Thursday, May 03, 2012

CEOs: Getting Back To The Front Line

Today’s guest blogger is Andrew Goldberg, head of the change management practice at Makovsky + Company.

One of the more shocking bits of research I have come across was a study by the Boston Research Group, which surveyed thousands of employees at all levels across the US. The study showed that close to 97 % 0f employees felt they operated in top-down, command and control systems. Over half felt that their leadership attempted to be motivational—a carrot and stick approach to getting tasks done. Yet we know from plenty of experience that incentivizing the implementation of top down strategy is no substitute for growing a business through active engagement of the managers and employees who operate on the front line, the actual point of engagement with customers, employees and the other stakeholders of one’s business. Why, despite the reams of data and case studies, and incalculable numbers of management attention, is there still such a detachment between top management and the front line? What does it take to overcome this disconnection?

One main reason is that CEOs disconnect from their organizations, and focus more on financial engineering than on innovation. When companies stop innovating, their growth flat-lines; and then those companies enter into mergers that are designed to create new value. The problem is, most mergers to achieve significant returns for shareholders. As many as 80 % fail by this criterion.

This is more than a business problem. It’s a national competiveness issue, because financial engineering correlates to decline in key sectors. Take the example of manufacturing . M&A changed the terrain of tier 2 and 3 suppliers to the automotive, transportation, technology and energy sectors among others. During two decades of nearly consistent GDP growth, from 1985 - 2005 that sector actually contracted nearly 50% as a percentage of the US economy, from about 22 to 11.7 percent of GDP.

The research on disconnected employees shows that most CEOs are detached from the front line, which is ultimately a recipe for failure. The message to CEOs should be simple and clear: focus on innovation over financial manipulation to fuel value.

Innovation though isn’t something a CEO can command. It is about engaging with personnel, encouraging them to form networks, living on the front line of the company. It is time consuming. But even the busiest CEOs should and can find the time by re-prioritizing their commitments.

Let’s take the example of one of the toughest CEO jobs in the world—the war in Afghanistan.

General John Allen, the top commander, and his team lead and LEARN from the front line. Tremendous amounts of time are invested in direct presence with men in the field. New cyber-technologies are used to allow front line commanders to have direct and regular access to the top. Front line creativity and adaptability are prized by General Allen. According to Bing West, one of the nation’s foremost military analysts, Allen spends 30 percent of his time on the battlefield. “I learn something every time I visit a line unit”, Allen says,” truth be told, visiting troops in the field recharges my batteries”. Allen’s leadership style has been described by Colonel Mike Killion, in a wonderfully expressive phrase as “progressive elaboration”: you establish an operating framework where good ideas are actively solicited” when a better idea comes along he’ll grab it and refine his framework. He doesn’t get stuck due to pride of ownership.”

If a commander can make this commitment to innovation in one the toughest environments anywhere, business CEOs can surely do even more if they are fully committed to the longevity and growth of their organizations. More CEOs and their key managers should make this type of engagement their principal job focus. Boards should make this type of leadership a priority when evaluating CEO performance. Leading from the front line may be burdensome and time consuming; yet it is also a necessity for staying innovative in a ferocious, complex business environment.

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