You Too Can (and Must) Become Effective

Peter Drucker on Teaching Yourself to Become Effective

Peter Drucker (1909–2005) is widely regarded as the most outstanding thinker on the subject of management theory and practice. He was amazingly prolific—he produced 39 volumes on management and leadership and worked right until his death a week before his 96th birthday.

Drucker’s The Practice of Management (1954) played a pivotal role in the recognition of management as a professional discipline. In this influential book (see my summary here,) Drucker explained what management is and how managers do their jobs.

'The Effective Executive' by Peter Drucker (ISBN 0060833459) In his bestselling The Effective Executive (1967,) Drucker defined effectiveness as getting the right things done and efficiency as making resources productive. His pivotal message was that effectiveness must be learned because effectiveness is every manager’s job. That’s what are managers get paid for—“the executive is paid for being effective.” Moreover, “Effective executives know that their subordinates are paid to perform, and not to please their superiors.”

Five Practices of the Effective Executive

Drucker devotes five chapters of The Effective Executive to five practices that have to be acquired to be effective. Introducing these effectiveness practices, Drucker writes, “Whenever I have found a person who—no matter how great in intelligence, industry, imagination, or knowledge—fails to observe these practices, I have also found an executive deficient in effectiveness.”

  • Effectiveness Habit #1—Know Where Time Goes: “Time is the scarcest resource, and unless it is managed nothing else can be managed.” In addition, “Effective executives know where their time goes. They work systematically at managing the little of their time that can be brought under their control.” Using the three-step time logging, time analysis, and time budgeting practice, effective executives know where there time goes. They exert themselves to make certain that they invest their time in line with their values and priorities.
  • Effectiveness Habit #2—Focus on Contribution: Whatever your span of responsibilities—supervisory, managerial or leadership—you are accountable to your ‘external’ stakeholders. These stakeholders measure your performance solely by your ability to identify opportunities and get things done through the resources you have. Drucker writes, “Effective executives focus on outward contributions. They gear their efforts to results rather than to work. They start out with the question, ‘What results are expected of me?'” Effective executives have a clear understanding of their contribution and their results.
  • Effectiveness Habit #3: Make Strengths Productive: “Effective executives build on strengths—theirs and others. They do not build on weaknesses. They do not start out with the things they cannot do.” Effective executives understand and build on the strengths of themselves, their team, and their organization to make everyone productive and to eliminate weaknesses. The only weaknesses that have a bearing—and must be remedied—are the ones that hinder effective executives from exercising their strengths.
  • Effectiveness Habit #4: Live Priorities: “Effective executives concentrate on superior performance where superior performance will produce outstanding results. They force themselves to stay within priorities.” Setting priorities is easier; the hard part is sticking to the decision and living the priorities. To get things done, focus on one task at a time or two at the most; three is usually impractical.
  • Effectiveness Habit #5: Systemize Decision-Making: “Effective executives make effective decisions. They know that this is a system—the right steps in the right sequence. They know that to make decisions fast is to make the wrong decisions.” For Drucker, decision-making was a matter of wisdom and sound judgment—making a choice between alternatives but seldom between mere right and mere wrong. “The sooner operating managers learn to make decisions as genuine judgments on risk and uncertainty, the sooner we will overcome one of the basic weaknesses of large organizations—the absence of any training and testing for the decision-making top positions.”

Idea for Impact: Teach yourself to become effective. Commit these five tasks to memory and practice them. Read The Effective Executive—it will have a profound effect on your performance.

Never Criticize Little, Trivial Faults

Lessons from the Renowned People Skills of Steel Tycoons Charles M Schwab and Andrew Carnegie

The American steel magnate Charles M Schwab (1862–1939,) was a protege of the steel baron-turned-philanthropist Andrew Carnegie (1835–1919.) During the course of a long and successful career, Schwab built his Bethlehem Steel Corporation into America’s second largest steel producer and one of the world’s most prominent businesses.

'Be hearty in approbation and lavish in your praise' - Lessons from the Renowned People Skills of Steel Tycoon Charles M Schwab

Don’t be “bothered with the finicky little things that trouble so many people.”

Charles M Schwab started his career as a laborer in Andrew Carnegie’s Edgar Thomson Steel Works. Thanks to his exceptional ability to cozy up to people and facilitate congenial working relationships, Schwab rapidly rose up the ranks of the Carnegie steel empire.

By the age of 19, Schwab was assistant manager of the steel factory. When an accident killed the factory superintendent in 1887, Andrew Carnegie appointed the 25-year-old Schwab as the manager of the Thomson Works. At 35, Schwab became president of the Carnegie Steel Company at an annual compensation exceeding $1 million (worth $30 million today.)

In an essay titled “My 20,000 Partners” in the 19-Dec-1916 issue of The American Magazine, Schwab shared a management lesson he learned from his mentor Andrew Carnegie:

Mr. Carnegie’s personality would enthuse anybody who worked for him. He had the broad views of a really big man. He was not bothered with the finicky little things that trouble so many people. When he made me manager, Mr. Carnegie said, “Now, boy, you will see a good many things which you mustn’t notice. Don’t blame your men for little, trivial faults. If you do you will dishearten them.

When I want to find fault with my men I say nothing when I go through their departments. If I were satisfied I would praise them. My silence hurts them more than anything else in the world, and it doesn’t give offense. It makes them think and work harder. Many men fail because they do not see the importance of being kind and courteous to the men under them. Kindness to everybody always pays for itself. And, besides, it is a pleasure to be kind. I have seen men lose important positions, or their reputations—which are more important than any position—by little careless discourtesies to men whom they did not think it was worthwhile to be kind to.

'Don't blame your men for little, trivial faults' - Lessons from the Renowned People Skills of Steel Tycoon Andrew Carnegie

“Be hearty in approbation and lavish in your praise”

Schwab’s excellent people skills and management methods are extolled in How to Win Friends & Influence People, Dale Carnegie‘s masterful guidebook on people skills. Dale Carnegie quotes Schwab:

I consider my ability to arouse enthusiasm among my people, the greatest asset I possess, and the way to develop the best that is in a person is by appreciation and encouragement.

There is nothing else that so kills the ambitions of a person as criticisms from superiors. I never criticize any-one. I believe in giving a person incentive to work. So I am anxious to praise but loath to find fault. If I like anything, I am hearty in my approbation and lavish in my praise.

I have yet to find the person, however great or exalted his station, who did not do better work and put forth greater effort under a spirit of approval than he would ever do under a spirit of criticism.

Idea for Impact: People who cannot tolerate others’ shortcomings are at a marked disadvantage in life.

'How to Win Friends & Influence People' by Dale Carnegie (ISBN 0671027034) The older you’ll get, the more you’ll appreciate the wisdom of enduring the negative emotions— skepticism, disapproval, anger, contempt, and hostility—that stem from others’ behaviors.

One of the keys to effective interpersonal skills is to know when and how to give feedback. Commend whenever you can, criticize when you absolutely must.

Remember, criticism can swiftly erode away positive feelings. Don’t nit-pick. Don’t get caught up in trivial peculiarities.

Intel’s Andy Grove on Looking at Problems from an Outsider’s Perspective

Look at Problems from an Outsider's Perspective

Fixation Hinders Creative Thinking

In two previous articles (this and this,) I’ve addressed the psychological concept of a “fixed mental set” or “fixation:” assessing a problem from a habituated perspective can prevent you from seeing the obvious and from breaking away from an entrenched pattern of thinking.

A period of rest, entertainment, or exposure to an alternative environment can usually dissipate fixation. The resulting shift in perspective can alter your point of view in a literal and sensory way, or it may change the way you think about or define the problem at hand.

A particularly instructive example of the beneficial effects of altering thought perspectives comes from Andy Grove’s autobiography / management primer Only the Paranoid Survive (1996.) Grove, the former Chairman and CEO of Intel who passed away earlier this year, was one of the most influential tech executives Silicon Valley has ever seen.

Japanese Onslaught on Intel’s Memory Business

'Only the Paranoid Survive' by Andrew S. Grove (ISBN 0385483821) Memory chips dominated Intel’s revenue, since the company was founded in 1968. In fact, Intel had a near monopoly in the memory business. However, by the late ’70s, a few Japanese competitors emerged. Grove reflected, “The quality levels attributed to Japanese memories were beyond what we thought possible. … Our first reaction was denial. We vigorously attacked the data.” In due course, Intel recognized the threat to its competitive position. (Between 1978 and 1988, the Japanese companies grew their market share in the memory business from 30% to 60%.)

At the same time, a small entrepreneurial team of engineers had developed Intel’s first microprocessor. In 1981, Intel persuaded IBM to choose this microprocessor to run their personal computers.

By 1985, when Grove was President, Intel’s executives engaged in an intense debate on how to respond to the onslaught of Japanese competitors in the memory business. One faction of engineers wanted to leapfrog the Japanese and build better memory chips. Another faction was in favor of disposing the lucrative memory business and betting Intel’s future on its promising microprocessor technology—something they believed the Japanese couldn’t match.

The “Revolving Door Test:” Getting an Outsider’s Perspective

In the middle of this intense debate, Grove was at a meeting with Intel’s CEO, Gordon Moore (of the Moore’s Law fame.) Grove had an idea for Moore; he recalled this episode in Only the Paranoid Survive,

I remember a time in the middle of 1985, after this aimless wandering had been going on for almost a year. I was in my office with Intel’s chairman and CEO, Gordon Moore, and we were discussing our quandary. Our mood was downbeat. I looked out the window at the Ferris Wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and asked, “If we got kicked out and the board brought in a new CEO, what do you think he would do?” Gordon answered without hesitation, “He would get us out of memories.” I stared at him, numb, then said, “Why don’t you and I walk out the door, come back in and do it ourselves?”

Andy Grove's Revolving Door Test: Getting an Outsider's Perspective The switch in perspective—i.e. asking “What would our successors do?”—provided a moment of clarity for Moore and Grove. By contemplating Intel’s strategic challenges from an outsider’s perspective, shutting down the memory business was the discernible choice. Even Intel’s customers were supportive:

In fact, when we informed them of the decision, some of them reacted with the comment, “It sure took you a long time.” People who have no emotional stake in a decision can see what needs to be done sooner.

From the time Intel made the important decision to kill its memory chips business, it has dominated the microprocessor market.

If existing management want to keep their jobs when the basics of the business are undergoing profound change, they must adopt an outsider’s intellectual objectivity. They must do what they need to do to get through the strategic inflection point unfettered by any emotional attachment to the past. That’s what Gordon and I had to do when we figuratively went out the door, stomped out our cigarettes and returned to the job.

People in the trenches are usually in touch with pending changes early. Salespeople understand shifting customer demand before management does; financial analysts are the earliest to know when the fundamentals of a business change. While management was kept from responding by beliefs that were shaped by out earlier successes, our production planners and financial analysts dealt with allocations and numbers in an objective world.

Idea for Impact: If You’re Stuck on a Problem, Shift Your Perspective

Often, you can find the solutions to difficult problems merely by defining or formulating them in a new, more productive way.

Consider employing Andy Grove’s “Revolving Door Test” and examining your problems through an outsider’s lens. This shift in perspective may not only engender intellectual objectivity but also muffle the emotion and anxiety that comes with momentous decision-making.

Book Summary of Peter Drucker’s “The Practice of Management”

Peter Drucker (1909–2005) was the 20th century’s leading thinker on business and management. He was amazingly prolific—he produced 39 volumes on management and leadership and worked right until his death a week before his 96th birthday.

'The Practice of Management' by Peter Drucker (ISBN 0060878975) Drucker’s The Practice of Management (1954) played a pivotal role in the recognition of management as a professional discipline. Even six decades after publication, The Practice of Management remains relevant for its original, profound, and timeless ideas. Drucker’s conception for the organization as an integral part of society, his elucidation of the nature of managerial tasks, his emphasis on good governance, and his prescription for effective leadership have served managers well over the decades.

Here are some prominent insights from The Practice of Management:

  • Drucker accentuated the need for clarity about the meaning of a business. He argued, “‘what is our business’ is the most important question successful management groups have to address.” In corporate strategy, this inquiry has become the underpinning for business analysis and the formulation of mission statements.
  • A business exists to “create a customer.” Therefore, managers need to query who their customers are and what the business must try to do for its customers.
  • The Practice of Management contributed to a rich analysis of the role of business in society. Drucker proposed that a business exists at three constructs that influence each other and thus establish the organization’s performance, mission, and business definition:
    1. as an economic establishment that produces value for its stakeholders and for the society,
    2. as a community that employs people, pays them, develops them, and coordinates their efforts to increase productivity,
    3. as a “social institution that is deeply embedded in society and values and as such is affected by public interest discussion, debate, and values.”
  • “The manager is the dynamic, life-giving element in every business” who defines the organization’s mission, develops and retains productive teams, coordinates various activities, sets goals, and gets things done.
  • Leadership gives the organization meaning and purpose—leadership defines and nurtures the organization’s central values, creates a sense of mission, allocates resources, and builds systems and processes in pursuit of the organization’s goals.
  • Management entails farsighted thinking about the future state of things and taking appropriate risks to capitalize on opportunities. Additionally, “managing a business must be a creative rather than adaptive task. The more a management creates economic conditions or changes them rather than passively adapts to them, the more it manages the business.”
  • The Practice of Management by Peter Drucker Managers inculcate the dominant cultural norm in the organization through their actions. These values become evident in the decisions they make concerning whom they recruit, whom they retain and promote, the goals they pursue, and the ethical parameters with which they frame their decisions.
  • The Practice of Management popularized the concept of management by objectives (MBO) for the successful execution of an organization’s strategic plan. The MBO process ensures delineation of key objectives, prudent allocation of resources, dedication of effort on key goals, use of real-time feedback, and effective communication. MBO helps managers organize and motivate their employees, promote effective communication, develop employees, measure performance, and increase their sense of empowerment.

The Practice of Management is one of those books that his admirers tend to appreciate more with every successive reading. Drucker’s remarkable virtues as the “father of modern management”—viz., clarity, usefulness, and common-sense pragmatism—are all on display in this book.

Recommendation: Read—it’s the best book you’ll find on the responsibilities, tasks, and challenges that managers undertake. The Practice of Management will have a profound effect on your thinking.

Book Summary of “Marissa Mayer and the Fight to Save Yahoo!” by Nicholas Carlson

Over the holidays, I finished reading journalist Nicholas Carlson’s Marissa Mayer and the Fight to Save Yahoo! This interesting book offers an account of Yahoo’s steady slide towards irrelevance and Marissa Mayer’s early tenure as CEO.

“Complex Monstrosity Built Without a Plan”

'Marissa Mayer and the Fight to Save Yahoo!' by Nicholas Carlson (ISBN 1455556610) Carlson devotes the first third of the book to explaining Yahoo’s beleaguered history and how years of mismanagement and strategy negligence got Yahoo into the mess that Mayer inherited as CEO in 2012.

The second third is about Mayer and her brilliant career as employee number twenty at Google. In 2010, her career allegedly stalled because Mayer got sidelined after conflicts with other luminaries within Google. Relying broadly on anonymous sources, Carlson portrays Mayer’s intense nature and her personality contradictions: in public settings, Mayer is brainy, glamorous, confident, articulate, and approachable. However, in one-on-one settings, Mayer is a self-promoting, dismissive, calculating, tardy, inquisitorial individual who avoids eye contact. “There was nothing especially abhorrent or uncommon about Mayer’s behavior as an executive,” Carlson writes. “She was headstrong, confident, dismissive, self-promoting and clueless about how she sometimes hurt other people’s feelings. So were many of the most successful executives in the technology industry.”

The last third is devoted to Mayer’s initial efforts to turn Yahoo around. Within the first year at the helm as CEO, Mayer motivated Yahoo’s beleaguered workforce, launched the redesign of some of Yahoo’s major sites, and made acquisitions to make Yahoo relevant in the mobile, media, and social realms. Carlson also describes Mayer’s bad hiring decisions, habitual tardiness, tendency to micromanage, tone-deaf style of communication, and dogged devotion to establishing the universally-despised practice of tracking goals and stack-ranking employees.

Yahoo: The Fabled Legacy Internet Company on the Slide to Irrelevance

Yahoo: The Fabled Legacy Internet Company on the Slide to Irrelevance

Anybody who follows the internet content industry understands that the principal question regarding the then-37-year-old Mayer’s recruitment as CEO was never whether she could save Yahoo. Rather, the question was whether Yahoo can be saved at all.

Yahoo has been a mess for a long time. For early consumers of the internet, Yahoo’s portal was the internet—from the mid-1990s until the early 2000s, Yahoo was the number-one gateway for early users of the internet who wanted to search, email, or consume news and other information. Then, Yahoo floundered as the likes of Google, Facebook, Apple, Amazon, Twitter, and Microsoft redefined the consumer internet and content consumption. Yahoo’s successive managements struggled to identify Yahoo’s raison d’etre and failed to set it apart from the up-and-coming websites. Yahoo’s management also fumbled on opportunities to harness the popularity of Yahoo Mail, Yahoo Sports, and Yahoo Finance to get advertising revenues growing again.

Mayer’s Arrival Was Too Late for Yahoo

Marissa Mayer could not succeed in reviving YahooMayer came to Yahoo with extraordinary credentials, drive, technical savvy, celebrity, and charisma. Her tenure was centered on answering the single question, “What is Yahoo? What should become of Yahoo?”

The odds of Mayer succeeding to revive Yahoo as an independent internet content company were very bleak right from the beginning, because Mayer took on an increasingly irrelevant business with very little actual or potential operating value—either as an internet content company or as a media company. Carlson appropriately concludes,

Ultimately, Yahoo suffers from the fact that the reason it ever succeeded in the first place was because it solved a global problem that lasted for only a moment. The early Internet was hard to use, and Yahoo made it easier. Yahoo was the Internet. Then the Internet was flooded with capital and infinite solutions for infinite problems, and the need for Yahoo faded. The company hasn’t found its purpose since—the thing it can do that no one else can.

Since the publication of the book in December 2014, Mayer has dedicated her leadership to selling Yahoo’s core internet businesses and its patent portfolio. Yahoo is expected to then convert itself into a shell company for its investments in Alibaba (15.5% economic interest) and Yahoo Japan (35.5%.)

Recommendation: As a fast read, Marissa Mayer and the Fight to Save Yahoo! is great. Beyond Nicholas Carlson’s gossipy narrative and his pejorative depiction of Mayer’s management style, readers of this page-turner will be interested in Yahoo leadership’s strategic and tactical missteps. Particularly fascinating are how Yahoo missed opportunities to buy Google and Facebook when they were mere startups, the rebuffing of an acquisition bid from Microsoft, a lack of strategic focus, the leadership skirmishes with activist investors, the revolving door at the CEO’s office, and an Asian-asset drama.

How Smart Companies Get Smarter: Seek and Solve Systemic Deficiencies

At Toyota, as cars roll off the assembly line, they go through a final inspection station staffed by astute visual and tactile inspectors.

At Toyota, as cars roll off the assembly line, they go through a final inspection station staffed by astute visual and tactile inspectors. If these inspectors spot a paint defect, they don’t just quietly fix the problem merely by touching up the paint to satisfy the customer or their plant manager.

As part of Toyota’s famed kaizen continuous improvement system, floor workers identify the systemic causes that led to the specific defect on the specific car. They then remedy the root cause of the problem so it won’t happen again.

Fostering an atmosphere of continuous improvement and learning

Most companies cherish employees who are watchful of problems and take it upon themselves to detect and solve problems without criticism or complaint. A software company, for example, may treasure a programmer who observes an unforeseen coding mistake, and swiftly develops a patch to keep her project moving forward.

In contrast, companies like Toyota who are obsessive about quality improvement, organizational learning, and developing collective intelligence don’t reward or tolerate such quiet fixers.

Taiichi Ohno - 'Having no problems is the biggest problem of all.' At companies that have adopted the kaizen philosophy, continuous improvement originates from the bottom up through suggestion systems that engage and motivate floor employees to look out for systemic problems, raise quality concerns, and help solve those problems. These companies encourage their employees to actively seek small, simple, and incremental improvements that could result in real cost savings, higher quality, or better productivity. According to Taiichi Ohno, the legendary Japanese industrial engineer identified as the father of the Toyota Production System, “Something is wrong if workers do not look around each day, find things that are tedious or boring, and then rewrite the procedures. Even last month’s manual should be out of date.”

Idea for Impact: To develop collective intelligence and build smarter organizations, discourage employees from heroically patching up recurring problems. Instead, encourage them to find, report, analyze, experiment, and fix systemic problems to prevent their recurrence.

Lessons from Lockheed Martin’s Skunk Works: Autonomy Can Create Innovative Workplaces

Lockheed Skunk Works

Lockheed Corporation's Skunk Works: A top-secret research and production facility In 1943, Lockheed Corporation established a top-secret research and production facility informally called Skunk Works. It was explicitly tasked with developing a high-speed fighter aircraft within 180 days. This new aircraft was to compete with aircraft produced by the German aircraft manufacturing company Messerschmitt.

Skunk Works consisted of Lockheed’s best design engineers and technicians who occupied a rented circus shelter adjacent to a foul-smelling plastic factory (hence the Skunk Works moniker.) More significantly, Skunk Works was isolated from corporate bureaucracy, granted much autonomy over decision-making, and encouraged to disregard standard procedures in the interest of expediency. In a record 143 days, Skunk Works designed, developed, and delivered the Lockheed P-80 Shooting Star aircraft, the first jet fighter operated by the United States Army Air Forces.

The Skunk Works framework of innovation was so successful that Lockheed has continued to operate this division for decades. Clarence “Kelly” Johnson, team leader of the first Lockheed Skunk Works project, codified 14 rules for all Skunk Works projects. Over the years, Lockheed’s Skunk Works designed and developed many aircraft, including the famous U-2 reconnaissance plane.

Disentangled from Bureaucracy and Management Constraints

Other companies borrowed this innovation idea from Lockheed to develop advanced products or discover product/service/business ideas that are entirely new to their parent organizations. Many businesses and engineering companies started their own “skunkworks” divisions consisting of self-directing teams of highly talented individuals who were seconded from their regular work environments. Unconstrained by executive interference, they operated under the radar. They were given a high degree of autonomy, access to R&D funds, and exceptional freedom from the parent organization’s bureaucracy and management constraints. Here are some examples of skunkworks projects.

  • At IBM, a skunkworks project in 1981 pioneered industry standards to adapt personal computers for business needs and released the IBM PC. This helped IBM break away from its lynchpin mainframe business and launch its celebrated personal computers division. IBM has since continued the skunkworks tradition. In the 2000s, IBM established many “emerging-business opportunities” or EBO teams and assigned its best and brightest people in charge of risky startup ideas that could germinate new business lines in five to seven years.
  • At Motorola in the mid-2000s, a team of designers and engineers defied the company’s own rules to develop the best-selling RAZR mobile phone. This skunkworks team was isolated from Motorola’s main R&D facility. Fortune magazine noted that this “tight-knit team repeatedly flouted Motorola’s own rules for developing new products. They kept the project top-secret, even from their colleagues. They used materials and techniques Motorola had never tried before. After contentious internal battles, they threw out accepted models of what a mobile telephone should look and feel like. In short, the team that created the RAZR broke the mold, and in the process rejuvenated the company.”
  • Google's Collaborative Office Spaces Encourage Innovation Google’s famous 20% rule and innovative workspaces lets employees collaborate across the company and work on their dream projects, but bring those projects to the larger collective for further funding and development. Many of Google’s innovative products and features in Gmail, Google News, Google Talk, Google Suggest, Transit Directions, etc. originated as 20% projects.
  • Microsoft’s skunkworks located in Studio B facility on its Redmond campus developed Kinect, Surface tablets and computers, and other recent products.
  • Apple has the most celebrated of skunkworks teams. Apple Chief Design Officer Jonathan Ive’s design laboratory consists of a few handpicked designers who work on “very experimental material that the world is not quite ready for.” Working in an area separate from Apple’s main Cupertino campus, Ive’s team maintains a culture of incredible secrecy.

Skunkworks Innovation Model and Startup Cultures

In the 1960s and 1970s, the skunkworks concept fell out of favor, as many companies started to see skunkworks teams as distractions and as cost centers “with an attitude.” However, with a renewed emphasis on teamwork and a focus on setting up startup-like innovative workplaces where teams can flourish, the skunkworks model of innovation has been renewed and revived in the last two decades.

Inertia, internal politics, bureaucracy, layers upon layers of management questioning risk and rewards, and the fear of failure weigh heavily on many a company’s pursuit of new products and services. The skunkworks innovation model and the startup culture offer frameworks for organizations to pursue growth ideas separate from current lines of business.

In 2013, General Electric instituted a program called FastWorks to mimic Silicon Valley’s startup culture in a company-wide effort to foster innovation and develop products quickly and cost-effectively. Boeing’s Phantom Works, Nike’s Innovation Kitchen and Sports Research Lab, Amazon’s Lab126 and A9 laboratories, Google X, and Walmart Labs are some of today’s prominent skunkworks organizations.

Idea for Impact: Autonomy Fosters a Creative Environment

Employee Autonomy Can Create Innovative Workplaces For managers, the key take-away from the skunkworks concept is that giving autonomy to employees and teams not only engenders a happier and satisfied workforce, but also fosters a creative environment. Some ideas to consider:

  • Give much autonomy to those employees and teams who have demonstrated the promise of being self-directed and maintaining alignment with the larger organizational goals. Direct them, oversee their progress, and follow-up when necessary. Micromanage when you must.
  • Give employees discretion over their tasks and resources. Create a favorable environment in which people are encouraged to discover, use, and grow their unique skills.
  • Don’t second-guess employees’ and teams’ ideas and decisions unless necessary. Judging or criticizing not only undermines their confidence, but also keeps them from sharing their ideas with you in the future.
  • Allow employees and teams to experiment, iterate their ideas, gather data and develop performance metrics, and quickly discard less promising ideas in favor of stronger ones.
  • Support risk-taking and failure. Celebrate failure as it can provide valuable technical and organizational insights. Encourage employees to be confident enough to try to fail and learn lessons without being apprehensive about being rebuked.

Leadership Lessons from the Spectacular Rise and Fall of Avon’s Andrea Jung / Book Summary of “Beauty Queen” by Deborrah Himsel

When companies do well, their CEOs are often heralded as outstanding visionaries and brilliant innovators. In particular, when macroeconomic conditions are favorable, these CEOs are sheltered from scrutiny because the spoils of their success deflect attention from their leadership shortcomings (see my previous article on how success often conceals wickedness.) When the tide turns, however, the leadership deficiencies are exposed for all to see. The CEOs are the first to get the blame, even if they may not merit it.

Deborrah Himsel’s Beauty Queen offers an insightful tale of the spectacular rise to the top and the tumultuous fall from grace of Andrea Jung. Beauty Queen divides Jung’s tenure as the CEO of cosmetics company Avon from 1999 to 2012 into two halves: Jung led six consecutive years of double-digit growth initially and then presided over a series of operational missteps that led to her resignation. Alas, Avon has never since recovered—its numerous restructuring efforts have failed, and its strategic and financial performance has severely deteriorated.

The Rise of Andrea Jung and Avon (1999–2005)

'Beauty Queen: Inside the Reign of Avon's Andrea Jung' by Deborrah Himsel (ISBN 113727882X) Promoted at age 41, Andrea Jung brought glamour, charm, and personal style to her CEO’s role. She quickly reshaped Avon’s image and articulated a powerful purpose for the company. She injected energy into a decaying cosmetics brand and pushed Avon into new profitable markets in China, Russia, and other countries. When Jung became CEO, 60% of Avon’s sales were in the United States; by 2011, only 17% of sales were in the United States and 70% were in developing markets.

Jung’s revival of Avon’s fortune catapulted her fame; she became one of America’s most recognized chief executives. Fortune magazine named her one of the most powerful women in the world. Jack Welch recruited her to General Electric’s board of directors.

Beauty Queen attributes this initial success not only to Jung’s inherent strengths in marketing and branding, but also to her right-hand person Susan Kropf. Kropf was a brilliant operations person, who balanced Jung’s acute lack of skills in running the day-to-day operations of a global company.

The Fall of Andrea Jung and Avon (2005–2012)

Avon’s sales started to slow down in 2005. And, Susan Kropf’s exit in 2006 corresponded with the dawn of Avon’s misfortunes. Andrea Jung never replaced Kropf; Avon was left without a chief operating officer.

As Avon started to struggle, Jung’s inadequate operations experience became a serious liability. A streak of self-inflicted problems resulted in strategic and operational disasters that took a huge financial toll and resulted in a flight of Avon’s top talent. Jung failed to deal effectively with failures of computer systems in Brazil, inadequate inventory and supply-chain management, poor management of working capital, and a staggering bribery scandal in China.

Jung’s lack of expertise to deliver results went up against her bold projections about the business’s future. Straying from Avon’s door-to-door direct selling roots, Jung experimented with a direct-selling channel, but quickly abandoned her strategy of running Avon retail stores. Her attempts to start baby-goods and other new product lines foundered after just two years. Avon’s many acquisitions failed; a silver jewelry company (Silpada) that Jung bought for $650 million had to be sold back to the original owners for $85 million.

Avon never recovered from the blunders that Andrea Jung presided over

Avon Beauty Products After Jung’s several turnaround efforts had failed to take hold, she resigned in 2011. Her replacement, former Johnson & Johnson executive Sheri McCoy, has since struggled to turn the company around.

The bribery scandal in China impaired Avon. In 2014, Avon settled the case with the Justice Department and the SEC for $135 million. To boot, Avon not only spent $350 million on legal fees, but also lost ground in the burgeoning cosmetics market in China.

Avon’s market value fell from $21 billion (1-Mar-2004) at the height of Jung’s success to $1.1 billion (15-Jan-2016). The company’s stock price fell from $44.33 to $2.50.

Lessons from Andrea Jung’s Leadership Style at Avon

Some of the most instructive leadership lessons from Beauty Queen are,

  • “Studying the trajectory of the Avon CEO is a great way to learn leadership. Andrea’s career … offers invaluable lessons about finding the right balance between substance and style.”
  • “Her story is a cautionary tale, one that suggests the critical importance of being aware of your weaknesses and how they can sabotage you.”
  • Leaders should know when to go. “If Andrea had departed in 2008, she would have left with her reputation and halo fully intact … CEOs that are successful early on often err on the side of staying too long.” [See my previous article on why leaders better quit while they’re ahead.]
  • Companies should pair up their leaders with deputies who have complementary skills to offset the Achilles’ heels of the leaders.

Recommendation: Skim through the first six chapters of Beauty Queen for an informative quick read on Andrea Jung’s rise and fall at Avon. Thumb through the next five chapters for an uninteresting discussion of broad leadership lessons and action lists in dry PowerPoint style.

When Should a Leader Pass Blame?

When Should a Leader Pass Blame? A leader is the “captain of the ship.” He is responsible for his organization’s every outcome—good or bad. He is wholly accountable for everything that happens under his authority.

If there is a problem caused by his mistakes or errors within his organization, a leader should not shirk responsibility. He should not abandon his team if things go wrong, nor should he pass the blame or use an employee as a scapegoat.

However, a leader cannot see and touch all his people, especially if his organization is large. He cannot be personally responsible for a rogue employee who steals information, misuses funds, or engages in unethical behavior. In such circumstances, the leader may pass blame.

Although a leader cannot police every action taken by every employee, the leader should be held accountable for not instituting and overseeing a rigorous control system to prevent problems, deter unethical actions, and to identify employees that engage in such behavior.

A leader also sets the tone for all his employees—not only in terms of goals and priorities but also in terms of proper organizational behavior. A legendary case in point are the ethical rules that investor Warren Buffett set in his company after the 1991 bond-rigging scandal at Salomon Brothers: “I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends, with the reporting done by an informed and critical reporter. If they follow this test, they need not fear my other message to them: Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” Even now, Buffett includes this statement in his biannual letters to his managers and displays a video of this speech at every Berkshire Hathaway annual meeting.

Success Conceals Wickedness

Biographies of Steve Jobs (by Walter Isaacson,) Jeff Bezos (by Brad Stone,) and Elon Musk (by Ashlee Vance)

Two common themes in the biographies of Steve Jobs (by Walter Isaacson,) Jeff Bezos (by Brad Stone,) and Elon Musk (by Ashley Vance) are these entrepreneurs’ extreme personalities and the costs of their extraordinary successes.

The world mostly regards Musk, Jobs, and Bezos as passionate, inspiring, visionary, and charismatic leaders who’ve transformed their industries. Yet their biographies paint a vivid picture of how ill-mannered these innovators are (or were, in the case of Jobs). They exercise ruthless control over every aspect of their companies’ products but have little tolerance for underperformers. They are extremely demanding of employees and unnecessarily demeaning to people who help them succeed.

  • Steve Jobs was renowned for his cranky, rude, spiteful, and controlling outlook. Biographer Isaacson recalls, “Nasty was not necessary. It hindered him more than it helped him.” Jobs famously drove his Mercedes around without a license and frequently parked in handicapped spots. For years, he denied paternity of his first daughter Lisa and forced her and her mother to live on welfare. He often threw tantrums when he didn’t get his way and publicly humiliated employees.
  • In a 2010 commencement address at Princeton, Jeff Bezos recalled his grandfather counseling, “Jeff, one day you’ll understand that it’s harder to be kind than clever.” Still, according to Brad Stone’s biography, Bezos often imparts insulting rebukes and criticisms to employees: “I’m sorry, did I take my stupid pills today?” “Are you lazy or just incompetent?” “Why are you wasting my life?” and “Do I need to go down and get the certificate that says I’m CEO of the company to get you to stop challenging me on this?”
  • According to Ashlee Vance’s biography, when an executive assistant asked for a raise, Elon Musk asked her to take a two-week vacation while he contemplated her request. When the assistant returned from vacation, Musk fired her.

“Success covers a multitude of blunders”

The great Irish playwright Oscar Wilde once remarked, “No object is so beautiful that, under certain conditions, it will not look ugly.”

The other great Irish playwright George Bernard Shaw wrote, “Success covers a multitude of blunders.”

British politician and historian Lord John Dalberg-Acton famously said, “Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or the certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it. That is the point at which … the end learns to justify the means.”

Ethics Violations by NBC News Anchor Brian Williams

Ethics Violations by NBC News Anchor Brian Williams In 2015, NBC suspended prominent news anchor Brian Williams after internal investigations revealed no less than 11 instances where he either embellished facts or bent the truth. Members of his team and NBC staffers who knew about these ethics violations chose to overlook because he was powerful. According to The New York Times,

Mr. Williams has been drawing 9.3 million viewers a night, and his position seemed unassailable. Even as the stature of the nightly newscast faded in the face of real-time digital news, Mr. Williams was one of the most trusted names in America … He was powerful. Williams had the ear of NBC boss Steve Burke. He was a ratings powerhouse. And he spent years overseeing TV’s most watched newscast. He was a winner, for himself, those around him and those above him—until it became clear the man who is supposed be among the most trusted in America had issues with telling the truth.

Power Corrupts the Mind

Brilliant men and women engage in morally wrong conduct simply because they can. They can get away with extreme pride, temper, abuse, and other disruptive behaviors because their spectacular success can and does cover many of their sins, even in the eyes of those at the receiving end of their crudeness.

Our high-achieving culture adores the successful, the powerful, and the rich. And part of this adoration is the exemption we grant these celebrities from the ordinary rules of professional civility.

Idea for Impact: The more people possess power and the more successful they get, the more they focus on their own egocentric perspectives and ignore others’ interests.