Create an Ad Hoc Leadership Circle to Generate New Ideas


leadership-circle

When leaders need innovative ideas to grow their company, they often turn to their direct reports for guidance. But this group, by design, represents the current operating units and functions, which often have a status quo to defend.

So when you need creative thinking, try forming a leadership circle, a diverse, ad hoc team of 15–18 people from throughout the company who can work together for about six months.

The circle should focus on the future, not the past, and healthy debate should be encouraged. Within the circle, each member should hold equal status and should not feel that he or she is being asked to represent the point of view of accounting, sales, shipping, or whatever their home department is.

Most important, whatever ideas come out of a leadership circle should be handled in the same way they were generated: They should be rigorously and systematically discussed, debated, and explored.

Adapted from “To Seize the Future, Create a Leadership Circle,” by Joseph Pistrui

leadership-circle

Trevor Lee

tblee@ceo-worldwide.com

http://www.ceo-worldwide.com

@trevorblee

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Successful Business Transformation


9 implementation principles that will guide you toward a successful transformation:

The problems facing every company are different. They largely depend on history, culture, capabilities, and information technology. However, the importance of vision and communication cannot be overestimated.


Therefore …

A clear vision of the tasks ahead and good communication skills will enable you to navigate around the most difficult obstacles and prevent the organization sliding back into its old habits. The following principles will guide you toward a successful transformation:

  1. Think like a revolutionary

  2. Build an urgent case for change and convince the board

  3. Establish a ‘guiding coalition’

  4. Create a compelling and coherent vision for change

  5. Communicate the vision

  6. Enable and encourage people to change

  7. Look for quick wins

  8. Work around the resistors

  9. Consolidate the gains and maintain the momentum

Ed: These are principals that form the core of my friends at the Beyond Budgeting Institute – bbrt.org – and form the business model of such diverse companies as AstraZeneca, Arla, Danfoss, Handelsbanken, HILTI, Lego, MAERSK, Michelin, Sodexo, SKF, Timpson, Volvo and many more.

But getting back to point number 2,

because it is crucial to discuss how we sell the case for change to the people that matter.

Who are the key ‘influencers’ that you need to convince?

In most companies, the two primary persons to convince will be the CEO and CFO. However, it is of great importance to engage the whole organization. I will get back to that later.

While the case for change might appear to be compelling to you, it can seem too vague and “in the future” for others.

Hard-pressed managers need more organizational change like a hold-in-the-head. Therefore, the reasons must be compelling and the case well prepared and presented.


So how do we convince key influencers?

Ask yourself the following questions:

  1. What will it involve?

  2. What are the costs and benefits?

  3. Which parts of the business are affected?

  4. Is this the only option?

  5. What evidence do we have that it will work?

  6. What are the risks?

  7. How long will it take?

  8. How will we know if we have succeeded or failed?

Addressing them objectively will strengthen your credibility and increase your chances of success even though these questions are difficult to answer. 


Remember …

One common pitfall of implementation is believing that the total transformation of the model can be driven by finance (or any other one function) alone, and failing to engage other parts of organization such as Human Resources or members of the management team.

Author: Anders Olesen – Director, Beyond Budgeting Institute.  E-Mail: info@bbrt.org

transformation

Curated by Trevor Lee

http://www.ep-i.net

http://www.ceo-worldwide.com

@trevorblee

 

Experiential Discovery Learning


A guest post from Alan Matcham

Partner in Accelerance – Leadership for Business Performance

Bridging the knowing-doing gap

knowledge-2

Knowing is not the problem

Organisations are full of intellectually bright executives who have no trouble articulating a good game. Consequentially they produce an endless array of professional looking, well intentioned strategic plans, presentations, action lists, commitment statements and meeting minutes. The problem is that most, if not all, of these well intentioned initiatives fail to deliver on the majority of what they set out to achieve. This is known as; “The Knowing-Doing Gap.” The difference between what you know needs doing and what actually gets done.

Jeff Pfeffer the renowned Professor of Organisational Behaviour at Stanford Graduate School of Business and co-author of “The Knowing – Doing Gap” states it very clearly, “If you know by doing, there is no gap between what you know and what you do.”

Working with Executives over many years I have found there to be two constants in any effective learning or transformational experience. The first is the power of discovery and the second is the power of doing. Combined, these approaches have a significant impact in translating new insights into positive action. They are also inextricably linked because to discover you need to do and to do you need to discover.

This has huge implications for anyone involved in Executive Development. Designing interventions that make executives intellectually richer with more content, more concepts, more models, more theories and more plans runs the risk of fuelling the knowing-doing gap. On the other hand if you design interventions that are grounded in real business issues and learning by doing then the change that is sought will more likely be achieved.

Discovery & Doing

At its heart discovery is learning from the unorthodox and the unusual and appreciating there is learning in everything. It is about taking time to “walk in other worlds”, to get your hands dirty, to ask great questions, to let go, to see, to feel and to experience new, different and challenging perspectives and ways of doing things. In doing so the aim is to bring new and fresh insights to address an increasing array of highly complex and adaptive business challenges related to change, innovation, creativity, agility, collaboration and transformation

Organisations seeking to create a cadre of executives who will lead change, build a more innovative culture or transform their organisation in some fundamental way will not do so by seeking inspiration or insight from people in the same industry, with the same world view or with the same basic DNA. That approach inevitably leads to sameness not difference.

I go to a meeting with a group of managers who attended the programme. Met them earlier where they fired questions at me. Thought initially this programme was a bit weird.

What do visits to Salvation Army, eating in the dark with blind people and talking to researchers from Shell have to do with leading better in the bank? I was mistaken.

Entering and discovering a completely different world and to hear how motivated others are, how they take responsibility and innovate is an inspiration to think about your own role.

During the meeting today, I hear how participants take initiatives to break through their own ways of doing and realise concrete improvements. What triggers me most is that they do not talk about what others should do better, but what they themselves can do differently and better.”

Genuine quote

Chairman of a major European Bank – 2012

How and what to discover?

If you believe, as I do, that the ultimate aim of executive education is to help people think things through for themselves and their unique context then discovery should be at the core of any learning strategy. The role of the expert facilitator or programme director is to create the context within which discovery learning is optimised. This is achieved by encouraging a set of skills and behaviours which:

  • Develop curiosity

  • Develop the ability to ask great questions

  • Engage all the senses

  • Learn how to learn and find learning in everything.

  • Observe the world through different lenses

  • Experience and feel new or different emotions

  • Try new things through experimentation and testing

In my experience the most effective discovery experiences have tended to follow certain basic steps which are outlined below. Each step requires significant attention but perhaps none more than the actual execution of the experience itself. It is crucial that all participants play an active role and are fully engaged.

Over the years I have led many discovery experiences. Below are a few examples of what is possible and the learning that is available. All are based on genuine examples where the discovery experience has been tailored to specific learning objectives to help resolve specific business challenges.

The Discovery experience

The Learning

The Business Challenge or Issue

Junior school in rural China

Challenging the traditional system of learning

Culture change

Salvation Army in Holland

A cause worth serving, humility and compassion

Employee engagement.

Blind Community in Hong Kong

Overcoming adversity and working with all your senses

Collaboration, resilience and communication.

Creating and reciting poetry in Singapore

Everyone has capability and talent. Building leadership confidence

Effective communication and meaning making.

Playing Jazz and Blues in Chicago

Creativity and team work as well as fun

Interdependencies and team work. Joy in work.

Prisoner reform group in Holland

Changing deep seated behaviours and potential in everyone

Behavioural change and business transformation.

Monastery and meditation in Europe

How to reflect and be in the moment. Self awareness

Finding time to think and reflect rather than just do.

High end restaurant in Vietnam

Discipline, clarity of role, all one team and client insight.

Customer intimacy

Children’s charity for those out of mainstream education in UK

Engagement, trust, compassion and meaning

Personal and team transformation

In conclusion

Knowing is not enough and knowing more is not enough, the translation into doing is everything if meaningful change is to be achieved. Doing and knowing should not be mutually exclusive and the most effective executive programmes understand this and design in these critical attributes.

About the author:

Alan Matcham (alan.matcham@btinternet.com): Is an internationally experienced executive development programme director, facilitator and educator. A passion for making work fit for people and people fit for work. His expertise is focused on Leadership and Management transformation, working to release the untapped potential in all employees. He has a record of enabling public and private sector organisations rise to the complex challenges of the 21st century.

Curated by Trevor Lee

http://www.ep-i.net

http://www.ceo-worldwide.com

@trevorblee

The Case for Moving Beyond Traditional Budgeting


A guest post:

The budgeting process can be laborious and it may also fail to give you the results you need. In this paper Anders Olesen explains how you can move beyond budgeting – and provides case studies.

The budget is generally regarded as an indispensable management tool. The process typically provides a detailed plan for the first year in the company’s strategic plan. The budget produces targets for the coming year, a financial forecast, and an allocation of resources. The thorough process ensures coordination throughout the entire company. The budget provides management with a “stick in the ground” and a sense of control.

In this paper, I would like to demonstrate that it is possible to achieve all of the above with fewer resources and with higher quality than is possible in a traditional budget process. One of the tricks is to separate the all-inclusive budget process into several separate sub-processes.

When combining such new processes with appropriate leadership principles to form a coherent man­agement model, it is possible to unlock the organization’s full performance potential. This is what we call Beyond Budgeting.

Conflicting purposes

When asking companies about the reasons for budgeting, they almost invariably mention the follow­ing purposes of the budget:

Target setting

  1. The budget sets targets in line with the corporate strategy.

  2. Targets are broken down by division, BU, region, team, etc.; thus enabling everyone to see how they contribute to the corporate strategy.

  3. Targets are used for the annual bonus plan.

Forecasting

  1. The budget provides a financial plan for the coming year.

  2. Such financial plan – including P&L, balance sheet and cash flow – is often required by shareholders and lenders.

Resource allocation

  1. The budget provides managers with the allowed maximum spending; in monetary terms and often also in terms of headcount.

The budget is thus supposed to do many important things for us. Most will agree that the above mentioned purposes must be addressed in order to manage a company and stay in control.

A key problem with the budget process, however, lies exactly in these purposes: they are all impor­tant, but they are different and even conflicting in nature.

There is for example an inherent conflict between target setting and forecasting:

  1. A target is what you want to happen.

  2. A forecast is what you think will happen.

A target should be ambitious; it should provide direction and inspiration for the organization to reach the desired outcome.

On the other hand, a forecast should show the expected outcome. It should provide decision makers with information about where the company is heading, whether they like what they see or not. To enhance the quality of decisions, such information must be unbiased and sufficient (without drowning in details).

When combining conflicting purposes in ONE process, it is impossible to solve all of the purposes equally good. Accordingly, the traditional budget process is by default flawed.

This insight leads to the natural conclusion that the budget process should be separated into different sub-processes that are directed at each of the important purposes, as illustrated below:

There are more problems with budgeting than the inherent conflict between target setting and forecasting; some of these are reviewed in the following.

Fortunately, experience shows that when companies separate their budget process into sub-process­es this also makes it easier to address the other budget problems.

Problems with traditional budgeting

Most leaders know that the budget process has its problems; I have yet to meet anyone who claims the opposite.

Multiple studies show, for example, that the validity of the budget is relatively short. Typically, some 20- 30 % of the companies interviewed will answer that the budget is obsolete even before the budget year begins. And very often, some 60-70 % will answer that this happens during the first half of the year.

The level of waste as expressed by these figures is horrifying; where else is such waste accepted year after year?

Some of the typical problems with budgets are that:

  • the link to strategy is often weak;

  • they are very time-consuming

  • decisions are made too early and at too senior a level;

  • assumptions are quickly outdated;

  • they can prevent value-adding activities;

  • they create an ‘accordion’ forecasting horizon; and

  • they are often a bad yardstick for evaluating performance.

Often weak link to strategy

The budget is supposed to be the detailed plan for year one in the strategy period. However, expe­rience shows that very little of the budget work has anything to do with strategy. Very quickly, the budget process is reduced to a fight for less ambitious targets and more resources. This has much to do with the relatively short (one year) budget horizon and is often due to the link to bonuses.

Decisions made too early and at too senior a level

Many decisions are made during the budget process: prioritization of resources, for example. Due to the nature of the traditional budget process, we very often find that people high up in the hierarchy and far away from the situation settle disputes over resources. This can affect the quality of decisions negatively.

This means that companies – simply because of an internal process – force themselves to take deci­sions much earlier than necessary. And since the best decisions are made with the latest information at hand (i.e. as late as possible) this too means that the quality of decisions will suffer.

Prevents value adding activities

When considering an expense or investment, this question is too often asked in budget environments: “Is it included in the budget?” If so: go ahead. If not: no go – wait for next year’s budget.

During the year, new and unexpected threats and opportunities will appear; things that were not – and could not – be foreseen when preparing the budget.

Despite all good intentions in the budget process, sticking to the budget will inevitably lead to a less than optimal use of resources simply because it is impossible to foresee what will happen.

Accordion” forecasting horizon

Logically, one should think that a company’s forecasting (or planning) horizon was determined by the nature of the company’s industry and that it, accordingly, would be relatively stable over time.

However, in a normal budget environment, the forecasting horizon lasts to the end of the budget year. This means that the forecasting horizon – and hence, the focus of the organization – will vary signif­icantly during the year: from roughly 3 to 15 months. This is purely driven by the financial year-end focus and has nothing to do with the underlying business needs.

A bad yardstick for evaluating performance

In a budget environment, you are a success if you reach your budget, and this often comes with a bo­nus. On the face of it, this sounds fine, but it has several negative side effects:

  1. rational managers will fight for relatively unambitious targets; thus increasing their chances for personal success;

  2. since conditions (and budget assumptions) always change during the year (currencies, oil prices, interest rates, etc.), it can be impossible to determine what success will look like beforehand;

  3. even if the cost budget is met, this is no guarantee for the most optimal use of resources. Some parts of the organization could probably have managed with less, and others may have under-spent and missed opportunities;

  4. even if the revenue budget is met, this is no proof of success; maybe the competitors did even bet­ter and the market share came down.

Why most companies still budget

Very few disagree that the budget has the above-mentioned problems, yet most companies continue to prepare annual budgets. Why is this? Well, we can only find two explanations; either:

  1. Managers do not know what to do instead – what is the alternative?, or

  2. Managers consider the problems too small to justify a change

In the former case, the good news is that an alternative exists – as explained in this paper.

Concerning the latter, we disagree that the problems are too small to justify change. The budget is meant to support and enhance performance but is actually doing the opposite, and when the budget is more of a barrier than a support for good performance then the problem is indeed very serious and worth changing.

Will performance suffer without the traditional budget?

No – quite the contrary. It is our experience that the separation of the budget process into sub-pro­cesses has a positive impact on an organization’s performance. Simply by changing the process, you will achieve better and more meaningful targets, more relevant and timely financial forecasts and an improved use of resources… with less effort.

The largest Norwegian business school recently conducted a research project within the Norwegian banking industry. The purpose was to identify relationships (if any) between financial performance and management tools applied by Norwegian banks. For most of the analysed tools, the researchers could not prove a significant link between tool and performance. However, concerning the budget, the study had a remarkable result: the financial performance (measured over a long period) of the banks without traditional budgets was significantly better than that of the other banks.

The Beyond Budgeting principles

One of the great advantages of separating the budget process into sub-processes for target-setting, forecasting, and resource allocation is that this opens up for significant process improvements; improvements that are impossible to achieve with one common budget process.

When you address the target-setting process, for example, and start thinking about how to design the optimal process, new and interesting ideas – that were unthinkable in the one-process-environ­ment – will appear: What is actually the purpose of the target? How is this best achieved? What kind of targets should we have? How about non-financial and relative targets? Must there be a date linked to every target? Who sets the targets? How often?

Another significant advantage is that the new processes invite to and can facilitate the implementa­tion of leadership practices that can further enhance performance improvement. Accordingly, and based on the practical findings of our network, we have developed the Beyond Budgeting Principles – see box – that address both the processes and the leadership aspect.

The focus of this paper is on the process side. However, organizations must address the leadership aspects as well. For employee motivation as well as management credibility, it is crucial that management processes and leadership principles are aligned.

12 LEADERSHIP PRINCIPLES

          Governance and Transparency

1. Values – Bind people to a common cause; not a central plan

2. Governance – Govern through shared values and sound judgement; not detailed rules and regulations

3. Transparency – Make information open and transparent; don’t restrict and control it

          Accountable Teams

4. Teams – Organise around a network of accountable teams; not centralised functions

5. Trust – Trust teams to regulate and improve their performance; don’t micro-manage them

6. Accountability – Base accountability on holistic criteria and peer reviews; not on hierarchical relationships

          Goals and Rewards

7. Goals – Set ambitious medium-term goals; not short-term negotiated targets

8. Rewards – Base rewards on relative per formance; not fixed targets

          Planning and Controls

9. Planning – Make planning a continuous and inclusive process; not a top-down annual event

10. Coordination – Coordinate interactions dynamically; not through annual budgets

11. Resources – Make resources available just-in-time; not just-in-case

12. Controls – Base controls on fast, frequent feedback; not on budget variances

Some practical examples

To illustrate how the separation of budget processes can work in practice, you will find some examples in the following. The examples are from successful – but very different – companies that have combined their management processes with strong leadership principles to form coherent management models.

As you will see, the specific solutions and processes adopted vary between the companies. There are, however, also several similarities:

  1. The companies place great emphasis on values and purpose (ref. principle 1 and 2) and transparency (principle 3).

  2. Some of the companies are organized as decentralised teams (principle 4 and 5); and others have implemented the new processes as part of an effort to increase the responsibility and accountabil­ity BU’s.

  3. Several of the mentioned companies have introduced profit sharing schemes instead of individual targets and bonuses (principle 7 and 8).

CASE STUDY – Alfa Laval

Alfa Laval is listed on the Stockholm Stock Exchange and is a leading global supplier of products and solutions for heat transfer, separation, and fluid handling. 2014 revenues stood at approx. GBP 2.6 billion. The company has about 18,000 employees and activities in 100 countries.

In 1998, Alfa Laval abandoned traditional budgets and introduced a new system of financial management whereby each of the budget purposes are handled in separate sub-processes.

The reasons for the change was very similar to that of other companies: conflicting purposes inherent in the traditional budget process, budget outdated early in the year due to inevitable changes in budget assumptions, too much time and energy spent on irrelevant details, weak link between planning horizon and the business cycle, etc.

In addition, the old budget process delayed the decision and implementation of important business initiatives as many of these were not foreseen when preparing the budget (principle 9-11).

Over the latest ten years (i.e. including the recent financial crises), Alfa Laval’s EBITDA-margin has been in the 15-22 % range; which is extremely good for its industry. One of the key elements behind this strong performance is a drive for continuous improvement (principle 2 and 6).

CASE STUDY – Statoil

Statoil is an international energy company with approximately 23,000 employees worldwide and operations in 36 countries. Headquartered in Norway, Statoil is listed on the New York and Oslo stock exchanges.

Ten years ago, Statoil decided to go beyond budgeting and they have since then developed its coherent management model also referred to as “Ambition to Action”.

Each division/BU/team has its own “Ambition to Action”; Statoil’s version of a balanced scorecard. All of these are transparent to everyone in the company, and teams can anytime during the year change their own targets, KPI’s, priorities, etc. (principle 3-6 and 9-10).

Like Handelsbanken, Statoil measures its success relative to its peers. Accordingly, they have two corporate financial targets: above average on Total Shareholder Return, and first quartile Return on Capital (principle 6-7).

Statoil has developed a dynamic forecasting model, which asks units to update their forecasts when something significant has changed (principle 9-10).

The company practices a dynamic resource allocation process (principle 11), whereby new projects can be proposed at any time, and are approved or rejected dynamically based on project quality and on financial capacity available from the dynamic forecasting.

Another key principle in Statoil’s model is a holistic performance evaluation (principle 6 and 8), which includes “pressure-testing” of measured KPI performance before any conclusions are drawn, as they see KPI’s as “Indicators” only. This involves applying hindsight insights, and using information not picked up through measurement. Values and how results are achieved are also emphasized, and counts 50 % in the final evaluation.

CASE STUDY – Handelsbanken

Handelsbanken is a full-service bank with nationwide branch networks in Sweden, the UK, Denmark, Finland, Norway, and the Netherlands. Listed on the Stockholm stock exchange, Handelsbanken has more than 11,000 employees in 25 countries.

Handelsbanken has one financial target: to achieve a shareholder return that is above the average of its peers. This target has remained unchanged for 42 years; i.e. the bank spends no time on target setting. The bank has reached this target every year since it was established.

In the same 42-year period, the bank has not prepared annual budgets and it does not even prepare financial forecasts. Yet it remains in full control and it is the most cost-effective listed full-service bank in Europe. Based on five different financial measures, including financial strength, the ability to manage risk and cost efficiency, Bloomberg recently ranked Handelsbanken as the strongest bank in Europe. During the recent financial crisis, the bank did not need help from governments or shareholders; contrary to almost all other banks in Europe.

Handelsbanken is a prime example of a company that has also addressed the leadership principles. A key component of the bank’s successful and coherent management model is a highly decentralised organizational structure and a high level of transparency; the latter also enables fast and frequent feedback (principle 12).

CASE STUDY – Mainfreight

Mainfreight is a global supply chain business headquartered in Auckland, New Zealand and it is listed on the New Zealand stock exchange. The company currently has more than 240 branches around the world. In 2014, it generated NZD 1.9 billion in revenues and it employs almost 6,000 team members.

Mainfreight’s success is underpinned by its unique performance management system. This supports a strong can-do attitude (principle 1 and 2) and excludes traditional budgets. As Mainfreight expands, it removes budgets from the companies it acquires and introduces its own performance management system.

One of its key principles is to avoid centralized control processes, budgets, and bureaucracy (principle 3-6). These are regarded as ineffective and time-consuming and take managers’ attention away from the business. To illustrate this, here is a quote from Mainfreight’s latest Annual Report: “As we grow our global business we continue to resist bureaucracy and corporate bull$#@t! It is a credit to our team of 5,771 people that we still think and act like a startup.”

CASE STUDY – The Maersk Group

The Maersk Group is a worldwide conglomerate and operates in some 130 countries with a workforce of more than 89,000 employees. The annual revenue is approx. USD 48 billion (2014).

With the objective of creating a stronger link between strategy and action, Maersk has implemented a new management model based on the following design criteria: visibility, agility, control, and simplicity. A key element of the new management process is the separation of processes for target setting, forecasting, and resource allocation (principle 7, 9, 10 and 11). This has resulted in significantly improved sub-processes for each of these very important planning elements.

They also now have a more holistic view on value creation (principle 6) which is now evaluated against internal as well as external benchmarks.

Rolling forecasts combined with a new performance review process have improved Maersk’s ability to react to rapidly changing market conditions.

CASE STUDY – Coloplast

Coloplast develops products and services that make life easier for people with very personal and private medical conditions. Their business includes ostomy care, urology and continence care, and wound and skin care. Coloplast operates globally, employing more than 9,000 people.

In 2009, following a year with four downward adjustments to the stock market, management realized that changes were needed. Coloplast wanted a new process to support its very ambitious performance improvements. This meant a farewell to the traditional budget and the introduction of new sub-processes: target setting, rolling forecasts, and a flexible resource allocation.

The new processes have helped Coloplast reach more ambitious targets, and provided the company with more agility. The absence of cost budgets has actually helped increase cost consciousness (principle 11). Financially Coloplast is now outperforming its peers. The EBIT margin, which stood at 12 % in 2008, was five years later at 32 %; far ahead of its peers.

CASE STUDY – Timpson

Timpson is a retail service business with more than 1,300 outlets in UK and Ireland. Timpson offers shoe repairs, key cutting, engraving, watch repairs, dry cleaning and mobile phone repairs – its biggest service is photo processing.

Timpson applies a unique management model where the people who front the customers are the ones that run the business – everyone else (without exception) is there to help them do their job. This is what Timpson calls Upside Down Management.

There is no headquarter; a small team supporting their colleagues in the shops provides central services.

Timpson “does not waste time trying to predict the future”, as John Timpson (the company’s chairman) writes on his blog; i.e. the company is not managed through budgets; they actually don’t even prepare targets or forecasts – and they manage very well.

Timpson often features on the Best Workplace lists in the UK and across Europe, which has very much to do with its leadership (principle 1-6).

Getting started / next step: For more information or help to get started, please feel free to contact the Beyond Budgeting Institute.  bbrt.org

I hope that this paper has demonstrated the benefits of separating the traditional budget process into sub-processes. Hereby, the quality of the company’s planning efforts can be significantly improved with the same or even with fewer resources.

To achieve the full performance potential of the organization, it must also address its leadership processes. The true strength lies in the combination of the two, thus forming a coherent management model.

For established organizations to get started on a Beyond Budgeting journey, we generally recommend to start with a separation of the budget process, and to address the leadership principles subsequently.

Definition: In this article, the word “budget” refers to the corporate budget that is prepared through an annual corporate-wide process, not the personal budget or a project budget or any other variety of that which generally refers to planned income and expenses.

Anders Olesen is Director at Beyond Budgeting Institute

http://www.bbrt.org         e-mail: aolesen@bbrt.org

Curated by: Trevor Lee

tblee@ceo-worldwide.com

http://www.ceo-worldwide.com

@trevorblee

 

Challenging Organisations and Society


Management Plasticity:

Neuronal Networking as the Organizing Principle for Enterprise Architecture to Unfold Human Potential and Creativity

A guest article by FRANZ RÖÖSLI, MICHAEL SONNTAG and DOUG KIRKPATRICK 

 creative-2

Abstract

The human brain exhibits a series of unique and highly desirable characteristics. It has the ability to grow rapidly during development, to learn, adapt and self-heal after injuries. lt is capable of making new discoveries and connecting seemingly disparate thoughts. At the core of these characteristics lies the brain’s ability to self-organize and form new connections, which is described by the term ‘neuroplasticity’. In an age where adaptability, creativity, and connectedness are key success factors for organizations, a new understanding of organizations as living systems maybe called for. In this article, we want to introduce the concept of management plasticity that challenges the underlying beliefs that shape traditional organizational structures. In our case study on the highly successful tomato processing company Morning Star, we illustrate how the principles and practice of management plasticity, like neuroplasticity, allow for development and connectivity, learning and memory, creativity and leadership as well as innovation.

  1. 1. Hitting the Wall with Mechanistic Organizational Structures and Styles

The business environment has changed dramatically over the past few decades as modern economies have transitioned from the industrial age to the digital age, in which innovation and creativity have become critical success factors. Tue new and highly dynamic environment has brought an array of challenges and it seems that the old organizational structures were not suited to meet the new demands.

In this environment, restructuring has come to be seen as a panacea, with the underlying belief that if only the right organizational chart could be drawn up, businesses would once again be operating efficiently. This goal has proved to be elusive. The effort has been focused on what the organization would look like, but the way people work has not really changed. Even worse, employee morale, trust and engagement have been suffering, as numerous studies have shown.1

In our view at the core of the problem lies a linear-mechanistic understanding of organizations as machines with its deeply and therefore predominantly unconsciously underlying assumption of predictability and control. Hierarchical organizational charts are indicative of a business philosophy from a bygone era, in which maximizing machine productivity was paramount. Einstein once said: “We can’t solve problems by using the same kind of thinking we used when we created them” and we assume that the numerous counterproductive attempts at reorganization will continue or even intensify if the underlying beliefs that shape organizational structures remain unchanged.

  1. A New Understanding: lntroducing Management Plasticity

To be successful in the new era, there is evidence that companies need a culture allowing employees to develop their human potential. This calls for a new understanding of organizations as living systems that operate in a mode of sense and respond, which is radically different from prediction and control for machines.2 What are the characteristics of a contemporary organizational structure and what principles could it follow?

1 See for example (LRN Corporation, 2012), (Towers Watson, 2014). 2 See (Laloux, 2014).

Looking at how Nature manages to cope with the dynamics and complexity of our environment we can try to build a new understanding. Modern neurobiology and affective neuroscience helps us to understand how the human brain’s ‘architecture’, through evolution, is conceived to cope actively with the complexity of the outside world in the most effective and impactful way. In fact in science the human brain is considered to be not only the most complex, but also the most adaptable living system that we know in the universe. lt is inherently built for learning.3 Our brain is organized as an immense, dynamic network based on self-organizing principles. lt is capable of changing either parts of its function or even its whole organizational state within milliseconds. In neuroscience this is called ‘neuroplasticity. lt is the ability to change functions coherently and quickly with a minimum of energy invested and without having to re-build or ‘re-structure’ the organic substrate.4

Besides high adaptability, self-organizing network structures have further portant advantages:

  • They are receptive to learning.

  • They work superbly even when the information is incomplete.

  • Being redundant, they are robust in case of partial failure of the system.

But how is neuroplasticity linked to the capacity to sustainably unfold human potential and creativity?

Research shows that unfolding human potential and creativity depends on our ability to mobilize intrinsic motivation.5 From neurobiology we know that these desired features will exclusively emerge when individuals and teams are able to act autonomously.6

  1. See (Fuchs, 2009).

  2. See (Haken & Schiepek. 2006). 5 See (Pink, 2010). 6 See (Panksepp & Biven, 2012).

On the other hand, not being able to act autonomously and to protect our integrity actively in the case of potential threat is a key cause of fear and chronic stress. In a state of chronic stress, as we all know, our overall health is impaired but also our cognitive capacity, e.g. our ability to think clearly and to create new understanding and connections is reduced dramatically – we are no longer able to find new solutions. But also our ability to connect socially, the precondition to ask for help, is dramatically impaired. Tue neuroplasticity of our brain declines severely. Even worse: under stress we ‘regress’. We often return to our old strategies of action, exactly those ‘proven’ strategies which have caused the existing rigidity and inability to act. Tue negative process is intensified. Stress and the energy invested to survive and ‘keep control’ increases while the energy reserves are ‘burned out: This is the case on an individual as well as on the organizational level.

Conversely, if a person has the organizational not only personal capability to act freely, in a self-organizing manner, the brain is stimulated and the energy level will increase. In this positively stimulated state, clear and flexible thinking is enabled and new thought patterns and innovative approaches arise. The eagerness to connect socially, which is the precondition for creativity, and the ability and willingness to act in a goal-oriented manner will rise. The brain’s neuroplasticity is boosted.

As we have seen, the traditional management approach with its rigid, command-and-control structures, division of labor into functional silos and underlying human nature assumptions attempts to ‘manage’ and control the individual and to minimize his or her ability to act autonomously. Thereby it creates exactly the opposite conditions to those that would be .necessary to unfold human potential and creativity. Having understood these basic principles, we have to conclude, that if an organization wants to meet the new economic conditions by enabling the unfolding of its human potential and creativity, it will have to build organizational structures enabling freedom to act within good relationships. Tue resulting organic, plastic structure is a dynamic network of self-organizing individuals and teams.7

Setting the organizational parameters correctly will facilitate neuroplasticity, problem solving and constructive actions, the preconditions to survive in the dynamic and changing circumstances of today’s economy.

Therefore we define management plasticity as the ability of organizational management to engage the energy and potential of each member to collaboratively, creatively and effectively learn from and adapt to dynamic internal or external changes, opportunities or threats.

  1. Morning Star as a Prototype

    1. lntroduction

California entrepreneur Chris Rufer formed Tue Morning Star Packing Company to process tomatoes near the small town of Los Banos, California. In the spring of 1990, a tiny farmhouse on the outskirts of town became a beehive of round-the-clock activity. The tiny farm kitchen became a conference room, where an endless parade of job applicants, bankers, regulators, vendors, and contractors met together in nonstop organizational meetings.

Chris and his team focused with intensity on getting the new factory up and running. A successful startup would declare an entirely new level of industry competition. Most of Morning Star’s new employees (including Doug Kirkpatrick, a co-author of this article) had left secure jobs to join the team. If the venture failed, there would be short-term personal disruption, but most of them would be able to find new employment. For Chris, however, everything was at risk.

7 See (Sonntag, 2012).

In a March 1990 organizational meeting with the founder (attended by co-author Kirkpatrick), Morning Star adopted two core principles: first, people should not use force or coercion against other people, and second, people should honor the commitments they make to others.

The first loads of tomatoes arrived at Morning Star’s first new state-of-the-art facility in mid-July of 1990 and kicked off a successful processing season, producing over ninety million pounds of bulk tomato paste for the world market. Morning Star is now the largest tomato processor in the world, with over $700 million in annual sales, its products consumed by virtually everyone in North America and millions more around the world.

While Morning Star owes much of its success to an innovative low-cost production strategy, much of its success is also traceable to its unique organizational philosophy of self-management, which is core for an organizational modus operandi of sense and respond. As a successful self-managed organization, it is a case study in management plasticity.

    1. Organizational Design and Philosophy

Morning Star exhibits zero hierarchy. There are no human bosses; the only boss is the mission. The operating philosophy is total self-management. Morning Star employees consider themselves professional colleagues.

Since command authority does not exist in the company, there is no unilateral authority to fire. Colleagues acquire or culminate the services of others by invoking written Colleague Principles. No one has a title, which reinforces Morning Star’s self-management philosophy. Everyone has an equal voice regarding decisions that affect them.

While lacking formal structure, there are resources available to help colleagues synchronize their activities with others. Each colleague executes a Colleague Letter of Understanding (also known as a CLOU). The CLOU is a dynamic, transparent, negotiated accountability agreement between colleagues declaring each individuars personal commercial mission, process stewardships, and performance measures.

Morning Star’s success takes place in a complex and demanding business environment. Morning Star colleagues continuously navigate complex disciplines that include cell biology, plant genetics, microbiology, food chemistry, thermodynamics, meteorology, global currency exchange and many others. The Colleague Letter of Understanding is a key navigational and communication tool that enables management plasticity by creating networks of individuals based on the resource requirements and urgency of diverse problems and opportunities.

  1. Interpretation of Morning Star’s Management Plasticity

There is as much need for leadership in a self-managed organization as in a hierarchical one; self-managed leadership is just dynamic rather than static- it completely depends on the issue and the individuals. Leadership in such an ecosystem can rotate and evolve naturally, depending on the circumstances. No particular leadership style is required, and many leadership styles can work well. Morning Star’s expression of self-managed leadership fits our definition of management plasticity. lt also proved to be a key enabler of Morning Star factory construction. A small band of self-managed colleagues in 1990 (about 24 during the construction phase) were able to oversee the construction of a new, state-of-the-art, $27 million dollar factory in a period of just a few months. This project and others could not have been completed on time with traditional, command-and-control hierarchies. Paradoxically, the very simplicity of the two simple foundational principles adopted in 1990 facilitated the management plasticity driving Morning Star’s growth. People had no choice but to manage with adaptability, agility and flexibility. There were simply no traditional management systems available to do it otherwise.

With the advent of successful new organizational models like that of Morning Star, it is worth asking the question: how do the properties of neuroplasticity inform the emerging theory and practice of management plasticity?

Morning Star’s organizational network resembles a spider web of connectivity. All associations between members are voluntary, and digitally recorded in the CLOU. When these connections are rendered in a diagram, they resemble a neural network. If one were to make a time-lapse movie of such a diagram, it would dynamically change shape and size as individuals enter and leave the ecosystem or voluntarily renegotiate their relationships and commitments. Morning Star’s actual organigraph is depicted above, built from a digital rendering of CLOU data.

One benefit of management plasticity is that organizations become more resilient and are able to adapt with flexibility to dynamic change. Threats and opportunities cause Morning Star’s human network connectivity to change rapidly in response, much like a human brain; it is all about a constant flow of sense and respond. Clusters of connections form and dissipate in response to organizational needs. Tue rapidity of this formation and dissipation is often startling – attempting to concoct or reorganize teams in a traditional hierarchical model would be glacially slow in contrast. Co-author Kirkpatrick has personally engaged with multiple temporary hot teams formed to address issues like spiking insurance costs and capital project management.

Self-managed organizations have also demonstrated, like human neural systems, the ability to regenerate themselves and self-heal.8 When an individual leaves the Morning Star ecosystem, roles and responsibilities are quickly relocated by self-managing peers, without direction or control. If the individual exiting the system possessed a unique talent or skill that cannot be quickly replicated by others, colleagues engage a recruitment and selection process to fill any gaps.

Morning Star’s member colleagues experience no structural barriers to communication with anyone in the organization. Learning is an ‘always-on’ activity, as members in similar and dissimilar functions and locations seek information from each other that will improve their own performances, and those of their peers. Members of individual business units that cross multiple factories (for example, Steam Generation) come together at least annually to formally share learnings and experiences. These formal meetings augment continuous informal communications that drive superior performance and innovation.

Creativity is another natural benefit of neuroplasticity. The virtuous cycle of absorbing new and outwardly unrelated ideas, and connecting them in unexpected ways, is the essence of human creativity. Does management plasticity provide similar benefits to organizations?

For decades, the tomato processing industry used energy-hungry elevators to carry loads of tomatoes uphill into flumes for processing in factories. Morning Star’s founder, Chris Rufer, observed that unloading trucks on top of a hill would allow gravity to carry tomatoes into the factory without the use of elevators. Today, the concept of an unloading hill is an industry standard. Similarly, he observed that evaporating water from tomatoes to produce concentrate required the use of large, inefficient cooling towers to cool water for reuse. He replaced the cooling towers with large ponds, and let the water cool down naturally through evaporation. In each case, creatively integrating natural methods of movement (gravity) and temperature change (evaporation) with industrial processes proved to be disruptive to an entire industry. In these examples, neuroplasticity and management plasticity worked together: neuroplasticity catalyzed new connections and creativity in the mind of the innovator, while management plasticity drove implementation.

When everyone is a manager, as in the case of Morning Star’s self-managed ecosystem, the benefits of management plasticity are widely distributed. In one recent example (2014), a mechanic identified an innovation in material management: the handling and usage of chemicals. The innovation, which generated a compelling return on investment, depended on the creativity of one individual with an ability to foresee improved process outcomes. The flexiblity of a self-managed environment, endowed with management plasticity, allowed that individual to creatively envision a desired future state, personally communicate the benefits to peers, re-design the process, create buy-in, and successfully implement the change.

8 See also (LRN Corporation, 2012).

  1. How to Start a Journey Toward Management Plasticity

How can enterprises that have been built on traditional command and control management structures and tools take steps toward greater management plasticity, i.e. enterprises that have not been built from scratch in a self-managed manner like Morning Star? In the natural sciences, experiments are fundamental to progress and success. In contrast, in the business world, experiments will often face bitter opposition, as they are perceived as carrying uncontrollable risks with possible undesired outcomes. Yet experiments can pay off precisely because of their very nature of accepting unpredictability and failure and therefore fostering learning and adaptation in contrast to traditional projects within the outdated predict-and-control fashion of traditional management.9 Examples of possible managerial experiments toward management plasticity are10:

  • Voluntary participation in meetings of all kinds·

  • Voluntary participation in projects or experiments

  • Access to all information for all employees

  • Time and space for the employees to develop their creativity

  • Abolition of formal talks on target agreements and incentives (also financial)

  • ·Abolition of job descriptions

  • Abolition of traditional budgeting and budget targets

Such kinds of experiments support management plasticity and the opportunities to live up to one’s full potential as lived by the Morning Star Company. This is in line with the call for management plasticity, which sees neuronal interconnectedness as a metaphor for a new organizational understanding.

  1. Conclusions

Building an organizational structure based on self-organizing, dynamic networks releases trapped human potential and leads to creativity, as well as to a whole field of other positive and critical features in today ‘s complex and fast changing world, as we have seen in the Morning Star case. These include adaptability, resilience, ability to innovate and self-healing capacity.

In the end, to really unfold human potential and creativity, we argue that courageous leaders will be needed everywhere in organizations to transform the traditional management mode of predict and control into a new mode of sense and respond that we have defined by the term management plasticity in this article.

  1. See (Hamel & Zanini, 2014).

  2. See detailed examples in (Kirkpatrick, 2011) and (Hope, Bunce, & Röösli, 2011).

creative-2

ABOUT THE AWESOME AUTHORS

Franz RÖÖSLI, PhD, is a professor at the University of Applied Sciences Zurich (ZHAW), management trainer and Director of the Beyond Budgeting Round Table (BBRT), an international, membership-based practitioner and research community. He had worked in different companies in leadership positions including member of the executive team before he started an academic career. His research and consulting interests are organizational behavior, leadership and management innovation. He co-authored the book “The Leader ‘s Dilemma”. Contact: franz.roeoesli@zhaw.ch
Doug KIRKPATRICK is the author of Beyond Empowerment: The Age of the Self-Managed Organization. He is a former financial controller for The Morning Star Company and a participant in the adoption of its unique self-management philosophy. He is an organizational change consultant, TEDx and keynote speaker, executive coach, writer, educator and SPHR. Contact: doug@redshift:3.org
Michael SONNTAG is a medical doctor, Bioenergetic Analyst (trained by Alexander Lowen) and management consultant. He is specialized in teaching and creating the conditions needed to enable, enhance and govern deep transformational and self-healing processes, both on an individual and an organizational level. Contact: m.sonntag@sonntag-consulting. ch

Curated by Trevor Lee

http://www.ep-i.net

http://www.ceo-worldwide.com

@trevorblee

 

References

Fuchs, T. (2009). Das Gehirn ein Beziehungsorgan. Eine phänomenologisch-ökologische Konzeption. Stuttgart: Kohlhammer.

Haken, H., & Schiepek, G. (2006). Synergetik in der Psychotherapie Selbstorganisation verstehen und gestalten. Göttingen; Hogrefe.

Hamel, G., & Zanini, M. (2014). Build a change platform, not a changeprogram. Retrieved November 12, 2014, from McKinsey Insights & Publications:http://www.mckinsey.com/ insights/organization/build_a_change_platform_not_a_change_program

Hope, J., Bunce, P., & Röösli, F. (2011). The leader’s dilemma how to build an empowered and adaptive organization without losing control. Chichester: John Wiley & Sons.

Kirkpatrick, D. (2011). Beyond empowerment the age of the self-managed organization.

Sacramento: Morning Star Seif-Management Institute.

Laloux, F. (2014). Reinventing organizations a guide to creating organizations inspired by the next stage of human consciousness. Brussels:Nelson Parker.

LRN Corporation. (2012). 1he HOW report new metrics for a new reality: rethinking the source of resiliency, innovation and growth. Retrieved März 9, 2014. Archiviert mit WebCite ais http://’\\’W\V.webcitation.org/6NwNkhUsk, from http://www.lrn.com/howmetrics/ data/LRNHowReport2012.pdf

Panksepp, J., & Biven, L. (2012). The archaeology of mind neuroevolutionary origins of human emotions. New York: W. W. Norton.

Pink, D. H. (2010). 1he surprising truth about what motivates us. Edinburgh: Canongate.

Sonntag, M. (2012). Jenseits von Managed Care -Wie aus unserem Gesundheitswesen ein modernes und wertgenerierendes System entstehen könnte. Schweizerische Ärztezeitung, 93, pp. 729-730.

Towers Watson. (2014). Towers Watson Global Workforce Study 2014. Retrieved November 12, 2014, from http://www.towerswatson.com/en/lnsights/IC-Types/Survey-Research­ Results/2014/08/the-2014-global-workforce-study

No more Command and Control. Please!


growth-1

In order to power growth you should aim for an adaptive and empowered organization, that:

  • Responds rapidly to threats and opportunities.

  • Adaptive organizations operate with speed and simplicity by giving managers the scope to act immediately and decisively within clear values and strategic boundaries. Making strategy an open, continuous and adaptive process is the key. It enables the firm to react to emerging threats and opportunities as they arise rather than being constrained by a fixed and outdated plan.

  • Attracts and keeps the best people.

  • It is no coincidence that Adaptive Organizations such as Google, Handelsbanken and W.L. Gore regularly appear in the lists of “best companies to work for”. The reasons are obvious. From the employee perspective, talented people want to learn and develop; they value time to think, reflect and try new ideas; they want decision-making responsibility and they want a friendly, collegiate culture. From the employer perspective, they want people who have the right attitude, have ideas and can add value, want to participate in decision-making, are good team players and have the talent to become leaders at any level.

  • Enables and encourages continuous innovation.

  • Innovation is about thinking and acting differently whether it is about strategies, business models, processes, or management practices. In adaptive organizations, people work within an open and self-questioning environment. Clear governance principles set the right climate and builds the mutual trust needed to share knowledge and best practices. This is also encouraged by the move away from individual rewards based on budgets and toward team rewards based on business unit or group performance.

  • Drives operational excellence.

  • Adaptive organizations have lower costs. Not only do they connect the work that people do with customer needs, but they also align products, processes, projects, and structures with their strategy. Operating managers also challenge resources used rather than seeing them as ‘entitlements’. Just asking the question, “Does it add value to the customer?” is often sufficient to ensure that unnecessary work is eliminated.

  • Leads to loyal and profitable customers.

  • Adaptive organizations know how customers want to conduct business with them. Key issues are whether customers just want the lowest-cost transaction, added-value services, or customized solutions. Under this “outside-in” approach, firms know how to satisfy customers’ needs profitably. This means not only knowing their needs, but also their net profitability.

  • Support good governance and ethical behaviour.

  • Adaptive organizations are held together by strong values and inviolate principles. However, it is not a soft option. It exposes nonperformers. It challenges people all the time. You cannot just agree on a number. You have to show people that you can actually achieve real performance improvements, and must always be prepared to be judged against others with similar problems and opportunities.

  • Leads to sustained value creation.

  • Leaders in Adaptive organizations focus their attention (either explicitly or implicitly) on creating wealth over the longer term. In particular, they focus on setting high performance expectations and stretching people’s ambitions. Those companies that operate this way tend to beat the competition not just this quarter or this year but year after year.

Clearly adapting in these ways the organisation that will emerge will replace the 20th century industrial age command and control management model that is no longer ‘fit for purpose’.

A viable alternative* that will provide a sustainable basis for high performance.

*BBRT.ORG will assist you on this journey as it has done alongside so many leading organisations (see website)

Trevor Lee

tblee@ceo-worldwide.com

http://www.ceo-worldwide.com

@trevorblee

 

 

Decoding Intuition for More Effective Decision-Making in 2017


It turns out that intuition is not really intuition at all.

Just like the invisible, inseparable quarks that underlie the protons and neutrons in the nucleus, rules of thumb (ROTs) are the fundamental, sometimes invisible, particles of CEO decision-making. They are the building blocks that underlie what CEOs describe as “intuition” or “gut feel.”

Ask an experienced CEO how she/he made a major decision and their typical response is “intuition” or “gut feel.” Yes, analysis also plays a role, but intuition was found to be a major or determining factor in 85% of thirty-six major CEO decisions that we studied.

Some were good decisions, some were not, but regardless, intuition seemed to always rule the roost.

intuit-2

But what is it?

After persistent and deft questioning, CEO’s will identify, sometimes to their surprise, judgmental heuristics — ROTs — that go a long way towards explaining their major decisions. It is these building blocks that we must examine in order to discriminate between “good” and “bad” intuition.

After CEOs identify a few ROTs, a torrent of supplementary ones often follows. Some CEOs argued, however, that they use values for guidance, not ROTs. But values alone don’t provide clear guidelines. Only when they are operationalized into ROTs do they serve as decision-making tools.

At Odebrecht S.A., a large ($22B) Brazilian conglomerate, the CEO and founder’s grandson, Marcelo Odebrecht and the rest of the company’s leadership are dedicated to upholding the company’s core values: trust and partnership. But when it came down to actual decision-making it became clear, after considerable probing, that the company operated with four basic ROTs derived from these overarching values and passed down from generation to generation of Odebrechts:

1. Decentralize operations
2. Decentralize strategy
3. Promote only from within
4. Partner with your customer

These ROTs guided CEO Marcelo Odebrecht when, despite serious misgivings, he decided to support his Brazil Director’s call to take over the construction of the Pan American Games facilities in Rio de Janeiro from another contractor. Marcelo did not interfere in his Director’s decision because of his commitment to his ROTs (#1 and #2) and because the director was a long-term employee who had “drank the Odebrecht Kool Aid” (ROT #3).

Business leaders ignore their intuition at their own peril. When Gustavo Cisneros, the CEO of the Cisneros Group, was considering a 50/50 partnership with AOL to establish AOL Latin America, his board, his family and his management team were united in endorsing the deal.

On the other hand, Cisneros had a gnawing feeling that Latin Americans were different from U.S. customers, and they would not pay a subscription fee to use the internet. But because everyone, including AOL’s intense and charismatic leaders — Steve Case and Bob Pitman — saw it as a great deal, Gustavo sublimated his intuition. Five years later, after a bankruptcy filing and nearly a billion dollars in accumulated losses, Gustavo regrets not having paid more attention to his “intuition.” Now Gustavo has a new ROT: “Never make a deal if it doesn’t feel right with your intuition.”

Bill Amelio, former President and CEO of Lenovo, learned the same lesson, even though he’d deliberately produced his own set of personalized rules of thumb, after taking on the challenge of merging Legend Computer and the IBM PC division into what we now know as Lenovo.

Here’s Bill’s list (amended following the merger, as described below):

Strategy:

1. Identify and concentrate on the critical few decisions.
2. A call is better than no call.
3. Give your decisions a short leash. Quickly pull back in case of mistake.
4. Trust your intuition.

People:
1. Communicate the critical few decisions effectively and repeatedly.
2. Don’t tolerate jerks.
3. Build a team of people you can trust and rely on.
4. Trust your intuition.

Self:
1. Get feedback early and often and act on this feedback.
2. Earn the trust and confidence of others.
3. Demonstrate vulnerability to gain credibility.
4. Play to your strengths.
5. Trust your intuition.

To build a new management team he could rely on (ROT — People #3), Amelio demoted a man who had contributed much to the development of Legend, someone the Chinese refer to as a “made man.” Bill went through the right process and got his Chinese Chairman to sign off. But he ignored his intuition and the body language of the Chairman when he responded cryptically that as CEO he had “full authority to decide.”
The result was a major debacle in which Bill was faulted for ignoring the values of Chinese culture and caused a significant loss of trust. Amelio consequently added “Trust your intuition” (ROT — Self #5) to his rules.

Discovering, and continuously updating, rules of thumb is an important task for every CEO. It is a fundamental element of self awareness. Yes, values and beliefs are important, but it is really ROTs that operationalize and bring down to earth what really guides CEO decision-making. These rules can then be identified, challenged and adapted as circumstances change.

 

intuit-1

Trevor Lee

tblee@ceo-worldwide.com

http://www.ceo-worldwide.com

@trevorblee

Executive Search & Interim Management since 2001
Connecting you with the best certified executive talent on the planet