Part of Lecture by Robert Townsend
TOWNSEND'S THIRD DEGREE IN LEADERSHIP
(Continued from introduction [ to go back to introduction]; the 2 parts form the entire lecture as published in across the board magazine)
I'm going to try to give all of you a Ph.D. in leadership.
The first Iesson is: To hell with centralized strategic planning. If you don't have a good Ieader, it's all nothing; it's just a bunch of papers flying around.
Let me tell you what Ieadership is not. In some companies the chief executive has retired on the payroll, and there aren't any leaders. The companies are run by strong planning departments, strong purchasing departments, strong human-resources departments, and strong management-information services. What generally happens in those strong staff organizations is that you get very mediocre performance from otherwise able people down the line.
Some companies have gotten out of that trap. I'll give you one Kollmorgen, 5,000 people!e, 16 divisions, had a marvellous management information system with a 360 computer to tell everybody in the company wherever a sparrow
fell. The whole company was so mesmerised with information that nobody did anything. And, bless his heart, Bob Swiggett the CEO, practically over the dead body of the Harvard Business School, which was telling him to centralize management-information services, shot the 360 computer between the eyes. He called up his 16 division presidents and said, "I am instituting a return-on-net-assets incentive compensation system for all of you; I want you to think of your divisions as your own~ treat them as if you owned them-, and telephone in 10 numbers every month so that I can consolidate a P & L and a balance sheet."
Well, the organization came to life. It became much more profitable, good, fun place to work. It turned around fast, without any consultants. They didn't have a strategic planning department to think about it for three years; they just did it.
Brunswick, a little company, sold its crown jewels to avoid a takeover and was left k~t with three businesses that Wall Street thought were very dull outboard motors, fishing tackle, and bowling. Fortunately, they put in charge of the company a guy who thought those were exciting businesses, and he also had a strange philosophy.
Profits are made in the divisions, not at corporate headquarters. So when he became CEO, he eliminated the group vice-presidents concept-- and there went 400 people and he reduced corporate staff by two thirds there's another 400 people. He took the division managements and sent them back into the fields, where they would be near the companies they were running. Then he leased out two thirds of the crystal-palace space so that nobody would ever get back in there, and then he gave nine shares of stock to every employee. And he never wrote a memo, never made a speech, and the company turned around on a dime, and it's a lean, happy organization. And much to Wall Street's amazement, the stock went from 5 to 35. They didn't have a strategic-planning department.
The second point about leadership I learned while working for American Express many years ago. I was a security analyst, and I worked for a boss who was very typical of bosses then and maybe now.
He was tall, he was handsome, he was ambitious, intelligent, articulate; and he was never there when we needed him.
He took credit for everything we did that was any good and blamed us for everything that went wrong.
We spent all our time coming in late and leaving early and bitching about the conditions We were all underpaid; we didn't have the right mix of people.
All of a sudden he died, and the company in its infinite wisdom named me head of the investment department. I called everybody in and said, "I don't know anything about management; I'm very uncomfortable. But one thing's for sure We don't have to talk about what's wrong; we haven't been doing anything else since I've been here. Why don't you people form a partnership and be the best investment department you can," I said, "and I'll try to get us the proper pay, the proper titles, the proper machinery, and the proper mix of people." And they said, "That's a pretty good idea, because you're a lousy analyst anyway, and we won't miss you."
So I did. I started to go around. And these people started coming in early and doing good work and making good decisions. And I remember one that Bobby Clarkson, who was chairman of the board, stopped me in the hall and said, "Townsend, that was a good bond swap you made last week." And I said, "Bond swap ? I don't know anything about a bond swap. I don't even get to read The Wall Street journal." 1 said, "I'm working full time to get bowls of rice for my
peons. so they dont starve on your front steps and embarrass you. '
Well gradually we started getting what we should be paid, and the titles we should have, so we could go in and interview top management. And I got more and more power from their performance, and one day Charlie Cuccinello, who invested our travellers check float which was billions of dollars in short-term securities, came to me, If i had one of the new Japanese calculators, he said instead of the hand-crank machines I have been using (his predecessor used an abacus -- this was an old company), I could make us a ton of money. I said, Charlie, youre right, youre absolutely right. Why didnt I think of that? Ill go get you one.
Listen, thats what a leader does. He doesnt say Ill call in one of my three secretaries and dictate a purchase requisition, which will sit in some out-box for three days and when it gets back to me for my signature Ill be in Europe, so it will wait until I get back and will just miss the three-monthly purchasing meeting, and it will be two months later when it is returned to me rejected. I said, Ill go get you one.
So I get in the elevator and go down to the fifth floor to the purchasing department, and say, "Hi, my name's Townsend. I work up on the 14th floor and I need an electronic calculator, and here's the make and model number."
And the man on duty says, "Is it in your budget?" And I say, "No, it isn't because I made my budget out last October, and I only found out I needed it today. So I've come to my purchasing department for help." The purchasing man says "If it's not in your budget, you can't have it."
I was carrying my resignation around, so I pulled it outit was battered. I said, "Would you please sign this," and he looked at it and he read it and said, "Why should I sign that?' That's your resignation, and you don't work for me." I said, "Because when I Ieave here I'm going up to the president's office, to whom I report, and I'm going to resign. He may ask me why I'm resigning, and if he does, I'm going to tell him it's because some stupid son of a bitch in the purchasing department won't give me a machine that would pay for itself the first two and a half minutes that we owned it. And if he asks me which stupid son of a bitch in the purchasing department, I want to show him your name."
Well, we got the machine. But that's not the point. The real point is that I was using the power that those people in the investment department were giving me not to get goodies for myself, but to get things for them, to enable them to do the job even better. If you ever break that circle and start stealing the goodies that come from their performance, they'll find out it before you will, and they'll stop cooking and they'll stop trying, and you won t know what turned the organization off.
What I was really doing, though I didnt know it at the time and this is the lesson for your Leadership Kit: was eliminating their excuses for doing lousy work. An excuse may be just Im underpaid, or Im undertitled, or We really dont have the right kind of people here, or We dont have an economist. I was eliminating their excuses.
At Avis I discovered another principle of leadership, which is to fight the them and us lines that separate people in a company. These lines are easy to see. There are the people you trust and the people you dont trust. The people you dont trust park outside the gate, have to punch the time clock, and have to get coffee out of a coffee machine. The people you trust park inside, dont
punch the time clock, and get free coffee. You want to fight those lines.
One of the interesting lines in America is that the difference in salary between the CEO and the highest paid blue-collar worker is 36 to l; in Japan it's 7 to 1. Now that's a them us line that I think hard to swallow, knowing what chief executives dont do for their companies.
The way we got around it at Avis was that we had I rental agent school taught by our finest rental agents, Iadies in red uniforms. It was a tough school, at O'Hare airport, with an exam every night. I made the whole management go through it, it is an absolute condition of employment. We had to study, and we had to spend two or three hours renting cars at the airport.
I went through it, too. One night, I had my trainee button on and was renting a car and was trying to get the the right keys with the right agreement -- this was before the computer did this. I was trying to get the figures in the right boxes. When my customer said, ' Can't you hurry up?' I'm on a real bummer of a trip. ' I said. "Give me a break, I'm a trainee." I kept on doing it, and I dropped the keys, and he said, "You're certainly the worst trainee l ever saw. Where did they dig you up from"' And I said, ''You want to know something really sick? I'm the president of the company.
I tell you when we fit back to headquarters we were so proud of those ladies out there on the firing line and the difficulty of the job that they were doing that we started wearing red jackets around the executive office as a sign that we were part of their team. When we went into a city, wed look at them with different eyes; they were our heroines now, instead of being the dopes who were renting cars.
Them and Us. Get rid of those lines, its not an act, its a career. You have to fight it like weeds in your garden... continuously.
As you know I have recommended that you fire all your management consultants, all of them. Promise them a bonus if they will get off the premises by 5 PM and another bonus if they wont submit a report. Let me explain this to you.
Lets say weve got three divisions in a mythical company and you are the chief executive. You have already gone to four board meetings a year, so youre already in that mode. You have three divisions. Its old Joes division. He keeps reorganising, missing his target, reorganising, missing his targets. Its
time to face up to the fact that old log is no longer the guy to run that division.
So you say to your board "I'm going to go over and run old Joe's division for three months, and I'll see what's going on." You tell old Joe to go skiing in Vail or go to Palm Springs and play golf with Gerry Ford or something. You say that when he comes back there will be a job with equal pay and benefits, but it sure as hell will not be running this division.
And thenand this is very importantyou actually go over and sit at Joe's desk. You don't bring anybody with you, like your secretary, to make your life comfortable; you go sit at old Joe's desk. You call everybody in who reported
to old Joe, and you say "Now you people know a lot about this problem. I'm your new division president, by the way. You all know a lot about and you all have different views about what it will take to make this thing cook. I'm going to call you in one at a time and ask you for your help. But I don't want your goddamn private grievances committee; I don't want to hear about any goddamn coffeepots. I want you to tell me how to save this division and make it a credit to the company, because if we can't do this in a relatively short period of time, I'm going to shut the mother down.''
Now that's motivation.
Contrast that with the normal approach of the big company, in which the chief executive is too lazy to get out of his office and give up all those comfortable surroundings. He calls McKinsey & Company and drops six Harvard Business School graduates on these poor beleaguered people. Then they know they are in trouble. They might love to solve the problem themselves. But now you have to educate six people who dont know anything about the business.
Now, let us go back to the alternative. You are sitting in old Joes chair and you may have to call in your people one at a time, three times each, but at some point youll wake up and they will have given you the plan of how to turn that thing around. They you call everybody in and say, This is the plan you have given me, this is what you want to do, and, Bill you are the obvious one to run the division and carry out this plan; if you want to change it tomorrow because you run into something, change it. I just want you to save this division and make it a credit .
In six months those people will be 10 feet tall, and they will have forgotten that you were ever there. And its all very proper that they do so, because they really did save the division them- selves, and you'll be back in your own office
with your cockamamy outside directors.