Stanford University

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NEWS RELEASE

6/11/01

Dawn Levy, News Service (650) 725-1944; e-mail: dawnlevy@stanford.edu

Memo to 'alpha' company leaders: If you want to leave a lasting monument, better be more beta-like

When we think of great leaders, we tend to think of charismatic individuals, many of them great orators, capable of bending the world to their whims.

Which, uh, leaves most of us out.

"I don't know about you, but when I get up in the morning and brush my teeth, I don't look in the mirror and see a charismatic leader," Jerry Porras, the Lane Professor of Organizational Behavior and Change at the Stanford Graduate School of Business, told an audience of about 70 corporate and institutional managers at a recent workshop on campus.

The one-day workshop, cosponsored by the Alliance for Innovative Manufacturing (AIM) and the Center for Quality of Management (CQM), featured talks by three business professors Porras and David Bradford of Stanford, and Mike Beer of Harvard followed by a panel discussion open to audience participation.

AIM is a campus-based joint venture initiated by Stanford's Graduate School of Business and School of Engineering and corporate partners to promote the exchange of technical ideas and techniques between academia and industry. CQM is a nonprofit consortium of 114 companies and academic affiliates focused on mutual learning and quality improvement from a management perspective.

Charisma or continuity?

Wannabe leaders, don't trade in that toothbrush for a scepter or ray gun just yet. In their 1994 book Built to Last: Successful Habits of Visionary Companies, Porras and coauthor Jim Collins sought to answer the question: "What is the key to a great, enduring company?" The prevailing assumption then was that the trick to withstanding the test of time was to have a charismatic leader, or an "alpha."

But, Porras and Collins soon realized, some highly successful companies currently lack a charismatic leader and in some cases had never had one. Further research showed that while in the short term a company led by a charismatic leader often does better, in the long term it's often the opposite. In fact, charisma can get in the way.

"In the long term, what happens to every charismatic visionary leader?" Porras asked. "They die. Or they retire which, from a company point of view, is the equivalent."

What are the factors that permit a company to endure and thrive over periods that far exceed the corporate lifetimes of its individual leaders? Enduring companies have something in them that outlasts any leader, Porras said, proceeding to draw a contrast between what he called "time-tellers" and "clock-builders." The former are the charismatic leaders, who build their companies around themselves. By dint of their advertising or engineering skills, selling prowess or general brilliance, time-tellers are looked to by subordinates for every major decision. When they leave, time-tellers leave a crater where the CEO's leather chair used to be. Clock-builders, on the other hand, are "betas" who quietly go about building the organizational systems that will ensure the company's continuity long after their passing they won't have to be there for people to know what time it is.

Porras contrasted two companies that, in the 1920s, were both in the radio business the "high tech" of its day. The first, Zenith, made home radios. Its chief, Eugene McDonald, was a brilliant advertiser and marketer and a former military man who made everybody call him "Commander." His company relied on his guidance, decisions and resourcefulness.

The second company, Motorola, made car radios. Motorola founder Paul Galvin had previously started two other companies; both had gone broke. Not an engineer himself, Galvin knew good engineers can be crusty, and he took pains to develop a training program for those who would dare to manage them.

The two firms tracked surprisingly closely in several areas. Each got into television manufacturing in the 1950s. In the late 1950s, both companies' CEOs after having led their respective organizations for 30 years died in office within 18 months of each other. The one glaring difference between companies lay in their leaders' divergent styles.

"Now, those of us who do research in behavioral sciences love it when these things happen," Porras said. "We even have a name for it: natural experiment."

So, what's Motorola doing these days? Everything but TVs, said Porras. The firm started building transistors for TVs, then got out of TVs altogether and stuck with transistors. Then, in rapid order, came computers, pagers, satellite communications, and, most recently, gene chips for biotechnology. Step by step, Motorola is morphing into a software company. And it's big.

And Zenith? It's still in the TV business, bought out by a larger foreign rival four years ago.

Visionary companies are typified not just by resilience in the face of change but by a passion for it, said Porras. This doesn't come without risk. Boeing's leadership "bet the company" on the 747, its new commercial airplane, and IBM did likewise with the introduction of its 360 computer model.

In practice, such risk-taking flies in the face of Wall Street wisdom, said Harvard's Beer. "Capital markets today, with their focus on next quarter's results, are making it all but impossible to be one of those enduring companies," he said. Nor does your board of directors reward you for building a company to last for the future "when you leave, the next guy is responsible," Beer said. And the average tenure of a CEO has shrunk dramatically in the last decade. Fortunately, noted Beer, "even if you're not a CEO, you can transform the group that reports to you. In our research, we've found that change started at the periphery, not at the core. This triggered changes in other parts of the company that got closer and closer to the core."

Stanford's Bradford stressed the importance of enlisting conflict in the cause of change. Too many organizations today, he said, "don't build a 'conflict-positive' climate. You should produce conflict, not just manage it. It makes things clear. It energizes the debate. Alfred Sloan, who built General Motors, would say to his team, 'Is there any debate around this issue?' And if there was none, he'd say, 'Then we haven't looked at it hard enough. I'm putting this discussion off until next week.'"

In addition to their embrace of change, visionary companies share a second characteristic, Porras told the workshop audience: They hold fast to some form of unchanging core ideology: a set of deeply held values that transcend the profit motive. The steadfastness of these core values, not their content, is what matters. Merck's core value, for example, might be summarized as: "Preserve and improve human life," whereas Walt Disney's core value would be: "Make people happy," Porras said.

"Disneyland opened up in the mid- to late 1950s," he recalled. "The employees smiled a lot and were very helpful. I've been there 25 times since, and the employees are the same way. But they're not the same people a lot of them aren't even 25 years old yet." Indeed, a new employee might find a visionary company a bit cult-like, Porras said. "If you don't fit, you get ejected like a virus. I wouldn't want to work for Disney. I don't want to be happy and smiling all day."

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By Bruce Goldman

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