July 26, 2006
What Happy Companies Know by Dan Baker, Cathy Greenberg, Collins Hemingway
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What it Takes to Be HAPIE: First, Humility
Some executives shy from the word humility like a horse from a snake. A few may find the word offensive. They relate it to the notion of forced submission (humiliation) rather than voluntary modesty. Or they assume that humility means that they must wear sackcloth and ashes rather than enjoy the perquisites of their success. In fact, humility of character is not an embarrassment but a gift. Far from implying a lack of ability, confidence, ego, or will, humility is a manner of expressing those capacities in a way that engages others. Humble leaders operate from conviction, either from moral values that cause them to act beyond themselves or from a deep belief in the company’s mission. In fact, some such leaders may be cold, anemic, or arrogant until they connect to their mission, and then their entire behavior becomes energized and their focus intense. Humble leaders know they have gifts. They just keep them in perspective, as they also do their lifestyle. Humble leaders enjoy the pleasures of life; in fact, they appreciate them rather than take them for granted. Humble leaders have powerful egos, meaning appropriate self-esteem as opposed to an overinflated self-opinion. They are demanding, but driving their demands is a capacity for caring and a desire to help others excel, rather than a desire for personal domination.
History comes alive with such examples. Jesus challenged religious orthodoxy by associating with the rabble and teaching universal love. Muhammad rejected ethnic and class distinctions and sought better treatment for slaves, orphans, women, and the poor. Martin Luther challenged the excesses and indulgences of the religious establishment. Gandhi used civil disobedience to oust the British from India. Mother Teresa scolded world leaders face to face to do more for the deprived. These were people with a profound sense of self-worth, and their actions changed the lives of hundreds of millions of people.
World War II provides a more macho example of humbling your way to victory. America’s finest general in the European campaign was George Patton, who manifested superior battle strategy, unyielding resolve, and ineptitude in matters personal and political that resulted in his sitting out D-Day as a decoy. Later unleashed, he led the Allies across Europe, including the rescue of the trapped American army at the Battle of the Bulge. Nonetheless, in the largest and bloodiest war in human history, Omar Bradley and Dwight Eisenhower, the relationship guys, won out over the classic alpha male. Roosevelt knew that they were the only men who had the trust to keep the unwieldy and often cranky alliance together. A similar point about hubris could be made regarding Douglas MacArthur, who won the war in the Pacific with limited means, oversaw the reconstruction of Japan, and led U.N. forces to early and brilliant victories in Korea until his ego overran his considerable abilities. It is telling that in Eisenhower’s presidential campaigns the tagline was not “I fear the general” (as it would have been for Patton or MacArthur), but “I like Ike.”
These various leaders demonstrate that true humility is a form of courage. It requires people to subsume their personal needs and pretensions into causes beyond themselves. Humble leaders are those leaders willing to give away power. They recognize that more overall good occurs if they spread power through the organization or community than if they hoard power for themselves. Charlie Horn, founder and chairman of ScriptSave, which offers programs that reduce the cost of prescriptions for companies and individuals, puts it best when he says he has a “deep-seated belief that ScriptSave not be limited by the limitations of Charlie Horn.” This belief carries over to current company CEO, Lori Bryant, and all members of the executive leadership team.
That is why “humble” includes most of the people at the top of Fortune’s list of wealthiest Americans. Warren Buffett, the investment guru, and the Walton clan of Wal-Mart carry the best of America’s heartland virtues. Sam Walton lived well, but not ostentatiously, because he saw more value in using corporate wealth to build stores or give customers better prices than by living a big showy lifestyle.
He had nothing but contempt for “overpaid CEOs who are really just looting from the top and aren’t watching out for anybody but themselves,” because “every dollar spent foolishly comes right out of our customers’ pockets.”
Bill Gates lives a bigger and showier lifestyle than Walton did, but like Walton, he achieved his wealth by focusing on the company, tying his future to Microsoft’s stock performance. He once wrote a memo telling employees not to spend money just because the company had it, and he flew coach until the volume of Microsoft employee travel caused the travel agency to automatically upgrade him. When his schedule necessitated a private jet, he paid personally rather than out of company funds. No stranger to magazine covers, he is astute enough to parlay his fame into meeting people he admires, such as South Africa’s Nelson Mandela. Far from being threatened by talent, Gates has spent many years wooing the industry’s best and brightest to join his firm. Warm and fuzzy Microsoft is not, but no one can accuse the leadership of not being open to new people and to new ideas that stretch the firm and its abilities.
Finally, a practical reason exists for CEOs to be more humble. Research by leadership consultant Marshall Goldsmith shows that business leaders have a high and largely unjustified regard for their abilities. His studies show that 85 percent of all business leaders rate themselves as being in the top 20 percent—even the leaders of failing companies! Goldsmith’s explanation is that, as they move up through an organization, leaders superstitiously associate all their traits with their success, when in fact they are successful despite some of those traits. They become “delusional,” unable to hear any feedback that is not consistent with their own self-image.
Perhaps this inflated sense of self helps explain the salary inflation of CEOs. In 1980, the CEOs earned 42 times the salary of the average production worker. In 1990, the ratio increased to 100 to 1. Now, the ratio at 367 top U.S. corporations is 431 times, and the spread continues to grow, according to the Institute for Policy Studies. Many
studies show no relationship between CEO pay and company performance. Financial writer Michael Brush compiled a list of the five most egregious examples. The CEOs at Ciena, Sanmina-SCI, Sun Microsystems, Bristol-Myers Squibb, and Albertson’s received compensation of tens of millions of dollars per year for four years while company stock values declined calamitously—93, 78, 76, 48, and 39 percent over four years, respectively.
With some of these companies, the delusional shell is so thick that the board of directors evidently cannot see through it, never mind the CEO. Humility—an openness to the way others perceive us—is a major step in cracking the delusional shell and pointing corporate leaders and boards toward the shareholders the company is supposed to be in business for.
Ego Satisfaction Through Results
In business, the natural desire to serve others becomes a proper aspiration for leadership. This concept, formulated by Robert Greenleaf, who coined the term servant-leader in 1970, has led to an entire school of thought on the proper approach to leadership, which differs sharply from the person who leads because of the need to acquire power or material possessions. Humble leaders express their ego through serving customers and helping employees to grow. Their ego reward comes through results and the company’s success. Their tendency is to accept blame for failure and to praise others for success. Having a strong work ethic and a quiet confidence in their own abilities, they also recognize the hard work and contributions of other people who have helped get them where they are.
Arrogant leaders express their ego through their status in the company and society. They ascribe their success to their own remarkable abilities and photogenic qualities. They are also the first ones to point fingers at others when things go wrong or to claim ignorance when corporate problems emerge. The media are treating us to the weird spectacle of all these CEOs who ruled as corporate potentates now claiming a pitiful, woe-is-me ignorance about all the horrible wrongdoing that occurred on their watch. It’s an Alice-in-Wonderland world in which gross incompetence becomes the preferred legal defense to charges of felony misconduct.
With arrogant leaders, the focus is always on them and their needs. (The root word of arrogance means to claim for oneself.) With humble leaders, the focus is not on them but on what they are trying to achieve. Sam Walton, who parlayed small-town merchant wisdom into the world’s largest retail chain, once said, “Submerge your own ambitions and help whoever you can in the company.”
Arrogance does not equate to criminality, but its limitations hurt companies in other ways. Like the tortoise over the hare, humility wins over hubris when it comes to sustained company performance. Jim Collins, in his book Good to Great, found in an extensive survey that humble leadership was one of the major reasons for the long-term success of many remarkable companies. Collins’s goal was to find average companies that turned into great companies and then figure out how the companies did it. His methodology was to identify companies whose stock performance had been average for at least 15 years, then outperformed the market substantially for at least another 15 years. The company also had to outperform its own industry, to ensure that the industry itself had not become the darling of the stock market, as high tech did during the 1990s. Of the 11 companies that met his criteria, 10 of the 11 had homegrown leaders, and all of the leaders were humble. They were anything but weak, timid, ineffectual, or any other negative that some might associate with the word humble. They were typified instead by “personal humility and professional will.” Their mindset was of the plow horse, not the racehorse, and it often took many years for them to build an organization before it broke out. When it occurred, however, success endured. “Rock star” CEOs, on the other hand, were six times as likely to show poor results against the same standards. In fact, there seemed to be an inverse relationship between the number of personal headlines a CEO received and the performance of the company over anything but the shortest term. (A tongue-in-check news article during the Enron-WorldCom era claimed that a CEO who received personal headlines was 25 percent more likely to go to jail than an anonymous CEO.)
Another aspect of humility is an executive’s willingness to be hands on. Too many American executives have the notion that to do actual work is beneath them, that execution as opposed to grand strategy is demeaning for someone in their position. In contrast, Toyota’s management philosophy is expressed in the phrase genchi genbutsu, or “go look, go see the actual situation.” Gemba is the Japanese word for the actual place, and leaders also talk of “going gemba.” The idea is simple. Leaders can lead only if they know what is actually going on! Intense observation by leaders combines with hands-on involvement. The first president of Toyota’s Georgetown, Kentucky, plant was known to go into trances observing manufacturing processes, then fire off memos on things he had seen that could be improved. The next president of the plant moved his office from the “white-collar” building to a spot directly over the main manufacturing area to be more actively engaged. Young engineers in Japan have been asked to stand for hours inside a circle marked on the floor of a manufacturing facility to practice the art of deep observation. They learn not to rely on spreadsheet data but to observe the process first hand. The approach is the same as that used by anthropologists to understand cultures (participant-observation) as well as by forensic scientists investigating a crime scene. This approach continues as Toyota employees climb the corporate ladder.
As described in the book The Toyota Way, by Jeffrey K. Liker, this attitude of engagement begins at the top. At Toyota, getting your hands dirty is not a metaphor. Kiichiro Toyoda, who made Toyota a world-class automobile manufacturer, once came across an engineer puzzling over why a machine was not operating properly. Wearing business attire, Toyoda rolled up his sleeves and thrust his hands elbow-deep into grimy oil to pull out sludge that was clogging the filter. You have to get your hands dirty to solve problems, Toyoda told the engineer.
That action captures Toyota’s approach to leadership. Managers must go and see for themselves—and do themselves, if necessary—so that they have more than a superficial understanding of a situation. Wawa, a 500-unit, fresh-food convenience chain in the mid-Atlantic states, requires executives to spend one week a year in their stores to learn first hand about issues they might not otherwise uncover. The manager of a water-conditioning company in Las Vegas takes over the routes of his employees for a day when they reach a safety goal, a nifty combination of keeping your hand in and showing appreciation. Sam Walton took pride in having done every job related to retail from sweeping floors to buying product to arranging merchandise to handling the bookkeeping. It was easy for him to assimilate new ideas and to be able to teach others how to incorporate them into practical store operations. A great storehouse of knowledge within a company, and the ability of leadership to teach that knowledge, is a hallmark of great companies.
This hands-on approach applies to any conceivable project. Brian Muirhead, the manager for the Pathfinder project that successfully landed the Sojourner rover on Mars in 1997, found that the most effective managers under NASA’s faster-better-cheaper mandate were those whose natural inclination was to be hands on. Jim Goodnight, the CEO of SAS Institute, still writes code for the software company. In addition to supervising the work of others, other SAS managers do “real work” for which they are personally accountable. Senior leaders keep their hands in because they enjoy the work and because they want to set an example to other team leaders and employees to be involved at a deep level. Business strategist Keith McFarland describes a CEO who each quarter commits to five specific, measurable goals for himself and challenges everyone else in his company to create similar goals for themselves within 48 hours. People work harder and become more inspired when they see their managers working side by side with them rather than issuing orders from the safety of the rear.
To avoid being drawn into every little project or detail, leaders should think of themselves as a strategic reserve. They should make themselves available on a select number of the most crucial or time-critical matters. These are where their own experience is most invaluable, and where they should be paying close attention anyway. Muirhead personally handled a serious problem with a faulty sun sensor, the failure of which would have made navigation to Mars impossible. A manager at a high-tech company regularly signed himself up for at least one task critical to each of his employees’ success (and to their personnel reviews). On that project, he would report to them. Some employees found the situation awkward until he actually delivered on the assignments. Their working relationship improved immeasurably when they saw that he was willing to hold himself to the same performance standards as he held them. The exercise was more than team building. By providing extra, experienced help on his staff’s most crucial assignments, he improved the likelihood of a breakthrough and multiplied the team’s (and his own) overall results.
Seen in this perspective, humility is at the heart of organizational development. Humility enables an honest appraisal of the leader’s strengths and weaknesses. Acknowledging what they lack, humble leaders are able to bring in other people who have complementary strengths. L. Ben Lytle, then CEO of Anthem, Inc., one of the largest health-benefits companies in the United States (since merged with Wellpoint, Inc.), did not hesitate to hire people with complementary strengths in operations and finance. One of those individuals, Larry Glasscock, succeeded him as CEO. Being self-aware enough to hire people with complementary skill sets is a business strength, because a new CEO with dissimilar strengths will do different things rather than be locked into the “same old, same old.” Jack Stupp, who pioneered the discount store concept in Canada, sent his senior staff to an offsite with a consultant every year for 20 years. At that meeting, the senior executives talked confidentially about all of their issues and concerns with the company, including feedback on Stupp’s performance. Afterward, the consultant wrote up a summary of the points raised. The comments led to changes in both operational practices and Stupp’s management style. The fact that Stupp solicited honest feedback and consistently made changes based on that feedback created a culture of trust in the company.
In contrast, arrogant leaders do not want to hear from good people. In fact, they are likely to run off good people, whom they perceive as threats. One boss invited a woman to take a difficult job running a department that was in trouble. Initially, he was very supportive, but as soon as she succeeded in turning the department around, he began to constantly berate her and to encourage her employees to complain about her. She understood why the department had struggled so much beforehand: The leader would not brook success in a subordinate. She left, and co-workers tell her that he has continued the pattern of verbal assault against anyone else who does a good job.
The boss is “safe” for now because he makes his numbers, but his behavior has left him stranded at this level in the organization. When he ultimately leaves, the several departments under his thumb are likely to collapse from the lack of a qualified successor.
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Excerpt from What Happy Companies Know by Dan Baker, Collins Hemingway, Cathy Greenberg; published by Prentice Hall in May 2006.