Leadership

Companies deploying dishonest tactics toward customers, suppliers, distributors and others typically do so to increase short-term profits, and in that regard they might succeed. But the misconduct is likely to fuel social psychological processes within the organization that have the potential for ruinous fiscal outcomes, outweighing short-term gains. There are three types of consequences to organizational dishonesty: reputation degradation, (mis)matches between values of employees and the organization, and increased surveillance. These outcomes can lead to decreases in repeat business and job satisfaction -- and increases in worker turnover, employee theft and other hidden costs. These consequences will, like tumors, spread and eat progressively at the organization's health and vigor. They will also be difficult to identify through typical accounting methods and might lead to corrective efforts that overshoot the true causes of poor productivity and profitability. Without a thorough understanding of the three types of consequences, an organization could try to control one financial hemorrhage (for example, losses from employee theft) by creating another (namely, investments in increasingly expensive security systems).

Charismatic and controversial former CEOs like General Electric Co.’s Jack Welch and Tyco’s Dennis Kozlowski are giving way to a new breed of leader dedicated to reviving the forward-thinking legacies of Old Economy titans, such as GE’s ingenious Thomas Edison and IBM’s visionary Tom Watson Jr. After years of focusing on the art of the deal, says the author, this renewed emphasis on innovation encourages corporate giants to again ground their organizations in what they do best. Many of today’s emergent corporate leaders, like MCI’s Michael Cappellas, IBM’s Sam Palmisano and GE’s Jeff Immelt, emulate the legendary standard bearers of invention by emphasizing technological engineering over financial engineering, product over marketing and real science over junk science. Critical to their leadership is an unrelenting drive for self-improvement, a strong interest in learning, an appreciation of a motivated work community and longer time frames than those dictated by a preoccupation with the daily stock price. For example, MCI is emerging from the years of WorldCom scandal by consciously drawing upon its legacy of telecommunications innovation. IBM actively seeks to again become the epitome of prestige, employee loyalty and innovation. GE creates a hothouse of R&;D while sharpening its innovative capability in the media and medical sectors through advantageous acquisitions. In addition, executives at 3M, DuPont and Pfizer, who increasingly emphasize research and innovation over promotion and hype, have helped their companies reassert their leadership roles in their respective fields.

If retaining employees is the goal, the answer is yes — and no.

Fear is a four-letter word in companies today, but CEOs” rhetoric of & ldquo;love”

Companies often focus on creating organizational processes and structures that allow them to learn quickly. But recent research shows that organizations must also effectively manage how they forget. The authors present a new construct for companies to determine how best to remember the knowledge they should and forget the knowledge they shouldn't. According to them, forgetting can be categorized along two dimensions. The first differentiates between accidental and intentional forgetting. The former is most often associated with the loss of valuable knowledge, which thus reduces a company's competitiveness. Intentional forgetting, on the other hand, can benefit an organization by helping to rid it of knowledge that has been producing dysfunctional outcomes. The other dimension highlights the difference between knowledge that is entrenched versus new. The two dimensions form a matrix that categorizes the four types of organizational forgetting: 1. memory decay, 2. failure to capture, 3. unlearning and 4. avoiding bad habits. Each form is associated with a distinct set of processes and contexts that result in a specific set of challenges. As such, each of the four processes must be managed differently.

Researchers are beginning to explore the complex effects of employee identity on the workplace.

Corporate America has spent the last few years in restructuring mode, drastically reorganizing processes in order to wring profits from a battered economy. However beneficial these efforts may be to the bottom line, say the authors, a reliance on restructuring has had unintended negative side effects, as hierarchies that once controlled the direction of many companies become less relevant, and loyal employees become increasingly disheartened by disruptive -- and often short-sighted -- strategies. In response, companies resort to even more restructuring, frequently with less than optimal results.The authors recommend that companies shift away from knee-jerk responses such as restructuring and hierarchy building toward a transformation of established corporate structures, a wider distribution of knowledge, and the use of modern performance-measurement systems and technologies. Citing examples at BP, North Carolina's Duke Power and W.L. Gore, the authors claim that only companies developing their advantage upon the agility and flexibility of their processes, people and technologies can build lasting value for their company, customers and employees.

Performance variability frustrates managers everywhere. According to the authors, it takes a variety of forms: vastly different sales figures for similar retail stores in similar neighborhoods; significantly varying productivity rates at factories producing the same products; major differences in insurance payments for similar auto accidents. In their quest to reduce performance variability, however, managers often go too far, say the authors. By forcing workers to "copy exactly" or "follow instructions exactly" in every situation, they make it far more difficult for people to use their own judgment and knowledge to solve problems that would benefit from a new approach. Having studied this issue in depth, the authors found that the appropriate intervention to reduce differences in performance depends on individual work practices -- their frequency and predictability. Practices that are more frequent and predictable tend to be more conducive to rigid duplication, whereas those that are rare and unpredictable have greater need for flexibility and innovation. The authors contend that it's not enough to have a balance between uniformity and discretion at the company level: Each group of practitioners within an organization must also have it.

Long-term research conducted with companies such as ABB and Lufthansa has helped the authors identify four organizational energy zones that, harnessed properly, can provide a powerful boost for achieving strategic goals. The researchers offer insight on selecting the type best suited to a company's culture and its leaders' personal style. They find that analytical approaches to management are increasingly incorporating a greater understanding of the major role that emotions play in corporate behavior. Today's challenge for leaders, the authors say, is to ensure that the company's vision and strategy capture employees' excitement, engage their intellect and fill them with urgency for action taking. First, they show that companies operating in what they call the aggression zone (responding to a threat) or the passion zone (responding to an exciting goal) are more likely to be successful. Companies in the low-energy comfort zone coast dangerously on past success, and those in the resignation zone have nearly given up. Second, they describe two strategies for unleashing organizational energy and the circumstances that indicate which to use. Finally, they point out ways to avoid common energy traps. Without a high level of energy, the authors contend, a company cannot achieve radical productivity improvements, grow fast or create major innovations. The researchers give examples of enlightened managers who are focusing on unleashing that energy and are leading their companies to outstanding performance.

Evolving a global approach to corporate distress is a difficult challenge, says the author, in part because codes vary internationally, reflecting fundamental differences in approaches to bankruptcy and attitudes about financial recovery. The U.S. approach favors rehabilitation as the way to serve creditors and restore value, whereas European nations lean toward liquidation. The author, who has worked with troubled companies in a variety of roles, describes how practitioners abroad are developing new, integrated approaches. Under the "light touch" approach, for example, a court-appointed administrator comes to agreement with the incumbent management team on operating protocols and delegates limited authority to it under administrator supervision. Thus, a more flexible, pragmatic approach is evolving that could represent a breakthrough for the global business community. To capitalize on such trends, the author, there are two additional strategies that could help establish common ground between the European and U.S. systems. The first is early intervention, which could make a difference in Europe and in relatively simple cases of corporate distress. However, in more complex situations, especially those that involve a bankruptcy filing in one or more national jurisdictions, a technique that is increasingly popular in the United States could be useful -- the retention of a "chief restructuring officer." Reporting to the board of directors rather than to a company's existing management team, a CRO is charged with developing and executing a plan to restructure the company's finances and/or operations. According to the author, the involvement of a CRO might well increase the likelihood of successful outcomes when rehabilitation is attempted with Europe-based companies, in part because many European practitioners lack experience in restructuring. With the various regulatory and attitudinal changes taking place across Europe, the author contends that a viable common-ground approach that seeks to maximize enterprise value is evolving -- to the benefit of companies, creditors and economies.