May 2011

The Big Idea: The Wise Leader

Reprint: R1105B

In an era of increasing discontinuity, wise leadership has nearly vanished. Many leaders find it difficult to reinvent their corporations rapidly enough to cope with new technologies, demographic shifts, and consumption trends. They can’t develop truly global organizations that operate effortlessly across borders. And they find it tough to ensure that their people adhere to values and ethics. The authors assert that leaders must acquire practical wisdom, or what Aristotle called phronesis: experiential knowledge that enables people to make ethically sound judgments.

Wise leaders demonstrate six abilities: (1) They make decisions on the basis of what is good for the organization and for society. (2) They quickly grasp the essence of a situation and fathom the nature and meaning of people, things, and events. (3) They provide contexts in which executives and employees can interact to create new meaning. (4) They employ metaphors and stories to convert their experience into tacit knowledge that others can use. (5) They exert political power to bring people together and spur them to act. (6) They use apprenticeship and mentoring to cultivate practical wisdom in others.

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The Power of Small Wins

Reprint: R1105C

What is the best way to motivate employees to do creative work? Help them take a step forward every day. In an analysis of knowledge workers’ diaries, the authors found that nothing contributed more to a positive inner work life (the mix of emotions, motivations, and perceptions that is critical to performance) than making progress in meaningful work. If a person is motivated and happy at the end of the workday, it’s a good bet that he or she achieved something, however small. If the person drags out of the office disengaged and joyless, a setback is likely to blame.

This progress principle suggests that managers have more influence than they may realize over employees’ well-being, motivation, and creative output. The key is to learn which actions support progress—such as setting clear goals, providing sufficient time and resources, and offering recognition—and which have the opposite effect.

Even small wins can boost inner work life tremendously. On the flip side, small losses or setbacks can have an extremely negative effect. And the work doesn’t need to involve curing cancer in order to be meaningful. It simply must matter to the person doing it.

The actions that set in motion the positive feedback loop between progress and inner work life may sound like Management 101, but it takes discipline to establish new habits. The authors provide a checklist that managers can use on a daily basis to monitor their progress-enhancing behaviors.

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Being More Productive

Reprint: R1105D

Allen, the author of the best seller Getting Things Done, and Schwartz, the author of the best seller Be Excellent at Anything and the CEO of The Energy Project, are two of the world’s foremost authorities on increasing personal efficiency. Yet although they agree on much, their ideas on how to maximize the output of knowledge workers are fundamentally different. In this edited conversation with HBR, they discuss their own approaches and what they’ve learned from each other’s work, along with subjects ranging from the distractive pull of e-mail to the benefits of napping in the middle of the workday.

Allen has developed a system of time management that encourages workers to regularly make to-do lists—and helps them blast through the items on them. Breaking down big tasks into smaller “next actions” can help people stay focused and productive, he argues, and multitasking is to be avoided at all costs: We have only so many resources and can do only one thing well at a time.

Schwartz focuses on workers’ attitudes and how organizations can help them achieve a mental state that keeps their energy high. People should work for 90 minutes and then take a break to recover, he says. They should tackle their most important task first thing in the morning. And managers should consider themselves “chief energy officers,” inspiring and regularly recharging the people they lead—while remembering to meet their own needs as well.

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The Case for Executive Assistants

Reprint: R1105E

As technology has transformed the workplace and organizations have downsized, companies have sharply reduced the ranks of administrative assistants. But many firms have gone too far.

In their zeal for cutting administrative expenses, numerous organizations now count on highly paid middle and upper managers to arrange their own travel, file expense reports, and schedule meetings. Some companies may see a type of egalitarianism in this assistant-less structure—believing that when workers see the boss loading paper into the copy machine, it creates a “we’re all in this together” spirit.

But as a management practice, that approach rarely makes economic sense. Generally speaking, work should be delegated to the lowest-cost employee who can do it well. Yet while companies seem to have embraced that logic by outsourcing work to vendors or to operations abroad, they ignore it back at headquarters.

In this article, Duncan, a longtime recruiter of C-suite executive assistants, argues that a good assistant is a crucial productivity booster for a busy executive—one that offers a solid ROI if he or she is deployed correctly.

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The Cosmopolitan Corporation

Reprint: R1105F

Never mind what you’ve heard about the world being flat. Today’s global landscape is marked by unbalanced growth, protectionism, and ethnic, religious, and linguistic divides. Differences still do matter.

The ideal of a truly global, stateless corporation has become popular, but it simply isn’t possible to achieve, says the author. Look at Rupert Murdoch’s News Corporation. A major player from Australia to the United Kingdom to the United Sates, the company made huge blunders in its move into TV services in Asia, ignoring English-speaking residents’ preference for local-language content and touting satellite TV as a threat to totalitarian regimes everywhere (prompting a ban on satellite dishes by the Chinese government). News Corporation had transcended its Australian origins but not its roots in English-speaking democracies.

Crafting a global strategy and organization is possible, but you must focus on understanding the differences among people, cultures, and places—not on eliminating them. One tool that can help you get a handle on the most critical differences is a rooted map, which sizes countries according to measures that reflect a particular nation’s perspective, such as the amount of industry services they purchase from domestic companies.

A cosmopolitan approach may lead firms, at least in the midterm, to concentrate more on adaptation to local markets than on aggregation or arbitrage. It has various other implications as well. Firms will have to think about how to readjust their organizations to better manage external distances, and they must cultivate leaders who know how to bridge cultural and national differences.

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How to Build Risk into Your Business Model

Reprint: R1105G

To create value, companies typically focus on revenue, cost structure, and resource velocity. Improving those factors is the main focus of management literature. But all of them are vulnerable to sharp changes in demand and supply.

Companies can innovate their business models to reduce the impact of such swings. But they can also create value by adding some risk. For instance, more than 30 years ago Rolls-Royce identified a major pain point in the aircraft industry: maintenance of airplane engines. An engine breakdown grounds the plane while the airline pays for repair time and materials. So Rolls-Royce offered a service contract whereby the airline would pay for an engine’s flight hours rather than for time and materials. The new contract triggered a completely new value creation dynamic, because Rolls-Royce was motivated to improve its own products and maintenance processes.

Business model innovations are much cheaper than product and technology innovations, and they can be approached in a systematic way. Furthermore, nearly all the big ones have already been done—so you can simply adapt them to suit your own situation.

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The Frontline Advantage

Reprint: R1105H

The managers most responsible for a company’s success or failure happen to be the ones with whom the CEO spends the least amount of time: frontline managers, such as shop-floor supervisors, heads of R&D or sales teams, and managers in restaurant chains or call centers. That’s a mistake, says Hassan, the CEO who led dramatic turnarounds at Schering-Plough and Pharmacia and who is now a senior adviser at Warburg Pincus.

In this article, Hassan makes the case that systematic interactions with individual and small groups of frontline managers are important to executing a company’s strategy and represent an all-important feedback loop that allows the CEO to stay abreast of the latest developments in the business.

He provides guidelines for how CEOs and other senior managers should structure interactions with this vital, and often overlooked, cadre of managers.

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The Globe: Cracking the Next Growth Market: Africa

Reprint: R1105J

In the 2000s, the African economy finally began to stir. Africa is today the world’s third-fastest growing region, and its collective GDP is equal to Brazil’s and Russia’s. Africans spend nearly $900 billion on goods and services—far more than Indians do. Pent-up consumer demand on the continent is enormous, and so are the opportunities: Consider that telecom companies have added 316 million subscribers—more than the U.S. population—in Africa since 2000.

Yet because of political instability and poverty, many companies have reservations about Africa. To help managers assess whether growth will continue there—and if so, where—McKinsey conducted an economic analysis of the continent and studied its consumer markets. The conclusion: Companies can no longer ignore Africa. But they need to manage risks, develop innovative strategies to deal with gaps in infrastructure and training, and recognize that it isn’t one market. There are four main types of economies: diversified, oil exporting, transition, and pretransition. Each presents a different set of opportunities and challenges, and executives must develop their strategies accordingly.

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How I Did It: The CEO of Duke Energy on Learning to Work with Green Activists

Reprint: R1105A

Rogers was a freshly minted CEO trying to lead Public Service Indiana back from the brink of bankruptcy when the results of a 10-year federal study on acid rain were released. He became convinced that legislation to curb sulfur dioxide emissions was inevitable—and that his industry should have a seat at the negotiating table. Though his peers were opposed to any government action, cap and trade looked to him like a smart and creative compromise that would enable utilities to modernize their plants and meet aggressive emissions targets without sending electricity prices skyrocketing.

In 1990 Rogers testified before Congress in support of cap and trade, which was established by the Clean Air Act Amendments that year. A relatively high number of allowances gave PSI time to make a deliberate and sustainable transition to cleaner generation. Within three years the company’s market capitalization had increased by more than 65%, while its price to customers had dropped. By 1995 its sulfur dioxide emissions were down by 30%.

PSI acquired a national reputation; it merged with Cincinnati Gas & Electric to create Cinergy, which in 2006 merged with Duke Energy. Together with 21 other companies and five leading environmental organizations, Duke created the U.S. Climate Action Partnership to lobby for strong federal legislation to reduce greenhouse gas emissions.

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Managing Yourself: Extreme Productivity

Reprint: R1105K

A veteran top executive at two giant mutual fund companies, the author has also been an attorney, a government official, a law school professor, and a business school professor—sometimes simultaneously. Over the years, he has devised a number of principles and practices to maximize his personal productivity without sacrificing his health or family life. In this article he presents six of them.

Know your comparative advantage. Focus not on what you do best but on what your organization most needs from you—and don’t spend too much time on operational details.

It’s not the time you spend but the results you produce. Most executives put a huge amount of time into their jobs, assuming that more hours equal more value added. That’s too simplistic.

Think first, read or write second. Figure out your argument in advance; then jot down your four or five key points and write the concluding paragraph.

Prepare your plan, but be ready to change it. Arrive early for a speaking engagement in order to grasp the mood of your audience and tailor your speech accordingly.

Let others own their space. Instead of assigning detailed tasks, present general priorities and let your reports decide how to implement them.

Keep things short and simple. Routine meals, naps, and travel habits can save time, effort, and health.

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