leadership

Britain's most famous manager of recent times, Sir John Harvey-Jones, had a personal habit which, at first sight, is distinct from the transformation he wrought in the affairs of ICI, the country's largest manufacturer. 'During the last twenty years at the beginning of each year I have taken a few hours out to write down on a pad which I keep in my desk drawer the hopes and aspirations that I had for achievement in the coming year.'

True, some of those hopes and aspirations must have related directly to ICI - culminating in a famous target. Within three years of falling into its first losses, ICI would make Britain's first billion-pound company profit. But the whole Harvey-Jones programme related to his executive tasks in a fundamental manner. Before managers can manage their responsibilities, they must manage themselves. That billion-pound promise gave a tangible expression to the chairman's ambitions for both himself and the group. It helped to focus attention, inside and outside ICI, on its transformation - and the organisational focus flowed directly from the focus of the man himself on his desk-pad agenda.

That's inevitable. Every organisation is a system. And no organisation can be more effective than its systemic elements allow. Yet what animates the system? Ultimately, the answer comes down to individuals - and specifically those in charge of elements of the system. As Harvey-Jones knew, how individual managers manage themselves, and the ends to which they direct their time and energy, must determine the effectiveness of the system, just as the system determines theirs.

That sounds more paradoxical than it is. Take banking - or, for that, matter, most suppliers of financial services. The system is geared to repeating the practices that have succeeded in the past. It can't cope with present pressures to which the past has no relevance. That helps explain the management fiascos at two of London's prime investment banks, S. G. Warburg and Barings. Both had thrived in a private world governed by known risks. But Warburg's system couldn't cope with the strategic challenge of global competition: and Barings' system was bust by seeking profits from novel, large-scale international wheeler-dealing.

SUBVERTING THE SYSTEM
Some perfectly competent individuals installed within both systems were trapped by their failure. More generally, efforts to get bankers and insurers to adapt to a more competitive and customer-driven marketplace have been stymied by systems geared to oligopoly and internal goals. No matter how hard individual managers strive, they won't succeed fully so long as an ineffective system stays in place. If they devote themselves to subverting the system, though, extraordinary results can follow.

Like Harvey-Jones, revolutionaries need a personal agenda, a plan for action. At Digital Equipment in Europe, for example, Vincenzo Damiani has combined his personal agenda with an attempt to create a radically altered organisation. This forms part of a worldwide effort to turn Digital from a supplier of proprietary minicomputers, plus associated services, into a full-line manufacturer of workstations and personal computers, committed to open systems and to all the services which such systems demand. The old Digital - which lost $5.7 billion in five awful years - was inimical to this new strategy. How could a new Digital be created?

You can't deduce much from the opening two statements of what he called (stressing the personal element) 'The Damiani Agenda'. The twain are:

1. The overall goal is satisfied customers
2. The focus is on leadership and management actions

Of these, the first is really a motherhood statement these days. To hear them talk, all managers all over the world think of nothing but satisfying the customer. Equally, the need for 'leadership' is a cliche of management seminars. But as Thinking Managers has stressed, satisfying customers isn't enough: they have to be 'highly satisfied', and to find your products and services 'excellent' - not just good. Similarly, leadership is meaningless unless those led are highly satisfied by those who lead - and who are proved to be excellent by their results. It's the last two words in Damiani's agenda which are meaningful: 'management actions'.

Harvey-Jones would call that 'making things happen', a phrase which he used as the title for a book on management which hardly used that word. His subtitle, 'reflections on leadership', though, conveys feelings which are echoed by the multibillionaire H. Ross Perot. While still on the General Motors board (which contributed massively to Perot's billions as the price for ousting him), Perot delivered a blistering critique of the car giant and proposed an action agenda. It included this sentence: 'Starting today, the word "management" will no longer be used...' It was to be replaced by 'leadership'.

MANAGEMENT IN ACTION
That's well defined as 'management in action', the turning of the leader's personal agenda into successful performance by the organisation. In a single-page document, Digital's Damiani went on to list three objectives and ten action points which spelt out the practical ends and means. The objectives are interesting from several angles - not least because they could be shared by any company in any industry. Nowadays everybody surely wants to create sustainable growth, increase efficiency, and 'optimise customer-focused management systems and processes.'

The second and third objectives make the point that, unless the business set-up is aligned with the aims, personal and corporate, of the top management, they won't be achieved. Some penetrating questions have to be answered before you can be certain that the set-up - the management organisation - is going to help, rather than hinder, the purposes of the company:

1. Is the corporate establishment the right size - not too little, not too big, but just right?
2. Are support activities concentrated to supply maximum contribution at minimum cost?
3. Are all key processes focused on meeting customer requirements?
4. Are those requirements satisfied optimally?

The Damiani Agenda, however, moves away from these hard action points to something much softer, stressing the need to 'communicate more and more efficiently' and - just as Harvey-Jones and Perot would want - to 'show leadership.' There's a tautology here: if the hard targets are being met, leadership must have been effective. The definition of leadership, after all, is 'making things happen'. How do managers set about this task - common to all of them, whatever their business?

One route is to give unit managers a general agenda of rules to follow - rules so powerful that obedience will automatically achieve the desired results. At the Wace Group, a graphic design company, chief executive Trevor Grice calls his agenda 'the Ten Commandments', which he describes (fitting the above bill) as 'a way of getting through to people in terms of the process of improvement.' Deeply influenced by his accountancy background, Grice directs the Commandments towards one financial end, the management of margins.

THREE FUNDAMENTALS
That, he argues, is the essential role of a managing director and the umbrella for all other activities. Reducing costs and optimising price, the two key elements in raising margins, are no more important than raising sales, but take priority: that's because, as every bankrupt expansionist knows, boostng sales without controlling margins is a potentially lethal poison. Like Damiani at Digital, Grice has three overriding objectives and ten specific actions (those enshrined in his Commandments). His three fundamentals are:

1. Speed conversion of business into cash.
2. Balance the cash equation and improve planning.
3. Improve profitability - by the aforesaid method of reducing costs and raising prices.

The Commandments cover all the basic business processes, which Grice insists are the responsibility of the leader. Forecasting, for example, shouldn't be left to the accountants. But managing directors are also responsible, not for running the purchasing system, the mail round, the complaints procedure, credits, discounts, etc, but for ensuring that they are properly run. For a major example, Grice doesn't tell people how much to invest, or what capital. equipment to buy. But they must write it off in the year of acquisition: the financing 'should be automatic, a component of cash. If the cash isn't right, you can't spend the capital.'

Grice's approach is fundamentally operational, rather than strategic. At larger companies, strategy tends to rule the agenda of the boss. For instance, at Smith & Nephew, the healthcare group, analysis of its changing marketplace, with its increasing customer pressures on costs, led to this programme: (1) becoming genuinely international (which meant expanding presence in the US); (2) achieving sufficient, market-leading mass to support global marketing programmes; (3) bringing down costs; (4) making advances in true innovation - improving what already exists is no longer enough.

To make all that happen, chief executive John Robinson relocated and strengthened R&D - no doubt to the inconvenience of the managers and scientists moved from a stately home in Essex to modern labs on the York University campus. But their upheaval in geography was nothing compared to the spiritual dislocation suffered by country managers. They had been free to decide what to sell and where to make or buy what they sold: now marketing programmes are dictated to them - otherwise global marketing can hardly exist.

Robinson's agenda therefore included establishing 'centres of excellence' for all key products. Implementing these central programmes was made mandatory, although local managers were allowed to set their own timetables. The centres, though, can appeal direct to Robinson (none has yet) if local managers aren't complying with sufficient alacrity or enthusiasm. That access could further intensify tensions which must be fairly acute - nobody likes having power taken away, especially so exciting a power as deciding on product development. Robinson didn't encounter overt resistance: but a lot of time was spent on selling and explaining the changes.

His agenda, in strategic and operational terms, is by no means unique. All over the world, managements are concentrating on those key businesses where they think they can be globally competitive. As a result, they are concentrating production (Smith & Nephew will only keep more than one factory for any product if the US and Europe require separate facilities): and they are reducing the power of country managers. That's paradoxical, in view of the general trend in management, which is to give more, not less authority to managers down the line - and there are bound to be repercussions, as IBM has found.

Its relatively new general manager in Britain, Javaid Aziz, quit the job after the company started working through world-wide marketing organisations dedicated to particular sectors. That's actually a strategy which Digital tried and rapidly overturned after finding it unworkable. Digital's alternative makes much more obvious sense: to have worldwide companies organised round products (like the PCs) rather than customers. But this, too, relegates national managers. As a breed, they face the prospect of becoming representatives rather than executives.

OLD DOGS AND NEW TRICKS
In some companies - Ciba, for example - rumblings of discontent have reached the public domain. Many ICI people didn't like the Harvey-Jones medicine, either. But leadership - management by action, remember - must include over-riding those whose personal agenda doesn't match that of the leader. The revolution in Digital's PC business, in fact, couldn't have been achieved by the people previously in charge. They had sold machines made by other manufacturers, using the same direct channels as the minicomputer business. To build an entirely new operation, making its own products and selling through all appropriate channels, Digital sensibly bought in new, high-class and deeply experienced management for the PC operation.

Sometimes old dogs can learn new tricks. But you can't afford either to be frustrated by overt or covert resistance, or to wait for an excessive length of time while the old dogs go through the learning process. At Allied Domecq, the strategy followed the lines described above. The company cut back on activities where it couldn't reach competitive scale and efficiency (like food and European brewing) to concentrate on the global spirits business and branded retailing. Like Digital, the company needed to change management extensively, importing marketing-minded executives from most of its major competitors.

It will be unfortunate for these new recruits, to say the least, if the new strategy proves to be misplaced. But changes in people are one way of ensuring that the chief executive's agenda and that of his key associates actually coincide. Another method - not necessarily an alternative - is to involve key managers in forming the strategic agenda. At SmithKline Beecham, Jan Leschly and his team spent 18 months working together on the new strategy: concentrating on human healthcare, but widening the market beyond drugs to total management of customers' needs.

Some of these core strategies, like their diversifying forerunners, are bound to fail. The logic of placing all your eggs in one basket is not inherently superior to that of spreading your risks. All depends on the choice of basket or baskets and the effectiveness with which they are managed. Action agendas built around the strategy may therefore be deeply flawed. But that possibility will be reduced if the personal agenda is based on the following base - five questions by which any operation should be tested:

1. In what technologies and techniques are we better than others?
2. What markets do we know better than others?
3. Where are our powers of creative thinking and innovation better than others?
4. Where is our operating/productive efficiency better than others?
5. Where are we better than others in driving forward new enterprises and creating new assets?

Note the emphasis on being 'better than others.' If the core business has no competitive advantage on those five scores - or indeed on any of them - the strategy is built on sand. You may get away with 'me too' competition, but the rewards will be lower and the risks considerable. Executive leaders likewise need to build their personal agendas on a base of inherent, unique strengths. For them, there are eight basic questions:

1. Do you truly lead others?
2. Do you question what currently exists and what you are currently being told?
3. Do you make up your mind in good time?
4. Do you take necessary action without delay?
5. Are you clear about what you're doing and why?
6. Are you prepared to change anything and everything that needs changing?
7. Do you do well all the basic things that need to be done?
8. Do you have written aims for this year, next year and beyond?

THE LEADERSHIP PLATFORM
That list places the personal agenda in the right position, as the final stage in creating a leadership platform. By no coincidence, the list was derived from the programme which Harvey-Jones executed at ICI . Yet the aftermath of that programme, after its author left, led by various stages to the break-up of ICI into two halves, abandoning his idea that a single top management could effectively maximise shareholder value. The personal agenda of the boss, supported by colleagues, is the necessary driving force. But there has to be a hidden item on every such agenda - summed up in that sixth question about readiness to change 'anything and everything.' That means what it says. It must include the core strategy - and, indeed, the whole leadership process.