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 / Summer 2003 / Issue 31(originally published by Booz & Company)


The Leadership Challenge 2003

Look at what happened at IBM. People who had counted on their IBM options and stock for all those years had lost confidence. The competitors were cutting them up. Analysts were saying, “Maybe we ought to break the place up.” And Lou Gerstner came in, and he had to instill confidence. And what did he say? “The last thing we need is a vision. We have to deliver.” His book is a very good look at CEO leadership. He said, “You know, the first thing we found out is that the servers were overpriced. People said we should get out of the server business.” He said, “That wasn’t the problem. Get the pricing thing down and let’s be competitive in that core business.” That’s what an operator does.

S+B: Is execution-based leadership a form of charisma? 

Khurana: The word “charisma” has been misused a lot. I’m a sociologist, too, so it has very specific meanings to me. Charisma is often contrasted with what’s called rational authority. Charismatic authority is seen as something that emanates from the individual. It’s about people who have a radical vision of the world, who use the force of their will to draw authority, and legitimacy for that authority. Rational leadership is really the hallmark of Western capitalism, in which the person’s leadership and authority comes from experience and judgment, and is in fact very much circumscribed and bounded within their realm of expertise. The last 10 years in business was a throwback to charismatic authority that has always proven to be unstable and uncertain.

Roman:  But look who remains standing at the end of the day. Microsoft. You wouldn’t call Bill Gates charismatic. You’d say, “Gee, these guys know what they’re doing and they seem to do it.” And they do it consistently, as opposed to the others, who are just a flash in the pan.

Pasternack:  What we are really saying is that you need people who understand alignment and adaptability, who can diagnose what’s going on in the world around them and continually push the company to the next level.

Roman:  That’s what Lou Gerstner does so well. He was my client when he was at American Express. He is an awe-inspiring strategic thinker. He will assess the problem, and he will decide the thing that he wants to do. He will set a strategy, and then he will set the plans, and then he lines up compensation systems that get the whole organization moving in that direction. Harold Geneen said it when he was running ITT: “Words are words, promises are promises, but only performance is reality.”

S+B: I guess during the charisma era, that focus on execution may have gotten lost at a lot of firms.

Roman:  It was the gold rush. Hard to resist the gold rush.

The Next Cycle

S+B: When we emerge from the current economic slump, will it simply be because of the business cycle, or will it be because a new leadership culture is taking hold? 

Pineau-Valencienne:  Could we put it another way?

S+B: Go ahead. 

Pineau-Valencienne:  When you are in an uncertainty, you have a lot of variables. Uncertainty creates opportunities. And there are more managers who are better skilled at picking from the opportunities and making things happen. That’s why I think we will get out of the present situation more easily than we think. It’s not going to be the same growth we had before. It’s going to be a different one, maybe much more challenging.

Khurana:  I have no idea when the economy will recover, but I do believe that one of the antecedent, necessary conditions is that faith has to be restored in the American corporation. A faith that the data that comes out from them can be trusted, faith that intermediaries we depend upon to interpret that information for the general public are doing so in a way that is in the public’s best interest. And faith that the corporate form that has served us well won’t be tinkered with too much. Somehow people have to trust the leadership of corporations again. Trust takes a long time to build but can be lost basically overnight.

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