Executive Insight

Russell Ackoff - unconventional management theorist - 1919-2009

An evangelist of the big picture, Russell Ackoff was a management theorist who helped U.S. corporations by reimagining their challenges as opportunities to restructure.

Mr. Ackoff, who died Oct. 29 at age 90, was an expert in conceptualizing problems. He liked to say they came in three flavors: problems, messes and puzzles, and each needed its own distinctive toolkit.

Mr. Ackoff was one of a small group of management-studies pioneers who changed the way corporations thought about their businesses. Peter Drucker once wrote to Mr. Ackoff that his early work "saved me -- as it saved countless others -- from descending into mindless 'model building' -- the disease that all but destroyed so many of the business schools."

No fan of most business education himself, Mr. Ackoff nevertheless ran a business graduate center at the Wharton School of the University of Pennsylvania. There, he trained generations of management graduate students in an unconventional program that he said had "no curriculum, no classes, no examinations, no admission requirements -- only exit requirements."

Acerbic and aphoristic, Mr. Ackoff was fond of sayings such as "All of our social problems arise out of doing the wrong thing righter. The more efficient you are at doing the wrong thing, the wronger you become. It is much better to do the right thing wronger than the wrong thing righter! If you do the right thing wrong and correct it, you get better!"

Mr. Ackoff published such sentiments in a series of books. He also wrote about how to manage in the face of extreme uncertainty, such as the crises presented by the oil shocks and inflation of the 1970s.

Mr. Ackoff implemented his ideas through consulting with hundreds of companies, and later in his career, with governments. He helped General Motors create its OnStar navigation system, and had a three-decade association with Anheuser-Busch in which he helped the St. Louis brewer achieve national dominance.

Working with August Busch III, later Anheuser-Busch's chairman, Mr. Ackoff in the early 1960s helped design an expansion strategy that included building new breweries and warehouses, after potential sites were identified via computer modeling, a highly unusual approach at the time.

Mr. Ackoff also studied Anheuser-Busch's marketing strategy, and came to the conclusion that increasing advertising budgets had little effect on sales. (Neither did the taste of the beer, he found through blind taste tests.)

"This was incredibly valuable," says Bill Finnie, a former director of strategic planning for Anheuser-Busch who studied for his Ph.D. under Mr. Ackoff. "It gave Anheuser-Busch the confidence to maintain its marketing budget flat from 1961 to 1976. We quadrupled sales."

According to Mr. Finnie, reduced marketing costs were passed on to the consumer, making Budweiser inexpensive compared with local brands that had dominated the market through the 1950s.

In Mr. Ackoff's more than 30 years working with Anheuser-Busch beginning in 1960, the company's national market share grew to more 40% from 7%.

In return for his insights, Anheuser-Busch sponsored Mr. Ackoff's academic pursuits, including Wharton's Ackoff Center for the Advancement of Systems Approaches.

But Mr. Ackoff grew frustrated with management studies, which he felt were too limited in their focus on private industry rather than looking at organizations in the public sector as well.

At the same time, academic departments objected to qualitative approach that lacked statistical backing, and Mr. Ackoff disappeared from reading lists in the 1970s and 1980s. Yet he remained in demand by corporate clients and increasingly by governments, such as Iran, where in the 1970s he helped design a way of clamping down on cigarette smuggling.

Born in Philadelphia, Mr. Ackoff sometimes credited his undergraduate studies in architecture at the University of Pennsylvania with sparking his interest in holistic systems.

After serving in the Army in the Philippines during World War II, he completed a doctorate in the philosophy of science at Penn in 1947, and in 1951 joined with his Ph.D. supervisor, C. West Churchman, to found one of the first schools of operations research, at the Case Institute of Technology in Cleveland, which later became Case Western Reserve University. In 1964, the Wharton School recruited Mr. Ackoff and a handful of colleagues from Case.

In a field he regarded as littered with charlatans, Mr. Ackoff rejected the term "guru," favoring "teacher," in the belief that he was helping his clients design their own solutions. He delighted in crossing discipline boundaries, and his influence sometimes turned up in unexpected places -- Mr. Ackoff was part of a team that redesigned the White House Communications Agency during the administration of President Bill Clinton.

"He is representative of what I fear is a dying breed -- management scholars willing to tackle big and broad business themes," says Roger Martin, dean of the Rotman School of Management at the University of Toronto.

Source: The Wall Street Journal , November 11 2009

Leadership Development - Why Experience is the Best Teacher

Leadership Development - Why Experience Is The Best Teacher

View more presentations from Charlesmore Partners International.

Do you have leadership continuity plans in place?

Management succession is one of the most critical strategic risks a corporation faces, particularly as 46% of executive departures are unplanned and 50% of baby-booming senior managers will reach retirement age in the next five years.

Yet 51% of companies do not have a succession plan in place and only 6 percent claim a system in place to build top-flight executive teams.

Management literature shows that failing in leadership transition can be deadly to even the most successful of businesses. Indeed, since it can be a source of such business uncertainty, The Conference Board recommends that succession plans and leadership development strategies be developed and integrated into enterprise-wide risk management programs. It also recommends that corporate executives dedicate full attention to their succession planning duties and use the challenges posed by the economic crisis as an opportunity to improve their companies’ leadership development programs.

Contact Charlesmore Partners International for more information on how to build and implement effective succession strategies, manage change in organizational leadership and mitigate the risk of leadership discontinuity. You can read a synopsis here.

Learning to lead in a different space

Much has been written over the years about leadership, leadership vs. management, the necessary shift from command-and-control to an empowering leadership style etc., etc. This issue of Executive Insight will add nothing new to this debate.

What we plan to explore here are the implications of new context.

Our business environment has rapidly shifting to one that is globalized and digitized; comprised of networks of alliances, partnerships, and outsourcers; increasingly staffed by combinations of employees with free agent mindsets, other people’s employees and free agents themselves.

Line-of-sight is replaced by more virtual realities, position-power by mutual-reciprocity and relationships, economic dependence by more risk and wealth sharing.

Learning to lead in this context requires different mindsets and skill sets, and the development and application of new business, accountability and interaction practices.

Clearly, not all businesses are here yet. In times of transition, new norms emerge at differing rates of change and intensity, but few companies today, and few executives, are unaffected by these trends.

We are experiencing an accelerating search for innovative ways to add value, leverage competency combinations, extend reach, reduce scale, shrink time and distance, cut cost, eliminate friction, simplify transaction, create new flexibilities and add new customer benefits.

The confluence of these dynamics is leading to the exploration of new organizational forms and combinations that in turn require new types of alignment, interaction, process management and leadership. Internally, companies become a combination of core employees, variables, in-sourced expertise and outsourced processes.

Beyond the perimeter, connections reach out via collaborative ventures, varying equity agreements, research and design partnerships, supply and sourcing configurations, distribution arrangements, licensing agreements, knowledge sharing etc. Designed to be “complementary blocks” or “pooling blocks” such arrangements add value through aggregation, connectivity or synergy.

Corporate leaders are increasingly looking at such arrangements as opportunities to form extended enterprise. Internal capabilities, whether physical or financial, no longer constrain the ability to satisfy customer requirements.

Collaboration enables the extended enterprise, linking key members of the network together seamlessly. Collaboration leverages the focus and specialized capabilities of the partners. But the success of such ventures doesn’t come from happenstance. It comes from effective design, integration and leadership.                   

For while business agreements will tie such arrangements together, flawed or ill-conceived design, poor integration or process management and parochial leadership behaviors can sound the death-knell for the venture.

For the leader, it means the development and application of some very specific competencies to manage most effectively in this type of environment, and building organizations (competencies, practices, mindsets and behaviors) that will thrive and not falter at this new frontier.

These key leadership competencies include the following, which although by title are not new executive requirements, by definition are centered far more in the networked world than the traditional corporate operating environment:

Strategic Thinking

Strategic thinking in this context includes the art of seeing the possible and knowing how to combine for value-creation and competitive advantage.

Commercial Alignment

Commercial alignment involves finding a platform of cooperation and collaboration of significance, and pooling the benefits together in ways that add value not just to the parties, but to the marketplace. Risk and reward models are defined and profitability for the entire network is considered collaboratively and cumulatively.

The skill is to craft arrangements that actually work, in application, not just in principal. 

Alliance Management

Alliance management entails relationship and process development that is capable of taking the combination to ever more valuable benefits and returns for all stakeholders through openness, mutuality, trust and perseverance.

Effective alliance managers stay focused on the goal, develop deep relationships throughout the venture, act win-win-win all the time, anticipate difficulties, nip problems in the bud, expeditiously remove impediments, and constantly grease the wheels of operation to assure success.

The social relationship between the principals reaches a level of importance to the success of the venture much akin to that which has characterized Asian businesses for generations.

Lateral Leadership

Lateral leaders are able to achieve great results without position-power through the strength of reason, personality and character, through clarity of purpose, keen thinking and persuasive influence, through the cultivation of deep relationships, the demonstration of unquestioned integrity, ease of communication and the ability to energize others to pursue a common goal.

Community Development

Community development involves the design of structures, interfaces and practices that will create an optimum operating model for the purpose. It also means developing (over time) a culture appropriate to the venture or circumstance, rather than the co-existence of a hybrid, which will breed dysfunctionality.

Culture develops through artifacts (what you see, hear or feel as you hang around), espoused values and the shared tacit assumptions of the group that develop over time. The skilled leader understands these factors and helps transition the group to a new place centered on the goals and the context.

The development of such competencies will increasingly be an essential part of the executive skill set required for the next decade, and particularly when considering or entering into new ventures or establishing alliances, companies should base their selection of principals on such attributes.

Additionally, companies should:

1. Build network management into your leadership development programs and practices, particularly emphasizing the relationship management and interpersonal aspects.
2. Assign high-potentials to manage the interface with current alliances, giving real responsibility for the success of the venture. Shadowing existing principals is one thing, giving experiential accountability is so much more valuable.
3. Only enter into networked relationships when you are certain that shared values, openness, trust and mutuality will characterize the relationship, particularly at the principal level. To move forward when you have doubts or evidence to the contrary is more than just high risk, it’s likely to be doomed.
4. Assure that new alliances or collaborations start-off with a structured alignment process that brings together the parties, focuses on common goals, mutual responsibilities, shared values and key deliverables. This should include the setting up of blame-free problem identification and resolution practices so that issues are addressed expeditiously rather than fester.
5. Set in place regular review sessions where progress, performance and deliverables are assessed against the original vision and objectives. 

In search of a kinder, gentler, recessionary chief executive

There’s an excellent article on leadership by Karen Mazurkewich in Canada’s Financial Post last Friday. “The economic crisis has created a crisis of leadership”, she writes and skillfully integrates commentary and insight from several executives, academics and theorists that calls for new open-book leadership behaviors to begin to restore confidence and new management education techniques forged in the real world not in the classroom. Source: Leadership angst: Who is the new CEO?  by Karen Mazurkewich in the Financial Post, Friday, May 01, 2009

What keeps CEOs up at night?

“Leadership”, answered the President of one of India’s largest business conglomerates recently. “Do we have the right skills and capabilities to pull our strategy off,” reported a Global 500 CEO. “I worry that the current management team will not be able to take us where we need to go to next,” answered a third corporate leader.

Most CEO’s are satisfied with their strategies. Many are less satisfied with their performance, despite the positive-speak that pervades investor conference calls. Leadership is the primary enabler that converts strategic intent into results; indeed as Larry Bossidy once famously said, “at the end of the day we bet on people not strategies”.

Recent research by consultants McKinsey demonstrates a clear correlation between growth in market capitalization and growth in profits per employee. Talent, they suggest, is the ultimate generator of wealth creation in this new digital age, requiring a very different focus for the modern CEO … maximizing returns on people, not capital.

High performing executives are in great demand and the war for leadership talent is intensifying; so much we know – indeed some 62% of companies currently report leadership capability shortages. What may be less well known is that as Boomers age the top 500 US companies will lose over half their managers to retirement in the next 5 years, and over 10 years the supply of leadership talent will shrink by some 10%. Leadership capability may reach crisis proportions for the ill-prepared; companies will need to have an effective leadership pipeline to thrive and survive in the decades ahead.

Adding leadership capability is never a short-term endeavor; hiring from the outside takes time, and the incidence of new executive derailment in major corporations is frightening (see the Executive Insight Thought Leader, “Why New Executives Fail” in the archive section of our web site). Long-term developmental initiatives are vital but will not close the gap sufficiently to satisfy real-time demand. 54% of CEO’s acknowledge that senior management spends insufficient time on talent management. So what’s he or she to do?

It’s time to move leadership capability development to center stage. To make it as much of a strategic priority as the next major acquisition or product launch; to put passion, emphasis, resources and accountability to the challenge; to solve systemically rather than piece-meal; to attack the problem from multiple dimensions simultaneously rather than slowly and sequentially; to integrate efforts smartly so that a leadership pipeline of consequence emerges and sustains to fuel the competitive future.

To start with:

• Be clear on the capabilities needed both now and into the future; this requires serious strategic attention to skill-set needs over the next two to three strategic time horizons
• Assess current capabilities rigorously and dispassionately; too frequently we try to build the future around today’s players and end up short. Include a process to discover talent in the organizational hinterlands
• Know the gaps and mobilize to close expeditiously – combinations of strategic hiring and focused leadership development efforts; build and work a transition plan

Next, it’s vital to understand how leaders really develop. Executive MBA’s and the like may provide some foundational knowledge, but they don’t provide the necessary “lessons of experience” for true capability development. Studies have shown – and we know from our own careers – that real-life business challenge and opportunity is the stuff of true development. So we need to connect those with the talent to lead the business with the opportunities necessary to add the skills they will need to be successful. Companies rarely do this in any systemic way. Effective leaders emerge more through the confluence of raw talent and serendipity than through purposeful intervention and planned experiential opportunity. 

Indeed, probably the single most important part of designing a leadership development system is to root it firmly in the business - deriving it directly from the needs of business strategy, involving senior management in its creation, and making it an integral part of running the business. Yet this is rarely the foundational underpinning of corporate executive development activity.

Moreover, for individuals – however talented – development is not automatic. As T.S. Eliot once wrote, we can have the experience and miss the meaning.

Successful development depends upon having the ability to learn, access to feedback, the open-mindedness to listen and the willingness to change. It is embedded in experience: leaders learn as they expand their experiences over time; and it is at its most effective when part of an ongoing system woven into the fabric of strategic and operational requirements, and facilitated by interventions that accentuate those experiences in connected and meaningful ways. Finally we should remember that development is a very individualized process; people begin at different points and progress at different rates; development is an ongoing process not a destination.