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The Human(e) Factor: Nurturing a Leadership Culture

Managing means more than barking orders. Personality, even charisma, is an important part of the leadership skill set. So are compassion, sensitivity, benevolence, and kindness.

(originally published by Booz & Company)
The Human(e) Factor - Nurturing a Leadership Culture
Illustration by Nicholas Wilton

When a company is an enormous success — or a dismal failure — there’s usually someone at the top who is responsible. Regardless of the size of the enterprise, this one executive puts together a leadership team, a group of individuals who are all going in the same direction and, as far as customers and suppliers are concerned, operate as one. When the team works successfully, the executive properly takes credit. When it fails, the executive takes the fall.

Selecting and training the right kind of team members is one of top management’s most important tasks. And it requires not just practical business experience, but compassion, sensitivity, benevolence, and kindness — or, in one word, humaneness.

If humaneness is an important trait in executive teams, how can a top manager make certain that his or her colleagues don’t just pay lip service to this managerial attribute, but rather incorporate it into daily routines and use it as a yardstick for performance?

Helmut Maucher, the grand old man of Nestlé SA, found his answer in his description of a strong manager. He once observed that personality, responsibility, and intelligence — attributes that have been in demand for at least a thousand years — still are the prevailing characteristics of leadership. Additionally, Mr. Maucher added, management skills should be enhanced with other characteristics: first, a blend of courage, nerve, and calmness; and, second, the ability to communicate internally and externally. Alfred Herrhausen, a Deutsche Bank AG board member, once articulated his credo for the successful manager: “One has to say what one thinks, do what one says, and be what one does.” When humaneness radiates from the top, it works its way through the rank and file.

It’s as simple as this: Managers who want to succeed in a networked, knowledge-based world must be able to communicate with co-workers. “In difficult times,” executive search consultants Heidrick & Struggles-Mülder & Partner concluded in a recent survey, “the manager must be able to set clear rules. In day-to-day business, however, the manager is well-advised to talk with the staff and learn from them, for they are highly qualified knowledge workers who are indispensable for the future of the company.” Strong communication is based on the integral attributes of humaneness — compassion, sensitivity, benevolence, and kindness. The most successful manager has a broad perspective encompassing not only financial topics, but cultural understanding as well. This manager recognizes the specialized talents of different people and keeps their needs in mind. And he includes their networks and interdependencies in the social fabric of the company. To do so — to make best use of team members’ skills and talents — the manager must learn the internal machinations of the workplace. To do all of this properly means working hard to learn skills that go far beyond spreadsheet analysis.

A top manager’s ability to integrate and to communicate is most highly challenged by the networked enterprise. A smart leader must be a successful integrator. And that kind of leadership requires social competence. Leadership is no longer a matter of ordering and instructing, but of having and using the ability to convince. Personality, even charisma, is an important part of the leadership skill set.

Social Competence
Social competence is the ability to motivate, to understand different (even opposing) points of view, and to manage a number of different character types (and emotions). As a whole, these varied criteria form the humane factor. They are the foundations of teamwork, of balance within a successful organization.

How does one acquire social competence, that managerial skill that enables a single manager’s output to exceed the work of committees? Understand first that “social competence” is one of those terms that becomes fashionable, falls into overuse, and quickly loses its real meaning. But that makes it no less important. In the U.S., managers get bonus points for studying various applications of social competence; proper training in its skills can facilitate promotion to more responsible positions. Social competence can be learned as part of a formal program at work, or, just as valuably, by volunteering at a local fire department, for example. In either case, the lessons come from the experiences of coping with problems in the social arena — with people from different backgrounds — in many dimensions that traditionally have not been a part of formal professional life.

Executives may wonder when (and how) social competencies can be learned. The curricula of elite universities and business schools and the demands of the workplace leave little time for gaining social experiences. But, no matter how severe the constraints, managers who aspire to positions of increased leadership must find the time to gather a wide variety of different learning experiences. The results of such learning are indispensable and, in general, facilitate the handling of different social situations later in one’s professional life.

Participating in sports or cultural activities can provide important social experiences.

For instance, consider the experiences of an amateur actor in a local theater company. In acting, one has to open up, to jump into the skin of other, sometimes contrary, characters. One has to submit to the director’s authority, to think and act within a team. In 45 Jaar met Philips: Tekstverzorging Leo Ott [45 Years with Philips: An Industrialist’s Life], his memoirs published in 1976, Dutch entrepreneur Frits Philips tells of his roles on the student stage. His story is one of self-education, of abandoning self-importance, and of becoming aware that no one is infallible. Mr. Philips’s tale fits the classic “T model,” which describes the social and educational needs of a successful manager. The horizontal beam stands for breadth of education; the vertical beam for the depth in one special field. It’s entirely appropriate to focus and increase the depth of that specialized knowledge. But it is every bit as important to have the kind of horizontal breadth that allows one to have a more fully formed perspective.

Broad Education
A business education that embraces noneconomic contexts can provide the kind of social competence that encourages humane leadership. For example, parts of the German university system (traditionally very specialization-focused) are adopting a general studies program, with an emphasis on educational breadth. The new University of Erfurt — a self-proclaimed “lab for developments in the university system” — requires a “fundamental” study program that makes up 20 percent of the course load for all students. In addition to requiring that core program, the university encourages students to build educational breadth. The founding dean of the university, Professor Peter Glotz, now a professor for media and society at Switzerland’s University of St. Gallen, explains the Erfurt experience: “Our students work on their degrees in professional practice. There, they learn to build social and humanist skills. They know, however, that they have not finished yet. They return to the university some time later to finish their studies.” Similarly, private universities like the European Business School mandate semesters in English- or French-speaking regions, creating educational and cultural experiences that doubtlessly expand the students’ horizons.

Because global companies increasingly encounter many culturally different ways of thinking and diverse living and working conditions, one can easily see the advantage of a broader educational background. Indeed, it makes sound business sense for management to preserve, consider, and employ traditional local cultural values in different markets throughout the world. In Asia, for instance, the newcomer is well advised to study carefully how business relationships develop over decades of commerce. Managers schooled in a more open, less business-centric study program simply are better trained to think in longer periods of 15 to 20 years. Yes, their emphasis must remain on efficiency; but as outsiders, they will do their jobs better if they have a fuller perspective of their business choices and understand the local consequences of their actions.

Again, strong leadership is rooted in not just in-depth professional knowledge in one area of expertise, but also a broad understanding of a number of different disciplines. And the effective leader never stops learning. Management techniques change to suit different times and conditions. This lesson has certainly not been lost on the young, very well informed, self-confident, creative, and innovative Internet-generation managers.

CEOs in this new millennium must be able to provide a vision for the future of the enterprise. Specifically, they must be able to:

  • Identify and implement the central tasks of the enterprise.
  • Fine-tune the central tasks to meet ever-changing business needs.
  • Define the core competencies in product and/or service areas, and consequently drive their further development.
  • Establish a clear understanding of the company’s achievements and be able to articulate its differentiated strengths vis-à-vis the competition fully.

Such visions can never be static. Instead, they must emphasize dynamic processes in which change may be the only constant. Vision statements that are not flexible can do more harm than good. The best insurance against mishaps is a certain amount of courage and the willingness to listen — a leadership kind of mind-set that heeds early recognition of mistakes and is willing to correct them. The real danger lies in shutting oneself off and stubbornly going forward, only because one does not want to admit mistakes.

Of course, correcting a vision statement means having the courage to admit that one is wrong. And there is a direct correlation between the inability to entertain self-criticism and the insistence on outdated, rigid hierarchical structures. To make matters worse, the higher up one is in a hierarchy, the more difficult it can be to admit mistakes in front of colleagues who may be competitors for the next promotion.

On the other hand, exemplary behavior in this area does exist. Witness Jürgen Schrempp’s courage to acknowledge openly DaimlerChrysler AG’s unprofitable investment in Fokker and his role in that decision. Mr. Schrempp shouldered the blame for the entire team. And, in the end, the company and the public honored his courage.

Binding Values and Culture
Continuity in management is, without doubt, a prerequisite for company growth. Yet CEOs and managing directors are remaining in top positions for decreasing periods of time. Because of market-driven needs to maintain performance levels from quarter to quarter, the turnover in the United States currently is higher than it is in Europe.

Executive churn means that continuity of values and clearly defined goals need to become an integral part of an enterprise in order for it to last beyond the tenure of a particular CEO. This continuity can be achieved only if the entire management team addresses values and goals as essential elements of long-term success. Humane leadership focuses on the hearts and minds of the people who work for the company. Of course, that first includes the staff base and the executives who direct the enterprise, but it also can encompass suppliers, dealers, service providers, and other business partners.

You can read the corporate culture in the demeanor of the people in the enterprise and in their ability to collaborate with the partners: Attributes like excellence, social awareness, flexibility, praise/recognition, openness to ideas, and teamwork show positive behavior patterns; approaches like bureaucracy, injustice, arrogance, knowing-it-all, and regimentation show negative behavior patterns.

The three biggest assets of a corporate culture are justice, fairness, and independence. Justice is a constitutional part of every democracy and democratically rooted organization. Fairness means being considerate toward those who are weaker, doing without personal advantages, and recognizing the achievement of those who are better. Independence is the basis for freedom in building and expressing one’s opinion and the acceptance of responsibility. The strong CEO secures employee confidence in the shared objectives, first through his or her own behavior, and second through noticeable corrective measures in cases of misbehavior.

Considering the daily pressures and short tenure of a CEO, establishing a corporate culture, improving it, and making it last requires well-defined priorities. The imperatives include:

  • Identification of cultural values.
  • Broad-based education and training targeted at creating competent generalists among the management team.
  • Communication programs that allow top management to carry the vision to internal and external constituencies.

To make all three points move from planning to execution, and then to make the corporate culture part of the day-to-day mind-set of management, requires a new set of nontraditional leadership skills. A German communications specialist with a strong political background talks about the educational qualifications of top managers: “I am strongly convinced that there will be bank directors who have studied archaeology. The two fields share some key needs: the ability to communicate; skills in managing complex situations; a facility in mastering languages; and making the best use of computer sciences. I do not, however, believe that universities can teach all the skills you need to succeed in our new digital society. That learning must happen on the job.”

Open Communication
The speed of corporate change forces managers to make fast decisions. How well those decisions are communicated can determine their long-term effectiveness. Fast decisions have a much better chance of being right if the relevant information lands on the table (or, to be more exact, on the computer screen) of those people who need to know it when they need to know it.

Knowledge management and competence networks are invaluable managerial tools that are indispensable in managing change. Naturally, a capability for well-organized communication is especially critical during delicate phases of mergers, acquisitions, and takeovers. But even in times of less corporate stress and sensitivity, smart communications are every bit as important. In decentralized structures and networks, employee information demands have changed considerably, and executive teams must pay attention to these new requirements. That, of course, is easier when the message is good news. But open communications must continue even when the news is painful. The advantage of full disclosure is that the afflicted are better able to cope with adversity if they are openly informed about their status, about what must be done.

As a globally active company that bridges five continents, histories, and cultures, DaimlerChrysler has identified communication as a central leadership and motivation instrument for its 420,000 employees on five continents. A corporate TV program is delivered in seven languages at 452 locations. The daily 20-minute show includes topical news and features. At 260 locations, additional local text pages are offered via TV. DaimlerChrysler recognizes that leadership must use modern media as information-distribution channels. But the vehicle is only one part of communicating. Sophisticated delivery is no substitute for personalized thoughts and the messages.

Sometimes complete honesty is not possible, despite the best intentions. Corporate law in most democracies restricts information flow during extraordinary business circumstances. Indeed, in many merger and crisis situations, law requires management to remain quiet. But in enterprises where the culture is not directed to the common good, some second- and third-tier staff members may not pay close attention to the confidentiality regulations. Their agenda is much more personal: They think that informing the media first will give them an advantage in turning public opinion against an inimical management. The bigger the company, the less it can leave the path of clear value orientation, strict loyalty to principles, and thorough compliance with legislation.

Aside from the demands of specific critical situations, communication is indispensable as a leadership instrument. The message is simple: Managers who want to reduce internal dissonance must not shut themselves off. They must seek out face-to-face discussions with all kinds of internal employees and external associates. Delivery of humaneness — of compassion, kindness, sensitivity, and benevolence — is a powerful tool.

What really matters is the quality and consistency of the thinking that goes into the creation of lasting values. The lasting influence of any manager, successful or flawed, in large part is a reflection of how much the humane factor influences his or her perspective and how steadily that perspective is maintained.

Seven Steps to Human(e) Leadership

Deutsche Bank’s Alfred Herrhausen once observed, “In the end, all problems of the economy are staff problems.” The lesson is true today, and so is its inverse: Enterprises can best compete in this global environment if they have flexible, highly motivated employees. Humaneness is the master key to coping with almost any entrepreneurial challenge, since most of them result from the way people are treated in the enterprise.

Although performance — both professional and personal — must be at the center of all personnel-related strategic measures, new business models call for a new strategic role for human resources departments: investing in people, not just filling job openings. For those companies that want to meet the challenges of the humane factor, there are seven fundamental qualities to consider:

1. Entrepreneurial action must be based on a clear, simple system of values. These values must be lived, creating loyalty in a new form. The continuity of shared cultural values will become more important to companies because continuity is no longer ensured by the long-term tenure of a CEO.

2. Being a model requires consistency in thinking and acting as well as encouraging and promoting followers. The development of a consistent culture of customer orientation throughout the organization is crucial for survival. Social competence comes most naturally to entrepreneur personalities with character, education, and broad-based life knowledge.

3. The consistent culture of customer orientation starts with the CEO and reaches down to each and every trainee.

4. With the right kind of leadership, the technology-driven enterprise transforms itself into a market- and people-oriented enterprise.

5. Companies must invest in people, in their skills, and in their knowledge. They must not only put the right people into proper positions, but also support initiatives that encourage personal and professional growth.

6. Successful management with a high degree of responsibility on all decision-making levels requires openness. Only with openness will change be understood, accepted, and actively driven.

7. Creativity flourishes only in freedom. Managers must grant the people within the enterprise free space for creativity, originality, and risk taking (e.g., in cross-hierarchy project teams).

Willingness to change may not be restricted to the top management and the second executive level; it must permeate all employees. This culture evolves when the people in the enterprise are perceived, respected, and promoted in their own identity, creativity, and originality. To that end, all enterprises should reevaluate their people as bearers of knowledge, sources of creativity, and propellers of change.

— R.W.H.

This article is adapted from Faktor Menschlichkeit [The People Sector], by Rolf W. Habbel (Wirtschaftsverlag Carl Ueberreuter, 2001). An English version of the book is scheduled to be published by Palgrave Macmillan in 2002.

Reprint No. 02108

Rolf W. Habbel,
Rolf W. Habbel is a member of Booz Allen Hamilton’s board of directors. A vice president with the firm in Munich, he specializes in worldwide market strategies, innovative business strategies, and efficiency programs in the telecommunications and information industry.
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