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Spotlight oN iNFlUENCE
How Experts Gain Influenceto increase their impact, functional leaders should develop four specific competencies. by Anette Mikes, Matthew Hall, and Yuval Millo
Artwork Jessica Snow Board Game, 2011, acrylic on panel 18" x 18"
Copyright 2013 harvard Business sChool puBlishing Corporation. all rights reserved.2 harvard Business reviewJulyAugust 2013
Spotlight on influenCe
Anette Mikes is an assistant professor in the accounting and management unit at harvard Business school.
Matthew hall is a reader in accounting at the london school of economics.
How Experts Gain InfluenceTo increase their impact, functional leaders should develop four specific competencies. by Anette Mikes, Matthew Hall, and Yuval Millo
n 2006 the risk management chiefs of two British financial institutionswell call them Saxon Bank and Anglo Bankwere in similar situations. Each reported directly to the CEO and had, in theory, the same influence in their organiza-tions. But by 2011 Saxons risk manage-ment group, unified around a common purpose, was deeply engaged in critical work throughout the bank, while An-
glos, divided into two specialized and loosely con-nected groups, had little visibility outside specific areas of expertise.
Our close study of these two banks offers lessons for other functional experts in search of influence, from management consultants and internal auditors to HR and marketing executives. We have identified four competenciestrailblazing, toolmaking, team-work, and translationthat help functional leaders or groups in any organization compete for top man-agements limited time and attention, and ultimately increase their impact.
Saxon and Anglo werent twins: Saxon focused on consumer lending in a geographically concentrated,
Yuval Millo is a professor of social studies of finance and management account-ing at the university of leicester, in the united Kingdom.
mature, and competitive market and was therefore seen as risk-averse. Operating functions, including a relatively large risk management group, were cen-tralized. Anglo focused on riskier corporate lending in geographically dispersed emerging markets. Its risk function consisted of two groups: corporate risk management, dedicated to companywide risk moni-toring and regulatory compliance, and country-level (local) risk management embedded in the busi-ness units, which advised on big deals and lending strategy. Despite those differences, we think the influence-building strategy Saxons chief risk officer (CRO) and her team pursuedthat is, their embrace of all four competenciescould also have worked for Anglos risk managers, had the two groups been able to combine their strengths.
trAilblAziNgfinding new opportunities to use expertise Individuals and functions high in this competency cast a wide net in order to identify and frame issues that top management is not adequately addressing. This gives them a great advantage in the internal competition for key decision makers attention.
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In some firms, the job of risk management is to police the business for compliance; in others, it helps the organization identify uncertainties and convert them into manageable risks. At Saxon, however, the CRO went further. In her initial years at the bank, she made a habit of spending one day a week talking to staff deep in the organization, and her team mem-bers followed suit. They felt that they had to under-stand the banks strategy and the businesses opera-tions because, as one senior risk officer explained,
you cant talk about the risks in the business with-out actually telling the story of what the business is doing. In this way, Saxons risk management group identified several internal and external issues that corporate needed to consider.
Saxons CRO also demandedand was granteda seat at the weekly executive committee meetings and the monthly board meetings, which gave her visibility and a regular opportunity to assert a risk
management perspective in the discussion of im-portant decisions. Moreover, she had direct access to nonexecutive directors, who used her expertise as ammunition with which to challenge top man-agement. As one nonexecutive director commented,
You want to have a really feisty CRO who just tells you the truthone who calls a spade a spade. All those things significantly expanded the groups mandate.
At Anglo, the local risk managers had close re-lationships with business unit managers; a good understanding of specific products, industries, and countries; and the authority to shape the lending portfolios size and composition. They scanned the environment and talked to business generators regularly so as to catch wind of developments that could affect their portfolio risk. But because their mandate was concerned more with revenue growth and credit risk control than with operational effi-ciency, their scanning activity was necessarily nar-rower than that of their counterparts at Saxon. More-over, Anglos corporate risk team was on the lookout for regulatory issues and techniques to ensure com-pliance with capital adequacy standardsnot for new ways to advance risk management throughout the firm.
toolMAkiNgdeveloping and deploying tools that embody and spread expertise Identifying important business issues is only the first step. Developing tools that help corporate-level executives analyze and interpret those issues is an-other matter. The visibility of Saxons CRO in high-level governance forums required her to present her perspective in a distinctive yet accessible language. To do this, she and her group came up with tools such as a quarterly risk report, which was presented to the board.
Toolmaking was often the groups opportunistic response to a perceived issue that warranted further discussion. For example, noticing that the quarterly risk report was prompting forward-looking ques-tions from the board, the group decided to introduce formal future-oriented reporting practices, which in turn led to more new tools: scenario planning tem-plates and early-warning indicators.
Anglos corporate risk team developed many companywide risk tools for regulatory compliance. The managers, recruited from other banks famed for model-based, heavily quantitative risk management, were concerned about the lack of a common risk
Compliance Champions (strength: toolmaking) play an important regu-latory role but do not shape their or-ganizations agendas or actions. their tools reflect mainly their own exper-tise and are therefore not regarded as central to the day-to-day running of the business. anglos corporate risk managers are an example.
Business Partners (strengths: trailblazing, teamwork, translation) gain the ear of decision makers by producing usable analysis and inter-pretation. But influence of this type is limited because it depends on the managers personal involvement with senior executives. anglos local risk managers are an example.
technical Champions (strengths: trailblazing, toolmaking) make their tools so easily understandable and relevant that they themselves are not needed to make sense of the information. Consultants generally fall into this category. this common type of expert does not appear in our two banks.
Engaged toolmakers (strengths: trailblazing, toolmaking, teamwork, translation) develop tools that em-body and disseminate their expertise throughout the firm but ensure that they remain necessary for interpret-ing, communicating, and acting on the information. saxons risk manag-ers are an example.
influential experts We found that individuals who combine all four compe-tenciesengaged toolmakersare best equipped to gain organization-wide influence, but other types of experts, who exhibit only some of the competencies, can still be influen-tial, depending on the structure, strategy, and management style of their companies.
4 harvard Business reviewJulyAugust 2013
Spotlight on influenCe
language and the consequent difficulty of aggregat-ing the banks risks at the group level. Nonetheless, they pushed for the development of advanced tools, such as economic capital models, even though regu-lators allowed (and Anglo had previously adopted) less technically challenging and more user-friendly compliance approaches.
Meanwhile, Anglos local risk managers dis-tanced themselves from this effort. They had their own valuable tools and heuristics for judging the risk of deals and portfolios in their domains, but these were carefully guarded, not disseminated through-out the company.
tEAMworkusing personal interaction to take in others expertise and convince people of the relevance of your own Functions that engage heavily in toolmaking need to enroll supporters and users. One approach is to co-opt people into collaborating on the creation or im-provement of the tools, seeking out their feedback and incorporating it into the design. Saxons risk management group, for example, gave divisional managers early versions of the scenario planning templates. The managers could then discuss them with their senior staff, provide feedback, and see their own influence on the final templates. The risk management group also sought out allies and col-laborators in other functions. For example, the sce-nario planning templates were deliberately attached to a planning tool already used by corporate finance, making it much easier to persuade busy managers to adopt them. The early-warning system benefited from cooperation with the chief economists team and with th