those with the perspective and judgment to leverage the power and creativity of people to contribute to the organization’s results. More than anything else, investing in its people—empowering them, encouraging them to continually learn and raise their aspirations, and facilitating a collaborative culture of mutual respect and humility—is what makes an organization effective.
Peter Drucker believed that democracy won the cold war by focusing on effectiveness—managing and leveraging people well—rather than efficiency. Many feared that dictatorships, right and left, which were focused on government power and scale, would win through greater efficiency. Peter believed that democracy would triumph through effectiveness—harnessing people’s innovativeness and working together in freedom to produce more abundantly.
With a similar view of the primacy of people, Marvin Bower walked away from the opportunity to work with General Motors in the 1980s, because he didn’t think its leadership trusted its employees. As he described it, there were too many good ideas sitting in desk drawers at the research center because the team in Detroit did not want to take any risks. GM engineers were passionate about these ideas, but the leadership was unmoved. This, he sadly thought, was not an organization that was going to survive.
Today, people are more central to the identity of the enterprise than ever before, because so many have moved from doing rote tasks to making decisions that impact at least one customer and the organization’s reputation. Jim Collins, author of Good to Great, describes the most important job today as “getting the right people on the bus.” In practice, however, there is much work to be done on this front at virtually every organization. Across America, less than one in five employees thinks that their boss trusts them. 
Yet practitioners all over the world are moving to prioritize people and collaboration:
- Morning Star Company, the largest tomato processor in the U.S., has no bosses. Morning Star’s organizational vision is to create a company in which all team members “will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others.” It is testing a new model that may be well suited to the seasonal nature of its business.
- One of the few large organizations centered on employees serving customers is Haier, the largest appliance company in the world. Its president, Madame Mianmian, describes
- While CEO of Proctor & Gamble, A.G. Lafley focused on changing the strategic planning process from a financial exercise to a thoughtful conversation about choices. Instead of answering upward—and protecting themselves as they did so—people doing strategic planning were contributing to a meaningful conversation about the customer as a basis for moving the organization forward. Instead of improving existing cleaning products, they saw the need for Swiffer. Instead of narrowing their focus on Oil of Olay’s existing customers, they created the masstige segment and attracted a younger group to the enhanced product. The impact of this change was far-reaching. It will be Lafley’s legacy: engaging a very talented group of employees in everything the business is
People are the effective enterprise’s most important asset. Though many organizations now breezily claim “people” as a value, leveraging and empowering people requires much more than a tossed-off line. Genuine trust, respect, diversity, and collaboration are what make enterprises successful and sustainable.
Lesson 5: Cultivate a Bias toward Action
Sins of omission are much worse than sins of commission.
The first time I heard this expression was in 1989. Henry Kravis of Kohlberg Kravis Roberts used it to describe the kind of companies they wanted to acquire. He prized forward momentum and abhorred the inertia that arises when managers become afraid of the risks that action always carries.
Peter Drucker also valued an action orientation and required it of the executives he advised. After meeting with a client, Drucker would ask the client to send him an action plan. Without an action plan, Peter would not meet with the client again. One such client, the president of a plumbing supply house, pulled from his files every action plan he had written for Peter and said they were the best plans he’d ever constructed and were worth going back to from time to time. One of my favorite of Peter’s expressions is: “Don’t confuse motion with progress. Always ask yourself how can progress happen, what barriers need to be removed.”
Nitin Nohria, Dean of Harvard Business School, expressed it well: “Management is the art of getting things done.” In this day of instant communication, rapid response, and instant action, the phrase has acquired new meaning. Best Buy moved from a has-been to a hot retailer when they began responding instantly to every customer’s tweets. Though the power of social media has made hiding mistakes all but impossible, it also provides great opportunity to those who harness it proactively.
As the pioneer of online retailing, Amazon has always exemplified an action orientation. Last year they undertook eight major distribution innovations, any one of which might have been a five-year plan at another company. For example, they: acquired Kiva Systems for $775 million to reduce order-processing time; increased spending on order fulfillment by $1.3 billion; added two major warehouses in New Jersey to serve New York; and launched a test of 7-Eleven delivery locker service in the Bay Area.
If there were a prize for Bias towards action, Googles’ creation of “people finder” within 12 hours of the Boston Marathon explosives would be my nomination.
For a consultant trying to move a client who is slow to take risks, bold action can be difficult to achieve. When I asked Marvin Bower about the perils of clients’ sins of omission,, he responded, “Yes, but commissions can be done in well-defined ways to maximize the learning and move forward.” I applied that idea to my consulting practice by advocating pilot programs, a powerful mechanism for learning. When we tested a modified scheduling on a line in a print factory, the loudest naysayer became our champion. When a hospital tested formalizing feedback after each operation, the doctors who thought it was a waste of time began suggesting ways to improve the feedback process. If there is an opportunity, or something seems off, define a possible action, write down what you expect, and try it. Inside an organization, the people who try and learn and modify become champions of a new way forward. There is no better way of organizational learning than trying and tracking results.
Lesson 6: Leading is a Balancing Act
“If you never fall off the balance beam, pick yourself up, and get back on, you are not leading and possibly not letting others lead.” When Peter Drucker said this to me, I couldn’t think of a single CEO who viewed his or her job as a balancing act, nor could I think of one who wouldn’t do a better job if he or she did.
What does a leader have to balance?
- Continuity and Change. If you don’t change, you will die. If there is no continuity, you will destroy what you have. Imbalance destroyed Polaroid, which held on to the past; JCPenney’s Ron Johnson failed when he changed everything and sales fell 25 percent in one quarter. The balance between continuity and change was evident in Lou Gerstner’s keeping IBM’s customer orientation and white shirt demeanor while changing its focus from product to service. It was what motivated Alan Mullay to keep Ford’s car-centric culture and eliminate the hierarchical controlling system. It is why T-Mobile’s recent move to change the cell-phone pricing game and still serve its customers the T-Mobile way is an exciting move.
- The Science and Art of Management. Frederick Taylor is associated with the science of management. He is credited with much of the productivity gain of the 20th century and blamed for much of its stagflation as management became too scientific. Management science can become limiting if not balanced with the art of motivating and inspiring people. Peter Drucker is known to have walked out of one of John Maynard Keynes’s classes on economics, saying, “He thinks it’s all numbers; I think it’s all people.” Roger Martin, former dean of the University of Toronto’s Rotman School of Management, recently attributed Warren Buffet’s success to his ability to understand both the science and the psychology of the markets.
- Near-term and Legacy Results. Much of the debate about capitalism today centers on whether we’ve focused too much on the near term. Adrian Woolridge of The Economist maintains, “Shareholder value is a very valuable tool and servant—and a dangerous master. Pursuit of shareholder value is an extreme view. It needs to be treated in a more intelligent way. Many companies are offering guidance quarterly—Unilever, IBM—and are also giving you a longer road map.”
Paul Polman, CEO of Unilever, believes, “Too many CEOs dance to the price for current shareholders. Some optimize short-term returns, which we know how to do; short-termness is destroying the fabric of society. How to balance growth and sustainability? Our conversations with shareholders must be more mature. Have the courage to do it and build trust with your shareholders—don’t dance.
- Division and Integration. Tasks need to be divided and customer solutions need to be integrated. How the pieces are split and come together is a balancing act. Drucker told the story of how the pyramids were built: Each worker was given a task, but when they put the stone in place, they often corrected the positions of other stones so the whole would fit. Marvin talked about how silos develop at organizations and that the language between silos is often a moat of ineffectiveness. At Yahoo, Marisa Mayer brought everyone back to headquarters so the organization would be better integrated; she recognized the need to rebalance.
- Leading and Managing. This is a distinction that neither Marvin Bower nor Peter Drucker cared for. Marvin said, “You can’t manage without leading.” And Peter said, “You can’t lead without managing.” Both felt that separating leadership and management created an artificial dichotomy; instead, you can’t do either without doing both. At West Point, the students get to choose to concentrate on management or leadership, and 80 percent choose management. They know they will lead and will need the management skills to make them effective as leaders.
The imperative to balance not only keeps leaders from extreme action , it also requires reflection and reevaluation. It demands a vision of the larger context as well as the reality of what is before us—and as such helps avoid the myopia that may cause the organization to overlook opportunities.
Things have changed dramatically over the past 35 years——and they’re now changing faster than ever. But I am convinced by what I see each day that the lessons I’ve learned about effective management still apply. The great management thinkers I’ve mentioned here still have much to teach us as students and practitioners, as we continue to learn from the leaders of today.
Elizabeth Haas Edersheim, PhD., a lifetime student of management and former partner with McKinsey & Company, is the founder and managing director of NYCP (www.nycp.com) and the author of “The Definitive Drucker” and “McKinsey’s Marvin Bower.” She is also the architect behind the new leadership App, ThEME, which is available on the web at www.nycp.com or at the App store for the iPad (search “the elements of management effectiveness”).
 John Hagel Deloitte at The Economist Conference on Innovation 2012