The structure worked. By the late 1920s, GM had a more versatile organization with a broader product line than Ford’s. With the founder still dominating his highly centralized company, Ford was poorly positioned to compete with GM’s multiple divisions, each producing its own cars and chasing distinct market niches at different price points. GM’s pioneering structural form eventually set the standard for others: “Only two basic organizational structures have been used for the management of large industrial enterprises. One is the centralized, functional departmentalized type perfected by General Electric and Du Pont before World War I. The other is the multidivisional, decentralized structure initially developed at General Motors and also at Du Pont in the 1920s” (Chandler, 1977, p. 463).
In the 1980s, GM found itself with another structural leader, Roger Smith, at the helm. The results were less satisfying. Like Sloan, Smith ascended to the top at a dif!cult time. In 1980, his !rst year as GM’s chief executive, every American carmaker lost money. It was GM’s !rst loss since 1921. Recognizing that the company had serious competitive problems, Smith banked on structure and technology to make it “the world’s !rst twenty-!rst century corporation” (Lee, 1988, p. 16). He restructured vehicle operations and spent billions of dollars in a quest for paperless of!ces and robotic assembly plants. The changes were dramatic, but the results were dismal: “[Smith’s] tenure has been a tragic era in General Motors history. No GM chairman has disrupted as many lives without commensurate rewards, has spent as muchmoney without returns, or has alienated so many along the way” (Lee, 1988, pp. 286–287).
Why did Smith stumble where Sloan had succeeded? The answer comes down to how well each implemented the right structural form. Effective structural leaders share several characteristics:
• Structural leaders do their homework. Sloan was a brilliant engineer who had grown up in the auto industry. Before coming to GM, he ran an auto accessories company where he implemented a divisional structure. He pioneered the development of better information systems and market research. He was an early convert to group decision making and created a committee structure to make major decisions. Roger Smith had spent his career with General Motors, but most of his jobs were in !nance. His numbers told him machines were cheaper than people, so much of his vision for General Motors involved changes in production technology, an area where he had little experience or expertise.
• Structural leaders rethink the relationship of structure, strategy, and environment. Sloan’s new structure was intimately tied to a strategy for reaching the automotive market. He foresaw growing demand, better cars, and more discriminating consumers. In the face of
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Henry Ford’s stubborn attachment to the Model T, Sloan initiated the “price pyramid” (cars for every pocketbook) and the annual introduction of new models, which soon became the industry norm.
For a variety of reasons, GM in the 1960s began to move away from Sloan’s concepts. Fearing a government effort to break up the corporation, GM reduced the independence of the car divisions and centralized design and engineering. Increasingly, the divisions became marketing groups tasked to build and sell the cars that corporate gave them. “Look-alike cars” confused consumers who found it hard to tell a Chevrolet from a Cadillac.
Instead of addressing this marketing challenge, Smith focused more on reducing costs than onmaking better cars. As he saw it, GM’s primary competitive problemwas high costs driven by high wages. He showed little interest in efforts already under way at GM to improve working conditions on the shop “oor. Ironically, one of his best investments—a joint venture with Toyota—succeeded because Toyota brought innovative approaches to managing people: “With only a fraction of the money invested in GM’s heavily robotized plants, [the NUMMI plant at] Fremont is more ef!cient and produces better-quality cars than any plant in the GM system” (Hampton and Norman, 1987, p. 102).
• Structural leaders focus on implementation. Structural leaders often miscalculate the dif!culties of putting their designs in place. They underestimate resistance, skimp on training, fail to build a political base, and misread cultural cues. Sloan was no human resource specialist, but he intuitively saw the need to cultivate understanding and acceptance of major decisions. He did that by continually asking for advice and by establishing committees and task forces to address major issues.
• Effective structural leaders experiment. Sloan tinkered constantly with GM’s structure and strategy and encouraged others to do likewise. The Great Depression produced a drop of 72 percent in sales at GM between 1929 and 1932, but the company adapted adroitly to hard times. Sales fell, but GM increased its market share and made money every year. In the 1980s, Smith spent billions on his campaign to modernize the company and cut costs, yet GM lost market share every year and remained the industry’s highest- cost producer.
Catalyst or Wimp? Human Resource Leadership The tiny trickle of writing about structural leadership is swamped by a torrent of human resource literature (including Argyris, 1962; Bennis and Nanus, 1985, 2007; Blanchard and Johnson, 1982; Bradford and Cohen, 1984; Boyatzis and McKee, 2005; Fiedler and Chemers,
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1974; Goleman, Boyatzis, and McKee, 2004; Hersey, 1984; Hollander, 1978; House, 1971; Levinson, 1968; Likert, 1967; Vroom and Yetton, 1973; and Waterman, 1994). Human resource theorists typically advocate openness, caring, mutuality, listening, coaching, partici- pation, and empowerment. They view the leader as a facilitator and catalyst who uses emotional intelligence and social skill to motivate and empower subordinates. The leader’s power comes from talent, caring, sensitivity, and service rather than position or force.
Greenleaf contends that followers “will freely respond only to individuals who are chosen as leaders because they are proven and trusted as servants” (1973, p. 4). He adds, “The servant-leader makes sure that other people’s highest priority needs are being served. The best test [of leadership] is: do those served grow as persons; do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants?” (p. 7). Research con!rms that servant leadership improves employee attitudes, job performance, and loyalty (Liden et al., 2014; Ling, Liu, and Wu, 2016)
Martín Varsavsky is one example of a human resource leader whose skill and artistry have produced extraordinary results. Varsavsky, a native of Argentina, wound up in New York as a teenager after violence forced his family to “ee the military dictatorship in his homeland. Over two decades, Varsavsky founded seven companies and picked up entre- preneur-of-the-year awards on both sides of the Atlantic. He made his !rst millions in New York City real estate before moving to Europe. There he founded two high-tech companies that he later sold for more than a billion dollars each. In 2005, he partnered with venture capitalists and Google to found FON, which soon became the world’s largestWi-Fi network. His approach to managing people was pivotal to his success: “Martín developed manage- ment practices that would be keys throughout his career: create horizontal organizations without any hierarchy, communicate clearly what you intend before doing it, delegate as much as possible, trust your colleagues, and leave operating decisions in the hands of others” (Ganitsky and Sancho, 2002, p. 101).
Gifted human resource leaders such as Varsavsky typically apply a consistent set of people-friendly leadership principles:
• Human resource leaders communicate a strong belief in people. They are passionate about “productivity through people” (Peters and Waterman, 1982). They express this faith in both words and actions, often formalized in a core philosophy or credo. Fred Smith, founder and CEO of Federal Express, sees “putting people !rst” as the cornerstone of his company’s success: “We discovered a long time ago that customer satisfaction really begins with employee satisfaction. That belief is incorporated in our corporate philoso- phy statement: “People—Service—Pro!t . . . In that order” (Waterman, 1994, p. 89).
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• Human resource leaders are visible and accessible. Peters and Waterman (1982) popularized “management by wandering around”—the idea that managers need to get out of their of!ces and spend time with workers and customers. Patricia Carrigan, the !rst female plant manager at General Motors, modeled this technique in the course of turning around two manufacturing plants, each with a long history of union–manage- ment con”ict (Kouzes and Posner, 1987). In both situations, she began by going to the plant “oor to introduce herself to workers and to ask how they thought the operation could be improved. One worker commented that before Carrigan, “I didn’t know who the plant manager was. I wouldn’t have recognized him if I saw him.”
• Effective human resource leaders empower others. People-oriented leaders often refer to their employees as “partners,” “owners,” or “associates.” They make it clear that workers have a stake in the organization’s success and a right to be involved in making decisions. In the 1980s, Jan Carlzon, CEO of Scandinavian Air Systems (SAS), turned around a sluggish business with the intent of making it “the best airline in the world for business travelers” (Carlzon, 1987, p. 46). To !nd out what the business traveler wanted, he turned to SAS’s frontline service employees. Focus groups generated hundreds of ideas and emphasized the importance of frontline autonomy to decide on the spot what passengers needed. Carlzon concluded that SAS’s image was built on countless “moments of truth:” 15-second encounters between employees and customers:
“We have to place responsibility for ideas, decisions, and actions with the people who are SAS during those 15 seconds. If they have to go up the organizational chain of command for a decision on an individual problem, then those 15 golden seconds will elapse without a response and we will have lost an opportunity to earn a loyal customer” (Carlzon, 1987, p. 66).
Advocate or Hustler? Political Leadership Even in the results-driven private sector, leaders !nd that they have to plunge into the political arena to move their company where it needs to go. Lee Iacocca, who became chief executive of Chrysler in the late 1970s when the company was near death, provided one of the most impressive examples of political leadership in American business history.
Iacocca’s career had taken him to the presidency of Ford Motor Company. But then in 1978 his boss, Henry Ford II, !red him, reportedly with the simple explanation, “Let’s just say I don’t like you” (O’Toole, 1984, p. 231). Iacocca’s unemployment was brief. Chrysler Corporation, desperate for new leadership, saw Iacocca as the best answer to the company’s business woes.
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Iacocca had done his homework before accepting Chrysler’s offer but still found things were worse than he expected. Chrysler was losing money so fast that bankruptcy seemed almost inevitable. He concluded that the only way out was to persuade the U.S. government to guarantee massive loans. It was a tough sell; much of Congress, the media, and the American public was against the idea. Iacocca had to convince them all that government intervention was in their best interest as well as Chrysler’s.