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The 13th Global Peter Drucker Forum again raised business critical questions such as: “Can big businesses be humanized” and “How fast should you transform your business. The answers were: “YES you can humanize a big company “, and “you need to CHANGE your perception on how fast a strategic change of your business will be”.
Drucker Forum 2021
Parallel Panel #7 – Can Big Business be (Re)humanized?
Moderator
Amy Bernstein Editor, Harvard Business Review & VP Harvard Business Publishing
Speakers
Hubert Joly Senior Lecturer Harvard Business School; former CEO, Best Buy
Claudio Fernández-Aráoz Executive Fellow for Executive Education, HBS
Maurice Lévy Chairman of the Supervisory Board, Publicis Groupe
Patricia Pomies Chief Operating Officer, Globant
Parallel Panel #9 – Leading People through Change – Hoch much? How fast?
Moderator
Jenny Darroch Dean, Farmer School of Business, Miami University in Oxford
Speakers
Roger L. Martin Strategy advisor; former Dean, Rotman School of Management
Sara Mathew Non-executive Chair, Freddie Mac; former CEO Dun & Bradstreet
Elsbeth Johnson Senior Lecturer MIT’s Sloan School of Management, Managing Director, SystemShift
Michael Watkins Professor of Leadership and Organizational Change at the Institute of Management Development and Co-Founder of Genesis Advisers
Can big businesses truly be humanized
The focus of this year’s Drucker Forum was on the leader him- or herself. Many top leaders are indoctrinated by the old- stereotyped picture of a leader- the hero, who knows it all and will guide his or her people on what to do and how do it. In a VUCA world, 80% of leaders, according to Hubert Joly, understand and want to adopt the new humanized leadership model, better suited for the current dynamic economy, but find it very hard to do. According to Joly, leaders’ true purpose is to transform from only being great business leaders to also become great human leaders. Today’s leaders must lead with, not only the brain, but also with their heart and soul. Therefore, leaders need to start with themselves and ask: “what is my true purpose as a leader?”. Getting some coaching help could be one way of managing this transformation, as mentioned in last year’s Forum.
Another factor that plays an important role in humanizing businesses is who the board select as the next CEO. According to Maurice Levy, board rooms are haunted by Milton Friedman and his maximizing shareholders’ value mantra as the ultimate duty of any board. Whilst boards recognize this may not be useful anymore, they struggle to discard it. Perhaps if boards started seeing and accepting the importance of an CEO as a great human leader, as well as a great business leader, they might recognize that better performance comes from better human qualities.
How fast should leaders push the transformation of their businesses
The panel shared the view that many leaders should “slow down” the transformation to achieve true strategic change of their business. The hunt for quick wins, could according to Dr. Elsbeth Johnson play some role to demonstrate success, but is not in any way a proof for true long-term change, which demands a true shift in mindset and of the technical system. Instead, leaders should view a transformation more long-term and understand that for a real change to happen, behavior need to change, supported by changes in structure, compensation and more. This reminds me about the excellent model developed by Schein and Schein (2017) in their book ‘The Corporate Culture Survival Guide’ in which they discuss cultural transformation from three perspectives: social culture (behavior), technical culture (the design), and the macro culture (influences from outside, for example fads such as Holacracy, Lean, and more).
In fact, the leader should during a transformation focus on ‘outcomes’ and ask the right questions to their people in the organization, rather than take on the role of the central agent for change. Johnson referred this phenomenon to ‘Magic Delusion’ in which the leader over values his or her own role and contribution to change. The risk then is that the change process will stop as soon as that leader has left the company. Other risks are the; ‘Drama delusion, the Activity delusion, and the Agency delusion. With the Drama delusion Johnson means that the change needs to be perceived as fast and action packed but is then also very risky. With Activity delusion she refers to the risk of focusing on quick wins, rather than on a long-term change. Finally, with Agency delusion she means the same as Schein and Schein (2017) stated, namely that a change in people and their behavior is not enough for a change. Instead, a change requires also changes in the technical system.
An excellent example on a leadership team that BOTH has humanized their company and successfully managed a long-term transformation, from being a cash cow to start being a winner in the digital age, is the leadership team at GE Appliances (GEA).
The team did 4 simple things:
a) Defined a leading goal
b) Promoted and role modelled a new set of beliefs (culture)
c) Reinvented the organizational structure and how different units were to be aligned with each other
d) Redefined the compensation system
The transformation of GE Appliances was not falling into any of Johnson’s ‘delusion traps.’
Let us start with the first one, ‘Magic delusion’. The transformation was and is not conducted by Kevin Nolan, the CEO himself. Instead, he got advice from Mr. Liang at Haier, and he consulted his senior leadership team and asked them to suggest solutions for working more ‘user focused’ and to become a winner in the North American market. Nolan trusted his senior leaders, so that important decisions were made based on senior leaders’ involvement and competences. Further, Nolan also avoided the ‘Agency delusion’, as GEA, after Nolan’s alignment with senior leaders, performed technical changes of management processes, structure, and compensation system, which in turn required a new behavior as well from leaders, between units, and between people on different levels. Regarding the ‘Drama delusion’, GEA did several of the big changes already during the first 12 months. However, the leadership team perceived the risk to stay ‘AS-IS’ as larger than to perform the changes during the first year- and they had key stakeholders with them. So even if many changes were done during a short time period, the team was not looking for quick wins (the ‘Activity delusion’) as they believed they had to change to stay relevant in the digital age. Their focus was, and still is, long-term and their transformation journey has not stopped. Neither will it, as the external environment continuous to change.
For more information about GE Appliances transformation, please read:
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About the Author:
Dr. Annika Steiber is a Professor, Best-Selling Author, Speaker, Founder, Investor and the Director of the Rendanheyi Silicon Valley Center. She is the author of eight management books.