- Email: [email protected]
Leading in an increasingly complex society
Technology in Society 26 (2004) 371–374 www.elsevier.com/locate/techsoc
Leading in an increasingly complex society George M.C. Fisher Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0229, USA
Abstract As our world has become increasingly complex, everything has changed; yet, in an even larger sense, nothing about great leadership has changed. Just as the great institutions of the past had strong but different cultures underpinned by explicitly stated or implicitly understood values and principles, so too, the great organizations of today and tomorrow require top leaders who consider their most important job to be the creation, nurturing and, yes, carefully adapting value-based cultures which enable organizations and their people to prosper while consistently adhering to well-understood values and operating principles. # 2004 Elsevier Ltd. All rights reserved. Keywords: Institutional culture; Institutional values; Institutional complexity; Institutional behavior
As a young person, I was always intrigued to read articles or to listen to talks given by wise people uttering clearly profound thoughts on any number of subjects. How did they become so wise, or were they born that way? Or, perhaps (blasphemy) they really did not know that much more than anyone else but just had the nerve to act like they did? Well, now, with the passage of many years, I find myself asked to utter profound thoughts on very complex subjects about which I really probably do not know that much more (and maybe less) than most of the intended readers. Suffice it to say that it is with great trepidation that I agreed to offer some thoughts on managing—or as I prefer, leading—in an age of complexity. I will try my best, but I am not an expert, only an aspiring student with lots of failures to teach me why some successes may have occurred. I am also a good student who has been privileged over many years in business to have observed and learned from some very effective leaders.
Tel.: +1-585-724-5150; fax: +1-585-724-9070. E-mail address: george.fi[email protected] (G.M.C. Fisher).
0160-791X/$ - see front matter # 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.techsoc.2004.01.011
372
G.M.C. Fisher / Technology in Society 26 (2004) 371–374
First let us stipulate that the world is inexorably marching toward greater complexity. In fact, I would assert, because of the increasing sophistication of society and its concomitant increasing regulation and technological progress, that without the force of a natural dialectic to reset the process, our lives and businesses follow a social second law of thermodynamics—with complexity in the analogous role to uncertainty or entropy. Whatever the philosophical basis of the condition of humankind, we do, indeed, live in very complex times; and whether you are in business, the academy, or other not-for-profit entities, I suppose it matters not how we got here but much more on how effective we are in our roles as judged by the performance metrics applied (fairly or unfairly) to our domains. For purposes of most of this discussion, I want to assume that we are dealing with our effectiveness as leaders of organizations, which by definition means that our success is really a measure of how well our associates perform with our guidance. Also for the purpose of this discussion, I would like to focus on leadership versus management—good leadership roughly relating to the ability to take an organization in a value-adding direction it might not have otherwise gone without us and doing it in a way that gives our people hope and optimism for the future of the enterprise as well as for their personal opportunities for fulfillment. Perhaps it is beneficial here to say a few words to distinguish between management and leadership. Both are necessary, and every person in an organization should at times be a leader and/or a manager. I think of a manager as being responsible for the day-to-day achievement of organizational goals. In that sense, much like a good athlete, he or she has to anticipate a course of events, select a mode of action, commit the resources (personal or collective) to the actions, and then execute flawlessly, and do this repeatedly day after day. By contrast, I see the leadership role being to set the tone and broad direction for the organization. In this role, he or she must be the owner or protector of the culture, based on the fundamental values and operating principles of the organization. The leader must envision the future strategic direction and create an environment that is both enabling and energizing to members of the organization. The leader provides a context for his own and other management roles and sets broad expectations for successful performance. Last, but not least, at the very top level, the leader must be the architect and guardian of the brand and the culture of the institution. Some people seem to be better managers than leaders, and vice versa, but most have to perform in both roles simultaneously without giving much conscious thought to the distinction. My fundamental thesis in this paper is that in an increasingly complex world great institutional leadership is dependent on creating and maintaining a great culture. Organizational culture drives everyday decisions. All organizations have a culture; but great leaders create cultures that reflect their own values and beliefs. At the end of the day, one would hope that each person in our organization makes decisions as we would, based on well-understood values and principles. If the organization does not already understand what the leader, by action or words, feels to be the essential values and principles of the organization, then let us not be surprised at the unintended consequences of renegade behavior patterns in our
G.M.C. Fisher / Technology in Society 26 (2004) 371–374
373
organization. Hence, I would suggest that a primary, and possibly most important, role of a leader is to clearly define the principles and values that underpin the culture and which, in fact, drive the decisions of each and every person every day. An important element of establishing a good culture has to be the minimization of conflict between expectations and values. A well-understood role of managers and leaders is to establish clear and demanding expectations of the organization; but this sometimes forces people into a conflict position (e.g. driving for X% revenue growth consistently or meeting quarterly earnings expectations while maintaining integrity in revenue recognition or accounting practices). A great leader must make it clear that the ultimate judgments must be based on values, not on motivational expectations. There is no unique ‘‘correct’’ set of values or operational principles that are definitive of the perfect culture. In fact, organizations thrive on their uniqueness, and each exists at a different point in its maturation or renewal cycle. Although most could agree that integrity and respect for the dignity of the individual should be basic to all organizations, there are many other values or operating principles that are explicitly stated and/or practiced. In fact, there is sometimes a temptation to define too many, as our world becomes more and more complex. In so doing, we face the danger of watering down the ones for which we must be absolutely unwavering. Also, actions we take, which contradict what we espouse to be our values, are not only confusing to our people but quickly tear down the desired culture. Actions do, in fact, speak louder than words. Cultures do, however, have to change and adapt to new or future realities. It is ironic that building a strong culture, which results from the long-term and consistent practice of core values and principles, can necessarily take time frames that are long in comparison to the relatively short time constant for change in an increasingly competitive world. In order to change an organization in a timely way, one is often confronted with the challenge of breaking the old culture (which is far too easy to do), but not being able to adapt it to an even stronger, more competitive culture quickly enough. As a result we can look back on some of the strongest, best-performing companies of the past and see how the strength of their old culture made them far too slow in adapting to a more competitive model for a new world. Our success does sometimes tend to slow our ability to adapt quickly to new ways. Changing a culture is, however, a fragile thing; and we must always be aware of and, in fact, emphasize those few underlying values and principles that are time invariant, even as we drive for a cultural change to address an increasingly complex world. Part of the apparent growing complexity facing us today derives, for the most part, from a dramatic push driven by competitive and budgetary forces for improved productivity in our organizations. Even though we have many more Information-Age tools, there is no doubt that each person must be asked to do more with fewer dollars. At the same time, the dimensions of our work are quickly escalating. Although many are not new issues, the depth of involvement has increased significantly. In business, we see not only the traditional customers, employees, suppliers, and community relationships that must be nurtured, but
374
G.M.C. Fisher / Technology in Society 26 (2004) 371–374
now, more than ever, a myriad of complex and important legal, regulatory, environmental, accounting, governance, and human relations forces coming to bear on managers and leaders at every level of our organizations. So, together the drive for improved productivity at a time of increasing job complexity dictates that more people have larger spans of control and larger job scope, and leaders must create an environment and culture in which lower levels make increasingly big decisions on very complex subjects. Thus there derives the growing importance that every person in the organization understands and practices the core values and principles that underlie the culture. In fact, every interface with a constituent, every decision large or small, presents a ‘‘moment of truth’’1 in which the institutional values and culture come head to head with a real test of whether the values are universally believed and practiced or whether they are merely verbal platitudes. By their actions you will know them, more than by any words. The real culture of an institution derives from the collective, accepted actions of its members. If those actions are seemingly at odds with the desired culture, then trouble is brewing. I suspect many of the corporate accounting problems of recent years were enabled by cultures that placed revenue recognition and short-term stock price growth and personal gain above all else in daily decisions, even though the companies would each purport to have desired a culture based on the usual good values, including total integrity. If we really want to see what a company values, just look at what it incents and rewards the most. You do, indeed, get what you pay for, and it may not be what you really want since sometimes along the way, means and ends do get mixed up. In a sense, as our world has become increasingly complex, everything has changed; yet, in an even larger sense, nothing about great leadership has changed. Just as the great institutions of the past had strong but different cultures underpinned by explicitly stated or implicitly understood values and principles, so too, the great organizations of today and tomorrow require top leaders who consider their most important job to be the creation, nurturing and, yes, carefully adapting value-based cultures, which enable organizations and their people to prosper while consistently adhering to well-understood values and operating principles as they manage through our increasingly complex society. George M.C. Fisher is the retired Chairman and CEO of Eastman Kodak Company and former chairman and CEO of Motorola, Inc. He holds a Bachelor of Science degree in Engineering (1962) from the University of Illinois, and a Master of Science degree in Engineering (1964) and a PhD in Applied Mathematics (1966) from Brown University. Fisher is chairman of the National Academy of Engineering, a member of The Business Council, and a Senior Advisor for Kohlberg Kravis Roberts & Company. He is a director of Eli Lilly and Company, Delta Air Lines Inc., and General Motors Corporation.
1
Borrowed from Mr. Jan Carlzon, former CEO of Scandinavian Airlines.
Leading in an increasingly complex society George M.C. Fisher Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0229, USA
Abstract As our world has become increasingly complex, everything has changed; yet, in an even larger sense, nothing about great leadership has changed. Just as the great institutions of the past had strong but different cultures underpinned by explicitly stated or implicitly understood values and principles, so too, the great organizations of today and tomorrow require top leaders who consider their most important job to be the creation, nurturing and, yes, carefully adapting value-based cultures which enable organizations and their people to prosper while consistently adhering to well-understood values and operating principles. # 2004 Elsevier Ltd. All rights reserved. Keywords: Institutional culture; Institutional values; Institutional complexity; Institutional behavior
As a young person, I was always intrigued to read articles or to listen to talks given by wise people uttering clearly profound thoughts on any number of subjects. How did they become so wise, or were they born that way? Or, perhaps (blasphemy) they really did not know that much more than anyone else but just had the nerve to act like they did? Well, now, with the passage of many years, I find myself asked to utter profound thoughts on very complex subjects about which I really probably do not know that much more (and maybe less) than most of the intended readers. Suffice it to say that it is with great trepidation that I agreed to offer some thoughts on managing—or as I prefer, leading—in an age of complexity. I will try my best, but I am not an expert, only an aspiring student with lots of failures to teach me why some successes may have occurred. I am also a good student who has been privileged over many years in business to have observed and learned from some very effective leaders.
Tel.: +1-585-724-5150; fax: +1-585-724-9070. E-mail address: george.fi[email protected] (G.M.C. Fisher).
0160-791X/$ - see front matter # 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.techsoc.2004.01.011
372
G.M.C. Fisher / Technology in Society 26 (2004) 371–374
First let us stipulate that the world is inexorably marching toward greater complexity. In fact, I would assert, because of the increasing sophistication of society and its concomitant increasing regulation and technological progress, that without the force of a natural dialectic to reset the process, our lives and businesses follow a social second law of thermodynamics—with complexity in the analogous role to uncertainty or entropy. Whatever the philosophical basis of the condition of humankind, we do, indeed, live in very complex times; and whether you are in business, the academy, or other not-for-profit entities, I suppose it matters not how we got here but much more on how effective we are in our roles as judged by the performance metrics applied (fairly or unfairly) to our domains. For purposes of most of this discussion, I want to assume that we are dealing with our effectiveness as leaders of organizations, which by definition means that our success is really a measure of how well our associates perform with our guidance. Also for the purpose of this discussion, I would like to focus on leadership versus management—good leadership roughly relating to the ability to take an organization in a value-adding direction it might not have otherwise gone without us and doing it in a way that gives our people hope and optimism for the future of the enterprise as well as for their personal opportunities for fulfillment. Perhaps it is beneficial here to say a few words to distinguish between management and leadership. Both are necessary, and every person in an organization should at times be a leader and/or a manager. I think of a manager as being responsible for the day-to-day achievement of organizational goals. In that sense, much like a good athlete, he or she has to anticipate a course of events, select a mode of action, commit the resources (personal or collective) to the actions, and then execute flawlessly, and do this repeatedly day after day. By contrast, I see the leadership role being to set the tone and broad direction for the organization. In this role, he or she must be the owner or protector of the culture, based on the fundamental values and operating principles of the organization. The leader must envision the future strategic direction and create an environment that is both enabling and energizing to members of the organization. The leader provides a context for his own and other management roles and sets broad expectations for successful performance. Last, but not least, at the very top level, the leader must be the architect and guardian of the brand and the culture of the institution. Some people seem to be better managers than leaders, and vice versa, but most have to perform in both roles simultaneously without giving much conscious thought to the distinction. My fundamental thesis in this paper is that in an increasingly complex world great institutional leadership is dependent on creating and maintaining a great culture. Organizational culture drives everyday decisions. All organizations have a culture; but great leaders create cultures that reflect their own values and beliefs. At the end of the day, one would hope that each person in our organization makes decisions as we would, based on well-understood values and principles. If the organization does not already understand what the leader, by action or words, feels to be the essential values and principles of the organization, then let us not be surprised at the unintended consequences of renegade behavior patterns in our
G.M.C. Fisher / Technology in Society 26 (2004) 371–374
373
organization. Hence, I would suggest that a primary, and possibly most important, role of a leader is to clearly define the principles and values that underpin the culture and which, in fact, drive the decisions of each and every person every day. An important element of establishing a good culture has to be the minimization of conflict between expectations and values. A well-understood role of managers and leaders is to establish clear and demanding expectations of the organization; but this sometimes forces people into a conflict position (e.g. driving for X% revenue growth consistently or meeting quarterly earnings expectations while maintaining integrity in revenue recognition or accounting practices). A great leader must make it clear that the ultimate judgments must be based on values, not on motivational expectations. There is no unique ‘‘correct’’ set of values or operational principles that are definitive of the perfect culture. In fact, organizations thrive on their uniqueness, and each exists at a different point in its maturation or renewal cycle. Although most could agree that integrity and respect for the dignity of the individual should be basic to all organizations, there are many other values or operating principles that are explicitly stated and/or practiced. In fact, there is sometimes a temptation to define too many, as our world becomes more and more complex. In so doing, we face the danger of watering down the ones for which we must be absolutely unwavering. Also, actions we take, which contradict what we espouse to be our values, are not only confusing to our people but quickly tear down the desired culture. Actions do, in fact, speak louder than words. Cultures do, however, have to change and adapt to new or future realities. It is ironic that building a strong culture, which results from the long-term and consistent practice of core values and principles, can necessarily take time frames that are long in comparison to the relatively short time constant for change in an increasingly competitive world. In order to change an organization in a timely way, one is often confronted with the challenge of breaking the old culture (which is far too easy to do), but not being able to adapt it to an even stronger, more competitive culture quickly enough. As a result we can look back on some of the strongest, best-performing companies of the past and see how the strength of their old culture made them far too slow in adapting to a more competitive model for a new world. Our success does sometimes tend to slow our ability to adapt quickly to new ways. Changing a culture is, however, a fragile thing; and we must always be aware of and, in fact, emphasize those few underlying values and principles that are time invariant, even as we drive for a cultural change to address an increasingly complex world. Part of the apparent growing complexity facing us today derives, for the most part, from a dramatic push driven by competitive and budgetary forces for improved productivity in our organizations. Even though we have many more Information-Age tools, there is no doubt that each person must be asked to do more with fewer dollars. At the same time, the dimensions of our work are quickly escalating. Although many are not new issues, the depth of involvement has increased significantly. In business, we see not only the traditional customers, employees, suppliers, and community relationships that must be nurtured, but
374
G.M.C. Fisher / Technology in Society 26 (2004) 371–374
now, more than ever, a myriad of complex and important legal, regulatory, environmental, accounting, governance, and human relations forces coming to bear on managers and leaders at every level of our organizations. So, together the drive for improved productivity at a time of increasing job complexity dictates that more people have larger spans of control and larger job scope, and leaders must create an environment and culture in which lower levels make increasingly big decisions on very complex subjects. Thus there derives the growing importance that every person in the organization understands and practices the core values and principles that underlie the culture. In fact, every interface with a constituent, every decision large or small, presents a ‘‘moment of truth’’1 in which the institutional values and culture come head to head with a real test of whether the values are universally believed and practiced or whether they are merely verbal platitudes. By their actions you will know them, more than by any words. The real culture of an institution derives from the collective, accepted actions of its members. If those actions are seemingly at odds with the desired culture, then trouble is brewing. I suspect many of the corporate accounting problems of recent years were enabled by cultures that placed revenue recognition and short-term stock price growth and personal gain above all else in daily decisions, even though the companies would each purport to have desired a culture based on the usual good values, including total integrity. If we really want to see what a company values, just look at what it incents and rewards the most. You do, indeed, get what you pay for, and it may not be what you really want since sometimes along the way, means and ends do get mixed up. In a sense, as our world has become increasingly complex, everything has changed; yet, in an even larger sense, nothing about great leadership has changed. Just as the great institutions of the past had strong but different cultures underpinned by explicitly stated or implicitly understood values and principles, so too, the great organizations of today and tomorrow require top leaders who consider their most important job to be the creation, nurturing and, yes, carefully adapting value-based cultures, which enable organizations and their people to prosper while consistently adhering to well-understood values and operating principles as they manage through our increasingly complex society. George M.C. Fisher is the retired Chairman and CEO of Eastman Kodak Company and former chairman and CEO of Motorola, Inc. He holds a Bachelor of Science degree in Engineering (1962) from the University of Illinois, and a Master of Science degree in Engineering (1964) and a PhD in Applied Mathematics (1966) from Brown University. Fisher is chairman of the National Academy of Engineering, a member of The Business Council, and a Senior Advisor for Kohlberg Kravis Roberts & Company. He is a director of Eli Lilly and Company, Delta Air Lines Inc., and General Motors Corporation.
1
Borrowed from Mr. Jan Carlzon, former CEO of Scandinavian Airlines.