strategy+business: Corporate Strategies and News Articles on Global Business, Management, Competition and Marketing
/ Spring 2018 / Issue 90

The Best Management Is Less Management

Lessons from the Chilean government’s response to crisis.

A version of this article appeared in the Spring 2018 issue of strategy+business.

On February 27, 2010, an 8.8 magnitude earthquake struck Chile. It was the fifth-strongest earthquake ever recorded; NASA estimated that it changed the tilt of the Earth’s axis by three inches. Schools, hospitals, roads, homes, and businesses across a huge swath of Chile’s midsection were left devastated, paralyzing the country for weeks. The recovery effort cost Chile the equivalent of 18 percent of its GDP.

Chile’s newly elected president, Sebastián Piñera, was inaugurated shortly after the earthquake. He quickly mobilized his cabinet ministers to help the injured and bury the dead, and then to repair hospitals and rebuild homes. He instructed his ministers to fully restore damaged buildings and infrastructure on a demanding time line. But he offered scant guidance on how to do so, leaving it to his trusted team to develop and execute specific recovery plans. (Piñera, who left office in 2014, was elected to a second term in late December 2017.)

Piñera’s actions in the aftermath of the earthquake may seem unusual to the casual observer because they demonstrate a level of trust that’s uncommon in most organizations. However, when time is limited and stakes are high, the most effective leaders rely on their ranks to do what they do best. These leaders empower people to use their expertise to solve problems and achieve goals. They also enable managers at every level of the organization to think like CEOs, making decisions with a large degree of autonomy. There’s a clear system in place for monitoring progress, but it doesn’t impede people from getting the work done. This is strategic leadership at its best, and in a moment of crisis it becomes all the more critical.

When time is limited and stakes are high, the most effective leaders enable managers at every level of the organization to think like CEOs.

In the days after the earthquake, Piñera recognized that he had neither the time nor the temperament to develop specific, complex recovery plans, so he set his experts — the cabinet ministers — to work. He insisted, for instance, that his education minister arrange for all of the country’s schoolchildren to be back in school within six weeks. This was no small task: One-third of Chile’s schoolhouses had been destroyed or severely damaged, leaving 1 million students without facilities.

But six weeks later, on schedule, the minister of education had arranged for all those children to be back in a classroom — some in traditional classrooms and others in community centers, in private homes, or even on school buses. “In times of emergency, we have to be creative,” explained the minister, who recruited a cadre of take-charge managers into his agency and drew on his own networks from his earlier service as mayor of the capital city of Santiago and as a two-time presidential candidate.

Piñera also worked with his finance minister to get the economy back on track within a year, implementing a plan to achieve a 6 percent annual growth rate at a time when the world economy was still reeling from the 2008–09 financial crisis. To accomplish this, the minister of finance moved budget lines, postponed public projects, mobilized private giving, and drew from the state-owned copper company. And in doing so, he stayed within the president’s dictate that large-scale debt financing was to be avoided, as was a raid on Chile’s sovereign wealth fund.

The type of strategic leadership on display in the aftermath of Chile’s earthquake relies on two operational concepts. The first, conveying strategic intent, enables leaders to establish direction and clearly defined goals. Leaders refrain from micromanaging the specific execution of the intent, but still hold their team members or subordinates accountable. Gary Hamel and C.K. Prahalad first articulated the value of strategic intent for business more than two decades ago.

The Chilean president’s strategic intent did not stop with his country’s immediate recovery. He also insisted that his ministers think over the long term, and that the national comeback move the country well beyond what it had in place before the earthquake — building stronger early warning systems, more resilient buildings, and better tsunami barriers. The president set forward a far-reaching strategy for national improvement, requiring his cabinet ministers to lay out and achieve a host of long-term goals for making the country more robust in the face of future calamities. That investment paid off four years later, when another powerful earthquake, 8.2 on the magnitude scale, rocked Chile — but this time resulted in minimal damage and minimal loss of life. The New York Times quoted a Chilean emergency official, as stating that “the 2010 earthquake provided us with an enormous learning opportunity.”

Once the president’s far-reaching agenda was made clear, he left it largely up to his subordinates to execute it, but his delegation of responsibility did not stop there. He also assumed the role of taskmaster, holding his cabinet ministers accountable. He insisted that they develop evidence-based options and make data-driven decisions, and that all of the specific targets in their comprehensive reconstruction plans be achieved on schedule.

Of course, this style of leadership works only if there are capable managers throughout the organization: Execution of the organization’s strategic intent can come only through multiple leadership tiers in a country or a company, not just the top rung. Thus the second operational concept, layering leadership, ensures that managers at every level are able to implement the strategy.

After the enterprise’s strategic intent has been conveyed by the most senior leader in the organization, it is the responsibility of the next tier to carry the same message further down, and in turn for their own subordinates to do the same. Strategic intent cascades down the company, requiring that each echelon lead the changes required at its own level. Because leadership in this model is not limited to the apex, vertical collaboration among the tiers becomes vital. The intent of the top echelon must be faithfully conveyed and diligently enacted through each of the successive layers below, and managers at each level must work hand in hand to achieve the senior leader’s established goals.

Piñera trusted his people to be able to execute, and this is key. He had selected his nearly two dozen cabinet ministers for their excellent leadership records regardless of political experience, and he expected the same excellence of them as they staffed their respective ministries. The power of this approach became evident yet again when another disaster struck Chile just five months after the 2010 earthquake: a cave-in that trapped 33 miners in a shaft nearly a half mile below Chile’s northern Atacama Desert.

On taking office, the president had designated Laurence Golborne as his minister of mining. Golborne was chosen not because he was especially familiar with either mining or politics — he was in fact experienced in neither — but because he had run Chile’s largest retail chain, Cencosud. As chief executive, he had overseen a workforce of more than 100,000 and an annual budget of more than US$10 billion. Golborne had a proven record of strategizing and leading a large enterprise, and it was those capacities, rather than his technical expertise or political experience, that the president had decided would be essential for the leadership of his own second tier.

The day after the cave-in, Piñera instructed Golborne to do everything feasible to rescue the miners — even though they were trapped in a private mine over which the government exercised no direct authority. The president’s strategic intent made unequivocal, he then left the management of the crisis largely in Golborne’s hands. The premise underlying the delegation of that authority: Golborne was a tested leader, capable of assembling and managing his own team to extract the miners. He had directed a large company, and now he could orchestrate a mining rescue.

Golborne assembled a diverse array of experts, brought in high-speed drilling equipment from abroad, opened a school for the miners’ children so that families could live close by, managed a press corps of more than 2,000, and kept the trapped miners nourished and fit until he could finally extract them. Ten weeks later, Golborne and his team lifted the last of the 33 miners safely to the surface.

We’ve seen companies perform similarly in times of crisis. Consider two examples from the auto industry: Carlos Ghosn was brought in to turn around Nissan when it was on the brink of financial disaster. And Alan Mulally restructured Ford Motor Company to weather the financial-crisis headwinds that would bring down its U.S. competitors. Both of these chief executives set forth their intent, built cadres to lead this intent through their firms’ many layers, and held all accountable for results.

Companies need to be able to exercise sound leadership when responding to a crisis. But what if you didn’t need to be desperate to implement this style of strategic leadership? What if it were considered the norm in your organization to enable and empower, to give people the freedom to own the company agenda and contribute to it in their own way, no matter how small? Then you wouldn’t have to wait for a crisis to learn to lead more effectively. Company leaders are in a constant search for the new best thing in management, but the answer just may be less management — and more trust.

Author Profiles:

  • Michael Useem is the William and Jacalyn Egan Professor of Management and director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania.
  • Harbir Singh is the William and Phyllis Mack Professor of Management and co-director of the Mack Institute for Technological Innovation at the Wharton School of the University of Pennsylvania.
  • This article is adapted from The Strategic Leader’s Roadmap: 6 Steps for Integrating Leadership and Strategy, by Harbir Singh and Michael Useem (2016). Reprinted by permission of Wharton Digital Press.

Comments

 
The Best Management Is Less Management