Leadership

Initiatives to build and maintain trust with various stakeholders, including customers, employees, suppliers and investors, have risen to the top of the executive agenda at many organizations. But the problem is that most companies don't really understand how to manage stakeholder trust effectively. In fact, the authors' research suggests that many of the trust-building initiatives and approaches that organizations invest in may be of questionable value. Others might actually be counterproductive. One of the reasons managing stakeholder trust is difficult is because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and it's not obvious which dimension executives need to focus on when dealing with any particular constituency. What, for example, is more important for building trust with employees and customers: a reputation for kind-hearted benevolence or for fair-minded integrity? To answer such questions, the authors conducted a study of stakeholder trust in four different organizations. The research analyzed the relevance (if any) of various factors: benevolence, integrity, managerial competence, technical competence, transparency and value congruence. In essence, the study asked what matters -- and to whom. Some of the results were unexpected, and a few were even counterintuitive, leading to the following key insights: Transparency is overrated; integrity is not enough; the right kind of competence matters; building trust with one group can destroy it with another; and value congruence matters across the board. The new framework challenges some existing beliefs and sheds light on a number of areas that companies would be wise not to ignore. Indeed, as the authors illustrate, fundamental misunderstandings about stakeholder trust have tripped up a number of corporations, including Coca-Cola, Google, Apple, Delta Air Lines, Mattel and Sprint. In the future, a deeper knowledge of stakeholder trust will help businesses become more adept at managing stakeholder trust so that they can reap the numerous benefits, including improved cooperation with suppliers, increased motivation and productivity among employees, enhanced loyalty from customers and higher levels of support from investors.

Despite the general understanding that leaders learn from experience, only a few organizations, such as Toyota, Boeing and General Electric, have truly taken it to heart by putting programs into place specifically to take advantage of experiential learning. Most companies stay within a narrow comfort zone. They certainly encourage aspiring and emerging leaders to "get experience," to take on "stretch" assignments and to take risks. But they provide precious little guidance on how to learn from experience -- how to mine it for insight about leading and adapting to change over the course of one's life. Organizations generally don't look outside their industry, or business itself, for new approaches. Instead, a banking model of learning predominates -- a semi-industrial process in which cost per unit is the key performance measure and knowledge is something deposited in aspiring leaders' heads for later use. That is unfortunate, because organizations are missing the opportunity to develop leaders by integrating their life and work experiences, especially those experiences the authors call "crucibles." Crucible experiences can be thought of as a kind of superconcentrated form of leadership development. Surprisingly, the best examples of organizations that deliberately employ such alchemy do not come from the business world. The authors draw on lessons from The Church of Jesus Christ of Latter-day Saints, better known as the Mormons, and the Hells Angels Motorcycle Club to develop four lessons for helping to develop managers. First, both the Mormons and the Hells Angels demonstrate how it is possible to craft or convert core activities to serve as practice fields for leaders. Second, they engage in elaborate preparation before sending would-be leaders out into the field. Third, they provide a supporting infrastructure while members are in the midst of a crucible. Finally, they recognize the need for renewal in individuals and the organization.

Scholars of various kinds long have documented the great degree to which people are influenced by similar others. Indeed, the opinions, experiences and behaviors of friends, neighbors and coworkers can provide an invaluable gold mine of persuasive resources. But even savvy executives can fail to appreciate the full power of peer influence -- or they might neglect to anticipate its unintended consequences. Consider, for example, managers who are responsible for shaping or enforcing policy within an organization. They will frequently call attention to a problem behavior, such as supply room theft, by depicting it as regrettably frequent. Although such admonitions might be well-intentioned, the communicators have missed something critically important: Within the lament of "Look at all the people who are doing this undesirable thing" lurks the powerful and undercutting disclosure "Look at all the people who are doing it." And in trying to alert people to the growing occurrence of a problem -- which could be anything from expense account padding to safety violations -- managers can inadvertently make it worse. After the Internal Revenue Service announced that it was going to strengthen the penalties for tax evasion because so many citizens were cheating on their returns, tax fraud actually increased in the following year. But that's not the only type of mistake that managers regularly make. Indeed, a more subtle problem occurs when they fail to recognize how peer influence is affecting their own decisions. Such situations can be particularly dangerous, leading people to do exactly what they shouldn't, all because they inadvertently have listened to the wrong voices. Thus, when trying to solve a problem, managers should resist the tendency (and the conventional wisdom) to start by casting the widest net possible and then later discounting information that isn't relevant. The potential pitfall of that approach is that it inserts the filtering process too late, after any irrelevant data might have already had a subconscious impact on a person's decision making.

Why do some subsidiaries become isolated — and does it matter?

Many executives speak about corporate reputation and brand as if they are one and the same. They are not, and confusing the two can be costly -- a lesson which companies like Nike Inc. and Wal-Mart Stores Inc. have learned the hard way. Focusing on reputation at the expense of brand can lead to product offerings that languish in the market. However, concentrating on brand and neglecting reputation can be equally dangerous, resulting in a lower stock price, difficulties in attracting top talent and even product boycotts. Brand is a "customercentric" concept that focuses on what a product, service or company has promised to its customers and what that commitment means to them. Reputation is a "companycentric" concept that focuses on the credibility and respect that an organization has among a broad set of constituencies, including employees, investors, regulators, journalists and local communities -- as well as customers. In other words, brand is about relevancy and differentiation (with respect to the customer), and reputation is about legitimacy of the organization (with respect to a wide range of stakeholder groups, including but not limited to customers). For most companies, even an outstanding reputation almost never comprises any unique characteristics that an organization can own and be known for. In short, reputation is a necessary but not sufficient condition for excellence because companies also need strong brands, which are characterized by high customer loyalty, pricing power and the ability to drive growth. Ultimately what drives customer preference and revenue is the ability of a company to create relevant products, services and brands and communicate and deliver them in a way that customers want to buy. Thus, executives need to do more than just keep their company's reputation on track. They need to differentiate their offerings in ways that win the hearts, minds and wallets of customers, and what helps make a company and its products special and preferred is its brand, not its reputation.

Observers are often amazed when executives with impressive track records are mysteriously transformed into corrupt and tyrannical monsters once they become chief executive officers. In truth, these executives often had serious character flaws that were either hidden or ignored for years. Corporate boards and search committees are not likely to detect personality problems of promising CEO candidates simply by examining their resumes or by conducting standard job interviews. This raises the question of how corporate boards or CEO search committees can penetrate the facade of an upwardly mobile executive who is, in reality, a wolf in sheep's clothing. What danger signals do these individuals exhibit and what measures can be taken to reduce the likelihood of hiring a dysfunctional CEO? The author identifies eight potential danger signals including: an obsession with acquiring prestige, power, and wealth; a proclivity for developing grandiose strategies with little thought toward their implementation; and a fondness for a data-driven management style that overshadows or ignores a broader vision. Even sterling CEOs occasionally exhibit one or more of the danger signals described here. Potentially bad CEOs, however, usually possess several of these characteristics, and they exhibit them repeatedly. There is no ideal method for selecting a CEO, and there may be no executive position that provides a true test of a person's fitness to assume the top job, but there are several ways that a company can limit its risks when deciding on a CEO. Boards are usually cautious when looking at CEO candidates from outside the organization. They are more likely to be lulled into a sense of complacency, however, when considering an internal candidate. Some suggestions for screening prospective CEOs include disregarding the time-tested rule that past success is a predictor of future success, performing a thorough background check that focuses on a candidate's integrity and interpersonal skills and using experience-based interviews to test CEO finalists

How are companies approaching intellectual property strategy, and what are successful strategies for managing IP? To explore such questions, the author and his research team conducted a detailed survey of senior IP executives at 34 companies. The survey findings indicate that IP has become an area of focus for the executive committee and the board at many companies. What's more, the study found that top executives' involvement in IP strategy was correlated with better IP performance. Analysis of the survey data suggests another intriguing point: Some companies are now using an approach to IP strategy that the author calls "full-fledged IP protection." This "full-fledged IP protection" strategy includes seeking technical and nontechnical IP protection for even minor inventions, in an attempt to "pack" technology spaces with IP claims. This practice differs from a classic IP strategy of using IP to support core research and development. At least in some industries, this change in IP use may, the author suggests, be causing the nature of IP competition to shift from the world of "real" products to that of "potential" products. The study also found that, in the companies surveyed, IP-related tasks often entail cooperation among staff from different functional areas within a company, such as product designers and patent and trademark attorneys. Having clear-cut rules about IP at the functional level was associated with better IP performance in the companies surveyed, as was having corporate management devote time to listening to the company's most senior IP officers. On the other hand, failure to sell or license out IP when circumstances facilitated or necessitated such a trade was associated with significantly lower IP performance. In addition to the survey data, the author conducted interviews with senior executives from two of the participating companies: Lars Rebien Sorensen, the CEO of Novo Nordisk A/S, a healthcare company with a specialty in diabetes care; and Dr. Gottlieb Keller, a member of the corporate executive committee of the healthcare company F. Hoffmann- La Roche Ltd. In these interviews, Sorensen and Keller discussed the role of corporate leaders in IP strategy at their respective companies.

Should executives make decisions based on what their "gut" tells them? Lately that idea has lost some favor, as technology's ability to accumulate and analyze data has rapidly increased -- supplanting, according to some accounts, the high-level manager's need to draw heavily on intuition. But intuition needs some rescuing from its detractors, and the place to start is by clarifying what it really is, and how it should be developed. Intuition is not a magical sixth sense or a paranormal process; nor does it signify the opposite of reason or random and whimsical decision making. Rather, intuition is a highly complex and highly developed form of reasoning that is based on years of experience and learning, and on facts, patterns, concepts, procedures and abstractions stored in one's head. In this article, the authors draw on examples from the worlds of chess, neuroscience and business -- especially Austria's KTM Sportmotorcycle AG -- to show that intuitive decision making should not be prematurely buried. They point out that although the study of intuition has not been extensively explored as a part of management science, studies reveal that several ingredients are critical to intuition's development: years of domain-specific experience; the cultivation of personal and professional networks; the development of emotional intelligence; a tolerance for mistakes; a healthy sense of curiosity; and a sense of intuition's limits. Companies should, of course, continue to exploit their abilities to mine data as a means of obtaining a competitive edge. But they shouldn't overlook the continuing value of experienced executives who can draw on their intuition to make decisions when the numbers yield a question rather than an answer: Now what do we do?

Solid principles for navigating the 21st century.

How innovators identify the critical things they don’t even know that they don’t know.