a conversation with warren bennis on leadership in the midst of downsizing

8/3/2019 A Conversation With Warren Bennis on Leadership in the Midst of Downsizing

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A Conversationwith

WarrenBennisOn Leadershipin the Mitlst ofDownsizing

Interviewed byRichard M. Ho dgetts

W arren B ennis is distinguished professorof business administrafion and found-ing chairman of The Leadership Institute atthe Un iversity of Southern California. H e haswritten 25 books, including the best-sellingLeaders an d On Becoming A Leader, both t rans-lated into 14 languages. In 1993, Addison-Wesley publ ished An Invented Life: Reflectionson Leadership and Change, a collecfion of essaysthat was nominated for the Pulitzer Prize. Inthe same year, Jossey-Bass republished hispath-breaking book Beyond Bureaucracy. Hehas served on the faculty of MIT's SloanSchool of Managem ent where he was Chair-m an of the organizafional studies depart-ment. He is a former faculty member of Har-vard and Boston University, former provost

and execufive vice presid ent of State U niver-sity of New York at Buffalo, and apast presi-dent of the University of Cincinnati. Heserves on the boards of Claremont UniversityCenter, theSalk Institute, and the FoothillG r o u p . The Wall Street journal named h im asone of the top ten speakers on managementin 1993. He is currently com plefing a book forAddison-Wesley, to be released in1997, tha tdeals with the dynamics of six extraordinarygroups, including the Disney Feature Anima-fions Studio, the Manhattan Project, and theoriginal Skunk Works at Lockheed.

The interview was conducted by RichardHodgetts, book review editor for Organiza-tional Dynamics an d a frequent contributor tothis journal.

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W arren, as you know , this is Organizational Dynamics' 25th anniversaryissue. In light of this, how do you think the challenges that are beingfaced by leaders h ave chan ged over the last 25 years?Well, tw o of the most obvious challenges are tho se of dealing with glob-alizafion and galloping technology. However, a third challengeevenmore interesfing in my opinionis the whole area of employee involve-ment, employee participafion, andempowerment . Of course, todaythese are not new ideas. But 25 years ago , the co ncept of work er parfici-

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Has this idea developed the w ay you though t it would?Yes and no. It certainly has progressed from being an esoteric idea to onethat is widely taken for granted . This certainly did no t surprise m e. How -ever, at the same fime, there have been dramafic changes in the envi-ronmentand these have had a significant impact. In parficular, I seethe notion of empo werm ent on a collision course with m any of the ideasassociated w ith down sizing, restructuring, and reengineering.What, in parficular, do you think is accounting for the conflict betweenthese two developments?One of the primary problems is that when you downsize an organiza-fion, reengine er the work, and res tructure the relafionships, you alter theculture dramafically. In particular, the organization's vision oftenchanges. The values of its leaders are altered and the trust of the per-sonnel begins to wane. Everyone starts asking, "What's going on here?"And they start getfing very wo rried abo ut their jobs and future prospectswith the firm.Do think this is more common in small firms than in large ones?No, I think it's comm on throug hout industry. Let me give you an exam-ple. About six weeks ago I was giving a talk on leadership at a Fortune100 firm. Among other things, 1 emphasized some of the tradifional as-pects of leadershipa sense of purpose, the capacity to generate trust,and a bias toward acfion and risk taking. Most of the peo ple in the aud i-ence were in their early 40s. And they listened to me very responsively,taking notes, and paying careful attenfion. However, when I finishedand the quesfion-and-answer period began, there was a very disheart-ening dialogue on the disconnect between my "marvelous ideas" andtheir own reality.So they w eren't totally sold on your c omm ents about effecfive leadership?Well, I think it we nt beyon d quesfioning w hethe r m y ideas were well-founded. What they were saying was that because of today's downsiz-ing and organizafional restructuring, they never know from one day tothe next whether they might have a pink slip in their mailbox. So howdo you generate the necessary trust to lead in an environnient like this?After all, this is a large organizafion w here you w ould th ink peop le's jobsare secure. And the y're not.So you think an o rganizafion's efforts to improv e its compefifiveness bycutting costs and b ecom ing progressively leaner can result in major lead-ership challenges.Absolutely! Wh en tru st declines, people start looking for other jobs; com-

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mitm ent to their current organizafion declines. So how do you create anem pow ered organizafion in a fime of radical reengine ering and layoffs?I'm not sure, but I do think this is a problem that will be with us for an-other decade.But hasn 't it always been like this, i.e., organ izations mee t compefifivepressures and respond by downsizing, cutfing costs, and laying off peo-ple? Are the 1990s so much different from any o ther decade?That's an interesfing quesfion because it forces us to make a historicalcomparison. Are things really that much different now than they werebefore? In my view, they are. In the past, these downturns lasted onlytwo or three years. If you w ere laid off today , you could co unt on gettingpicked u p by som eone else within 24 to 36mon ths on the outside. More-over, when the economy picked u p again, you m ight even get hired backby the very firm that let you go. However, today this no longer h appen s.Organizations are not trimming down in order to meet temporarydownturns in the economy. They are trimming down for the long run.When they let someone go, there is no plan to rehire the individual. Sothe old idea about the "creafive destrucfion of capitalism"which heldthat those who were thrown out of work because of compefifive pres-sures would soon find posifions in new, innovative firms that could sur-vive in this environment no longer holds.In a recent arficle in the Los Angeles Times, you made reference to com-panies today that can generate more output and profit with fewer em-ployees than ever. Is this an example of the new trend to which you'rereferring?Yes. In fact, Charles Handy wrote about a CEO who boasted that hisequafion for success was "half fimes two fimes three equal success." TheCEO was saying that, with half the work force, he could produce twiceas much goods an d g enerate three fimes as much profit. These are im-pressive numbers , but they fail to answer the question: W hat happ ens tothe other 50 percen t of the work force that gets laid off? A nd since no o neknows for sure whether they're going to make the cut, trust and com-mitment of the personnel decline. Everyone's concerned about their ownfate, and the organizafion suffers as a result.So when an organizafion is in a down sizing mo de, even those wh o re-main may not be giving 100 percent?Yes. Because the trust factor, or sho uld 1 say lack of trust, is likely to im-pede their performance. This means that the com pany's intellectual cap-ital is being d iminis hed. So things like ideas, innovafion, invenfions andreinvention are going to be less than they would be under ideal condi-fions. Rather than feeling emp ow ered, peop le feel disem pow ered, fright-ened , anxious, and scared. This will be the major challenge for leaders inthe 1990s and beyond.

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AU of this sounds somew hat om inous. Are there any comparues doing agood job in meefing this leadership challenge?There are, but before talking about them let me point out one o ther dis-parity that is causing problem s for toda y's leaders. It revolves aro und thegoals and purposes of the corporafion and the quesfion, to whom is thebusiness responsible? Many p eople might say the shareholderand noone else. But that overlooks other stakeholders including employees,customers, the com munity, etc. In recent years, however, it seems thatmany corporafions have been run for the sole benefit of the sharehold-ers. Everything they do is to increase shareholder value by driving upthe price of the compan/s stock.Has the fact that insfitufional investors now hold a majority of the stockin most large corporafions helped perpetua te this trend?Absolutely. And because these insfitufional investors are interested in in-creasing the wealth of their holdingsand they have the power to in-fluence top management decisions in this direcfionthey have createda shift away from a stakeholder orientafion to a shareholder mind-set. Thisis wh y you see the em ergence of people like Al Dun lap, former chairmanand CEO of Scott Paper, who sharply downsized the com pany an d thensold it to Kimberiy Clark. He walked away with $100 million, and theshareholders also made out well. However, what about all of the em-ployees w ho lost their jobs as a result?Do you think the fact that senior-level man agers have th e oppor tunity tomake so much money ends up negatively affecfing the trust factor?Sure, and these rewards do n't hav e to be the result of a takeover or someother one-fime deal. Just a few years ago, the average CEO's annual in-come was 140 times mo re th an that of the average worker. Tod ay it's 187fimes more than the average worker. Now this is obscene, because ithelps create an "us vs . them" mentality within the work force rather thanpromoting teamwork. Now, I don't propose paying everyone the same.However, there are ways of prevenfing things from getting out of hand.For example, one company I know does not allow its top corporate ex-ecufives to get a bon us unfil all the w orkers are assure d a 15 percen t in-crease in their profit sharing. If the employees don't get a first cut at apercent of profit sharing, the executives don't get any bonus.But if a company puts greater attention on the long-run developm ent ofits emp loyees, can it rema in competifive in an era w hen so many leadersappear to be mofivated by short-run results?Yes. And there are companies all over the country that are doing just this.Perhaps the best example is Harman International Industries, whichmakes sou nd systems for car radios, com puters , large concert halls, andstadiums. Harman's major manufacturing facility is here in Northridge,California, where they have been able to achieve tremendous increases

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in productivity. In fact, thank s to some of these brea kthr oug hs, they h avefound that they have more people than they need. They could get bywith two-thirds of their work forceand in the short-run they wouldprobably have generated more profit if they did. But they put their peo-ple first, because they believed that this would provide even greater re-sults than dow nsizing and firing employees. The first thing Harm an In-ternational did was to train people so they could get jobs elsewhere inthe company. They then stopped outsourcing many of the elements inthe sound system and began producing them internally. They also be-gan looking at the way they carried o ut operafions and studying ways todo things less expensively and with higher quality. They also began set-ting up discount stores countrywide to sell some of Iheir products thatare not top-of-the-line. Today H arm an sells goo ds to consum ers right offthe rack. As a result, they have gen erated a lot more rev enue a nd, in theprocess, created more jobs for their people.One of the ideas that you often discuss is value-based leadership. Whatdo you mean by this term? Are you saying that a leader's values have tobe in synch with those of the workers and the environm ent?Yes, but let me enlarge on that a bit. There a re tw o aspects of value-basedleaders hip. On e is that the leader has to take into account al! of the stake-h o ld er and not just the shareholders. The individual has to create a bal-ance among these groups, despite the fact that, collectively, they mayhave conflicting objecfives. The other part of value-based leadership isthat there are certain values and morals that leaders must possess. Theyhav e a sort of moral com pass, and their vision a nd values are closely cor-related. In the case of Harm an Intem afional, for exam ple, there ismore tothe firm's leadership than just increasing the wealth of the shareholders.You hav e a new book com ing out in 1997 that deals with creafive coUab-oration. What is the book about?Well, my early work and research was in small groups and in group dy-namics. Since then, I moved toward more macro issues. This book isabout G reat Groups. I'm trying to unders tand excepfional, extraordinarygroup s that, to a certain extent, changed the world in which we live. Andthere's something about the dynamics of these groups that relates tosomething I said earlier, because the issue is how you generate intellec-tual capital. It seems to me that by looking at extraordinary groups wecan learn impo rtant things, just as we learn about leade rship by focusingon extraordinary, exemplary leaders.On which groups did you decide to focus your attenfion?I looked at six: the Manhattan Project, the Disney Feature AnimafionsStudio, the Clinton 1992 campaign (not his presidency but the cam paigngroup), the Black Mountain College (which during its 23-year existenceprobably had more influence on the arts and music in America than anyother grou p), the original skunk works at Lockheed (the grou p that cre-



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ated the Stealth Bomber), and the Macintosh Revolution. The book isabout how these six groups began, operated, and ended. I've finishedmost of the book and am n ow in the throes of wrap ping it up .Did you find something special about these particular groups that dis-tinguishe s them from less influenfial group s?Good quesfion. And the answ er is yes. I found tw o things that stand out.First, the members of these groups all believed that they were literallygoing to change the world . They felt that th ey we re on the edg e of some-thing colossal and that th e world was go ing to be different as a result oftheir efforts. In a way, you can call it grandiosity to the nth degre e. All ofthese groups h ad a sense that what they were do ing was significant andcompelling. And they weren 't doing it for the money they w ere doingit because they believed in it. As a person with the Clinton team put it,"There's a simple doctrine. Outside of a person's love, the most sacredthing they can give is their labor." Now w hen love and labor are merg ed,when there's no distincfion b etween the two, you get Great Groups. Sothat's the major thing about them. They have an unbelievable convic-fion, a zany belief, and an unwarranted opfimism that they can changethe world..You said that there were two things that distinguished these groups.What is the other?The other is the presen ce of a deadline and a product. In fact, one m em-ber of a Great Group said that this project was a dream with a deadline.All of these groups had dates by which they wanted to accomplish theirmain objecfives. The Clinton peo ple w anted to win the election; the Mac-intosh group wanted to get their machine into the market place beforethe compefifion; the Manhattan Project people wanted to develop theatomic bomb before the Axis did. Lockheed wanted to produce theStealth Bomber before the Soviets were able to develop their own. TheDisney Feature Animation Studio wanted to develop new product inrecord fime because the com pany at large was having serious problems.On ly in the case of Black Mou ntain was a de adline not a critical issue.Warren, you've given us interesfing insights to leadership challenges ofthe fuhare a nd the past. In looking at all of this as a totality, are lead ersgood leaders regardless of the fime period in which they emerge? Orwould a successful world leader, say Winston Churchill, fail in GreatBritain today becau se he lacks the skills need ed at this poin t in time?You've presented an interesfing dilemm a, and in answering you r ques-tion let m e contrast the views of Leo Tolstoy, the Russian no velist, withthose of Thomas Carlyie, the great Brifish historian. Tolstoy believed thatmen w ere always the effectrather than a causeof events. Events havetheir own historical force and, at best, a leader can guide the way. Thisviewpoint of situafionalism is sharply different from that of Cariyle, whobelieved that history is a succession of biograp hies. Every insfitufion is

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the "length and breadth of one great man." I, personally, lean towardCarlyle's view an d believe that great leaders create the situation. And no tnecessarily where the situation is currently, but where it is headed. Asmy favorite management philosopher, Wayne Gretzky, put it, "It's notwhere the puck is; it's where the puck will be."An effective leader is an individ ual w ho can see th rou gh the fog of real-ity to interpret events an d b e able to make sense of the blurring and am-biguous complexity. And to be able to do this has nothing to do withwhether we're living in 2010 or 1996. Moreover, even if you have th e bestvision in the wo rld, if you can't gen erate trus t, it doesn 't m atter. And it'snot just trust in an abstract sense. It's the ability to connect with peoplein their gut and in their heart and not just in their head.There's a leader I know who runs one of the country's largest trans-portation firms. He read an article of mine where I quoted Gretzky andhe said to me, "You know , I really appreciate you r quote, but I run a com-pany where I think we know where the puck is going to be, but I can'tget the unio n, the work force, or anyb ody to actually go with m e on thatvision." He talked in very negative terms about his overall oper ation, bu tnever ackn owled ged the fact that the peo ple in the firm do no t trust him.They see him as a "revolving SOB"an SOB regardless of the angle fromwhich they look at him. So he has the vision and the ability to seethrough the fog of reality, but he can't get the people to follow him. Hereminds me of Glendower, the Scottish seer in Shakespeare's Henry IV,Part 1, wh o boasts, "I can call forth th e spirits from the vasty d eep." AndHo tspur deflates him by respo nding, "Well, so can I. So can any man; butwill they come wh en you call them ?" And this is the issue of not just in-terpreting and envisioning the future, or knowing w here the puck is go -ing to be, but being able to create the kind of mean ing for peo ple, the val-ues that make sense to them, where there's enough trust in the systemso it's going to stick. So I'm not sajdng that situation s are not imp ortan t.But I am saying that the effective leader has to be able to size up that sit-uation, forge a new path to see where the puck is going, and the n havea message and vision that has meaning to the work force. And there hasto be trust in the system. Without that, you can call for the spirits fromthe vasty dee p foreverand they wo n't come.So, in closing, you feel that over the last 25 years the challenges of theleader remain similar to what they have been in terms of not just visionbut the developm ent of trust.Absolutely, and that's particularly true in this era of reengineering anddownsizing, where trust continues to be a major concern for the em-ployees. If leaders can't establish that trust, then participation and em-powerment will be cynical relics of a distopian nightmare. The problemis squarely in the hands of management, and it's a challenge that willconfront us well into the next century.



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a conversation with warren bennis on leadership in the midst of downsizing

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