The Leader's Dilemma
This book is about rethinking how we manage organizations in a post-industrial, post credit crunch world where innovative management models represent the only remaining source of sustainable competitive advantage. Above all The Leader's Dilemma is about learning how to change business - based on best practice and innovation drawn from leaders world-wide who have built and managed successful organizations.
'Every executive will have already had to face the well-known dilemma between trust and control. Based on the principles described, the authors succeed in finding a way out of this dilemma. Supported by concrete practical examples, these twelve principles add up to an integral management model which encompasses employee engagement, efficiency and innovation intelligently.'
Philippe Hertig, Managing Partner, Egon Zehnder International (Switzerland)
'As Albert Einstein once accurately stated, problems can never be solved using the same approach as that out of which they came. The management approach in The Leader's Dilemma is not subject to this unconscious, but very frequent mistake. It shows an entirely new approach on leadership and management, which regards organizations as living systems.'
Erich Harsch, CEO, dm drogerie-markt
'Executives are increasingly recognizing that the traditional model by which they manage their organizations is obsolete and counter-productive. In The Leader's Dilemma, Hope, Bunce and Röösli radically re-define the core principles of management - including accountability, goals, rewards, planning and coordination - to bring management into the 21st century.'
Dr Jules Goddard, Research Fellow, MLab, London Business School
'In a dozen clear principles, The Leader's Dilemma codifies a rethink of the conventional management model. The book's approach should be studied by any company aiming to survive and thrive in a transforming business landscape.'
Vineet Nayar, CEO of HCL Technologies and author of Employees First, Customers Second
Jeremy Hope is co-founder of the Beyond Budgeting Round Table, a not-for-profit collaborative dedicated to helping organizations improve their management models. He is a chartered accountant and a co-author of Transforming the Bottom Line , Competing in the Third Wave and Beyond Budgeting . He is also author of Reinventing the CFO . He lives in West Yorkshire, England and can be contacted at firstname.lastname@example.org .
Peter Bunce is a co-founder of the Beyond Budgeting Round Table (BBRT), a not-for-profit collaborative dedicated to helping organizations improve their management models. He is a Chartered Engineer and has held various posts in manufacturing engineering and collaborative research. He lives in Hampshire, England and can be contacted at email@example.com .
Franz Röösli is a professor and management trainer at the University of Applied Sciences North Western Switzerland (FHNW) and Director of the Beyond Budgeting Round Table (BBRT), an international shared learning network for management development. He has experienced many years in management positions in different industries. He lives in Switzerland and can be contacted at firstname.lastname@example.org .
The Leader's Dilemma
The organization as an adaptive system
What ultimately constrains the performance of your organization is not its operating model, nor its business model, but its management model. 1
Gary Hamel, The Future of Management
Most of you will remember Aesop's fable about the tortoise and the hare who decide to have a race on a sunny day. The brash, confident hare thinks he has won the race before it even starts and decides to have a nap under a tree half way through. But when the hare awakes, the tortoise is at the finish line.
Too many business leaders think and act like hares. They think they can grow shareholder value at unrealistic rates each year by setting aggressive targets and incentives and then (like the hare) "predict and control" their future results through detailed budgets and short-term decisions. Tortoises don't make such promises, predictions or assumptions. Instead they keep their eye on the path ahead and continuously improve their performance. Tortoises always win in the end. Their aim is to adapt to changing conditions, beat their peers and endure over long periods of time. The best organizations are adaptive systems that continuously learn, adapt and improve.
Unfortunately, in the business world, when tortoise-type organizations appoint new leaders they can turn into hares. Royal Bank of Scotland (founded 1727), Citigroup (1812), Lehman Brothers (1850), Washington Mutual (1889), Merrill Lynch (1914) and AIG (1919) had all adapted and endured for, in most cases, a century or more but collapsed when a new leadership generation changed the way they were managed. The result was the credit crunch of 2007–9, when trillions of dollars were wiped off corporate balance sheets, leaving governments around the world with no option but to step in with taxpayers' funds to avoid a catastrophic collapse of the financial system.
What followed was the worst recession since the 1930s. Everyone is asking the same questions: How did it happen? How did the banking sector, full of mature organizations with long histories of steady growth and run by highly professional people, suddenly collapse? Why did governance and regulatory systems fail so badly? Who is accountable? What lessons can we learn? And how do we prevent it from happening again?
Commentators have pointed their fingers at naïve central bankers, inept regulators, unrealistic ratings agencies, passive politicians, greedy executives, aggressive salespeople, unscrupulous mortgage brokers and short-selling hedge funds. While all these actors in this tragedy (or was it a farce?) are culpable in one way or another, the roots of the crisis lie elsewhere. They are deeply embedded in the management model itself. Hijacked by financial engineers a few decades ago, lent credence by academics and pseudo-management science, and seized upon by macho leaders and private equity partners, it was a slow-burning fuse waiting to explode.
The harbingers of this crisis were visible several years ago when Enron, WorldCom and many other large corporations collapsed, triggering the Sarbanes-Oxley (SOX) legislation. Like today, fingers were pointed at greedy executives and inept regulators but, also like today's crisis, the root causes lay in a corrupt culture and a flawed management model.
If you doubt this conclusion, think about how the typical management model works. 2 Like the hare in the fable, leaders sit down once a year and plan the annual race: "What target will excite the market and boost the share price? Fifteen percent growth in earning-per-share feels good, so that's what we'll choose." The next step is to cascade this target down the organization so each division, business unit, function and department owns a piece of it. Tough negotiations take