Management Stories

In 1975, the CEO of pharmaceutical giant Johnson&Johnson presented his executive team with exactly those challenges. He sent the team on a two-day retreat to discuss the founding document of their company, the J&J Credo, which had hung unheeded and yellowing on company walls for decades after it was penned by the company’s founder. The Credo outlines the company’s specific responsibilities to all its stakeholders, starting with its customers—the doctors, nurses, patients and mothers of sick children who buy the companies medicines—as well as its suppliers, employees, host communities and, finally, the company’s share owners.

Toward the end of the meeting, one of J&J’s top executives summarized what he saw as the reality of corporate life. He said that being an executive in a large company was like being a circus juggler, attempting to keep five balls in the air simultaneously. Four of those balls were white (those representing customers, suppliers, employees and communities). The fifth ball, the one representing shareholders, was red. To the approval of most of his fellows in the room—and, in fact, reflecting the beliefs of the vast majority of corporate mangers at the time—the executive said it was possible to drop one of the white balls and still survive, but allowing the red ball of profit to fall would be fatal. At that point, the company’s president, James Burke, spoke up and said: “My friend, I am afraid you are wrong. Today, all the balls are red.”

By being the first corporate leader to acknowledge this new reality, and thus to accept the challenge of balancing the legitimate needs of all of J&J’s stakeholders, Burke later went on to become one of the most successful CEOs in North America. When his European competitors paid bribes to win business in developing markets, he refused to do so. When it was discovered that eight people had died from ingesting cyanide-laced Tylenol capsules (a J&J product), he immediately assumed full responsibility for the deaths, pulling $100 million worth of the analgesic off drugstore shelves. He then opened the company’s executive suite to the media and dealt with the issue in a transparent manner that, to this day, stands as the model for corporate crisis management. His critics in the financial community said he was a fool to do so, and that his actions would cause the company to go bankrupt. He was urged to put the interests of his shareholders first: Remember the red ball! Later, it was discovered that a psychopath had placed the poisoned bottles on the shelves of only a few stores in one city; therefore, the company was not responsible for the deaths. But by publicly assuming responsibility before that fact was known, J&J built such a strong reputation for integrity that it recovered quickly and went on to new heights of profitability.

In short, Burke did what was the unthinkable in North American big business in the 1980s and 90s: He sacrificed short-term profits to do the right thing for his company’s stakeholders in the conviction that it is the long term that counts. That he was right to do so is a lesson finally being learned in the executive suites of many large American companies.

Source: Connecting the Dots Between Leadership, Ethics and Corporate Culture by James O’Toole | Ivey Business Journal, September/October 2009

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You don’t necessarily need an outsider to provide an outside perspective, however. Occasionally a creative, clear-headed insider can break free of both his company’s and his own preconceptions by adopting a novel point of view.

This was demonstrated by Andy Grove in 1985, when he and his boss, Gordon Moore, were fighting what appeared to be a losing battle against an impossible business dilemma. In the midst of their aimless wandering, Grove asked Moore, “If the board kicked us out and brought in new management, what do you think they would do?” Suddenly the answer to Intel’s dilemma became clear to both men. Grove’s deceptively simple question stripped the blinders of denial from their eyes. It allowed them to see the situation afresh, face it squarely, and make what had instantly become the obvious choice.

Grove’s question did not make either man smarter. Both were, and are, smart enough. Fighting denial is not a matter of IQ. It is a matter of point of view.

Source:: Ruthlessly Realistic: How CEOs Must Overcome Denial by Richard S. Tedlow, Martha Lagace | HBS Working Knowledge, March 29, 2009

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A fable from the East tells of an emperor and a zen monk who came face to face for the first time. The emperor ruled over a kingdom that practiced Buddhism and the monk was eager to meet with him, looking forward to sharing tales of enlightenment.

But when they met, the emperor decided to test the monk by saying to him: “When you look at me, what do you see?”

“I see a Buddha,” answered the monk. And what do you see when you look at me?”

“I see a pig!” countered the emperor. Waiting to see the monk’s reaction, he said no more.

The monk pondered for a moment, then said:

“A Buddha sees a Buddha; a pig sees a pig!”

Source: Our Cranky Critic- Self-Talk & Public Speaking: What One Reveals About the Other | by Saskia Shakin

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An ancient Chinese story, retold by Phil Jackson, coach of the phenomenally successful Chicago Bulls basketball team, makes this point rather more emphatically. In the 3rd century BC, the Chinese emperor Liu Bang celebrated his consolidation of China with a banquet, where he sat surrounded by his nobles and military and political experts. Since Liu Bang was neither noble by birth nor an expert in military or political affairs, some of the guests asked one of the military experts, Chen Cen, why Liu Bang was the emperor. In a contemporary setting, the question would probably have been: “What added value does Liu Bang bring to the party?” Chen Cen’s response was to ask the questioner a question in return: “What determines the strength of a wheel?” One guest suggested that the strength of the wheel was in its spokes, but Chen Cen countered that two sets of spokes of identical strength did not necessarily make wheels of identical strength. On the contrary, the strength was also affected by the spaces between the spokes, and determining the spaces was the true art of the wheelwright. Thus, while the spokes represent the collective resources necessary to an organization’s success-and the resources that the leader lacks-the spaces represent the autonomy for followers to grow into leaders themselves. In sum, holding together the diversity of talents necessary for organizational success is what distinguishes a successful leader from an unsuccessful one: Leaders don’t need to be perfect, but they do have to recognize that their own limitations will ultimately doom them to failure unless they rely upon their subordinate leaders and followers to fill in the gaps.

Source: Leadership Ltd: White Elephant to Wheelwright by Keith Grint | Ivey Business Journal, January/February 2005

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The field of neuroscience has been especially helpful in expanding our understanding of the role of emotions in decision-making. Research shows that while emotions are essential for decision-making, they can also lead us far astray in ways we may not anticipate. Antonio Damasio, one of the world’s leading researchers in neuroscience, helped design a seminal experiment that assessed the role of emotions in decision-making. It is known as the Iowa Gambling Task.

Participants are seated at a table on which four decks of cards have been placed. The players are given $2,000 in play money and told that the object of the task is to make money. Some cards, they are told, will give them a payout — as much as $100 — while others will signify penalties, sometimes several hundred dollars. They can choose cards from any pile.

What the players do not know is that the gains and losses from two decks – the bad decks – are negative, while those from the other decks – the good decks – are positive. Each deck has different cards, with different payouts and penalties. The bad decks, on average, offer higher payouts but even higher penalties. If a player were to pick ten cards in a row from a bad deck, he would expect payouts of $1,000 and penalties of $1,250, leaving a net loss of $250. If the player were to pick ten cards from a good deck, the payout would be $500 and the losses $250, giving a net gain of $250.

The players are hooked up to equipment that detects fluctuations in heart rate and skin-conductance, both good measures of emotional arousal. They are also asked to describe what they are thinking as they draw cards.
At first, players draw cards, randomly noting the outcomes. However, as soon as a player draws a penalty card, his or her emotions are activated. After a few cards, it is possible to observe the increase in emotional activity when players are about to choose cards from the bad decks, even before the players make any comments about these decks. In fact, players start to prefer the good decks and avoid the bad decks before they are able to articulate what they are doing or why they are doing it. The explanation for their behavior usually comes 20 or so cards after their behavior starts to change, and as much as 30 cards after their emotions are signaling that they have concerns about the bad decks.

The order of their responses is as follows. First they exhibit an emotional response to the penalty cards. They then exhibit emotional responses whenever they draw from the bad decks. Then, they start to avoid the bad decks, without being aware that they are doing so. The process is clearly subconscious. In the next stage, they begin to articulate a preference for the good decks, without being able to say exactly why. They have a gut bias. Finally, players explain that they are avoiding the bad decks because the gains are consistently less than the penalties. From then on, they only draw from the good decks.

This experiment not only demonstrates that our emotions are part of our decision-making process, but also how powerfully our emotions can influence how we think. Indeed, emotions appear to lead the process, even in an exercise as unemotional as drawing cards from decks. The order of the decision-making process appears to be as follows. The process starts with inputs from the environment: the information from the cards. The next step is an unconscious emotional reaction. This is followed by behavioral change in line with the emotional reaction. Then we become conscious of the feelings that are driving the behavioral change. These are our gut feelings. Finally, we are able to make a decision by reasoning. Eventually, most players avoid the bad decks entirely and are able to give a rational explanation of the differences between the decks.

Source: How Emotional Tagging Can Push Leaders to Make Bad Decisions by Sydney Finkelstein and Jo Whitehead and Andrew Campbell | Ivey Business Journal, January/February 2009

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In 1959, Play of the Week, an icon of civilization on television, was at risk of being canceled. Broadcast on Channel 13, New York’s public television station, the show offered high-quality theater week after week — including works by such writers as Eugene O’Neill, John Steinbeck, and Jean-Paul Sartre, with top talent. But the ratings were low, and sponsors were dropping out.

Ogilvy was looking for a television opportunity for his client Standard Oil Company of New Jersey (then known in the industry as “Jersey,” and later to be renamed Exxon). The company was headed by Monroe (Mike) Rathbone, who had become a friend. They worked well together. Now they had a chance to do a good thing together. Rathbone wanted to sponsor a television program that would reflect “Jersey’s” own high standards and prestige (it was the second-biggest industrial company in the world) and was not about to share the stage with TV spots for yogurts, bras, and denture cleansers. Ogilvy agreed and told the sponsors at Channel 13 he thought he could find a single company to underwrite the whole program — but only the whole program.

People at the agency and at Channel 13 went to work to persuade the few remaining underwriters to swap their spots for another program or simply cancel, so the show could go on. Company after company and agency after agency responded favorably — with one exception. Representatives of the agency Lennen & Newell Inc., which had bought one or two spots for the Lorillard Tobacco Company, balked at the request, arguing that they had made a good buy, their sole responsibility was to their client, and they would hold Channel 13 to its contract.

Ogilvy stepped in, calling a Lennen & Newell executive he knew. He went through the history of the project and made every argument he could think of, including an appeal to public spirit: It was “in the national interest” that Play of the Week should survive. The executive said he could not interfere and hung up. The program appeared to be doomed. Ogilvy sat for a moment, then picked up the phone and got the Lennen & Newell man back on the line.“

Go to your chairman immediately. Tell him that our agency will pay Lennen & Newell all the commission that will accrue [to Ogilvy & Mather] from Play of the Week sponsorship over the next two years. I will wait for your answer.”

Within five minutes, the executive was back. “You’ve got a deal.”

Gone were protestations of representing client interests. Gone were arguments about the value of the spots. Gone was any semblance of honor for the Lennen & Newell agency. But Play of the Week survived, its rescue front-page news in the New York Times. Life magazine said if there were a congressional medal for business, it should go to Standard Oil. The New York Post credited Ogilvy with the decisive role, saying his heroic save would “enshrine him in the hearts of the literate public at which he has often aimed his commercial arrows.” The tone was set at the top.

Source: The House That Ogilvy Built by Kenneth Roman | strategy+business

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In the 1930s, when I first knew the automotive industry, Alfred Sloan, who ran General Motors, would disappear from Detroit once every six weeks. Next morning he would walk into a dealership in Cincinnati or Kansas City and say, “I am Mr. Sloan from Detroit. Would you allow me to work for two days as your assistant service manager?“ When he left, customers always said, “Who was that incompetent clunk?,“ but that wasn’t the point of the exercise.

Or he would appear in Albany, New York. I know about this from the Albany dealer, who complained about it very volubly. The old man had been there and said, “Mr. Yeager, do you mind if I work for you as a salesman for three days? I don’t want any commission.“ And Mr. Yeager said, “Alfred Sloan cost me more sales than I can possibly tell you.“ The point is that when Alfred Sloan went back to Detroit from these forays, he knew customers. Since World War II, nobody in Detroit has done that.

I have not been able to get this idea across to people, even people who have been my friends for 40 years. They don’t get it because not one of them has gone to work as an assistant service manager for two days. They look at statistics; they look at “information.“

Source: Viewpoint What Executives Need to Learn by Peter Drucker | Prism, Issue 4, 1990

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The first [leadership lesson] I learned in the jungles of Bangalore, at an elephant camp. When you visit such a camp you see these gigantic elephants tethered with a small stake. I asked the trainer: ‘Why do they stay tethered when they could so easily pull up the stake?’ He told me: ‘Well, the elephant is tethered as a small calf; when it tries to pull up the stake, it learns it can’t do it … and it never tries again.’ That’s an amazing parable about how we always tend to underestimate ourselves. The lesson for me is: Don’t let self limitations hold you back.

Source: Vivek Paul | Knowledge@Wharton

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One of my most recent illustrations of leadership is an executive I know who was invited to a black-tie dinner in another city. Instead of taking her husband as escort, she took her 11-year-old son. I can only begin to describe how this simple act affected senior executives in a client firm with whom she was in the early stages of establishing a relationship. They were deeply moved with admiration and respect. In the words of one: “Her choice spoke volumes about who she was as a person and the organization that would promote her to a senior position.“ I think I can safely say that behavior would never be found in the most thorough survey of prescriptions for leadership. True leadership comes from who the person is – from his or her character.

Source: Viewpoint Leadership and the Learning Organisation by Charles F. Kiefer | Prism, Edition: 3 / 1995

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John DeLorean told me that shortly after he had become general manager of Chevrolet he attended a sales conference in Dallas, and when he arrived at his hotel suite he discovered that someone from the company had delivered a huge basket of fruit to his room. Remarking to an associate on the basket’s size and variety he commented, humorously, he thought, “What? No bananas?”

From that moment on, the word throughout General Motors was “John DeLorean loves bananas.” No matter how many times he attempted to explain that he had only meant to be amusing, bananas kept showing up in cars, chartered planes, hotel suites—even in meetings—and followed him throughout his career at Chevrolet.

Source: What They Don’t Teach You at Harvard Business School by Mark H. McCormack

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