how leaders develop leaders

8/8/2019 How Leaders Develop Leaders

1/21

1

How am I doingas a leader? asksLarry Bossidy, CEO of AlliedSignal in a meetingwith his operatingmangers. The answer is,how are the people youlead doing? Do theylearn? Do they visitcustomers? Do theymanage conflict andinitiate change? Are theygrowing and beingpromoted?

When you retire, youwont remember what youdid in the first quarter of 1994, or the third. Youllremember how manypeople you developed how many you helped havea better career because of your interest anddedication to theirdevelopment. Whenyoure confused about howyoure doing as a leader,find out how the peopleyou lead are doing. Youllknow the answer.

Andy Grove, CEO of Intel:Roger Enrico, CEO of PepsiCo; Jack Welch, CEOof General Electric; andAdmiral Ray Smith of theU.S. Special OperationsCommand agree withBossidy. All are respectedleaders of successfulorganizations thatconstantly outthink andoutmaneuver theircompetitors. Though thoseleaders have been


2/21

2


3/21

3

instrumental in theircompanies success, theyhave also built large poolsof talent. They havecontributed to their

organizations success bypersonally developingleaders at all levels.

Once upon a timeHeres what you would seeif you visited Grove,Enrico, Welch, and Smithleading their businesses.

Intel . In Santa Clara,

California, Andy Grove isteaching Intel managershow to lead in an industryin which the product(semiconductors) doublesin capacity every 18months. In Grovesteaching sessions, hediscusses the role of leaders in detecting andnavigating turbulent

industry shifts shifts thatmany companies fail tosurvive. Why does Grovetake the time to do this?Because he believes thathaving leaders at all levelsof Intel who can spottrends and who have thecourage to act will enableIntel to prosper while othercompanies falter. So,

Grove is dedicated toimploring and encouragingpeople across Intel middle managerssalespeople, engineers, andothers to lead in theirindividual businesses.

PepsiCo . A few years agoin the Grand CaymanIslands, Roger Enrico, thenvice chairman of PepsiCo,woke at dawn to gather his

thoughts. At 8 a.m., hebegan a five-dayleadership program fornine of PepsiCos highest-potential executives. Thesessions went on untilevening, as Enrico taughthis point of view on how togrow a business. Then, heasked participants to comeup with ideas for theirbusiness, facilitating theirdiscussion to help shapetheir ideas. The results of those and other sessionshave been 100 better-prepared leaders and,according to one observer,some of the biggestbusiness ideas thatPepsiCo has had in the pastseveral years.

General Electric . InCrotonville, New York,Jack Welch, CEO of General Electric, isteaching a developmentprogram for some of GEssenior leaders. He asksthem, If you were namedCEO of GE tomorrow,what would you do?In such programs, Welchuses that question toorchestrate a no-holds-barred discussion. He

jousts with participants,and hones their analyticabilities and leadershipinstinct by having them

joust with each other. Healso offers his own viewsand experience. SaysWelch, Ive gone toCrontonville every two

weeks for 15 years tointeract with new[employees], middlemanagers, and seniormanagers. Havent misseda session.

U.S. Navy SEALs. Recently in Coronado,California, Rear AdmiralRay Smith, a Navy SEALsince the Vietnam War,was visiting a graduatingclass of the SEALs six-month selection program,BUDS. Of the 100candidates that enter thiselite program, only 20percent remain to graduate,due to the great physicaland mental demands.Throughout the day,Smith, in his fifties,participated in the samephysical training as theSEAL candidates in theirtwenties. At the end of theday, he talked informallywith them, as someone thathas been where they are, toimpress on them theleadership duties of becoming a SEAL theconduct, honor, andteamwork required of them.

Staggering success

We [the authors]uncovered those best


4/21

4

practices during severalyears of research. Wewanted to combine ourexpertise in leadershipwith the watershed

changes taking place inevery corner of thebusiness world on everycontinent. These changesare so great that theyverocked even the moststable companies andaffected peopleeverywhere.

For the past decade,investors have asserted thatanything short of transformational leadershipwould be dealt withharshly. In fact, they havesuddenly and violentlyoverthrown leaders atpreviously stablecompanies because thoseleaders failed to changeahead of the times.American Express,Westinghouse, EastmanKodak, IBM, and GeneralMotors all changed theirleaders in the hope of recapturing their halcyondays.

Against that backdrop, weset out three years ago towrite The Leadership

Engine: How WinningCompanies Develop

Leaders at All Levels (HarperCollins, 1997). Westarted by looking forwinners in the capitalmarkets companies thathad sustained superior

increase in shareholdervalue. In other words, wewanted companies that hadrewarded their investorswith rising share prices

that consistentlyoutperformed marketaverages. We looked forcompanies as GeneralElectric, Hewlett-Packard,Intel, and ServiceMaster.We also examined somenonbusiness organizationsknown for being successfulin their missions, includingthe Special OperationsForces, a branch of theU.S. military made up of elite units such as the NavySEALs, Army Rangers,and Green Berets. Werounded out our search atFocus Hope an inner-city, not-for-profitorganization in Detroit thatruns one of the mostadvanced job-traininginstitutions in the world.

The long-term success of many of thoseorganizations is staggering.General Electric, forexample, has the worldshighest market value atmore than $175 billion.ServiceMaster hasaveraged a 25 percentreturn to shareholders forthe past 25 years. Intelowns 90 percent of themicroprocessor market,outwitting several smartcompetitors to attain itsdominance. The SpecialOperations Forces deploys

on thousands of missionsin more than 100 countriesevery year. The operationin Haiti in 1994,exemplifies the forces

increasingly complex rolein the worked. In thatdeployment, 1,000 GreenBerets operated in villagesand towns across Haiti,covering 90 percent of thecountry. Their missionwas to ensure the smoothrunning of Haitiancommunities and teachHaitians about democraticgovernment. Thoughproblems still exist inHaiti, the SOF gave thenew Haitian government ahead start on forming aworkable democracy.

Focus: Hope turned anurban area bombed out byDetroits 1967 riots into avibrant economiccommunity. Theorganization feeds 51,000people each month, and itsMachinist TrainingInstitute has 1,500graduates, who came fromthe streets and now havewell-paying jobs.

By studying thoseorganizations, we wantedto show how a companywins by developing leadersat all levels. Midwaythrough our research, wehad an insight that shouldhave been blindinglyobvious: Leaders mustdevelop leaders. In those


5/21

5

winning organizations, wefound that developingleaders at all levels was acritical priority, pursuedwith the same zeal as new

products, new customers,and competitive edge. Inthose organizations,leaders felt it was their jobto develop others, and theydid it personally instead of delegating the task toconsultants or professors.As we examined how othercompanies could replicatetheir success, wedeveloped our own pointof view on why and how todevelop leaders.

Winners are judged bysustained success . Inpublicly traded companiesthat means sustainedsuccess in adding value forshareholders. Thoughmany people would accuseWall Street of beingshortsighted, the stock market is the true measurein the long run of whetheryou are growing a businessor wasting capital.

Winning companies haveleaders at every level .Companies dont dothings, people do. Atsuccessful companies,leaders constantly sensechange, excite others aboutchange, and implementchange faster than theircompetitors. That is whatwe call, the LeadershipEngine a system with all

parts geared to drive acompany forward throughleadership.

The best way to get more

leaders is to have leadersdevelop leaders . At thecompanies we studied,leaders passed on theirown experience to others,who were expected to useit and develop their ownleadership styles.

To develop others,leaders must have ateachable point of view .A teachable point of viewis a leaders opinion onwhat it takes to win in hisor her business and what ittakes to lead other people.In the companies westudied we observed thatacquiring a teachable pointof view involved in-depthpreparation by the leaders.Once they had a teachablepoint of view, they thoughtof creative ways to findteaching and learningopportunities. They triedto turn every interactionwith their people into alearning and teachingevent and often set asidetime to teach leadershipoutside of scheduledactivities.

Leaders create storiesabout the future of theirorganizations . Ateachable point of viewbecomes the basis forleaders to present a

dynamic, compelling storyto others. These storiescreate a case for change, avision of where theorganization is going, and

an understanding of how toget there. Once leadershave a story, they takebold actions that bringabout massive and lastingchange.

Those points are commonsense, and manycompanies and leadersfollow them, or someversion of them. But thegreat companies follow allof them all of the time. Inthose companies, theleadership role of executives and managers isdifferent than at othercompanies. And the roleof HRD professionals isdifferent. (See the box,Are You DevelopingLeaders? To learn moreabout the differences andtheir implications.)

Leaders at all levelsIn slower, more predictabletimes, command-and-control hierarchies werentsuch a bad idea. Theyprovided a simple systemfor consistent decision

making: All questionswere passed up the ladderto the same small group of people, and their decisionswere handed back down.Not in the current wired-together globalmarketplace, pleasing


6/21

6

customers and making aprofit are functions of quick thinking and agileaction.

In the time it takes for aquestion to be passed upthe ladder and a decisionhanded back down, acustomer may have goneelsewhere, or theopportunity may be lost.

Says Larry Bossidy, CEOof AlliedSignal, Everyoneelse in the world is doingthe same things we are.For AlliedSignal tosucceed, it must get therefaster with better-preparedpeople. People ready toinitiate change.

The importance of speedand customerresponsiveness is not new.How Managers CanSucceed Through Speedwas the cover story in a1989 issue of Fortune.But, by past standards, thedegree of responsivenessand speed required now isastounding.

Says Dick Notebaert,chairman of Ameritech,The only differentiator inthe marketplace is speed of action. He says that theonly way to get speed is tohave leaders - peopleprepared to make smartdecision and implementthem efficiently.

The need for quick thinking and instantresponsiveness applies toall organizations. TheSpecial Operations Forces,for example, is replacingthe U.S. militarystraditional hierarchicalleadership style withsomething moreappropriate for the newroles it fills in the world.Soldiers in those units areas likely to be deployed ona crowded urban street asin a foreign invasion force.A young leader confrontedby an angry crowd of Bosnian or Haitian citizensdoesnt have time tocontact his or her superiorfor instruction.

Such soldiers, most underage 30, have to think notonly about specific ordersand the physical safety of their units, but they alsomust consider geopoliticalramifications. An act tomaintain a units safety ora checkpoints securitymay hinder a peacekeepingalliance or result incondemnation from theinternational community.These soldiers often have

to make a decision in ananosecond withoutadvisers, pollsters,politicos, or even a radiothat works.

During the past five years,the military has more thanquadrupled the number of assignments conducted bythe Special OperationsForces. In 1995, thoseforces were deployed onmore then 2,700 missionsin more than 137 countries.In most cases, thedeployments werent thetraditional jobs of warfarebut had to do withprojecting American ormultilateral foreign policy.Consequently the leadersof those special units havehad to redirect leadershipdevelopment toward newtypes of missions in whichleadership at all levels iscritical.

Leaders developingleadersIf an organization needsleaders at all levels, what isthe secret to achievingthat?

Winning organizations aredistinguished from losing

ones by their extraordinarysuccess at teaching peopleto be effective leaders.Great leaders are greatteachers. In organizationswith leaders at all levels,experienced andaccomplished leaders do


7/21

7the teaching. When you

look at history and variousfields of endeavor, you seethats true. Institutions andmovements succeed overthe long term not because

of their core competenciesor use of modernmanagement tools, butbecause they continuouslyregenerate leadership at alllevels. Such leadersreinvent cultures,competencies, and tools atcritical times. Jesus,Gandhi, and Martin LutherKing Jr. understood that.They were strong leaders,but without disciples tospread their missionsduring their lifetimes andafter their deaths, theirlegacies would have beenshort-lived.

One of our favoriteexamples of leadersdeveloping leaders is theChicago Bulls basketballteam. Though manypeople attribute its successto talented athletes, coachPhil Jackson tells adifferent story in his book,Sacred Hoops. Jacksonfelt that player MichaelJordans talent couldnt beimproved, so he focusedhis efforts on makingJordan a true leader of theteam. And it worked. Fiveyears after joining theleague and the same yearJackson became headcoach of the Bulls, Jordanbegan to see his role notonly as a high scorer, but

Are You Developing Leaders?The challenge to haveleaders develop leadershas profoundimplications for the headsof business, linemanagers, and humanresource professionals. Acompanys future is tooimportant to outsource.Yet, when it comes todeveloping leaders, manycompanies rely onconsultants or executiveeducation programs.

For leaders todevelop leaders,executive and managersmust completely re-examine their mostpotent tool theircalendars. They musttake an active role indeveloping theirteachable points of viewand in coaching people.That may involvespending a 100 daysrunning a program, likePepsiCos Roger Enricodid. It may involvewriting books andteaching regularly, likeIntels Andy Grove. Itmay involve usingbusiness forums asteaching events, like Jack Welch does at GE. Or itmay mean seizingteachable moments, likeAdmiral Smith did withSEAL graduates.

Executives, HRDpeople, and others haveto link their initiatives fordeveloping leaders withthe immediate prioritiesof their businesses. Thatmeans committing

personally to developingleaders, making thatcommitment public, andmaking sure others areequally committed. Italso means making surethat leadershipdevelopment programsprovide a rapid return oninvestment. Innovativeprograms, such as theones described in thisarticle, can have animmediate financialbenefit as inAmeritechs case, $700million in cost savingsand revenue growth .Innovative programs likethe one at Shell Oildevelop leaders whileadding momentum to andinvigorating changesalready taking place.

For HRDprofessionals, theres anurgent message: Yourrole in developing leadersmust change. You canno longer be thecontractors that developleaders for other peopleor the buyers of consulting services thataim to do the same. Toooften, those have becomeempty promises. HRDpeople have an incredibleopportunity to help installa tradition of leadersdeveloping leaders.Specifically, HRprofessionals mustidentify key leaders toteach, help them create apoint of view, and designapproaches for them toteach.


8/21

8

also as a leader whose jobwas to raise the level of play of other teammembers. After that, theBulls began their record

run of championshipseasons.

We dont man to suggestthat it isnt possible tobuild a successfulorganization withoutgenerating new leadership at least, successful for awhile. Such autocrats asHarold Geneen at ITT, EdHennessey at AlliedSignal,and Edzard Reuter atDaimler Benz built highlyacclaimed corporationsthrough their own forcefulinitiatives. But they didntsee the need to developother leaders. In fact, theyactively discouragedpeoples leadership efforts.Consequently, theircompanies didnt have theresources to steer themthrough complicated times,and they have experiencedcrises in recent years.

While having a discussionwith a middle manager atIntel, we started to discussIntels success. It was likepushing a button. For 30minutes, the manager laidout a case for why teachingis important and who oughtto teach:

At Intel, we had toughtimes in the late 1980s.That led us to be

conservative in our hiring.For a long time, we grewbut didnt hire anyone.When our sales were aboutthree times what they had

been, we hired morepeople.

In the past three years,weve practically doubledin size. Half of ourmanagers have never beenthrough downsizing. Weare losing some of thehungry, paranoid culture.So, every leader fromCEO Andy Grove toexperienced managers isrequired to teach, and partof their bonuses is basedon whether they do it.

Its not a big part of thebonus, but it was Andysway of saying, This isimportant, and we wantyou to do it. Most dontdo it because of the money[but] because itsembarrassing to get dingedfor not doing it.

All of the guys that teachare busy so, in some ways,they wish they didnt haveto. But they know itsimportant [that] managersthat have been thereteach others. Otherwise,you end up like IBM. Itsteaching was done bypeople that werent leadersor werent even in thecompany. When thingschanged, IBMs seniorpeople didnt know how to

make tough decisions.You can only learn thatfrom people that have beenthere.

Intels culture of leadersdeveloping leaders isntlimited to senior leaders orclassrooms. Even thoughthe middle manager wespoke with had onlyrecently been promoted, hesaw teaching as a big partof his job.He continued: At everyfacility, we haveorientation programstaught by people like me folks that have beenaround a while. We teacha bit about the companyand the culture. I teach aclass on how to initiate andmanage constructiveconflict. The real learning,though, comes on the job.When my people arentconfronting an issue, Iconfront them. I supportthem if thats what theyneed, but I make sure theyconfront [the issue].

When I see a chain of e-mail messages, I knowpeople arent confronting.When I see an e-mail witha big long tail floatingacross my screen, I tellpeople, Ill stay the wholetime in the meeting youneed to have but weve gotto confront this.

At General Electric, Jack Welchs Work-Out


9/21

9

program has been theworlds largest teach-in.More than 200,000 of GEs employees haveengaged in two-to three-

day sessions led by a junior, middle, or seniormanager. The managersteach GEs business modeland tools for teamwork andchange, such as processmapping. They alsolaunch projects designed toreduce costs and practicenew cultural behaviors.

Leaders under fireOther organizations havetheir own ways of ensuringthat leader develop leaders.In the Special OperationsForces, only the best andbrightest people are askedto become instructors. Butevery person that makes itinto an elite unit isexpected to develop other

people.Recently, we spent twodays at Fort Benning,Georgia, with the U.S.Armys First RangerBattalion of the 75 th Ranger Regiment on a visitarranged by Col. DavidAbrahamson, a ranger atthe United States Special

Operations Command.It was during that visit thatwe saw in action a cultureof leaders developingleaders. The SpecialOperations Forces isknown for the complexity

of its missions and itsdetailed rehearsals andpreparations. While atFort Benning, we watcheda simulated mission during

which a platoon entered acompound of terrorists(actually, army personnel)who were well-armed andalso had chemicalweapons.

As the simulationunfolded, we saw that itwas anything but the well-orchestrated ballet weexpected. It was chaos.Such simulations arent, assome people might think,opportunities to becomeperfect in choreographedmaneuvers. Instead,theyre meant to seasonsoldiers to make split-second decisions and risk their lives based in thosedecisions. In other words,the simulations aredesigned to developleaders.

After the mission, a dozenof the platoon and squadleaders gathered at a tentdeep in Fort Benningswooded landscape. Black camouflage still coveredtheir faces. Despite theirfatigue, they met tocritique the operationwhile it was fresh in theirminds.

For two hours, theydiscussed everything thatthey could have done

better in the 45-minuteraid. At the end of thebriefing, a seniornoncommissioned officer,a 20-year veteran,

reminded the leaders of their most importantmission.

Everything we justdiscussed will let us do our

jobs quicker with fewercasualties, said the NCO.But dont forget: Whatgets the job done is bold,aggressive leadership.

Nothing went accordingto plan. We were supposedto face a chain-link fence;we faced triple-strandrazor wire. The enemywasnt supposed to havenight-vision goggles, butthey did, so we werecompromised before webreached the fence. Ourradios were supposed towork; they didnt.

Thats going to happen.But we got it done becausesome men stepped up andmade decisions. When thealpha-squad leader wentdown, his team leaderstook charge. When thecommunication didntwork, the lieutenant didntfiddle with the radio or yellat his communicationsspecialist. He ran aroundto find out what was goingon and gave orders. Whenthe fence turned out to berazor wire, the bravo-squad


10/21

10

leader changed hisapproach andcommandeered two men tohelp him get everyone intothe compound.

When you leave tonight,the NCO told the group,you can and should work with your men to correctthe little things. But beforeyou correct actions,remember to strike abalance. Never doanything to discourage thatbold, aggressive leadershipinitiative.

A teachable point of viewThe idea of having leadersdevelop leaders has beenformulating for years. Inthe late 1980s, Noel Tichyand Patricia Stacey, aprincipal of ActionLearning Associate in Ann

Arbor, Michigan, workedat General ElectricMedical Systems to designits Work-Out program.Later at Ameritech,HaperCollins, and ShellOil, leaders were asked todevelop leaders.

For example, at Ameritechin 1993, 1,000 managers

participated in a program,called Breakthrough, todevelop their leadershipskills. To kick off theexperience, seniorexecutives taught three-dayworkshops to 50 managersat a time. The executives

discussed the threats andopportunities fromaccelerating changes in thetelecommunicationsindustry. They also taught

managers aboutAmeritechs response arenewed focus on growth,a reorganization intocustomerfocused units,and an aggressive drive forcost leadership. The seniorleaders also introduced andhelped people deal with amassive culture change tofocus on customers, toencourage risk taking andinitiative, and to break internal barriers andbureaucracy. Last,managers received tools inteamwork, problemsolving, and changemanagement.

The 1,000 managers werechallenged to return totheir work units and dotwo things: Holdworkshops with theirpeople to explainAmeritechs strategic andcultural shifts and launchaction projects forpracticing new behaviors,such as working acrossorganizational boundaries.

The action projects wereboth learning opportunitiesand a financial benefit, inthe form of $700 millionthrough cost savings ornew revenue.Breakthrough also helpeddevelop the executives and

the 1,000 managers intobetter leaders by makingthem teach and developothers. Senior leadersdeveloped the 1,000

managers. Then, the 1,000managers developed theirstaffs while running theaction projects.

When we integrated thatwork with our research, wemade an importantconnection: The mostpowerful experience iswhen leaders teach theirown points of view. Youcant just hand leaders adeck of slides and tell themto go forth.

For two years, we haveused a particular approachin more than 40 workshopsat organizations such asGE Capital, PepsiCo, theSpecial Operations Forces,Royal Dutch/Shell, FordMotor, and Royal Bank of Canada. In the approach,participants benchmark other companies andleaders, and the y examinetheir own experiences.Then, theyre asked tostate their points of viewon leadership and how towin in their businesses,

The approach focuses onhelping leaders do twothings: Develop ateachable point of viewand create a business-oriented story that islinked to their experience


11/21

11

as a leader. We havehelped leaders developtheir points of view in fourcritical leadership areas:ideas, values, edge, and

energy.Ideas . A business startswith ideas about servicesor products in themarketplace. Those ideaslead the business toproduce and deliver valueto customers. Ultimately,that can be linked tosuccess in the capitalmarkets ( for publiclytraded companies).Leaders must be able toexplain to all stakeholdershow the business succeedsin creating value.

Values . Winningorganizations have leadersthat can articulate valuesexplicitly and shape valuesthat support business ideas.Such leaders avoid usingabstract terms, focusinginstead on operationalvalues that affect thebusiness. For example,GEs Jack Welcharticulates the value of boundarylssness in orderto facilitate speed-to-market, the generation of ideas, and the sharing of best practices. AndyGrove values constructiveconflict because Intelsmarkets move too fast towaste time on wishy-washy feedback.

Edge . Leadership is aboutmaking tough yes-nodecisions. Winningleaders face reality, andthey make decisions about

people, products,businesses, customers, andsuppliers. They dontwaffle. And theyrewilling to make decisionswith imperfect data.

Energy . Winning leadersare motivated, and theymotivate others regardingchange and transition.Leaders must teach peoplehow to energize others,face-to-face and throughlarge-scale organizationalefforts.

Business storiesLeaders with a point of view have views aboutbudgeting, planning,investing capital, and a

host of other things. Greatleaders take a point of view and use it as a springboard to action. First, aleader engages otherpeople by translating his orher point of view into adynamic story. In hisbook , Leading Minds: An

Anatomy of Leadership (Basic Books, 1995),

Harvard professor HowardGardner says that storiesare the basic humancognitive form. Mostpeople think, recall, andcommunicate with stories.

Says Mark Helprin of theboard of editors at the WallStreet Journal, The classicbusiness story is much likethe classic human story.

There is much like theclassic human story. Thereis a rise and fall, theovercoming of great odds,the upholding of principlesdespite the cost, questionsof rivalry and succession,and even the possibility of descent into madness. Wecouldnt agree more.

Leaders take thefoundation of a point of view and build storiesabout beating thecompetition, satisfyingcustomers, and othersuccesses. Ekhard Pfeifferis leading CompaqComputer with a storyabout becoming thecomputer company of thefuture the leadingcompany in wiringtogether the world.Compaq plans to do thatby providing the serversthat run corporatenetworks and the PCs thatenable people to becomemore productive. Forfamilies, Pfeiffer wantsCompaq to be the Proctor& Gamble of new digitalhomes by providing all of the necessary tools forwork, play, andcommunication viacomputers. So, Compaq isinvesting in partnershipwith such companies as toy


12/21

12

and appliances makers tocreate the exciting newproducts.

In another example, Jack

Welchs story is to createthe worlds most excitingenterprise in which ideaswin and people flourishand grow in which theexcitement from their work lives is transferred to theirwhole lives. All of Welchs actions fromdelayering to re-jiggeringGEs portfolio aim togive employees a sense of ownership so they willfeel excited about thebusiness and their work.

We use the term storyrather than vision onpurpose. Organization sthat want to stay ahead of the competition have to actquickly and decisively.That means that leadersmust offer more than avision or static snapshot of where an organizationwants to be. They mustalso foster motivation andaction. They do that bycreating stories.

Leaders stories have theseelements:4 A case for change4 An idea where the

organization is headed4 How it will get there

Based on those stories,leaders take irreversible

actions that transform theirorganizations.

For example, at RoyalDutch /Shell, Tichy and

Stacey worked with thefour-member Committeeof Managing Directors ontransforming the company.The CMD took on thatchallenge when thecompany was at the heightof prosperity. In 1994,Royal Dutch/Shell mademore than $7 billion, up to33 percent from theprevious year. But thecommittee members feltthat the aggressive pace of change in the businessworld overtake thecompany eventually, if they didnt act. Theywanted to change beforethey had to. The CMDneeded to create a storythat would make otherpeople in the company feelthe same urgency tochange. To launch thateffort in July 1995, Tichy,Stacey, and theircolleagues Michael Brimmand Phil Mirvis conducteda two-day, off-site meetingwith the CMD. Thatsession, and several thatfollowed, surfaced themembers teachable pointsof views and stories.

Drawing from their rootsas career executives atShell, the CMD memberssettled on a story thatfocused on the need for

breakthrough performancein an increasinglycompetitive world. Theyspelled out some specificthreats, such as the

growing scarcity of oilsupplies and the increasingpresence of cheap retailoutlets for gasoline thatwere stealing market shareacross Europe. Theydescribed the desiredfuture as Shell being thetop performer and assatisfying the interests of customers, shareholdersand employees. And theydiscussed how they wouldachieve that.To further thetransformation the CMDlaunched a series of intensive workshopsinvolving all of Shellsseparate business. It alsoengaged Shells top 50leaders in an intensedevelopment and changeprocess, bringing themtogether in Amsterdam fora workshop in amagnificent old churchconverted to a conferencehall.

The workshop wasdesigned to shock,energize, and mobilize theexecutives. Chairman CorHerkstroter broke withShell tradition by notopening with a speech.Instead, he dove into atough exercise. He askedeach executive to write aletter of resignation from


13/21

13

SHELLSS HIGH-TEST PROGRAM Jerome Adams, head of ShellOils Learning Center, hashis own leadership story.The Learning Center, Adamsinsists, can never be atraditional managementdevelopment center. It mustalways be a lever for Shellscontinuous transformation.

That means thatAdams creates cutting-edgeprograms linked closely tothe companys businesspriorities. His programsfocus on implementing theShell Business Model acrossits operating companies andenhancing leaders abilities todrive change and engageothers in driving change.

The program forShells top 200 leadersfurthered Adams agenda byissuing a daunting challenge:Participants were not assigned to learn a leadershipmodel. They were there todevelop their own model inthe form of a teachable pointof view. To do that, theyworked throughvarious elements of leadership and thentied them together in astory. The result wasthat they were betterable to lead theirbusinesses and coachothers.

During thethree-day program,participantsworked on eachelement of theteachable-point-of-view model: ideas,

values, edge, and energy.Ideas. Participantscompletedexercisesdesigned todevelop anintellectualframework.First, theylooked at theoutsidebusiness environment andtheorized about major shiftstaking place in markets andwith customers andcompetitors. Then, theylooked inside the company tosee how they could aligntheir businesses accordingly.

Before working ontheir own issues, participantsbenchmarked severalcompanies to see how theyshifted their businessframeworks. One examplewas Compaq Computersshift from producing apremium product toemphasizing cost

competitiveness,market share, andnew markets.Another wasIntels shift to themicroprocessormarket. Theyalso examinedhow LarryBossidy uses acombination of strong ideas and

personal coaching to developleaders by providingdirection about whereAlliedSignal is going andgiving the leaders enoughindependence to lead theirown units. The results of thatloose-tight approach aredozens of better leaders incharge of AlliedSignalsbusiness units and a marketvalue of nearly $20 billion,up form $3 billion in just fiveyears. The benchmarkingwas led by facilitators, whodescribed the actions of suchleaders as Pfeiffer, Grove,and Bossidy.

Values . On day 2,participants saw the frontlines of other organizationsthrough videotapes,watching other leaders tryto integrate their valuesinto their work. Forexample, they saw howmanagers at ServiceMaster

balance their values aboutdeveloping others with thenecessities of running abusiness.

From there, it wastime for the leaders to dealwith their own values.Each reflected on which of their values were most


14/21

14

important to them. Next,they dealt with conflicts,helped by other participantsand the facilitators. Forexample, the leadersstruggled with conflictingvalues on the importance of people and the economicneed for a lean organization.Edge . Next, participantsdeveloped theirorganizational and personalstories, focusing on leadingchange. They examinedseveral academic changemodels, including LewinsUnfreezing-Change-

Refreezing mode; andTichys Three-Act Drama.

The videobenchmarks captured leadersengaged in massive changeprograms, including BillWeiss and Dick Notebaert atAmeritech and the lateMichael Walsh, former CEOof Tenneco. Participantswere challenged to developtheir business, using the

benchmarks and each otherscoaching to develop actionplans. The plans focused onhow each would create asense of urgency and acompelling story, and howeach would take the firststeps toward change.Energy. Even the bestleadership stories are doomedif the audience is unpreparedfor them. Shell, a company

that had been through twoyears of change before theprogram, had its fair share of cynics. To overcome theirresistance, Adams and hisstaff used the final learningmodule to focus on theimportance of leading withpassion.

Adams took an unusualapproach in this part of theprogram. He invitedcommunity and militaryleaders to talk about theirleadership. For example,from inner-city Houston, hebrought a woman that hadsold all of her possessionsand dedicated her life toproviding homes for elderlypeople without shelter.

The participants took away important lessons.Many said, I have 700people and an operatingbudget of three-quarters of a

billion dollars, and Im stillstruggling how to get thisdone. She isnt sure howshell make payroll nextweek, but look at her passionand enthusiasm, and what shehas been able to accomplish.

Adams capitalized onthe contrast in participantsrealization by getting them tohelp each other think abouthow they could foster passion

in themselves and theircompany.As the experiences at

Royal Dutch/Shell, Shell Oil,and Ameritech show, afterleaders create a teachablepoint of view, they must actto bring it alive. So,participants spent the last dayof the program integratingtheir teachable points of viewinto stories.

First, they wrote anannual report for the comingyear, describing what theywere going to do to actualizetheir personal andorganizational stories.Projecting only 12 monthsahead was done on purposeto focus participants on

taking immediate actions.They related their annualreports and stories to eachother in groups of four.

The program endedby exemplifying the lessonthat leaders develop otherleaders: Participants coachedeach other on the content andpresentation of their stories.


15/21

15

the old RoyalDutch/Shell to submit tothe CMD. He also askedthe executives to explainwhy they were resigning.

The group was silent.Then, a few peoplelaughed, thinking it was a

joke. When Herksroterreturned to his chair togather his thoughts, theyrealized he was serious.Everyone began to write.After 20 minutes,Herkstroter asked theexecutives to divide intofour groups, with a CMDmember leading each one,In each group, people readtheir resignations lettersaloud.

That exercise engaged the50 leaders emotionally.Most were 25-yearveterans of Shell. It wasunsettling and eye-openingfor them to have to resignand describe why.Intellectually, it was thestart of them internalizinga story for the case forchange.

Next, the executivesreceived 360 feedback andparticipated in outdoorteam building. Throughoutthe workshop, the CMDand the 50 leaders refinedthe Shell story spelling outhow the company woulduse five business lines tooversee its globalbusinesses. The story set

clear targets for revenuegrowth and return-on-capital, and gaveemployees new tools formeeting the targets.

The CMD and 50 leadersagreed that Shell required ashift in its culture. Thenew Shell, they decided,would reward executivesthat focused externallyrather than internally andthat fostered individualaccountability andinitiative instead of painstaking consensus. Toassist that shift, leaders rantheir own action- learningprograms, and theychanged evaluation andreward systems to reflectnew financial and culturalpriorities.

The story at RoyalDutch/Shell continues toevolve. Each month,leaders teach the story tomore people and propel thechange further .Herkstroter is clear that itsa journey in progress. Hesays, The story reflectsaspirations we know wemay not live up to in everycase, but can feel certainwe should be aimingtowards. The companysefforts are paying off; itearned about $9 billion innet income in 1996.

A teaching cultureIn such organizations asGeneral Electric, the

Special Operations Forces,and Intel, the idea of leaders developing leadersis the way to do business.Other companies face a

challenge in creating ateaching culture.

At Shell Oil, that challengehas been part of a broadtransformation initiated byCEO Phil Carroll. (ShellOil is a subsidiary of RoyalDutch/Shell and operatesindependently within theparent company.)

In 1993, Carroll begunworking with Tichy andStacey. In October of thatyear, Carroll convened athree-day, off-site meetingof his top team, facilitatedby Tichy and Stacey , towork on Shell Oils future.From the outset, theirdiscussions were thoroughand holistic. Carroll andhis team (known as, theLeadership Council) had asense of their place in thecompanys history. ShellOil had been deliveringsubstandard returns. TheLeadership Council feltthat it had to turn thebusiness around or faceirreversible decline. Thecouncil members delvedinto their points of view,debating the external andinternal reasons for Shellspoor performance andwrestled with solutions.


16/21

16

The catalysts forthe new story wasa writing exerciseat the off-sitemeting. To ensure

that everyoneconfronted theissues andcontributed to thedialogue, everycouncil memberworked on hispersonal version of the story. Eachspent and hourwriting a mock Fortune articledescribing ShellOil three years inthe future and howit got there. Then,each read his storyto the entire group. Next, Tichy andStacey helped thecouncil memberscoalesce around acommon story. Inthat story, Carroll and histeam described the ShellOil Company as on a

journey to becoming thepremier company in theUnited States, providingsuperior financial returns,and being a great place towork. Behind thatstatement were detaileddescriptions of how thecompany would get therethrough cultural shifts andnew targets for financialperformances.

The Leadership Councilbrought its story to life

through irreversibleactions. In 1994, Carrollconvened a three-daysession of Shells top 200leaders. He announced theformation of four teamsthat would meet for sixmonths to work onstrategic issues. Later, theLeadership Council begandeveloping leaders to runthe new Shell. Hundredsof managers attendedworkshops taught bysenior leaders and thenreturned to work to spreadthe word and launch actionprojects.

Carroll and histeam alsoreinventedShells

governance andcapitalstructures,working withLarry Selden, afinance professorat ColumbiaUniversityBusiness School,to create theShell BusinessModel. Theylaunchedoperatingcompanies, freeof bureaucraticcentralization.Those companiesare responsiblefor their use of capital andmanage theirbusinesses

independently.

An internal team of 16change agents, theBusiness TransformationTeam, was created to helpShell leaders implementthe business model. Theteam was launched on afast-track-developmentprocess designed by Tichyand Stacey.

By the end of 1995, thestrategic initiatives, actionprojects, and businessmodel were in place.Carroll and his team had


17/21

17

restructured Shell andcreated a new languagearound leadership thatemphasized urgency andchange. For the fiscal

year, Shell Oil delivered toits parent company morethan $1.5 billion in netincome, the highest in 10years.

Its at this stage that a lotof companies and leaderslose momentum. ButCarroll was determinedthat this transformationwould be total and longlasting. He took steps toensure that and, as a result.Shell continued its recordperformance by delivering$2 billion in new incomein 1996, the highest ever atthe company.

One of Carrolls key stepswas creating the ShellLearning Center, whichlike GEs Crotonville, is alever for continuoustransformation at Shell bydeveloping leaders at alllevels. Carroll recruitedJerome Adams fromUSF&G to lead theLearning Center. Adamshad experience developingleaders at West Point,GEs Crotonville, TRW,and USF&G. He quicklysaved Shell tens of millions of dollars byforming a partnership withthe Woodlands ConferenceCenter in Houston to house

the Learning Center ratherthan build a new one.

The Shell storyWhen Adams diagnosed

the situation at Shell Oil,he saw a need to helpleaders develop theirteachable points of viewand stories. Based on hisexperience with otherlarge-scaletransformations, Adamsthought Shell was at acritical juncture. Thoughresults had improved, the

changes were taking a toll.There had been layoffs,and employees wereworking longer and harder.

Says Adams. I had thesense that trust in seniorleadership throughout allof Shell Oil Company hadbeen eroding. Someemployees were caught up

in downsizing, but theperception was that seniorleaders werent [affected.In fact,] though there usedto be 24 people at the top,there were now 10. Butthe [mis]perception had ledto this eroding trust.

In order to support Adamsleadership agenda, we [the

authors] designed aprogram for Shellsleaders. Its dual aim wasto deal with the trust issueand increase the leadersskills as change agents tofurther Shellstransformation. The

program helpedaccomplish that by helpingeach leader develop ateachable point of view.

Shells top 200 seniorleaders gathered, 50 at atime, at the LearningCenter. The three-dayworkshops were facilitatedby Adams and two outsidefaculty, Phil Mirvis andRam Charan. Participantsworked on the elements of a teachable point of view:ideas, values, edge, andenergy. For each element,we attempted to seed ideaswith participants andcompel them to cultivatetheir own points of view.First, they examined theirown experience in thecontext of Shell and theirunits. The facilitatorspresented videotapedbenchmarks of leaders atother companies that hadfaced situations similar tothe one at Shell. Thosevideo benchmarks weretaken from a database thathad compiled during theprevious two years. Thevideo benchmarks featureinterviews and footageshot in internal meetings atthe benchmarkedcompanies, showing theirleaders in action. For theShell workshop, we culledrelevant examples fromthe database. After thebenchmarking ,participants developedsolutions for their own


18/21

18

situations and coachedeach other.

The result was 200 leadersthat developed teachable

points of view and created(or refined) theirleadership stories. Thestories became powerfultools for leadingcontinuous change bydetailing why leaders andthe business needed tochange.

That filled a void for manyleaders at Shell. SaysAdams, Many leaders canuse the Shell businessmodel to say in thelanguage of finance, Hereis the gap between wherewe are and where weshould be. But Adamscautions, That isnt acase for action that toucheseveryone in all parts of anorganization. Our programhelped Shell leaders createa case for action byconnecting with folksdifferently. They did it,Adams says, throughleadership stories thatillustrate the direction of the business and theleaders personal stories.

The program helped Shellleaders with someimmediate changes. SaysAdams, We had recentlycreated six new companiesby making our refineriesseparate entities, eachheaded by its own CEO

and leadership team. Wetold them, You are nolonger a through-putsystem to the gasstation. We want you to

run the refinery as abusiness.

That change required Shellleaders to state theirbusiness cases for action ina way that they hadntbeen asked to before SaysAdams, Many of therefinery CEOs told me thatthe program was a valuablelearning tool for them andhelped prepare them forthat new role. (See thebox, Shells High-TestProgram.)

Several months after theprogram, we conductedinterviews withparticipants. Heres whatwe learned.

To transform a company,leaders need a teachablepoint of view . In the pasttwo years, Shell Oil hasundergone immensechange and the pace isaccelerating. AlanKirkley, CEO of Shellsrefinery near New Orleans,has the job of leading thisnewly independentcompany. To do that, hehas focused on developingand delivering personalpoint of view.

Says Kirkley, One of themore powerful things that

have happened acrossShell is that leaders aretelling more I stories. Itused to be that [we] wouldinsulate [ourselves] from

change. We would talk inthe third person management thinks orthe company wants to.Now, the focus is onleaders personalizing themessage from anintellectual and emotionalstandpoint. By doing that,people are dealing morewith true feelings andbeliefs. We quickly moveto a less superficial levelthat is rooted in reality.

Charles Dunagan, vicepresident of marketing andsales for Shell Chemicals,notes that to lead in hisunit, he was required to putpersonal stakes in theground with his story.

With where we are todayand the amount of changethat has to take place,says Dunagan, we have tointeract in deeprelationships that aresustainable. People haveto have a personal storythat is powerful in terms of true conversations opposedto a one-way exchange.

Developing oneself is thefirst step . A companyneeds leaders at everylevel. At Shell, the 200leaders that participated inAdamss program had to


19/21

19

continue to develop otherleaders. The program gavethose 200 leaders theopportunity to examine thebusiness and their personal

experiences in depth. Italso enabled them todeliver their teachablepoints of view and stories,receive feedback on them,and refine them. Theexperience also gave manyShell leaders theconfidence they needed todevelop and coach otherleaders.

Irv Doty, who leads a unitof more than 100 people,says, I think that I hadbeen perceived as a typicalShell manager in that Icame across as though Ihad all of the answers.When I tried to open upand talk personally aboutan issue rather than sayheres the answer, it waspowerful. It caused me toengage in a dialogue withothers that resulted inmutual learning on allsides. My coachingapproach turned from whatI call, the technicalapproach to [issuesregarding ] transformation,style, and effectiveness.[Now,] I focus more oncoaching people inleadership.

Start with the hard stuff .Developing a teachablepoint of view and a story isa highly personal exercise.

Leaders in the Shellprogram explored issuesabout balancing ones life,and many tied theirpersonal leadership stories

to their personaldevelopment as youths.Though that can be useful,a dialogue has to start fromthis standpoint: We arehere to improve thiscompanys performance.Leadership is the key tothat, and we will exploreall facets of makingourselves better leaders.

Adams says that the Shellprogram was grounded inthe context of the business.This was not personaltherapy [or] developmentfor developments sake.This was development inthe context of furtheringbusiness objectives bymaking people morecapable. We purposefullyfocused first on thequestion, What is thebusiness framework?

Dunagan agrees. Theintroduction to anyleadership story has tocome from the overallbusiness context becausethats where everyone isconnected.

When I told my story, Isaid that we were finishingthird at best. Employeesatisfaction was average.We were preferredsuppliers for a fairly low

percentage of customers.And our financialperformance was sub par.I said that if we continuedto do things the same way,

wed get similar results. If we wanted differentresults, we needed to dothings differently.

For Dunagan, starting inthat context made thetransition to his personalstory easier. For all of us, he says, there is afinancial incentive. Therewards are better if youare number 1 than number5. But more importantly,being on a winning team ismuch more satisfying thanbeing average. Itscertainly important to meto be among winners.

Tough-love feedback iscrucial . Each of themodules in Shellsprogram featured anelement of peer coaching.Participants presentedideas or situations onwhich they wanted advicefrom each other, theirpeers. Everyone was toldto be honest. Though suchfeedback wasnt alwayseasy to hear, many peoplebenefited from it.

Andy Grove has built aculture at Intel that placesa high value on feedback.He points out that itsbetter to share your ideaswith other people at your


20/21

20

company and let themcriticize them. It may hurt,but not as much as whencustomers do it.

Cathy Lamboley, vicepresident of Shellscommercial productsgroup, used the program asa forum to gain insightfrom other leaders aboutsome plans she wasthinking of implementing.

She says, It was useful toget feedback. I talked withpeople offline and duringthe exercises. It gave metime to reflect and benefitfrom the conversations. Iwent back and made somequick moves.

Leaders will developothers if given anapproach . The programshowed participants how todevelop leaders. Thestarting point for each of them was to meet withtheir teams and tell theirbusiness and personalstories. In that contextthey engaged their teams,asking for their reactionsand comments. Throughthat process, the leadersarrived at a common story.Then, they helped theirteams write their ownstories for their units.

Another way Adams beganingraining the idea of leaders developing leadersat Shell was to ask the 200

participants to return tomiddle managementprograms to teach andfacilitate modules onShells transformation. In

those modules, the leaderstold their personal storiesabout why they thought thetransformation wasimportant, what they weredoing about it, and whatthey were struggling with.

At companies in whichleaders develop leaders, akey role of HRD people isto help leaders craft theirteaching approaches. Thatrequires HRD staff to playa different role bycollaborating with theleaders and driving acultural mindset in whichleadership and teaching areintertwined.

A shifting agenda

The agenda for leadershipdevelopment has shifteddrastically during the pastseveral years. The 1980swas an era of radicalrestructuring, spurred bymany mergers andacquisitions, and thedecline of many leadingcompanies. The idea of developing leaders seemed

to fade in the face of fearof the future and thepursuit of quick fixes. Theearly 1990s will probablybe remembered formanagement fads thatemphasized processes andculture over leadership.

Now the central challengefor senior executives is tocreate a company that winscontinuously. Jack Welch,

who has run GeneralElectric for almost 17years and led it tounprecedented levels of success, describes hischallenges as making this100-year-old companyyounger every day. Inother words, while GEchugs along deliveringearnings increases quarterafter quarter, Welch isfocusing on how he canrenew and invigorate GEs200,000 people around theworld.

In that context, most of what has been done inleadership developmentfalls drastically short. Ithas been too rote, toobackward- looking, and tootheoretical. It has rarelybeen tied to a businesssimmediate needs nor has itprepared leaders for thechallenges of the future.Companies that win nowand that develop leaders sothey can win in the futuretake a different approach.Their leaders personallyand actively developleaders. This article hasdescribed companies thatdo that and companies thatare beginning to do that,such as Shell Oil.


21/21

21

Larry Bossidy of AlliedSignal says that no

matter how effective aleader is, he or she has no

idea what kind of change,or how much, a successorwill bring to anorganization. If thats thecase, we should all hopethat we have prepared oursuccessors well.

Eli Cohen is researchdirector at the Universityof Michigan BusinessSchool, 700 E. University,

Ann Arbor, MI 48109.Phone 313/763-4563.Noel Tichy is a professor of organizational behavior and human resourcemanagement and academicdirector of the Global

Business Partnership at the University of Michigan

Business School. Tichy iscoauthor, with Stratford Sherman, of Control YourDestiny or Someone ElseWill: How Jack Welch isMaking GE the WorldsMost competitiveCorporation (Doubleday,1993).

Text and Graphics takenfrom original publicationin Training &

Development , May 1997.

Illustration by JamesEndicott.

how leaders develop leaders

Documents