Delusions of Leadership

Regular readers know that we don’t exactly have a high opinion of most books on the latest leadership fads.  Bill once commented that it requires a hefty Amazon account to be a traditional leader.  As only Bill can put it,

To be a leader, a manager should master Accountability Leadership, Collaborative Leadership and Contagious Leadership. He should get his or her arms around the Tao of Leadership and learn how to Lead From the Front and know Leadership That Works. There is Zen Leadership (perhaps this is the 102 version of the Tao of Leadership?), Spiritual, Ethical, Inspirational and Moral Leadership – all separate approaches. There is a 5th Wave of Leadership to master (no first through fourth, however), along with Thought Leadership, Facilitative Leadership, Systematic Leadership and, most important, I would imagine, Grown Up Leadership.

In order to keep all of this straight, leadership has been organized into 4 E’s, 5 Personalities, 6 Priorities, 7 Zones, 8 Keys, 9 Lessons, 10 Common Sense Lessons (apparently the 9 Lessons defy common sense), 21 Principles, 50 Basic Laws, 124 Actions and 180 Ways – each a separate tome.

For help along the way, the would-be leader should read up on Abraham Lincoln, Attila The Hun, Santa Claus and basketball coach John Wooden.  Jesus, the Founding Fathers and the US Army Rangers all have leadership lessons to teach, as do Teddy and Eleanor Roosevelt (not Franklin, though), Alfred Sloan, Martin Luther King and Six University Presidents (the rest of the academic folks are not leadership examples – just 6 of them). Jack Welch, the old rebel Robert E Lee and TV characters the Sopranos are leadership paragons to study. George Patton, Ronald Reagan, Alexander The Great, the Navy Seals and arctic explorer Robert Shackleton have leadership principles, practices and secrets to adopt, as does Mohandas Karamchand Gandhi – better known as Mahatma.

Ok, ok, I know I basically inserted most of his original post.  But how do your parse such a great piece of prose?

So it was with a grin and a smirk that I read today’s issue of the McKinsey Quarterly, with an article by  Phil Rosenzweig on his latest book, The Halo Effect and Eight Other Delusions That Deceive Managers.  In it he takes to task, very directly and bluntly, all of the revolving fads of management thought.  As Publisher’s Weekly writes,

This tart takedown of fashionable management theories is a refreshing antidote to the glut of simplistic books about achieving high performance. Rosenzweig argues that most popular business ideas are no more than soothing platitudes that promise easy success to harried managers. Mega-selling books like Good to Great, Rosenzweig argues, are nothing more than comforting, highbrow business fables.

Finally someone has the balls to call Good to Great a "business fable!"  Collins’ book is an interesting read, but guess where some of those companies are today.  That’s the "halo effect"…   

Many studies of company performance are undermined by a problem known as the halo effect. First identified by US psychologist Edward Thorndike in 1920, it describes the tendency to make specific inferences on the basis of a general impression.

How does the halo effect manifest itself in the business world?

Imagine a company that is doing well, with rising sales, high profits, and a sharply increasing stock price. The tendency is to infer that the company has a sound strategy, a visionary leader, motivated employees, an excellent customer orientation, a vibrant culture, and so on. But when that same company suffers a decline—if sales fall and profits shrink—many people are quick to conclude that the company’s strategy went wrong. In fact, things may not have changed much, if at all. Rather, company performance, good or bad, creates an overall impression—a halo—that shapes how we perceive its strategy, leaders, employees, culture, and other elements.

Rosenzweig even takes on the hand that feeds him (well, probably not anymore since he’s a bigwig author), McKinsey:

The halo effect is especially damaging because it often compromises the quality of data used in research. Indeed, many studies of business performance—as well as some articles that have appeared in journals such as Harvard Business Review and The McKinsey Quarterly and in academic business journals—rely on data contaminated by the halo effect.

The reason why books on leadership are often useless is,

Following a given formula can’t ensure high performance, and for a simple reason: in a competitive market economy, performance is fundamentally relative, not absolute. Success and failure depend not only on a company’s actions but also on those of its rivals. A company can improve its operations in many ways—better quality, lower cost, faster throughput time, superior asset management, and more—but if rivals improve at a faster rate, its performance may suffer.

Which is often a problem in the manufacturing world.  A company may follow the lemmings to low cost labor countries in order to compete with companies in those countries, only to find that other companies are working to truly improve their internal cost structure instead of masking it with cheap labor.  The bar is always rising, as GM has painfully experienced,

Compared with the automobiles GM produced in the 1980s, its cars today boast better quality, additional features, superior comfort, and improved safety. Owing to myriad factors, including the increased prominence of Japanese and South Korean automakers, GM’s share of the US market keeps slipping. Its declining performance must be understood in relative terms. Paradoxically, the rigors of competition from Asian automakers are precisely what have stimulated GM to improve. Is GM a better automaker than it was a generation ago? Yes, if we look at absolute measures. But that’s little comfort to its employees or shareholders.

So instead of reading the latest business book, presumably not including his and obviously not including ours, Rosenzweig suggests,

Rather than search in vain for success formulas, business executives would do better to adjust their thinking about the context of strategic decisions. As a first step, they should recognize the fundamental uncertainty of the business world.  Faced with this basic uncertainty, wise managers approach problems as interlocking probabilities. Their objective is not to find keys to guaranteed success but to improve the odds through a thoughtful consideration of factors. The goal should be gathering accurate information and subjecting it to careful scrutiny in order to improve the odds of success.

Such as working to truly understand and eliminate the waste in your organization instead of reading a book that tells you to follow the outsourcing lemmings overseas.