Harvard Business Review on What Makes a Leader

HarvardBusinessReview

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The series is designed to bring today’s managers and professionals thefundamental information they need to stay competitive in a fast-moving world. From the preeminent thinkers whose work has definedan entire field to the rising stars who will redefine the way we thinkabout business, here are the leading minds and landmark ideas thathave established the Harvard Business Review as required reading forambitious businesspeople in organizations around the globe.

Other books in the series:

Harvard Business Review Interviews with CEOs

Harvard Business Review on Brand Management

Harvard Business Review on Breakthrough Thinking

Harvard Business Review on Business and the Environment

Harvard Business Review on the Business Value of IT

Harvard Business Review on Change

Harvard Business Review on Corporate Governance

Harvard Business Review on Corporate Strategy

Harvard Business Review on Crisis Management

Harvard Business Review on Decision Making

Harvard Business Review on Effective Communication

Harvard Business Review on Entrepreneurship

Harvard Business Review on Finding and Keeping the Best People

Harvard Business Review on Innovation

Harvard Business Review on Knowledge Management

Harvard Business Review on Leadership

Harvard Business Review on Managing High-Tech Industries

Harvard Business Review on Managing People

Harvard Business Review on Managing Uncertainty

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Other books in the series (continued):

Harvard Business Review on Managing the Value Chain

Harvard Business Review on Measuring Corporate Performance

Harvard Business Review on Mergers and Acquisitions

Harvard Business Review on Negotiation and Conflict Resolution

Harvard Business Review on Nonprofits

Harvard Business Review on Organizational Learning

Harvard Business Review on Strategies for Growth

Harvard Business Review on Turnarounds

Harvard Business Review on Work and Life Balance

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What Makes a Leader? 1

Narcissistic Leaders: The Incredible Pros, the Inevitable Cons 27

Leadership That Gets Results 53

Getting the Attention You Need 87 . .

The Successor’s Dilemma 111

The Rise and Fall of the J. Peterman Company 135

Why Should Anyone Be Led by You? 153

Leading Through Rough Times: An Interview with Novell’s Eric Schmidt 177

About the Contributors 197

Index 201

Contents

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What Makes a Leader?

Executive Summary

SUPERB LEADERS HAVE very different ways of directinga team, a division, or a company. Some are subduedand analytical; others are charismatic and go with theirgut. And different situations call for different types of lead-ership. Most mergers need a sensitive negotiator at thehelm, whereas many turnarounds require a more forcefulkind of authority.

Psychologist and noted author Daniel Goleman hasfound, however, that effective leaders are alike in onecrucial way: they all have a high degree of what hascome to be known as emotional intelligence. In fact,Goleman’s research at nearly 200 large, global compa-nies revealed that emotional intelligence—especially atthe highest levels of a company—is the sine qua non forleadership. Without it, a person can have first-class train-ing, an incisive mind, and an endless supply of goodideas, but he still won’t make a great leader.

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The components of emotional intelligence—self-aware-ness, self-regulation, motivation, empathy, and socialskill—can sound unbusinesslike. But exhibiting emotionalintelligence at the workplace does not mean simply con-trolling your anger or getting along with people. Rather,it means understanding your own and other people’semotional makeup well enough to move people in thedirection of accomplishing your company’s goals.

In this article, the author discusses each component ofemotional intelligence and shows through examples howto recognize it in potential leaders, how and why it leadsto measurable business results, and how it can belearned. It takes time and, most of all, commitment. Butthe benefits that come from having a well-developedemotional intelligence, both for the individual and theorganization, make it worth the effort.

E knows a story about ahighly intelligent, highly skilled executive who was pro-moted into a leadership position only to fail at the job.And they also know a story about someone with solid—but not extraordinary—intellectual abilities and techni-cal skills who was promoted into a similar position andthen soared.

Such anecdotes support the widespread belief thatidentifying individuals with the “right stuff ” to be leadersis more art than science. After all, the personal styles ofsuperb leaders vary: some leaders are subdued and ana-lytical; others shout their manifestos from the mountain-tops. And just as important, different situations call fordifferent types of leadership. Most mergers need a sensi-tive negotiator at the helm, whereas many turnaroundsrequire a more forceful authority.

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I have found, however, that the most effective leadersare alike in one crucial way: they all have a high degree ofwhat has come to be known as emotional intelligence. It’snot that IQ and technical skills are irrelevant. They domatter, but mainly as “threshold capabilities”; that is,

they are the entry-levelrequirements for executivepositions. But my research,along with other recentstudies, clearly shows thatemotional intelligence is the

sine qua non of leadership. Without it, a person can havethe best training in the world, an incisive, analyticalmind, and an endless supply of smart ideas, but he stillwon’t make a great leader.

In the course of the past year, my colleagues and I havefocused on how emotional intelligence operates at work.We have examined the relationship between emotionalintelligence and effective performance, especially in lead-ers. And we have observed how emotional intelligenceshows itself on the job. How can you tell if someone hashigh emotional intelligence, for example, and how canyou recognize it in yourself ? In the following pages, we’llexplore these questions, taking each of the components ofemotional intelligence—self-awareness, self-regulation,motivation, empathy, and social skill—in turn.

Evaluating Emotional Intelligence

Most large companies today have employed trained psy-chologists to develop what are known as “competencymodels” to aid them in identifying, training, and promot-ing likely stars in the leadership firmament. The psy-chologists have also developed such models for lower-level positions. And in recent years, I have analyzed

Effective leaders are alikein one crucial way: theyall have a high degree of emotional intelligence.


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competency models from 188 companies, most of whichwere large and global and included the likes of LucentTechnologies, British Airways, and Credit Suisse.

In carrying out this work, my objective was to deter-mine which personal capabilities drove outstanding per-formance within these organizations, and to what degreethey did so. I grouped capabilities into three categories:purely technical skills like accounting and business plan-ning; cognitive abilities like analytical reasoning; andcompetencies demonstrating emotional intelligencesuch as the ability to work with others and effectivenessin leading change.

To create some of the competency models, psycholo-gists asked senior managers at the companies to identifythe capabilities that typified the organization’s most out-standing leaders. To create other models, the psycholo-gists used objective criteria such as a division’s prof-itability to differentiate the star performers at seniorlevels within their organizations from the average ones.Those individuals were then extensively interviewed andtested, and their capabilities were compared. This pro-cess resulted in the creation of lists of ingredients forhighly effective leaders. The lists ranged in length from 7to 15 items and included such ingredients as initiativeand strategic vision.

When I analyzed all this data, I found dramaticresults. To be sure, intellect was a driver of outstandingperformance. Cognitive skills such as big-picture think-ing and long-term vision were particularly important.But when I calculated the ratio of technical skills, IQ, andemotional intelligence as ingredients of excellent perfor-mance, emotional intelligence proved to be twice asimportant as the others for jobs at all levels.

Moreover, my analysis showed that emotional intelli-gence played an increasingly important role at the high-

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est levels of the company, where differences in technicalskills are of negligible importance. In other words, thehigher the rank of a person considered to be a star per-former, the more emotional intelligence capabilitiesshowed up as the reason for his or her effectiveness.When I compared star performers with average ones insenior leadership positions, nearly 90% of the differencein their profiles was attributable to emotional intelli-gence factors rather than cognitive abilities.

Other researchers have confirmed that emotionalintelligence not only distinguishes outstanding leadersbut can also be linked to strong performance. The find-ings of the late David McClelland, the renownedresearcher in human and organizational behavior, are agood example. In a 1996 study of a global food and bever-age company, McClelland found that when senior man-agers had a critical mass of emotional intelligence capa-bilities, their divisions outperformed yearly earningsgoals by 20%. Meanwhile, division leaders without thatcritical mass underperformed by almost the sameamount. McClelland’s findings, interestingly, held as truein the company’s U.S. divisions as in its divisions in Asiaand Europe.

In short, the numbers are beginning to tell us a per-suasive story about the link between a company’s suc-cess and the emotional intelligence of its leaders. Andjust as important, research is also demonstrating thatpeople can, if they take the right approach, develop theiremotional intelligence. (See the insert “Can EmotionalIntelligence Be Learned?”)

Self-Awareness

Self-awareness is the first component of emotional intel-ligence—which makes sense when one considers that


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the Delphic oracle gave the advice to “know thyself ”thousands of years ago. Self-awareness means having adeep understanding of one’s emotions, strengths, weak-nesses, needs, and drives. People with strong self-aware-

The Five Components of Emotional Intelligence at Work

Self-Awareness

Self-Regulation

Motivation

Empathy

Social Skill

Definition

The ability to recognizeand understand yourmoods, emotions, anddrives, as well as theireffect on others

The ability to control orredirect disruptiveimpulses and moods

The propensity to sus-pend judgment—tothink before acting

A passion to work forreasons that go beyondmoney or status

A propensity to pursuegoals with energy andpersistence

The ability to understandthe emotional makeup ofother people

Skill in treating peopleaccording to their emo-tional reactions

Proficiency in managingrelationships and build-ing networks

An ability to find com-mon ground and buildrapport

Hallmarks

Self-confidence

Realistic self-assessment

Self-deprecating sense ofhumor

Trustworthiness andintegrity

Comfort with ambiguity

Openness to change

Strong drive to achieve

Optimism, even in theface of failure

Organzational commit-ment

Expertise in building andretaining talent

Cross-cultural sensitivity

Service to clients andcustomers

Effectiveness in leadingchange

Persuasiveness

Expertise in building andleading teams

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ness are neither overly critical nor unrealistically hope-ful. Rather, they are honest—with themselves and withothers.

People who have a high degree of self-awareness rec-ognize how their feelings affect them, other people, andtheir job performance. Thus a self-aware person whoknows that tight deadlines bring out the worst in himplans his time carefully and gets his work done well inadvance. Another person with high self-awareness willbe able to work with a demanding client. She will under-stand the client’s impact on her moods and the deeperreasons for her frustration. “Their trivial demands takeus away from the real work that needs to be done,” shemight explain. And she will go one step further and turnher anger into something constructive.

Self-awareness extends to a person’s understanding ofhis or her values and goals. Someone who is highly self-aware knows where he is headed and why; so, for exam-ple, he will be able to be firm in turning down a job offer

that is tempting financiallybut does not fit with hisprinciples or long-termgoals. A person who lacksself-awareness is apt tomake decisions that bringon inner turmoil by tread-

ing on buried values. “The money looked good so I signedon,” someone might say two years into a job, “but thework means so little to me that I’m constantly bored.”The decisions of self-aware people mesh with their val-ues; consequently, they often find work to be energizing.

How can one recognize self-awareness? First and fore-most, it shows itself as candor and an ability to assessoneself realistically. People with high self-awareness areable to speak accurately and openly—although not nec-

Self-aware job candidateswill be frank in admittingto failure—and willoften tell their tales witha smile.


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essarily effusively or confessionally—about their emo-tions and the impact they have on their work. Forinstance, one manager I know of was skeptical about anew personal-shopper service that her company, a majordepartment-store chain, was about to introduce. With-out prompting from her team or her boss, she offeredthem an explanation: “It’s hard for me to get behind therollout of this service,” she admitted, “because I reallywanted to run the project, but I wasn’t selected. Bearwith me while I deal with that.” The manager did indeedexamine her feelings; a week later, she was supportingthe project fully.

Such self-knowledge often shows itself in the hiringprocess. Ask a candidate to describe a time he got car-ried away by his feelings and did something he laterregretted. Self-aware candidates will be frank in admit-ting to failure—and will often tell their tales with a smile.One of the hallmarks of self-awareness is a self-deprecat-ing sense of humor.

Self-awareness can also be identified during perfor-mance reviews. Self-aware people know—and are com-fortable talking about—their limitations and strengths,and they often demonstrate a thirst for constructive crit-icism. By contrast, people with low self-awareness inter-pret the message that they need to improve as a threat ora sign of failure.

Self-aware people can also be recognized by their self-confidence. They have a firm grasp of their capabilitiesand are less likely to set themselves up to fail by, forexample, overstretching on assignments. They know,too, when to ask for help. And the risks they take on thejob are calculated. They won’t ask for a challenge thatthey know they can’t handle alone. They’ll play to theirstrengths.

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Consider the actions of a mid-level employee who wasinvited to sit in on a strategy meeting with her com-pany’s top executives. Although she was the most juniorperson in the room, she did not sit there quietly, listen-ing in awestruck or fearful silence. She knew she had ahead for clear logic and the skill to present ideas persua-sively, and she offered cogent suggestions about thecompany’s strategy. At the same time, her self-awarenessstopped her from wandering into territory where sheknew she was weak.

Despite the value of having self-aware people in theworkplace, my research indicates that senior executivesdon’t often give self-awareness the credit it deserveswhen they look for potential leaders. Many executivesmistake candor about feelings for “wimpiness” and fail togive due respect to employees who openly acknowledgetheir shortcomings. Such people are too readily dis-missed as “not tough enough” to lead others.

In fact, the opposite is true. In the first place, peoplegenerally admire and respect candor. Further, leaders areconstantly required to make judgment calls that requirea candid assessment of capabilities—their own andthose of others. Do we have the management expertise toacquire a competitor? Can we launch a new productwithin six months? People who assess themselves hon-estly—that is, self-aware people—are well suited to dothe same for the organizations they run.

Self-Regulation

Biological impulses drive our emotions. We cannot doaway with them—but we can do much to manage them.Self-regulation, which is like an ongoing inner conversa-tion, is the component of emotional intelligence that


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frees us from being prisoners of our feelings. Peopleengaged in such a conversation feel bad moods andemotional impulses just as everyone else does, but theyfind ways to control them and even to channel them inuseful ways.

Imagine an executive who has just watched a team ofhis employees present a botched analysis to the com-pany’s board of directors. In the gloom that follows, theexecutive might find himself tempted to pound on thetable in anger or kick over a chair. He could leap up andscream at the group. Or he might maintain a grimsilence, glaring at everyone before stalking off.

But if he had a gift for self-regulation, he wouldchoose a different approach. He would pick his wordscarefully, acknowledging the team’s poor performancewithout rushing to any hasty judgment. He would then

step back to consider thereasons for the failure. Arethey personal—a lack ofeffort? Are there any miti-gating factors? What washis role in the debacle?

After considering these questions, he would call the teamtogether, lay out the incident’s consequences, and offerhis feelings about it. He would then present his analysisof the problem and a well-considered solution.

Why does self-regulation matter so much for leaders?First of all, people who are in control of their feelings andimpulses—that is, people who are reasonable—are ableto create an environment of trust and fairness. In suchan environment, politics and infighting are sharplyreduced and productivity is high. Talented people flockto the organization and aren’t tempted to leave. And self-

People who have masteredtheir emotions are able to roll with the changes.They don’t panic.

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regulation has a trickle-down effect. No one wants to beknown as a hothead when the boss is known for her calmapproach. Fewer bad moods at the top mean fewerthroughout the organization.

Second, self-regulation is important for competitivereasons. Everyone knows that business today is rifewith ambiguity and change. Companies merge andbreak apart regularly. Technology transforms work at adizzying pace. People who have mastered their emo-tions are able to roll with the changes. When a newchange program is announced, they don’t panic; in-stead, they are able to suspend judgment, seek out in-formation, and listen to executives explain the newprogram. As the initiative moves forward, they are ableto move with it.

Sometimes they even lead the way. Consider the caseof a manager at a large manufacturing company. Like hercolleagues, she had used a certain software program forfive years. The program drove how she collected andreported data and how she thought about the company’sstrategy. One day, senior executives announced that anew program was to be installed that would radicallychange how information was gathered and assessedwithin the organization. While many people in the com-pany complained bitterly about how disruptive thechange would be, the manager mulled over the reasonsfor the new program and was convinced of its potentialto improve performance. She eagerly attended trainingsessions—some of her colleagues refused to do so—andwas eventually promoted to run several divisions, in partbecause she used the new technology so effectively.

I want to push the importance of self-regulation toleadership even further and make the case that it


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enhances integrity, which is not only a personal virtuebut also an organizational strength. Many of the badthings that happen in companies are a function of impul-sive behavior. People rarely plan to exaggerate profits,pad expense accounts, dip into the till, or abuse powerfor selfish ends. Instead, an opportunity presents itself,and people with low impulse control just say yes.

By contrast, consider the behavior of the seniorexecutive at a large food company. The executive wasscrupulously honest in his negotiations with local dis-tributors. He would routinely lay out his cost structurein detail, thereby giving the distributors a realisticunderstanding of the company’s pricing. This approachmeant the executive couldn’t always drive a hard bar-gain. Now, on occasion, he felt the urge to increaseprofits by withholding information about the company’scosts. But he challenged that impulse—he saw that itmade more sense in the long run to counteract it. Hisemotional self-regulation paid off in strong, lastingrelationships with distributors that benefited the com-pany more than any short-term financial gains wouldhave.

The signs of emotional self-regulation, therefore, arenot hard to miss: a propensity for reflection and thought-fulness; comfort with ambiguity and change; andintegrity—an ability to say no to impulsive urges.

Like self-awareness, self-regulation often does not getits due. People who can master their emotions are some-times seen as cold fish—their considered responses aretaken as a lack of passion. People with fiery tempera-ments are frequently thought of as “classic” leaders—their outbursts are considered hallmarks of charismaand power. But when such people make it to the top,their impulsiveness often works against them. In my

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research, extreme displays of negative emotion havenever emerged as a driver of good leadership.

Motivation

If there is one trait that virtually all effective leadershave, it is motivation. They are driven to achieve beyondexpectations—their own and everyone else’s. The keyword here is achieve. Plenty of people are motivated byexternal factors such as a big salary or the status thatcomes from having an impressive title or being part of aprestigious company. By contrast, those with leadershippotential are motivated by a deeply embedded desire toachieve for the sake of achievement.

If you are looking for leaders, how can you identifypeople who are motivated by the drive to achieve ratherthan by external rewards? The first sign is a passion forthe work itself—such people seek out creative chal-lenges, love to learn, and take great pride in a job welldone. They also display an unflagging energy to dothings better. People with such energy often seem rest-less with the status quo. They are persistent with theirquestions about why things are done one way ratherthan another; they are eager to explore new approachesto their work.

A cosmetics company manager, for example, wasfrustrated that he had to wait two weeks to get salesresults from people in the field. He finally tracked downan automated phone system that would beep each of hissalespeople at 5 P.M. every day. An automated messagethen prompted them to punch in their numbers—howmany calls and sales they had made that day. The systemshortened the feedback time on sales results from weeksto hours.


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That story illustrates two other common traits of peo-ple who are driven to achieve. They are forever raisingthe performance bar, and they like to keep score. Takethe performance bar first. During performance reviews,people with high levels of motivation might ask to be“stretched” by their superiors. Of course, an employeewho combines self-awareness with internal motivationwill recognize her limits—but she won’t settle for objec-tives that seem too easy to fulfill.

And it follows naturally that people who are driven todo better also want a way of tracking progress—theirown, their team’s, and their company’s. Whereas peoplewith low achievement motivation are often fuzzy aboutresults, those with high achievement motivation oftenkeep score by tracking such hard measures as profitabil-ity or market share. I know of a money manager whostarts and ends his day on the Internet, gauging the per-formance of his stock fund against four industry-setbenchmarks.

Interestingly, people with high motivation remainoptimistic even when the score is against them. In suchcases, self-regulation combines with achievement moti-vation to overcome the frustration and depression thatcome after a setback or failure. Take the case of anotherportfolio manager at a large investment company. Afterseveral successful years, her fund tumbled for three con-secutive quarters, leading three large institutional clientsto shift their business elsewhere.

Some executives would have blamed the nosedive oncircumstances outside their control; others might haveseen the setback as evidence of personal failure. Thisportfolio manager, however, saw an opportunity to proveshe could lead a turnaround. Two years later, when shewas promoted to a very senior level in the company, she

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described the experience as “the best thing that everhappened to me; I learned so much from it.”

Executives trying to recognize high levels of achieve-ment motivation in their people can look for one last

piece of evidence: com-mitment to the organiza-tion. When people lovetheir job for the workitself, they often feel com-mitted to the organiza-

tions that make that work possible. Committed employ-ees are likely to stay with an organization even whenthey are pursued by headhunters waving money.

It’s not difficult to understand how and why a motiva-tion to achieve translates into strong leadership. If youset the performance bar high for yourself, you will do thesame for the organization when you are in a position todo so. Likewise, a drive to surpass goals and an interestin keeping score can be contagious. Leaders with thesetraits can often build a team of managers around themwith the same traits. And of course, optimism and orga-nizational commitment are fundamental to leadership—just try to imagine running a company without them.

Empathy

Of all the dimensions of emotional intelligence, empathyis the most easily recognized. We have all felt the empa-thy of a sensitive teacher or friend; we have all beenstruck by its absence in an unfeeling coach or boss. Butwhen it comes to business, we rarely hear people praised,let alone rewarded, for their empathy. The very wordseems unbusinesslike, out of place amid the tough reali-ties of the marketplace.

The very word empathyseems unbusinesslike, outof place amid the toughrealities of the marketplace.


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But empathy doesn’t mean a kind of “I’m okay, you’reokay” mushiness. For a leader, that is, it doesn’t meanadopting other people’s emotions as one’s own and try-ing to please everybody. That would be a nightmare—itwould make action impossible. Rather, empathy meansthoughtfully considering employees’ feelings—alongwith other factors—in the process of making intelligentdecisions.

For an example of empathy in action, consider whathappened when two giant brokerage companies merged,creating redundant jobs in all their divisions. One divi-sion manager called his people together and gave agloomy speech that emphasized the number of peoplewho would soon be fired. The manager of another divi-sion gave his people a different kind of speech. He wasupfront about his own worry and confusion, and hepromised to keep people informed and to treat everyonefairly.

The difference between these two managers wasempathy. The first manager was too worried about hisown fate to consider the feelings of his anxiety-strickencolleagues. The second knew intuitively what his peoplewere feeling, and he acknowledged their fears with hiswords. Is it any surprise that the first manager saw hisdivision sink as many demoralized people, especially themost talented, departed? By contrast, the second man-ager continued to be a strong leader, his best peoplestayed, and his division remained as productive as ever.

Empathy is particularly important today as a compo-nent of leadership for at least three reasons: the increas-ing use of teams; the rapid pace of globalization; and thegrowing need to retain talent.

Consider the challenge of leading a team. As anyonewho has ever been a part of one can attest, teams are

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cauldrons of bubbling emotions. They are often chargedwith reaching a consensus—hard enough with two peo-ple and much more difficult as the numbers increase.Even in groups with as few as four or five members,alliances form and clashing agendas get set. A team’sleader must be able to sense and understand the view-points of everyone around the table.

That’s exactly what a marketing manager at a largeinformation technology company was able to do whenshe was appointed to lead a troubled team. The groupwas in turmoil, overloaded by work and missing dead-lines. Tensions were high among the members. Tinkeringwith procedures was not enough to bring the grouptogether and make it an effective part of the company.

So the manager took several steps. In a series of one-on-one sessions, she took the time to listen to everyone inthe group—what was frustrating them, how they ratedtheir colleagues, whether they felt they had been ignored.And then she directed the team in a way that brought ittogether: she encouraged people to speak more openlyabout their frustrations, and she helped people raise con-structive complaints during meetings. In short, her empa-thy allowed her to understand her team’s emotionalmakeup. The result was not just heightened collaborationamong members but also added business, as the team wascalled on for help by a wider range of internal clients.

Globalization is another reason for the rising impor-tance of empathy for business leaders. Cross-culturaldialogue can easily lead to miscues and misunderstand-ings. Empathy is an antidote. People who have it areattuned to subtleties in body language; they can hear themessage beneath the words being spoken. Beyond that,they have a deep understanding of the existence andimportance of cultural and ethnic differences.


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Consider the case of an American consultant whoseteam had just pitched a project to a potential Japaneseclient. In its dealings with Americans, the team wasaccustomed to being bombarded with questions aftersuch a proposal, but this time it was greeted with a longsilence. Other members of the team, taking the silence asdisapproval, were ready to pack and leave. The lead con-sultant gestured them to stop. Although he was not par-ticularly familiar with Japanese culture, he read theclient’s face and posture and sensed not rejection butinterest—even deep consideration. He was right: whenthe client finally spoke, it was to give the consulting firmthe job.

Finally, empathy plays a key role in the retention oftalent, particularly in today’s information economy.Leaders have always needed empathy to develop andkeep good people, but today the stakes are higher. Whengood people leave, they take the company’s knowledgewith them.

That’s where coaching and mentoring come in. It hasrepeatedly been shown that coaching and mentoring payoff not just in better performance but also in increasedjob satisfaction and decreased turnover. But what makes

coaching and mentoringwork best is the nature ofthe relationship. Outstand-ing coaches and mentorsget inside the heads of thepeople they are helping.

They sense how to give effective feedback. They knowwhen to push for better performance and when to holdback. In the way they motivate their protégés, theydemonstrate empathy in action.

Social skill is friendlinesswith a purpose: movingpeople in the direction youdesire.

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In what is probably sounding like a refrain, let me re-peat that empathy doesn’t get much respect in business.People wonder how leaders can make hard decisions ifthey are “feeling” for all the people who will be affected.But leaders with empathy do more than sympathize withpeople around them: they use their knowledge to improvetheir companies in subtle but important ways.

Social Skill

The first three components of emotional intelligence areall self-management skills. The last two, empathy andsocial skill, concern a person’s ability to manage relation-ships with others. As a component of emotional intelli-gence, social skill is not as simple as it sounds. It’s notjust a matter of friendliness, although people with highlevels of social skill are rarely mean-spirited. Social skill,rather, is friendliness with a purpose: moving people inthe direction you desire, whether that’s agreement on anew marketing strategy or enthusiasm about a newproduct.

Socially skilled people tend to have a wide circle ofacquaintances, and they have a knack for finding com-mon ground with people of all kinds—a knack for build-ing rapport. That doesn’t mean they socialize continu-ally; it means they work according to the assumptionthat nothing important gets done alone. Such peoplehave a network in place when the time for action comes.

Social skill is the culmination of the other dimensionsof emotional intelligence. People tend to be very effectiveat managing relationships when they can understandand control their own emotions and can empathize withthe feelings of others. Even motivation contributes to


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social skill. Remember that people who are driven toachieve tend to be optimistic, even in the face of setbacksor failure. When people are upbeat, their “glow” is castupon conversations and other social encounters. Theyare popular, and for good reason.

Because it is the outcome of the other dimensions ofemotional intelligence, social skill is recognizable on the job in many ways that will by now sound familiar.Socially skilled people, for instance, are adept at manag-ing teams—that’s their empathy at work. Likewise, theyare expert persuaders—a manifestation of self-aware-ness, self-regulation, and empathy combined. Giventhose skills, good persuaders know when to make anemotional plea, for instance, and when an appeal to rea-son will work better. And motivation, when publicly visi-ble, makes such people excellent collaborators; their pas-sion for the work spreads to others, and they are drivento find solutions.

But sometimes social skill shows itself in ways theother emotional intelligence components do not. Forinstance, socially skilled people may at times appear notto be working while at work. They seem to be idlyschmoozing—chatting in the hallways with colleagues orjoking around with people who are not even connectedto their “real” jobs. Socially skilled people, however, don’tthink it makes sense to arbitrarily limit the scope of theirrelationships. They build bonds widely because theyknow that in these fluid times, they may need help some-day from people they are just getting to know today.

For example, consider the case of an executive in thestrategy department of a global computer manufacturer.By 1993, he was convinced that the company’s future laywith the Internet. Over the course of the next year, hefound kindred spirits and used his social skill to stitch

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together a virtual community that cut across levels, divi-sions, and nations. He then used this de facto team toput up a corporate Web site, among the first by a majorcompany. And, on his own initiative, with no budget orformal status, he signed up the company to participate inan annual Internet industry convention. Calling on hisallies and persuading various divisions to donate funds,he recruited more than 50 people from a dozen differentunits to represent the company at the convention.

Management took notice: within a year of the confer-ence, the executive’s team formed the basis for the com-pany’s first Internet division, and he was formally put incharge of it. To get there, the executive had ignored con-ventional boundaries, forging and maintaining connec-tions with people in every corner of the organization.

Is social skill considered a key leadership capability inmost companies? The answer is yes, especially whencompared with the other components of emotional intel-ligence. People seem to know intuitively that leaders

need to manage relation-ships effectively; no leaderis an island. After all, theleader’s task is to get workdone through other peo-ple, and social skill makes

that possible. A leader who cannot express her empathymay as well not have it at all. And a leader’s motivationwill be useless if he cannot communicate his passion tothe organization. Social skill allows leaders to put theiremotional intelligence to work.

I to assert that good-old-fashioned IQ and technical ability are not important

Emotional intelligencecan be learned. The process is not easy. It takestime and commitment.


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ingredients in strong leadership. But the recipe wouldnot be complete without emotional intelligence. It wasonce thought that the components of emotional intelli-gence were “nice to have” in business leaders. But nowwe know that, for the sake of performance, these areingredients that leaders “need to have.”

It is fortunate, then, that emotional intelligence canbe learned. The process is not easy. It takes time and,most of all, commitment. But the benefits that comefrom having a well-developed emotional intelligence,both for the individual and for the organization, make itworth the effort.

Can Emotional Intelligence Be Learned?

FOR AGES, PEOPLE HAVE debated if leaders are bornor made. So too goes the debate about emotional intelli-gence. Are people born with certain levels of empathy,for example, or do they acquire empathy as a result oflife’s experiences? The answer is both. Scientific inquirystrongly suggests that there is a genetic component toemotional intelligence. Psychological and developmentalresearch indicates that nurture plays a role as well. Howmuch of each perhaps will never be known, but researchand practice clearly demonstrate that emotional intelli-gence can be learned.

One thing is certain: emotional intelligence increaseswith age. There is an old-fashioned word for the phe-nomenon: maturity. Yet even with maturity, some peoplestill need training to enhance their emotional intelligence.Unfortunately, far too many training programs that intendto build leadership skills—including emotional intelli-

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gence—are a waste of time and money. The problem issimple: they focus on the wrong part of the brain.

Emotional intelligence is born largely in the neuro-transmitters of the brain’s limbic system, which governsfeelings, impulses, and drives. Research indicates thatthe limbic system learns best through motivation, ex-tended practice, and feedback. Compare this with thekind of learning that goes on in the neocortex, whichgoverns analytical and technical ability. The neocortexgrasps concepts and logic. It is the part of the brainthat figures out how to use a computer or make a salescall by reading a book. Not surprisingly—but mistak-enly—it is also the part of the brain targeted by mosttraining programs aimed at enhancing emotional intelli-gence. When such programs take, in effect, a neocorti-cal approach, my research with the Consortium forResearch on Emotional Intelligence in Organizationshas shown they can even have a negative impact onpeople’s job performance.

To enhance emotional intelligence, organizationsmust refocus their training to include the limbic system.They must help people break old behavioral habits andestablish new ones. That not only takes much more timethan conventional training programs, it also requires anindividualized approach.

Imagine an executive who is thought to be low onempathy by her colleagues. Part of that deficit showsitself as an inability to listen; she interrupts people anddoesn’t pay close attention to what they’re saying. To fixthe problem, the executive needs to be motivated tochange, and then she needs practice and feedback fromothers in the company. A colleague or coach could betapped to let the executive know when she has beenobserved failing to listen. She would then have to replay


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the incident and give a better response; that is, demon-strate her ability to absorb what others are saying. Andthe executive could be directed to observe certain exec-utives who listen well and to mimic their behavior.

With persistence and practice, such a process canlead to lasting results. I know one Wall Street executivewho sought to improve his empathy—specifically his abil-ity to read people’s reactions and see their perspectives.Before beginning his quest, the executive’s subordinateswere terrified of working with him. People even went sofar as to hide bad news from him. Naturally, he wasshocked when finally confronted with these facts. Hewent home and told his family—but they only confirmedwhat he had heard at work. When their opinions on anygiven subject did not mesh with his, they, too, were fright-ened of him.

Enlisting the help of a coach, the executive went towork to heighten his empathy through practice and feed-back. His first step was to take a vacation to a foreigncountry where he did not speak the language. Whilethere, he monitored his reactions to the unfamiliar and hisopenness to people who were different from him. Whenhe returned home, humbled by his week abroad, theexecutive asked his coach to shadow him for parts of theday, several times a week, in order to critique how hetreated people with new or different perspectives. At thesame time, he consciously used on-the-job interactions asopportunities to practice “hearing” ideas that differedfrom his. Finally, the executive had himself videotaped inmeetings and asked those who worked for and with himto critique his ability to acknowledge and understand thefeelings of others. It took several months, but the execu-tive’s emotional intelligence did ultimately rise, and theimprovement was reflected in his overall performance onthe job.

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It’s important to emphasize that building one’s emo-tional intelligence cannot—will not—happen without sin-cere desire and concerted effort. A brief seminar won’thelp; nor can one buy a how-to manual. It is muchharder to learn to empathize—to internalize empathy as anatural response to people—than it is to become adept atregression analysis. But it can be done. “Nothing greatwas ever achieved without enthusiasm,” wrote RalphWaldo Emerson. If your goal is to become a real leader,these words can serve as a guidepost in your efforts todevelop high emotional intelligence.

Originally published in November–December 1998Reprint 98606


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Narcissistic LeadersThe Incredible Pros, the Inevitable Cons

Executive Summary

TODAY’S BUSINESS LEADERS maintain a markedlyhigher profile than their predecessors did in the 1950sthrough the 1980s. Rather then hide behind the corpo-rate veil, they give interviews to magazines like Busi-ness Week, Time, and the Economist. According topsychoanalyst, anthropologist, and consultant MichaelMaccoby, this love of the limelight often stems fromtheir personalities—in particular, what Freud called anarcissistic personality.

That is both good and bad news: Narcissists aregood for companies that need people with vision andthe courage to take them in new directions. But narcis-sists can also lead companies into trouble by refusing tolisten to the advice and warnings of their managers.

So what can the narcissistic leader do to avoid thetraps of his own personality? First, he can find a trusted

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sidekick. Good sidekicks can point out the operationalrequirements of the narcissistic leader’s often grandiosevision and keep him rooted in reality. Second, the narcis-sistic leader can get the people in his organization toidentify with his goals, to think the way he does, and tobecome the living embodiment of the company. Finally, ifnarcissistic leaders can be persuaded to undergo ther-apy, they can use tools such as psychoanalysis to helpovercome vital character flaws.

With the dramatic discontinuities going on in theworld today, more and more larger corporations arefinding there is no substitute for narcissistic leaders. Forcompanies whose narcissistic leaders recognize their lim-its, these will be the best of times. For other companies,these could be the worst.

T ’ about theCEOs who are transforming today’s industries. Just com-pare them with the executives who ran large companiesin the 1950s through the 1980s. Those executivesshunned the press and had their comments carefullycrafted by corporate PR departments. But today’sCEOs—superstars such as Bill Gates, Andy Grove, SteveJobs, Jeff Bezos, and Jack Welch—hire their own publi-cists, write books, grant spontaneous interviews, andactively promote their personal philosophies. Their facesadorn the covers of magazines like Business Week, Time,and the Economist. What’s more, the world’s businesspersonalities are increasingly seen as the makers andshapers of our public and personal agendas. They adviseschools on what kids should learn and lawmakers on

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how to invest the public’s money. We look to them forthoughts on everything from the future of e-commerceto hot places to vacation.

There are many reasons today’s business leaders havehigher profiles than ever before. One is that businessplays a much bigger role in our lives than it used to, andits leaders are more often in the limelight. Another isthat the business world is experiencing enormouschanges that call for visionary and charismatic leader-ship. But my 25 years of consulting both as a psychoana-lyst in private practice and as an adviser to top managerssuggest a third reason—namely, a pronounced change inthe personality of the strategic leaders at the top. As ananthropologist, I try to understand people in the contextin which they operate, and as a psychoanalyst, I tend tosee them through a distinctly Freudian lens. Given what Iknow, I believe that the larger-than-life leaders we areseeing today closely resemble the personality type thatSigmund Freud dubbed narcissistic. “People of this typeimpress others as being ‘personalities,’ ” he wrote,describing one of the psychological types that clearly fallwithin the range of normality. “They are especially suitedto act as a support for others, to take on the role of lead-ers, and to give a fresh stimulus to cultural developmentor damage the established state of affairs.”

Throughout history, narcissists have always emergedto inspire people and to shape the future. When military,religious, and political arenas dominated society, it wasfigures such as Napoléon Bonaparte, Mahatma Gandhi,and Franklin Delano Roosevelt who determined thesocial agenda. But from time to time, when businessbecame the engine of social change, it, too, generated its share of narcissistic leaders. That was true at the

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beginning of this century, when men like AndrewCarnegie, John D. Rockefeller, Thomas Edison, andHenry Ford exploited new technologies and restructuredAmerican industry. And I think it is true again today.

But Freud recognized that there is a dark side to nar-cissism. Narcissists, he pointed out, are emotionally iso-lated and highly distrustful. Perceived threats can triggerrage. Achievements can feed feelings of grandiosity.

That’s why Freudthought narcissists werethe hardest personalitytypes to analyze. Con-sider how an executive atOracle describes his nar-cissistic CEO Larry Elli-

son: “The difference between God and Larry is that Goddoes not believe he is Larry.” That observation is amus-ing, but it is also troubling. Not surprisingly, most peoplethink of narcissists in a primarily negative way. After all,Freud named the type after the mythical figure Narcis-sus, who died because of his pathological preoccupationwith himself.

Yet narcissism can be extraordinarily useful—evennecessary. Freud shifted his views about narcissism overtime and recognized that we are all somewhat narcissis-tic. More recently, psychoanalyst Heinz Kohut built onFreud’s theories and developed methods of treating nar-cissists. Of course, only professional clinicians are trainedto tell if narcissism is normal or pathological. In thisarticle, I discuss the differences between productive andunproductive narcissism but do not explore the extremepathology of borderline conditions and psychosis.

Leaders such as Jack Welch and George Soros areexamples of productive narcissists. They are gifted and

Productive narcissistshave the audacity to pushthrough the massivetransformations that societyperiodically undertakes.

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creative strategists who see the big picture and findmeaning in the risky challenge of changing the worldand leaving behind a legacy. Indeed, one reason we lookto productive narcissists in times of great transition isthat they have the audacity to push through the massivetransformations that society periodically undertakes.Productive narcissists are not only risk takers willing toget the job done but also charmers who can convert themasses with their rhetoric. The danger is that narcissismcan turn unproductive when, lacking self-knowledge andrestraining anchors, narcissists become unrealisticdreamers. They nurture grand schemes and harbor theillusion that only circumstances or enemies block theirsuccess. This tendency toward grandiosity and distrust isthe Achilles’ heel of narcissists. Because of it, even bril-liant narcissists can come under suspicion for self-involvement, unpredictability, and—in extreme cases—paranoia.

It’s easy to see why narcissistic leadership doesn’talways mean successful leadership. Consider the case ofVolvo’s Pehr Gyllenhammar. He had a dream thatappealed to a broad international audience—a plan torevolutionize the industrial workplace by replacing thedehumanizing assembly line caricatured in CharlieChaplin’s Modern Times. His wildly popular vision calledfor team-based craftsmanship. Model factories werebuilt and publicized to international acclaim. But hissuccess in pushing through these dramatic changes alsosowed the seeds for his downfall. Gyllenhammar startedto feel that he could ignore the concerns of his opera-tional managers. He pursued chancy and expensive busi-ness deals, which he publicized on television and in thepress. On one level, you can ascribe Gyllenhammar’sfalling out of touch with his workforce simply to faulty


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strategy. But it is also possible to attribute it to his nar-cissistic personality. His overestimation of himself ledhim to believe that others would want him to be the czarof a multinational enterprise. In turn, these fantasies ledhim to pursue a merger with Renault, which was tremen-dously unpopular with Swedish employees. Because Gyl-lenhammar was deaf to complaints about Renault,Swedish managers were forced to take their case public.In the end, shareholders aggressively rejected Gyllen-hammar’s plan, leaving him with no option but to resign.

Given the large number of narcissists at the helm ofcorporations today, the challenge facing organizations isto ensure that such leaders do not self-destruct or leadthe company to disaster. That can take some doingbecause it is very hard for narcissists to work throughtheir issues—and virtually impossible for them to do italone. Narcissists need colleagues and even therapists ifthey hope to break free from their limitations. Butbecause of their extreme independence and self-protec-tiveness, it is very difficult to get near them. Kohut main-tained that a therapist would have to demonstrate anextraordinarily profound empathic understanding andsympathy for the narcissist’s feelings in order to gain histrust. On top of that, narcissists must recognize that theycan benefit from such help. For their part, employeesmust learn how to recognize—and work around—narcis-sistic bosses. To help them in this endeavor, let’s firsttake a closer look at Freud’s theory of personality types.

Three Main Personality Types

While Freud recognized that there are an almost infinitevariety of personalities, he identified three main types:erotic, obsessive, and narcissistic. Most of us have ele-ments of all three. We are all, for example, somewhat

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narcissistic. If that were not so, we would not be able tosurvive or assert our needs. The point is, one of thedynamic tendencies usually dominates the others, mak-ing each of us react differently to success and failure.

Freud’s definitions of personality types differed overtime. When talking about the erotic personality type,however, Freud generally did not mean a sexual person-ality but rather one for whom loving and above all beingloved is most important. This type of individual is depen-dent on those people they fear will stop loving them.Many erotics are teachers, nurses, and social workers. Attheir most productive, they are developers of the youngas well as enablers and helpers at work. As managers,they are caring and supportive, but they avoid conflictand make people dependent on them. They are, accord-ing to Freud, outer-directed people.

Obsessives, in contrast, are inner-directed. They areself-reliant and conscientious. They create and main-tain order and make the most effective operationalmanagers. They look constantly for ways to help peoplelisten better, resolve conflict, and find win-win opportu-nities. They buy self-improvement books such asStephen Covey’s The 7 Habits of Highly Effective People.Obsessives are also ruled by a strict conscience—theylike to focus on continuous improvement at workbecause it fits in with their sense of moral improve-ment. As entrepreneurs, obsessives start businesses thatexpress their values, but they lack the vision, daring,and charisma it takes to turn a good idea into a greatone. The best obsessives set high standards and com-municate very effectively. They make sure that instruc-tions are followed and costs are kept within budget.The most productive are great mentors and teamplayers. The unproductive and the uncooperativebecome narrow experts and rule-bound bureaucrats.


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Narcissists, the third type, are independent and noteasily impressed. They are innovators, driven in businessto gain power and glory. Productive narcissists areexperts in their industries, but they go beyond it. Theyalso pose the critical questions. They want to learn every-thing about everything that affects the company and itsproducts. Unlike erotics, they want to be admired, notloved. And unlike obsessives, they are not troubled by apunishing superego, so they are able to aggressively pur-sue their goals. Of all the personality types, narcissistsrun the greatest risk of isolating themselves at themoment of success. And because of their independenceand aggressiveness, they are constantly looking out forenemies, sometimes degenerating into paranoia whenthey are under extreme stress. (For more on personalitytypes, see “Fromm’s Fourth Personality Type” at the endof this article.)

Strengths of the Narcissistic Leader

When it comes to leadership, personality type can beinstructive. Erotic personalities generally make poormanagers—they need too much approval. Obsessivesmake better leaders—they are your operational man-agers: critical and cautious. But it is narcissists whocome closest to our collective image of great leaders.There are two reasons for this: they have compelling,even gripping, visions for companies, and they have anability to attract followers.

I once asked a group of managers to define a leader. “Aperson with vision” was a typical response. Productive

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narcissists understand the vision thing particularly well,because they are by nature people who see the big pic-ture. They are not analyzers who can break up big ques-tions into manageable problems; they aren’t numbercrunchers either (these are usually the obsessives). Nordo they try to extrapolate to understand the future—they attempt to create it. To paraphrase George BernardShaw, some people see things as they are and ask why;narcissists see things that never were and ask why not.

Consider the difference between Bob Allen, a produc-tive obsessive, and Mike Armstrong, a productive narcis-sist. In 1997, Allen tried to expand AT&T to reestablishthe end-to-end service of the Bell System by resellinglocal service from the regional Bell operating companies(RBOCs). Although this was a worthwhile endeavor forshareholders and customers, it was hardly earth-shatter-ing. By contrast, through a strategy of combining voice,telecommunications, and Internet access by high-speedbroadband telecommunication over cable, Mike Arm-strong has “created a new space with his name on it,” asone of his colleagues puts it. Armstrong is betting thathis costly strategy will beat out the RBOC’s less expen-sive solution of digital subscriber lines over copper wire.This example illustrates the different approaches ofobsessives and narcissists. The risk Armstrong took isone that few obsessives would feel comfortable taking.His vision is galvanizing AT&T. Who but a narcissisticleader could achieve such a thing? As Napoléon—a clas-sic narcissist—once remarked, “Revolutions are idealtimes for soldiers with a lot of wit—and the courage to act.”

As in the days of the French Revolution, the world isnow changing in astounding ways; narcissists haveopportunities they would never have in ordinary times.


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In short, today’s narcissistic leaders have the chance tochange the very rules of the game. Consider Robert B.Shapiro, CEO of Monsanto. Shapiro described his visionof genetically modifying crops as “the single most suc-cessful introduction of technology in the history of agri-culture, including the plow” (New York Times, August 5,1999). This is certainly a huge claim—there are stillmany questions about the safety and public acceptanceof genetically engineered fruits and vegetables. But in-dustries like agriculture are desperate for radicalchange. If Shapiro’s gamble is successful, the industrywill be transformed in the image of Monsanto. That’swhy he can get away with painting a picture of Mon-santo as a highly profitable “life sciences” company—despite the fact that Monsanto’s stock has fallen 12%from 1998 to the end of the third quarter of 1999. (Dur-ing the same period, the S&P was up 41%.) Unlike Arm-strong and Shapiro, it was enough for Bob Allen to winagainst his competitors in a game measured primarilyby the stock market. But narcissistic leaders are aftersomething more. They want—and need—to leavebehind a legacy.

Narcissists have vision—but that’s not enough. People inmental hospitals also have visions. The simplest defini-tion of a leader is someone whom other people follow.Indeed, narcissists are especially gifted in attracting fol-lowers, and more often than not, they do so through lan-guage. Narcissists believe that words can move moun-tains and that inspiring speeches can change people.Narcissistic leaders are often skillful orators, and this isone of the talents that makes them so charismatic.

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Indeed, anyone who has seen narcissists perform canattest to their personal magnetism and their ability tostir enthusiasm among audiences.

Yet this charismatic gift is more of a two-way affairthan most people think. Although it is not always obvi-ous, narcissistic leaders are quite dependent on their fol-lowers—they need affirmation, and preferably adulation.Think of Winston Churchill’s wartime broadcasts orJ.F.K.’s “Ask not what your country can do for you” inau-gural address. The adulation that follows from suchspeeches bolsters the self-confidence and conviction ofthe speakers. But if no one responds, the narcissist usu-ally becomes insecure, overly shrill, and insistent—justas Ross Perot did.

Even when people respond positively to a narcissist,there are dangers. That’s because charisma is a double-edged sword—it fosters both closeness and isolation. Ashe becomes increasingly self-assured, the narcissist

becomes more sponta-neous. He feels free ofconstraints. Ideas flow.He thinks he’s invincible.This energy and confi-dence further inspire hisfollowers. But the very

adulation that the narcissist demands can have a corro-sive effect. As he expands, he listens even less to words ofcaution and advice. After all, he has been right before,when others had their doubts. Rather than try to per-suade those who disagree with him, he feels justified inignoring them—creating further isolation. The result issometimes flagrant risk taking that can lead to catastro-phe. In the political realm, there is no clearer example ofthis than Bill Clinton.

One of his greatest problemsis that the narcissist’sfaults tend to become evenmore pronounced as hebecomes more successful.


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Weaknesses of the Narcissistic Leader

Despite the warm feelings their charisma can evoke, nar-cissists are typically not comfortable with their ownemotions. They listen only for the kind of informationthey seek. They don’t learn easily from others. They don’tlike to teach but prefer to indoctrinate and makespeeches. They dominate meetings with subordinates.The result for the organization is greater internal com-petitiveness at a time when everyone is already under asmuch pressure as they can possibly stand. Perhaps themain problem is that the narcissist’s faults tend tobecome even more pronounced as he becomes moresuccessful.

Because they are extraordinarily sensitive, narcissisticleaders shun emotions as a whole. Indeed, perhaps one ofthe greatest paradoxes in this age of teamwork and part-nering is that the best corporate leader in the contempo-rary world is the type of person who is emotionally iso-lated. Narcissistic leaders typically keep others at arm’slength. They can put up a wall of defense as thick as thePentagon. And given their difficulty with knowing oracknowledging their own feelings, they are uncomfort-able with other people expressing theirs—especially theirnegative feelings.

Indeed, even productive narcissists are extremely sen-sitive to criticism or slights, which feel to them likeknives threatening their self-image and their confidencein their visions. Narcissists are almost unimaginablythin-skinned. Like the fairy-tale princess who slept on

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many mattresses and yet knew she was sleeping on a pea,narcissists—even powerful CEOs—bruise easily. This isone explanation why narcissistic leaders do not want toknow what people think of them unless it is causingthem a real problem. They cannot tolerate dissent. Infact, they can be extremely abrasive with employees whodoubt them or with subordinates who are tough enoughto fight back. Steve Jobs, for example, publicly humiliatessubordinates. Thus, although narcissistic leaders oftensay that they want teamwork, what that means in prac-tice is that they want a group of yes-men. As the moreindependent-minded players leave or are pushed out,succession becomes a particular problem.

One serious consequence of this oversensitivity to criti-cism is that narcissistic leaders often do not listen whenthey feel threatened or attacked. Consider the responseof one narcissistic CEO I had worked with for three yearswho asked me to interview his immediate team andreport back to him on what they were thinking. Heinvited me to his summer home to discuss what I hadfound. “So what do they think of me?” he asked withseeming nonchalance. “They think you are very creativeand courageous,” I told him, “but they also feel that youdon’t listen.” “Excuse me, what did you say?” he shotback at once, pretending not to hear. His response washumorous, but it was also tragic. In a very real way, thisCEO could not hear my criticism because it was toopainful to tolerate. Some narcissists are so defensive thatthey go so far as to make a virtue of the fact that theydon’t listen. As another CEO bluntly put it, “I didn’t get


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here by listening to people!” Indeed, on one occasionwhen this CEO proposed a daring strategy, none of hissubordinates believed it would work. His subsequentsuccess strengthened his conviction that he had nothingto learn about strategy from his lieutenants. But successis no excuse for narcissistic leaders not to listen.

Best-selling business writers today have taken up the slo-gan of “emotional competencies”—the belief that suc-cessful leadership requires a strongly developed sense ofempathy. But although they crave empathy from others,productive narcissists are not noted for being particu-larly empathetic themselves. Indeed, lack of empathy is acharacteristic shortcoming of some of the most charis-matic and successful narcissists, including Bill Gates andAndy Grove. Of course, leaders do need to communicate

persuasively. But a lack ofempathy did not preventsome of history’s greatestnarcissistic leaders fromknowing how to commu-nicate—and inspire. Nei-ther Churchill, de Gaulle,

Stalin, nor Mao Tse-tung were empathetic. And yet theyinspired people because of their passion and their con-viction at a time when people longed for certainty. Infact, in times of radical change, lack of empathy canactually be a strength. A narcissist finds it easier thanother personality types to buy and sell companies, toclose and move facilities, and to lay off employees—deci-sions that inevitably make many people angry and sad.But narcissistic leaders typically have few regrets. As one

There is a kind ofemotional intelligenceassociated with narcissists,but it’s more streetsmarts than empathy.

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CEO says,” If I listened to my employees’ needs anddemands, they would eat me alive.”

Given this lack of empathy, it’s hardly surprising thatnarcissistic leaders don’t score particularly well on evalu-ations of their interpersonal style. What’s more, neither360-degree evaluations of their management style norworkshops in listening will make them more empathic.Narcissists don’t want to change—and as long as theyare successful, they don’t think they have to. They maysee the need for operational managers to get touchy-feelytraining, but that’s not for them.

There is a kind of emotional intelligence associatedwith narcissists, but it’s more street smarts than empa-thy. Narcissistic leaders are acutely aware of whether ornot people are with them wholeheartedly. They knowwhom they can use. They can be brutally exploitative.That’s why, even though narcissists undoubtedly have“star quality,” they are often unlikable. They easily stir uppeople against them, and it is only in tumultuous times,when their gifts are desperately needed, that people arewilling to tolerate narcissists as leaders.

Lack of empathy and extreme independence make it dif-ficult for narcissists to mentor and be mentored. Gener-ally speaking, narcissistic leaders set very little store bymentoring. They seldom mentor others, and when theydo they typically want their protégés to be pale reflec-tions of themselves. Even those narcissists like JackWelch who are held up as strong mentors are usuallymore interested in instructing than in coaching.

Narcissists certainly don’t credit mentoring or educa-tional programs for their own development as leaders. A


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few narcissistic leaders such as Bill Gates may find afriend or consultant—for instance, Warren Buffet, asuperproductive obsessive—whom they can trust to betheir guide and confidant. But most narcissists prefer“mentors” they can control. A 32-year-old marketing vicepresident, a narcissist with CEO potential, told me thatshe had rejected her boss as a mentor. As she put it,“First of all, I want to keep the relationship at a distance.I don’t want to be influenced by emotions. Second, thereare things I don’t want him to know. I’d rather hire anoutside consultant to be my coach.” Although narcissis-tic leaders appear to be at ease with others, they findintimacy—which is a prerequisite for mentoring—to bedifficult. Younger narcissists will establish peer relationswith authority rather than seek a parentlike mentoringrelationship. They want results and are willing to takechances arguing with authority.

Narcissistic leaders are relentless and ruthless in theirpursuit of victory. Games are not games but tests of theirsurvival skills. Of course, all successful managers want towin, but narcissists are not restrained by conscience.Organizations led by narcissists are generally character-ized by intense internal competition. Their passion towin is marked by both the promise of glory and the prim-itive danger of extinction. It is a potent brew that ener-gizes companies, creating a sense of urgency, but it canalso be dangerous. These leaders see everything as athreat. As Andy Grove puts it, brilliantly articulating thenarcissist’s fear, distrust, and aggression, “Only the para-noid survive.” The concern, of course, is that the narcis-

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sist finds enemies that aren’t there—even among hiscolleagues.

Avoiding the Traps

There is very little business literature that tells narcissis-tic leaders how to avoid the pitfalls. There are two rea-sons for this. First, relatively few narcissistic leaders areinterested in looking inward. And second, psychoana-lysts don’t usually get close enough to them, especially inthe workplace, to write about them. (The noted psycho-analyst Harry Levinson is an exception.) As a result,advice on leadership focuses on obsessives, whichexplains why so much of it is about creating teamworkand being more receptive to subordinates. But as we’vealready seen, this literature is of little interest to narcis-sists, nor is it likely to help subordinates understandtheir narcissistic leaders. The absence of managerial lit-erature on narcissistic leaders doesn’t mean that it isimpossible to devise strategies for dealing with narcis-sism. In the course of a long career counseling CEOs, Ihave identified three basic ways in which productive nar-cissists can avoid the traps of their own personality.

Many narcissists can develop a close relationship withone person, a sidekick who acts as an anchor, keepingthe narcissistic partner grounded. However, given thatnarcissistic leaders trust only their own insights andview of reality, the sidekick has to understand the nar-cissistic leader and what he is trying to achieve. Thenarcissist must feel that this person, or in some cases


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persons, is practically an extension of himself. The side-kick must also be sensitive enough to manage therelationship. Don Quixote is a classic example of a nar-cissist who was out of touch with reality but who wasconstantly saved from disaster by his squire SanchoPanza. Not surprisingly, many narcissistic leaders relyheavily on their spouses, the people they are closest to.But dependence on spouses can be risky, because theymay further isolate the narcissistic leader from his com-pany by supporting his grandiosity and feeding hisparanoia. I once knew a CEO in this kind of relation-ship with his spouse. He took to accusing loyal subordi-nates of plotting against him just because theyventured a few criticisms of his ideas.

It is much better for a narcissistic leader to choose acolleague as his sidekick. Good sidekicks are able topoint out the operational requirements of the narcissis-tic leader’s vision and keep him rooted in reality. Thebest sidekicks are usually productive obsessives. Gyllen-hammar, for instance, was most effective at Volvo whenhe had an obsessive COO, Håkan Frisinger, to focus onimproving quality and cost, as well as an obsessive HRdirector, Berth Jönsson, to implement his vision. Simi-larly, Bill Gates can think about the future from thestratosphere because Steve Ballmer, a tough obsessivepresident, keeps the show on the road. At Oracle, CEOLarry Ellison can afford to miss key meetings and spendtime on his boat contemplating a future without PCsbecause he has a productive obsessive COO in Ray Laneto run the company for him. But the job of sidekickentails more than just executing the leader’s ideas. Thesidekick also has to get his leader to accept new ideas. Todo this, he must be able to show the leader how the newideas fit with his views and serve his interests. (For more

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on dealing with narcissistic bosses, see “Working for aNarcissist” at the end of this article.)

The narcissistic CEO wants all his subordinates to thinkthe way he does about the business. Productive narcis-sists—people who often have a dash of the obsessive per-sonality—are good at converting people to their point ofview. One of the most successful at this is GE’s JackWelch. Welch uses toughness to build a corporate cul-ture and to implement a daring business strategy,including the buying and selling of scores of companies.Unlike other narcissistic leaders such as Gates, Grove,and Ellison, who have transformed industries with newproducts, Welch was able to transform his industry byfocusing on execution and pushing companies to thelimits of quality and efficiency, bumping up revenues andwringing out costs. In order to do so, Welch hammersout a huge corporate culture in his own image—a culturethat provides impressive rewards for senior managersand shareholders.

Welch’s approach to culture building is widely mis-understood. Many observers, notably Noel Tichy in TheLeadership Engine, argue that Welch forms his com-pany’s leadership culture through teaching. But Welch’s“teaching” involves a personal ideology that he indoctri-nates into GE managers through speeches, memos, andconfrontations. Rather than create a dialogue, Welchmakes pronouncements (either be the number one ortwo company in your market or get out), and he insti-tutes programs (such as Six Sigma quality) that becomethe GE party line. Welch’s strategy has been extremelyeffective. GE managers must either internalize his


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vision, or they must leave. Clearly, this is incentivelearning with a vengeance. I would even go so far as tocall Welch’s teaching brainwashing. But Welch doeshave the rare insight and know-how to achieve what allnarcissistic business leaders are trying to do—namely,get the organization to identify with them, to think theway they do, and to become the living embodiment oftheir companies.

Narcissists are often more interested in controlling oth-ers than in knowing and disciplining themselves. That’swhy, with very few exceptions, even productive narcis-sists do not want to explore their personalities with thehelp of insight therapies such as psychoanalysis. Yetsince Heinz Kohut, there has been a radical shift in psy-choanalytic thinking about what can be done to helpnarcissists work through their rage, alienation, andgrandiosity. Indeed, if they can be persuaded to undergotherapy, narcissistic leaders can use tools such as psy-choanalysis to overcome vital character flaws.

Consider the case of one exceptional narcissistic CEOwho asked me to help him understand why he so oftenlost his temper with subordinates. He lived far from myhome city, and so the therapy was sporadic and veryunorthodox. Yet he kept a journal of his dreams, whichwe interpreted together either by phone or when we met.Our analysis uncovered painful feelings of being unap-preciated that went back to his inability to impress acold father. He came to realize that he demanded anunreasonable amount of praise and that when he feltunappreciated by his subordinates, he became furious.Once he understood that, he was able to recognize his

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narcissism and even laugh about it. In the middle of ourwork, he even announced to his top team that I was psy-choanalyzing him and asked them what they thought ofthat. After a pregnant pause, one executive vice presi-dent piped up, “Whatever you’re doing, you should keepdoing it, because you don’t get so angry anymore.”Instead of being trapped by narcissistic rage, this CEOwas learning how to express his concerns constructively.

Leaders who can work on themselves in that way tendto be the most productive narcissists. In addition tobeing self-reflective, they are also likely to be open, lik-able, and good-humored. Productive narcissists haveperspective; they are able to detach themselves and laughat their irrational needs. Although serious about achiev-ing their goals, they are also playful. As leaders, they areaware of being performers. A sense of humor helps themmaintain enough perspective and humility to keep onlearning.

The Best and Worst of Times

As I have pointed out, narcissists thrive in chaotic times.In more tranquil times and places, however, even themost brilliant narcissist will seem out of place. In hisshort story The Curfew Tolls, Stephen Vincent Benétspeculates on what would have happened to Napoléon ifhe had been born some 30 years earlier. Retired in pre-revolutionary France, Napoléon is depicted as a lonelyartillery major boasting to a vacationing British generalabout how he could have beaten the English in India.The point, of course, is that a visionary born in the wrongtime can seem like a pompous buffoon.

Historically, narcissists in large corporations havebeen confined to sales positions, where they use their


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persuasiveness and imagination to best effect. In settledtimes, the problematic side of the narcissistic personalityusually conspires to keep narcissists in their place, and

they can typically rise totop management positionsonly by starting their owncompanies or by leaving tolead upstarts. Consider JoeNacchio, formerly incharge of both the business

and consumer divisions of AT&T. Nacchio was a super-salesman and a popular leader in the mid-1990s. But hisdesire to create a new network for business customerswas thwarted by colleagues who found him abrasive, self-promoting, and ruthlessly ambitious.

Two years ago, Nacchio left AT&T to become CEO ofQwest, a company that is creating a long-distance fiber-optic cable network. Nacchio had the credibility—andcharisma—to sell Qwest’s initial public offering to finan-cial markets and gain a high valuation. Within a shortspace of time, he turned Qwest into an attractive targetfor the RBOCs, which were looking to move into long-distance telephony and Internet services. Such a salewould have given Qwest’s owners a handsome profit ontheir investment. But Nacchio wanted more. He wantedto expand—to compete with AT&T—and for that heneeded local service. Rather than sell Qwest, he chose tomake a bid himself for local telephone operator U.S.West, using Qwest’s highly valued stock to finance thedeal. The market voted on this display of expansivenesswith its feet—Qwest’s stock price fell 40% between lastJune, when he made the deal, and the end of the thirdquarter of 1999. (The S&P index dropped 5.7% during thesame period.)

More and morecorporations are findingthere is no substitute fornarcissistic leaders in thisage of innovation.

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Like other narcissists, Nacchio likes risk—and some-times ignores the costs. But with the dramatic disconti-nuities going on in the world today, more and more largecorporations are getting into bed with narcissists. Theyare finding that there is no substitute for narcissistic lead-ers in an age of innovation. Companies need leaders whodo not try to anticipate the future so much as create it.But narcissistic leaders—even the most productive ofthem—can self-destruct and lead their organizations ter-ribly astray. For companies whose narcissistic leaders rec-ognize their limitations, these will be the best of times.For other companies, these could turn out to be the worst.

Fromm’s Fourth Personality Type

NOT LONG AFTER FREUD described his three personal-ity types in 1931, psychoanalyst Erich Fromm proposeda fourth personality type, which has become particularlyprevalent in today’s service economy. Fromm called thistype the “marketing personality,” and it is exemplified bythe lead character in Woody Allen’s movie Zelig, a manso governed by his need to be valued that he becomesexactly like the people he happens to be around.

Marketing personalities are more detached thanerotics and so are less likely to cement close ties. Theyare also less driven by conscience than obsessives.Instead, they are motivated by a radarlike anxiety thatpermeates everything they do. Because they are soeager to please and to alleviate this anxiety, marketingpersonalities excel at selling themselves to others.

Unproductive marketing types lack direction and theability to commit themselves to people or projects. But


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when productive, marketing types are good at facilitatingteams and keeping the focus on adding value asdefined by customers and colleagues. Like obsessives,marketing personalities are avid consumers of self-helpbooks. Like narcissists, they are not wedded to the past.But marketing types generally make poor leaders intimes of crisis. They lack the daring needed to innovateand are too responsive to current, rather than future, cus-tomer demands.

The Rise and Fall of a Narcissist

THE STORY OF JAN CARLZON, the former CEO of theScandinavian airline SAS, is an almost textbook exampleof how a narcissist’s weaknesses can cut short a brilliantcareer. In the 1980s, Carlzon’s vision of SAS as the busi-nessperson’s airline was widely acclaimed in the busi-ness press; management guru Tom Peters described himas a model leader. In 1989, when I first met Carlzonand his management team, he compared the ideal orga-nization to the Brazilian soccer team—in principle, therewould be no fixed roles, only innovative plays. I askedthe members of the management team if they agreedwith this vision of an empowered front line. One vicepresident, a former pilot, answered no. “I still believe thatthe best organization is the military,” he said. I thenasked Carlzon for his reaction to that remark. “Well,” hereplied, “that may be true, if your goal is to shoot yourcustomers.”

That rejoinder was both witty and dismissive; clearly,Carlzon was not engaging in a serious dialogue with hissubordinates. Nor was he listening to other advisers.

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Carlzon ignored the issue of high costs, even whenmany observers pointed out that SAS could not competewithout improving productivity. He threw money atexpensive acquisitions of hotels and made an unneces-sary investment in Continental Airlines just months beforeit declared bankruptcy.

Carlzon’s story perfectly corroborates the often-recorded tendency of narcissists to become overlyexpansive—and hence isolated—at the very pinnacle oftheir success. Seduced by the flattery he received in theinternational press, Carlzon’s self-image became soenormously inflated that his feet left the ground. Andgiven his vulnerability to grandiosity, he was propelledby a need to expand his organization rather thandevelop it. In due course, as Carlzon led the companydeeper and deeper into losses, he was fired. Now he isa venture capitalist helping budding companies. AndSAS has lost its glitter.

Working for a Narcissist

DEALING WITH A narcissistic boss isn’t easy. You haveto be prepared to look for another job if your bossbecomes too narcissistic to let you disagree with him. Butremember that the company is typically betting on hisvision of the future—not yours. Here are a few tips onhow to survive in the short term:

• Always empathize with your boss’s feelings, but don’texpect any empathy back. Look elsewhere for your ownself-esteem. Understand that behind his display of infalli-bility, there hides a deep vulnerability. Praise his achieve-


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ments and reinforce his best impulses, but don’t beshamelessly sycophantic. An intelligent narcissist can seethrough flatterers and prefers independent people whotruly appreciate him. Show that you will protect hisimage, inside and outside the company. But be careful ifhe asks for an honest evaluation. What he wants is infor-mation that will help him solve a problem about hisimage. He will resent any honesty that threatens hisinflated self-image and will likely retaliate.

• Give your boss ideas, but always let him take the creditfor them. Find out what he thinks before presenting yourviews. If you believe he is wrong, show how a differentapproach would be in his best interest. Take his para-noid views seriously, don’t brush them aside—they oftenreveal sharp intuitions. Disagree only when you candemonstrate how he will benefit from a different point ofview.

• Hone your time-management skills. Narcissistic leadersoften give subordinates many more orders than they canpossibly execute. Ignore the requests he makes that don’tmake sense. Forget about them. He will. But be careful:carve out free time for yourself only when you knowthere’s a lull in the boss’s schedule. Narcissistic leadersfeel free to call you at any hour of the day or night.Make yourself available, or be prepared to get out.

Originally published in January–February 2000Reprint R00105

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Leadership That Gets Results

Executive Summary

A LEADER’S SINGULAR JOB is to get results. But evenwith all the leadership training programs and “expert”advice available, effective leadership still eludes manypeople and organizations. One reason, says DanielGoleman, is that such experts offer advice based oninference, experience, and instinct, not on quantitativedata.

Now, drawing on research of more then 3,000 exec-utives, Goleman explores which precise leadershipbehaviors yield positive results. He outlines six distinctleadership styles, each one springing from different com-ponents of emotional intelligence. Each style has a dis-tinct effect on the working atmosphere of a company,division, or team, and in turn, on its financial perfor-mance. The styles, by name and brief description alone,will resonate with anyone who leads, is led, or, as is the

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case with most of us, does both. Coercive leadersdemand immediate compliance Authoritative leadersmobilize people toward a vision. Affiliative leaders cre-ate emotional bonds and harmony. Democratic leadersbuild consensus through participation. Pacesetting lead-ers expect excellence and self-direction. And coachingleaders develop people for the future.

The research indicates that leaders who get the bestresults don’t rely on just one leadership style; they usemost of the styles in any given week. Goleman detailsthe types of business situations each style is best suitedfor, and he explains how leaders who lack one or moreof these styles can expand their repertoires. He maintainsthat with practice leaders can switch among leadershipstyles to produce powerful results, thus turning the art ofleadership into a science.

A of businesspeople the question“What do effective leaders do?” and you’ll hear a sweepof answers. Leaders set strategy; they motivate; they cre-ate a mission; they build a culture. Then ask “Whatshould leaders do?” If the group is seasoned, you’ll likelyhear one response: the leader’s singular job is to getresults.

But how? The mystery of what leaders can and oughtto do in order to spark the best performance from theirpeople is age-old. In recent years, that mystery hasspawned an entire cottage industry: literally thousandsof “leadership experts” have made careers of testing andcoaching executives, all in pursuit of creating business-people who can turn bold objectives—be they strategic,financial, organizational, or all three—into reality.

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Still, effective leadership eludes many people andorganizations. One reason is that until recently, virtuallyno quantitative research has demonstrated which pre-cise leadership behaviors yield positive results. Leader-ship experts proffer advice based on inference, experi-ence, and instinct. Sometimes that advice is right ontarget; sometimes it’s not.

But new research by the consulting firm Hay/McBer,which draws on a random sample of 3,871 executivesselected from a database of more than 20,000 executivesworldwide, takes much of the mystery out of effectiveleadership. The research found six distinct leadershipstyles, each springing from different components of emo-tional intelligence. The styles, taken individually, appearto have a direct and unique impact on the working atmo-sphere of a company, division, or team, and in turn, onits financial performance. And perhaps most important,the research indicates that leaders with the best resultsdo not rely on only one leadership style; they use most ofthem in a given week—seamlessly and in different mea-sure—depending on the business situation. Imagine thestyles, then, as the array of clubs in a golf pro’s bag. Overthe course of a game, the pro picks and chooses clubsbased on the demands of the shot. Sometimes he has toponder his selection, but usually it is automatic. The prosenses the challenge ahead, swiftly pulls out the righttool, and elegantly puts it to work. That’s how high-impact leaders operate, too.

What are the six styles of leadership? None will shockworkplace veterans. Indeed, each style, by name andbrief description alone, will likely resonate with anyonewho leads, is led, or as is the case with most of us, doesboth. Coercive leaders demand immediate compliance.Authoritative leaders mobilize people toward a vision.


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Affiliative leaders create emotional bonds and harmony.Democratic leaders build consensus through participa-tion. Pacesetting leaders expect excellence and self-direc-tion. And coaching leaders develop people for the future.

Close your eyes and you can surely imagine a col-league who uses any one of these styles. You most likelyuse at least one yourself. What is new in this research,then, is its implications for action. First, it offers a fine-grained understanding of how different leadership stylesaffect performance and results. Second, it offers clearguidance on when a manager should switch betweenthem. It also strongly suggests that switching flexibly iswell advised. New, too, is the research’s finding that eachleadership style springs from different components ofemotional intelligence.

Measuring Leadership’s Impact

It has been more than a decade since research firstlinked aspects of emotional intelligence to businessresults. The late David McClelland, a noted Harvard Uni-versity psychologist, found that leaders with strengths ina critical mass of six or more emotional intelligencecompetencies were far more effective than peers wholacked such strengths. For instance, when he analyzedthe performance of division heads at a global food andbeverage company, he found that among leaders withthis critical mass of competence, 87% placed in the topthird for annual salary bonuses based on their businessperformance. More telling, their divisions on averageoutperformed yearly revenue targets by 15% to 20%.Those executives who lacked emotional intelligence wererarely rated as outstanding in their annual performancereviews, and their divisions underperformed by an aver-age of almost 20%.

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Our research set out to gain a more molecular view ofthe links among leadership and emotional intelligence,and climate and performance. A team of McClelland’scolleagues headed by Mary Fontaine and Ruth Jacobsfrom Hay/McBer studied data about or observed thou-sands of executives, noting specific behaviors and theirimpact on climate.1 How did each individual motivatedirect reports? Manage change initiatives? Handlecrises? It was in a later phase of the research that weidentified which emotional intelligence capabilities drivethe six leadership styles. How does he rate in terms ofself-control and social skill? Does a leader show high orlow levels of empathy?

The team tested each executive’s immediate sphere ofinfluence for its climate. “Climate” is not an amorphousterm. First defined by psychologists George Litwin andRichard Stringer and later refined by McClelland and hiscolleagues, it refers to six key factors that influence anorganization’s working environment: its flexibility—thatis, how free employees feel to innovate unencumbered byred tape; their sense of responsibility to the organization;the level of standards that people set; the sense of accu-racy about performance feedback and aptness of rewards;the clarity people have about mission and values; andfinally, the level of commitment to a common purpose.

We found that all six leadership styles have a measur-able effect on each aspect of climate. (For details, see theexhibit “Getting Molecular: The Impact of LeadershipStyles on Drivers of Climate.”) Further, when we lookedat the impact of climate on financial results—such asreturn on sales, revenue growth, efficiency, and prof-itability—we found a direct correlation between the two.Leaders who used styles that positively affected the cli-mate had decidedly better financial results than thosewho did not. That is not to say that organizational


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Getting Molecular:The Impact of Leadership Styles on Drivers of Climate

Our research investigated how each leadership style affected the six drivers of climate, or working atmosphere. The figuresbelow show the correlation between each leadership style and each aspect of climate. So, for instance, if we look at the climatedriver of flexibility, we see that the coercive style has a -.28 correlation while the democratic style has a .28 correlation, equallystrong in the opposite direction. Focusing on the authoritative leadership style, we find that it has a .54 correlation withrewards—strongly positive—and a .21 correlation with responsibility—positive, but not as strong. In other words, the style’scorrelation with rewards was more than twice that with responsibility.

According to the data, the authoritative leadership style has the most positive effect on climate, but three others—affiliative,democratic, and coaching—follow close behind. That said, the research indicates that no style should be relied on exclusively,and all have at least short-term uses.

Flexibility

Responsibility

Standards

Rewards

Clarity

Commitment

Overall impact on climate

Coercive Authoritative Affiliative Democratic Pacesetting Coaching

-.28 .32 .27 .28 -.07 .17

-.37 .21 .16 .23 .04 .08

.02 .38 .31 .22 -.27 .39

-.18 .54 .48 .42 -.29 .43

-.11 .44 .37 .35 -.28 .38

-.13 .35 .34 .26 -.20 .27

-.26 .54 .46 .43 -.25 .42

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climate is the only driver of performance. Economic con-ditions and competitive dynamics matter enormously.But our analysis strongly suggests that climate accountsfor nearly a third of results. And that’s simply too muchof an impact to ignore.

The Styles in Detail

Executives use six leadership styles, but only four of thesix consistently have a positive effect on climate andresults. Let’s look then at each style of leadership indetail. (For a summary of the material that follows, seethe chart “The Six Leadership Styles at a Glance.”)

The computer company was in crisis mode—its salesand profits were falling, its stock was losing value precip-itously, and its shareholders were in an uproar. Theboard brought in a new CEO with a reputation as aturnaround artist. He set to work chopping jobs, sellingoff divisions, and making the tough decisions that shouldhave been executed years before. The company wassaved, at least in the short-term.

From the start, though, the CEO created a reign of ter-ror, bullying and demeaning his executives, roaring hisdispleasure at the slightest misstep. The company’s topechelons were decimated not just by his erratic firingsbut also by defections. The CEO’s direct reports, fright-ened by his tendency to blame the bearer of bad news,stopped bringing him any news at all. Morale was at anall-time low—a fact reflected in another downturn in thebusiness after the short-term recovery. The CEO waseventually fired by the board of directors.


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The Six Leadership Styles at a Glance

Our research found that leaders use six styles, each springing from different components of emotional intelligence. Here is a summary of the styles, their origin, when they work best, and their impact on an organization’s climate and thus itsperformance.

The leader’smodusoperandi

The style ina phrase

Underlyingemotionalintelligencecompetencies

When the styleworks best

Overall impacton climate

Coercive

Demands immedi-ate compliance

“Do what I tellyou.”

Drive to achieve,initiative, self-control

In a crisis, to kickstart a turnaround,or with problememployees

Negative

Authoritative

Mobilizes peopletoward a vision

“Come with me.”

Self-confidence,empathy, changecatalyst

When changesrequire a newvision, or when aclear direction isneeded

Most strongly positive

Affiliative

Creates harmonyand builds emo-tional bonds

“People comefirst.”

Empathy, buildingrelationships, com-munication

To heal rifts in ateam or to moti-vate people duringstressful circum-stances

Positive

Democratic

Forges consensusthrough participa-tion

“What do youthink?”

Collaboration,team leadership,communication

To build buy-in or consensus, or to get input from valuableemployees

Positive

Pacesetting

Sets high stan-dards for perfor-mance

“Do as I do, now.”

Conscientiousness,drive to achieve,initiative

To get quickresults from ahighly motivatedand competentteam

Negative

Coaching

Develops peoplefor the future

“Try this.”

Developing others,empathy, self-awareness

To help anemployee improveperformance ordevelop long-termstrengths

Positive

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It’s easy to understand why of all the leadership styles,the coercive one is the least effective in most situations.Consider what the style does to an organization’s cli-mate. Flexibility is the hardest hit. The leader’s extremetop-down decision making kills new ideas on the vine.People feel so disrespected that they think, “I won’t evenbring my ideas up—they’ll only be shot down.” Likewise,people’s sense of responsibility evaporates: unable to acton their own initiative, they lose their sense of ownershipand feel little accountability for their performance. Somebecome so resentful they adopt the attitude, “I’m notgoing to help this bastard.”

Coercive leadership also has a damaging effect on therewards system. Most high-performing workers aremotivated by more than money—they seek the satisfac-tion of work well done. The coercive style erodes suchpride. And finally, the style undermines one of theleader’s prime tools—motivating people by showingthem how their job fits into a grand, shared mission.Such a loss, measured in terms of diminished clarity andcommitment, leaves people alienated from their ownjobs, wondering, “How does any of this matter?”

Given the impact of the coercive style, you mightassume it should never be applied. Our research, how-ever, uncovered a few occasions when it worked master-fully. Take the case of a division president who wasbrought in to change the direction of a food companythat was losing money. His first act was to have the exec-utive conference room demolished. To him, the room—with its long marble table that looked like “the deck ofthe Starship Enterprise”—symbolized the tradition-bound formality that was paralyzing the company. Thedestruction of the room, and the subsequent move to asmaller, more informal setting, sent a message no one


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could miss, and the division’s culture changed quickly inits wake.

That said, the coercive style should be used only withextreme caution and in the few situations when it isabsolutely imperative, such as during a turnaround orwhen a hostile takeover is looming. In those cases, thecoercive style can break failed business habits and shockpeople into new ways of working. It is always appropriateduring a genuine emergency, like in the aftermath of anearthquake or a fire. And it can work with problememployees with whom all else has failed. But if a leaderrelies solely on this style or continues to use it once theemergency passes, the long-term impact of his insensi-tivity to the morale and feelings of those he leads will beruinous.

Tom was the vice president of marketing at a flounder-ing national restaurant chain that specialized in pizza.Needless to say, the company’s poor performance trou-bled the senior managers, but they were at a loss forwhat to do. Every Monday, they met to review recentsales, struggling to come up with fixes. To Tom, theapproach didn’t make sense. “We were always trying tofigure out why our sales were down last week. We hadthe whole company looking backward instead of figuringout what we had to do tomorrow.”

Tom saw an opportunity to change people’s way ofthinking at an off-site strategy meeting. There, the con-versation began with stale truisms: the company had todrive up shareholder wealth and increase return onassets. Tom believed those concepts didn’t have thepower to inspire a restaurant manager to be innovativeor to do better than a good-enough job.

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So Tom made a bold move. In the middle of a meet-ing, he made an impassioned plea for his colleagues tothink from the customer’s perspective. Customers wantconvenience, he said. The company was not in therestaurant business, it was in the business of distributinghigh-quality, convenient-to-get pizza. That notion—andnothing else—should drive everything the company did.

With his vibrant enthusiasm and clear vision—thehallmarks of the authoritative style—Tom filled a leader-ship vacuum at the company. Indeed, his conceptbecame the core of the new mission statement. But thisconceptual breakthrough was just the beginning. Tommade sure that the mission statement was built into thecompany’s strategic planning process as the designateddriver of growth. And he ensured that the vision wasarticulated so that local restaurant managers understoodthey were the key to the company’s success and were freeto find new ways to distribute pizza.

Changes came quickly. Within weeks, many localmanagers started guaranteeing fast, new delivery times.Even better, they started to act like entrepreneurs, find-ing ingenious locations to open new branches: kiosks onbusy street corners and in bus and train stations, evenfrom carts in airports and hotel lobbies.

Tom’s success was no fluke. Our research indicatesthat of the six leadership styles, the authoritative one is

most effective, driving upevery aspect of climate. Takeclarity. The authoritativeleader is a visionary; he moti-vates people by making clearto them how their work fitsinto a larger vision for the

organization. People who work for such leaders under-stand that what they do matters and why. Authoritative

An authoritative leaderstates the end butgives people plenty of leeway to devise theirown means.


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leadership also maximizes commitment to the organiza-tion’s goals and strategy. By framing the individual taskswithin a grand vision, the authoritative leader definesstandards that revolve around that vision. When he givesperformance feedback—whether positive or negative—the singular criterion is whether or not that performancefurthers the vision. The standards for success are clear toall, as are the rewards. Finally, consider the style’s impacton flexibility. An authoritative leader states the end butgenerally gives people plenty of leeway to devise theirown means. Authoritative leaders give people the free-dom to innovate, experiment, and take calculated risks.

Because of its positive impact, the authoritative styleworks well in almost any business situation. But it is par-ticularly effective when a business is adrift. An authorita-tive leader charts a new course and sells his people on afresh long-term vision.

The authoritative style, powerful though it may be,will not work in every situation. The approach fails, forinstance, when a leader is working with a team of expertsor peers who are more experienced than he is; they maysee the leader as pompous or out-of-touch. Another limi-tation: if a manager trying to be authoritative becomesoverbearing, he can undermine the egalitarian spirit ofan effective team. Yet even with such caveats, leaderswould be wise to grab for the authoritative “club” moreoften than not. It may not guarantee a hole in one, but itcertainly helps with the long drive.

If the coercive leader demands, “Do what I say,” and theauthoritative urges, “Come with me,” the affiliativeleader says, “People come first.” This leadership style

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revolves around people—its proponents value individu-als and their emotions more than tasks and goals. Theaffiliative leader strives to keep employees happy and tocreate harmony among them. He manages by buildingstrong emotional bonds and then reaping the benefits ofsuch an approach, namely fierce loyalty. The style alsohas a markedly positive effect on communication. Peoplewho like one another a lot talk a lot. They share ideas;they share inspiration. And the style drives up flexibility;friends trust one another, allowing habitual innovationand risk taking. Flexibility also rises because the affilia-tive leader, like a parent who adjusts household rules fora maturing adolescent, doesn’t impose unnecessary stric-tures on how employees get their work done. They givepeople the freedom to do their job in the way they thinkis most effective.

As for a sense of recognition and reward for work welldone, the affiliative leader offers ample positive feedback.Such feedback has special potency in the workplacebecause it is all too rare: outside of an annual review,most people usually get no feedback on their day-to-dayefforts—or only negative feedback. That makes the affil-iative leader’s positive words all the more motivating.Finally, affiliative leaders are masters at building a senseof belonging. They are, for instance, likely to take theirdirect reports out for a meal or a drink, one-on-one, tosee how they’re doing. They will bring in a cake to cele-brate a group accomplishment. They are natural rela-tionship builders.

Joe Torre, the heart and soul of the New York Yan-kees, is a classic affiliative leader. During the 1999 WorldSeries, Torre tended ably to the psyches of his players as they endured the emotional pressure cooker of apennant race. All season long, he made a special point to


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praise Scott Brosius, whose father had died during theseason, for staying committed even as he mourned. Atthe celebration party after the team’s final game, Torrespecifically sought out right fielder Paul O’Neill.Although he had received the news of his father’s deaththat morning, O’Neill chose to play in the decisivegame—and he burst into tears the moment it ended.Torre made a point of acknowledging O’Neill’s personalstruggle, calling him a “warrior.” Torre also used thespotlight of the victory celebration to praise two playerswhose return the following year was threatened by con-tract disputes. In doing so, he sent a clear message to theteam and to the club’s owner that he valued the playersimmensely—too much to lose them.

Along with ministering to the emotions of his people,an affiliative leader may also tend to his own emotionsopenly. The year Torre’s brother was near death awaitinga heart transplant, he shared his worries with his players.He also spoke candidly with the team about his treat-ment for prostate cancer.

The affiliative style’s generally positive impact makesit a good all-weather approach, but leaders should employit particularly when trying to build team harmony, in-crease morale, improve communication, or repair brokentrust. For instance, one executive in our study was hiredto replace a ruthless team leader. The former leader hadtaken credit for his employees’ work and had attemptedto pit them against one another. His efforts ultimatelyfailed, but the team he left behind was suspicious andweary. The new executive managed to mend the situationby unstintingly showing emotional honesty and rebuild-ing ties. Several months in, her leadership had created arenewed sense of commitment and energy.

Despite its benefits, the affiliative style should not beused alone. Its exclusive focus on praise can allow poor

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performance to go uncorrected; employees may perceivethat mediocrity is tolerated. And because affiliative lead-ers rarely offer constructive advice on how to improve,employees must figure out how to do so on their own.When people need clear directives to navigate throughcomplex challenges, the affiliative style leaves them rud-derless. Indeed, if overly relied on, this style can actuallysteer a group to failure. Perhaps that is why many affilia-tive leaders, including Torre, use this style in close con-junction with the authoritative style. Authoritative lead-ers state a vision, set standards, and let people know howtheir work is furthering the group’s goals. Alternate thatwith the caring, nurturing approach of the affiliativeleader, and you have a potent combination.

Sister Mary ran a Catholic school system in a largemetropolitan area. One of the schools—the only privateschool in an impoverished neighborhood—had been los-ing money for years, and the archdiocese could no longerafford to keep it open. When Sister Mary eventually gotthe order to shut it down, she didn’t just lock the doors.She called a meeting of all the teachers and staff at theschool and explained to them the details of the financialcrisis—the first time anyone working at the school hadbeen included in the business side of the institution. Sheasked for their ideas on ways to keep the school openand on how to handle the closing, should it come to that.Sister Mary spent much of her time at the meeting justlistening.

She did the same at later meetings for school parentsand for the community and during a successive series ofmeetings for the school’s teachers and staff. After twomonths of meetings, the consensus was clear: the school


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would have to close. A plan was made to transfer stu-dents to other schools in the Catholic system.

The final outcome was no different than if Sister Maryhad gone ahead and closed the school the day she wastold to. But by allowing the school’s constituents toreach that decision collectively, Sister Mary receivednone of the backlash that would have accompanied sucha move. People mourned the loss of the school, but theyunderstood its inevitability. Virtually no one objected.

Compare that with the experiences of a priest in ourresearch who headed another Catholic school. He, too,was told to shut it down. And he did—by fiat. The resultwas disastrous: parents filed lawsuits, teachers and par-ents picketed, and local newspapers ran editorialsattacking his decision. It took a year to resolve the dis-putes before he could finally go ahead and close theschool.

Sister Mary exemplifies the democratic style inaction—and its benefits. By spending time getting peo-ple’s ideas and buy-in, a leader builds trust, respect, andcommitment. By letting workers themselves have a sayin decisions that affect their goals and how they do theirwork, the democratic leader drives up flexibility andresponsibility. And by listening to employees’ concerns,the democratic leader learns what to do to keep moralehigh. Finally, because they have a say in setting theirgoals and the standards for evaluating success, peopleoperating in a democratic system tend to be very realisticabout what can and cannot be accomplished.

However, the democratic style has its drawbacks,which is why its impact on climate is not as high as someof the other styles. One of its more exasperating conse-quences can be endless meetings where ideas are mulledover, consensus remains elusive, and the only visible

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result is scheduling more meetings. Some democraticleaders use the style to put off making crucial decisions,hoping that enough thrashing things out will eventuallyyield a blinding insight. In reality, their people end upfeeling confused and leaderless. Such an approach caneven escalate conflicts.

When does the style work best? This approach is idealwhen a leader is himself uncertain about the best direc-tion to take and needs ideas and guidance from ableemployees. And even if a leader has a strong vision, thedemocratic style works well to generate fresh ideas forexecuting that vision.

The democratic style, of course, makes much lesssense when employees are not competent or informedenough to offer sound advice. And it almost goes withoutsaying that building consensus is wrongheaded in timesof crisis. Take the case of a CEO whose computer com-pany was severely threatened by changes in the market.He always sought consensus about what to do. As com-petitors stole customers and customers’ needs changed,he kept appointing committees to consider the situation.When the market made a sudden shift because of a newtechnology, the CEO froze in his tracks. The boardreplaced him before he could appoint yet another taskforce to consider the situation. The new CEO, while occa-sionally democratic and affiliative, relied heavily on theauthoritative style, especially in his first months.

Like the coercive style, the pacesetting style has its placein the leader’s repertory, but it should be used sparingly.That’s not what we expected to find. After all, the hall-marks of the pacesetting style sound admirable. The


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leader sets extremely high performance standards andexemplifies them himself. He is obsessive about doingthings better and faster, and he asks the same of every-one around him. He quickly pinpoints poor performersand demands more from them. If they don’t rise to theoccasion, he replaces them with people who can. Youwould think such an approach would improve results,but it doesn’t.

In fact, the pacesetting style destroys climate. Manyemployees feel overwhelmed by the pacesetter’sdemands for excellence, and their morale drops. Guide-lines for working may be clear in the leader’s head, butshe does not state them clearly; she expects people toknow what to do and even thinks, “If I have to tell you,you’re the wrong person for the job.” Work becomes nota matter of doing one’s best along a clear course so muchas second-guessing what the leader wants. At the sametime, people often feel that the pacesetter doesn’t trustthem to work in their own way or to take initiative. Flexi-bility and responsibility evaporate; work becomes so taskfocused and routinized it’s boring.

As for rewards, the pacesetter either gives no feed-back on how people are doing or jumps in to take overwhen he thinks they’re lagging. And if the leader shouldleave, people feel directionless—they’re so used to “theexpert” setting the rules. Finally, commitment dwindlesunder the regime of a pacesetting leader because peoplehave no sense of how their personal efforts fit into thebig picture.

For an example of the pacesetting style, take the caseof Sam, a biochemist in R&D at a large pharmaceuticalcompany. Sam’s superb technical expertise made him anearly star: he was the one everyone turned to when theyneeded help. Soon he was promoted to head of a team

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developing a new product. The other scientists on theteam were as competent and self-motivated as Sam; hismétier as team leader became offering himself as amodel of how to do first-class scientific work undertremendous deadline pressure, pitching in when needed.His team completed its task in record time.

But then came a new assignment: Sam was put incharge of R&D for his entire division. As his tasksexpanded and he had to articulate a vision, coordinateprojects, delegate responsibility, and help develop others,Sam began to slip. Not trusting that his subordinateswere as capable as he was, he became a micromanager,obsessed with details and taking over for others whentheir performance slackened. Instead of trusting them toimprove with guidance and development, Sam foundhimself working nights and weekends after stepping into take over for the head of a floundering research team.Finally, his own boss suggested, to his relief, that hereturn to his old job as head of a product developmentteam.

Although Sam faltered, the pacesetting style isn’t al-ways a disaster. The approach works well when all em-ployees are self-motivated, highly competent, and needlittle direction or coordination—for example, it can workfor leaders of highly skilled and self-motivated profession-als, like R&D groups or legal teams. And, given a talentedteam to lead, pacesetting does exactly that: gets workdone on time or even ahead of schedule. Yet like any lead-ership style, pacesetting should never be used by itself.

A product unit at a global computer company had seensales plummet from twice as much as its competitors to


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only half as much. So Lawrence, the president of themanufacturing division, decided to close the unit andreassign its people and products. Upon hearing the news,James, the head of the doomed unit, decided to go overhis boss’s head and plead his case to the CEO.

What did Lawrence do? Instead of blowing up atJames, he sat down with his rebellious direct report andtalked over not just the decision to close the division butalso James’s future. He explained to James how movingto another division would help him develop new skills. Itwould make him a better leader and teach him moreabout the company’s business.

Lawrence acted more like a counselor than a tradi-tional boss. He listened to James’s concerns and hopes,and he shared his own. He said he believed James hadgrown stale in his current job; it was, after all, the onlyplace he’d worked in the company. He predicted thatJames would blossom in a new role.

The conversation then took a practical turn. Jameshad not yet had his meeting with the CEO—the one hehad impetuously demanded when he heard of his divi-sion’s closing. Knowing this—and also knowing that theCEO unwaveringly supported the closing—Lawrencetook the time to coach James on how to present his casein that meeting. “You don’t get an audience with theCEO very often,” he noted, “let’s make sure you impresshim with your thoughtfulness.” He advised James not toplead his personal case but to focus on the business unit:“If he thinks you’re in there for your own glory, he’llthrow you out faster than you walked through the door.”And he urged him to put his ideas in writing; the CEOalways appreciated that.

Lawrence’s reason for coaching instead of scolding?“James is a good guy, very talented and promising,” the

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executive explained to us, “and I don’t want this to derailhis career. I want him to stay with the company, I wanthim to work out, I want him to learn, I want him to bene-fit and grow. Just because he screwed up doesn’t meanhe’s terrible.”

Lawrence’s actions illustrate the coaching style parexcellence. Coaching leaders help employees identifytheir unique strengths and weaknesses and tie them totheir personal and career aspirations. They encourageemployees to establish long-term development goals andhelp them conceptualize a plan for attaining them. Theymake agreements with their employees about their roleand responsibilities in enacting development plans, andthey give plentiful instruction and feedback. Coachingleaders excel at delegating; they give employees challeng-ing assignments, even if that means the tasks won’t beaccomplished quickly. In other words, these leaders arewilling to put up with short-term failure if it furtherslong-term learning.

Of the six styles, our research found that the coachingstyle is used least often. Many leaders told us they don’thave the time in this high-pressure economy for the slowand tedious work of teaching people and helping themgrow. But after a first session, it takes little or no extratime. Leaders who ignore this style are passing up a pow-erful tool: its impact on climate and performance aremarkedly positive.

Admittedly, there is a paradox in coaching’s positiveeffect on business performance because coachingfocuses primarily on personal development, not onimmediate work-related tasks. Even so, coachingimproves results. The reason: it requires constant dia-logue, and that dialogue has a way of pushing up everydriver of climate. Take flexibility. When an employee


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knows his boss watches him and cares about what hedoes, he feels free to experiment. After all, he’s sure to getquick and constructive feedback. Similarly, the ongoingdialogue of coaching guarantees that people know whatis expected of them and how their work fits into a largervision or strategy. That affects responsibility and clarity.As for commitment, coaching helps there, too, becausethe style’s implicit message is, “I believe in you, I’minvesting in you, and I expect your best efforts.” Employ-ees very often rise to that challenge with their heart,mind, and soul.

The coaching style works well in many business situa-tions, but it is perhaps most effective when people on the

receiving end are “up forit.” For instance, thecoaching style works par-ticularly well whenemployees are alreadyaware of their weaknessesand would like to improvetheir performance. Simi-larly, the style works well

when employees realize how cultivating new abilities canhelp them advance. In short, it works best with employ-ees who want to be coached.

By contrast, the coaching style makes little sensewhen employees, for whatever reason, are resistant tolearning or changing their ways. And it flops if the leaderlacks the expertise to help the employee along. The factis, many managers are unfamiliar with or simply inept atcoaching, particularly when it comes to giving ongoingperformance feedback that motivates rather than createsfear or apathy. Some companies have realized the posi-tive impact of the style and are trying to make it a core

Leaders who havemastered four or more—especially the authoritative,democratic, affiliative,and coaching styles—havethe best climate andbusiness performance.

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competence. At some companies, a significant portion of annual bonuses are tied to an executive’s developmentof his or her direct reports. But many organizations have yet to take full advantage of this leadership style.Although the coaching style may not scream “bottom-line results,” it delivers them.

Leaders Need Many Styles

Many studies, including this one, have shown that themore styles a leader exhibits, the better. Leaders who havemastered four or more—especially the authoritative,democratic, affiliative, and coaching styles—have the verybest climate and business performance. And the mosteffective leaders switch flexibly among the leadershipstyles as needed. Although that may sound daunting, wewitnessed it more often than you might guess, at bothlarge corporations and tiny start-ups, by seasoned veter-ans who could explain exactly how and why they lead andby entrepreneurs who claim to lead by gut alone.

Such leaders don’t mechanically match their style tofit a checklist of situations—they are far more fluid. Theyare exquisitely sensitive to the impact they are having onothers and seamlessly adjust their style to get the bestresults. These are leaders, for example, who can read inthe first minutes of conversation that a talented butunderperforming employee has been demoralized by anunsympathetic, do-it-the-way-I-tell-you manager andneeds to be inspired through a reminder of why her workmatters. Or that leader might choose to reenergize theemployee by asking her about her dreams and aspira-tions and finding ways to make her job more challenging.Or that initial conversation might signal that theemployee needs an ultimatum: improve or leave.


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For an example of fluid leadership in action, considerJoan, the general manager of a major division at a globalfood and beverage company. Joan was appointed to herjob while the division was in a deep crisis. It had notmade its profit targets for six years; in the most recentyear, it had missed by $50 million. Morale among the topmanagement team was miserable; mistrust and resent-ments were rampant. Joan’s directive from above wasclear: turn the division around.

Joan did so with a nimbleness in switching amongleadership styles that is rare. From the start, she realizedshe had a short window to demonstrate effective leader-ship and to establish rapport and trust. She also knewthat she urgently needed to be informed about what wasnot working, so her first task was to listen to key people.

Her first week on the job she had lunch and dinnermeetings with each member of the management team.Joan sought to get each person’s understanding of thecurrent situation. But her focus was not so much onlearning how each person diagnosed the problem as ongetting to know each manager as a person. Here Joanemployed the affiliative style: she explored their lives,dreams, and aspirations.

She also stepped into the coaching role, looking forways she could help the team members achieve whatthey wanted in their careers. For instance, one managerwho had been getting feedback that he was a poor teamplayer confided his worries to her. He thought he was agood team member, but he was plagued by persistentcomplaints. Recognizing that he was a talented executiveand a valuable asset to the company, Joan made anagreement with him to point out (in private) when hisactions undermined his goal of being seen as a teamplayer.

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She followed the one-on-one conversations with athree-day off-site meeting. Her goal here was team build-ing, so that everyone would own whatever solution forthe business problems emerged. Her initial stance at theoff-site meeting was that of a democratic leader. Sheencouraged everyone to express freely their frustrationsand complaints.

The next day, Joan had the group focus on solutions:each person made three specific proposals about whatneeded to be done. As Joan clustered the suggestions, anatural consensus emerged about priorities for the busi-ness, such as cutting costs. As the group came up withspecific action plans, Joan got the commitment and buy-in she sought.

With that vision in place, Joan shifted into the author-itative style, assigning accountability for each follow-upstep to specific executives and holding them responsiblefor their accomplishment. For example, the division hadbeen dropping prices on products without increasing itsvolume. One obvious solution was to raise prices, but theprevious VP of sales had dithered and had let the prob-lem fester. The new VP of sales now had responsibility toadjust the price points to fix the problem.

Over the following months, Joan’s main stance wasauthoritative. She continually articulated the group’snew vision in a way that reminded each member of howhis or her role was crucial to achieving these goals. And,especially during the first few weeks of the plan’s imple-mentation, Joan felt that the urgency of the business cri-sis justified an occasional shift into the coercive styleshould someone fail to meet his or her responsibility. Asshe put it, “I had to be brutal about this follow-up andmake sure this stuff happened. It was going to take disci-pline and focus.”


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The results? Every aspect of climate improved. Peoplewere innovating. They were talking about the division’svision and crowing about their commitment to new,clear goals. The ultimate proof of Joan’s fluid leadershipstyle is written in black ink: after only seven months, herdivision exceeded its yearly profit target by $5 million.

Expanding Your Repertory

Few leaders, of course, have all six styles in their reper-tory, and even fewer know when and how to use them. Infact, as we have brought the findings of our research intomany organizations, the most common responses havebeen, “But I have only two of those!” and, “I can’t use allthose styles. It wouldn’t be natural.”

Such feelings are understandable, and in some cases,the antidote is relatively simple. The leader can build ateam with members who employ styles she lacks. Takethe case of a VP for manufacturing. She successfully rana global factory system largely by using the affiliativestyle. She was on the road constantly, meeting with plantmanagers, attending to their pressing concerns, andletting them know how much she cared about them per-sonally. She left the division’s strategy—extreme effi-ciency—to a trusted lieutenant with a keen understand-ing of technology, and she delegated its performancestandards to a colleague who was adept at the authorita-tive approach. She also had a pacesetter on her team whoalways visited the plants with her.

An alternative approach, and one I would recommendmore, is for leaders to expand their own style repertories.To do so, leaders must first understand which emotionalintelligence competencies underlie the leadership stylesthey are lacking. They can then work assiduously toincrease their quotient of them.

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For instance, an affiliative leader has strengths inthree emotional intelligence competencies: in empathy,in building relationships, and in communication. Empa-thy—sensing how people are feeling in the moment—allows the affiliative leader to respond to employees in away that is highly congruent with that person’s emo-tions, thus building rapport. The affiliative leader alsodisplays a natural ease in forming new relationships, get-ting to know someone as a person, and cultivating abond. Finally, the outstanding affiliative leader has mas-tered the art of interpersonal communication, particu-larly in saying just the right thing or making the apt sym-bolic gesture at just the right moment.

So if you are primarily a pacesetting leader who wantsto be able to use the affiliative style more often, youwould need to improve your level of empathy and, per-haps, your skills at building relationships or communi-cating effectively. As another example, an authoritativeleader who wants to add the democratic style to hisrepertory might need to work on the capabilities of col-laboration and communication. Such advice aboutadding capabilities may seem simplistic—“Go changeyourself ”—but enhancing emotional intelligence isentirely possible with practice. (For more on how toimprove emotional intelligence, see “Growing Your Emo-tional Intelligence” at the end of this article.)

More Science, Less Art

Like parenthood, leadership will never be an exact sci-ence. But neither should it be a complete mystery tothose who practice it. In recent years, research hashelped parents understand the genetic, psychological,and behavioral components that affect their “job perfor-mance.” With our new research, leaders, too, can get a


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clearer picture of what it takes to lead effectively. Andperhaps as important, they can see how they can makethat happen.

The business environment is continually changing,and a leader must respond in kind. Hour to hour, day today, week to week, executives must play their leadershipstyles like a pro—using the right one at just the right timeand in the right measure. The payoff is in the results.

Notes

1. Daniel Goleman consults with Hay/McBer on leadershipdevelopment.

Emotional Intelligence: A Primer

EMOTIONAL INTELL IGENCE—the ability to manage our-selves and our relationships effectively—consists of fourfundamental capabilities: self-awareness, self-manage-ment, social awareness, and social skill. Each capability,in turn, is composed of specific sets of competencies.Below is a list of the capabilities and their correspondingtraits.

Self-Awareness

• Emotional self-awareness: the ability to read and under-stand your emotions as well as recognize their impact onwork performance, relationships, and the like.

• Accurate self-assessment: a realistic evaluation of yourstrengths and limitations.

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• Self-confidence: a strong and positive sense of self-worth.

Self-Management

• Self-control: the ability to keep disruptive emotions andimpulses under control.

• Trustworthiness: a consistent display of honesty andintegrity.

• Conscientiousness: the ability to manage yourself andyour responsibilities.

• Adaptability: skill at adjusting to changing situations andovercoming obstacles.

• Achievement orientation: the drive to meet an internalstandard of excellence.

• Initiative: a readiness to seize opportunities.

Social Awareness

• Empathy: skill at sensing other people’s emotions, under-standing their perspective, and taking an active interest intheir concerns.

• Organizational awareness: the ability to read the cur-rents of organizational life, build decision networks, andnavigate politics.

• Service orientation: the ability to recognize and meetcustomers’ needs.

Social Skill

• Visionary leadership: the ability to take charge andinspire with a compelling vision.

• Influence: the ability to wield a range of persuasive tactics.

• Developing others: the propensity to bolster the abilitiesof others through feedback and guidance.


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• Communication: skill at listening and at sending clear,convincing, and well-tuned messages.

• Change catalyst: proficiency in initiating new ideas andleading people in a new direction.

• Conflict management: the ability to de-escalate dis-agreements and orchestrate resolutions.

• Building bonds: proficiency at cultivating and maintain-ing a web of relationships.

• Teamwork and collaboration: competence at promot-ing cooperation and building teams.

Growing Your Emotional Intelligence

UNLIKE IQ, which is largely genetic—it changes littlefrom childhood—the skills of emotional intelligence canbe learned at any age. It’s not easy, however. Growingyour emotional intelligence takes practice and commit-ment. But the payoffs are well worth the investment.

Consider the case of a marketing director for a divi-sion of a global food company. Jack, as I’ll call him, wasa classic pacesetter: high-energy, always striving to findbetter ways to get things done, and too eager to step inand take over when, say, someone seemed about tomiss a deadline. Worse, Jack was prone to pounce onanyone who didn’t seem to meet his standards, flying offthe handle if a person merely deviated from completinga job in the order Jack thought best.

Jack’s leadership style had a predictably disastrousimpact on climate and business results. After two years ofstagnant performance, Jack’s boss suggested he seek

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out a coach. Jack wasn’t pleased but, realizing his ownjob was on the line, he complied.

The coach, an expert in teaching people how toincrease their emotional intelligence, began with a 360-degree evaluation of Jack. A diagnosis from multipleviewpoints is essential in improving emotional intelligencebecause those who need the most help usually haveblind spots. In fact, our research found that top-perform-ing leaders overestimate their strengths on, at most, oneemotional intelligence ability, whereas poor performersoverrate themselves on four or more. Jack was not thatfar off, but he did rate himself more glowingly than hisdirect reports, who gave him especially low grades onemotional self-control and empathy.

Initially, Jack had some trouble accepting the feed-back data. But when his coach showed him how thoseweaknesses were tied to his inability to display leader-ship styles dependent on those competencies—especiallythe authoritative, affiliative, and coaching styles—Jackrealized he had to improve if he wanted to advance inthe company. Making such a connection is essential. Thereason: improving emotional intelligence isn’t done in aweekend or during a seminar—it takes diligent practiceon the job, over several months. If people do not see thevalue of the change, they will not make that effort.

Once Jack zeroed in on areas for improvement andcommitted himself to making the effort, he and his coachworked up a plan to turn his day-to-day job into a learn-ing laboratory. For instance, Jack discovered he wasempathetic when things were calm, but in a crisis, hetuned out others. This tendency hampered his ability to lis-ten to what people were telling him in the very momentshe most needed to do so. Jack’s plan required him to


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focus on his behavior during tough situations. As soon ashe felt himself tensing up, his job was to immediately stepback, let the other person speak, and then ask clarifyingquestions. The point was to not act judgmental or hostileunder pressure.

The change didn’t come easily, but with practice Jacklearned to defuse his flare-ups by entering into a dia-logue instead of launching a harangue. Although hedidn’t always agree with them, at least he gave peoplea chance to make their case. At the same time, Jack alsopracticed giving his direct reports more positive feed-back and reminding them of how their work contributedto the group’s mission. And he restrained himself frommicromanaging them.

Jack met with his coach every week or two to reviewhis progress and get advice on specific problems. Forinstance, occasionally Jack would find himself fallingback on his old pacesetting tactics—cutting people off,jumping in to take over, and blowing up in a rage.Almost immediately, he would regret it. So he and hiscoach dissected those relapses to figure out what trig-gered the old ways and what to do the next time a simi-lar moment arose. Such “relapse prevention” measuresinoculate people against future lapses or just giving up.Over a six-month period, Jack made real improvement.His own records showed he had reduced the number offlare-ups from one or more a day at the beginning to justone or two a month. The climate had improved sharply,and the division’s numbers were starting to creepupward.

Why does improving an emotional intelligence com-petence take months rather than days? Because theemotional centers of the brain, not just the neocortex, areinvolved. The neocortex, the thinking brain that learns

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technical skills and purely cognitive abilities, gains knowl-edge very quickly, but the emotional brain does not. Tomaster a new behavior, the emotional centers need rep-etition and practice. Improving your emotional intelli-gence, then, is akin to changing your habits. Brain circuitsthat carry leadership habits have to unlearn the old onesand replace them with the new. The more often a behav-ioral sequence is repeated, the stronger the underlyingbrain circuits become. At some point, the new neuralpathways become the brain’s default option. When thathappened, Jack was able to go through the paces ofleadership effortlessly, using styles that worked for him—and the whole company.

Originally published in March–April 2000Reprint R00204


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Getting the Attention You Need . .

Executive Summary

EMPLOYEES HAVE AN ENORMOUS amount of businessinformation at their fingertips—more specifically, at theirdesktops. The floodgates are open; profitable possibili-ties abound. But having to handle all that information haspushed downsized staffs to the brink of an acute atten-tion deficit disorder. To achieve corporate goals, busi-ness leaders need their employees’ full attention—andthat attention is in short supply.

Authors Thomas Davenport and John Beck have stud-ied how companies manage the attention of theiremployees and their site visitors. In this article, they ana-lyze the components of attention management throughthree lenses—economic, psychobiological, and techno-logical—and offer guidelines for keeping employeesfocused on crucial corporate tasks. Their lessons aredrawn from the best practices employed by today’s

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stickiest Web sites and by traditional attention industriessuch as advertising, film, and television.

The authors say executives must manage attentionknowing that it’s a zero-sum game (there’s only so muchto go around). Managers should also consider capitaliz-ing on the basic survival and competitive instincts we allhave that help determine how much attention we pay tocertain things. For instance, the threat of corporatedemise—and the consequent loss of jobs and liveli-hoods—undoubtedly focuses worker’s attention on theneed to change. Likewise, internal competition amongbusiness units may give employees added incentive topay attention to a profit or sales goal.

Leaders today need to pay more attention to atten-tion because it’s widely misunderstood and widely mis-managed, the authors conclude.

B ’ anythingif their employees aren’t paying attention; to achievelong-term and short-term corporate goals, leaders needtheir people to focus in a sustained way on those goals.

And lately, a lot of people’sattention is wandering. It’seasy to see why. Bill Gates’sdream that we’d have allthe information we want atour fingertips has cometrue with a vengeance.

Intranets, software applications, and portals continuallywash tsunamis of information onto our desktops. Theaverage manager receives more than 100 voice mail ande-mail messages a day. It would be bad enough if all this

Leaders today needto pay more attention toattention because it iswidely misunderstood andwidely mismanaged.

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information were flung at a steady state audience, but inmany organizations, staffs are leaner than ever. Moreinformation, fewer people—it’s no wonder that so manycompanies are on the verge of an acute attention deficitdisorder.

Over the past several years, we’ve studied attentionmanagement, looking at how well—and how poorly—itis practiced in traditional organizations and on theWorld Wide Web. We’ve analyzed attention manage-ment using three lenses: the economic, the psychobiolog-ical, and the technological. One overarching lesson hasemerged from our research: leaders today need to paymore attention to attention because it is widely misun-derstood and widely mismanaged. People may be payingattention to all the information coming at them butrarely in the ways that leaders would want or expect.

In this article, we’ll explore the economic, psychobio-logical, and technological perspectives on attentionmanagement, and we’ll identify the operating principlesthey suggest. Interestingly, while attention managementhas been around for thousands of years—think Moses onMount Sinai or Winston Churchill in the darkest hoursof World War II—some of the most powerful tacticswe’ve observed come from the new adventurers on theWeb. Not all, however. Lessons from the advertising,television, and film industries can also help executives asthey try to manage one of their scarcest resources: thefull engagement of employees’ minds. (See “Lessons fromthe Attention Industries” at the end of this article.)

The Economics of Attention

Is it hyperbolic to suggest that we’re living in an atten-tion economy? Not in our opinion. Economics, by

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definition, is the study of how whole societies allocatescarce resources. The scarcest resource for today’s busi-ness leaders is no longer just land, capital, or humanlabor, and it certainly isn’t information. Attention iswhat’s in short supply. And human attention certainlybehaves like an economic good in the sense that we buyit and measure it. On an individual level, we’re deeplyaware when we don’t have enough of it—which suggeststhe first lesson of attention management.

Manage attention knowing that it’s a zero-sumgame; there’s only so much to go around. Peoplemay not think of their own attention as a scarce eco-nomic good, but they certainly act as though it is. Theydon’t want their time, or their attention, wasted.

The best Web sites have capitalized on this principle.The stickiest sites—meaning the URLs that visitors tendto click on, stay at for a while, and return to time andtime again—provide high returns on attention invest-ment, usually measured in time savings for the user. Forinstance, Yahoo! is a hugely successful search enginebecause its human-based approach to classifying sitesyields fewer irrelevant “hits” than a computer-basedapproach and promises a less complex search. Moregenerally, our research suggests that Web users valueportals not because they want access to many sites butbecause the portals provide efficient access to the fewsites that interest them. And when Web sites sell prod-ucts or services, users tend to reward easy transactions,straightforward navigation, and access to a variety ofgoods. Again, the attraction for users is a high return on attention investment, and managers at sticky siteslike Amazon.com and eBay actively strategize towardthis goal.


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The most important implication of the zero-sum rulefor managers at traditional organizations is that theyneed to limit the number of internal programs that com-pete for employees’ attention. We can’t overstate theimportance of this point. One Harvard professor’s infor-mal survey suggested that the average company hasmore than 16 major initiatives under way at any giventime—for instance, implementing new technologies orrestructuring a functional unit. Many businesspeople wespeak with complain of “initiative fatigue” and say theyjust can’t pay attention to all of them. Wise leadersunderstand the danger of spreading attention too thin.When they introduce a new initiative, they retire an oldone. It’s as simple as that. For example, when BPacquired Amoco and then Atlantic Richfield, senior exec-utives were concerned that managers would be dis-tracted by too much information, at a time when oilprices were very low. So BP halved the number of its ITapplications to cut down on the information those appli-cations produced.

But what happens if several strategic imperatives cryout for attention at once? This happened recently atClarica, formerly Mutual Life of Canada, a large Cana-dian insurance company that went through two majorchanges, one in 1998 and one in 1999. The company hadannounced its intention to demutualize—in otherwords, to change its ownership by policyholders to own-ership by public stock. This is a complex and difficulttransition, involving regulatory, financial, and customerrelationship changes. Insurance companies prepare for itfor months and years, and it monopolizes senior man-agement’s attention.

A few months into the demutualization process,another major opportunity emerged. Metropolitan Life,


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the largest U.S. insurer, decided to sell its Canadian busi-ness and announced that it was taking bids. The possibil-ity of buying the MetLife business, which would increase

by half Clarica’s customersand assets, presented an“attention crisis” for CEOBob Astley and the execu-tive team. They didn’t feelthey had enough seniormanagement attention left

to undertake the deal’s due diligence process, make thebid, and integrate the business with Clarica if their bidwas successful.

The demand for attention dictated the need for a newsupply of it. Astley and his team decided to deputize 150second-level managers to work on different aspects of theMetLife acquisition. Hubert St. Onge, senior vice presi-dent of strategic resources, led the effort. As a result, thesenior team continued to focus most of its attention onthe demutualization process. Every Saturday, they met for several hours to be briefed on the acquisition. AfterClarica’s bid was accepted, an Integration ManagementOffice was formed to merge the two organizations; theoffice required little of senior management’s attention.Eventually, both the demutualization process and theMetLife acquisition were completed, and the acquisitionand integration of the new business were completedahead of schedule. Those successes can be traced back, inlarge part, to senior management’s intelligent allocationof its own attention.

The Psychobiology of Attention

Seeing attention purely through an economic lens dis-torts its reality somewhat. Economics, after all, assumes

One of the most importantfactors for gainingand sustaining attentionis engaging people’semotions.


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that rational actors make deliberate investment choicesto optimize their returns. In reality, much of what deter-mines where people invest their attention is below thelevel of pure reason. Indeed, our research suggests thatone of the most important factors for gaining and sus-taining attention is engaging people’s emotions.

Allow us to predict one specific behavior, based onthe psychobiology of attention: no matter what businessactivity you are involved in—sitting in a meeting, mak-ing a decision, or reading the Wall Street Journal—youwould stop that activity immediately if a snake slitheredinto the room. Over millennia of focusing on life-and-death issues, our nervous systems have evolved to payattention to some things more than others. Aspiringattention managers should be at least as attuned to thepsychobiology of attention as they are to its economics.There are four linked lessons from psychobiology.

People are hardwired to fight for survival; use thatto your benefit. All primates are biologically pro-grammed not simply to fear snakes but to pay closeattention to them. Web designers and business man-agers alike can use that natural reaction to get and holdonto people’s attention.

On-line grocery shopping in Brazil illustrates thepoint. Brazilians became so accustomed to hyperinfla-tion over the years that when they got a paycheck, they’dimmediately buy vast quantities of groceries. Who knewhow much the check would be worth in one day, letalone after a whole month? Even though inflation hasbeen tamed, Brazilians still buy groceries in huge quanti-ties. On-line retailers there have noted this survival reac-tion and have exploited it. By far, the largest e-commercecategory in Brazil is grocery sales: they constitute 39% oftotal e-commerce in Brazil versus 3.4% in the U.S.


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In organizations, the psychobiology of survival is obvi-ous in the strategies managers use to get and keep work-force attention. The threat of corporate demise—and theconsequent loss of jobs and livelihoods—focuses atten-tion on the need to change. But that attention must bemanaged carefully, lest people become paralyzed by fearrather than attentive to it. Employees find new jobs, orthey hunker down and get ready to change. Either way,you can be sure they are paying attention. WhenJapanese automakers threatened to drive Ford out ofbusiness in the early 1980s, senior managers and employ-ees were motivated to pay attention to quality and effi-ciency in a way they never had before. Suddenly productand process design became high priorities. By the end ofthat decade, an MIT study rated Ford facilities as thehighest-quality plants in the world.

In short, scaring your employees is a great way to gettheir attention. But make sure the threat is genuine, anddon’t use this tactic too often. If you do, your employeeswill stop believing that the threat is real.

People are naturally competitive; use that to yourbenefit, as well. Competitive urges are part instinct,part cultural conditioning, and eminently exploitable.Sports and investment Web sites play to those urgesindirectly by providing the latest scores, stock prices, and predictions. And some of the stickiest Web sitesinvolve outright competition. For instance, at Lycos’sGamesville.com, participants compete against thousandsof other players who are simultaneously logged on to theWeb site. Players return to the site again and again tohave fun, to beat their neighbors at backgammon, and towin prizes. Even though the prizes are small—typically$1 to $5—Lycos’s executives think they’re one key to thesite’s success.


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Competition can also focus people on a business goal.There’s no question, for instance, that the MalcolmBaldrige Award has helped employees at quality-mindedorganizations keep their eyes on the prize. The conceptcan be taken too far if internal competition—to be theunit that creates most value, for instance—begins to pro-duce divisiveness. But the chances are good that a bit ofrivalry will make the work more compelling to everyone.

Smart leaders find ways to keep employees laser-focused on their business competitors, too. During aperiod of economic doldrums for Motorola during themid-1990s, executives in one cellular-phone divisionwere encouraged to carry a pager that periodicallyannounced stock prices for Motorola, Ericsson, AT&T,and Nokia. Every time a competitor’s stock price jumpedsignificantly, pagers would beep or vibrate and everyonein the room would know they were in a tough battle—and that the stock market was giving Motorola’s com-petitors a lot of credit. At the time, the pagers didn’t gooff much for Motorola stock increases. But partlybecause of employees’ competitiveness, Motorola experi-enced rapid shareholder increases the next two years.

Don’t let distractions keep people away from yourcore message. If you want to catch a raccoon, showhim a shiny object to distract him. People, like raccoons,are infinitely distractible, and that’s the biggest problemin this age of attention deficit.

On the Web, distractibility cuts both ways: banneradvertising, for example, is the number one source ofrevenue, and it’s also the number one distraction forusers. One of the most popular banner ads of 1999 fea-tured an animated monkey quickly bounding across thetop of the screen. If you “punched the monkey” by click-ing on it, you were whisked to a gambling site. Many


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people found the manic monkey an irresistible target.Great news for the gambling site—but mixed news forthe sites running that ad.

In most organizations, the worst distraction is one wementioned previously—the multiple internal programsthat compete for employees’ attention. But they’re hardlythe only distraction. For example, when the Chemicaland Manufacturers Hanover banks agreed to merge sev-eral years ago, employees at both banks were justifiablyconcerned about their futures. Bruce Hasenyager, an ITexecutive at Chemical, noticed that productivity wasslumping because employees were gossiping andexchanging rumors. He created “Rumor Mill,” a discus-sion database that allowed any IT employee to describe a rumor that he or she had heard about the merger.Hasenyager promised that he would address any rumorabout which he had information. While some executiveswere uncomfortable with the discussion, Hasenyagerbelieved that deflating all the speculation made it easierfor employees to get back to work.

Other companies attack distractions by offering tohelp employees with their personal chores. For example,concierge services are available to stand in line at theregistry of motor vehicles or to pick up dry cleaning sothat overextended employees can focus on their work.

People want to feel engaged, so help make thathappen. If you can get people to invest something oftheir own, they’re going to be more committed than ifthey feel like observers. That’s the main force behind thestickiness of investment sites like Fidelity’s andSchwab’s, event-tracking sites like When.com, and anysite that makes heavy use of on-line discussion. Co-creation pulls people in. It makes people feel like they


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count, and it makes it harder for them to disengage. Per-sonalization and customization are forms of cocreationbecause they require the site user to invest some time toreport their preferences for the type of service they’llreceive. A perfect example is MyYahoo!.com, whichallows a sports fan to position sports news at the top ofhis or her personalized home page, or a homesick expa-triate to highlight all the news from Ohio—and requiresboth of them to share information and invest time withthe Web site up front.

Amazon.com is often cited as another champion ofcocreation, since it relies on reader-submitted reviews toprovide other site visitors with rich content. The successof the tactic may actually have more to do with the flat-tery and recognition that the user doing the postingreceives than on the content itself. Amazon also relies onpersonalization techniques to get users’ attention, begin-ning with the cheery “Hello John Smith!” that greets Johnwhen he logs on. At a deeper level, the site targets return-ing customers by recommending books or other itemsbased on past purchases.

Personalization requires relatively sophisticated tech-nology and a labor-intensive approach to content, whichis why more Web sites don’t do it. Yet our research sug-gests that when people have too much information toprocess, personalization is one of the most importantfactors in their choice to attend to one piece of informa-tion over another. (See “What Kind of Message GetsAttention?” at the end of this article.)

Cocreation works inside businesses, too. Employeeswho have helped to make something happen stayinvested, and they stay interested. One of the best exam-ples we’ve discovered is Texas Instruments, whose CEOmade it a top priority in 1994 for the company to define


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its new vision and strategic plan. To ensure that the plangot the attention it deserved, he put not only his strate-gic leadership team on the hook for it, but also a broadergroup of vice presidents, senior vice presidents, andother employees. And the process didn’t end there. Oncean initial draft was produced, more than 200 other TIexecutives were invited to participate in shaping it.Senior managers could have just herded this second tierof employees into a large room and asked for comments,but they didn’t. Instead, they orchestrated a series of five-day events for groups of 25 to 30 managers and revealedthe draft strategic vision only after two full days ofexploring competitive dynamics and explaining the pro-cess that resulted in the vision proposal. At that point,participants had the knowledge base and the confidenceto offer thoughtful criticisms and recommendations,which were readily incorporated into the final product.

One TI executive reported that this inclusive processhad multiple benefits. It helped keep the strategic visionalive when the CEO died unexpectedly: “Two or threehundred of us had worked on this. We didn’t want to justmove forward with it—we wanted to pick up the pace.”The process also helped TI gain consensus quickly on thedivestiture of a financially successful business unit thatdidn’t fit the strategy. Even the heads of the unit in ques-tion, who’d been among the original strategists, agreedwith the divestiture.

Personalization can also be a powerful tool for gettingand holding employees’ attention. At one company, theCEO recently sent each employee a letter at home statinghow much revenues needed to increase in the last quar-ter to meet a growth goal—and exactly how much biggerthe individual’s bonus would be if that goal was reached.Previously, only the top people would have received a let-


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ter of that kind; it used to be considered too expensive topersonalize a mass mailing. Employees overwhelminglyagreed that the letters had focused them mightily ontheir tasks—and the goals were met.

Technologies and Attention

Technologies offer extraordinarily rich ways to capturepeople’s attention. This has been true throughout humanhistory: the Protestant Reformation wouldn’t have hap-pened without the distribution of Bibles, for example,and the French and American revolutions wouldn’t havehappened without newspapers. The invention of theprinting press made both media possible.

Today, businesses use dozens of technologies andmedia to attract attention. Burson-Marsteller, a globalcommunications firm, prepares both internal and exter-nal communications campaigns for its clients. PR hastraditionally focused on broadcasting messages outsidethe company using a variety of media. But now multime-dia technologies are being employed to communicateboth internal and external messages.

Burson has one client, a financial services firm, whosemanagers concluded that if they wanted to get the atten-tion of analysts, bankers, and traders, e-mail was notenough; communications had to be face to face. Thecompany now uses a combination of worldwide satellitebroadcasts and streaming video Webcasts, sometimeswith simultaneous translation of the audio stream intomultiple languages. The same broadcast may be viewedby investment analysts and employees.

Many companies now use worldwide videoconfer-ences to distribute important messages to those whoweren’t closely involved in creating them. Sometimes the


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broadcasts are augmented with anonymous Web chatrooms, in which the participants can say what they reallythink about their leaders’ messages—and such candidfeedback tends to get the leaders’ attention in return. Inanother example, Hewlett-Packard issues audiocassettesabout new initiatives and programs for employees to lis-ten to while they’re commuting. Despite all these poten-tial improvements to communication, we have two cau-tionary notes about technology and attention.

Don’t let technology get in the way. Something thatappears to be a great attention-getting technology can beworse than useless if it’s supported by an insufficientinfrastructure. Web users outside the United States oftentalk about whether the country is “awake yet” before log-ging on, because heavy Internet usage during U.S. day-time hours slows down so many sites. Multiple formatsand complex technologies for playing sound and videoover the Web may draw attention to a site, but they maydestroy its capacity to sustain attention.

Similar problems crop up at traditional companies.Managers promoting a new venture or initiative oftendon’t realize that, even as they are asking people tobehave in a new way, they are making it difficult for thatto happen. For instance, different e-mail systems andincompatible releases of crucial software programs makeit nearly impossible for workers to get up to speed with anew initiative. One German multinational we workedwith had launched a knowledge management projectdesigned to let employees and customers share informa-tion seamlessly. This initiative was central to the com-pany’s larger goal—to change from a company that soldproducts into one that sold knowledge-based services.The problem was there were two competing versions ofthe software the company was using for knowledge man-


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agement. One, in German, was based in Germany. Theother, in English, was global. Neither flourished, partlybecause nobody could figure out which version of thesoftware to use.

Don’t get into a technology arms race. The standardfor what gets attention is always being raised; what wasdazzling yesterday is boring today. On the Web, forexample, it used to be de rigueur to divide the page intobrowsable sections, or frames, even though the frameswere confusing and slow to download. Today, frames areas outdated as hula hoops.

The same holds true for company communications.At one point, inserting into a presentation cute clip artof a duck bashing a computer with a sledgehammercould get your audience’s rapt attention—and a fewchuckles besides. Now, every person with a computeruses the same goofy clips in their presentations, alongwith the same artful backgrounds, the same fonts, thesame snazzy transitions between slides. If you’re talkingabout newsletters, everybody’s got the same crisp, Page-Maker-supplied, multicolumn formats. Even video isbecoming a commodity. Sun Microsystems CEO ScottMcNealy realized that this kind of arms race was coun-terproductive and banned PowerPoint presentations atthe company.

Sustaining Attention

Getting employees to stick to important strategic initia-tives—and to give those initiatives their undivided atten-tion over time—is crucial to competing successfullytoday.

In discussing the factors that contribute to sustainedattention, we’ve focused on elements different from


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those required for capturing attention in the first place.We should point out that the tactics that lure a Web userto a site for the first time—or an employee to focus on a

strategic initiative in thefirst place—are not thesame as the ones thatwill keep them comingback. Stickiness as mea-sured on the Web is usu-ally a combination of thenumber of unique visits

to the site and the total time spent by the average useracross multiple visits, but the factors that create thosebehaviors are not the same.

In the organizational setting, managers have suc-ceeded all too well in getting that first bite—and theresult is that workers everywhere have become asimmune to management’s messages as the neighbors ofthe boy who cried wolf did. The difference between cap-turing attention in the first place and sustaining it isnothing short of the difference between making apromise and keeping it. It’s far more important to do thelatter. Management must set the right example if itwants a focused, committed workforce.

In the industrial economy, attention wasn’t the scarceresource that it is today. There were more people to dothe same amount of work, or even less work. Businesswasn’t as complex and didn’t change as quickly, andknowledge workers weren’t at the core of sophisticatedeconomies. Information was scarce, and so we pursuedhardware and software strategies that made vastamounts of information available at every desktop. Withan enormous boost from the Internet, we were successfulbeyond our wildest dreams. Now it’s human attention

The difference between capturing attention in thefirst place and sustaining itis nothing short of thedifference between making apromise and keeping it.


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that’s scarce, and our entire view of business needs tochange. When we ask ourselves what’s the constrainingfactor in the success of new business strategies, market-ing campaigns, or knowledge management initiatives,the answer is likely to be attention. In the attentioneconomy, we will have to evaluate every action withregard to how much attention it will consume and howwe can get and keep the attention we need.

Lessons from the Attention Industries

SOME INDUSTRIES, such as advertising, television, film,and print have grown up learning to capture and sustainattention. Managers in other industries can benefit fromwhat they’ve learned.

Advertising

Advertising, which is about very little else but attractingand sustaining attention, offers managers three importantpoints to ponder. First, good advertisers measure every-thing. Devices that measure how many viewers arewatching a TV program were developed primarily forthe benefit of the advertising industry, for example. Agood agency knows exactly which ads pull in whichconsumers, how much those consumers spend, and whattheir return rates are. We’ve only started to learn to mea-sure employees’ attention; getting better at it will pay offin a big way. (See “Measuring Attention.”)

Second, agencies have long counseled that anadvertising message should be delivered through multi-ple media—TV, newspapers and magazines, billboards,video screens at gas station pumps, and so on. Internet


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banner advertising is in that mix. If senior managers wantto get an important message across to their people, theyalso need to employ multiple media. Executives at thesoftware company Symantec, for example, receivedcomplaints from employees about poor internal commu-nications—which were primarily by e-mail. They con-cluded that crucial messages should be sent throughexecutive speeches, e-mail, paper memos, and expressmailings of documents and videotapes to employees’homes.

And third, advertisers are virtually unanimous on theimportance of a clear message, repeated often. If you’regoing to get consumers’ attention and change theirbehavior, it’s got to be obvious what you want them todo. Companies, too, must focus attention on a small setof clear ideas. CEO Jack Welch is extremely effective atfocusing the attention of GE employees on a single criti-cal topic. This year, it’s “destroy your business.com,” aninitiative to understand how GE business units can com-pete using electronic commerce. Previously, Welch hadtargeted improved quality through the use of Six Sigmastandards, increased inventory turns, and the eliminationof unnecessary work. Like a good advertiser, he repeatsthe message in speeches, in one-on-one meetings withmanagers, in annual reports, and in press interviews. AGE employee who doesn’t want to heed the messagewould have a tough time avoiding it.

Television

Television, which is still stickier than the Internet overall—the average American watches TV for three hours and26 minutes per day—offers some lessons of its own. Takeprogram scheduling: a network’s promising new showsare typically slated to follow proven winners. Even the


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highly structured, predictable nature of TV programs overtime is a factor in managing viewers’ attention. Learningfrom that, executives in companies should schedule theircommunications at regular intervals—for instance, sendinge-mails that summarize the previous week’s performanceevery Monday at 9 A.M. Television programs also relyheavily on narrative and storytelling. Their success mayaccount for the rise of storytelling in business. 3M, forexample, has had great success adapting its strategicplanning process to a storytelling format. (For moredetails, see Gordon Shaw, Robert Brown, and PhilipBromley’s “Strategic Stories: How 3M is Rewriting Busi-ness Planning,” HBR May–June 1998.)

Film

In darkened theaters around the world, we sit like zom-bies, our attention totally focused on projected imagesand recorded sounds. One of the most important lessonsfrom the film industry is that people actually like the “cap-tive attention” environment of the theater—as long as theyare entertained. This bodes well for those who want tomanage attention, though it also shows how high theentertainment value of a message must be to capturepeople’s focus.

Movies also illustrate the importance of age segmen-tation in attention management. Attention allocation is dif-ferent for people at different ages and from different envi-ronments. Web companies like iTurf and Yahoo! are justnow beginning to focus on the attention market for teensand preteens, which movies have monopolized foryears. Companies must be careful about segmentingtheir internal communications according to age becauseof discrimination issues, but the crafty communicatormight avoid that problem by segmenting according to


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level or rank. If you’re sending a message to lower-levelemployees who are likely to be young, make the com-munication as flashy and colorful as you can. For higher-level executives, you may still get away with black-and-white text.

Print

Magazines and books prosper when they embrace the“cult of personality,” glorifying authors and the subjectsthey cover. In 1999, there were more new magazinesabout media personalities than in any other category,and the best-selling books were by celebrity authors suchas Stephen King and John Grisham.

The literature on leadership is full of discussions aboutthe virtues—and problems—of charismatic CEOs. SteveJobs at Apple, Lee Iacocca at Chrysler, and Ross Perotat EDS and Perot Systems demonstrated the attention-get-ting potential of a “star” leader. Hewlett-Packard isattempting to make its latest CEO, Carly Fiorina, anexecutive celebrity by featuring her in TV ads. And man-agers inside the company say she’s getting more internalattention than any CEO has since HP’s foundersbecause she’s orchestrated this major communicationscampaign.

What Kind of Message Gets Attention?

WE SURVEYED 60 executives, asking each of them totrack every message they received for one week and torate how well each message attracted their attention. Forthe messages that received a high level of attention, weasked about the attributes of the message. Overall, the


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factors most highly associated with getting their attention,in rank order, were: the message was personalized, itevoked an emotional response, it came from a trustwor-thy or respected sender, and it was concise. The mes-sages that both evoked emotion and were personalizedwere more than twice as likely to be attended to as themessages without those attributes.

Almost half the messages that got high levels of atten-tion were e-mails, while only 16% were voice mail mes-sages. Messages in other media grabbed even lessattention. Several factors were not correlated with atten-tion impact: whether the message came from a superior,whether the information was new or unusual, andwhether the recipient agreed with the sender about thecontent of the message.

Measuring Attention

The same things that make for sticky Web sites make forsticky business in general because the same conditionsof attention deficit prevail. So why has “stickiness”become such a Web-specific buzzword? One simplereason is that the attributes of the Internet make ituniquely capable of measuring stickiness.

We believe that attention in a business can be mea-sured, albeit not with the precision that it’s measured on-line. We’ve relied thus far on getting people to report ontheir own mental processes. We’ve developed the Atten-tionScape, one of several tools that we’ve used in ourresearch, which maps the way a person allocates his orher attention. It’s based on the fact that there are sixtypes of attention that anyone can give to any issue or


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item; the six types represent the opposite extremes inthree categories. Attention can be voluntary or captive;aversive or attractive; and front-of-mind or back-of-mind.Attention is maximized by appealing to all six types,which isn’t as paradoxical as it sounds. A movie trailermay command your captive attention, because you’re sit-ting in a dark room and have been shamed into silence,and your voluntary attention, because the preview turnsout to be pretty engaging—both at the same time.Employees are most productive when they feel the rightmix of stress (what we consider aversive attention) andreward (what we consider attractive attention). You wantyour employees’ work to have highly engaging front-of-mind elements as well as routine back-of-mind elements.And there should be some parts of the job that they feelthey cannot escape and some parts they’re crazy about.

The AttentionScape was designed to reveal the typeof attention an individual—or a team or a corporation—pays to a particular issue at a given time, using a chartlike the one at right. The size of the bubbles indicates theamount of attention devoted to the issue. The X axis plotsthe amount of captive versus voluntary attention a userexperiences. (If they are balanced equally, the attentionbubble is at the center of the axis lines.) The Y axis plotsfront-of-mind versus back-of-mind attention. And the shadeof the bubbles indicates attractive attention (darkershades) versus aversive attention (lighter shades).

The chart we show here measures responses fromSally B. Goode, an executive at a software companycalled FloppyTech. Sally answered several questionsabout her daily tasks and responsibilities, and shereported the time and attention she paid to each. Foreach task, there is a shaded bubble on Sally’s Attention-Scape chart. A reasonable share of her attention is


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going to innovation—but we were surprised that it wasn’tlarger, since that’s the most important part of her job.Business logistics get a lot of her attention, even thoughthey’re not meant to be Sally’s major concern. Teamworkruns a distant third among her attention getters, followedby client and interpersonal issues.

The shades on Sally’s chart indicate that she findsmost of her work interesting. But almost every item onSally’s chart is plotted left of the axis line, indicating that


Front of Mind

Innovation

6

5

4

3

2

1

0

TeamworkLeadership

Clients

Captive

InterpersonalIssues

Voluntary

Family

BusinessLogistics

External CompetitiveEnvironment

Back of Mind

-1

Attractive

Balanced

Somewhat Attractive

Somewhat Aversive Aversive

-1-2 -1

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her attention to her work is captive—she’s focusingbecause she feels she has to. And most of the items arein the front-of-mind area of the chart. This means thatSally hasn’t been able to make parts of her job routine.She goes through her day paying close, conscious atten-tion to almost everything, including items that really don’trequire—or deserve—such a large chunk of her expensivefocus. People who keep everything in front-of-mind atten-tion are easily overwhelmed, overworked, and over-wrought. Based on this chart, we can conclude that Sallymight need some help directing her attention to Floppy-Tech’s most pressing corporate issues.

The AttentionScape is used in a number of ways: withleadership teams to understand their focus; with potentialmovie viewers to predict their likelihood of going to anygiven movie; and within companies to assess the “atten-tion chain” throughout the organization. The charts aresimple to create: the user compiles a list of attention itemsto rate, assesses how much of his or her or the team’stotal attention is paid to each item, and then vets out—through the use of analytical statements—the type of atten-tion that is paid to each. While these charts are con-structed with mathematical algorithms, the logic is quitesimple, and you can map a theoretical AttentionScapewithout any numbers. (To walk through the process, goto www.attentionscape.net.)

Originally published in September–October 2000Reprint R00505


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The Successor’s Dilemma

Executive Summary

BOTCHED LEADERSHIP TRANSITIONS occur with alarm-ing frequency—a fact that’s laid bare regularly in the busi-ness pages of the nation’s newspapers. The headlinestrumpet the premature departures of designated succes-sors—leaders such as Merrill Lynch’s Herb M. Allison andAT&T’s John Walter, who left their respective companiesbefore they could claim the CEO’s seat.

Dan Ciampa and Michael Watkins, who have coun-seled senior executives and successors through morethan 100 leadership transitions in the past 25 years,point to the successor’s dilemma as the dominant causeof failed leadership transition. The dilemma is an emo-tionally charged power struggle played out between theCEO and his would-be heir.

Ciampa and Watkins describe the way the problembuilds on both sides of the desk—the CEO’s fear of giving

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up control versus the designated successor’s need toenact the changes expected of him and prove himself tothe board. They cite anecdotal evidence and their ownresearch to suggest that this complex psychologicaldynamic leads CEO-successor relations astray and canblock the successor’s path to the top spot.

But the authors also offer four ways for the would-beheir to overcome the successor’s dilemma. These includegauging the CEO’s readiness to leave before acceptingthe number two spot, maintaining regular communicationwith the CEO despite ever-present obstacles, such astravel and business schedules, and developing and usinga balanced personal advice network to help navigatethe shift in power.

The authors stress that defusing the problem is theresponsibility of the successor, not the CEO. The reasonis simple: the successor has the most to lose.

A - CEO approaches retirement age.He knows it is only responsible to designate a successor,and the board agrees wholeheartedly. Together, theyscreen internal candidates but decide that none pos-sesses all the skills necessary to propel the company for-ward. Soon, a bright star is hired from outside the com-pany—with the assurance that if he performs well, hewill ascend to the top spot in two or three years.

At first the successor dazzles. He launches impressivestrategic initiatives, some that yield surprisingly fastresults, and he deploys managerial practices that getwork done more effectively than ever. The CEO and theboard congratulate themselves for their wise choice.Slowly but surely, however, the star’s brilliance begins todim. His take-charge approach starts to alienate the CEO

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and key members of the senior management team. Thenit offends them outright. Soon, his initiatives are resisted,and some are even blocked altogether.

The designated successor grows frustrated, evenangry. In his gut, he knows what is going on: the CEO ishaving trouble letting go of his job. He’s not ready to giveup control of the company he has toiled to build. Still,the board expects the designated successor to postimpressive results, and the successor himself knows hemust make organizational and strategic changes to pre-pare the company for the time when he will lead it. Butwithout support from the CEO and his team, how can hetake charge? The successor’s hands are tied. If he pushestoo hard, he alienates the CEO; if he doesn’t push hardenough, his performance won’t warrant a promotion tothe top spot.

Thus the stage is set for the successor’s dilemma, aseemingly intractable set of circumstances that hasentangled leaders for as long as there have been organi-zations. Indeed, the drama of leadership succession is atimeless part of the human condition—think of the Bibli-cal story of Saul and David and Shakespeare’s King Lear.In both cases, the kings eventually found themselvesunable to let go after choosing someone to succeed them.In modern times and organizations, the succession storyplays out with similar themes. For the would-be leader,succession is a time of great excitement and promise, theculmination of a long and arduous climb to the top. Forthe incumbent leader, succession is a time to confrontthe passage of time, the end of a career, and even mortal-ity itself. It is no wonder that relationships between suc-cessors and those they hope to replace are so fraughtwith emotion.

The successor’s dilemma presents a pair of damningalternatives. If a CEO resists passing the torch, his


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would-be successor can wage open war to win the topjob—but that can get ugly and rarely works. Or the suc-cessor can resign—a “solution” that can seriously dam-age the successor’s reputation and his wallet. He maywalk away relatively unscathed, but a high-profile failuremight make second chances hard to come by.

The successor’s dilemma is exacerbated by the factthat few people in an organization can help the succes-sor and the CEO work out their crisis. Most boards ofdirectors drop out of sight once the successor is hired;they check in only periodically. Similarly, most humanresources executives don’t play a mitigating role, primar-ily because few of them are the kind of trusted advisersnecessary to negotiate a peace treaty between the CEOand his designated successor. Thus the CEO and hiswould-be heir are on their own to overcome, or be over-come by, the successor’s dilemma. It’s the latter thathappens most often.

But the successor’s dilemma itself can be overcome.Four practices can allay, and even prevent, the problem.Before he accepts the number two position, the succes-sor can learn as much as possible about the CEO toassess his emotional readiness to leave his position. Thesuccessor can make it a top priority to maintain regularcommunication with the CEO. He can also develop andutilize a balanced personal advice network to help navi-gate the strategic and personal minefields of the leader-ship change. And, finally, he can stay focused on theendgame—that is, on his professional goals, not theemotional traps that surround them.

The successor must be responsible for managing thedilemma, because it is he who has the most to lose. TheCEO’s legacy might be tainted by conflict with his would-be heir, particularly if it is covered by the media. The


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board may take a hit to its credibility, having bungled oneof its primary jobs. And many employees stand to suffer ifthe CEO and the successor battle it out. But no one paysthe price of the successor’s dilemma quite like the succes-sor himself. He must own the problem—and its solution.

The Succession Minefield

Botched leadership transitions occur with alarming fre-quency. John Walter was installed as president of AT&Tin October 1996—and was gone within nine months. Dis-ney put Michael Ovitz in place as president in August1995; he departed late the next year when his relation-ship with chairman Michael Eisner soured. A likely heirapparent at Citigroup, Jamie Dimon, exited in 1998. Andjust this past summer, Merrill Lynch president and chiefoperating officer Herb M. Allison resigned before claim-ing the top leadership position many thought was his.

The evidence isn’t just anecdotal, however. Lookingat records from 1992 for thousands of publicly tradedcompanies, we identified 94 that had appointed a newperson to the position of chief operating officer thatyear. Of those 94 would-be CEOs, 35 were brought infrom outside the organization. Five years later, 22 ofthose executives had left the company before being pro-moted and four were still in their original position—fully 75% had not made it to the top as expected. (Thisarticle focuses on the transitions of successors hiredfrom the outside. For a brief discussion of internal suc-cessions, see “It’s Different from the Inside” at the endof this article.)

Just as it would be impossible to link every failedmarriage to a single phenomenon, it’s impossible toattribute every failed leadership transition to the


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successor’s dilemma. But our research and experiencestrongly suggest that it is, by far, the dominant driver offailed successions. Indeed, one of us has served as anadviser to CEOs and their would-be successors duringmore than 100 transitions in the past 25 years. In everyone of those cases, the successor’s dilemma was atwork, wreaking its unique brand of personal and orga-nizational havoc.

An All-Too-Human Dynamic

The dynamics of the successor’s dilemma can begin longbefore the successor sets foot in his new office. Even if acompany is successful, the board typically wants to bringin a second in command who can meet an anticipatedchallenge—an emerging technology, for example. That iswhy the board and the CEO often agree that they mustbring in a so-called “change agent” to eventually run theorganization. When the search produces such a leader,the board makes it clear that great things are expected ofthe designated successor—and fast.

And so the new successor plunges in to learn aboutproducts, markets, and internal processes. Even for exec-utives with years of experience, the learning curve can bequite steep in the early months; after all, no two compa-nies are identical. At the same time, the successor mustlearn to operate in an unfamiliar corporate culture.Indeed, he must make a new political system work to hisadvantage. That means building credibility with peoplewho now report to him—some of whom expected to benamed to the job he was hired to fill. As one executivetold us about his early days in the successor’s position, “I thought I was pretty prepared coming into the job


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because of my background in finance and because I washead of marketing [at my former company]. Those werethe areas that needed attention here, too. But I didn’tcount on the culture being so different. The marketingissues were tough enough, but I had to get people tothink differently to get things done faster, and to getthem to work across departments and functions. Thatwas just brand new to them.”

In the midst of this intense learning period, the suc-cessor must also try to build a relationship with the per-son he hopes to replace, a process that is riddled withpitfalls. Because he’s coming from the outside, the suc-cessor barely knows the CEO and therefore enters therelationship gingerly. The successor usually avoids chal-lenging the CEO even when he disagrees with him. Thatreticence is understandable, but it can plant the seeds oftrouble. Take the case of the executive who joined a largefinancial services company as chief operating officer andexpected to take over in three years when the chairmanretired. The chairman had helped shape the industry,had founded the industry association, and had trainedseveral executives who went on to become successfulCEOs at other companies. He wasn’t an arrogant person,but the chairman’s reputation made him an intimidatingfigure.

The financial services company was in good shape buthad room to improve. It needed to improve the efficiencyof its business operations in order to keep costs down.The new successor quickly spotted ways to do so, but hedidn’t know how to tell the chairman without soundingdisrespectful. In fact, he kept his opinions to himself andpublicly supported the chairman’s status quo approachto the business. In this case, the board recognized the


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bind the COO was in and helped him resolve it. Muchmore often, the successor’s silence can lead him to frus-tration and anger.

The CEO’s View

If the successor is facing new and daunting challenges, sotoo is the CEO. Indeed, our experience and research indi-cate that he typically passes through three distinctphases after a successor is designated. In the first phase,he feels pleased with having “done his duty” by installinga replacement. That satisfaction can last several weeksor several months, depending on how quickly the succes-sor moves to make changes.

When the successor starts shaking things up, how-ever, the CEO enters the second phase—growing discom-fort and gradual resistance. While he may be happy tohave found a successor to whom he can entrust the com-pany, the CEO soon discovers that the cost of a smoothtransition is having to give up control. He is confrontedwith the reality of handing over important decisions tosomeone who can certainly run the organization wellenough but who has a different style and different priori-ties. The CEO must face up to the fact that his successorwill run the company differently—and that just feelswrong. He still wants the transition to go forward andtries to hide his defensive reactions, at least initially. Butthat doesn’t make his feelings less intense.

As the CEO struggles to retain some control, he alsodiscovers that having a successor requires him to sharethe limelight in his interactions with the board, stockmarket analysts, and the press. Accepting that shiftrequires a level of humility that most CEOs are notknown for. One CEO we observed relished his high pro-


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file. Tensions quickly developed when he hired a COOwho was an aggressive change agent. Matters came to ahead when the COO was on a business trip. The CEOused the opportunity to change reporting relationships:he assigned the head of IT to report to the chief financialofficer, who reported to the CEO. Even though the movestirred up tension within the company, it helped the CEOretain the sense that he was the one in charge.

Also in the second phase, chief executives begin toconfront the question of what to do once they retire. Forpeople who have devoted every thought and energy tothe job for many years—and who delight in their identityas CEO—this can be a difficult, even terrifying, consider-ation. Research on retiring CEOs points out that many

chief executives of suc-cessful companies areanointed heroes bygrateful employees orinvestors. As a result,they come to believe not

only that they deserve such praise but also that they areindispensable to the ongoing success of the enterprise.1

As they contemplate leaving, their heroic self-conceptrevolts. They cannot live without the company thatdefines them, and they believe that the company cannotlive without them.

In this context, many CEOs start to ponder the mean-ing and extent of their legacy. They ask themselves whatthey will be remembered for—and many realize that itmight be overshadowed, or perhaps even diminished, bywhat the new leader is trying to do. For instance, oneCEO had spent much of his career building his com-pany’s manufacturing capabilities; under the CEO’s lead-ership, the company had bought or built 15 plants across

As the CEO feels his power in eclipse, the successor’simpulse is to push for moreand deeper change.


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the United States. His successor, he knew, would likelysell them all to focus the company more on providingservices. Similarly, another CEO considered his greatestaccomplishment at his company to be the creation of aculture in which employees cared for and respected oneanother. In the name of improving financial results, hissuccessor would surely dismantle it, the CEO realized, toinstall a more performance-driven atmosphere. Ration-ally, both CEOs knew their successors had to make thechanges; indeed, they had endorsed those changes them-selves. But that didn’t stop their feelings of sadness andresentment about the new plans. A legacy is a deeplypainful thing to lose, and emotions can take over.

As the CEO feels his power in eclipse, the successor’simpulse is to push for more and deeper change. With afew successful initiatives under his belt, he calls more

openly for renewal andreinvention, and hearticulates more widelyhis vision for the com-pany. That only exacer-bates the CEO’s alreadythreatened sense of

identity and control, and he digs in his heels. The two“sides” enter into more open conflict, and communica-tion between them falls off precipitously. Indeed, it is atabout this time that phase three—active resistance—begins to emerge.

What often happens next is a turning point fromwhich there is no easy return. The CEO calls for supportfrom his troops—mostly members of his senior team.Many are willing accomplices. They are feeling over-whelmed by the successor’s changes and have strongpersonal ties to the CEO. As soon as the CEO shows dis-

Right around the time thesuccessor should be gettingready to move up, he is facingthe fact that the CEO wants him to leave.


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agreement with the successor’s style or direction, evensubtly, the senior team feels free to operate around orwithout the designated successor—for example, goingdirectly to the CEO with ideas or plans.

The dynamic spirals downward from there. Thinkinghe has no other alternative, the successor continues topursue his change agenda to win the board’s approval. Infact, in many cases he tries harder than ever to post im-pressive results. Ironically, if the successor succeeds, theCEO feels even more threatened, which causes the rela-tionship to deteriorate further. If he doesn’t succeed, theCEO points to that as evidence that the successor doesn’tdeserve the top job. In either case, right around the timethe successor should be getting ready to move up, he isfacing the fact that the CEO wants him to leave. In most ofthose cases, after a period of awkward or painful thrash-ing about on both sides, the successor does leave.

Meeting the Challenge

Leadership transitions are high-stakes situations, but thefact is, most people aren’t prepared to meet them. That’snot surprising. Few executives go through more than onehigh-level leadership change in their lifetime. The firststep toward becoming prepared is understanding thedynamic that undergirds a changing of the guard.Indeed, just knowing that a psychological drama is atwork is useful. But such understanding is not suffi-cient—action is. And that action, as we noted, is the suc-cessor’s responsibility. Virtually every number two exec-utive that we have observed and worked with makes thesame point: don’t expect anyone to solve this problemfor you, including the CEO. As one successor who over-came a difficult transition said, “If my daughter were


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going through this, I would tell her that the way toincrease the likelihood of making a successful transitionis to never assume that anyone else cares as much aboutyour success as you do. You have to take on the processyourself.”

That process, we have found, includes the followingpractices:

Learn as much as possible about the CEO, profes-sionally and personally, before signing on. The suc-cessor can help himself by doing his homework beforetaking the job. As he learns about the company, heshould make it a point to learn, too, about the CEO’scareer and personality and how he might deal with thereality of his own retirement. That requires delicateinvestigation, and solid answers can’t be guaranteed.Nevertheless, the executive search firm should be able toshed light on the CEO’s state of mind, and the successormight also gather relevant information from interviewswith board members who know the CEO well.

An executive can also discuss the transition processwith the CEO himself—making sure, of course, not tosuggest that he is anxious for the CEO to step asidequickly. In such a dialogue, a successor candidate can geta sense of the CEO’s views on leadership transitions byasking questions about the CEO’s own shift to power.Was it smooth? Was there an adviser involved? Is thatperson still available? What was the role of the board?The information uncovered in such a diagnostic processmay not stop a successor from walking into a difficultsituation, but at least he will be more prepared for thechallenges he meets along the way.

Maintain regular communication with the CEO. Assimple as it sounds, talk is a powerful antidote to the


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successor’s dilemma. If a successor finds ways to makesure he and the CEO are in near constant conversations,he has gone far to prevent the misunderstandings andmissed cues of the fragile leadership-in-transitiondynamic. Unfortunately, it is easy for the successor andCEO not to talk. Both are busy, usually with different ini-tiatives, and both travel. Both executives also have differ-ent sets of colleagues and friends within and outside theorganization, which makes impromptu conversationsless common.

To overcome those obstacles, the successor mustseize every opportunity to spend time with the CEO. Thesuccessor can—and should—travel with the CEO to visitbusiness plants or customers. He should take the lead insetting up regular meetings with the CEO to review thebusiness—and he should go into those sessions withmore questions than assertions. Meetings work betterwhen they are dialogues, not reports.

The successor also might make it a point to talk to theCEO before announcing a major decision, such as anorganizational change or an alliance. In fact, the mostsavvy successors use such meetings to test their ideasand solicit the CEO’s input. That’s good for the businessand great for the relationship. Which leads to anotherpoint: communication between the successor and theCEO is good in and of itself, but it’s even more effectivewhen the successor makes sure that his words communi-cate sincere respect for the CEO. If overdone, respect cansound obsequious, but when a successor praises his bossoccasionally and genuinely, it sets a tone that goes fartoward defusing the tensions of the successor’s dilemma.

Assemble and frequently confer with a balancedpersonal advice network. Because few companieshave built-in systems to facilitate leadership transitions,


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successors must create their own network of advisers tohelp them navigate this minefield. The best networks forthis purpose include some people who can offer adviceon strategy or operations, and others who can offercounsel on the political realities of a company goingthrough an operational change and a leadership handoff.Balanced personal advice networks should be composedof a judicious mix of external and internal advisers.External advisers should be drawn from the successor’smentors, colleagues, and friends outside the company;they should have only his interests at heart. Internaladvisers should have the requisite technical knowledgeand deep insight of the company’s operations, history,politics, and culture.

The usefulness of a balanced personal advice networkcan be seen in the case of one successor who found thatthe culture of the company he had joined stood firmly inthe way of his plans for fast-paced change. The com-pany’s customer service was poor, and the designatedsuccessor quickly determined the reason. “We neverdelivered to our customers on time because the produc-tion schedule was based on relationships, not proce-dures,” he recalled. “If a product manager was launchinga new product and needed the plant manager to changethe schedule, they’d negotiate it at the card game on Fri-day night or over a beer. It would never get done at a pro-duction meeting. So people who didn’t know how to playthe game were at a real disadvantage, and our costs andschedule in the plant were a mess.” The successor knewhe couldn’t turn to the CEO for help. “He had helped tocreate that culture,” he explained.

The successor sought advice from two people. Onewas a consultant who had previously worked with thecompany on improving its operations and its culture.


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The consultant was respected by managers throughoutthe company and by the CEO. The second person was hisretired boss and mentor, who understood productionsupply problems and was creative in solving them. Justas important, his former boss cared deeply about thesuccessor’s career.

Over the next few weeks, the consultant met with across section of people who were involved in productsupply, mapped the decision-making processes, and cal-culated the costs of the current way of operating. He alsomet with the successor and the successor’s former bossto review his findings. Together, the three formulatedand implemented a strategy that resulted in majorimprovements in customer service. Best of all, they didso without ruffling too many feathers—one of the primevirtues of a balanced personal advice network.

A final way in which a balanced personal advice net-work can be used is in mediation. A board member, anoutside adviser, or a senior staff member can bring thesuccessor and CEO together if he has the trust of bothparties and if he has no vested interest except in wantingto see a positive resolution. Such a person might also beable to reason with the CEO in a way that the second incommand cannot. (For an example of such facilitation,see “A Succession Saved from the Brink” at the end ofthis article.)

Stay focused on the endgame. Because of the inten-sity of emotions and competitive spirit of many succes-sors, they may consider a disagreement with the CEO asa contest to be won. They temporarily lose sight of theirultimate goal: to move to the top and lead the companyforward. One successor who failed to make the transitionto the top slot lamented afterwards, “I had decided early


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on what I wanted before any of my friends did—the kindof job and the sort of place I wanted to work at. When Igot the successor’s job, it was like I had gone to heaven.It was all right there.” Then, he recalled, “I got drawn intoa battle that I never intended to fight. I let myself get dis-tracted by my feelings and pride, and I took my eye offthe real goal.” This leader failed to manage his emotions.He let the successor’s dilemma get the best of him.Scrambling toward his goal, he didn’t know when to pullback or how to do it gracefully. Leaders must be able todo both of those things to manage the successor’sdilemma.

One way for the successor to keep his emotions incheck is to practice empathy and focus on what the CEOis going through rather than on his own experience. Onedesignated successor embroiled in a difficult transitioncame to understand what his boss was experiencing, withsome help from his wife and two board members. Theyhelped him see that the CEO’s actions, such as overrulingthe successor’s decisions and taking over his meetings,didn’t prove that he had changed his mind about retiring.Rather they showed that the CEO was struggling with los-ing the position that gave him his identity. The succes-sor’s wife put it most directly by saying, “This is not aboutyou. [The CEO] is not thinking about you at all as he’sdoing these things. It’s all about him.”

Perhaps the hardest part of managing the successor’sdilemma is allowing the CEO himself to save face. It canalso be the most critical part. Take the case mentionedearlier in this article about the CEO who changed report-ing duties while his successor was away. At first, the COOwas angry when he returned from his trip. But he soonrealized this was not a battle to pick. The CEO onlywanted to show the organization he was still boss. The


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successor quietly met with the chief financial officer, andtogether they decided they would both work with thehead of IT. “I decided that I could still get the changes Iwanted in IT,” the successor recalled, “and that the onlyreason to make an issue about it was my ego.” He let theCEO’s pride win instead, and he went on to land the topjob 18 months later.

A Timeless Drama

The poignant and often painful drama of succession isages old. As one person rises to new heights, anothermust fall, or at least step back from the spotlight. Thussuccession forces its players to confront the hard andeternal human questions of power and identity. And theymust do so with many eyes on them, including themedia, their colleagues, and their families. But the hard-est audience the characters in the succession dramamust face are themselves and each other.

Yet leadership transitions can be managed in waysthat make success more likely. The successor can pre-pare for the challenge before joining the organization.Once he does that, he can work assiduously to create agood relationship with the incumbent leader. He can alsodraw on the outside help of advisers. In the end, the suc-cess or failure of a leadership transition belongs to thesuccessor, and it always will.

Notes

1. Jeffrey A. Sonnenfeld, The Hero’s Farewell (Oxford Univer-sity Press, 1988).


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It’s Different from the Inside

THE SUCCESSOR’S DILEMMA is clearly a tough chal-lenge for executives coming from outside the company.But what about executives moving up from inside thebusiness? They’re better off, according to our research.We found that about half of the internal successors in ourstudy were promoted to CEO within five years com-pared with about a quarter of the successors who hadbeen hired from the outside.

Without question, internal CEO candidates have anedge because they already understand the organiza-tion’s culture and politics and have established relation-ships with the CEO and other senior managers. But thefact that half aren’t successful in becoming CEOs indi-cates they still face substantial challenges:

• They must rreeccaasstt tthheeiirr rreellaattiioonnsshhiippss within the organizationas they become the boss to former coworkers and super-visors. Colleagues who were passed over for the succes-sor’s job often present the most difficulty; they resist thenew leader’s direction much more than they would resistdirectives from someone brought in from the outside.

• They must mmooddiiffyy ppeeooppllee’’ss eexxppeeccttaattiioonnss of them. Theorganization knows the insider as he was. But once he ispromoted and given a mandate for change, the succes-sor must introduce new ways of operating the business,hold people to higher standards, and spend time withnew stakeholders, such as the board.

• They must rreebbuuiilldd tthhee ttoopp tteeaamm or create a new one,either by hiring from the outside or by moving people upfrom within the organization. While the successor almostcertainly won’t move people around much during the


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transition itself, he will have to deal carefully with col-leagues who are jockeying for position and trying tosecure their jobs in anticipation of his takeover.

Inside and outside successors do share one chal-lenge. Both must deal with the strong emotions—andinevitable resistance—of the CEO. Just because the suc-cessor comes from within the company, that doesn’tmean the CEO will let go more easily. Nor does the suc-cessor’s insider status mean that he won’t want to makehis own bold mark during the transition period. If the twoindividuals had any problems before the transition, thoseconflicts will be accentuated now. If the two executiveshad no problems, some are sure to develop—and willdemand careful attention.

A Succession Saved from the Brink

THE STORY OF BILL AND HOWARD begins like a lead-ership transition bound to fail. It didn’t. Bill, a talentedexecutive brought in to succeed Howard as CEO of alarge manufacturing company, used several simple buthighly effective practices to stop the successor’s dilemmain its well-worn tracks.

Bill and Howard’s problems began about two yearsafter Bill joined the company as president of internationaloperations. Bill hadn’t been given an outright guaranteethat he would make it to the top position, but he hadreceived strong assurances. Howard, he was told, hadagreed with the board that he would retire in threeyears. If all went well, the CEO’s post was Bill’s.

Both Howard and the board had exhorted Bill to getinternational operations back on track. The division had


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been strong in the past, but performance had suffered asaggressive competitors made inroads. To make mattersworse, two recent product launches had failed, andcosts were rising. Despite those problems, the company’snew strategic plan called for double-digit growth outsidethe United States. It was up to Bill to achieve that.

Bill got off to a good start, and within a year and ahalf he was making solid improvements. He had acceler-ated product launches, cut manufacturing costs, andstreamlined distribution. Market share rebounded, andprofits climbed. Bill was on a roll, and the financial com-munity took notice.

Along the way, Bill kept Howard informed of hisactions and saw no indication that he disagreed. But justas Bill began to post good results, his relationship withHoward started to sour. In year-end reviews, Howardpraised Bill publicly for what he had accomplished. Butboth men could feel a chill. One obvious reason wasthat they simply did not spend any time together. Bill’sinternational travel prevented it. But there were otherproblems, too.

Bill was feeling increasingly restless. When would theboard and Howard start talking about succession?Surely, he thought, he had earned the top job by now.Meanwhile, Howard was developing cold feet. He wasonly 64 and in good health. Bill had been with the com-pany for less than two years. Now that the internationaldivision was back on track, why shouldn’t he remain andlead the company he had spent close to a decadebuilding? These are the best of times, Howard told him-self, so why leave now?

After a few small snubs from Howard, Bill consideredasking him to talk things over but decided to wait. Forone thing, he reasoned, if Howard thought that he was


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trying to push him out prematurely, a meeting might back-fire. Anyway, he decided, it was up to Howard to initiatea dialogue. Bill concluded that his best course was tokeep posting great results.

In the next few months, Bill accelerated his pace. Hecut costs again in the plants and entered into a major dis-tribution alliance—without consulting Howard. The agree-ment meant that the international division would need tohit more challenging targets than ever, but Bill believedthat the pact’s benefits far outweighed the temporarystress it might cause. He also knew the deal would catchthe attention of the board, who might then advocate forhis promotion.

The deal did get attention, but it also angeredHoward, and the CEO’s active resistance began. Hestarted telling other executives that Bill was taking toomuch cost out of the plants and that the new alliancewas full of booby traps. Howard grumbled to himselfabout being left out of the loop and upstaged. He wasstill CEO, wasn’t he?

It soon became apparent that Bill’s new distributionalliance was a success. It increased revenues, and whenpaired with the cost cutting, boosted profits. The boardwas delighted; they decided that Bill had earned theright to be named chief operating officer and to be nomi-nated to a board seat, publicly putting him in line to suc-ceed Howard.

Over the next weeks, Howard went from remote toicy. He never congratulated Bill on his promotion andnever mentioned the board position at all. Howard con-tinued to make all the corporate decisions and said noth-ing about a handoff. Bill became increasingly worriedthat Howard had changed his mind about retirementand that he’d been parked in a job with no power.


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Tensions hit a peak when a national business magazinewanted to spotlight the company and wanted to put Billon its cover. Howard vetoed it.

Now Bill was angry. His first impulse was to leave; hehad gotten several calls about attractive managementpositions in larger companies. At the same time, hewanted to complete what he had started in a companyhe had come to like. So he turned to two key people inhis personal advice network—his wife and a trusted out-side adviser. Bill accepted the chance to step back,count to ten, and more rationally decide on the bestcourse of action.

He consulted several board members confidentially.Howard would have been threatened if he had knownabout the meetings, but it was worth the risk to Bill. Hewanted to affirm the board’s commitment to Howard’sretirement—and to Bill as the next CEO.

Bill then approached Cliff, the company’s chief finan-cial officer, whom he had come to trust. His appeal tothis internal adviser—who also was respected byHoward—is what helped this successor story have ahappy ending. Cliff opened Bill’s eyes to what Howardwas going through—his unease about losing his identityas CEO and his fear that his legacy might be eclipsed.“Bill, we’re talking about his emotions here. This has noth-ing to do with your performance,” Cliff told him.“Howard needs an exit plan, one that lets him leavegracefully and go to something that he’s excited about.He’s keeping all this inside because he’s used to beingthe one with the answers.”

As he and Cliff talked, Bill realized that a smooth tran-sition was as important to his success as any of his strate-gic or operational accomplishments. Bill knew that themanagers whose support he needed in order to be a


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successful CEO were loyal to Howard. He couldn’tappear to be forcing Howard out. Moreover, Billrespected Howard. He wanted to see him leave with thecredit he deserved. He knew he had to speak withHoward and begin to work toward a transition thatmade sense to both of them. Cliff agreed to facilitate thediscussion.

The first meeting lasted six hours. The executivesbegan by focusing on the distribution alliance and onHoward’s anger at not being consulted about it, but thediscussion quickly moved to deeper issues in the relation-ship. Although the meeting was awkward for both lead-ers, they were able to share their concerns with helpfrom Cliff. Howard expressed his misgivings about leav-ing the company and going into retirement. Bill assuredHoward he had no intention of rushing him from his post.By the end of the session, the successor and his bossagreed to meet in person every two weeks and havemonthly checkup sessions with Cliff present.

One year later, Bill did indeed succeed Howard in asmooth leadership transition that almost got away.

Originally published in November–December 1999Reprint 99604


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The Rise and Fall of theJ. Peterman Company

Executive Summary

IN 1987, JOHN PETERMAN started the J. PetermanCompany with a $500 investment and a $20,000 unse-cured loan. What began with an ad in the New Yorkerand a single product prospered for years. But in 1998,the company slid harrowingly into bankruptcy proceed-ings. What happened?

As Peterman tells it, it all started with a trip he took toJackson Hole, Wyoming, where he bought a coat. Itwas a long, sweeping cowboy duster, and he liked theway wearing it made him feel. He suspected that otherpeople would like to buy something that made them feelromantic and individualistic, too. He was right. With DonStaley writing the copy, Peterman issued the first catalogin 1988. It contained just seven items. By 1989, the com-pany did $4.8 million in sales; by 1990, that figure hadgrown to $19.8 million.

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But the business model was always implicit—a mis-take. They should have developed a precise missionstatement. In hindsight, Peterman says, it would havebeen easy. The business concept could have beensummed up in six words: unique, authentic, romantic, jour-ney, wondrous, and excellent. The most successful itemsevoked all of those things.

The business grew, and as more items were addedto the catalog and their retail stores expanded, every-one in the company had difficulty focusing. Rapidexpansion in the late 1990s brought more staff, morebackers, more risk, more rules, and less focus. Time ranout when a cash-flow crisis ultimately squeezed the lifeout of the company. Looking back, Peterman draws anumber of transferable lessons about creating a dreamand building a culture, and about the nature of trustand control in a growing organization.

T life of a growingbusiness when you, as its founder and top manager,realize that the company has taken on a momentum ofits own. You influence it, certainly, but more and moreyou are swept along by it. I hit that point in 1996. Icreated the J. Peterman Company on a $500 investmentand $20,000 borrowed, unsecured. I made the companygrow. I gave it momentum. And then I began to recog-nize that it had gained a momentum of its own. Iwatched it hit its stride—and then I watched it stumbleand fall. J. Peterman went into Chapter 11 on January25, 1999, and has been purchased by Paul Harris Stores,to reemerge as what, I’m not sure. I am no longer asso-ciated with it.

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Now I’m in a transition period. I’m saddened by theloss of J. Peterman. (I mean that quite literally. Ironically,John Peterman is J. Peterman, and J. Peterman is JohnPeterman, but I no longer own the J. Peterman name.)And I’ve been operating—living—under significant pres-sure. Going through a bankruptcy is unmercifully stress-ful. It’s very difficult—even in the aftermath—to focus onthe future. I am jumping back on the horse; it’s in mygenes. To tell the truth, though, deciding which horse tojump on hasn’t been easy. Figuring out a strategy—deciding which direction I want to go in as a person andas an entrepreneur—has been hard. Particularly since Ihave to think about it this time. There wasn’t a hugeamount of strategizing involved in creating the J. Peter-man catalog business. It was intuitive, it fit, it felt right.Any new project I take on must also feel right, but itmust have a considered strategy as well. Sadly, that maymean I’ll never allow myself quite the freedom and spon-taneity I enjoyed for a time with the J. Peterman Com-pany. But I feel that’s the right way to move forward.

I’m getting ahead of myself. I’ll go back to the begin-ning. I didn’t sit down and say, “I’m going to build anorganization with this kind of culture aimed at attractingthat kind of customer.” I knew what kind of culture Ienjoyed working in; I strongly suspected that there werepeople who would respond to a company marketingromance and individuality. But the company was born,as it were, with my own purchase of a cowboy duster.

I bought the coat during a trip to Jackson Hole,Wyoming, because I liked it—it said something aboutme that I wanted said. It said that I don’t need to wearsomething with a logo to show people who I am. It wasromantic, different. I found when I wore it, strangersseemed to give me approving glances. In airports, people


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would try to meet my eye as I walked by them. And Ithought, “I like the way this feels; I wonder if there areothers who would appreciate the feeling as well.”

Armed with that very unscientific research, my friendDon Staley and I decided to run an ad in the local Lex-ington, Kentucky, paper and see what we could sell. Wethought that we would try writing about the way I feltwearing the duster—that we would try to create the con-text and see if that appealed to anyone. Well, we soldone. To my accountant’s secretary, so it didn’t reallycount. But, we thought, we’ll just try one more time. Sowe ran some more ads, searching for the people wethought might be out there. We hit pay dirt with the adwe ran in the New Yorker. We sold 60 or 70 coats, and theJ. Peterman Company was up and running.

It was a stressful time. I would buy dusters on 30-dayterms, secure the ad space, and then use the money fromthe sales to pay for the ad. But then I had to run anotherad to get the money to pay for the dusters. It worked in acycle, and a few cycles into it, I realized that I couldn’t

afford to get out of the business;I owed so much money. Survivalis a great motivator, and weknew that we were hitting a sig-nificant chord with the public,so we created the catalog and

continued to push. Our first Owner’s Manual catalog,with black-and-white drawings and that same romanticcopy—which was to become our trademark—went outin the fall of 1988. It had seven items in it, including theduster. We mailed our first color book the followingspring.

By the end of the first year, we had about three full-time people and three or four part-time people working

We made the cheesedownstairs and ran J. Peterman upstairsin two rooms.

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with us—none of them making much money. My wife,Audrey, who was in charge of the whole back end, wasgetting paid (not much). I wasn’t. But even with a staff, Ididn’t spend time thinking about the organization I wascreating. I was too busy. In the beginning, I was main-taining myself by running a specialty-foods consultancy,along with a regional business that made and distributedHall’s BeerCheese, which had limited growth potential.All three businesses were located in one very old build-ing; we made the cheese downstairs and ran J. Petermanupstairs in two rooms. One room was full of dusters andsuch, and the other had three desks and, believe it or not,a potbellied stove we used for heat. We were staying justahead of the curve financially—selling stuff, paying theprinter, sending out the catalog, selling stuff.

I was also looking for capital. I contacted 100 venturecapitalists initially and was turned down by every singleone. They would look at my very crude and rudimentarybusiness plan and say, “Tell us about your experience inthe catalog business.”

And I would say, “I don’t have any.”And they would say, “Well, tell us about your experi-

ence in the apparel business.”And I would say, “I don’t have any.”And they would say, “Well, you’ll have to go look for

your money someplace else.”I had some near misses with several venture capital-

ists—one we came very close to finalizing a deal withbefore it fell through. (I had to sweet-talk the printer intorunning our catalog that cycle.) And then in 1989 wewere approached by Hambro America. A man namedEdwin Goodman called me and said something like,“We’ve seen your ad in the New Yorker, and we’re kind ofintrigued—thought maybe you would be looking for


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capital.” And I said with barely contained excitement,“Possibly.” The deal was done in three weeks.

We had come up with a very engaging concept for abusiness. We were getting a tremendously high responserate from prospects. Virtually every book we mailed had

a very high response rate.In 1989, we did $4.8 millionin sales, and in 1990, wedid $19.8 million. Our staffgrew even faster. We wentfrom 15 people in 1989 to

probably 75 or 80 in 1990, and we were all working welltogether toward a common, if unstated, goal. The roadahead looked exciting.

We had also, without realizing it, planted the seedsfor serious problems later on. All the thinking about thebrand, the niche, the target market—it was intuitive for avery long time. I wish now that we’d written down ourideas, our concept—in detail—at the start. It was a longtime before we put anything into words in that way, andby then I think it was too late. The theory of our businesswas in my head and in Don’s head (as creative director,he concentrated on writing and producing the catalogs),and until 1996, we took the time to make sure that it wasalso in the heads of everyone on staff. But in 1997, whenwe laid our plans for retail expansion and we had torecruit many more people quickly, it got lost. In the faceof success and rapid growth, it’s easy to assume that peo-ple joining the team know what the game is. Failing tomake sure that everyone knows what you stand for andwhy—that can come right back and ambush you muchsooner than you realize.

We did always have one thing in writing, a generalphilosophy, in our catalog. It was, “People want to live

In the face of success, it’seasy to assume that peoplejoining the team knowwhat the game is.

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life the way they wish they were.” The problem was thatsuch a philosophy, so broadly stated, didn’t give ouremployees nearly enough guidance. We should havedeveloped a precise mission statement, or somethingalong those lines.

It’s easy for me to do that now. In fact, I can sum upthe concept of the business in six words: “unique,”“authentic,” “romantic,” “journey,” “wondrous,” and“excellent.” The items we sold—the ones that were mostsuccessful—were all of those things. The duster, forexample. It would definitely have been unusual on theUpper East Side. At the same time, though, it wasn’t con-trived; it certainly wouldn’t have been unusual on aranch. It evoked a sense of romance; cowboys are roman-tic figures. Worn outside the context of a ranch, itimplied that the wearer was on a journey, intellectuallyand emotionally. With that implication came a certainsense of wonder. And its quality was excellent. At onepoint early on, in fact, we lost the supplier for the duster,so I cut up one of the coats, took out all the stitching,sourced 22 different components, and found a manufac-turer to produce it. That duster embodied the six words;it was the company. There was never a question aboutreplacing it even with a similar product, though we were,for a time, up against the wall.

At any rate, when we matched our products withthose six words, we were successful. The duster, the J.Peterman shirt (a colonial style—99% Thomas Jefferson,1% Peterman), even the items we associated with classicmovies—all met the criteria. When we strayed from thesix words, we faltered. Toward the end of the company,we were developing 2,000 new products a year. There isjust no way to generate 2,000 products that are trulyromantic, unique, and authentic.


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Some people have questioned whether we were trueto our concept by pursuing and selling the props fromthe movie Titanic, very late in the company’s life. Wewere. The sinking of the actual ship Titanic during theEdwardian era was a terrible tragedy, but it was also aromantic story. (Tragedies often are.) The products wereauthentic movie props; we never led people to believethat the materials came off the ship, nor did we wantthem to think so. The connection we aimed to create forcustomers was with the movie, as well as with the actualevent. What we were helping customers capture forthemselves was the magic of Hollywood, along with theromance of the time and of the story.

Where we strayed from our concept was in sellingreproductions of the “heart of the ocean” necklace wornby the heroine in the movie. The product did well, butselling it was a clear commercial decision. We shouldn’thave. It was not authentic, it was tied too completely tothe movie, and it appealed to an audience younger thanour target 35 to 55 year olds. It was a costly success interms of our brand’s integrity. On the other hand, sellingthe “Kate Winslet dress,” a reproduction of one of thecostumes from the movie, was just fine. The dress was ofthe Edwardian period; it was something we might havecarried even without the movie.

We were also true to our concept when we recreatedthe ambiance of the catalog in our retail stores. Theproblem with the retail stores was the pace of our expan-sion, not the decision to expand. But I’ll get to that later.

I put a lot of time into thinking about how the retailstores could reflect the sentiment and tone of the writingin the catalog, and I think that time paid off. The trickwas taking the catalog one step further. Inviting cus-tomers to my Grandmother’s barn, actually.

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When I was ten years old, I would go to my grand-mother’s barn, open the door, and be transfixed. I couldspend hours, days, summers there, exploring all the won-derful treasures. It was that sense of discovery that weaimed to re-create in the retail environment. And itworked. The full-price retail stores averaged over $500per square foot in sales. The store in Grand Central Sta-tion did over $800 per square foot. A senior analyst fromGoldman Sachs toured the store in the fall of 1998 andtold us it was the freshest retail concept he’d seen in tenyears.

Peterman on-line shopping was another story. I hadn’tspent much time thinking about the potential of the Web,and I didn’t really see the need to. I knew our Web sitewasn’t very exciting, but my focus was elsewhere. TheWeb certainly got my attention when we sold half a mil-lion dollars’ worth of “heart of the ocean” necklaces inabout six weeks. But before that, and afterwards, the sitejust puttered along. Since I left the J. Peterman Company,I have spent a great deal more time thinking about howretail can work, and should work, on the Internet. My nextbusiness, in fact, will be Web oriented. I don’t knowwhether we missed an opportunity, large or small, by notdevoting more attention to e-commerce at J. Peterman.But speculating about that now won’t do anyone anygood.

This seems like as good a place as any to mentionSeinfeld. A lot of people have asked me about the J. Peter-man character on what was then the number one televi-sion show in America. In fact, a good many people havesaid that I had a blind spot where the Peterman charac-ter was concerned. That I missed an enormous opportu-nity to take advantage of the character and all the pub-licity. That I should have hired the actor who portrayed


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me, John O’Hurley, to represent the company. I don’tthink so. Certainly, we missed an opportunity to exploitthe name recognition; most people who watched Seinfeld

didn’t realize that we werea real company or that J. Peterman was a real per-son. In retrospect, wemight have done morewith that. But changingour business to dovetailwith the fictitious one on

television would have been too much of a commercialmove, and our business had been built around the idea ofstaying away from commercialism.

I did review the scripts. After the first time O’Hurleyappeared as me on the show, Seinfeld ’s lawyers con-tacted me, and we agreed that I would sign off on thescripts in which my character had a part. And we did putan Elaine Bennes suit into our catalog, mostly as a way ofwinking at our customers. But I regret doing that. It wasone of those little decisions that was slightly off point forour brand. The suit actually sold quite well. But it was agood suit—I think it would have sold well even if we hadcalled it “Barbara’s suit.” The problem was that it was atick in the wrong direction. It may have been an excel-lent suit, but it did not embody any of the other ele-ments. It was not romantic or wondrous. It representedno sort of journey. And it was not authentic; it was tiedto a TV show that was entirely fictional.

Seinfeld was a bit of a nonstarter for me overall. Thefirst appearance of the J. Peterman character on theshow in May 1995 coincided with a substantive increasein the prices of postage and paper. We posted a signifi-cant loss that year, and it was hard to take. So my mindwasn’t on television; it was on retrenchment.

The first appearance of Peterman on Seinfeldcoincided with increases inthe prices of paper andpostage; my mind wasn’ton television.

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I was beginning to realize that we had reached theceiling of potential for the Owner’s Manual catalog. Ourefforts at developing a home-hard-goods mail-orderbusiness were not progressing as I had hoped. I intu-itively believed that our niche could be larger than a $65million a year catalog business, so I started thinkingabout other ways to grow. Ultimately, we broke even in1996. But even one flat year makes backers nervous, andI was starting to get some pressure from our investors(we had more by then) and from the bank (we had ofcourse moved beyond the $20,000 by then, too) to“restart” the business. I also knew that we needed morecapital, and none of our current investors was interested.That’s when, at the end of 1996, I started consideringrapid retail expansion and, along with it, the recruitmentof name-brand managers. Investors want to see creden-tials on staff.

On paper, the expansion plans and their rate of imple-mentation made sense. After all, only one in four peopleever buy anything out of catalogs, but just about every-one shops in retail stores. Our existing retail stores—afull-price store in Lexington, Kentucky, and two outlets,one in Chattanooga, Tennessee, and another in Man-chester, Vermont—were doing well.

Retail expansion also seemed to be a way to bringour finances in line. Our G&A expenses were gettingtoo high. We broke even in 1996 because we cut backon advertising; we mailed fewer books and to moreresponsive customers. What we should have done inaddition was cut back on the number of products wewere offering.

We were adding items because we felt that the moreitems we offered, the more opportunity people wouldhave to buy. There was ample evidence in general retailresearch to support that. So we continued the trend with


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our retail stores. But the more-is-better theory didn’twork for us in practice. The more items we offered,whether through the catalog or through the stores, theless special—the less “Peterman”—each new itembecame. And we needed more staff to support the prolif-eration of products. It was the beginning of the end, but Ididn’t recognize it at the time.

All of which brings me to 1998, when we rolled out thevery aggressive retail expansion. Let me be clear: left tomy own devices, I wouldn’t have moved that fast. But wehad to expand aggressively to get the infusion of capitalwe wanted. In hindsight, maybe if I hadn’t received thecapital, I would have slashed the product line, as I shouldhave. At the time, I didn’t have the perspective to thinkalong those lines. Expansion looked like survival to me.

Our many new products in turn created the need formany new business systems and an ever-expanding staff.It was too much change at once, and it was a recipe fordisaster. I’ve covered the product proliferation problem.Now I’ll tackle the staff and the systems problems.They’re all related.

In the beginning, I didn’t have the money to hiremany people with “credentials.” Most of our merchantsrose through the ranks internally, working directly withme the whole way, and now I think that was just as well.It gave us the luxury of developing talent. Sure, your“insiders” have to have some talent to start with, but Ifound that it wasn’t good to make the judgment call onthat too early. The best people we had took a year tolearn what the business was. To give you an example,when I brought in Paula Collins as a catch-all assistantback in 1990, her claim to fame was that she had been asecretary to a guy based in White Plains, New York, whoexported nuts and bolts. Paula didn’t exhibit a great deal

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of talent initially, but she did exhibit a great work ethic, awillingness to learn, and tremendous resiliency.

Very early on, Paula became the women’s merchant.She would come in with a product, and I would say“that’s not right; that’s not the business we’re in,” andshe would ask why, and we would go back and forth. Shekept learning, kept trying to figure out what the businesswas about, and ultimately she developed into one of thebest merchants in the industry.

The problem in 1997 and 1998 was that we were miss-ing some very specific areas of expertise that I felt weneeded to handle our retail expansion. And so we wentoutside for high-level employees to fill those gaps. Hiringat high levels from other companies isn’t inherently abad idea. I can’t deny the need for new blood; outsidersbring fresh energy and perspective to the table, and wedid hire very talented people. The idea of recruiting high-powered people with credentials, though, is that they canhit the road running. They never got the chance.

If you’re changing systems—purchasing, computer,merchandising—you need high-level people who havebeen with the company awhile and know the business sothey can keep it steady through the transition. If yoursystems are set, you can add high-level people from out-side because they’ll be able to start working within estab-lished guidelines. We were changing the systems and thepeople at the same time. The ground was moving; thenewcomers never gained traction. What was needed wasa carefully orchestrated transition period. We neverslowed down long enough to allow for a transitionperiod, much less manage it.

Doing what we did, the way we did it, caused prob-lems on several levels. For one, our existing staff feltslighted. The people we brought in were in many cases


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making higher salaries for no good reason except that tohire them we had to meet what they were already mak-ing. And the spotlight was on the new folks. When deci-sions needed to be made, we paid more attention to thenew staff than to the old-timers.

For another, the culture started to fray. We didn’thave a hard time recruiting. It was well known that ourculture was one of creativity and respect for people;there was no shortage of people who wanted to join thatculture. But when you hire people from a culture thatisn’t respectful or from a culture that is very controlling,it’s like bringing an abused dog into a friendly home. Ittakes time and a lot of patience and positive reinforce-ment for the dog to trust you—to know that every timeyou walk by you’re not going to whack it.

When you don’t have the time to offer continual posi-tive reinforcement, the natural tendency is for the newpeople to slip back into old cultural habits. After all,that’s what they know best. In the absence of constantreminders that they now have the authority to do this,and that the organization is structured so that theyshould feel free to do that, they’ll re-create their old cul-ture and set up boundaries between people, levels, anddepartments where none previously existed. We didn’thave the time to keep reinforcing what we assumed wasa rock-solid culture. And so the new team didn’t havetime to gel. There was friction; there was confusion.

We had had a culture in which every employee under-stood and recognized that every job was important, thateveryone was a valued contributor. Culture can’t be dic-tated; it must be absorbed over time. Until 1997 or so, wewere giving newcomers the time they needed to absorb it.

I’ll cite a brief example. From the beginning through1996, I had breakfast each Friday with a different group

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of eight employees, randomly selected from all levels andareas of the company. The only rule at breakfast was,“There are no rules.” People were encouraged to ask meany questions, personal or business related. We used thetime simply to get to know one another. It was a smallthing—it only took an hour a week—but it was tremen-dously important because it showed my employees that Icared about them. Well, things got too busy in 1997; Iwas out of the office a great deal trying to raise capital; Iwas working 12- or 14-hour days, seven days a week. Thebreakfasts got lost in the shuffle. That was telling.

Some postmortem critics have said that our open cul-ture allowed too much freedom and that that freedomwas a critical factor in the company’s demise. Not true.I’ll defend the culture we had in the early days—andtried to keep throughout the life of the company—to thedeath. We did not go bankrupt because of the culture.

Ultimately, the death of the J. Peterman Company wascaused by a combination of things. We made mistakes,but we could have survived them. We were bombardedby external, out-of-our-control kinds of things, but wecould have survived them. What we couldn’t survive wasour own mistakes coupled with the external, out-of-our-control kinds of things. We faced too many hurdles atonce, and it all tumbled in on us.

For one thing, the business plan for 1998 was back-end loaded. That means we were counting on too manysales coming in during the last three months of the year.More seriously, that back-end loading was based on adirect-marketing fallacy. The theory was that if weoffered customers more products—if we mailed a Peter-man Owner’s Manual to customers one week and fol-lowed up with a hard-goods book the next—we’d sellmore stuff. We didn’t. The catalogs competed with each


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other for our customers’ “Peterman dollars.” We justended up doubling our marketing costs while leaving oursales where they were. So while we built up our fixedorganization in anticipation of rapid growth in the nextyear, those sales didn’t materialize.

There are two theories of growth. One is that you letorganizational development lag behind business growth.The danger with that approach is that you get too muchbusiness, and then your company crumbles from withinbecause you don’t have the staff to handle it. The othertheory is that you build the large organization to handlethe business you anticipate. That’s what we did, at theurging of the venture capitalists, and we ended up in aliquidity crisis. I’ll not disguise my feelings; I’m bitter.

Nothing seemed to work. In the midst of everythingelse, we replaced our hard-goods book, Peterman’s Eye,with a new hard-goods book, Peterman’s Notebook. TheEye wasn’t a loser, but it also wasn’t hugely profitable,and we thought we could do better. The problem was thechange cost too much, in time as well as money. It wasanother bump in the road when we couldn’t handle anymore bumps.

Offering more products meant not only confusingcustomers and adding more staff to source items butalso adding more manufacturers and so forth, rightdown the channel. To stay on top of things, we replacedour old inventory-management system, but we never gota handle on it. We did not manage inventory very welltoward the end, and that’s a gracious comment.

And then our bank made a significant error, whichmade our financial picture look much worse than it actu-ally was. Even after they recognized the error, the peoplehandling our account didn’t retreat from panic mode.They started to squeeze us, in a legal way, though not to

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my mind in an ethical way. They withheld an advance wehad counted on; they refused to finance the inventory inour retail stores; they squeezed millions of dollars out ofour fall line.

So there we were, faced with soft sales, fixed costs thatwere too high, too much inventory, and a lendingsqueeze. Add to that a breakdown at the printer, whichdelayed one of our catalogs by three weeks, which, inturn, aggravated a deal in the making that I had withanother bank, and you’ve got a full-blown liquidity crisis.

Ultimately, the venture capitalists pulled out, we wereunable to restructure, and you know the rest. There wereseveral 11th-hour rescue attempts, but none panned out.I felt as though we were a plane going down. We were ina spiral at 30,000 feet, we leveled out at 20,000, went intoa spiral again at 10,000, and then we had no altitude left.Our vendors got shafted and so did our employees, andI’m sorry.

Paul Harris bought the company—inventory, assets,the J. Peterman trademark—on March 5, 1999. End ofstory.

You know, the popular press has had a field day withArnie Cohen, former president and chief operating offi-cer of J. Crew, who joined us as president and COO inJuly of 1997. To some extent, they were justified. Arnie isa great salesman; he is very intelligent and has manygood qualities. He had been involved in the company foralmost a year as an adviser and consultant before hecame on as president, and he had gained my completeconfidence during that time. In retrospect, however, hewasn’t as good an operator as I thought he was. He con-tributed to many of the transitional problems we had, inlarge part because he pushed the company to take on toomany initiatives at once. He should have known better.


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For my part, I should have listened more to my own intu-ition. I should have trusted myself—over anyone else—and I should have known when to say no.

It’s tough to balance your own instincts as a founderand top manager with the desire to let the people you’vehired do their thing. Managing managers wasn’t some-thing I set out to do; it was a job requirement that wasincorporated by default into my position because myoriginal idea for a business was a good one. But I think Idrew out of this experience the skills to do it well; Ibelieve that next time around I will know how to stepback from the fray, assess things objectively, and makethe right call. Next time, I’ll get that right. That’s not tosay I’m in the market to lead just any company. I am,first and foremost, an entrepreneur. What drives me isthe act of creating—the chase, if you will. But I knowmore now about what happens when an entrepreneursucceeds—more about the vicissitudes of the way. AndI’m ready to try again.

Originally published in September–October 1999Reprint 99507

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Why Should Anyone BeLed by You?

Executive Summary

WE ALL KNOW THAT LEADERS need vision and energy,but after an exhaustive review of the most influential theo-ries on leadership—as well as workshops with thousandsof leaders and aspiring leaders—the authors learned thatgreat leaders also share four unexpected qualities.

The first quality of exceptional leaders is that theyselectively reveal their weaknesses (weaknesses, notfatal flaws). Doing so lets employees see that they areapproachable. It builds an atmosphere of trust and helpsgalvanize commitment.

The second quality of inspirational leaders is theirheavy reliance on intuition to gauge the appropriate tim-ing and course of their actions. Such leaders are good“situation sensors”—they can sense what’s going on with-out having things spelled out for them.

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Managing employees with “tough empathy” is thethird quality of exceptional leadership. Tough empathymeans giving people what they need, not what theywant. Leaders must empathize passionately and realisti-cally with employees, care intensely about the work theydo, and be straightforward with them.

The fourth quality of top-notch leaders is that theycapitalize on their differences. They use what’s uniqueabout themselves to create a social distance and to sig-nal separateness, which in turn motivates employees toperform better.

All four qualities are necessary for inspirational lead-ership, but they cannot be used mechanically; they mustbe mixed and matched to meet the demands of particu-lar situations. Most important, however, is that the quali-ties encourage authenticity among leaders. To be a trueleader, the authors advise, “Be yourself—more—with skill.”

I of executives, trythis small trick. Ask them, “Why would anyone want tobe led by you?” We’ve asked just that question for thepast ten years while consulting for dozens of companiesin Europe and the United States. Without fail, theresponse is a sudden, stunned hush. All you can hear areknees knocking.

Executives have good reason to be scared. You can’tdo anything in business without followers, and followersin these “empowered” times are hard to find. So execu-tives had better know what it takes to lead effectively—they must find ways to engage people and rouse theircommitment to company goals. But most don’t knowhow, and who can blame them? There’s simply too much

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advice out there. Last year alone, more than 2,000 bookson leadership were published, some of them even repack-aging Moses and Shakespeare as leadership gurus.

We’ve yet to hear advice that tells the whole truthabout leadership. Yes, everyone agrees that leaders needvision, energy, authority, and strategic direction. Thatgoes without saying. But we’ve discovered that inspira-tional leaders also share four unexpected qualities:

• They selectively show their weaknesses. By exposingsome vulnerability, they reveal their approachabilityand humanity.

• They rely heavily on intuition to gauge the appro-priate timing and course of their actions. Their abil-ity to collect and interpret soft data helps them knowjust when and how to act.

• They manage employees with something we calltough empathy. Inspirational leaders empathize pas-sionately—and realistically—with people, and theycare intensely about the work employees do.

• They reveal their differences. They capitalize onwhat’s unique about themselves.

You may find yourself in a top position without thesequalities, but few people will want to be led by you.

Our theory about the four essential qualities of leader-ship, it should be noted, is not about results per se. Whilemany of the leaders we have studied and use as examplesdo in fact post superior financial returns, the focus of ourresearch has been on leaders who excel at inspiring peo-ple—in capturing hearts, minds, and souls. This ability isnot everything in business, but any experienced leaderwill tell you it is worth quite a lot. Indeed, great resultsmay be impossible without it.


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Our research into leadership began some 25 yearsago and has followed three streams since then. First, asacademics, we ransacked the prominent leadership the-ories of the past century to develop our own workingmodel of effective leadership. (For more on the historyof leadership thinking, see “Leadership: A Small Historyof a Big Topic” at the end of this article.) Second, asconsultants, we have tested our theory with thousandsof executives in workshops worldwide and through ob-servations with dozens of clients. And third, as execu-tives ourselves, we have vetted our theories in our ownorganizations.

Some surprising results have emerged from ourresearch. We learned that leaders need all four qualitiesto be truly inspirational; one or two qualities are rarelysufficient. Leaders who shamelessly promote their differ-ences but who conceal their weaknesses, for instance, areusually ineffective—nobody wants a perfect leader. Wealso learned that the interplay between the four qualitiesis critical. Inspirational leaders tend to mix and matchthe qualities in order to find the right style for the rightmoment. Consider humor, which can be very effective asa difference. Used properly, humor can communicate aleader’s charisma. But when a leader’s sensing skills arenot working, timing can be off and inappropriate humorcan make someone seem like a joker or, worse, a fool.Clearly, in this case, being an effective leader meansknowing what difference to use and when. And that’s nomean feat, especially when the end result must beauthenticity.

Reveal Your Weaknesses

When leaders reveal their weaknesses, they show us whothey are—warts and all. This may mean admitting that


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they’re irritable on Monday mornings, that they are some-what disorganized, or even rather shy. Such admissionswork because people need to see leaders own up to someflaw before they participate willingly in an endeavor. Ex-posing a weakness establishes trust and thus helps getfolks on board. Indeed, if executives try to communicatethat they’re perfect at everything, there will be no need foranyone to help them with anything. They won’t need fol-lowers. They’ll signal that they can do it all themselves.

Beyond creating trust and a collaborative atmosphere,communicating a weakness also builds solidaritybetween followers and leaders. Consider a senior execu-tive we know at a global management consultancy. Heagreed to give a major presentation despite being badlyafflicted by physical shaking caused by a medical condi-tion. The otherwise highly critical audience greeted thiscourageous display of weakness with a standing ovation.By giving the talk, he had dared to say, “I am just likeyou—imperfect.” Sharing an imperfection is so effectivebecause it underscores a human being’s authenticity.Richard Branson, the founder of Virgin, is a brilliantbusinessman and a hero in the United Kingdom. (Indeed,the Virgin brand is so linked to him personally that suc-cession is a significant issue.) Branson is particularlyeffective at communicating his vulnerability. He is ill atease and fumbles incessantly when interviewed in public.It’s a weakness, but it’s Richard Branson. That’s whatrevealing a weakness is all about: showing your followersthat you are genuine and approachable—human andhumane.

Another advantage to exposing a weakness is that itoffers a leader valuable protection. Human nature beingwhat it is, if you don’t show some weakness, thenobservers may invent one for you. Celebrities and politi-cians have always known this. Often, they deliberately


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give the public something to talk about, knowing fullwell that if they don’t, the newspapers will invent some-thing even worse. Princess Diana may have aired her eat-ing disorder in public, but she died with her reputationintact, indeed even enhanced.

That said, the most effective leaders know that expos-ing a weakness must be done carefully. They own up toselective weaknesses. Knowing which weakness to dis-close is a highly honed art. The golden rule is never toexpose a weakness that will be seen as a fatal flaw—bywhich we mean a flaw that jeopardizes central aspects ofyour professional role. Consider the new finance directorof a major corporation. He can’t suddenly confess thathe’s never understood discounted cash flow. A leadershould reveal only a tangential flaw—and perhaps evenseveral of them. Paradoxically, this admission will helpdivert attention away from major weaknesses.

Another well-known strategy is to pick a weaknessthat can in some ways be considered a strength, such asbeing a workaholic. When leaders expose these limitedflaws, people won’t see much of anything and little harmwill come to them. There is an important caveat, how-ever: if the leader’s vulnerability is not perceived to begenuine, he won’t gain anyone’s support. Instead he willopen himself up to derision and scorn. One scenario wesaw repeatedly in our research was one in which a CEOfeigns absentmindedness to conceal his inconsistency oreven dishonesty. This is a sure way to alienate followerswho will remember accurately what happened or whatwas said.

Become a Sensor

Inspirational leaders rely heavily on their instincts toknow when to reveal a weakness or a difference. We call


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them good situation sensors, and by that we mean thatthey can collect and interpret soft data. They can sniffout the signals in the environment and sense what’sgoing on without having anything spelled out for them.

Franz Humer, the CEO of Roche, is a classic sensor.He is highly accomplished in detecting shifts in climateand ambience; he can read subtle cues and sense under-lying currents of opinion that elude less perceptive peo-ple. Humer says he developed this skill as a tour guide inhis mid-twenties when he was responsible for groups of100 or more. “There was no salary, only tips,” he explains.“Pretty soon, I knew how to hone in on particular groups.Eventually, I could predict within 10% how much I couldearn from any particular group.” Indeed, great sensorscan easily gauge unexpressed feelings; they can veryaccurately judge whether relationships are working ornot. The process is complex, and as anyone who has everencountered it knows, the results are impressive.

Consider a human resources executive we workedwith in a multinational entertainment company. Oneday he got news of a distribution problem in Italy thathad the potential to affect the company’s worldwide

operations. As he wasthinking about how tohide the information tem-porarily from the Paris-based CEO while heworked on a solution, thephone rang. It was the

CEO saying, “Tell me, Roberto, what the hell’s going on inMilan?” The CEO was already aware that something waswrong. How? He had his networks, of course. But in largepart, he was gifted at detecting information that wasn’taimed at him. He could read the silences and pick up onnonverbal cues in the organization.

Sensing can createproblems. In making finejudgments about howfar they can go, leaders risklosing their followers.


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Not surprisingly, the most impressive business leaderswe have worked with are all very refined sensors. Ray vanSchaik, the chairman of Heineken in the early 1990s, is agood example. Conservative and urbane, van Schaik’sgenius lay in his ability to read signals he received fromcolleagues and from Freddie Heineken, the third-genera-tion family member who was “always there withoutbeing there.” While some senior managers spent a lot oftime second-guessing the major shareholder, van Schaikdeveloped an ability to “just know” what Heinekenwanted. This ability was based on many years of workingwith him on the Heineken board, but it was more thanthat—van Schaik could read Heineken even though theyhad very different personalities and didn’t work togetherdirectly.

Success stories like van Schaik’s come with a word ofwarning. While leaders must be great sensors, sensingcan create problems. That’s because in making fine judg-ments about how far they can go, leaders risk losing theirfollowers. The political situation in Northern Ireland is apowerful example. Over the past two years, several lead-ers—David Trimble, Gerry Adams, and Tony Blair,together with George Mitchell—have taken unprece-dented initiatives toward peace. At every step of the way,these leaders had to sense how far they could go withoutlosing their electorates. In business, think of mergers andacquisitions. Unless organizational leaders and negotia-tors can convince their followers in a timely way that themove is positive, value and goodwill quickly erode. Thisis the situation recently faced by Vodafone and FranceTelecom in the sale and purchase of Orange.

There is another danger associated with sensing skills.By definition, sensing a situation involves projection—that state of mind whereby you attribute your own ideas


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to other people and things. When a person “projects,” histhoughts may interfere with the truth. Imagine a radiothat picks up any number of signals, many of which areweak and distorted. Situation sensing is like that; youcan’t always be sure what you’re hearing because of allthe static. The employee who sees her boss distractedand leaps to the conclusion that she is going to be fired isa classic example. Most skills become heightened underthreat, but particularly during situation sensing. Suchoversensitivity in a leader can be a recipe for disaster. Forthis reason, sensing capability must always be framed byreality testing. Even the most gifted sensor may need tovalidate his perceptions with a trusted adviser or a mem-ber of his inner team.

Practice Tough Empathy

Unfortunately, there’s altogether too much hype nowa-days about the idea that leaders must show concern fortheir teams. There’s nothing worse than seeing a man-ager return from the latest interpersonal-skills trainingprogram with “concern” for others. Real leaders don’tneed a training program to convince their employeesthat they care. Real leaders empathize fiercely with thepeople they lead. They also care intensely about the worktheir employees do.

Consider Alain Levy, the former CEO of PolyGram.Although he often comes across as a rather aloof intel-lectual, Levy is well able to close the distance betweenhimself and his followers. On one occasion, he helpedsome junior record executives in Australia choose singlesoff albums. Picking singles is a critical task in the musicbusiness: the selection of a song can make or break thealbum. Levy sat down with the young people and took on


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the work with passion. “You bloody idiots,” he added hisvoice to the melee, “you don’t know what the hell you’retalking about; we always have a dance track first!”Within 24 hours, the story spread throughout the com-pany; it was the best PR Levy ever got. “Levy really knowshow to pick singles,” people said. In fact, he knew how toidentify with the work, and he knew how to enter his fol-lowers’ world—one where strong, colorful language is thenorm—to show them that he cared.

Clearly, as the above example illustrates, we do notbelieve that the empathy of inspirational leaders is thesoft kind described in so much of the management liter-ature. On the contrary, we feel that real leaders managethrough a unique approach we call tough empathy.Tough empathy means giving people what they need, notwhat they want. Organizations like the Marine Corpsand consulting firms specialize in tough empathy.Recruits are pushed to be the best that they can be;“grow or go” is the motto. Chris Satterwaite, the CEO ofBell Pottinger Communications and a former chief exec-utive of several ad agencies, understands what toughempathy is all about. He adeptly handles the challengesof managing creative people while making tough deci-sions. “If I have to, I can be ruthless,” he says. “But whilethey’re with me, I promise my people that they’ll learn.”

At its best, tough empathy balances respect for theindividual and for the task at hand. Attending to both,however, isn’t easy, especially when the business is insurvival mode. At such times, caring leaders have to giveselflessly to the people around them and know when topull back. Consider a situation at Unilever at a timewhen it was developing Persil Power, a detergent thateventually had to be removed from the market because it


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destroyed clothes that were laundered in it. Even thoughthe product was showing early signs of trouble, CEONiall FitzGerald stood by his troops. “That was the popu-lar place to be, but I should not have been there,” he saysnow. “I should have stood back, cool and detached,looked at the whole field, watched out for the customer.”But caring with detachment is not easy, especially since,when done right, tough empathy is harder on you thanon your employees. “Some theories of leadership makecaring look effortless. It isn’t,” says Paulanne Mancuso,president and CEO of Calvin Klein Cosmetics. “You haveto do things you don’t want to do, and that’s hard.” It’stough to be tough.

Tough empathy also has the benefit of impelling lead-ers to take risks. When Greg Dyke took over at the BBC,his commercial competitors were able to spend substan-tially more on programs than the BBC could. Dykequickly realized that in order to thrive in a digital world,the BBC needed to increase its expenditures. Heexplained this openly and directly to the staff. Once hehad secured their buy-in, he began thoroughly restruc-turing the organization. Although many employees werelet go, he was able to maintain people’s commitment.Dyke attributed his success to his tough empathy withemployees: “Once you have the people with you, you canmake the difficult decisions that need to be made.”

One final point about tough empathy: those more aptto use it are people who really care about something.And when people care deeply about something—any-thing—they’re more likely to show their true selves. Theywill not only communicate authenticity, which is theprecondition for leadership, but they will show that theyare doing more than just playing a role. People do not


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commit to executives who merely live up to the obliga-tions of their jobs. They want more. They want someonewho cares passionately about the people and the work—just as they do.

Dare to Be Different

Another quality of inspirational leaders is that they capi-talize on what’s unique about themselves. In fact, usingthese differences to great advantage is the most impor-tant quality of the four we’ve mentioned. The most effec-tive leaders deliberately use differences to keep a socialdistance. Even as they are drawing their followers closeto them, inspirational leaders signal their separateness.

Often, a leader will show his differences by having adistinctly different dress style or physical appearance,but typically he will move on to distinguish himselfthrough qualities like imagination, loyalty, expertise, oreven a handshake. Anything can be a difference, but it isimportant to communicate it. Most people, however, arehesitant to communicate what’s unique about them-selves, and it can take years for them to be fully aware ofwhat sets them apart. This is a serious disadvantage in aworld where networking is so critical and where teamsneed to be formed overnight.

Some leaders know exactly how to take advantage oftheir differences. Take Sir John Harvey-Jones, the formerCEO of ICI—what was once the largest manufacturingcompany in the United Kingdom. When he wrote hisautobiography a few years ago, a British newspaperadvertised the book with a sketch of Harvey-Jones. Theprofile had a moustache, long hair, and a loud tie. Thedrawing was in black and white, but everyone knew whoit was. Of course, John Harvey-Jones didn’t get to the top


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of ICI because of eye-catching ties and long hair. But hewas very clever in developing differences that heexploited to show that he was adventurous, entre-preneurial, and unique—he was John Harvey-Jones.

There are other people who aren’t as aware of theirdifferences but still use them to great effect. Forinstance, Richard Surface, former managing director ofthe UK-based Pearl Insurance, always walked the floorand overtook people, using his own pace as a means ofcommunicating urgency. Still other leaders are fortunateenough to have colleagues point out their differences forthem. As the BBC’s Greg Dyke puts it, “My partner tellsme, ‘You do things instinctively that you don’t under-stand. What I worry about is that in the process ofunderstanding them you could lose them!’” Indeed, whatemerged in our interviews is that most leaders start offnot knowing what their differences are but eventuallycome to know—and use—them more effectively overtime. Franz Humer at Roche, for instance, now realizesthat he uses his emotions to evoke reactions in others.

Most of the differences we’ve described are those thattend to be apparent, either to the leader himself or to thecolleagues around him. But there are differences that are

more subtle but still havevery powerful effects. Forinstance, David Prosser,the CEO of Legal andGeneral, one of Europe’slargest and most success-

ful insurance companies, is an outsider. He is not asmooth city type; in fact, he comes from industrial SouthWales. And though generally approachable, Prosser has ahard edge, which he uses in an understated but highlyeffective way. At a recent cocktail party, a rather

Executives can over-differentiate themselves intheir determination toexpress their separateness.

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excitable sales manager had been claiming how good thecompany was at cross-selling products. In a low voice,Prosser intervened: “We may be good, but we’re not goodenough.” A chill swept through the room. What wasProsser’s point? Don’t feel so close you can relax! I’m theleader, and I make that call. Don’t you forget it. He evenuses this edge to good effect with the top team—it keepseveryone on their toes.

Inspirational leaders use separateness to motivateothers to perform better. It is not that they are beingMachiavellian but that they recognize instinctively thatfollowers will push themselves if their leader is just a lit-tle aloof. Leadership, after all, is not a popularity contest.

One danger, of course, is that executives can overdif-ferentiate themselves in their determination to expresstheir separateness. Indeed, some leaders lose contactwith their followers, and doing so is fatal. Once they cre-ate too much distance, they stop being good sensors, andthey lose the ability to identify and care. That’s whatappeared to happen during Robert Horton’s tenure aschairman and CEO of BP during the early 1990s. Hor-ton’s conspicuous display of his considerable—indeed,daunting—intelligence sometimes led others to see himas arrogant and self-aggrandizing. That resulted inoverdifferentiation, and it eventually contributed to Hor-ton’s dismissal just three years after he was appointed tothe position.

Leadership in Action

All four of the qualities described here are necessary for inspirational leadership, but they cannot be usedmechanically. They must become or must already be part


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of an executive’s personality. That’s why the “recipe”business books—those that prescribe to the Lee Iaccocaor Bill Gates way—often fail. No one can just ape anotherleader. So the challenge facing prospective leaders is forthem to be themselves, but with more skill. That can bedone by making yourself increasingly aware of the fourleadership qualities we describe and by manipulatingthese qualities to come up with a personal style thatworks for you. Remember, there is no universal formula,and what’s needed will vary from context to context.What’s more, the results are often subtle, as the follow-ing story about Sir Richard Sykes, the highly successfulchairman and CEO of Glaxo Wellcome, one of theworld’s leading pharmaceutical companies, illustrates.

When he was running the R&D division at Glaxo,Sykes gave a year-end review to the company’s top scien-tists. At the end of the presentation, a researcher askedhim about one of the company’s new compounds, andthe two men engaged in a short heated debate. Thequestion-answer session continued for another 20 min-utes, at the end of which the researcher broached thesubject again. “Dr. Sykes,” he began in a loud voice, “youhave still failed to understand the structure of the newcompound.” You could feel Sykes’s temper rise throughthe soles of his feet. He marched to the back of the roomand displayed his anger before the intellectual brain-power of the entire company. “All right, lad,” he yelled,“let us have a look at your notes!”

The Sykes story provides the ideal framework for dis-cussing the four leadership qualities. To some people,Sykes’s irritability could have seemed like inappropriateweakness. But in this context, his show of temperdemonstrated Sykes’s deep belief in the discussion about


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basic science—a company value. Therefore, his willing-ness to get angry actually cemented his credibility as aleader. He also showed that he was a very good sensor. IfSykes had exploded earlier in the meeting, he would havequashed the debate. Instead, his anger was perceived asdefending the faith. The story also reveals Sykes’s abilityto identify with his colleagues and their work. By talkingto the researcher as a fellow scientist, he was able to cre-ate an empathic bond with his audience. He really cared,though his caring was clearly tough empathy. Finally, thestory indicates Sykes’s own willingness to show his dif-ferences. Despite being one of the United Kingdom’smost successful businessmen, he has not conformed to“standard” English. On the contrary, Sykes proudlyretains his distinctive northern accent. He also doesn’tshow the typical British reserve and decorum; he radiatespassion. Like other real leaders, he acts and communi-cates naturally. Indeed, if we were to sum up the entireyear-end review at Glaxo Wellcome, we’d say that Sykeswas being himself—with great skill.

Unraveling the Mystery

As long as business is around, we will continue to pickapart the underlying ingredients of true leadership. Andthere will always be as many theories as there are ques-tions. But of all the facets of leadership that one mightinvestigate, there are few so difficult as understandingwhat it takes to develop leaders. The four leadershipqualities are a necessary first step. Taken together, theytell executives to be authentic. As we counsel the exec-utives we coach: “Be yourselves—more—with skill.”There can be no advice more difficult to follow thanthat.


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Leadership: A Small History of a Big Topic

PEOPLE HAVE BEEN TALKING about leadership sincethe time of Plato. But in organizations all over the world—in dinosaur conglomerates and new-economy start-upsalike—the same complaint emerges: we don’t haveenough leadership. We have to ask ourselves, Why arewe so obsessed with leadership?

One answer is that there is a crisis of belief in themodern world that has its roots in the rationalist revolu-tion of the eighteenth century. During the Enlightenment,philosophers such as Voltaire claimed that through theapplication of reason alone, people could control theirdestiny. This marked an incredibly optimistic turn inworld history. In the nineteenth century, two beliefsstemmed from this rationalist notion: a belief in progressand a belief in the perfectibility of man. This producedan even rosier world view than before. It wasn’t untilthe end of the nineteenth century, with the writings firstof Sigmund Freud and later of Max Weber, that thechinks in the armor appeared. These two thinkersdestroyed Western man’s belief in rationality andprogress. The current quest for leadership is a directconsequence of their work.

The founder of psychoanalysis, Freud theorized thatbeneath the surface of the rational mind was the uncon-scious. He supposed that the unconscious was responsi-ble for a fair proportion of human behavior. Weber, theleading critic of Marx and a brilliant sociologist, alsoexplored the limits of reason. Indeed, for him, the mostdestructive force operating in institutions was somethinghe called technical rationality—that is, rationality withoutmorality.


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For Weber, technical rationality was embodied inone particular organizational form—the bureaucracy.Bureaucracies, he said, were frightening not for their inef-ficiencies but for their efficiencies and their capacity todehumanize people. The tragic novels of Franz Kafkabear stark testimony to the debilitating effects of bureau-cracy. Even more chilling was the testimony of Hitler’slieutenant Adolf Eichmann that “I was just a goodbureaucrat.” Weber believed that the only power thatcould resist bureaucratization was charismatic leader-ship. But even this has a very mixed record in the twenti-eth century. Although there have been inspirational andtransformational wartime leaders, there have also beencharismatic leaders like Hitler, Stalin, and Mao Tse-tungwho committed horrendous atrocities.

By the twentieth century, there was much skepticismabout the power of reason and man’s ability to progresscontinuously. Thus, for both pragmatic and philosophicreasons, an intense interest in the concept of leadershipbegan to develop. And indeed, in the 1920s, the firstserious research started. The first leadership theory—traittheory—attempted to identify the common characteristicsof effective leaders. To that end, leaders were weighedand measured and subjected to a battery of psychologi-cal tests. But no one could identify what effective leadershad in common. Trait theory fell into disfavor soon afterexpensive studies concluded that effective leaders wereeither above-average height or below.

Trait theory was replaced by style theory in the1940s, primarily in the United States. One particularstyle of leadership was singled out as having the mostpotential. It was a hail-fellow-well-met democratic style ofleadership, and thousands of American executives weresent to training courses to learn how to behave this way.


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Belief in progressand in theperfectibilityof man19th

century

Max WeberSigmund Freud

18thcentury

RationalistRevolution

EnlightenmentContingencyTheory

TraitTheory

StyleTheory19

40s

1920

s

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There was only one drawback. The theory was essen-tially capturing the spirit of FDR’s America—open, demo-cratic, and meritocratic. And so when McCarthyism andthe Cold War surpassed the New Deal, a completelynew style was required. Suddenly, everyone was encour-aged to behave like a Cold War warrior! The poorexecutive was completely confused.

Recent leadership thinking is dominated by contin-gency theory, which says that leadership is dependenton a particular situation. That’s fundamentally true, butgiven that there are endless contingencies in life, thereare endless varieties of leadership. Once again, thebeleaguered executive looking for a model to help himis hopelessly lost.

For this article, we ransacked all the leadership the-ories to come up with the four essential leadershipqualities. Like Weber, we look at leadership that isprimarily antibureaucratic and charismatic. From traittheory, we derived the qualities of weaknesses and dif-ferences. Unlike the original trait theorists, however, wedo not believe that all leaders have the same weak-nesses; our research only showed that all leaders ex-pose some flaws. Tough empathy grew out of styletheory, which looked at different kinds of relationshipsbetween leaders and their followers. Finally, contexttheory set the stage for needing to know what skills touse in various circumstances.

Four Popular Myths About Leadership

In both our research and consulting work, we have seenexecutives who profoundly misunderstand what makes an


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inspirational leader. Here are four of the most commonmyths:

Everyone can be a leader.

Not true. Many executives don’t have the self-knowl-edge or the authenticity necessary for leadership. Andself-knowledge and authenticity are only part of theequation. Individuals must also want to be leaders, andmany talented employees are not interested in shoulder-ing that responsibility. Others prefer to devote more timeto their private lives than to their work. After all, there ismore to life than work, and more to work than being theboss.

Leaders deliver business results.

Not always. If results were always a matter of goodleadership, picking leaders would be easy. In everycase, the best strategy would be to go after people incompanies with the best results. But clearly, things are notthat simple. Businesses in quasi-monopolistic industriescan often do very well with competent managementrather than great leadership. Equally, some well-led busi-nesses do not necessarily produce results, particularly inthe short term.

People who get to the top are leaders.

Not necessarily. One of the most persistent mispercep-tions is that people in leadership positions are leaders.But people who make it to the top may have done sobecause of political acumen, not necessarily because oftrue leadership quality. What’s more, real leaders arefound all over the organization, from the executive suiteto the shop floor. By definition, leaders are simply peo-ple who have followers, and rank doesn’t have much to


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do with that. Effective military organizations like the U.S.Navy have long realized the importance of developingleaders throughout the organization.

Leaders are great coaches.

Rarely. A whole cottage industry has grown up aroundthe teaching that good leaders ought to be goodcoaches. But that thinking assumes that a single personcan both inspire the troops and impart technical skills. Ofcourse, it’s possible that great leaders may also be greatcoaches, but we see that only occasionally. More typi-cal are leaders like Steve Jobs whose distinctivestrengths lie in their ability to excite others through theirvision rather than through their coaching talents.

Can Female Leaders Be True to Themselves?

GENDER DIFFERENCES CAN be used to either positiveor negative effect. Women, in particular, are prone tobeing stereotyped according to differences—albeit usu-ally not the ones that they would choose. Partly this isbecause there are fewer women than men in manage-ment positions. According to research in social psychol-ogy, if a group’s representation falls below 20% in agiven society, then it’s going to be subjected to stereo-typing whether it likes it or not. For women, this maymean being typecast as a “helper,” “nurturer,” or “seduc-tress”—labels that may prevent them from defining theirown differences.

In earlier research, we discovered that manywomen—particularly women in their fifties—try to avoid thisdynamic by disappearing. They try to make themselves


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invisible. They wear clothes that disguise their bodies;they try to blend in with men by talking tough. That’s cer-tainly one way to avoid negative stereotyping, but theproblem is that it reduces a woman’s chances of beingseen as a potential leader. She’s not promoting her realself and differences.

Another response to negative stereotyping is to col-lectively resist it—for example, by mounting a campaignthat promotes the rights, opportunities, and even the num-ber of women in the workplace. But on a day-to-daybasis, survival is often all women have time for, thereforemaking it impossible for them to organize themselvesformally.

A third response that emerged in our research wasthat women play into stereotyping to personal advan-tage. Some women, for example, knowingly play therole of “nurturer” at work, but they do it with such wit andskill that they are able to benefit from it. The cost of sucha strategy? It furthers harmful stereotypes and continuesto limit opportunities for other women to communicatetheir genuine personal differences.

Originally published in September–October 2000Reprint R00506


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Leading Through Rough TimesAn Interview with Novell’s Eric Schmidt

Executive Summary

FEW LARGE COMPANIES HAVE soared as high, sunk aslow, and struggled as long as the 18-year-old network-ing software maker Novell. For years, the company dom-inated the market for local area networks, but by 1997,it had faltered due to misguided acquisitions, productmissteps, and large unsold inventories. That’s when EricSchmidt arrived from Sun Microsystems to take over asNovell’s third CEO.

He turned the company around with a deft combina-tion of cost reductions, divestitures, and new productrollouts, and by 1998, it was back in the black. Unfortu-nately, the good times didn’t last, and like most technol-ogy companies, Novell is once again struggling with aslowdown in demand.

But Schmidt is optimistic about returning Novell togood health, and his strategies suggest ways for other

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organizations to handle themselves during downturns.He counsels against being overly cautious during suchtimes. It may be necessary to eliminate excess inventory,cut costs, and reduce the size of the staff and the man-agement team in order to stabilize a company. Workingto retain those employees whom he calls the “smart peo-ple” and keeping them motivated will have long-termpayoffs.

Further, Schmidt says it is necessary to acknowledgeand overcome a “culture of fear,” the deadening envi-ronment of cynicism in which employees suppressthoughts and feelings because they’re worried about lay-offs. His additional advice: keep new products comingout to sustain the interest of customers and the press, payattention to your cash position, stay focused on yourdesired outcomes, and take heart from other industryleaders.

Few large companies have soared as high, sunk as low,and struggled as long as the 18-year-old networking soft-ware maker Novell. Not long after it was founded inProvo, Utah, in 1983, the company came to dominatethe market for local area networks. But after several mis-guided acquisitions and product missteps in the mid-1990s, Novell seemed to be down for the count in April1997. That’s when Eric Schmidt, the highly respectedCTO at Sun Microsystems, surprised the business worldby accepting an offer to become the beleaguered com-pany’s third CEO as well as its chairman. His mandate:put Novell back onto a sound financial footing, refocus iton its core engineering strengths, and turn it into a lead-ing player in Internet software and network services.

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The situation Schmidt faced was daunting, to say theleast. Microsoft, with its Windows NT operating system,was competing aggressively for the networking market.Novell was saddled with an outdated product line andlarge unsold inventories. Customers were getting ner-vous, and reporters were beginning to write the com-pany’s obituary. With a deft combination of cost reduc-tions, divestitures, and new product rollouts, Schmidtturned the company around. By 1998, it was back inthe black. But the good times didn’t last long. Like mosttechnology companies, Novell is now struggling with aslowdown in demand. And in March, the companyannounced its intentions to acquire Cambridge Technol-ogy Partners and to appoint Jack Messman, currentCEO of CTP, as CEO of Novell. Now acting as No-vell’s chief strategist, Schmidt is back in turnaroundmode.

It’s a mode that seems to suit him. In February, whenhe sat down in Novell’s executive offices in San Jose,California, for this interview, he talked expansivelyabout the challenges involved in bringing a once proudcompany back to life and then leading it through yetanother tough stretch. When you enter a downturn, hesaid, you have to fight the instinct to be overly cautious.Rather, you have to encourage your most creative peo-ple to take chances, to follow their hunches. The alterna-tive is to succumb to a “culture of fear,” in which ableak vision of the future becomes a self-fulfillingprophecy.

In today’s unpredictable business world, with its evershifting markets and competitors, the prospect of a sud-den downturn haunts every executive. Eric Schmidt’sexperience provides more than a cautionary tale; it sug-gests a path through the wilderness.

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A lot of people were stunned when you left Sun forNovell in 1997. Why did you make the move? And whatdid you find when you arrived?

I had spent a long time—14 years—in a variety of execu-tive positions at Sun, and I’d hit the top of my game asCTO. I was ready to try something new. Over time, I’dbecome fascinated by network technology, and Novelllooked like a good fit with my interests. When I agreed totake the job, I’d done my homework. McKinsey had per-formed an audit and reported that the company had lotsof cash. Novell’s main product, NetWare, was a solidbrand. I knew that I was coming to an organization thatneeded help, but I certainly didn’t think it was hopeless.

Things were considerably worse than I expected. Onmy first day on the job, the president told me that itlooked like our revenues would be up $20 million for thequarter. That was terrific news. But on day three, hecaught me in the hallway. He was ashen. “We have aproblem,” he said. “Remember what I told you aboutbeing up $20 million? Well, it turns out we’re actuallydown $20 million.” Our sales were tanking, and we had alot of inventory backed up in the channel. It was a shock,to say the least.

A few days later, I found myself on a plane sitting nextto Roel Pieper, the former CEO of Tandem Computers,which had recently been acquired by Compaq. I told Roelabout my problem. He smiled at me and said, “Congratu-lations. You’re about to do a turnaround.”

“Are you kidding?” I said. “That’s not at all what Isigned up for.”

“Nonetheless, that’s what you’re going to do,” Roelinformed me. “And I can help you. First, you do a biglayoff.”

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“But I didn’t come here to fire people.”“Second, you get rid of 80% of your executives.”“You’ve got to be kidding.”“And,” he said, “you do all this in the next three

weeks.”“I can’t possibly terminate people I haven’t met yet,” I

said. And then I asked myself, “What on earth have I got-ten into?”

In my third week on the job, we had to decide what totell Wall Street regarding our revenue loss. The CFO toldme that we had enough revenue reserves, despite highinventory in the distribution channel, to avoid prean-nouncing the shortfall. But that strategy made me ner-vous. I knew that a lot of software companies had runinto trouble with the SEC for questionable accountingtricks. I called the cochairman, John Young (the formerCEO of Hewlett-Packard), to seek his advice, and heasked me, “What does your gut say?” I said that I felt weshould be honest and announce the shortfall. And Johnsaid, “I approve.” Later, he told me that he knew thenthat he’d made the right decision in hiring me. But afterthat announcement, everyone really thought the com-pany was dead as a doornail.

After you got over the shock, how did you go aboutbringing Novell back to life?

First, of course, you have to stop the bleeding and stabi-lize the patient. And that requires exactly the kind oftough, fast action Roel Pieper had described. We hadwhat I call a “kitchen sink” quarter, when you clean upthe mess. We drained the excess inventory from thechannel and cut costs drastically. We laid off more than1,000 employees and replaced most of the executive


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management team, reducing seven layers of manage-ment to four. Those were painful steps, but they werenecessary to save the company. At the same time, I metpersonally with our major customers to show them whatwe were doing and to convince them that we were stillalive. And we launched an aggressive PR campaign,announcing new products or product upgrades everymonth. The trade press is crucial in our business, and wehad to get the word out that we were moving forward.

While we were making these kinds of tactical moves,we were also repositioning the company strategically andrefocusing on our core networking strengths. But neitherthe cost cutting nor the repositioning represented thebiggest challenge we faced when I joined Novell. Thebiggest challenge was retaining our key talent—the onesI call the “smart people”—and keeping them motivated.A company can survive losing a lot of people, but if itloses its smart people, it’s done for.

Keeping your most talented employees must have beenparticularly difficult given the company’s precariouscondition. What did you do?

The first thing I had to do was identify them. In a com-pany like ours that is driven by innovation, you can’tjust look at an org chart to find your most importantemployees. The key people here are our most creativeengineers—they’re the smart people, the ones who con-trol our future—and they can be very well hidden in theorganization. They’re not necessarily at the top of anyhierarchy.

I used a kind of algorithm to locate these people. Afew days after I started, I was on the company shuttlefrom San Jose to Provo, where our engineering staff is

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centered, and I was sitting knee-to-knee with two engi-neers embroiled in a fascinating, heated argument. Theywere obviously two extremely bright people. I askedthem to give me the names of the smartest people theyknew in the company. They gave me a list, and over thenext week I set up half-hour meetings with all of thoseother smart people, and I asked each of them to give methe names of the ten smartest people they knew. Becausethe smart people in an organization tend to know oneanother, I eventually found out who they were—about100 in all.

I met and talked with each of them. It helped that, asan engineer myself, I understood their intellectual andtechnological needs and what their concerns were. I lis-tened intently while they told me about their experiencesand their frustrations. They were very demoralized; noone had listened to them for a long time, and they hadbasically decided to lie low and keep their mouths shut.As a result, lots of great ideas were being lost.

The more conversations I had, the more clear itbecame that Novell had a dysfunctional culture, a sickculture. Doctors will tell you that when you’re sick, hav-ing a diagnosis allows you to focus your energy on over-coming your disease. So my management team worked

together to name Novell’scondition, and we endedup calling it the “culture offear.” In a culture of fear,which I think is a commoncondition in companiesgoing through rough

times, people are always worried about getting laid off,and so they suppress their feelings. Instead of complain-ing to their bosses, whom they fear might fire them, they

It’s a natural reactionto turn cautious when yourcompany’s in trouble, butthat’s precisely the wrongtack to take.


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complain vociferously to their peers. That’s what wasgoing on here. This situation created a kind of pervasivebellyaching, a corporate cynicism. A related condition,which we came to call the “Novell nod,” was ubiquitous.People would sit in a room, listening to someone talkand nodding in agreement. Then, as they left the room,they’d all say to one another, “That was the stupidestthing I’ve ever heard.” I’d see that kind of behaviorconstantly.

So exactly how do you overcome a culture of fear?

You begin by recognizing that you can’t change a cultureby fiat. The problem lies deep within the organization,and you have to give everyone—not just the smart peo-ple—permission to correct it. In our case, that meantencouraging people to say what was really on theirminds. I remember one instance of this, in a meetingwith a group of engineers. There was something wrongwith the meeting’s atmosphere: it was a little too con-trolled, a little too formal. I kept asking questions, push-ing for an answer. And finally, one of the engineersexploded, saying, “I can’t take this!” We were all a littleshocked. Then he looked at me and said, “Do I have per-mission to be passionate?” I said, “Yes, of course!” Thenhe stood up and gave this incredibly lucid proposal for anew product. He’d been so constrained by the culturethat he’d been afraid to promote his idea for fear of beingshot down by his boss.

I spent a lot of time trying to get people to open up inthis way, to give voice to the ideas they’d buried insidethemselves. Some of these ideas were brilliant, and Iencouraged people to work on them. You know, it’s anatural reaction to turn cautious when your company’s

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in trouble, but that’s precisely the wrong tack to take.You have to give people freedom to pursue their pas-sions. That’s the only way to keep them focused andinspired and to ensure you’ll have a flow of new productsto regain, retain, or grow ground in the market. The newversion of our flagship product, NetWare 5.0, emerged inthis way. After we released it in September 1998, our rev-enues improved nicely, leading to after-tax profits of$192 million on revenues of $1.3 billion in 1999. Thisbuilt on improvement from the preceding fiscal yearwhen our after-tax profits were $102 million on revenuesof $1.1 billion, compared with a loss of $78 million on $1billion of revenue in 1997. The turnaround wouldn’t havebeen so dramatic if we’d told people to be careful.

Another way to overcome a culture of fear is to showemployees that you understand what the cultural prob-lems are and that you are committed to fixing them.Sales meetings, for example, offer opportunities not onlyto motivate people and get them excited about newproducts or directions but also to address cultural issueson a broad scale. At one meeting, I told the audience thatwe had discovered a secret weapon deep in the bowels ofProvo. And I introduced this engineer in a Hawaiianshirt named Ron Tanner. Ron launched into a very funnystory about how the management in California has neverunderstood anything and how a few engineers in Utahpulled together as a team and developed this brilliantproduct for customers. Everything he said resonatedwith the audience, who were laughing and shouting,“Yeah!” Then he unveiled the product, ZENworks, thefirst new product developed under my leadership. Thisproduct had long been suppressed within the culture offear, but Ron and his team succeeded in bringing it out.ZENworks now produces more than $100 million in


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revenues for us. That sales meeting was a wonderful pub-lic acknowledgment that there had been suppression—akind of denial about things like the friction between theUtah people and the California people—but that now theera of suppression was over.

I’m not saying we’re completely cured, by the way.The cultural issues have been extremely difficult to erad-icate. In fact, I’m less satisfied about this today than Iwas two years ago. When I first arrived here, I experi-enced an incredible outpouring of goodwill, as if I’d rid-den in on a white horse. But cultural problems are likecancer. They keep coming back. So I still feel the rem-nants of the culture of fear, and I still sometimes see theNovell nod. The good news is that these problems don’tappear in gross forms the way they used to, and, whenthey do appear, we know how to address them.

Despite the cultural problems, you’ve had good luck inkeeping employees from jumping ship. Novell’s turnoverrate in 1998–99 hovered around 15%, which was signif-icantly lower than the industry average of 22%. Howhave you kept people, particularly the smart people,from leaving?

A lot of it is Management 101: repeating the same mes-sage 20 times, training the trainers, getting in front ofpeople, cheering them on. We’re also fortunate to haveour engineering headquarters in Utah, where the compe-tition for talent is much less fierce than in Silicon Valley.We do whatever it takes to hang on to our top talent.Sometimes that includes counteroffers. Most people willtell you that’s a bad idea, because extending a counter-offer leads to bidding wars. But when you lose a talentedmarketing person to the competition, it’s a huge cost to

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your business because great knowledge and skills go to acompetitor. Usually, when we ask people why they’releaving, they talk about money. But most of the time, it’ssomething else, like a project or a manager or their confi-dence in the company. We pay attention to compensa-tion issues but then also work on the real issues of man-agement and leadership.

In addition, you need some kind of early warning sys-tem so that you always have a chance to get to people

before they’re out thedoor. In a company indifficulty, you can’t pre-sume that people arehappy. So I’ve told mystaff to sit down everyday with everyone whoreports to them and ask

overtly how they’re doing and if they’re happy. Thatforces people to discuss their concerns. Most of themwill be honest if you give them the opportunity, I’vefound.

Retaining people is only one facet of the challenge,though. You also have to keep them motivated, andsmart people are not as motivated by money as they areby recognition. At Novell, we have something called thePresident’s Award Program, an annual dinner at whichwe recognize individual accomplishments. We choose 20of our top employees each year, and we invite them andtheir spouses to the dinner and give them plaques andstock option grants to recognize their accomplishments.These are simple gestures, but it’s amazing what they dofor people. Recognition like this makes it much harderfor them to leave the company, and it keeps them muchmore engaged in their work.

I’ve found that the best way to manage smartpeople is to let them self-organize so they can operateboth inside and outside themanagement hierarchy.


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Smart people also need to feel that they are part of thesolution. Most companies make the mistake of puttingtheir most creative people in places where their contri-butions are limited or where they’re resented by others. Ifyou put them in research, they’re ghettoized. If you putthem in product groups, no one likes them because theywork differently than everyone else. If you put them instrategy jobs, they write wonderful documents that noone uses. And in a hierarchical company, you have somemanagers who are not as smart as the people who workfor them. These managers act like colonels. They tell thesmart person, “Take the hill!,” and the smart person says,“But I’ve been thinking about this and—” And thecolonel says, “No. Take the hill!” That kind of commandand control does not work.

I’ve found that the best way to manage smart peopleis to let them self-organize so they can operate bothinside and outside the management hierarchy. Theyreport to a manager, but they also have the latitude towork on projects that interest them, regardless ofwhether they originate with their own manager. You tellthem, “Look, I don’t know how to solve this problem, sowhy don’t you throw yourself at it and figure it out? Takethe time and resources you need, and get it right.” If theyget frustrated and need to blow off steam, you invitethem to talk to you directly—no go-betweens. At thesame time, you discuss this new component of the per-son’s work directly with his or her manager, and thereare no reprisals when a smart person works outside amanager’s jurisdiction. It’s the complete opposite of theculture of fear.

To win the hearts and minds of your key employees,you have to communicate directly and physically with

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them. Videoconferencing, telephone, e-mail, and othertools don’t cut it. Politicians use the handclasp, and sodo the best industry leaders. Since I’ve been here, I’vespent way too much time on our corporate jet. In thebeginning, I routinely hit five cities a day. That lifestyle isgrueling but utterly necessary. Eighty percent of winningis just showing up.

Rarely is a corporate culture embedded only in a com-pany’s people; it also tends to be embedded in the pro-cesses and systems of the company. Was that the caseat Novell?

Yes, and it was a big problem. For example, we had tochange our reward systems to make sure people stayedfocused on our key objectives, and we had to do it in avery short time frame. When I first came to Novell, oursalespeople knew that they were spending too muchtime selling through the channel and not enough sellingdirectly to corporate customers. This practice led to hugeinventory problems, which were very costly to us. So weset up quarterly objectives for direct selling, and we alsointroduced a new incentive program based on 25 points:if you earned at least 20 points, based on the fulfillmentof your objectives, you got a 100% bonus at the end of thequarter. When people would come to me and com-plain—which they always did—I would ask, “What areyour objectives for this quarter?” If they didn’t knowthem, I’d call their bosses and make sure they knew thatthe objectives had to be clearly communicated down theline. Business as usual wasn’t going to cut it.

Incidentally, not all systemic changes work. I’ve also learned that certain management techniques can

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actually make things worse when applied to a distressedculture. For example, I had always worked in companieswith yearly and quarterly employee ranking systems, inwhich people were divided into three groups: overper-forming, performing, and underperforming. So not longafter I came here, we started a ranking program thatgraded on a curve: 45% into the overperforming group,50% into the performing group, and 5% into the under-performing group. I didn’t know—and certainly didn’tintend it this way—that if you got the lowest grade, itwas presumed that you were about to be fired. Westarted getting hate mail from people who argued thatthere was no way to rank people who worked as a team.The ranking system exacerbated the culture of fear andproved to be such a huge retention and motivation issuethat we were forced to stop it after a year. In its place, weintroduced a modified ranking program that betterreflected overall employee performance.

Novell had a resurgence through 1999, so your effortsobviously paid off. But like many companies, particu-larly in the tech sector, it’s now facing slackeningdemand, rapid technological change, and relentlesscompetition. How do you keep the company buoyantthrough the ups and downs?

First of all, we take our cash position very, very seriously.I balance my personal checkbook to the penny everymonth, and we run the company in the same way—as ifthe cash were our personal money. My first rule of busi-ness is that when you run out of cash, you close thedoors. Cash is the last bulwark. That’s a simple rule, butit’s one that executives too often forget. I was fortunateto learn it when Sun nearly ran out of cash in 1989. The

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CFO had to get a bank loan to keep the company afloat.So after we turned around Novell, I was careful to harvestassets. The goal was to collect cash, hoard it, manage it,and talk about it a lot.

Harvesting cash is particularly tricky for companies indistress, because that’s when customers don’t pay. Weput in a set of objectives for the sales force based on cashcollection, and we made it a point to get everybodythinking about saving money. That discipline is helpingus in our current transition away from our packagedsoftware and toward our new technology platform. Oursales are under pressure at the moment, but our balancesheet is in incredibly good shape. We have almost noinventory in the channel, more than $700 million in cash,strong positive cash flow from operations, and hundredsof millions in investments that, we hope, will generatemore cash down the road. Our cash position allows us togo on as we are for a long, long time, but we expect rev-enues to grow again in 2002.

Reporters and stock analysts can be brutal on a CEOwhen a company goes through a downturn. Whatkeeps you from getting discouraged? What gives youthe perspective to keep leading Novell through difficulttimes?

Obviously, I have very good reasons for putting up withfour years of turning around a business and struggling tomake it successful in new markets. First, I actually likethe network services space that Novell is in. We have animmense market opportunity in this area. As for thosegreatly exaggerated rumors of Novell’s death, I try to takethem in stride while working hard to educate the marketabout our real situation. You know, it’s easy to sit on the


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outside and criticize the one who’s making the decisions.Taking harsh criticism is part of any top executive’s job.

Real leadership involves taking the heat and stayingfocused on the way to achieve the desired outcome. Lookat Steve Case. In 1997, he decided to change AOL’s pric-ing to a flat $21 per month. He shouldered unbelievable

criticism for that. Iremember being on apanel with him at thetime, and he was intro-duced as the “mosthated CEO in America.”They played a busy sig-nal as he walked onstage.And he came out and

said to the audience, “I’m sorry, I’m sorry. We’re doingeverything we can to get this right. But this is the deci-sion we’ve made, and this strategy is the right one.”Today, AOL is incredibly successful. No one doubts nowthat Steve was right, but everybody doubted him backthen.

It helps that business leaders understand what theircolleagues are experiencing and go out of their way tosupport one another. I’m fortunate to have lots of goodrelationships with the tech industry’s leaders, many ofwhom I met when I was Sun’s CTO. I recall a moment inMay 2000 when Novell was forced to preannounce a badquarter. That very afternoon, Steve Jobs called me andsaid, “I wanted you to know that I know what you’regoing through, but I respect what you’re doing and I wishyou the best of luck.” The next call was from DaveWetherell of CMGI, which has had ups and downs, too.He told me, “These things are hard, but you have to stickwith your principles, stay with your focus, and you will

When you fly a plane,as complicated as it is, thereare only a few things thatwill kill you. You can run outof gas, fly too low, or go offcourse. In my world, it’s agood metaphor.

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win.” I believe these people. In fact, I think people trustleaders who have toughed it out through crises morethan those who’ve had easy sailing. In a way, the fact thatNovell has gone through crises has made me a morecredible leader. I’m still here, and I’m still fighting for thecompany.

One thing that helps me a lot—that keeps things inperspective—is flying. I’m a commercial pilot, and duringmy most recent training, I was doing a difficult maneu-ver called “circle to land.” I was in a twin-engine plane,and I was wearing a kind of hood so that I couldn’t seeout the windows. The instructor had shut down half theinstruments and one engine, and I had to fly by the fewremaining indicators. Then, at 900 feet, the control towerswitched the runway on me. I had to turn around withina mile and come in on the other runway. I did themaneuver successfully. When you fly a plane, as compli-cated as it is, there are only a few things that will kill you.You can run out of gas, fly too low, or go off course. In myworld, it’s a good metaphor. As long as we pay attentionto the important things, we’ll survive.

Back to the Network

AFTER NOVELL WAS FOUNDED in 1983, its flagshipproduct, NetWare, quickly became the de facto stan-dard in operating system software for local area net-works (LANs). But in the 1990s, two epochal eventscombined to undermine the company’s leadership posi-tion. First, in late 1993, Microsoft entered the networkingmarket with its Windows NT operating system. Second,the rise of the Internet created a powerful new standard


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for networking, rendering the old LAN architecture obso-lete. Faced with an erosion of its core market, Novelllaunched an ill-fated diversification initiative, spending$1.5 billion to acquire packaged-software businessessuch as WordPerfect Corporation to compete withMicrosoft on the desktop. Thus distracted, Novell saw itsgrip on the networking market slip further, even as itsnew products failed to live up to the company’s overlyoptimistic expectations.

Since taking over as chairman and CEO in 1997,Eric Schmidt has pulled Novell back to its networkingroots while also guiding the company into the boomingmarket for Internet-based products and services. At thecore of Schmidt’s strategy is a new product calledeDirectory (founded on the Novell Directory Servicesplatform). This software allows corporate IT departmentsto hold down the operational costs associated withlocating and managing millions of “objects”—servers,PCs, notebooks, wireless devices, routers, applicationprograms, files, and users—on ever expanding networkscomposed of complicated and diverse mini-networks. Bydeveloping and selling applications and services thattake advantage of the eDirectory system and that oper-ate across all computing platforms, Schmidt believesNovell can become a leader in the rapidly growingdirectory-services market.

The company’s fortunes initially rebounded in 1999with the successful launch of NetWare 5.0, its new,industrial-strength network operating system. And cus-tomers appear to be embracing the eDirectory system,opening up many new opportunities for the company.Indeed, the fastest growing segment of its business isapplications such as ZENworks and GroupWise, built torun on eDirectory.

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But Novell is not out of the woods yet. In 2000, cor-porate technology spending began to slow, and No-vell’s revenues, like those of many high-tech companies,flattened. In March 2001, the company announcedplans to acquire Cambridge Technology Partners, aglobal IT service provider, accelerating Novell’s shift intoservices. As part of the acquisition, CTP CEO Jack Mess-man will succeed Schmidt as CEO of Novell. Schmidtwill continue as the company’s chairman and will alsobecome its chief strategist.

Originally published in May 2001Reprint R0105H


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197

About the Contributors

. is Associate Partner and Director of Researchat Accenture’s Institute for Strategic Change, Palo Alto. He isalso a visiting professor at the Anderson School of Manage-ment at the University of California at Los Angeles and anadjunct professor at the Ivey School at the University of West-ern Ontario. Beck has served as Publisher of The Asian Centurynewsletter and has published more than one hundred books,articles, and business reports on topics of e-commerce, busi-ness in Asia, strategic management, globalization, leadership,and organizational behavior.

is an advisor to CEOs and other senior leaderswho must improve overall organizational performance andchange corporate culture for sustainability. He was Chairmanand CEO of Rath & Strong, Inc., from 1984 to 1996. In twenty-five years there, he consulted on leadership challenges andoperations improvement with leading manufacturing, con-sumer packaged goods, financial services, and pharmaceuticalcompanies. He led the first successful integration of organiza-tion development and technical problem solving, participatedin the introduction of total quality management and leanmanufacturing to the United States, and chaired cross-industry collaboration groups such as the Automation Forum.He serves on the boards of seven organizations includingDelta Rubber Company, Union College, National Public Radio

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Foundation, and the American Health Foundation. He is theauthor of three books and numerous articles. His most recentbook is Right from the Start, published in 1999.

. is Director of Accenture Institutefor Strategic Change, a research center in Cambridge, Mas-sachusetts. He is also Distinguished Scholar in Residence atBabson College. He is the author of nine books including TheAttention Economy, coauthored with John Beck; Mission Criti-cal, Working Knowledge, coauthored with Laurence Prusak;and Process Innovation. He has written over a hundred arti-cles on the roles of information, knowledge, and technology incontemporary business.

is a senior editor at Harvard BusinessReview.

is Professor of Organisational Behaviour atLondon Business School. He also serves as Deputy Dean forExecutive Education, Director of the Innovation Exchange,and a member of the Governing Body. Previously, he wasDirector of the Accelerated Development Programme andChair of the Organisational Behaviour Group. Professor Gof-fee has led significant executive development initiatives inEurope, North America, and Asia. His work has covered arange of industries with a focus on leadership, change, andcorporate performance. His clients have included Heineken,Roche, Sonae, KPMG, Unilever, and MLIM. He has publishednine books and over fifty articles in the areas of entrepreneur-ship, managerial careers, organization design, and corporateculture. These include Entrepreneurship in Europe, ReluctantManagers, Corporate Realities, and The Character of a Corpo-ration. “Why Should Anyone Be Led by You?” won theMcKinsey Award for best article published in 2000. He isFounding Partner of Creative Management Associates, which

198 About the Contributors

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consults to major international companies around the worldin the areas of change management, top teams, and organiza-tional development.

is the author of the best-selling booksEmotional Intelligence and Working with Emotional Intelli-gence, and coauthor of the forthcoming Leading with Emo-tional Intelligence. A trained psychologist, he worked for manyyears for the New York Times covering the brain and behav-ioral sciences. He has also been a visiting faculty member atHarvard University. Dr. Goleman is co-chair of the Consor-tium for Research on Emotional Intelligence in Organizationsat Rutgers University, and a founder of the Collaborative forSocial and Emotional Learning at the University of Illinois atChicago. Through an affiliation with the HayGroup he con-sults on leadership and organizational development world-wide.

At the time this article was originally published,

was the director of human resources and internationalcommunications at the British Broadcasting Corporation anda former professor of organizational development at HenleyManagement College in Oxfordshire, England.

is an anthropologist and a psychoana-lyst. He is also Founder and President of the Maccoby Group,a management consultancy in Washington, DC. The formerdirector of the Program on Technology, Public Policy, andHuman Development at Harvard University’s Kennedy Schoolof Government in Cambridge, Massachusetts, Maccoby is theauthor of The Leader: A New Face for American Management,The Gamesman: The New Corporate Leaders, and Why Work?Motivating the New Workforce.

was the chairman and CEO of the J. Peter-man Company from 1987 to 1999.

About the Contributors 199

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is Associate Professor of BusinessAdministration at Harvard Business School. Prior to joiningHarvard Business School, Professor Watkins was an associateprofessor of public policy at Harvard University’s KennedySchool of Government, where he taught negotiation and per-suasion and did research on international diplomacy and themanagement of organizational transformation. His currentresearch focuses on corporate diplomacy, exploring howsenior executives manage external relations with other busi-ness leaders, government officials, boards of directors, share-holders, analysts, and the media. He is the coauthor of Rightfrom the Start and Winning the Influence Game and author ofTaking Charge in Your New Leadership Role.

200 About the Contributors

HBR028ABO 8/8/01 11:44 AM Page 200

achievement orientation, 81.See also motivation

adaptability, 81advertising industry, 103–104affiliative leadership style, 58,

60, 64–67, 76, 79age

attention management and,105–106

emotional intelligence and,22

age of innovation, and narcis-sist leaders, 47–49

Allen, Bob, 35Amazon.com, 97America Online (AOL), 192anger. See emotional expres-

sionAOL. See America Online

(AOL)Armstrong, Mike, 35Astley, Bob, 92AT&T, 35, 48, 115attention management, 87–110

attention-getting messagesand, 106–107

attention industries and,103–106

capturing attention and,92–99

economics of, 89–92measurement of attention

and, 107–110sustaining attention and,

101–103technologies and, 99–101as zero–sum game, 90–92

AttentionScape, 107–110authenticity. See credibility;

empathyauthoritative leadership style,

58, 60, 62–64, 77, 79

balanced personal advice net-work, 114, 123–125

BBC. See British BroadcastingCompany

belief in progress, 169, 171belief in the perfectibility of

man, 169, 171Bell Pottinger Communica-

tions, 162

Index

201

HBR028index 8/8/01 11:45 AM Page 201

BP. See British Petroleum (BP)Branson, Richard, 157Brazil, 93British Broadcasting Company

(BBC), 163, 165British Petroleum (BP), 91, 166Burson-Marsteller, 99

Cambridge Technology Part-ners (CTP), 179, 195

Carlzon, Jan, 50–51Case, Steve, 192cash position, 178, 190–191“change agent,” 116. See also

succession managementcharisma

narcissist leaders and, 36–37self-regulation and, 12–13

Chemical Bank, 96Churchill, Winston, 37, 40, 89Clarica, 91–92“climate,” 57–59, 70coaching capabilities, 174coaching leadership style, 58,

60, 71–75, 76cocreation, 96–99coercive leadership style, 58,

59, 60, 61–62Cohen, Arnie, 151collaborative capabilities,

20–21, 79, 157Collins, Paula, 146–147commitment

climate and, 57cocreation and, 96–99leadership style and, 70, 74motivation and, 15

202 Index

communication. See also dif-ferences, promotion of;listening skills

attention management and,101, 106–107

corporate communicationsand, 101

cross-cultural dialogue and,17–18


humor and, 156key employees and, 188–189leadership style and, 65, 66,

79multimedia technologies

and, 99–100succession management

and, 114, 122–125Compaq, 180compensation, 187. See also

reward systemscompetitiveness


narcissist leaders and, 42–43competitive strategy, 11conscientiousness, 81Consortium for Research on

Emotional Intelligence, 23consulting firms, 162contingency theory, 171, 172control issues, and succession

management, 118–121corporate culture

“culture of fear” and,183–186

HBR028index 8/8/01 11:45 AM Page 202

intelligence; leadershipstyle; qualities of greatleaders; succession man-agement

Eichmann, Adolf, 170Ellison, Larry, 30, 44e-mail, and attention, 106–

107emotional expression, 8, 9, 10,

65–66, 167–168emotional intelligence, 1–25

components of, 6, 80–82development of, 22–25,

82–85empathy and, 6, 15–19,

40–41evaluation of, 3–5leadership style and, 56–59,

78–79motivation and, 6, 13–15self-awareness and, 5–9,

80–81self-regulation and, 6, 9–15social skill and, 6, 19–22

“emotional self-awareness,” 80.See also self-awareness

empathydevelopment of, 24–25emotional intelligence and,

6, 15–19, 40–41, 81leadership style and, 79narcissist leaders and,

40–41, 51–52succession management

and, 126–127tough empathy and, 155,

161–164, 168

Index 203

at GE, 45–46hiring process and, 148–149narcissist leaders and, 45–46systems and, 189–190

credibility, 116–117, 168, 193criticism, sensitivity to, 38–39CTP. See Cambridge Technol-

ogy Partners (CTP)“cult of personality,” 106culture. See corporate culture;

“culture of fear”; mission“culture of fear,” 178, 183–186,

190customization, 97–99

democratic leadership style, 58,60, 67–69, 77, 79

differences, promotion of, 155,156, 164–166. See alsogender differences

discouragement, 191–193distractibility, 95–96diversification, 194downturn strategies. See J.

Peterman Company;Novell

Dyke, Greg, 163, 165

economics of attention man-agement, 89–92

education programs. See learn-ing; mentoring

effectiveness. See leadershipstyle

effectiveness, and leadershipbehaviors. See attentionmanagement; emotional

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energy, 13Enlightenment, 169, 171entrepreneurship. See J. Peter-

man Companyerotic personality type, 33

failure, 8, 14–15, 20feedback, and leadership style,

64, 65, 70, 73. See also per-formance reviews

Fidelity, 96film industry, 105–106Fiorina, Carly, 106FitzGerald, Niall, 163flexibility, and leadership style,

57, 61, 65, 73–74, 75–78Ford (company), 94Freud, Sigmund, 29, 30, 32–34,

169, 171friendliness. See social skillFromm, Erich, 49–50

Gamesville.com, 94Gates, Bill, 28, 40, 42, 44, 167GE. See General Electricgender differences, 174–175General Electric (GE), 45, 104Glaxo Wellcome, 167–168globalization, 17–18goals. See also attention man-

agement; missionfocus and, 88, 178self-awareness and, 7succession management

and, 114, 125–127

204 Index

Goodman, Edwin, 139–140great leaders, essential quali-

ties of. See qualities ofgreat leaders

Grove, Andy, 28, 40, 42–43guidance, 81Gyllenhammar, Pehr, 31–32,

44

Hall’s BeerCheese, 139Hambro America, 139–140Harris, Paul, 136, 151Harvey-Jones, Sir John,

164–165Hasenyager, Bruce, 96Hay/McBer (consulting firm),

55, 57Heineken, 160Hewlett-Packard, 100, 106hiring process. See also human

resourcesculture and, 148–149emotional intelligence and, 8high-level people and,

147–148history of concern with leader-

ship, 169–172Horton, Robert, 166human resources. See also hir-

ing process“culture of fear” and,

186–189talent retention and,

186–189Humer, Franz, 159, 165humor, 8, 156

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J. Peterman Company, 135–152bankruptcy process at, 137business plan at, 143–144capital and, 139–140,

150–151catalog sales and, 138, 143,

149–150causes of demise of, 149–151concept behind, 136, 140,

141–143, 144culture at, 148–149downturn at, 144–149growth at, 138–140, 150marketing strategy at, 138,

140, 143–144, 149–150mission statement and,

140–141on-line shopping and, 143origins of, 135–136, 137–138personnel issues at, 146–149product line at, 137–138,

141–142, 144, 145–146,150

retail concept at, 142–143retail expansion at, 145–146,

147sale of, 136, 151Seinfeld and, 143–144systems problems at,

146–149trademark (company name),

137, 151Jobs, Steve, 28, 39, 106, 192

Kafka, Franz, 170Kohut, Heinz, 30, 32, 46

Index 205

Iacocca, Lee, 106, 167ideas

cocreation and, 96–99credit for, 52generation of, 69

industrial economies, andattention, 102–103

industry leadersrelationships with, 192–193social change and, 29–30

information technology, andattention management,88–89, 96. See also Inter-net

initiative, 81“initiative fatigue,” 91instincts. See intuitionintegrity, 11internal competition, 88internal succession, 128–129Internet

attention management and,89, 90, 93, 94, 95–96,95–97, 99, 100, 101, 102

economics of attention and,89, 90

investment Web sites and, 96networking standards and,

193–194psychobiology of attention

and, 93, 94, 95–96, 99, 100,101

stickiness and, 102intuition (instincts), 155,

158–161. See also empa-thy; sensing skills

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layoffs, 180–181, 183–184leadership

history of concern with,169–172

myths about, 172–174women as leaders, 174–175

leadership styleaffiliative, 58, 60, 64–67, 76,

79authoritative, 58, 60, 62–64,

77, 79coaching, 58, 60, 71–75, 76coercive, 58, 59, 60, 61–62democratic, 58, 60, 67–69,

77, 79effectiveness and, 53–85emotional intelligence and,

56–59, 78–79, 82–85expansion of repertory and,

78–79impact on climate, 56–59mixed repertory and, 55, 67,

75–78narcissistic leaders and, 41pacesetting, 58, 60, 69–71types of, 55–56, 60

leadership transitions. See suc-cession management

learning. See also mentoringemotional intelligence and,

22–25, 82–85indoctrination and, 45–46leadership style and, 73succession management

and, 116–117Legal and General Insurance

Company, 165–166

206 Index

Levy, Alain, 161–162limbic system, and emotional

intelligence, 23listening skills

emotional intelligence and,17, 23–24, 82

leadership style and, 39–40,67–68, 72

narcissist leaders and, 39–40Lycos, 94

Malcolm Baldrige Award, 95Mancuso, Paulanne, 163Marine Corps, 162marketing personality, 49–50maturity, 22McClelland, David, 5, 56measurement

of attention, 107–110of personal performance, 14

mediation, and successionmanagement, 125

mentoring, 41–42. See alsoguidance

Messman, Jack, 179, 195Metropolitan Life, 91–92micromanagement, 71Microsoft, 179, 193, 194mission

J. Peterman Company and,140–141

leadership style and, 61, 63Monsanto, 36morale


leadership style and, 66, 70

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Novell, 177–195cash position and, 178,

190–191CEO discouragement and,

191–193“culture of fear” concept

and, 183–186diversification and, 194layoffs at, 180–181, 183–184President’s Award Program,

187product line and, 178,

185–186, 193–194“smart people” and, 182–189talent retention strategies at,

186–189

obsessive personality type, 33O’Neill, Paul, 66on-line retailing, 93optimism, 14, 20organizational awareness, 81outcomes, focus on, 178. See

also goals; leadership styleoverdifferentiation, 166

pacesetting leadership style, 58,60, 69–71

Paul Harris Stores, 136, 151perfectibility of management,

belief in, 169, 171performance reviews

leadership style and, 64motivation and, 14self-awareness and, 8

performance standards, 70Perot, Ross, 37, 106

Index 207

motivationemotional intelligence and,

6, 13–15leadership style and, 61reward systems and,

189–190“smart people” and, 182, 183,

184–189Motorola, 95multimedia technologies,

99–100Mutual Life of Canada. See

Claricamyths about leadership,

172–174MyYahoo!.com, 97

Nacchio, Joe, 48–49Napoleon Bonaparte, 29, 35, 47narcissist leaders, 27–52

in age of innovation, 47–49charisma and, 36–37competitiveness and, 42–43culture building and, 45–46examples of, 29–31, 50–51mentoring and, 41–42personality types and, 34psychoanalytic views of, 30strategies for, 43–47strengths of, 34–37therapy and, 46–47weaknesses of, 38–43, 50–51working for, 51–52

networkingstandards for, 193–194succession management

and, 114, 123–125

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personal failure, 8, 14–15, 20personality types, 32–34,

49–50. See also emotionalintelligence; narcissistleaders; qualities of greatleaders

personalization, 97–99persuasiveness, 20–21, 81Pieper, Roel, 180–181PolyGram, 161–162PR. See public relations (PR)product line

J. Peterman Company and,137–138, 141–142, 144,145–146, 150

Novell and, 178, 185–186,193–194

progress, belief in, 169, 171Prosser, David, 165–166psychobiology



psychotherapy. See therapypublic relations (PR), 182publishing industry, 106–107

qualities of great leaders,153–175. See also emo-tional intelligence; narcis-sist leaders

authenticity and, 156exposure of weaknesses and,

155, 156–158interplay among, 156,

166–168

208 Index

intuition and, 155, 158–161promotion of differences

and, 155, 156, 164–166tough empathy and, 155,

161–164, 168Qwest, 48

rationalist revolution, 169, 171

RBOCs. See regional Bell oper-ating companies

recognition, 187recruiting. See hiring processregional Bell operating compa-

nies (RBOCs), 35, 48relationships. See also emo-

tional intelligence; publicrelations

CEO-successor relationsand, 112, 117–118

with industry leaders,192–193

internal succession and, 128

leadership style and, 79narcissistic leaders and,

40–41responsibility, 57retail industry. See J. Peterman

Company; on-line retail-ing

reward systems, 61, 70,189–190. See also compen-sation

risk, 35Roche (pharmaceutical com-

pany), 159, 165

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Soros, George, 30–31Staley, Don, 135, 138, 140standard setting, 57

networking and, 193–194performance and, 69–70

stereotyping, 174–175“stickiness,” 102, 107–110storytelling format, 105style. See differences, promo-

tion of; leadership stylestyle theory, 170–172succession management,

111–133CEO resistance and,

118–121, 129CEO-successor relations

and, 112, 117–118,122–123

“change agent” and, 116example of successful transi-

tion, 129–133internal successors and,

128–129learning curve and, 116–117pitfalls of succession and,

115–116successor responsibility for,

114–115, 121–122successor’s dilemma and,

112, 113–115useful practices in, 121–

127Sun Microsystems, 177, 180,

190–191, 192survival, and attention man-

agement, 93–94Sykes, Sir Richard, 167–168

Index 209

SAS, 50–51Satterwaite, Chris, 162Seinfeld (TV show), 143–144self-assessment, 80self-awareness, 5–9

narcissistic leaders and,38–39

traits of, 80–81self-confidence, 8–9, 81self-control, 81self-management skills. See

empathy; self-regulation;social skill

self-organization, 188self-regulation, 6, 9–15, 81sensing skills, 158–161. See also

intuitionemotional expression and,

168humor and, 156projection and, 160–161

sensitivity to criticism, 38–39service orientation, 81setbacks, 14. See also J. Peter-

man Company; NovellShapiro, Robert B., 36sidekick, and narcissist leader,

43–45“smart people”

communication and,188–189


self-organization and, 188social change, and industry

leaders, 29–30social skill, 6, 19–22, 81–82

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systemsculture and, 189–190personnel changes and,

147–148

talent retention“culture of fear” and,

182–186empathy and, 18strategies for, 186–189

Tanner, Ron, 185teams

empathy and, 16–17leadership style and, 64succession management

and, 128–129technical rationality, 169–170technology. See also Internet


social change and, 29–30television industry, 104–105Texas Instruments, 97–98therapy, and narcissist leaders,

46–47threat of corporate demise, and

attention, 88, 94time-management skills, 52top team, and succession man-

agement, 128–129Torre, Joe, 65–66, 67tough empathy, 155, 161–164,

168traditional organizations, and

attention management,

210 Index

89, 91–92, 94, 95, 96,97–101, 102

trait theory, 170, 171trust, 10, 66, 70, 157trustworthiness, 81

Unilever, 162–163uniqueness. See differences,

promotion of

values, 7van Schaik, Ray, 160Virgin Airlines, 157vision


leadership style and, 63–64narcissist leaders and, 34–36

voice mail, and attention,106–107

Voltaire, 169

weaknesses, selective exposureof, 155, 156–158

Weber, Max, 169–170, 171, 172Web sites. See InternetWelch, Jack, 28, 30–31, 45–46,

104Wetherell, Dave, 192–193women as leaders, 174–175World Wide Web. See Internet

Young, John, 181

zero-sum rule, 90–92

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