The Leadership Balance: People and Performance

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Every company is, at once, two things: an economic organization whose survival depends on delivering value in an unforgiving market and a social institution with deep impact on the lives of its employees. The successful CEO must achieve a critical balance between the needs of shareholders and those of employees. A paper1 recently published in Harvard Business Review identifies the CEOs of 22 organizations in Europe and North America who have achieved this balance without compromise. The article answers two questions central to the authors' research: How do these high-commitment, high-performance CEOs (as the authors call them) reconcile the tension between high performance and a high-commitment institution? What allows them to introduce the sometimes severe measures that their companies require while winning acceptance and commitment from the people most affected? The authors have discovered that these CEOs are motivated by more than financial success; that many have worked for their respective organizations for several years, rising through the ranks; and that they feel a personal responsibility for the organization's future. Many have been required to make bold and surprising moves, such as Leif Johansson's decision to sell Gothenburg, Sweden-based Volvo's car division to Ford Motor Co. All face the challenge of driving major strategic and cultural change, though firms on the European continent are more successful at avoiding significant downsizing than their North American and British counterparts. The CEOs perceive these measures as affirmations of their companies' core proficiencies and values. Jorma Ollila of Nokia, Espoo, Finland, who made the decision to focus exclusively on mobile-phone technology, tells the authors, "My job was twofold: to make sure that people had an opportunity to realize the potential of what there was in this business, number one. Number two, we needed to get rid of the no-growth businesses—the cable, the televisions, etc." Achieving the Balance Yet another commonality among the high-commitment, high-performance CEOs is the ability to connect directly and personally with their people and operations, eschewing intermediaries. They maintain the balance by making a direct and personal connection between their people and the results they must deliver. They do so by first earning the trust of their organizations through openness and honesty, which sometimes requires acknowledging the CEOs' own mistakes. The authors offer the example of Ed Ludwig, CEO, Becton, Dickinson & Co, Franklin Lakes, NJ, who shut down a major project (which he had launched as CFO) into which millions of dollars had been poured, publicly acknowledging that the program was broken and that he was, in large part, to blame. The program was relaunched and is now considered a foundation of the company's success. Second, they go to great lengths to ensure direct and unmediated communications with their people. Allan Leighton, CEO of Britain's Royal Mail, London, has visited more than 1,600 of the country's delivery offices, and he stops to talk with every mail carrier he sees. Russ Fradin, CEO, Hewitt Associates, Lincolnshire, Ill, made sure that all levels of management shared in any pain felt by the rank and file when he had to trim his workforce by 5%. A third way that high-commitment, high-performance leaders hold the center, as the authors call it, is by having a clear, focused purpose, selecting a few key initiatives on which to concentrate at any one time. Tim Solso, responsible for the turnaround of Cummins, Columbus, Ind, tells the authors that he came to understand the need to pick one or two initiatives, drive them for four or five years, and watch the good things happen. Val Gooding, CEO of BUPA, London, tells the authors, "The reinforcement and continuity of direction is the real job of the CEO.” Fourth, these CEOs supplement their own strong personal involvement in the company's people and operations by building leadership capacity. The authors say that this belief in collective leadership is particularly pronounced outside the United Kingdom and North America. Shared Purpose The authors point out that the most unwavering focus from the CEO is useless without buy in across the organization, and that achieving that focus is particularly challenging for diverse global companies. The authors observe that high-commitment, high-performance leaders invest a great deal of time in creating what they call "an emotionally resonant shared purpose" for their employees. Such projects as building a school in India and a joint effort to develop textiles that can gather and store solar energy for use in the developing world are seen by high-commitment, high-performance CEOs as more than just good corporate citizenship. These leaders understand that such efforts can unleash the commitment and passion of their people. For ultimate job-based fulfillment, however, people need to work for a high-performance organization, most leaders find. In addition, great employees want to work with other great employees, but they also need performance accountability in order to deliver on their leadership's commitment to the financial markets and their boards. In building these meritocracies, these CEOs focus on the full set of indicators needed to build a great company, rather than just on financial factors. Central to a high-commitment, high-performance organization is the ability of each employee to find personal and professional fulfillment. Many of the CEOs interviewed see the creation of opportunity for their people as one of their most important functions, and many personally train and mentor their next-generation leaders. Standard Chartered, London, conducts a strategic people review inside each operating unit, checking the talent pipeline and updating succession plans for key positions. In general, high-commitment, high-performance CEOs manage to keep their work in perspective by maintaining enough personal distance to avoid favoritism, by having lives outside the office, and by not taking themselves or their positions too seriously, the authors find. Overall, these gifted leaders share an uncompromising belief in both their people and their companies. "These CEOs approach finding and holding a firm's moral and strategic center in a competitive market as a calling and an art, not an engineering problem,” the authors contend. "Because of their passionate commitment both to their people and to achieving superior performance, they do not make the trade-offs that most CEOs make.” That is how high-commitment, high-performance leaders build great organizations, the authors conclude.