The elements of leadership—not as ineffable as some would have you believe—are a topic I spend a fair amount of time on, for one simple reason: I believe that leadership matters, deeply. Regular readers will know that I subscribe to the theory that individuals make history, history does not make individuals.
So comes a new question: How do leaders have to evolve over time during their tenure at the top?
On one level, the answer might be obvious: "You evolve to meet the evolving challenges." And that, indeed, is the answer that the unimaginative and by the book bar exam graders will give you a "pass" for.
But, if one believes Wharton Business School’s "Leading for the Next Act: Why CEOs Must Evolve or Step Aside," it’s not quite that simple. According to research conducted by David Nadler, a consultant to boards and senior executives, a CEO’s tenure is "a performance with a series of distinct acts. Each act requires the CEO to lead, think and behave in fundamentally different ways. The successful ones are those who are able to make the transitions."
What does he mean by this?
In corporate-land, many CEOs appear on the scene when a fire needs to be put out. Their first hurdle, then, is to pass the test of getting the company over that first challenge, be it changing the culture or bringing innovation. Now comes the problem:
"The problem comes after the CEO solves that first issue; then it is act two and something else is needed, he says. Many CEOs fail because of what Nadler terms "success syndrome, that is, codifying a certain way of doing things, and then charging ahead with the old game plan no matter how the context has changed."
Bad example: Carly Fiorina, whose 5-1/2 years at Hewlett-Packard Nadler assesses as successful at first, when she had to transform HP, break it static culture, and develop a new strategy through the acquisition of Compaq. But after that, when her task turned to the more mundane one of execution and integration, she needed to "hunker down" but instead "she continued on the same approach, and the leadership model that had been successful in act one killed her in act two."
Good example: Stan O’Neal, who took over Merrill Lynch just three months post-9/11, with the firm on the rocks and literally blown out of its World Financial Center headquarters. In reality, the firm’s challenges ran far deeper than those superficial wounds, and threatened the firm’s very existence. (Nadler doesn’t explain this, but I will: The threats to Merrill consisted of discounters like Schwab eating away from the bottom, an increasing sophistication of global investment banking competition at the top, and a somewhat ill-defined brand and value proposition trying with difficulty to bridge the gap between catering to Main Street and Wall Street.)
O’Neal’s initial strategy was "demanding, almost brutal at times"; he focused relentlessly on control, discipline and cost. "His feeling was, ‘I have to save the company. If I don’t do this, we’ll be finished and thousands of jobs will be gone.’"
Once that strategy began to kick in and Merrill began to recover, a new game plan was called for. O’Neal realized this and acted on it.
O’Neal did something different: He changed his entire executive team, focused on growth and rethought his own leadership style. Today, says Nadler, with Merrill Lynch stock trading at nearly three times the amount it did in 2001, O’Neal is focusing on building up the next generation of leaders.
Here’s where Nadler’s research gets interesting. He asked himself what caused the difference between success and failure and then decided to study failure rather than success—"because success is transient, but failure is reasonably permanent." (By this he means that one can have success upon success and be remembered for that, but if your last act—and by the rigors of a competitive talent marketplace it will be your last act—is failure, that’s what you’ll be remembered for.
Focusing his efforts, Nadler decided that the most fascinating cases were CEOs who came into a job, did well for awhile, but, when circumstances changed, had a hard time adjusting their leadership—had a hard time moving from one act to the next:
"The most ‘heartbreaking’ kind of failure, says Nadler, is when CEOs try to change but can’t. ‘We are not infinitely malleable. Asking a person who is 55 to act dramatically differently, and pull it off naturally, is setting a very difficult-to-achieve goal.’"
Nadler’s conclusion is that boards of directors should constantly be alert to whether the CEO-in-place has the attitudes, the disposition, the talents, and the mindset, to lead the organization in the direction it needs to go now, knowing that that direction changes and is cyclic or episodic:
- We merge; we integrate
- We grow; we assimilate
- We retrench; we restore
- We redirect; we consolidate
And so forth.
But for all of Nadler’s research, I found myself unsatisfied with his casual approach to one profound question: He seems to assume that a CEO (read: Managing Partner) can succeed only during one time frame addressing one challenge. The moment times change, one needs to change horses. As he says, "We are not infinitely malleable. Asking a person who is 55 to act dramatically differently, and pull it off naturally, is setting a very difficult-to-achieve goal."
I could not disagree more strongly.
We live in the age of re-inventing careers. If Detroit auto workers can retrain themselves as registered nurses (and they are), how hard can it be for the managing partner of a firm to recognize that the challenge has moved from, say, getting the firm’s Shanghai office in shape to figuring out how to recruit and retain Gen Y? Nadler does humanity, and Type A, driven-to-succeed at the top of their game humanity, a shocking disservice.
With one caveat.
You need to listen. Seriously listen.
"Active listening" is one of the more depressing cliches to have emerged from the booming self-help industry, but I’ll tell you what active listening means to me: Actively encouraging disagreement. What is wrong with this picture I’ve drawn? What am I missing? If you were me, what would you do differently? "Conflict" it’s not; "consensus" it’s not. Common sense it might be.
So can you be managing partner through more than a single economic and strategic cycle? Only if you’ll listen.
Update Tues 14 August: A regular reader writes:
"Bruce, Great post! Thanks for bringing this Wharton resource to all our attention.
I agree that leadership is simply vital to law firms , but I draw a somewhat different conclusion, if I follow your drift.
I tend to agree with Nadler. Precisely because law firms are going through such gigantic leaps in their understanding of more sophisticated management models, expanding into further and more complex and more challenging markets (geographic, industry and subject-matter area), and in general staring dazedly at the changes in their industry going by at a pace they can scarce keep up with, I believe that a paradigm that encourages short tenures for firm CEOs (MPs) is advisable.
Further, why not also have strong central leadership committees (for example, something akin to a board of directors–some firms have them) whose sole job it would be to identify the most important challenge or small set of challenges that the firm next needs to tackle, and then select either one of their own (or an outside leader) to address it. Once that issues has been effectively dealt with, I see every reason for that person to pass the baton on. As Nadler I think rightly points out, it is difficult to one person to work against type–especially when their natural inclination is so successful in one project. Better to quit while ahead, get back into full-time practice, or, why not??, take the reins on somewhere else.
I personally see great benefit in the rise of a nascent law firm manager class that moves from platform to platform much as corporate CEO’s do.
The necessary corollary to this, I believe, would need to be a strong sense of group leadership and ownership by all leadership within the firm, both senior and mid-level. Only in this way can the firm have the strength of will to identify new challenges, rather than simply resting on laurels, or indeed, approaching new challenges with old thinking. I heartily recommend the "Bees" post by fellow (and new) blogger Bilinksy at Thoughtful Legal Management. Adding a dash of "hive-mind"–de-centralized decision-making, can, I think, dynamically interact with an even, and conversely, stronger centralized and powerful chief executive officer. The two together could help launch law-firms not only to parity in terms of quality of leadership that is found in corporate America, but perhaps even sling-shot beyond it.
One can only hope!!!"
Have a great week! I can’t wait to see your next post.
pete
