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1. SURVEY - MASTERING MANAGEMENT: Beyond Sloan: trust is at the core of corporate values Technocrats no longer rule and hierarchies are dead. Manfred Kets de

SURVEY - MASTERING MANAGEMENT: Beyond Sloan: trust is at the core of corporate values Technocrats no longer rule and hierarchies are dead. Manfred Kets de Vries finds common traits at the heart of the best companies

82% match; Financial Times; Oct 2, 2000

During the industrial age, corporations such as General Motors were the archetypes for organisations and leadership. Alfred Sloan's My Years with General Motors became a bible for generations of business leaders. The book was an ode to the pyramidal structure, the hierarchical organisation, staff departments, top-down decision-making and position power. It heralded a period when functional and divisional structures prevailed. Technocrats ruled and consumer needs were often sidelined. Bureaucratic leaders had credibility and were viable in an age of stability and continuity.

These concepts became less relevant as we entered a period of increased discontinuity. Corporations faced a multitude of destabilising economic and social factors in the past two decades. Demographic shifts took place. An explosion in information and communication technology began to transform business activity. After the fall of the Iron Curtain, eastern Europe and Russia underwent dramatic economic and social change. The euro was launched as a monetary unit, affecting the financial and economic arrangements of participating and neighbouring European countries.

During this period many companies restructured and large industries consolidated through mergers, acquisitions and strategic alliances on a global scale. In the new environment, the former archetypes of management no longer worked. Top-down decision-making created autocratic leadership, a bureaucratic culture, bloated corporate headquarters, and rigid, irrelevant policies and procedures. Many of these organisations became more inward-looking, obsessed by power politics, neglectful of outside constituencies, customers and the competition. Given the increasing irrelevance of the model provided by Sloan, what should replace it in the 21st century?

The self-renewing organisation

One way of answering this question is to consider Fortune magazine's listing of the most admired companies in the US. Since 1983 (the date the list started), a number of companies have made it to the top many times. They include Merck, Proctor & Gamble, Coca-Cola, Johnson & Johnson, Wal-Mart, 3M, Hewlett-Packard, Microsoft, Intel and General Electric. What makes them different? Is there something special about their leadership and organisational practices?

Broadly, they know how to reinvent and renew themselves, and they recognise when to deal with changes in the business environment. They also know how to select, develop and retain people who make a difference. And these people are distinguished by their possession of a common set of values, which are set out below.

First, these companies are permeated by the perception that people are treated fairly: trust is a critical part of the equation. There exists a strong relationship between the effectiveness of a leader and the degree to which people trust him or her. With trust comes candour, the willingness of people to speak their minds. When people are reluctant to discuss their ideas and thoughts openly, realism disappears, and the quality of decision-making deteriorates. In healthy organisations, employees have a healthy disrespect for their superiors.

Second, successful organisations are good at building teams and exploiting teamwork. People need to be able to work in teams; they need to subordinate their own agenda to the well-being of the group. Further, organisations need to foster diversity, which entails respect for the individual and makes group decision-making more creative. Such organisations also empower their employees. Decision-making power is pushed to the lowest level at which a competent decision can be made. To foster such a process, managers should operate with minimal secrecy.

Customer focus is the third core value. Employees realise that their most important constituency is their customers. Another value is the spirit of competition, having the desire to win. Focusing on achievement creates excitement and momentum. Further, no organisation can survive without fostering creativity and encouraging innovation among employees. In these companies, an executive's mistakes do not put a permanent black mark on his or her career. On the contrary, senior managers realise that people who don't make mistakes don't accomplish anything.

There is a rule of management that states: "What isn't measured doesn't get done", the implication being that everything should be accounted for. The corollary is that managers should use benchmarking inside and outside the company to deter tunnel vision and the emergence of the not-invented-here syndrome, or any arrogance about the success of the organisation on the part of employees. To forestall hubris, the best companies foster an attitude that welcomes change. Those who resist change will not fare well.

Leaders of self-renewing organisations are keenly aware of the need to develop employees and so invest in training and development. They create a learning environment, which allows them to tap the creative abilities of staff. A primary role of a leader is to act as teacher or coach, able to foster other leaders throughout the organisation. Distributed leadership, which is not confined to the top of the organisation, is essential.

Creating successful organisations

Apart from possessing a set of values that creates the right conditions for high performance, is there something more going on in the best companies? Do they touch upon a deeper layer of human functioning that causes people to make an extra effort? Several concepts from psychology throw some light on this.

When psychotherapists talk about helping people to live up to their full potential (which is the essence of their discipline), they want them to gain insights into their own goals and motivations; to understand better their strengths and weaknesses; and to prevent them from engaging in self-destructive activities. The emphasis is on widening choice, which enables people to choose more freely, instead of being led by forces of which they are unaware.

Motivational need systems

Motivational need systems are the systems on which such choice is based. They drive people to behave and act the way they do. These need systems become "wired" at infancy and continue throughout life, but are altered by the forces of age, learning and maturation.

One motivational need system regulates physiological needs for food, water, sleep and breathing. Another handles needs for sensual enjoyment and (later) sexual excitement. Another still deals with the need to respond to specific situations perceived as threatening, through antagonism or withdrawal. Although these systems will influence work, two other motivational need systems are of particular interest for life in organisations: attachment/affiliation and exploration/assertion.

The search for relationships is an essential human trait. The need for attachment concerns the process of engagement with another human being, the universal experience of wanting to be close to others. It also relates to the pleasure of sharing and affirmation. When this need for intimate engagement is extrapolated to groups, the desire to enjoy intimacy can be described as a need for affiliation. Both attachment and affiliation serve an emotional balancing role by confirming the person's self-worth and contributing to self-esteem.

The need for exploration, closely associated with cognition and learning, affects the ability to play and to work. This need is manifested soon after birth, and opportunities for exploration continue into adulthood. Closely tied to the need for exploration is the need for self-assertion, the need to be able to choose. Playful exploration and manipulation of the environment in response to exploratory-assertive motivation produces a sense of effectiveness and competence, of autonomy, initiative and industry. Because striving, competing and seeking mastery are motivating forces of human personality, exercising assertiveness (following our preferences, acting in a determined manner) serves as a form of affirmation.

Organisational culture and personal needs

Leaders who want to get the best out of their people create an ambience where people feel inspired to give their best. Managers need to pay attention to motivational need systems. First, they must ensure these personal needs are congruent with the organisation's objectives. Such a sense of congruence will give people a feeling of control over their lives and a belief that their actions make a difference. This is what empowerment is all about.

Companies that get the best out of their people are characterised by a set of higher values than those listed earlier. As mentioned, attachment, affiliation and exploration provide a powerful underlying motive in human behaviour; so the first such value is a feeling of community, a sense of belonging to the company. The second value contributes a sense of fun, of enjoyment. These feelings can be enhanced in several ways, such as organisational structure or specific practices. A sense of belonging will help create a cohesive culture. Furthermore, people who have fun together stay together. Such values contribute to the emergence of distributed leadership.

Organisations that enhance ways for staff to relate to each other are the ones where senior executives obtain vicarious pleasure in coaching younger executives and feel proud of the accomplishments of others. The experience of developing and caring for others can be a source of creativity and, indeed, continuity, by seeing one's efforts continue through the work of successors.

If these basic motivational need systems can be presented in the context of transcending one's own personal needs, for example, by improving the quality of life, helping people, or contributing to society, the impact can be extremely powerful. People like to work in organisations that provide a sense of meaning. These are the kinds of places where people put their imagination and creativity to work and have a feeling of involvement and concentration in whatever they are doing. As one CEO said: "People work for money but die for a cause."

Conclusion

The challenge for leaders is to create corporations that possess these qualities. Working in such organisations is an antidote to stress, enhances the imagination and contributes to a more fulfilling life. Such companies help employees maintain an effective balance between personal and organisational life, and give time for self-examination. Crucially, they will be able to turn continuous and discontinuous change to their advantage. These are the organisations we need to strive for in the 21st century. l

Manfred F. R. Kets de Vries is Clinical Professor of Leadership Development and Raoul de Vitry d'Avaucourt Professor of Human Resource Management at Insead.