Maybe I always thought that change was an important component of leadership … I really can’t remember any more. But, I do remember the moment when my current appreciation for the link between the two became really clear to me. For four years as a graduate student, I was a research assistant to John Kotter at Harvard Business School. He was interested in what made leaders into leaders and wrote and researched a great deal on the topic — eventually he was named the Konosuke Matsushita Professor of Leadership at Harvard.
A few years after he was named THE leadership guy at HBS, I realized that he was no longer talking a lot about leadership. He was spending a lot more time talking about “change.” I was puzzled by the shift, but the answer was simple. He told me: “I finally distilled the essence of leadership down into what leaders really do. What a real leader does is changes the way that other people do things.”
Kotter had written an early book describing the differences between leaders and managers. And when you think about it, getting people to do the same thing over and over again is management; getting people to do something different is truly leadership. It is one of the best definitions of the difference between those two words that I’ve ever heard.
Thus, good leaders have to be leaders of change.
Not all organizational changes will involve a change in the prioritization of Goods. I’ve seen plenty of companies that have gone through some sort of wrenching change — as the company decides to globalize, for instance. The greatest Good is still Growth, but the determination has been made that growth can’t come from the local market any more, so there needs to be a new external focus for the corporation.
But, often a big change involves a shift in what the organization is ultimately trying to accomplish. And the more explicit this shift is, the better.
While countries can change their goods and sometimes do, the priorities of nations usually stay in place for a much longer time than they might for organizations. The inertia of a nation is just a lot bigger than for a company. With really strong leadership, even countries can change their focus — especially in the face of a crisis or a major opportunity.
But, there are some other good reasons why you see major strategic changes in an organization. For instance, customers may have new needs; new technologies may be emerging; or your competitors are getting stronger. Sometimes the shift in prioritization of Goods comes because of new leaders who bring with them, their personal priority set.
However, there is one prediction I can make without potential refute. If you don’t regularly reassess the priority of your Goods and either recalibrate or re-emphasize your current prioritization, I know that over time your organization will become one that emphasizes Stability over all else.
For some organizations, Stability is exactly the Good they should emphasize. I want my electricity utility to be highly focused on stability — well … I suppose I want them to emphasize Lifeor safety first, but after that stability. I want to be sure that I get my electricity in an uninterrupted way. I don’t want them to be tinkering with the system as they try to grow their revenues or profits. I just want to pay about the same amount every year and get the same services.
Even so, there are other organizations that would not choose Stability as their most important strategic goal and yet they find themselves making decisions based primarily on that basis. This is the process of bureaucratization. As individuals, we like to have some assurance of stability in our lives. When a large number of individuals in an organization are all seeking that stability, you get lots of routinization and boundary building. And, it is hard to hack your way out of that icy wasteland of bureaucracy. So, as a leader, you need to constantly assess and assert your Eight Great Goods.
One of my favorite examples of an organization that has been struggling with identity — partly because they don’t have a clear set of Eight Great Goods priorities — is a school in Glendale, Arizona called Thunderbird School of Global Management. I’ve been associated with the organization for two decades and have watched it go through a major change of Goods from which it never really recovered.
Thunderbird was established in 1946 at a decommissioned air base in the Arizona desert. The charter of the original school was to teach students — many of them recently discharged military men on the GI bill — foreign languages and cultures to ready them for jobs outside of the US. The classroom buildings and dorms were just the old barracks and hangers from the air base that were repurposed for educational programs. The control tower building, for instance, became the “student union.”
Through its first 40 years, the school took a very practical bent — lots of language classes, along with culture, business and government courses often taught by recently retired practitioners. This strategy was all about Society — helping students to better connect to the world around them and become valuable contributors to our increasingly global society. Students claimed that one of the most valuable parts of their time at Thunderbird was the socialization with students from so many different nationalities who became friends for life. The entire program was very human relationship centric.
And, it developed a strong reputation — especially outside of the US. When I took a job at Thunderbird in 1994, a colleague from Brazil informed me that he thought Thunderbird was better regarded in his country than was Harvard.
When I first visited the campus, the education, students, and teachers were all in stark contrast to Harvard Business School where I had been educated. I was, honestly, enthralled with the fact that I could sit in a corporate strategy course team-taught by a really smart theoretician and a recently retired IBM executive. The conversations became real world based applications of the theory they were learning. It all seems so … relevant.
In the early 1990s a new president was brought in with a much more traditional academic background. Until that time Thunderbird was a big hit with students, but it was not so popular with professional educators. The way to prestige in academia was with lots of publishing in academic journals and this was not the forte of the average teacher at Thunderbird. So a new class of academics was hired — mostly young folks but, from good schools — with a strong potential; and a deep interest — in publishing.
Since rankings of MBA programs were based to a large degree on the publications and reputation of academic personnel, Thunderbird’s star began to ascend quickly. When US News & World Report started ranking “International” business programs, Thunderbird became a perennial list topper.
Over the next few years, the school made some wrenching changes. In terms of the Eight Great Goods, the school moved from a focus almost exclusively on Society to one on Growth and Individuality. The master’s degree, which had been called an MIM (Master’s of International Management), was dropped in favor of an MBA degree. The language requirement for real proficiency in a second language was abandoned. And the third of the school that had focused on International Policy was almost completely dismantled — the professors, for the most part, “outplaced”.
The focus of the curriculum was business, students were no longer encouraged to take jobs in not-for-profits or governments upon graduation — it was argued that the lower salaries in those professions kept the schools’ rankings low; and there was increasing emphasis on the discipline of finance which helped graduates in finding jobs on Wall Street — where the high salaries help drive up rankings. While students would still congregate at the on-campus Pub for socializing, the professors, for the most part, did not. The professors became more traditionally academic — sequestered in their offices trying to pound out the next academic article and eschewing Master’s level teaching because it interfered with their research. The introduction of an Executive Education program at the school added further Growth focus to the faculty. Executive Education paid faculty members a lot more than teaching the master’s students. And, the revenue from those classes went mostly into faculty pockets rather than to the school itself.
Meanwhile tuition for the MBA program went up — to very near Harvard Business School levels — but enrollment went way down. When I first joined Thunderbird, there were about 1500 master’s students on campus. When I reconnected with the school in the mid-2000s, the campus felt like a ghost town. There were only about 500 students on campus at that time.
The decrease in head count — regardless of higher tuition — was wreaking havoc on finances. By the time a new president came into the school in 2003, the school was hemorrhaging almost $10 million a year. What had once been a very self-sufficient business model based on Society, had turned into a financial wreck when the priorities changed to Growth and Individuality.
A shift like this need not necessarily have such dire consequences. In fact, you would expect a focus on Growth would usually lead to better financial management. But, in this case, individual faculty members reaped the harvest of a Growth emphasis — some of them making as much as a half million dollars a year while the school was sinking into receivership.
Furthermore, there was another important incongruence. The students were still coming to the school based on its reputation for an emphasis on Society. Sure they came to get an MBA, but Thunderbird students were not your usual group of MBA students. They were former peace corps volunteers, missionaries, nurses, writers, and philosophers who were surprisingly — for MBAs — much more interested in traveling the globe and in making the world a better place than they were in making a buck. The priority of the students never changed from their emphasis on Society.
This disconnect between what Master’s students wanted and what Thunderbird offered became a source of tremendous tension.
Under the direction of the new president, the school has stopped losing money, but still is not anywhere close to being in good financial shape. Also, the rankings of the school continue to slide. Interestingly, the highest overall ranking the school ever achieved in the Business Week MBA list — number 25 — was in the mid-1990s when Thunderbird wasn’t even offering an MBA! Since then, overall rankings of the school have dropped. The School has managed to retain good rankings in Global education and regularly does very well on Wall Street Journal rankings that look at the quality of students and the student’s reputations among employers. The school still attracts students who want to be different from the usual MBA, and their employers appreciate that.
The president of Thunderbird recognizes this too and continues to try to edge the focus of the faculty away from Individuality and Growth — in both curriculum and behaviors — but, the president is a natural Society-based leader who wants consensus for change. That consensus is not forthcoming and the stand off between student (customer) priorities and school (faculty) priorities continues to this day.
I started this section talking about John Kotter and his theories of change, but it was interesting to be a fly on the wall in some of the meetings with him and his team as he was starting up his company, Kotter International. John has always been a bit of a nonconformist, rankling at any system or process that tied him down too much. Academia is good for that kind of individual freedom. Unless you are on the administrative side of higher education, you can actually create a lot of autonomy for your career. But now, for the first time, Kotter was trying to start a company of his own. With the first couple of employees, he gave them the same the autonomy that he had always fought for in his career. But as the company grew, he realized that there had to be rules. In fact, Stability was a more important Good than he’d ever realized when he was just doing things on his own. His employees couldn’t be inside Kotter’s head all the time, and they were all creative talented people themselves. So, rather than having them out selling and delivering dozens of different products as the Kotter “system,” he quickly discovered that he was going to have to create a standard and hold everyone to it. I watched as Kotter had to make the shift quickly from Individuality and Joy to Stability, Society, and Growth. And while this was a necessary change in his new firm, the irony was not lost on him: Here was a company that was all about telling clients how to change and it was adopting Stability as its greatest Good.
The toughest wars, debates and disagreements come when the combatants are supporting a different version of the same Good. Religious wars, ethical disagreements, economic model diatribes, and tribal clashes are all examples of different interpretations of the same Goods. Changing from one version of a Good to another version can be equally challenging. That is what I found myself in the middle of as a Board member at Choice Humanitarian — a non-profit charity for poverty alleviation and village development based in Salt Lake City, Utah.
I was invited onto the Board of the organization at an interesting turning point in their history. They had been founded by Mormons and developed a network around the world based on connections to Mormon missionaries and communities. Everyone on the Board, when I started talking to them, was Mormon. But the CEO had a notion that the Society of Choice Humanitarian should not be the Mormon community but, rather, the world. One of their country managers was by that time a non-Mormon and they had decided that they wanted to expand their Board — and their fund raising efforts — beyond the confines of Utah. I had grown up Mormon but had left that belief system behind long before, so it was thought that I might be a good “bridge” to a bigger world for them.
The first efforts to make the change were almost comical. I’ll never forget the offsite in Mexico where a group of teetotalling Mormon retirees had a day of leadership training led by two non-Mormon gay men. After a tense afternoon session in which one member of the Board was reprimanded by the gays for his sexist ways — he consistently interrupted and talked over the one woman Board member every time she tried to add anything to the discussion — the dinner conversation was commandeered by one of the gay consultants who expounded on the finer points of understanding a truly great beer.
Eventually a non-Mormon CEO was hired and the Board expanded to a handful of non-Mormons. But it was a rocky road. Board votes on new initiatives tended to split Mormon versus non-Mormon. And the new CEO was concerned that the cultural gulf between the two Societies might be too great for the organization to bridge.
And he was right.
Eventually the non-profit reverted to its largely Utah roots. Making perhaps a fair assessment that for consistency and uniformity of decision-making, Choice Humanitarian needed to retain its focus on Mormon Society. It had tried valiantly to shift its definition of Society, but failed.
I’m sure the difficulty, yet necessity, of changing Goods can be seen not only in the company stories that I’ve watched personally. Just look around at some of the big companies that have seen changes in their histories. You probably have some pretty good stories yourself. And there are plenty in the news on an almost daily basis.
In an earlier chapter I talked about Sears trying to change its strategy. It was basically moving from an emphasis on Stability (“Protect the Assets of the Company”) to Society (customer focus).
Toyota had long been known as a car company devoted to quality control and safety (Stability and Life). New management and an increasingly international Board pushed Toyota to focus more on Growth in the last decade. During the car company’s safety and recall crisis in early 2010, the company’s new CEO, the 53-year-old grandson of Toyota’s founder, was quoted on the front page of The Wall Street Journal as saying: “Toyota’s rapid expansion in recent years attracted much praise from outside the company, and some people just got too big-headed and focused too excessively on profit.” (“Toyoda concedes profit focus led to flaws” WSJ, March 2, 2010)The elevation of Growth in their priorities had caused problems that created the first economic loss for the firm in 50 years. Now the company admits that they have re-elevated their focus on quality, longevity of the firm and the sanctity of Life as their primary goals.
Remember, none of this is to say that Growth is unimportant to Toyota or any other firm; just that priorities can and do shift.
Another case that I watched from the inside — but if you read the papers at the time, you probably know about it too — was the shift from Andersen Consulting to Accenture. Arthur Andersen, an audit firm that sadly saw its demise during the Enron scandal, had its start — as do many accounting firms — as a company and culture focused on Stability. There is not much that happens in the business world that is more about Stability than accounting and audit rules. This is the place where companies have to show that they comply with the law of the land. And the auditors are there to make sure that the companies do that — or at least look like they are doing that. From this foundation of audit, a consulting firm — Andersen Consulting — got its start. But Andersen Consulting was not, at the beginning, anything like the McKinseys or the Bains of the world. AC consultants were not advising CEOs about broad far-reaching strategic views. The firm’s bread and butter was in computer system implementation and the reason that Andersen Consulting was better than almost anybody else doing this kind of implementation is that they had a rule book — which was a damn good rule book — called Method/1. This was such a rigid process — much like a good audit — that the New York Times called Andersen’s a “culture of clones” in a 1992 article (September 6, 1992). In addition to the focus on Stability, there was also Society — very little mid-career hiring and a feeling that you were part of the Andersen Consulting family when you joined the partnership. Also, Fairness mattered a whole bunch — career paths were clearly laid out. No one got a promotion inside Andersen until they had the proper tenure with the firm — no matter how talented they were.
In the early 2000s, the firm split with Arthur Andersen formally and changed its structure from a partnership to a listed corporation. Suddenly, the culture and the priorities also shifted significantly. Growth became the main focus, but there was also more focus on Individuality — and individual merit — than in the past. Accenture has been very successful with this strategy. The firm has tripled the number of employees and more than doubled its share price since it made the shift in Good prioritization.
It should be obvious from the stories above that organizational changes in priorities can happen, but they are tricky. Some happen quickly — particularly when there is pent up “demand” for the change or there has been a crisis that drives an organization to redefine itself. Some intended changes never quite “take” and the organization reverts to the safety of an old set of priorities. But to be successful, the leadership of the organization must be involved. And the more explicit the change is, the better. If you can let your people know that you’re shifting from a Stability focused organization to a Joy based organization and, if your actions are consistent with that message, you stand a much better chance of making the change successfully.
To see if your change efforts can be improved by using the Eight Great Goods tool, try the following exercises:
1) As a leader, prioritize your own personal Eight Great Goods. What is most important to you personally? If you have a leadership team in place that is helping you to lead, ask them to list the priorities they believe are in place in the leadership team.
2) Ask your employees what they think the organization’s Eight Great Goods are. If you are the leader of the organization, employee’s perceptions of your priorities and the organization priorities will probably closely align. But if they are different, that should be cause for an interesting discussion about why your decisions and the organization’s Goods are different.
3) Ask your employees and customers what priorities you and the organization SHOULD focus on.
4) Meet with your people and discuss how you can make decisions that will better reflect what the organization’s Goods should be. If you are saying that your priorities are one thing, but your decisions are reflecting another prioritization, how do you change your decisions to make the two align?
5) If you are in the middle of a change effort in the organization, how would the change be characterized from an Eight Great Goods perspective? Would your employees be able to tell you how the Good’s prioritization would change based on the efforts you have initiated?