n 2000, the legendary chief executive of General Electric Jack Welch was named Manager of the Century by Fortune magazine. When he stepped down the following year after 20 years in the role, Welch stood like a colossus, unchallenged, as the CEO’s CEO. A decade on, while still in demand as a management speaker and educator with his own MBA program, “the take-no-prisoners tough guy who gets results at any cost” is looking, dare one say it, a little dated. Welch was famous for his macho management style. He was ruthless about eradicating any errors or wastage at GE, was known for his disdain of work-life balance and every year he would fire the bottom 10 per cent of performers to keep everyone on their toes.
These days – particularly in a skills shortage – you can’t imagine hailing anyone a management hero for doing that. But Welch was a legend and his legacy was the many macho imitators in management and leadership positions today. Management consultant and academic Marc Stigter gives Welch his due: “He would not have achieved what he has achieved without being an exceptional leader. [But] having said that, times have changed and he is perceived as yesterday’s guru by many people.
“I’m not sure in today’s environment how successful Jack’s hero-type and arguably egocentric leadership style would be. “People nowadays are less inclined to go into fifth gear for ‘the ultimate leader’ and that especially goes for Gen Y.” Yet getting people to go into fifth gear, to give that little bit more, is key to company performance. It is now understood that employee engagement is a key motivator of end of year results – and getting employees engaged is the number one job of the manager. What this does is put a crucial focus on getting management right.
Stigter, principal of Critical Management Group and senior fellow at the University of Melbourne’s Graduate School of Business and Economics, says employees’ expectations for recognition and inclusiveness have radically changed the way managers and employees interact in the workplace. This has put managers under more pressure to develop a more communicative style of management.
Stigter, a freshly minted PhD who specialises in employee engagement, says research for his doctoral thesis found that the biggest contributor to employee disengagement is disaffection with non-communicative, unresponsive line managers. And it’s not just the everyman employee who feels unappreciated. Stigter recalls running a workshop with a group of senior general managers from one of the big four banks. At one point he asked the executives, “When was the last time you received recognition for your efforts?”
After a period of silence, one of the executives spoke up. He recounted working back one night when, at about 8 o’clock, the bank’s chief executive, who was leaving for the night, stepped into the executive’s office, put his hand on his shoulder and said, “You shouldn’t be working this late but I really appreciate the time and effort you’re putting into the job.” It was an important moment for the executive, who got teary as he recalled the encounter.
Rather than being moved, the story makes Stigter cross. It also makes his point. “What kind of environment have we created where recognising and acknowledging somebody’s contribution is so uncommon that it can reduce somebody to tears when it happens?” Stigter says disengaged employees often feel they are not valued or understood, they don’t feel part of decision-making processes and they resent not receiving regular feedback from their immediate manager. Receiving recognition from direct line managers, Stigter’s research found, is the biggest contributor to exerting “extra energies” from employees over and above business-as-usual, “especially when recognition is given personally, informally and sincerely”.
“An employee receiving recognition from a direct line manager has a dramatic impact on engagement but costs the company nothing. Alternatively, disengagement can lead to non-compliance, harassment and bullying, which definitely costs the company something,” he says. Stigter believes a fundamental reason for companies’ inability to engage staff is that they generally promote and recruit managers on the basis of their technical rather than interpersonal skills.
“Many managers have climbed the corporate ladder based mainly on their technical skills and competencies, yet 75 per cent of the issues that concern a typical manager are people-related not technical-related,” he says.
What companies need today instead are managers with attributes other than technical skills – and typically they are softer skills than those used by Jack Welch-type managers. “Managers who are able to exert extra energies from their employees are inspiring, empathetic, inclusive and they listen,” Stigter says.
When Craig Scroggie became Pacific region managing director of US-based software giant Symantec four years ago, he recognised that these were precisely the skills he needed to instil in his managers. Scroggie, who is responsible for 1000 employees in Australia and New Zealand, found that a series of mergers and acquisitions had left staff fractious, demoralised and “very aggressive”.
Turning his division’s battered culture around became his first priority. As Stigter has observed, Scroggie found that many of his senior managers who had excelled as salespeople or in their technical fields lacked communication skills – an essential leadership attribute at the best of times but especially given the challenge at hand. “Managers have to be able to communicate with their employees that the role they play in the company is important and that we value their contribution,” he says. Some communication is harder than others, especially for managers who like to focus on what they’re good at and hope the rest will go away. “People naturally have an aversion to difficult conversations, they avoid them for as long as they can, then when they have to have those conversations, they mess it up. Good leaders have to be effective communicators – it sounds simple but it’s crucial.” Scroggie used business coaches as the first step to making his managers better communicators. Each member of his senior leadership team – “the leaders who lead the leaders” – was assigned a coach as the transition process started. (The 19 executives have retained their coaches.)
Slowly but surely, Scroggie and his managers succeeded in reshaping the culture. A workplace culture previously marked by “lack of clarity, lack of transparency and poor communication” was transformed into one of “candour, openness and accountability” – and empowerment. Annual employee performance reviews have been replaced by facilitated quarterly “coaching discussions” at which the skills, behavioural traits and competencies that employees need to excel at their jobs are discussed, assessed and if necessary enhanced by additional training, coaching or mentoring.
Every quarter, managers and employees also meet over “round table feedback sessions”. “Company goals are articulated to every employee in our team,” Scroggie says. “Every person has a clear understanding of what the organisation is trying to achieve, what their role is in the organisation’s success and how they contribute to that success.” It’s not been an easy or short journey but Scroggie says the investment of “millions” has been worth it: satisfied employees result in satisfied customers and business partners. And Symantec’s employees are definitely satisfied – now.
Four years ago, when employees were asked if they would recommend Symantec as a place to work, three out 10 said they would. Today, it’s eight out of 10.
Scroggie says, though, that employee engagement is a continual process. “The minute I stop making it a priority, our culture will change,” he says. It used to be that such softer issues were the terrain of the human resources department – in fact, that’s why HR departments were invented. Management had no role in this kind of touchy-feely area, their focus was on bottom and top line results. The connection between the two – touchy-feely communication and financial results – had yet to be made.
Now, however, company director and the principal of Melbourne-based Kronborg Leadership Advisors , Peter Kronborg, says employee engagement is no longer the preserve of the human resources department but rather it forms part of the core management focus of an organisation. “HR issues are now a concern for the executive leadership and for the whole board,” he says. “Boards are interested in succession issues, talent management policies and the HR processes of the company – that’s a recent development.”
It’s a new development because the employee-employer relationship has changed from a strictly hierarchical one to a more level one, where employers recognise how dependent on their employees they are for success. “Leaders have to think about people and engagement and retention much more than they have in the past because it’s so much harder to engage the younger workforce and it’s necessary to re-engage older workers who are thinking of opting out and doing other things with their lives.”
Kronborg, a former managing partner of executive recruitment firm Korn/Ferry International, says “meaning and purpose is a new currency for staff engagement”. The HR process has become a vital business process, he says. For the chief executive, creating an organisation that people want to work for is critical.
“People are much more ready to move,” he says. “They expect that a company has a heart, they expect that a company will treat its people fairly, they expect an organisation to have meaning and purpose for them as an individual but also for the environment and for the world.” What this means is that there’s much more focus on the personal characteristics of managers – they need to be able to inspire and connect on a personal level. Their every move and word is closely watched and interpreted.
Bruce Rosengarten, executive chairman of Melbourne telecommunications technology company Message Media, says the danger of this is that a business leader’s efforts to create a more engaged workforce can fall down when employees question the leader’s commitment to the values that have been set out.
“It’s not so much that the leader’s role has changed, it’s more that people’s values have changed,” he says. “Leaders that say one thing but do another won’t have the authenticity and credibility that’s needed to be an effective leader in today’s environment.” Rosengarten, until 2008 global vice-president of retail marketing for Shell based in Singapore, recalls that when he introduced a work-life balance program for his leadership team at Shell, setting and abiding by “norms of behaviour” was essential to its success. Executives were required to nominate the elements of their personal work-life plan – such as not travelling or responding to emails on weekends and he had to demonstrate that he would abide by what he had set out to achieve – a better work-life balance for management.
“Whether it’s a small or big company, if you want to retain your talent and create a climate that motivates them, as a leader you will be judged by what you do, not what you say.”
The founder and chief executive of the Strategic Management Institute, Paul Hunter, believes that all this means it is a time of change for organisational management to get the best from employees. “Quite literally, a reinvention of management is required – a change in the way we manage, communicate and structure business entities, but it will take time,” he says. For managers, however, the challenge is to take a long-term strategic view of employee relations at a time of uncertainty and increasing complexity. “Rather than a focus on the customer to improve short-term revenue, for example, managers must believe in and be committed to a customer and employee focus that engenders long-term relationships,” Hunter says. “Ultimately, the best results are obtained from highly motivated individuals.”
Strategy, according to Hunter, defines the direction around which managers lead, provides the rationale for the organisational structure and is the driver of organisational renewal. But Hunter admits that business is “bedevilled by uncertainty to the point where predictions about the future are close to impossible and the content of strategic plans are based more on assumptions and estimates than fact”.
The key to these tensions between long-term strategy and constant change, Hunter says, is agility, which is a theme taken up by the head of consulting at PwC, Sammy Kumar. Kumar says agile businesses have “the rare capacity” to adapt to volatility and complexity by anticipating necessary changes and making them stick.
“Businesses that have this adaptive capacity are able to develop a sustained competitive advantage and stay ahead of the game,” he says.
The ability to change has long been known to be a critical asset for businesses, Kumar says, but agility is now emerging as “a key indicator of organisational success”. Even so, agility is not well understood and PwC and the University of Melbourne have embarked on a study of 130 organisations to determine what makes some companies better able to “adapt and thrive” than others.
“Traditional approaches [to change] assume most businesses to be operating in reasonably stable environments where any change only had to be reactive, incremental and episodic,” Kumar says.
“An agile business explicitly anticipates the challenges of a dynamic environment in an increasingly globalised and politically turbulent world where the battle for resources is intensifying. The more turbulent the business environment, the more important agility becomes.”
With longer and more complex supply chains, for example, even businesses concentrating on local and regional markets are exposed to disruption in distant economies. But Kumar says this is not cause for alarm: an agile business recognises risks and challenges but also the opportunities of operating in a volatile and complex world.
Another aspect of managerial greatness requires managers to be able to take risks and to experiment, Ralph Kerle, the executive chairman of the Sydney-based Creative Leadership Forum, says. Kerle believes agility is also an important building block in an innovative organisation. Risk-taking and experimentation, he says, are “the lifeblood of management greatness in creativity and innovation”.
All this makes it sound as though the modern-day manager has to be almost superhuman. They have to be empathetic, communicative and yet agile and ready to take risks. But it was the “superhuman” work ethic and his conviction about what made good management style that won Jack Welch millions of readers and fans. So while the core tenets of Welch’s management style may be out of fashion, some things never change. We are all looking for someone to inspire and motivate us – step forward the new Jack Welch, whomever you may be.
Leo D’Angelo Fisher Columnist BRW