Leadership is crucial for business. Leadership is a starting point of strategy. It’s the magic elixir for achieving sustainable growth and value creation. Leadership is at the heart of engaged employees, innovation and vibrant cultures. It is what makes organizations thrive and prosper. Yet for all its importance, leadership is widely misunderstood because many people consider leadership and management to be the same. This confusion is evident as these two terms are routinely used as if they were interchangeable.

While they are both very important for a business, they are not the same. Management and leadership are different, though both are important. Most businesses will not be successful over time without the contributions of both management and leadership. But make no mistake, they are different.

Common Misconceptions

The common misconception is that leadership and management are the same. Let’s look at three examples of this confusion and misconception:

1. Leadership is determined by position, e.g., this person is a senior executive so therefore he/she must be a leader. Since leaders are at the top of the organization, the meaning of being a leader is seen as doing whatever senior executives do.
2. Leadership only comes from people in management positions. In this case the term management positions include supervisors and mid-managers as well as executives. In reality, many of the best leaders in an organization are not in management positions.
3. Leadership is a title. The use of the word leadership in titles for positions and teams has proliferated. Examples of position titles are sales leader and manufacturing leader. Examples of teams using the word leadership are “Executive Leadership Team”, “Regional Leadership Team” and “Plant Leadership Team.” In each of these cases the expectations of this team is heavily focused on management, not leadership.

Evidence of the Confusion Can Be Found in Conversations

Evidence for the confusion in the differences between leadership and management is widespread and easy to find. Try this little experiment. Ask people in the organization three questions:

Question #1: “Are management and leadership the same?”

Chances are high that you will get one of two responses to this question:

1. Yes, management and leadership are the same. “Its two words we use to describe upper levels of management”, is a common response.
2. “No, they are not the same”. If you ask for further explanation of the differences, the answers you hear will be muddled and unconvincing. It is likely that somewhere along the way this person has heard a discussion about the differences in management and leadership, but has not integrated the essence into their thinking.

Question #2: “Who are the leaders in your organization?”

The person answering this question will likely point toward incumbents in higher level management positions within that part of the organization. There is a common misperception that senior managers are leaders while those in middle management and supervisors are not.

Question #3: “Given who you identified as leaders in your organization, please describe what makes them a leader?”

The person will describe what makes them “leaders” by discussing their management roles and / or the level of their management position. Seldom is there an appreciation that a leader’s role is to make things happen that otherwise would not have happened. That is, leaders interrupt the status quo and redirect the business to a future which is much more compelling.

These questions also help to provide a line of thinking and reasoning for organizations to determine their thoughts on leadership and management. The answers received also provide feedback about the organization. As an example, it’s a good sign if:

• Those in the organization articulated that management and leadership are different AND both are important to the business.
• People were identified as leaders who are not in management positions.

Other less positive feedback about the organization would be if the responses were:

• We don’t have any leaders in this organization.
• We only have managers, as I am not sure our organization would tolerate actual “leaders”.

While these statements are seldom accurate, they are reflective of the negative views of  leadership in the organization. Put another way, it’s an example of “I know leadership when I see it, and I’m not seeing it”.

Differences in Management & Leadership

Given the confusion in how the two terms management and leadership are used, one might think it is a new conversation. That is, a recent set of conversations which has not yet reached executive and management ranks. Hardly. This conversation burst to the forefront of business management thinking in 1977 when Abraham Zaleznik published his classic article, Managers and Leaders: Are They Different? In this article, Zaleznik left little doubt that the two roles are quite different. This article was republished as part of the Best of HBR series in 2004 by Harvard Business Review. In the introduction to this classic article, the HBR editors wrote:

The traditional view of management, back in 1977 when Abraham Zaleznik wrote this article, centered on organizational structure and processes. Managerial development at the time focused exclusively on building competence, control, and the appropriate balance of power. That view, Zaleznik argued, omitted the essential leadership elements of inspiration, vision, and human passion—which drive corporate success.

Notice that inspiration was considered a key driver of corporate success in 1977. We are clearly not dealing with a new concept. The introduction goes on to say:

The difference between managers and leaders, he wrote, lies in the conceptions they hold, deep in their psyches, of chaos and order. Managers embrace process, seek stability and control, and instinctively try to resolve problems quickly—sometimes before they fully understand a problem’s significance. Leaders, in contrast, tolerate chaos and lack of structure and are willing to delay closure in order to understand the issues more fully.

Zaleznik makes clear that in his mind managers and leaders are quite different. He points out that the differences are fundamental in both their personalities and temperament. He highlights the differences in dealing with chaos and lack of order. Managers are prone to want to quickly reduce chaos and move to an answer. Leaders on the other hand appreciate the need for chaos and prefer to dwell in the chaos in order to understand it, rather than rushing to cut it off. Employees often live in the chaos. Consequently, they appreciate leaders who do not pretend it does not exist and rush to a premature conclusion in order to reduce the discomfort brought on by “disorder and not knowing”. Conversely, managers often appear to employees as being “out of touch” and “living in make believe world” given their rush to judgement. The irony of course is that managers pride themselves in being grounded in reality and accuse leaders of being out of touch and living in make believe world, when in fact, it is them who wear those labels.

Zaleznik drives the final nail in the differences by asserting that:

…business leaders have much more in common with artists, scientists, and other creative thinkers than they do with managers. Organizations need both managers and leaders to succeed, but developing both requires a reduced focus on logic and strategic exercises in favor of an environment where creativity and imagination are permitted to flourish.

As you can see from this introduction, Zaleznik launched a full-frontal attack on the notion that management and leadership were the same. To get the sense of impact it made, consider the description from the editors of HBR.

Zaleznik’s article “caused an uproar in business schools. It argued that the theoreticians of scientific management, with their organizational diagrams and time-and-motion studies, were missing half the picture—the half filled with inspiration, vision, and the full spectrum of human drives and desires. The study of leadership hasn’t been the same since”.

In 1985, Warren Bennis and Bert Nanus added weight to this conversation when they stated that management typically consists of a series of contractual exchanges. They add “leadership stands in the same relationship to empowerment that management does to compliance”. They summarized their views with the classic phrase:

Managers do things right

Leaders do the right things

 

John Kotter is one of the best known thinkers and writers on management, organizational change and transformation. He has had an illustrious career as professor at Harvard Business School and co-founder of a consulting firm which bears his name. In 1990, Kotter added fuel to the fire with his classic HBR article What Leaders Really Do. The opening narrative is:

Leadership is different from management, but not for the reasons most people think. Leadership isn’t mystical and mysterious. It has nothing to do with having “charisma” or other exotic personality traits. It is not the province of a chosen few. Nor is leadership necessarily better than management or a replacement for it. Rather, leadership and management are two distinctive and complementary systems of action. Each has its own function and characteristic activities. Both are necessary for success in an increasingly complex and volatile business environment. Most U.S. corporations today are over-managed and under-led.

 

Over-Managed & Under-Led

In the quote in the previous paragraph, John Kotter asserted that North American organizations are over-managed and under-led. To be sure, Kotter was not being critical of the amazing skills of management, but instead was pointing to the lack of balance between leadership and management. Let’s look at how Kotter describes management and leadership:

Management is about coping with complexity. Its practices and procedures are largely a response to one of the most significant developments of the twentieth century: the emergence of large organizations. Without good management, complex enterprises tend to become chaotic in ways that threaten their very existence. Good management brings a degree of order and consistency to key dimensions like the quality and profitability of products.

Leadership, by contrast, is about coping with change. Part of the reason it has become so important in recent years is that the business world has become more competitive and more volatile. Faster technological change, greater international competition, the deregulation of markets, overcapacity in capital-intensive industries, an unstable oil cartel, raiders with junk bonds, and the changing demographics of the work-force are among the many factors that have contributed to this shift. The net result is that doing what was done yesterday, or doing it 5% better, is no longer a formula for success. Major changes are more and more necessary to survive and compete effectively in this new environment. More change always demands more leadership.

In modern business it is clear that for influential business thinkers, management and leadership are different. Both are important, but are also quite different.

Given the magnitude of this risk of being over-managed and under-led, one would think that this would be taken very seriously. Sadly, it is not and is frequently overlooked.

Consider the example of the experience of an energy company which was reacting to a major environmental event. This event was triggered by employees’ behaviors caused by cognitive biases in interpreting data. This company was in full press recovery mode and had a team redesigning their corporate risk profile and programs. The group talked about many potential physical risks. Some seemed real and threatening. Others were more obscure and seemingly unlikely. However, the single biggest cause of the event was never addressed; the people element. Further, the overbearing on management on their people during the critical moments appeared to contribute to the problem. The biggest positive influence that could have occurred was if the company would have stood up and pointed out the organizational culture and the stifling level of being over-managed and under-led. Of course, this did not happen, with the predictable consequences.

 

Tangible Evidence of Leadership vs. Management

Vineet Nayar offers three tests to understand the differences in leadership vs. management:

Test #1: Counting Value vs. Creating Value

The first question is, are you counting value or creating value? Nayar asserts that leaders create value while managers count it. Leaders give clear guidance on how an employee can add value and then takes additional actions to add that value. This allows the leader to generate value above and beyond what team can achieve. Also, leaders set an example and assures people are in action. Nayar asserts that managers only count value at best and can reduce value by micromanaging those who are potentially creating value at worst.

Test #2: Circles of Influence vs. Circles of Power

Leaders have followers while managers have subordinates. Managers create circles of power while leaders create circles of influence. Nayar points out that the quickest way to assess which role you are playing is to ask, “How many people outside of my formal authority and reporting hierarchy come to me for advice?” Nayar asserts that the larger the number who come from outside, the more likely that you are perceived as being a leader.

Test #3: Leading People vs. Managing Work

Management is designed to control a group of people or entities to accomplish a specific goal. Leadership is the influencing, motivating and enabling others to contribute toward organizational success. Nayar writes “Influence and inspiration separate leaders from managers, not power and control.”

“Management Team” or “Leadership Team”?

Perhaps the confusion between management and leadership is most evident in the practice of renaming management teams as leadership teams. After observing the roles expected of the so-called leadership team, typically one would find that the actual purpose of the group is to manage. There is little, if any, intent to provide leadership nor is there any action which reflects leadership. As a consequence, many of these so called “leaders” aren’t leaders at all. They are managers. They have no interest in being leaders and offer little capability to lead. They are often capable managers, but not leaders.

Risks of Confusing Leadership & Management

The risks of confusing leadership and management are only as great as the risk of not identifying and adapting to challenges with customers and threats in the external environment. For most organizations that risk is huge. Yet in spite of this risk, management in these organizations is focused on maintaining the current approaches. Keeping the same approaches means that the trajectory of the business will remain the same. Of course, these managers look for ways to tweak the organization in order to increase the velocity. However, tweaking business approaches in the face of the need for large scale change is not likely to achieve the desired results. This tweaking could mean hurling the organization continuously faster toward a cliff or at least in the wrong direction. Leadership, in contrast, sees the oncoming challenges and enables those in the organization to explore other possibilities. This intense effort continues until a viable opportunity is determined.

Management Is Critically Important

In some organizations there is the belief that leadership is better and more important than management. This belief fails to appreciate the enormous contributions made by management to the modern business organization. We take global corporations for granted. We overlook that the sheer concept of a global corporation would not be possible were it not for the amazing advancements in management.

My grandfather worked on railroads as a conductor in the caboose. His view of the world was shaped by the view from the back of the train. His world experience was essentially one day’s train ride from Memphis, TN. If as a boy I tried to tell him about the emergence of the internet and new technologies, or how corporations would be able to effectively serve customers around the world … he would have thought me crazy. His response would have been akin to “Boy, you’ve been out in the sun for too long…”. Yet those remarkable accomplishments are possible due to advances in management practices. Of course, leadership was blended in to enable some of those advancements in what we today see as management practices.

The evidence for leadership being better than management can be found with an internet search. A Google search entered as “Are management and leadership the same?”, there are many sites which infer that leadership is better than management. This is inaccurate and unfortunate. Management is very much needed. The capabilities of companies to manage complex business on a global scale is truly amazing. This incredible capability is often taken for granted. It was not that long ago when managing a business with more than one location was thought difficult, if not impossible.

Reflect on this final analogy for the amazing contributions of management.

The American comedian Louis CK talks about how the general populous takes the amazing technology around them for granted. He gives example of being on an airplane when the person sitting next to him turns to complain about the speed of Wi-Fi on an airplane. Louis CK says we have no appreciation of the miracle of flying on airplane. He says “You are sitting in a chair in the sky!!!” Louis CK points out that rather than being in awe of this experience, people take it for granted and somehow assume that it is “their right”. He says the evidence for this is how frequently people come back from a flight with complaints about the slightest alteration in expectations and inconveniences.

This is a wonderful analogy for how people experience management. The advances in management capabilities are truly amazing. The importance of management must be acknowledged while at the same time recognizing that leadership is a different capability. Both are essential for business success!

Management and leadership are both very important. Yet they are different. To reiterate, management and leadership are NOT the same. Some individuals are capable of being effective both as a manager and a leader. Many are not.

Leadership is not given by the level of a person’s position in the organization. Being in an executive, management or supervisory position does NOT infer that one is a leader. Not being in a management or supervisory position does not mean that a person is not a leader. Some of the most inspiring leaders in an organization are not in management positions. These non-managerial employees bring heart to the organization and reinforce the culture.

Conclusion

Leadership and management are both important but are distinct capabilities. Many companies have well developed management capabilities and processes. Yet these came companies often do not have such well-developed leadership capabilities and processes. This shortage shows up when facing the need for growth and change.

Growing a business is a daunting task for many, if not most, executives. While growth is considered fun, and what executives dream of being engaged in, achieving sustainable growth is another story. 

Download our PDF: “Executive Challenges” and learn the Execution of Growth Strategies and Organizational Transformation.

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By Larry G Hoelscher, Partner & Bob Chapman, PhD, Managing Partner of KingChapman

Leadership is the starting point for strategy, execution and transformation. Building a cadre or core of leaders is a critical success factor. Yet too often leadership is thought to be exercised only by executives and a few other chosen individuals. We say that is not only wrong, but it robs organizations of a most precious resource for executing strategic change and transformation. How then does this mistake keep occurring?

Where to Start?

The place to begin is by expanding one’s view of leadership beyond the narrow views that…

• Leadership is the “private reserve” of executives and senior managers
• Leadership is done by people in management and supervisory positions
• Leadership and management are the same thing

As we have worked with clients around the world for decades, we continue to hear some if not all of these assertions. A most common expression is that leadership is performed by executives or “those people on top”. When employees are asked “What are the things these executives do that show leadership”, we most often here “I don’t know”. In most challenging settings the “I don’t know” is often followed by “not much given the shape we are in”.

It is very common to hear that “our leaders are our managers and supervisors”. Again, when employees are asked what this means, the most common answers have to do with management roles performed by this individual. This includes:

• Forecasting
• Planning
• Organizing
• Commanding
• Coordinating
• Controlling

Each of these are important functions of management, yet this is not leadership.

Leadership is Different from Management

We have written a number of blogs and articles on the differences between management and leadership. For the purposes of this article, we would like to paraphrase John Kotter from one of his videos “The Key Differences Between Leading and Managing”:

“Management is fundamentally a set of processes, most core of which are planning, budgeting, organizing, staffing, controlling, and problem solving. Leadership is a set of processes involving creating a vision of the future and strategies to get there, communicating out to people in a way that gets them to buy in to the vision and strategies, creating an environment that motivates those people, and inspiring the people to want to make the vision a reality.”

By distinguishing between Management and Leadership, it becomes clear that Management occurs as a result of the business structure, and the people in management roles are designated to manage a group of people, functions, etc. It also becomes clear that leadership is not the result of any structure or function, or even of the level someone happens to be in on the organization chart. Instead, leadership can be seen by the inspired actions of others, and with this concept in mind, anyone can be doing their jobs and having a positive and inspiring impact on others around them – that is, being leaders.

Accepting the fundamental differences between Management and Leadership, we are making the following assertions:

• First – that anyone can be a leader
• Second – if employees are being leaders, they have a greater sense of commitment to delivering the outcomes of the business, have greater effectiveness, have more ownership of why they are doing the things they are charged to do, and have a greater sense of their impact on others around them
• Third – if employees are operating as leaders, they will perform in ways that create greater value to the organization

For executives of any organization to desire a fully engaged workforce, they must commit to doing the things necessary to generate this kind of inspired and generative group of employees. If the executives are creating this kind of environment, there are a few fundamental distinctions we have found that are necessary for employees to fully embrace the full power of “Anyone Can Be a Leader”.

How Can Anyone in an Organization Be a Leader?

There are fundamentally 3 steps in creating the kind of engagement demonstrated by a workforce of leaders:

1.  Commitment to Being a Leader

Commitment to being a leader comes in two parts:

1. The executives of the organization commit themselves to creating this kind of environment
2. Each employee commits themselves to think and behave as a leader in the business

2. Ownership / Accountability

3. Communication

Commitment to Being a Leader

The first step in getting everyone engaged as a leader is for the executive(s) to make a clear and public commitment to this concept. When people are empowered to demonstrate their leadership in the organization while doing their jobs, their engagement levels in executing the vision and strategies of the organization goes “sky high”. It is essential that the senior executives are fostering this kind of mindset and behavior from everyone in the organization, and that examples of “being a leader” are recognized and appreciated.

For everyone in the organization, their first step is similar – they must decide that they are going to be a leader in the organization. This decision is a personal choice, that once made, unleashes their creativity, spirit, energy – all the good stuff that are demonstrations of a highly engaged workforce.

Ownership

Any leader in the business must be fully aware of the OUTCOMES for which they are accountable. With this awareness, committing themselves to deliver the outcomes in a way that is inspiring to others. Let’s look at some definitions:

• Definition of ownership is “the state, relation, or fact of being an owner”
• Definition of owner is

1. One with an interest in and often dominion over property
2. One with the right to exclusive use, control, or possession of property

With this kind of ownership, leaders’ passion to deliver results is immediately apparent. One motto that we suggest the leaders plant in their heads: “Good excuses do not equal results!”. Leaders’ ownership and accountability for delivering the business results, and ownership and accountability of HOW they deliver results, are powerful indicators of being an inspiring leader.

Communication

For this concept of “anyone can be a leader” to work, an increase in communication by each leader is essential. A significant increase in:

• Communication up (to supervisors, managers, execs),
• Communication laterally (to peers and co-workers), and
• Communication down (to others on teams, in the organization, suppliers, contractors, customers)

This heightened level of communication elevates each of the leaders to be aware of how they fit into the big picture, with a commitment to keep the other parts of the organization aware of their status, issues, breakdowns, etc – so that more leaders are involved to maximize success.

An interesting analogy on how this plays out can be found in any team sport. Let’s use American football:

Imagine a college football team, the offensive unit, and further that one of the offensive linemen sprains his ankle. Whose problem is that player’s sprained ankle?

Clearly, it is the player’s problem. After all, it is his ankle.

However, his sprained ankle is also the team’s problem. Because now, the team does not have one player at 100% capacity.

The main job of the injured player? Communicate their problem with the team, so that the team can figure out how to execute and work around the injured player. Or the communication could result in the player being replaced by another player. Etc.

The point – the offensive lineman is demonstrating his leadership by being accountable for the success of his position, and is communicating to the team so that future plays can be adjusted to take into account the injured player.

Anyone Can Be a Leader

“Anyone Can Be a Leader” is absolutely true! We see it all the time with our clients. The value created by people not in management positions is amazing. Some of the most powerful breakthroughs and growth stories occur because of leadership from nonmanagers. Further, committing to making anyone and everyone in the organization a leader is among the most powerful interventions to increase engagement than any we have seen. It is well worth the time and effort to foster this level of engagement!

 

If you want to learn more about what characteristics and roles leadership plays in the success of any organization, download our whitepaper: ‘Successful Strategic Execution Begins With Leaders’.

In it, you will learn:

• The two hallmarks of an effective leader
• The most crucial value for leaders to possess
• The greatest contribution a leader provides
• The most valuable ‘tool’ for a leader to wield

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I frequently hear the question, “How do I know that we are doing the right things to execute our growth strategies and transform our organization?” What a great question! To have the insight to craft such a question, one has to be aware that executing strategies and transforming organizations requires something “out of the ordinary”. Success in creating value through growth strategies and transformation requires an exceptional approach. Simply doing more of the same is unlikely to be successful, so something out of the ordinary is required. This level of change requires strong leadership. It will not happen simply through good management. Strong leadership must be actively involved.

This brings us to the question of “how do I know we are doing the right things?”

The answers center around:

* “Are you being a leader?”

* “Can your leadership fingerprints be seen on the execution actions and change efforts?”

Leadership is not a position, role or title. It is a state of being by a person who is committed to exceptional results / value creation and knows that success will require intense involvement of others. Thinking about how to involve others brings us to the fingerprints, or more specifically the thumbprints of transformation. We at KingChapman have used the term “Thumbprint” to refer to the important elements for success in organizational transformation. We began asking “when we look back at successful transformations, what evidence do we see which identifies successful practices?” This is akin to how forensic scientists look for evidence of fingerprints at a crime scene. Fingerprints are the chemical traces of the impressions from the frictional ridges of the hand which are transferred onto a surface. The best surfaces are hard, like glass or wood.

Importance of “Prints”

So why has fingerprint been the gold standard for identification for well over one hundred years? It is because human fingerprints are quite detailed, difficult to alter and change little during the life of an individual. This makes fingerprints a good identifier of identity over the long term. Thumbprints are particularly effective as identification. As an example, the Texas Bankers Association developed a fraud prevention program called the Thumbprint Signature Program.

Under this program people who wanted to cash a check were asked to place an impression of their thumbprint on the face of the check using a small inkless touchpad. This program found that few who were intentionally seeking to commit check fraud would leave their thumbprint. Of course, those who did left a positive identification which could be turned over to the police for further investigation and prosecution.

The term thumbprint is also used to say that it has a distinctive identifying characteristic. Harper Collins Dictionary adds “If you say that something such as a project has someone’s thumbprint on it, you mean that it has features that make it obvious that they have been involved with it”. It is in this light that we refer to our Transformational Thumbprint.

KingChapman’s Transformational Thumbprint

The elements in the Thumbprint initially came from our team asking, “what factors have we seen in the successful transformations in which we were involved?” At first, we were simply making note of these factors, without trying to draw inference to what drove success. Then, over time we observed that when we were able to get the client to include these elements, the projects were more successful. Additionally, we have collaborated with other consultants and have learned from their experiences as well.

KingChapman’s Transformational Thumbprint include:

1. Strong Leadership

2. Communicating a Clear and Compelling Business Case for Change

3. Achieving a New Context

4. Establishing Urgency for Action

5. Selecting Aspirational Outcomes

6. Inventing a Compelling Future for the Business

7. Rigorously Assessing Current Conditions and Performance

8. Formulating Strategies to Create Value and Achieve the Invented Future

9. Creating Scorecards with Clear Metrics & Milestones

10. Building an Accountability Structure for Leading the Transformation

11. Implementing Transformational Strategies via Breakthrough Projects

12. Just-In-Time Training in Producing Breakthroughs

13. Communicating, Communicating, Communicating

14. Enrolling Stakeholders

15. Changing Mindsets

16. Assuring Frontline Employees Feel Ownership of the Transformation

17. Choosing the Best Talent

18. Building Capabilities in the Organization

19. Sustaining Energy for Involvement & Transformation

20. Delivering Results & Not Accepting Excuses

21. Sharing Learning Throughout the Organization

22. Evaluating Results Achieved and Planning Next Steps

Conclusion

The ‘Thumbprint’ represents the features that confirm leaders have been involved in executing strategies which transform organizations. None of these features is beyond the wit of man to implement. Successful implementation of these features requires commitment, passion and time.

 

We were blown away – so simple and yet so . . . perfect!

When we began working with Neos Marketing, we posed a simple request – is there a way to demonstrate “transformation”, either visually or physically? Neos took up the challenge. And the result was brilliant!

First – a brief definition for transformation (from Webster’s Dictionary):

transform, v.

Etymology: < Latin transformāre, < trans- prefix + formāre to form, < forma form. Compare French transformer (14th cent. in Godefroy Compl.), also Old French tresformer

1. a. trans. To change the form of; to change into another shape or form; to metamorphose.

b. transf. To change in character or condition; to alter in function or nature.

2. intr. To undergo a change of form or nature; to change.

1. The action of transforming or fact of being transformed.

– a. The action of changing in form, shape, or appearance; metamorphosis.

– b. A changed form; a person or thing transformed.

2. transf. A complete change in character, condition, etc.

So how we can show people a visual representation of that? By using a metaphor.

Metaphor for Transformation

When we speak about organizational transformation, which is the bread and butter of our practice, we are using the definition:

“To change in character or condition; to alter in function or nature.”

We have been fortunate as a firm to have worked with many organizations over the past thirty years with their transformational efforts. Any organization wanting to “transform” is really wanting to realize a complete change in their character, condition, etc.

A few examples, expressed in the client’s words:

• “from a declining business in a declining market, to a growing business winning in the marketplace”
• “from a product centric business, to a customer centric business”
• “from a business struggling to survive, to a darling of Wall Street”

As you can see from these simple expressions, the organizations pursuing their transformation were not interested in incremental improvements, which definitely have their place in any successful business. The transformational aspect for these organizations represented significant changes, in order to deliver a step change in performance. These were big changes, and big deal changes. As KingChapman’s tag line suggests:

Big Growth Requires Big Change

Big Change Demands Big Leadership

So, our request to our partners at Neos Marketing was with this understanding of transformation in mind.

When Neos came up with the idea of tangrams, to be honest, I had to look the word up before I knew what they were talking about!

What is a Tangram?

The tangram is a dissection puzzle consisting of seven flat shapes, called tans, which are put together to form shapes. The objective of the puzzle is to form a specific shape (given only an outline or silhouette) using all seven pieces, which may not overlap. It is believed to have been invented in China and carried over to Europe by trading ships in the early 19th century. A Chinese psychologist has termed the tangram “the earliest psychological test in the world”, albeit one made for entertainment rather than for analysis.

This is an example:

 

Why were we so excited with this idea?

We at KingChapman believe in the people inside our client organizations, because we have seen for decades how much people can do if they are given the right mix of best practices and expertise that we bring to our clients. We have seen people achieve amazing results, make great changes in the approaches to their businesses, think about themselves and their companies in new and different ways – all in the pursuit of making the transformation happen in their organizations.

So just like the tangram can change into different shapes, so too can organizations make major changes happen that add material value to themselves, their owners, their employees, their communities and their customers.

Same components + different shape = a transformation

Part of our ‘secret sauce’ in working with organizations that are engaged in a transformational effort is making certain that leaders in the organization are also transforming in the process. As our tagline above says, ‘big change demands big leadership’ in any transformational effort.

How do the leaders change? They grow / expand / develop their leadership capabilities and competencies.

And why do they do this? Because this is what it takes for any organization to truly transform – everyone in the company must transform as well, starting with the leaders of the organization.

Our many thanks to the team at Neos Marketing. This tangram idea is a brilliant demonstration of what KingChapman is all about – transformation of organizations to drive big time gains in value.

 

Another way to drive transformation in organizations is through a ‘breakthrough project’.  To learn more about how to implement this in your organization, download our white paper, “7 Elements for Chartering a Breakthrough Project”.

In it you will learn:

• what a ‘Breakthrough Project’ is and why it’s critical to organizational transformation
• why creating a ‘charter’ is a critical step in the process
• the critical roles that key people must play in the project to enhance success

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Accountability, leadership and transformation are inexorably linked. Accountability is an acute and overt manifestation of leadership. Leadership involves accepting and acting on the accountabilities of the position. Transformation will not occur without leadership. One of the first aspects of a business that needs to be transformed is accountability. Among the strongest evidence that a business is transforming is that the executives, managers and employees have a new relationship to accountability, and this new relationship to accountability is manifested in the performance of the business, relationships with stakeholders, and service provided to customers.

What is Accountability

The word ‘accountable’ stems from late Latin accomptare (to account), a prefixed form of computare (to calculate), which in turn derived from putare (to reckon). The concept of account-giving has ancient roots in record keeping activities related to governance and money-lending systems that first developed in Ancient Israel, Babylon, Egypt, Greece and later, Rome. The Oxford English Dictionary (OED) defines the word accountable as:

1. Liable to be called to account, or to answer for the responsibilities and conduct: answerable and responsible. Chiefly of persons.

2. To be counted on or reckoned on.

3. Able to be reckoned or computed.

4. To be reckoned or charged, chargeable, attributable to.

5. Able to be accounted for or explained, explicable.

The term ‘accountability’ means “The quality of being accountable; liability to give an account of, and answer for, discharge of duties or conduct; responsible, amenableness.” I want to highlight the quality of being accountable since it provides a valuable insight into how leadership accountability is developed. Development begins with commitments which shape the person’s being. That is, if one wants to develop leadership accountability one begins with a strong commitment to being accountable. This commitment in turn shapes the context for the leader so that opportunities to develop occur clearly and with opportunities for action. Developing leadership accountability happens when the person acts on commitments to be accountable.

In business we say that leader accountability is acknowledgment and acceptance of responsibilities and results of the position. To expand this, we further say that accountability is:

1. Willing acceptance of the responsibilities inherent in the leadership position with a commitment to serve the well-being of the organization;

2. Expectation that the leader will be publicly linked to actions, behavior, communication, outcomes, performance, and value achieved;

3. Expectation that the leader may be called on to explain beliefs, decisions, commitments, and strategies to constituents.

Leadership accountability is the acceptance and fulfillment by managers of their critical role in the overall success of the organization. This term encompasses the achievement of personal and departmental results as well as contribution to reaching the company’s broader goals and vision. Accountability involves setting expectations, clearly communicating these expectations and then holding yourself and everyone within your sphere of influence responsible for consistently meeting the established expectations. Accountability is a process, with a beginning and an end. Accountability is not about blame, making excuses and scapegoating. It is not about telling people what you expect them to do, then quickly moving on to the next thing.

The Importance of Self-Examination

Self-examination is excellent means of developing leadership accountability. The person is committed to being accountable and based on that commitment sees to opportunities for action. Self-examination allows the person to assess effectiveness of her/his actions. A key question is “were my actions consistent with my commitment to be accountable as a leader?” Self examination will often reveal areas for improvement. This is particularly important with the circumstances in which the action occurred were complicated. Developing accountability as a leader is a long process of trial and error.

Accountability is personal, so self-examination is crucial. Self-examination occurs through looking in the mirror and asking questions such as:

• When have your words about accountability been stronger than your actions?
• Where have you allowed things to exist that you now know was a mistake?
• Have you allowed people around you to misbehave, use company resources inappropriately, foster ineffectiveness, and ultimately destroy value? If so, who and why?
• Have you allowed people around you to behave in a way that invalidates what you say you believe and stand for?
• Have you allowed others not to be accountable because you wanted to avoid a conflict, or you were benefiting in some way from the continued existence of this situation?

These are tough questions. Yet candid inquiry into one’s own accountability is essential. My advice to leaders is that accountability begins with you and will develop based on your willingness to accept your own mistakes. This acceptance allows the leader to be bigger than the circumstances and to talk about openly the consequence of prior actions. Accountability begins in the leader’s chair. If the leader is candid and honest about themself, then there is an opening for establishing empowering accountability in the organization.

Unfortunately there are many in executive and senior management positions who have not developed their leadership accountability. This lack of developing leadership accountability is best demonstrated when employees experience “holding others to account” as a version of “do what I say, not what I do”.

This is perceived by employees as inherently hypocritical since the one who is “holding” does not actually act in an accountable manner, nor hold themself to account.

Accountability works when employees experience it as empowering and as an expression of joint commitment to success. Accountability is not empowering when it is experienced as punitive. As example, it is common to hear a negative tone when managers use the term “holds others to account”. This punitive tone replaces the power which can be created in a candid conversation for accountability.

 

If you want to learn more about what characteristics and roles leadership plays in the success of any organization, download our whitepaper: ‘Successful Strategic Execution Begins With Leaders’.

In it, you will learn:

• The two hallmarks of an effective leader
• The most crucial value for leaders to possess
• The greatest contribution a leader provides
• The most valuable ‘tool’ for a leader to wield

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“I am here to help you. What do you need?”, offered Becca.

True leadership is shown in the spontaneous actions of people to their circumstances. When people are inspired to make a difference, they become leaders and inspire others to take extraordinary actions. In this case, it was a generous woman reaching out to support families who could never repay the gifts that they were given. Further, the leaders in this case were inspirational and were never acknowledged for their contribution. Lastly, the evidence of inspired leadership was the amazing response of other people and organizations joining in to help. There were some important leadership lessons learned from the tragedy wrought by Hurrican Harvey.

This past Saturday evening, I had the chance to join some friends over dinner. All of the dinner guests were very fortunate in that none of us suffered any losses from Hurricane Harvey, which dumped up to 50” of rain on the Houston area in less than a week, producing unbelievable flooding all around our great city. But one person in our party – Becca – shared an amazing story about a neighborhood not far from her home that didn’t escape the flooding.

I want to repeat her story, because I found it so inspiring as I realized that her experience demonstrates the kind of true leadership that my partners and I are always attempting to foster with our clients.

Becca’s Story

A couple of days after Hurricane Harvey moved out of our area, Becca went to one of her favorite local restaurants and noticed that one of the waiters who had been around for 10 years was not in the building. She asked if he was ok, and learned that his neighborhood had experienced massive flooding. Since this neighborhood was not far away, she drove there and was shocked at what she witnessed. Homes had taken up to five feet of water, mud was everywhere including the streets and inside the homes, and homeowners were starting to empty their homes because everything inside had been ruined.

She found her “favorite waiter” at his home, with his wife and 2 little children, and Becca walked right up to him, looked him in the eye, and said, “I am here to help. What do you need?”

When she got his list, she went home and got on Facebook with one of her neighborhood friends and asked them to help. Later that day, she returned with other friends with 600 sandwiches for the families in the neighborhood, cases of bottled water, cleaning supplies, rakes, shovels, tools – basically everything on the list.

Becca and her team returned the next day…

And the next day…

And has been helping this neighborhood of people for over two weeks.

And her list of volunteers continues to grow, as do the supplies needed by these families to rebuild their lives.

I found her story incredibly moving, and inspiring. She looked at the people and their situation, and chose to be a leader by making a difference in the best way she could comprehend. What has been achieved as a result of her leadership has made a difference to that whole neighborhood, and far exceeded what a rational person would have predicted could have been accomplished.

Breakthrough Projects and Leadership

Last month, my partner Bob Chapman wrote an article, “Creating Organizational Transformation With Breakthrough Projects”.

In this article, he shared a number of predictable actions, based on our years of experience, that come from the teams that are leading breakthrough projects:

• Delivering exceptional business results more quickly than expected
• Developing transformation leaders in different levels of the business
• Engaging employees in a way they have never been engaged before

This article was obviously written with a business in mind. Typically, an executive is looking to deliver some step-change in performance due to a variety of factors. We work with client companies to properly charter these breakthrough projects, and then work with both the Executive Sponsors of the projects as well as the Project Leaders and Project Teams, to create and execute breakthrough projects delivering unimaginable performance and results.

Ways Becca Personafied Transformational Leadership

What is it that is so inspiring about Becca and what she has been able to do? There are many comparisons between Becca and the transformational leaders that we are working to develop within all of our clients.

#1: Engagement

Becca saw a group of people who were in need of help. These people weren’t begging or crying about their fate – they were too busy getting themselves organized and cleaning up to prepare for rebuilding. She saw this group of people and asked what she could do. She then turned to people she knew and trusted and got them engaged to help her help them.

Getting people engaged is a key capability of a transformational leader. Notice that Becca could not coerce or force or command her friends to jump in with both feet. All she had was a request for help – and of course, knowing Becca, she brought her own personal brand of enthusiasm to the request. And her friends came out in full force, sharing with their own circles of friends to provide additional help and support.

This is what we have seen happen in breakthrough projects – people get engaged and start doing things that no one would have ever predicted.

#2: Creativity

After two days going to this neighborhood and working with the people there, she realized that everyone in the neighborhood needed to shower. She talked to one of her friends, asking how in the world could that be done? There was no electricity, no shower facilities (all homes had been flooded) – what to do. Her friend came up with an ingenious plan, and later that afternoon there was a home-made set of six semi-private showers. When they were installed and turned on, Becca said you could hear the whole neighborhood clap and cheer.

When breakthrough project teams get really engaged and act to deliver outcomes to which they are committed, they invariably face obstacles or roadblocks, i.e. special needs that they had not planned for. The way we coach the teams, and the way we help create the teams’ charters, helps facilitate the creativity that is often needed to be effective. We have seen time and again that when a breakthrough project team decides to get something done, their creativity to find a resolution is unstoppable. And often the resolutions they create become a transformational pillar in the construction of the whole breakthrough initiative.

For the breakthrough project leaders and teams, learning to tap into this creativity through commitment, dialogue, and engagement, becomes a way of working rather than a one off. This is one reason the work of breakthrough teams becomes a sustainable set of capabilities available to the organization for years more.

#3: Being a Leader vs Having the Title of a Leader

Becca clearly did not have a title “Neighborhood Leader”, or “Homeowners’ Association President”. She didn’t even live in the neighborhood! But she took a stand for those people – and she took a stand for herself – that she was going to make a difference. Her stand didn’t sound like “I am a leader” – she just BECAME the leader.

And in her leadership, she lost total control the first day. The engagement she got from people was so intense, that others came out of the woodwork with offers of all kinds of help, work, supplies, etc. She had to ask one volunteer to take the donated clothing somewhere other than the neighborhood, because at that time, there was nothing in the neighborhood that was dry and clean. She had no storage! So the volunteer found a local business that became the storage place for the clothes, and later, for much more in supplies.

Her leadership didn’t need control – she needed inspiration, engagement, creativity – and lots of people taking lots of action!

Breakthrough project leaders learn very similar lessons. The objective of the breakthrough project is to generate far more action and results than would be otherwise predictable. And like Becca, breakthrough project team leaders often find that the activity gets more robust and voluminous than what one person can control. This is a good sign because it means that the whole possibility of the project is becoming immersed within the organization. As the old saying goes, “Success has many fathers, failure is an orphan”. People love to play on a winning team, and just as Becca was leading a winning neighborhood effort, breakthrough project team leaders are being trained to lead winning projects.

Thank you, Becca. You are an inspirational leader!

This is a final note about something that I still cannot get over as it makes me even more inspired by Becca and what she has accomplished:

Becca was laid off from her job the week before Harvey.

So even though she was going through her own issues and challenges, she still stepped up and became a truly inspiring leader who has made, and is making, a profound difference to an entire neighborhood.

We have seen so often that people in organizations want to make a difference – they want to do something that matters. It is this spirit that we at KingChapman are in business to foster and bring out in all of our clients. We have seen people just like Becca take business initiatives on as leaders no matter where they happen to be in an organization, and with inspiration, commitment, and creativity fully engage themselves to deliver outcomes that are transformational.

 

 

If you want to learn more about what characteristics and roles leadership plays in the success of any organization, download our whitepaper: ‘Successful Strategic Execution Begins With Leaders’.

In it, you will learn:

• The two hallmarks of an effective leader
• The most crucial value for leaders to possess
• The greatest contribution a leader provides
• The most valuable ‘tool’ for a leader to wield

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Empowering Accountability first and foremost occurs in the overt actions of leaders, such as communication. Other equally important actions include quality of strategic thinking, planning, design of strategic initiatives, sustaining execution during hard times, learning from experiences, and sustaining momentum until desired results are achieved. All of these actions are part of what is required to be a leader in a complex world.

Often, I am asked, “How can I see accountability in my organization”? The answer to seeing actual accountability in your organization is watching the action. That is, the manifestation of accountability is action. Actions shine a bright light on executives and managers being accountable, or the lack thereof. The effectiveness of your organization is determined by the degree to which your leaders hold themselves to account for their actions, communications, and results.

Executives must act from being accountable for all the results, not just the ones they like or those that make them look good. Leaders’ actions must include communication about decisions made and intended results from these decisions and actions. Employees pay very close attention to executives’ and managers’ actions and non-actions, what is talked about and what is ignored, what is rewarded and punished, and the support given for those in the organization who step out and try to lead.

Empowering Accountability

Empowering Accountability is created by leaders in order to carry out their roles. These roles include aligning people, communicating goals, developing commitments, motivating, and inspiring. Empowering Accountability creates a new context and collaborative environment for people in the business. This clarity of accountability energizes your people to step out, to be more creative and resourceful in seeking breakthrough opportunities. This energizing is the evidence of leadership. Therefore, accountability and leadership are inseparable, as leadership is seen in the inspired actions of others.

Leaders are responsible for imagining possibilities, then turning possibility thinking into an inspiring shared vision, per Kouzes and Posner in their 2002 book, The Leadership Challenge.

Empowering Accountability allows your people to experience being trusted and enabled to take action and see the consequences. Seeing the consequences is essential to fine tuning and ultimately achieving a result. Yet, much too often there is not an environment of accountability, which limits the effectiveness and satisfaction of people.

Accountability Establishes Clear Expectations

Successful execution of growth strategies requires extensive communications and engagement to assure your people know and understand what is expected of them. People will not be accountable until they fully embrace the expectations. Assumptions that “We told them” means “Our people know and understand our expectations and are on board with them” is one of the prime reasons strategic execution projects fail. That is, executives and managers assume that “We told them, so people know” is dangerous. Also, it simply does not work.

Don’t assume your employees know what is expected. An email, town hall meeting, or video alone does not assure people actually know and understand the expectations. Instead, paint a word picture by clarifying, detailing, and outlining what is expected. Unless the expectations are made explicit, as well as the metrics for how all performance will be assessed, there is no reason to expect people to act differently than they have in the past. Only when your people know and understand will they begin to take on being accountable; and only when they have chosen to be accountable can Empowering Accountability be created.

Accountability Establishes Boundaries of Behavior

Empowering Accountability involves communicating to your employees the boundaries of acceptable behavior, as well as the consequences of desirable and undesirable behavior. When appropriate, it is also important to point out the consequences for violating these boundaries.

Empowering Accountability assures that employees know which boundaries your executives want them to push. For example, in down markets, there is a strong temptation to cut prices in order to capture orders. Yet, it is hard to know when the prices have been cut lower than needed, which has a big impact on profitability.

I have worked with a CEO who would encourage his business leaders to experiment with raising prices as a means of testing where the bottom is. In many companies, raising prices in a down market would be punished. Yet, in this case, the CEO made it safe for the business unit leaders to challenge or push these perceived boundaries.

The same CEO also had a colorful way of challenging the business units to bring forward bold growth opportunities. In many companies, there is an unwritten rule that it is not wise to bring growth opportunities to the CEO that are bolder than his/her preferences. As a consequence, the CEO’s personal style and temperament becomes an invisible constraint on potential growth. This CEO’s statement was, “I want you to bring forward growth opportunities that are so bold it will make my hands turn white while gripping my chair.” That set a very high bar for the businesses to purse bold growth ideas.

Accountabilities also establish boundaries that are “out-of-bounds.” This may include geographies which are simply “off-limits” because of political instability and other factors. In one E&P company, it was simply the point of view of influential directors…

For example, I was working with a UK E&P company who wanted to expand its gas operations in Pakistan. A very influential director held strong beliefs that their company should reduce its exposure, rather than increase it. The CEO was undeterred and finally convinced this director to go on a tour with the executives in charge of operations in the country. A well-orchestrated visit was planned and was proceeding smoothly until an attempted coup broke out. While the director and executives were unharmed, there were some very tense moments. Needless to say, the director’s point of view was not changed.

Empowering Accountability assures that employees know the boundaries. This includes which boundaries the executives want them to push vs. which boundaries are “out-of-bounds.”

Accountability occurs in action. It is a beautiful thing to watch!

 

Implementing Empowering Accountability in your organization will take leadership, first and foremost. If you’re an executive and want to lead this change, you may want to read our whitepaper entitled ‘Change Management vs. Change Leadership’.

In it you will gain insights into:

• what is the key difference between these two and why is it critical
• a simple exercise framework to look at the level of the problem driving the change effort
• understanding the distinction between a ‘default future’ and an ‘invented future’

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Leading in a complex world requires continued development of leadership attributes and tools.

An excellent example of this is when accountability is created in the context of leadership, rather than management. Leaders use accountability to empower, while managers use it to control. This is entirely consistent with the differences in management and leadership.

In many organizations creating leadership accountability this is easier said than done, since there is such strong presence of management orientation and little leadership orientation. John Kotter once wrote, “Most U.S. corporations today are overmanaged and underled”. In companies which are ‘overmanaged’, accountability will be designed to produce consistency, control and order. In contrast, accountability in leadership context is designed to align, communicate, engage, motivate and inspire.

Leadership accountability is a primary tool of executives to successfully achieve strategic growth. Executing growth strategies involves implementing substantial change, which in turn requires leadership. While leadership accountability provides a powerful leverage for growth, it can lose its power if the executives and senior managers fall into common organizational traps. These traps can in ensnarl even the most committed, experienced and intelligent executive.

Blame and Excuses

Blame is not useful in leadership accountability as it shuts down openness and transparency. Blame involves accusing another of being the cause for failure. In business it is often used to avoid or duck accountability. In many companies ‘The Blame Game’ dominates much executive energy and time. The effort is spent in documenting and explaining so that when another attempts to blame, there will be ample justification to assert innocence. Too often executives in business view other executives as the enemy and spend so much time posturing against other executives that there is little time to be concerned with customers, competitors, and shareholders.

In his book, The Oz Principle: Getting Results Through Individual and Organizational Accountability, author Roger Connors found that a thin line separates success from failure and the great companies from the ordinary ones:

“Below that line lies excuse making, blaming others, confusion, and an attitude of helplessness, while above that line lies a sense of reality, ownership, commitment, solutions to problems, and determined action.”

Making Scapegoats

The term scapegoat is commonly used in organizations, but most people do not know of its origin. It comes from the Old Testament in the Bible. Leviticus 16 describes how the Jewish chief priest symbolically laid sins of the people on the goat, which was in turn was driven out into the wilderness to meet its certain demise.

The scapegoat has been applied in social systems, as well. It denotes the practice of placing all the blame for the organizations troubles on an individual as a means of reducing the stress on that system. The problems are blamed on another and thereby the guilt and responsibility is transferred. Scapegoating is common in organizations, especially when the organization is in midst of change and/or not functioning well.

I often use the prevalence of scapegoating in an organization as an indication of organizational health. One can determine this as well by simply asking a few questions. A classic place to start is with the functional groups which could be causing stress, such as “Tell me about HR?”.

Executives who are executing growth strategies must studiously avoid blame and scapegoating, as well as not allowing others to do so. Empowering accountability will not flourish in environment of blame and scapegoating.

Leads to Avoidance of Accountability and “Becoming Victims”

You probably have heard the old joke about the teacher who asked a young student why his math homework wasn’t turned in, to which the young student replied, “Well, you see I did my homework but then the dog ate it”. While we joke about such ludicrous excuses, think about this the next time you are in a budget meeting or operational review. Look to see how often you hear the adult version of “the dog ate my homework”.

We in the U.S. have taken excuse making to an art form. Conner’s says that Americans lead the world in what is termed the “cult of victimization”. The quote is from an article in The Economist that describes this as “an odd combination of ducking responsibility and telling everyone else what to do”. Certainly this tendency is alive and well in U.S. businesses.

Excuse making is one small step up from denial. In denial, the person says “it never happened”. In excuse making, the person says “It did happen but it is not my fault because of these extenuating circumstances”. Excuses are a story that a person makes up about the circumstances surrounding the events and results that serve to absolve the person of any accountability for what happened.

Excuses cloud the conversations and thinking, so little progress can be made toward producing the desired results. Further, excuses begin as little stories, but lay the foundation for much more debilitating organizational dynamics. These dynamics are becoming victims and building campaigns against other departments, functions and organizational units in the business.

Until an individual and organization takes accountability for the outcomes and does not cover it with an excuse or story, that individual and organization will be a victim. Victims are the opposite of being accountable. Victims are passive and not at fault. Individuals who are victims are not accountable and will not be effective as leaders. Becoming a victim precludes individuals, groups and organizational entities from owning their own involvement and contribution to what happened.

Avoiding These Traps

How can we avoid these traps? Being alert is the first step, of course. Beyond that I encourage you to talk openly with the other executives and managers who will be leading the growth strategies. Staying alert as a group is your best defense. Speaking immediately to one another if you see even a hint of one of the traps coming into play. Chances are others will see the trap waiting for you before you do.

Who could you talk today to begin collaboration on avoiding traps to your establishing empowering accountability and leadership?

 

 

Half of M&A transactions fail to create value. Ever wonder why? Download our whitepaper ‘The Conundrum of People in M&A’, and understand the critical elements that impact mergers and acquisitions success or failure.


In it, you will learn:

• Eight common flaws in decision-making often made by executives in M&A transactions
• Why the integration process is so critical
• Tactics in organizing, planning, and communicating that lead to successful integrations

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Having been a part of many integrations of mergers and acquisitions with different clients, we have observed numerous issues that predictably arise. These issues affect the integration project leaders, the integration teams and ultimately a broader group of employees. While there was great effort in the pursuit of an M&A deal, some of the effects of these efforts on everyone else in the organization often go unnoticed.

The Chase Begins

There are predictable dynamics that will happen as the “chase begins”. As an example, rarely do the M&A integrations go as scheduled. Rather, there is a continual speeding up and then slowing down of the process. A visual analogy to this phenomenon is what happens when a train with a heavy load of cars begins to move. There is often lurching back and forth.

This phenomenon of speeding up and slowing down is due to several factors:

• Buyer and seller negotiating the transaction because of changes occurring in either or both of the businesses
• Questions or delays due to outside factors, such as regulatory bodies, unions, local or national governments, etc.
• Changes in terms needed to fit outside financing sources’ requirements
• The time of the year (e.g., people going on vacations, holidays, etc.)
• Internal snags coming from legal, accounting, finance, HR, etc.

The Jolt Factor

Obviously, these sorts of issues are to be expected, and managed through. But generally, what is not addressed is the stress added to the executives involved, and to the people in the organizations involved. This stress often has a jolting impact on everyone. This jolting experience has a growing impact on the people in the business as each delay happens. We can use a freight train as a good analogy.

When the engine of a train begins moving, there is a jolt felt by each of the cars as their couplings become engaged. This is referred to as slack action in the railroad industry.

From Wikipedia:

In railroading, slack action is the amount of free movement of one car before it transmits its motion to an adjoining coupled car. This free movement results from the fact that in railroad practice, cars are loosely coupled, and the coupling is often combined with a shock-absorbing device, a “draft gear,” which, under stress, substantially increases the free movement as the train is started or stopped. Loose coupling is necessary to enable the train to bend around curves and is an aid in starting heavy trains, since the application of the locomotive power to the train operates on each car in the train successively, and the power is thus utilized to start only one car at a time.

When the train starts, the first car behind doesn’t move until the slack is eliminated in the coupling, then it jolts into movement. The second car doesn’t move until the slack is eliminated between cars 1 and 2, and then car 2 jolts into movement. And so on.

Organizational Impact

As an executive of a company involved in some merger or acquisition, the start and stop nature of these transactions give this jolting experience to all people in both companies, even if they are not directly involved in the process. And just like a train car along the line, if you can’t see what the engine is doing, the start and stop of the process turns out to be a surprise and a jolt. This goes on for either starting or stopping the process, just as it happens on a freight train.

The resulting organizational impact includes,

• Stress from the jolting actions
• Feeling “out of the loop”, so less effective in making things happen
• Frustration because no one understands what is really happening
• Loss of enthusiasm for the transaction, especially if the transaction takes a long time

Transformational Leadership provides an excellent antidote to mitigate these impacts during any M&A activity, for both organizations involved, and particularly for major M&A activities. My partners and I have written extensively about Transformational Leadership, which is available on request.

 

 

Half of M&A transactions fail to create value. Ever wonder why? Download our whitepaper ‘The Conundrum of People in M&A’, and understand the critical elements that impact mergers and acquisitions success or failure.


In it, you will learn:

• Eight common flaws in decision-making often made by executives in M&A transactions
• Why the integration process is so critical
• Tactics in organizing, planning, and communicating that lead to successful integrations

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Quite a few years ago, I was hitting golf balls with my 5-iron, when Kelly, my golf instructor, asked “Larry, what do you want to get out of your lesson today?” I told him of my frustration of hitting a short 150 yard slice (ugly) and I want to hit a 175 yard shot with a slight draw (beautiful!). After hitting a few balls, Kelly showed me a “strong grip” – which is not about how firm to hold the club, but rather the location of the hands on the club.

I tried hitting the ball using this new grip, and I swear, I could hardly get the club face on the ball. After a number of tries, I turned and looked at Kelly and said in frustration, “Kelly, I can’t hit the ball this way. It just feels too strange. Let me go back to my old grip and show me something else!”

I will never forget the look on Kelly’s face. He said, “But Larry, it is SUPPOSED TO FEEL STRANGE! If it doesn’t feel strange, then there is no change, and if you don’t change, you will never hit a 5-iron 175 yards with a slight draw!”

What a lesson! Yes, I can still hit that shot, but that’s really not the point. The biggest lesson for me was, how change can be so difficult, even when I wanted to result of the change! Here I was, a relatively inexperienced golfer, wanting to become a much better golfer, and yet, making the change was so challenging.

Why is Change Hard? Cognitive Bias

Haven’t you ever wondered why it is that change can be so difficult, hard, upsetting, takes a long time, challenging – even when the business case for the change is so promising? These are but a few of the many descriptions that any of us have experienced when going through some change. Whether it’s landing a new client, going to a new job, changing strategic direction, learning a new software program, acquiring or being acquired, or combining corporate entities – all are ripe with changes, some small and some big.

We can look to the decades-long studies of Cognitive Bias to help shed some light on possible answers to this question: Why is change hard?

Cognitive bias can be loosely defined as a systematic, automatic pattern of observing or evaluating things around us, and from this, draw conclusions, make decisions, and behave in ways consistent with these biases. Part of what it is to be a human being includes cognitive bias.

In fact, when you really study different biases that we all have, it is obvious that cognitive bias is a way of describing the way our brains work, and have been working for generations, which allowed our species to survive. Many cognitive biases are so automatic that they don’t seem like a bias at all.

For example, if you look at the following illustration, what do you see?

Is your answer: A box? A square? 9 random dots?

We generally would not see “9 random dots”, although technically that is exactly what is shown. We can’t help but see a box, or a square, or some pattern. So one type of cognitive bias – we look for patterns in things. In the illustration above, try NOT to see a pattern.

3 Types of Cognitive Bias

Here are a 3 types of possible cognitive biases that could explain why change can be so difficult, even when we WANT to change:

Congruence Bias

Congruence Bias is the tendency to test hypotheses exclusively through direct testing, instead of testing possible alternative hypotheses (indirect). The classic example was discovered by Peter Wason who presented subjects with a number sequence “2, 4, 6”, telling the subjects that the sequence followed a particular rule and instructing them to use logic to find the sequence logic.

• When asked for their answer, they responded with “ascending by + 2”.
• When told they were wrong, they then guessed “the previous two numbers summed equals the next number”, which was also incorrect.
• Most participants felt much stress and confusion by the test although the answer was simply “a group of numbers that are ascending”.

We often will jump to a conclusion especially if we perceive a pattern. Thus, instead of a subject testing to see if saying “5” was the wrong answer (thus proving their theory) they instead decided to test numbers they thought would be true.

Loss Aversion Bias

This is the natural tendency for humans to value avoiding loss much higher than the risk of potential, even if that potential gain far outweighs the potential loss. Studies have shown that the pain of a loss is almost twice as strong as the reward felt from a gain.

Status Quo Bias

This is an emotional bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss no matter how irrational.

So you can imagine that when someone has done something the same way for a long time, and they have been rewarded for delivering a given result as a consequence of that, trying to change could be very challenging. After all, they are losing the tried and true way of getting something done. And losing their status quo way is more painful than the potential of some gain based on changing.

The Real Problem and What is Required

Now for the alarming part. Yes, we can hypothesize why change can be so challenging. And we can describe behaviors and actions, and justify it because of what we know about change. But this is woefully insufficient in MOST major change initiatives, due to enormous consequences from error (energy industry as an example).

We see little evidence of cognitive bias being acted on in many industries, including the energy industry. What we see are engineering approaches designed to control cognitive biases through tight processes and technology – and these approaches do not work. If you visit company training centers you will see impressive programs and technologies, but little to no awareness of cognitive factors. If you speak to energy executives about cognitive biases you will likely hear some version of “we are attempting to engineer it out via processes and training”. Cognitive bias is NOT controlled by process nor eliminated by training.

What is required is changing people’s actions and collaboration between people… change leadership. This uses the creativity and resourcefulness of people to learn and to be engaged. Action requires strong leadership commitment – really transformational leadership – given very fundamental contexts and cognitive biases will be challenged.

Our approach at KingChapman is to recognize these challenges in any change scenario, and to provide the guidance and direction to transformational leadership as a successful way of making these changes.

 

 

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