Saturday, November 15, 2008

Business people as heroes - Harold Geneen to Vikram Pandit

At any point in time, the press anoints a few business executives as heroes. From the days of Henry Ford, through Harold Geneen at ITT, Jack Welch at GE, to modern heroes such as Carly Fiorina, to Vikram Pandit. A very few are considered to be specially talented in retrospect, but most are seen to be far from perfect. This should not surprise us we do not often see what the CEO really does. Furthermore, a large organization is a group activity, and the leader does not know or influence most of what happens in it. Middle management who have been at the company a long time are often adept at preventing any change from taking place even if the leader pushes forcefully. Thus, while A.G. Lafley probably is one of the great CEOs of all time, he could only acheive his objective because he has a superb organization in place.

There are very few really great leaders, and even they are often flawed. Alfred Sloan thought that the Allies would lose to Germany because of its superior organization! We need to scale back our expectations of CEOs and also recognize that middle managers are critical to any successes or failures. Assigning star status to a CEO is counter-productive. Robert Nardelli was pushed out of Home Depot (with a $210 Million severance - it was cheaper to pay him that than keep him in place), so was hired to run Chrysler, a dying company in an industry which he knew not at all. Few middle managers would ever be hired on that basis.

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