carisma analisis

7/25/2019 Carisma Analisis

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Interviews with two of the

worlds

most respected xecutivesshow how they have

combined

charismatic leadership with architectural sk ill

to

build high-energy

corporations.

Charisma in Action:

The Transformational bilities

Of Virgins RichardBranso

And ABBsPercyBarnevik

MANFRED F. R. KETS DE VRIES

C

hange has become a mantra for corporate

success. The word leaps out of the pages

of the business press: We have

to do t

and do it

fast to get the rewards we want.

Balanced against this urgency is a

weighty body of literature affirming that as

individuals people are profoundly resistant to

change. Psychologically and socia lly, we are

more comfortable with the status quo.

Change is anxiety-provoking. We avoid it,

and avoidance behavior can become deeply

ingrained. Whats more, repetition compul-

sion-repeating past behavior despite the

suffering attached to it-is a well-observed

human tendency. We are often more com-

fortable with the dysfunctional devils we

know than with the more sanguine spirits we

dont, and we deploy complicated patterns of

resistance to avoid rocking the emotional and

psychological boat.

Given all this, how does the process of

change ever get under way? How is our resis-

tance to change weakened? After all, people

can and do change, in both major and rela-

tively insignificant ways.

As a collection of individuals, people in

an organization have to be mentally prepared

for the fact that change is inevitable. This is

self-evident, but easier said than done. Man-

aging employee resistance-and there will be

a lot of resistance-is the first challenge for

those leading the change process. If they fail

at this, the whole exercise will fail.

Awareness of the need for change is at its

sharpest when the organization is under

stress from both internal and external pres-

sures. Outside pressures may come from

competitors, declining profits, decreasing

market share, scarc ity of resources, deregula-

tion, technological development, and prob-

lems with suppliers and customers. If these

are coupled with internal pressures-ineffec-

tive leadership, poor morale, high turnover,

labor problems, highly politicized behavior-

the growing malaise wi ll reach an unen-

durable point. Daily frustrations increase; dis-

satisfaction spreads from person to person,

gradually awakening a universal recognition

that something needs to be done.

It is at this point, however, that the dan-

ger of stalling in the change process i s most

acute; employees defensive routines and

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resistance strengthen in proportion to the

threats they face. What the organization

needs now is the intervention of an effective

change agent-and this should ideally be the

CEO, somebody with established power and

authority who i s in a position to drive the pro-

cess through the organization.

THE ORGANIZATIONAL ARCHITECT

What sort of person does the leader need to

be to act as an effective agent of change? The

answer appears to be someone who can com-

bine the characteristics of a charismatic with

an architectural role-a visionary who can

build a solid construction on his or her vision.

Charismatic leaders are by definition

agents of change. A wealth of literature exists

to describe the special characteristics that earn

them the label of charismatic and equip them

with this ability. To summarize: They display

dissatisfaction with the status quo; they are

restless and energetic; they are action ori-

ented; their discontent pushes them into

searching for new opportunities; they are

entrepreneurial, impatient, and gifted at artic -

ulating a strategic vision, making the big pic-

ture seem within reach of their followers.

They are also very gifted at building alliances

and making people feel special.

Leaders like this stand out like beacons in

the business world (as they do in the worlds

of politics, art, and sport) as much for their

rarity as for their brilliance. Because of this,

they attract a great deal of attention. Of

course, we cannot all become charismatic

leaders. If it is not in our disposition, no

amount of emulation wi ll transform us. But

we can draw on our observation of their ski lls

and actions and learn something about how

to identify challenges, formulate a strategic

vision, align others behind it, and otherwise

improve our leadership abilities. It is in the

interests of organizational change-which

requires exceptional performance and com-

mitment from everybody involved in the pro-

cess-to do so.

In order to move the change process for-

ward, such leaders know that every individual

8 ORGANIZATIONAL DYNAA 4ICS

should be empowered to consider him- or her-

self as a crucia l player. If employees are

inspired, empowered, and free to act, they will

stretch themselves to make exceptional efforts,

demonstrate a high degree of commitment,

and be willing to take risks . Performing in this

way will simultaneously drive the change pro-

cess and reinforce the new basis of the organi-

zation. The blueprint for the change process is

drawn from the leaders ideals and a shared

vision. The bricks and mortar are communica-

tions, trust, and reward.

Lets look more close ly at two people who

are rare ly out of the public eye and whose

reputations have been built on their ability to

sustain change and innovation in their orga-

nizations-Richard Branson of Virgin and

Percy Barnevik, until recently, CEO of ABB,

now head of Investor, a holding company

that has ABB in its portfolio. (Barnev ik has

remained in the Chairmans position at ABB.)

Nearly every press report and personal com-

mentary attaches the adjective charismatic

to their names and both are wide ly acknowl-

edged as brilliant organizational architects.

Following are background notes on both

individuals along with exerpts from interviews

with them.

RICHARD BRANSON AND VIRGIN

In the summer of 1967,

the headmaster of

Stowe, an exclus ive

private boys school,

confronted a student

who had decided

to drop out of the

institution to pursue

nonacademic interests.

Richard, the head-

master said, you w ill

end up either in prison

or a millionaire

Both prophecies

proved correct. Early in his career, Richard

Branson spent one night in jai l after being

caught in a tax evasion scheme, an incident

that embarrassed him greatly-and yet now,


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according to Forbes, he is one of the richest

people in the world. His company, Virgin, has

become a household name.

Not only are the Virgin Groups products

and services trendy and highly visible, Bran-

son is also a genius at promoting his company

through his daring personal exploits. He is a

master of the media. Rarely a week goes by

without finding mention in the press of Vi r-

gin or its flamboyant chairman. Branson is

regularly cited as a role model by young peo-

ple who wish to seek successful business

careers without compromising their personal

ethics. He is a unique combination of energy,

originality, shrewdness, and last but not least,

luck. Against many odds, through sheer per-

severance, he has been extremely successful

in his business ventures. And at the same

time, he seems to be a truly happy man.

Bransons personal philosophy is, Life is

short, one has to make the most of it. Do

things that you like . If your work and your

hobby are the same, you wil l work long hours

because you are motivated. Much of this phi-

losophy is reflected in the way he sees his role

as an organizational architect. Although he

never had a traditional management educa-

tion, his philosophy of management has

proved high ly effective: His sprawling busi-

ness empire is an impressive achievement.

He is stil l motivated by a good chal-

lenge. Having built his empire, Branson con-

tinues to lead the Virg in Group in a daring

drive for expansion, taking on one estab-

lished industry after the other. He loves to

shake up what he calls fat and complacent

business sectors.

The Virgin Groups core businesses

include retail operations (a chain of mega-

stores in Australia, Britain and Ireland, conti-

nental Europe, Hong Kong, Japan, North

America, and South Korea), hotels, communi-

cations (video games, book publishing, radio

and television production), and an airline. His

flagship company, Virgin Atlantic Airways,

has regular flights to New York, Los Angeles,

San Francisco, Orlando, Tokyo, Hong Kong,

Dublin, and Athens. Branson reluctantly sold

Virgin Music, the crown jewel of his empire,

to Thorn EM1 in 1992. Recent successful ven-

tures include Virgin Cola and Virgin Direct

Personal Financial Services.

In many ways, Branson has designed a

model company for the 21st century. His

statement that People are our greatest asset

was not made just to impress the public. His

business maxim-staff first, customers sec-

ond, and shareholders third-is something in

which he really believes. He is of the opinion

that his employees should be given top pri-

ority. Therefore, he has created a friendly,

egalitarian,

non-hierarchical, family-like

atmosphere in all of his companies, an ambi-

ence in which people have fun and enjoy

themselves. A central point of his corporate

philosophy is small i s beautiful. Branson

likes to preserve a creative, entrepreneurial

atmosphere within Virgin.

Following are excerpts from a recent

interview with Branson.

THE BRANSON PHILOSOPHY OF MANAGEMENT

KETS DE VRIES: What do you see as Vivgins key success factors? What makes your

company different from others?

BRANSON:

Im absolutely certain that its a question of the kind of people you have, and the

way you motivate them. Im sure thats what makes any company successful. If you can

motivate your people, use their creative potential, you can get through bad times and

you can enjoy the good times together. If you fail to motivate your people, your company

is doomed....If your employees are happy and smiling and enjoying their work, they will

perform well. Consequently, the customers wiIl enjoy their experience with your com-

pany. If your employees are sad and miserable and not having a good time, the customers

will be equally miserable.

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Could you say something about the way you design your organization, its

architecture?

Well, our record company [now divested], I suppose, would have been the best example. My

philosophy was always that if there were 50 people in a building, I would go there and ask

to see the deputy managing director, the deputy sales manager, and the deputy marketing

manager. I would say: You are now the managing director, the sales manager, the market-

ing manager, or the press officer of a new company. And I would put them into a new

building. Then again, when that company got to a certain size, say 50 people, I would do the

same thing again. So we actually set up about 25 or 30 small record companies. Cumula-

tively, they became the biggest independent record company in the world.

What can you say about your reward systems? You once said that you were in the

business of making millionaires.

Yes, I suppose that we have made maybe 15 or 20 mult imillionaires through this structure.

We like to reward our key performers for their creative contribution.

When you look at creative, high performing organizations, they seem to have a

number

of

characteristics in common. What do you think they are?

Obviously, speed is something that we are better at than most other companies. We dont

have formal board meetings, committees, etc. If someone has an idea, they can pick up the

phone and talk to me. I can vote done, lets do it. Or better sti ll, they can just go ahead and

do it. They know that they are not going to get a mouthful from me if they make a mistake.

Rules and regulations are not our forte. Analyzing things to death is not our kind of thing.

We very rarely s it back and analyze what we do.

Some people argue that the way you run your company is almost like a venture

capital firm. Basically, anybody with a crazy idea gets a hearing.

I hope that crazy idea part i s not too true. But to an extent, the statement is valid.... Its a

fair comment.

What do you see as your weaknesses? Do you have any characteristics that get in

the way of your work?

I suspect not being able to say no. Hopefully, I am getting better at it now. But there are so

many wonderful ideas. I do love new projects; I love new ideas. We are in a position where

almost anybody and everybody who has got an idea likes to bring it to us. There arent many

companies like us, who have got, in a sense, a certain amount of entrepreneurial flair, com-

panies that seem accessible to the public. Therefore, in any one day we receive hundreds of

requests of all sorts. And some of them are very good ones.

My weaknesses really go back to the fact that I have spread myself too thin. In a purely

business sense, I suspect that if I just wanted to maximize profits, I should have stayed more

focused on one area and really concentrated on that one area. Thats the conventional way,

and Im sure thats what most business schools teach. Perhaps its right. But it wouldnt have

been half as much fun.

I must admit that I feel very much alive when I set out to achieve something. On reflec-

tion, its really more the fight than the actual achieving. I love people and I just love new cre-

ative challenges. Some people ask, why keep battling on when you can take it easy? My rea-

son, bas ical ly, is that Im very fortunate to be in the position I am. Ive learned a great deal

and Ive had great fun doing so. Im in a unique position of being able to do almost anything

10 ORGANIZATIONAL DYNAMICS


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I like and achieve almost anything I wish. I dont want to waste the position that I find

myself in. I know that at age 80 or 90 I would kick myself if I just frittered away this second

half of my life. I really do believe that fighting competition is exciting. And its good for busi-

ness. I think that Virg in can get in there and it can compete with the biggest and improve

them-and hopefully survive along side them, have fun, and pay the bil ls at the same time.

Basically, I admire anyone who takes on either the establishment or something like a moun-

tain and succeeds or fails.

I sometimes wake up at night and lie there and think, Is it all a dream? Because it has

been pretty good to date. It just seems almost too much for one man in one lifetime. So, if I

am to reflect, I have been very fortunate to have so many wonderful experiences. Every day

is fascinating. Every day, I am learning something new.

When you leave Virgin, what kind of enduring mark do you want to leave behind?

How do you want to be remembered?

I think that it would be nice if Virg in can be remembered as a company that challenged the

established way of doing things, and that built up a number of companies that were world

leaders in their own fields. That doesnt necessarily mean being the biggest companies, but

the best in that particular field. I also would like that the staff of Virgin would have very

happy memories of the time that they spent working here.

PERCY BARNEVIK AND ABB

Percy Barnevik sur-

prised the business

community in 1987

by announcing the

creation of the

worlds largest cross-

border merger since

Royal Dutch joined

Shell in 1907. In

record time, Barnevik

combined ASEA, a

Swedish engineering

group, with Brown

Boveri, a Swiss com-

petitor, and by adding 70 more companies in

Europe and the U.S. created a $30 billion giant

with a portfolio covering global markets for

electric power generation and transmission

equipment, high speed trains, automation and

\

robotics, and environmental control systems.

This merger triggered a much needed

restructuring of the whole power industry,

which had been characterized by fragmenta-

tion and over-capacity. To many business

analysts, the new company became the

model merger for the new Europe. Since

then, ABB has been a whirlwind of acquisi-

tions, restructuring, and growth. In the past

five years, the com.pany has been involved in

more than 100 acquisitions and joint ven-

tures, which have added 100,000 employees

to its payroll. It has become not only the

principal supplier to the worlds electricity

industry, but also the world leader in

robotics, process automation systems, loco-

motives, and air pollution control equip-

ment. With Barnevik s leadership, two rather

sleepy engineering firms were transformed

into the worlds top engineering giant.

Barnevik presented to the world a new

vision of a Europe without frontiers: a

Europe where there would be room for a

decentralized, transnational company oper-

ating freely across borders. Having con-

quered that territory, he went on to explore

other continents. As a global citizen, he rec-

ognized a window of opportunity in envi-

ronmental control systems, high speed rail

transportation, robotics, and energy in other

parts of the world.

To make his global empire work,

Barnevik championed the concept of mul-

tidomesticity (giving a new meaning to the

phrase think global, act local), leveraging

WINTER 1998 11


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core technologies and global economies of

scale without eroding local market presence.

He made it clear that although the new giant

was a transnational company, it would oper-

ate like a local employer with deep roots in

the individual countries.

Just as Alfred Sloan of General Motors

was the master architect of what used to be

the modern corporation, a model that held

up for many decades, Percy Barnevik has

become the designer of a new prototype of

organization more in line with the post-

industrial age. He recognized the kind of cor-

poration that would be viable in the 1990s

and beyond, and he has gone further than

any other company president in creating an

organization that combines global scale and

world class technology with deep roots in the

local community. In shaping ABB, Barnevik

has become one of the worlds leading indus-

trialists.

To translate his vision into reality,

Barnevik created a master matrix. In one

dimension, ABB is a global network where

business area managers around the world

make decisions on product strategy and per-

formance without regard to national bound-

aries. In the other dimension of the matr ix are

a large number of traditionally organized

national companies deeply entrenched in

their respective home markets.

Simultaneously, Barnev ik designed the

flattest, most decentralized of organizations.

He pushed authority, responsibility, and

accountability deep down the organization,

never allowing more than five people

between the CEO and the shop floor. The

seriousness of his commitment to this princi-

ple is reflected in the size of the ABB profit

centers, typica lly made up of about 50 people.

A corps of 250 global executives leads more

than 200,000 employees.

Since the merger, ABB has followed a pol-

icy of relentless expansion and cost cutting.

From the beginning, Barnevik stated his

intention of making AB B the lowest cost com-

petitor in the industry. In addition, AB B has

also pioneered innovative ways of managing

cross-border operations. Barnevik foresaw

that in a borderless world one of the great

prizes would be to break protectionist

national power markets. And AB B has acted

accordingly, opening markets in Europe, the

U.S., and Asia . The company has also become

a major investor in the former Comecon

countries.

Barnev ik has been the catalyst in making

AB B into the kind of company it currently is.

His hallmarks have been action and speed.

He has successfully put together an extremely

complex corporate jigsaw puzzle originally

dominated by four different national cultures:

Swiss, Swedish, American, and German. To

do so, he has created an organization built on

internal contradictions: a company that is

multinational without having a national iden-

tity, simultaneously global and local, large

and small, centralized and decentralized.

Barneviks leadership style has inspired

many executives around the globe. His pho-

tograph has graced the pages of such influen-

tial business magazines as Fortulze, Business

Week, and Forbes. Numerous business analysts

and professors of management have written

lengthy case studies on the ways he has trans-

formed and runs ABB .

What is Barneviks philosophy of leader-

ship? What kind of corporate culture is he try-

ing to establish? Where is he taking the com-

pany? What kind of person is he? What drives

him? What made him the way he is? Answers

to some of these questions may go a long way

to help us understand what effective leader-

ship is all about.

THE BARNEVIK PHILOSOPHY OF MANAGEMENT

KETS DE VRIES-MR Barnevik, could you say something about the architecture

of your global organization?

BARNEVIK-The fundamental organizational design that

ABB

is known for is its extreme

decentralization. This obsession with decentralization has been a theme throughout my

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whole career. Ive seen the defic iencies of the big corporation, the dangers of bureaucracy,

the effects of the ivory tower where people sit in their rooms, far away from their cus-

tomers. Ive seen the lack of engagement, the absence of the creative, entrepreneurial

spir it. Im sure youve heard the story of the person coming into a big office who asked,

How many people are working here? and got the answer, Half of them. This may be

a worn out joke, but theres truth behind it.

What I have tried to do is recreate small company dynamism and creativity by build-

ing 5,000 profit centers and 1,300 legal entities. I have also made an effort to reduce the lay-

ers. I am fully aware, however, of the pros and cons of doing so. Fewer layers mean big-

ger spans of control and fewer jobs to which one can be promoted. But the advantages lie

in communication and feedback, or as I call it, quickback. When you are in the process

of change, rapid communication is indispensable. We try to make an environment where

you can have creative, entrepreneurial people, where you can feel engaged.

You say that the values represented n youv policy bible provide the glue that

keeps he people in your organization together Its very nice to say this, but how

do you get people to internalize those values?

There are many different ways we can do that. I would say that the most important thing

of all, overshadowing everything else, is to live that way yourself. If you say people devel-

opment is important, and then dont develop your own people, you lose cred ibility. If you

talk about speed in action and you procrastinate on certain difficult decis ions, you are not

believable. So I think that I and the members of the executive committee, and further

down, must walk the talk as the Americans say. Thats the single most important thing.

We must always check that we are living up to what we say.

Whatgets you excited at work?

A lot of things. I know I am competitive. Beating the competition for a big project gets me

excited; so does breaking into a new industry where we werent previously. But what

really g ives me the greatest satisfaction is seeing young people whom I have promoted

succeed. Then you have created something that wi ll outlast an indiv idual transaction. At

the same time, I have had some of my biggest disappointments when people fail.

I want my people to constantly test their imagination, their abi lity to move further. To

create this change mentality, this creat ive spiri t, you have to show them that the environ-

ment, the competitors, the customers are changing. In order to survive we have to change.

You know the expression, When you are through changing, you are through

What do you plan to do to continue to nurture the creative spirit in the

company?

To continue this momentum, it is important that people in an organization have some-

thing to be proud of. It is important that our people can feel pride in something beyond

the numbers. For example, if you look at our company now, we have been pioneering

investments in Eastern Europe, spearheading East-West integration, I dont want to claim

that we knew more than anyone else, but I was absolutely convinced that Eastern Europe

would open up. Many of our people are proud of participat ing in that process. The same

can be said about our work in the environmental field. I would like to create and develop

an image of us as helping to improve the world environment. For example, transferring

sustainable technology to China or India, where they have a tremendous need to clean up

their coal-fired power plants.

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Our employees can look at work like that and see that we contribute something beyond

mere shareholder value. Internally, we can pride ourselves on certain environmental

improvements without being too bombastic or boastful about them. Th is is particularly rel-

evant for attracting young people to the company. They are by and large not just happy to

work for a big company with high profits; they also like to see a purpose that goes beyond

numbers. It is important that a company can be perceived as changing the world in a posi-

tive way.

I believe that there is a tremendous potential in our people that is not exploited. Take for

example the workers. They use only 5 to 10 percent of their brain capacity standing at a

machine. Then they go home. There they administer; they organize for the children; they

build a summer house. Al l of a sudden, they seem to be able to do an enormous amount of

things. Theyre using 90 to 95 percent of their brain. Now, why cant we move these people

into bigger tasks?

We are now experimenting with cutting out a whole layer of clerical supervision to give

teams of workers bigger responsib ility. I think there is a huge potential here that we havent

tapped yet. The obstacles to tapping it go back to the roots of the way we run industrial orga-

nizations. It all comes out of the Frederick Taylor system: managers do the thinking and the

workers do the working. This attitude has to be changed. One doesnt need a blue colla r or

a white collar union. We are all in the same boat.

When you open that vista up, all of a sudden there is a whole new avenue for exploiting

and developing human potential. Future leaders should be able to stimulate and develop

this extra capacity inside their companies to be really successfu l. However, this type of fun-

damental change in industrial organizations wi ll take a long time to implement, maybe a

generation. Those who start early will also reap the benefits early.

Given your reputation of always being overprepared, do people in the company

question some

of

your ideas? Do they dare to disagree?

Its a difficult question to answer because all executives say, Oh sure, others disagree. Even

the worst dictators tend to say something like that. Now, I appreciate that my characteris-

tics are sometimes a little bit dominant. At times I can overwhelm people. Im aware of the

risk, sitting in my position, of not getting enough feedback and not having a sufficiently

open attitude. Of course, its comfortable, whatever position you are in, to have people agree

with you. The temptation is always there.

In this organization, for people who know me well, there is absolutely no problem about

saying, Youre wrong. I disagree.

But of course in an organization this size , there are many

people who dont know me that well. In the Latin countries especially, and maybe in Ger-

many, there is a tendency to be a little cautious so as not to offend the top guy. It s difficul t

to make people really speak their mind and tell you things openly, particularly unpleasant

things.

I can only say that I am aware of the problem, that I work at it. With new people whom

I dont know well, I go out of my way to try to build their confidence so that they dont

worry about that aspect of the conversation. How successful I am in doing that is another

matter.

In our organization, with all these different cultures and our global presence, we really

have no choice but to create an attitude and an atmosphere where people can speak their

minds. When people dont come out with real objections to certain decisions, it can be catas-

trophic for us.... But once a decis ion i s taken, we demand that people stand behind it

14 ORGANIZATIONAL DYNAMICS


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whether they like it or not. We dont want them to sabotage it. But before decisions are

taken, people must speak their minds

Of course, the worst thing you can do when you are trying to create an open atmosphere

is to interrupt someone, to be degrading, to show your disapproval. You rather have to do

the opposite. You have to say thats a very interesting point, or something of that sort. You

have to bear in mind all the time that you must encourage dissenters. You must demonstrate

that willingness. Even when someone goes against you, it should not rebound on them in

any way. People shouldnt get the impression that doing so is bad for their career.

What drives you?

What gives me a sense of reward is to create something, to make some kind of lasting

impact. Things like penetrating new countries, developing and commercializing new tech-

nologies, creating new opportunities. I dont work for the money and the prestige and all

that. I guess its like a person designing a house. People want to build something, create

something that is worthwhile. Thats what it all boils down to.

ACCENTUATE YOUR CHARISMA

What guidelines for managing change in an

organization can we draw from these obser-

vation and examples? To answer that ques-

tions, lets look first at how these two indi-

viduals have functioned as charismatic

leaders, then at their actions as organiza-

tional architects.

Envisioning

The preeminent requirement of any leaders

role is to formulate and communicate a vision,

aligning the workforce behind it. Why is a

clearly defined and communicated vision so

important for corporate change? To begin to

answer this, it is useful to go back to basics to

consider the nature of our need to work. Most

social systems in developed countries provide

adequate support for those who cannot or do

not work-so what lies behind our impulse to

accomplish a given or self-generated task? An

attempt to answer this question was one moti-

vation behind Stud Terkels great book of the

197Os,

Working.

In his introduction he writes:

This book, being about work, is, by its

very nature, about violence-to the

spirit as well as to the body....It is about

a search, too, for daily meaning as well

as daily bread, for recognition as well as

cash, for astonishment rather than tor-

por; in short, for a sort of life rather

than a Monday through Friday sort of

dying. Perhaps immortality, too, is part

of the quest.

These terms link indivisibly the practical

needs of working (making a living, feeding,

clothing, and keeping oneself warm) and the

psychological-even spiritual-needs that

people require work to answer. In fact, if the

performance needs of the organization are

made to match the psychological needs of the

individual-if the organization structures

itself as an enabling and holding environ-

ment, seizing opportunity and unlocking

potential both as an internal dynamic (cultural,

psychological, individual) and as a business

strategy-ordinary people will behave

extraordinarily. Make this equation work, and

the change process and rewards should fol-

low-and the key to making this equation

work is vision.

Most well-known politicians are masters of

envisioning, expressing a general dissatisfac-

tion with the status quo and presenting a

viable alternative. Through language, similes,

metaphors, and ceremonies, they create cap-

tivating, magnetic imagery; they build

alliances, inspire others, and make their vision

reality. For example, Mahatma Gandhi had a

vision of an independent India where

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10/15

Manfred Kets de Vries holds the Raoul de

Vitry dAvaucourt Chair of Huma n Resource

Management at INSEAD , France. He

received an econom ics degree from the Uni-

versi ty of Amsterdam and an MBA and DBA

from the Harvard Business School. He has

held professorships at McGill University, the

Ecole des Hautes Etudes Commerciales,

Montreal, and the Harvard Business School.

Kets de Vries research interests include

leadership, cross-cultural manag ement,

career dynam ics, organizational stres s,

entrepreneurship/family business , and the

dynam ics of corporate transformation and

change. Kets de Vries is the author, co-

author, or editor of numerous books , includ-

ing Power and the Corporate Mind

1975/1985), The Irrational Executive: Psy-

choanalytic Explorations in Managem ent

1984), The Neurotic Organization

1984/1990), Unstable at the Top 1988),

Prisoners of Leadership 1989), Handbook

of Character Studies 1991), Organizations

on the Couch 1991), Leaders, Fools and

lmposters 1993), and Fam ily Business :

Human Di lemmas in the Family Firm. His

book Life and Death on the Execu tive Fas t

Lane received the Critics Choice Aw ard for

1995-1996. He has conducted executive

development seminars for numerous organi-

zations in Europe, the U.S., and Asia and

serves as a consultant in organizational

design/transformation and strategic human

resource management at many of the top

European and U.S . corporations.

Moslems and Hindus would live together in

peace. Martin Luther King had a vision of

harmony between blacks and whites. As Pres-

ident of the United States, John F. Kennedy

had a specific vision of placing a man on the

Moon by the end of the 1960s. M&hail Gor-

bachev had a vision of a more open Soviet

society. Then there were the darker visions of

leaders such as Adolph Hitler and Josef Stalin.

In the world of business, the first Henry

Ford wanted to build a car for the masses, his

particular interest being in helping the farmer

(his father being a farmer). Ingmar Kamprad

of IKEA founded a company to make afford-

able furniture for the common man, and Bi ll

Gates has changed the way people work by

making it necessary for everyone to be com-

puter literate.

As in the political sphere, if people are to be

motivated, if they are to commit themselves

to a vision, the mission statement needs to be

emotionally engaging. It should stretch the

mind of all the companys employees. It

should play on the imagination and stimulate

creativity. It is important for leaders to make

their v ision exciting. It must be inspirational,

create a sense of pride, and go beyond the

bottom line.

Consider how Richard Branson fosters

entrepreneurship. He looks for people with

innovative ideas who will start new busi-

nesses, people who want to be the best at

whatever they are doing, whether it is enter-

tainment, communications, airlines, hotels,

store management, financial services, or bev-

erages; people who have a strong desire to

beat the competition. As for Percy Barnevik,

he wants to create the worlds number one

engineering group.

As these two examples show, to talk about

increasing shareholders wealth or profit max-

imization is not enough. Money is important

but not an end in itself. Barnevik and Branson

recognize that people like to be proud of

something and feel that they have made a

meaningful contribution to the world.

A leaders wish to engage in good works,

to look beyond the bottom line, is a very effec-

tive way of motivating and challenging peo-

ple to work. Thus Percy Barnevik says that he



11/15

is motivated by a desire to create a better

world by generating employment (particu-

larly in Eastern Europe, where he is the

largest investor), and to improve environ-

mental conditions by providing clean energy

and transportation. For Branson, too, social

concern is an important part of corporate phi-

losophy. On many occasions he has put his

money where his mouth is. Two instances,

among many, come to mind: Virg ins produc-

tion of low-priced Mates condoms, in

response to the AIDS cris is, and Bransons

bidding for the national lottery franchise in

the UK with a promise to donate all profits to

charity (a bid that was unsuccessful).

Empowering

A differentiating factor of effective leaders is

their abi lity to get the best out of people.

They are good at building alliances and cre-

ating the commitment that wi ll involve oth-

ers in their vision. They possess great team-

building ski lls, treating their employees as

competent, responsible human beings. They

help their employees understand the busi-

ness and build trust by sharing sensitive

information about the companys perfor-

mance. They allow them to experiment, to

play, to make mistakes.

They want to foster a sense of ownership

among their people. They believe strongly

that strategic awareness should not be limited

to the top echelons of the organization but

spread throughout it. This means pushing

authority, responsibility, and accountability

far down the reporting line and flattening

hierarchical structures.

People often talk about empowerment in

this context. Effective leaders make empow-

erment seem deceptively simple. They know

how to express expectations of high perfor-

mance. They also realize that the kind of com-

mitment that makes this possible requires a

strong show of confidence. In most instances,

empowered employees wi ll do their utmost

to perform to those expectations. Enhancing

peoples self-esteem will make many perform

beyond expectations.

To get the kind of commitment that makes

that possible, a strong show of confidence is

needed. And in most instances, empowered

employees will do their utmost to oblige.

Enhancing peoples self-esteem wi ll make

many perform beyond expectations. Empow-

erment is a term Napoleon Bonaparte, who

declared that every French soldier carried a

marshals baton in his knapsack, might have

felt at home with.

Energizing

In every organization, there is an enormous

amount of free-floating aggressive and affec-

tionate energy. Effective leaders know how to

channel this energy in the right direction. It is

important for aggressive energy to be

directed externally. Employees should fight

the competition, not each other. It helps to

have an enemy to focus on while enacting a

mission; it concentrates the mind. Enemies

help to shape organizational identity and suc-

cessful companies watch their competitors

very closely. Percy Barnevik constantly

reminds his people of enemies such as

Siemens, General Electric, Alcatel-Ahlstrom,

and others, while Richard Branson is masterly

in his use of David and Goliath imagery,

pitching constantly against powerful adver-

saries like British Airways, Coca Cola, or EMI.

As for affectionate energy, that too has to

be used appropriate ly. Every leader, at what-

ever leve l, is to some extent a kind of psych i-

atric socia l worker, a container of the emo-

tions of his or her subordinates. He or she

provides a sense of security, inspires trust and

confidence, and creates a safe holding envi-

ronment.

The way he or she goes about creating this

environment distinguishes effective from

ineffective leaders. Empathy is critical to the

management of energy in organizations.

Remember, a CEO is seldom derailed by his

or her ignorance of the latest marketing,

financial, or production techniques, but fre-

quently by a lack of interpersonal ski lls, a fail-

ure to get the best out of the people who do

possess such essential information. Emotional

intelligence is also a sine qua non for genera-

tivity, or the ability to get pleasure from help-

WINTER 1998 17


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ing the next generation by, for example,

assuming the role of mentor and coach. When

leaders lack this quality and are envious of

others, they stifle organizational learning and

endanger the organizations future.

BUILD YOUR ARCHITECTURAL

SKILLS

The most effective leaders recognize that the

art of leadership comes in building the kind of

environment where people can be creative

and become completely involved in what

they are doing. Branson and Barnev ik have

created organizational structures where peo-

ple have a sense of control and a feeling of

ownership over what they are doing. The

envisioning, empowering, and energizing

facets of charismatic leadership need the con-

crete consolidation of the leaders architec-

tural skil ls. While these charismatic qualities

address peoples inner theater-the why of

work-the architectural concerns (organiza-

tional design, and control and reward sys-

tems) deal with the external world-the way

they work.

Organizational Design

There is a certain dilemma involved in creat-

ing an exciting working environment. Larger

size means more poss ibilities, but size can

become a serious impediment to perfor-

mance. Economies of scale are not without

serious diseconomies of size. When organiza-

tional units become too big, employees

become less involved.

Effective leaders minimize the negative

aspects of large organizations by eagerly

embracing the concept that small is beautiful.

These leaders go to great lengths to create a

small business atmosphere in their large cor-

porations. They also realize that hierarchical

organizations have had their day. Hierarchi-

cal structures are out, flat structures are in,

encouraging lateral rather than vertical com-

munication. Decentralization and operational

autonomy are sine qua nons for high perfor-

mance organizations.


Percy Barneviks aim for AB B is to be cen-

tralized and decentralized, big and small,

global and local. Consequently, he has cre-

ated a company made up of 5,000 profit cen-

ters. Richard Branson spins a new business off

an exist ing one as soon as there are more

than

50 people working for it. Branson applies his

philosophy religiously: His organization, like

ABB , exists as a number of small autonomous

units run by self-managed teams made up of

individuals who do not have to be continually

prodded to do things.

Both Barnevik and Branson look for the

kinds of people who set their own standards

and rewards, who are eager to learn and

know how to adapt, and who possess a high

tolerance for ambiguity. Moreover, they go to

great lengths to change the mind-set of those

people who were not really committed in the

past, but were merely going through the

motions.

Critical to the design of these organizations

is their customer-centeredness. Employees

are constantly reminded that only customers

can help them to tenure in their organization.

The innovative way in which Richard Bran-

son runs Virgin Atlantic is a good example.

Every effort is made to surprise the customer

in a positive way. First class (upper class)

passengers on Virgin Atlantic have free access

to a four-hole putting green at the Virgin

Clubhouse and receive an in-flight aromatic

relaxation massage. Car service at both ends

of the trip is included in the price of the ticket.

Branson has also been known to personally

meet flights that arrive late or experience

other difficulties,

In creative, high performance organiza-

tions like Virgin and ABB , customers are not

merely an abstraction. Al l structures and pro-

cedures are directed toward providing the

best customer service. Again, small business

size enhances the possib ility of contact and

improves the feedback loop. In ABBs 1994

annual report, Percy Barnevik accounts for

his companys performance record in terms

of size:

Our strategy of delegating responsibil-

ity to many small profit centers is a


13/15

winning one. It puts our people close to

customers and lets them see how their

decisions and attention to customer

needs contribute to AB Bs growth. This,

in turn, frees up rich human resources

of initiative and energy. We want to

achieve management by motivation

and goals instead of by instruction and

directives....Adopt the right priorities:

Customer first, ABB Group second,

own profit center third.

Product life cycles are forever shrinking,

and speed to market has become increasingly

important. Too many companies have

invented great products, only to lose out in the

process of market introduction. One of the key

success factors in Richard Bransons organiza-

tion has been his ability to move fast. As he

says himself, I can have an idea in the morn-

ing in the bath tub, and have it implemented

in the evening. Speed also has an essential

place in Percy Barneviks management philos-

ophy. In his policy bible, he states that it is

better to be roughly right than exactly right

with respect to speed. He has made it very

clear that it is permissible to make mistakes

due to speed. At ABB, failure to act because of

a reluctance to make decisions is unacceptable

and will lead to dismissal.

Control Systems

Barnevik and Branson know that change is

not easy. Their experience implies the need

for a structure free from the stifling costs of

bureaucratic controls and hierarchical

authority. Rules and regulations are mini-

mized; it should be possible to bend them;

nothing is written in stone. AB B has a sophis-

ticated global matrix structure with enor-

mous fluidity between business area man-

agers and country managers. Virgin

resembles a keiretsu organization-a structure

of loosely linked companies continuously

dividing and reproducing (quite mystifying

to outsiders) where employees have the pos-

sibil ity to rewrite their job definitions

depending on the kind of new challenges

they are prepared to undertake.

Until recently, designing an organization

of this type would have been impossible.

Being simultaneously big and small, breaking

up a large company into a number of small,

loosely connected companies while maintain-

ing cohesiveness has only become feasible

with the revolution in information technol-

ogy. Sophisticated information systems have

become a major force pulling geographically

dispersed employees together. It is now pos-

sible for top executives to decentralize with-

out the fear of losing control. Naturally, suc-

cess in these new structures requires a high

degree of literacy in modern information and

communication technology.

Branson and Barnevik also realize that

there are two k inds of glue that will make

their loosely structured organizations func-

tion effectively. Sophisticated information

systems form one kind. The other is a set of

shared common values. Effective leaders

(implicitly or expl icitly) want each organiza-

tional participant to share certain values spe-

cific to their corporation, values that go

beyond their national cultures,

At ABB, these key values are summarized

in a policy bible. At Virgin, they are more

subtly instilled. Everyone, however, is

expected to be familiar with the corporate

culture of their organization. New recruits

are indoctrinated in these values. The values

are reaffirmed in workshops, seminars, and

meetings. People are expected to internalize

these values and behave accordingly, with a

positive pay-off: the internalization of cor-

porate values means a greatly reduced need

for external controls. To make this work, the

selection of individuals who embrace these

values becomes crucial. Having high barri-

ers to entry can prevent many headaches

later on.

Freedom from excessive control does not

mean, however, that employees are not held

accountable for their performance. Account-

ability is driven deep down the organiza-

tion. It is impossible to be part of a winning

institution without distinguishing between

excellent and mediocre work. Thus con-

struc tive feedback about performance is an

essential and pervasive part of the culture of

WINTER 199.3

19


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AB B and Virgin. There is compassion, but

there is a limit to excuses.

Reward Systems

Barnevik and Branson also realize that

todays high performers are like frogs in a

wheelbarrow: They can jump out at any time.

Imaginative human resource management

systems have to be found to keep them com-

mitted to the organization. Apart from giving

these people the opportunity to spread their

wings, the company needs to reward their

performance with attractive material benefits

that go beyond salary increases. Sharing cor-

porate success in the form of stock options,

bonuses, or some other profit-sharing plan is

an effective way to reward such people.

Share-ownership can play an important part

in retaining the best people.

Richard Branson has said that he is in the

business of making millionaires. He makes it

quite clear that he does not want his high per-

formers to leave Virgin to start their own com-

panies elsewhere. He ensures that his key

players have the possib ility of becoming mil-

lionaires under the Virgin umbrella. Of

course, this way of rewarding employees can

only increase a sense of ownership.

CHANGE AND AFTER

As I wrote at the beginning of this article, the

first major challenge for a company in the

process of change is to motivate people to

function effectively in an unpredictable envi-

ronment and, at the same time, manage an

opposing dynamic of resistance. A second,

ongoing challenge is to prove that the orga-

nization can build on the sk ills used in the

change process (the ability to analyze a situ-

ation, to adapt to the altered logic of a com-

pany, and alter behavior to fit a new operat-

ing environment) and integrate them into

the continuously changing culture of the

organization.

A leader has to be able to give followers a

good reason to get out of bed in the morning,

and to do that the leader has to have a good

reason himself. What is a major motivating

force in Richard Bransons behavior?

I think fun should be a motivator for

all businesses. I think the reason weve

been successful is that weve had this

great bunch of people around. Weve

done things differently and thats

made life more fun and enjoyable

than if wed taken a slightly more con-

servative approach. Ive been deter-

mined to have a good time (Newsweek,

13 June 1994, p.33).

Branson and Barnev ik realize that life is

not a rehearsal; on the contrary, it is the real

thing. They want to live it to the fullest. Both

executives have recognized a basic need exist-

ing in every human being-the drive to do

new things; the pleasure of exploration.

Unfortunately, in many companies, for many

employees, this basic need lies dormant.

Many executives behave like organizational

sleepwalkers. Their liveliness is no longer on

the job.

Branson and Barnevik, however, subscribe

to the dictum that the challenge of life is to die

young-as late as possible. And they do not

want to have that experience alone. They

want their employees to accompany them on

an enterprise that is as much about discovery

of themselves as about profit margins-a sort

of life in which immortality, in terms of a last-

ing legacy, is a definite part of the quest.

To order reprints, call 800-644-2464 ref. number

8930). For photocopy permission, see page 2.



15/15

SELECTED BIBLIOGRAPHY

More information about Richard Branson and

Percy Barnev ik can be obtained from two case

studies I have written about them: Percy

Barnev ik and AB B and Bransons Virgin: The Com-

ing

of

Age

of

a Counter-Cultural Enterprise. Two

videos (Percy Barnevik and ABB and Virgin:

Entrepreneurship in Action) containing additional

material are also available that provide excellent

footage of these two leaders. On the tape these

two executives share their insights on the way

they run their businesses. In addition, two

books have been written about Richard Bran-

son: Richard Branson: Virgin King by Tim Jackson

(London: HarperCollins, 1994) and Richard Bran-

son, The Inside Story by Mick Brown (London:

Michael Joseph, 1988).

Articles and books on change and corpo-

rate transformation are too numerous to cite

here. An interesting angle, however, is found in

the book Discontinuous Change by David Nadler,

Robert Shaw, Elise Walton, and associates (San

Francisco: Jossey-Bass, 1995). This book is a col-

lection of essays on the dynamics of organiza-

tional transformation. The book by Noel Tichy

and Stratford Sherman, Control Your Destiny or

Someone Else Will: How Jack Welch is Making GE

the Worlds Most Competitive Enterprise, gives an

informative account of the transformation pro-

cess at GE. I have just co-authored an article on

the change process entitled Transforming the

Mind-set of the Organization: An Owners

Manual (Manfred F. R. Kets de Vries and

Katharina Balazs, INSEAD Working Paper,

96/81iENT) in which we integrate individual

and corporate change processes, conceptualiz-

ing the different stages both indiv idua ls and

organizations have to go through to make the

change process work.

A very good description of the successfu l

habits of highly successful companies is done by

James Collins and Jerry Porr is in their book Built

to Last (New York: Random House, 1994). They

address the issue of what makes exceptional

companies different from others. Although they

deemphasize the role of transformational lead-

ership, they stress the importance of dis-

tributed leadership (leadership throughout the

organization) as a factor in truly outstanding

companies.

Finally, insights into the psychodynamics of

leadership can be found in my book Life and

Death in the Executive Fast Lane (San Francisco:

Jossey-Bass,1995). In these essays I describe con-

cepts that help to explain the inner theater of

executives and the qualities that make for global

executives.

Studs Terke ls book Working is published by

Pantheon Books, New York (1974).

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carisma analisis

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