An effective executive does not need to be a leader in the typical sense of the word. Peter Drucker, the author of more than two dozen HBR articles, says some of the best business and nonprofit CEOs he has worked with over his 65-year consulting career were not stereotypical leaders. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious.
What made them all effective is that they followed the same eight practices: They asked, “What needs to be done?” They also asked, “What is right for the enterprise?” They developed action plans. They took responsibility for decisions. They took responsibility for communicating. They were focused on opportunities rather than problems. They ran productive meetings. And they thought and said “we” rather than “I.”
The first two practices provided them with the knowledge they needed. The next four helped them convert this knowledge into effective action, for knowledge is useless to executives until it has been translated into deeds. The last two ensured that the whole organization felt responsible and accountable.
Effective executives know that they have authority only because they have the trust of the organization. This means they must think of the needs and opportunities of the organization before they think of their own needs and opportunities.
The author also suggests a ninth practice that’s so important, he elevates it to the level of a rule: Listen first, speak last.
The demand for effective executives is much too great to be satisfied by those few people who are simply born to lead. Effectiveness is a discipline. And, like every discipline, it can be learned and must be earned.
The U.S. health care system is in bad shape. Medical services are restricted or rationed, many patients receive poor care, and high rates of preventable medical error persist. There are wide and inexplicable differences in costs and quality among providers and across geographic areas. In well-functioning competitive markets—think computers, mobile communications, and banking—these outcomes would be inconceivable. In health care, these results are intolerable, with life and quality of life at stake.
Competition in health care needs to change, say the authors. It currently operates at the wrong level. Payers, health plans, providers, physicians, and others in the system wrangle over the wrong things, in the wrong locations, and at the wrong times. System participants divide value instead of creating it. (And in some instances, they destroy it.) They shift costs onto one another, restrict access to care, stifle innovation, and hoard information—all without truly benefiting patients.
This form of zero-sum competition must end, the authors argue, and must be replaced by competition at the level of preventing, diagnosing, and treating individual conditions and diseases. Among the authors’ well-researched recommendations for reform: Standardized information about individual diseases and treatments should be collected and disseminated widely so patients can make informed choices about their care. Payers, providers, and health plans should establish transparent billing and pricing mechanisms to reduce cost shifting, confusion, pricing discrimination, and other inefficiencies in the system. And health care providers should be experts in certain conditions and treatments rather than try to be all things to all people.
U.S. employers can also play a big role in reform by changing how they manage their health benefits.
Nearly all areas of business—not just sales and human resources—call for interpersonal savvy. Relational know-how comprises a greater variety of aptitudes than many executives think. Some people can “talk a dog off a meat truck,” as the saying goes. Others are great at resolving interpersonal conflicts. Some have a knack for translating high-level concepts for the masses. And others thrive when they’re managing a team. Since people do their best work when it most closely matches their interests, the authors contend, managers can increase productivity by taking into account employees’ relational interests and skills when making personnel choices and project assignments.
After analyzing psychological tests of more than 7,000 business professionals, the authors have identified four dimensions of relational work: influence, interpersonal facilitation, relational creativity, and team leadership. This article explains each one and offers practical advice to managers—how to build a well-balanced team, for instance, and how to gauge the relational skills of potential employees during interviews. To determine whether a job candidate excels in, say, relational creativity, ask her to describe her favorite advertising campaign, slogan, or image and tell you why she finds it to be so effective.
Understanding these four dimensions will help you get optimal performance from your employees, appropriately reward their work, and assist them in setting career goals. It will also help you make better choices when it comes to your own career development. To get started, try the authors’ free online assessment tool, which will measure both your orientation toward relational work in general and your interest level in each of its four dimensions.
Time management Article
Anyone who has ever managed people who abuse time—whether they are chronic procrastinators or individuals who work obsessively to meet deadlines weeks in advance—knows how disruptive they can be to a business’s morale and operating efficiency. But lessons in time management will have no impact on these employees. That’s because real time abuse results from psychological conflict that neither a workshop nor a manager’s cajoling can cure. Indeed, the time abuser’s quarrel isn’t even with time but rather with a brittle self-esteem and an unconscious fear of being evaluated and found wanting.
This article describes four types of time abusers typically encountered in the workplace:
Perfectionists are almost physically afraid of receiving feedback. Their work has to be “perfect,” so they can increase their likelihood of earning a positive evaluation or at least avoid getting a negative one.
Preemptives try to be in control by handing in work far earlier than they need to, making themselves unpopular and unavailable in the process.
People pleasers commit to far too much work because they find it impossible to say no.
Procrastinators make constant (and often reasonable-sounding) excuses to mask a fear of being found inadequate in their jobs.
Managing these four types of people can be challenging, since time abusers respond differently from most other employees to criticism and approval. Praising a procrastinator when he is on time, for instance, will only exacerbate the problem, because he will fear that your expectations are even higher than before. In fact, some time abusers, like the perfectionist, may need professional treatment. This article will give you insight into why they are the way they are—and what can be done to help them manage their problems.
Of late, offshoring and outsourcing have become political hot buttons. These o words have been conflated to mean that high-paying, white-collar jobs have been handed to well-trained but less expensive workers in India and other locales. The brouhaha over the loss of service jobs, which currently account for over 80% of private-sector employment in the United States, is not merely an American phenomenon. The fact is that service-sector jobs in all developed countries are at risk.
Regardless of what the politicians now say, worry focused on offshoring and outsourcing misses the point, the author argues. We are in the middle of a fundamental change, which is that services are being industrialized. Three factors in particular are combining with outsourcing and offshoring to drive that transformation: The first is increasing global competition, where just as with manufactured goods in the recent past, foreign companies are offering more services in the United States, taking market share from U.S. companies. The second is automation: New hardware and software systems that take care of back-room and front-office tasks such as counter operations, security, billing, and order taking are allowing firms to dispense with clerical, accounting, and other staff positions. The third is self-service. Why use a travel agent when you can book your own flight, hotel, and rental car online?
As these forces combine to sweep across the service sector, executives of all stripes must start thinking about arming and defending themselves, just as their manufacturing cousins did a generation ago. This will demand proactive and far-reaching changes, including focusing specifically on customer preference, quality, and technological interfaces; rewiring strategy to find new value from existing and unfamiliar sources; de-integrating and radically reassembling operational processes; and restructuring the organization to accommodate new kinds of work and skills.
Decision making Article
Rutgers sociologist and disaster studies expert Lee Clarke discusses how organizations unwittingly make pie-in-the-sky plans—what he calls symbolic plans—that are often worse than useless. He advises companies to expose and reassess these unrealistic strategies.
Financial management Article
By definition, forecasted numbers in a financial statement involve educated guesses. But that’s not always clear in the statement itself. To reduce legal liability for off-the-mark predictions, a proposed new model for financial statements clearly distinguishes hard numbers from forecasts.
Norman Windom, the chairman of Tiverton Media, may not know much about the world of popular music, but he does fancy himself a careful planner and a superb judge of managerial talent. That’s why he’s been grooming COO Sean Kinnane, a Wharton-minted numbers man, to take over an important division, Aleph Records, and one day Tiverton itself. But Derek Solomon, Aleph’s 68-year-old CEO and founder, remains a creative force and a father figure to the label’s artists. What’s more, he’s touchy about anything that might slow down Aleph’s responses to the market’s ever-shifting preferences—or that might call into question his indispensability.
Though Sean dutifully participates in Tiverton’s broad-based and elaborate executive development plan, he senses that Aleph’s future leadership structure is uncertain. As impatient as he is ambitious, he announces that he’s leaving Tiverton for more suitable pastures. Several of his associates, also unsure about their fate within Aleph, are following him out the door. In one fell swoop, they’ve torn Norman’s proud succession plan apart.
What kind of plan should the board adopt going forward? Commenting on this fictional case study are Francis N. Bonsignore, a senior vice president at Marsh & McLennan; Michelle L. Buck, a clinical associate professor of management and organizations at Northwestern’s Kellogg School of Management; Jon Younger, who heads leadership development at National City Corporation, a financial holding company in Cleveland; and Thomas Leppert, the chairman and CEO of the Turner Corporation, a large construction company in Dallas.
Decision making Article
Imitation exerts enormous influence over society, and business and finance in particular. And its influence has grown as the avenues by which people imitate—and are imitated—have multiplied and the process has gotten faster. Thousands of communications channels make it possible for virtually anyone in the developed world to know, almost instantaneously, what others do, think, believe, claim, or predict. More significantly, we can and do act upon such knowledge. The resulting fads and fashions, bubbles and crashes are ever more frequent, severe, and complex.
The information age has cast up more than its share of paradoxes, including this one: When information is plentiful, we often use it not to make better decisions but to imitate others—and their mistakes. In consumer purchases, financial markets, and corporate strategy, what others do matters more to us than the facts. When there’s too much information, imitation becomes a convenient heuristic. This is the basis for a self-referential society.
Imitation has its virtues, but it also promotes instability and unpredictability. That’s because, by definition a multiplier, it can swell a single opinion into a mass movement or catapult the smallest player to the forefront of a market.
Mastering the dynamics of self-reference won’t ensure mastery of its consequences. But businesses that understand how imitation works can at least attempt to gird themselves against its worst effects—by accounting for it in their forecasts and risk-management plans, by becoming more sensitive to unexpectedly changing circumstances, and by avoiding mindless imitation of other companies’ moves. In some instances, they may even be able to build strategies around self-reference and use the tools of imitation to capture new business. That won’t make the world any less confusing. But it may make it more profitable.
Financial analysis Article
Intangible assets—patents and know-how, brands, a skilled workforce, strong customer relationships, software, unique processes and organizational designs, and the like—generate most of a company’s growth and shareholder value. Yet extensive research indicates that investors systematically misprice the shares of intangibles-intensive enterprises. Clearly, overpricing wastes capital. But underpricing raises the cost of capital, hamstringing executives in their efforts to take advantage of further growth opportunities.
How do you break this vicious cycle? By generating better information about your investments in intangibles, and by disclosing at least some of that data to the capital markets.
Getting at that information is easier said than done, however. There are no markets generating visible prices for intellectual capital, brands, or human capital to assist investors in correctly valuing intangibles-intensive companies. And current accounting practices lump funds spent on intangibles with general expenses, so that investors and executives don’t even know how much is being invested in them, let alone what a return on those investments might be.
At the very least, companies should break out the amounts spent on intangibles and disclose them to the markets. More fundamentally, executives should start thinking of intangibles not as costs but as assets, so that they are recognized as investments whose returns are identified and monitored.
The proposals laid down in this article are only a beginning, the author stresses. Corporations and accounting bodies should make systematic efforts to develop information that can reliably reflect the unique attributes of intangible assets. The current serious misallocations of resources should be incentive enough for businesses to join—and even lead—such developments.
By making the most of organizational capabilities—employees’ collective skills and fields of expertise—you can dramatically improve your company’s market value. Although there is no magic list of proficiencies that every organization needs in order to succeed, the authors identify 11 intangible assets that well-managed companies tend to have: talent, speed, shared mind-set and coherent brand identity, accountability, collaboration, learning, leadership, customer connectivity, strategic unity, innovation, and efficiency. Such companies typically excel in only three of these capabilities while maintaining industry parity in the other areas. Organizations that fall below the norm in any of the 11 are likely candidates for dysfunction and competitive disadvantage.
So you can determine how your company fares in these categories (or others, if the generic list doesn’t suit your needs), the authors explain how to conduct a “capabilities audit,” describing in particular the experiences and findings of two companies that recently performed such audits. In addition to highlighting which intangible assets are most important given the organization’s history and strategy, this exercise will gauge how well your company delivers on its capabilities and will guide you in developing an action plan for improvement.
A capabilities audit can work for an entire organization, a business unit, or a region—indeed, for any part of a company that has a strategy to generate financial or customer-related results. It enables executives to assess overall company strengths and weaknesses, senior leaders to define strategy, midlevel managers to execute strategy, and frontline leaders to achieve tactical results. In short, it helps turn intangible assets into concrete strengths.