Leader-Led and Action Learning Programs That Build…

         Leader-Led and Action Learning Programs
           That Build Transformation Capabilities
                          Michael Hostetler
                          Associate Dean for Executive Education
                          Cornell University, Executive Education
                          Mike Hostetler is responsible for all executive education programs at the Johnson School, and
                          where he has designed programs for a variety of leading global corporations, including the delivery
                          of custom executive education programs for both domestic and international clients and the EMBA
         Program. Mike's main interests in research and teaching are leadership, decision-making, strategy, high-performance
         teams, and change management. Prior to joining Cornell University, he was assistant dean for executive education at
         the Fuqua School of Business, Duke University.



         Introduction
         In 1988 Morgan McCall, Ann Morrison, and Michael Lombardo, researchers at the Center for
         Creative Leadership, published The Lessons of Experience. 1 This book claims that managers
         primarily develop on the job, a conclusion based on extensive interviews conducted with a
         broad cross-section of primarily American managers in primarily American companies.
         While acknowledging the value of job-based development, I do challenge the corollary that
         many people have attributed, incorrectly, to this research--that business schools have little, if
         any, effective role to play in leader-led executive development. Companies need not avoid the
         classroom-vs.-action learning-debate, but should create partnerships with business schools to
         maximize the effectiveness of executive development initiatives. A particularly fertile area for
         such partnerships is transformation initiatives.
         Many researchers have studied successful and unsuccessful organizational transforma tions
         over the last 15 years. Most agree that the organization's senior leadership, meaning the CEO
         and the top team, has a critical role to play. Although leaders' activities vary from company to
         company, research clearly shows that their involvement must be more than flag waving, pithy
         slogans, and occasional public statements. In his book Managing Change, 2 John Kotter outlines
         eight critical areas requiring senior leadership. In addition, Reichers et al.3 add the critical need
         for leaders to manage cynicism during change. In the Future of Leadership,4 authors White,
         Hodgson, and Crainer argue that orga nizational learning and successful change go hand-in-
         hand. Leaders are responsible for creating the culture and values that support a learning focus.
         What to do seems relatively clear. But how to do it--therein lies the rub!


         1   The Lessons of Experience, McCall, Morrison, and Lombardo, 1988, The Free Press.
         2   Leading Change, John Kotter, 1996, The Harvard Business Review Press.
         3   "Understanding and Managing Cynicism About Organizational Change," Reichers, Warriors, and
             Austia, Academy of Management Executive, 1997, vol. II, no. 1.
         4   The Future of Leadership, White Hodgson, and Crainer, 1996, Pitman Publishing.




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Leader-Led and Action Learning Programs                                                  Michael Hostetler   2
    That Build Transformation Capabilities                                                 Working Paper


Over the last six years the Johnson School has partnered with two different companies as they
have pursued major transformation initiatives. Executive development was a key component of
both initiatives. We'll briefly review both initiatives, paying particular attention to the senior
leaders' involvement. Then we'll draw general conclusions and highlight implications--for both
corporations and business schools--regarding executive development and change initiatives.


Case Study 1--ACME Company


Context
ACME Company is a multi-billion dollar, integrated manufacturing company in the lighting
and lighting products business. ACME was created by the merger of two companies, one
American and one European, in the early 1990's. By 1995 the CEO had determined that ACME
needed a major transformation to ensure its ability to effectively compete in the global
marketplace. This transformation had two distinct but related goals--revolutionize
manufacturing management and develop next-generation leaders committed to a new
leadership model. The CEO knew that this initiative meant sustaining the focus on building
new capabilities in people, rethinking the company's business model, realigning internal
functions to more effectively support manufacturing, raising the bar on performance
expectations, and changing the way people were managed. This transformation was, in fact,
also a learning initiative. The CEO knew he had to achieve two things--the support and
involvement of senior executives, and the participa tion of an outside learning partner.
From the inception of the ACME/Cornell partnership, it was clear that the CEO and senior
executives would play a significant role in both design and delivery of content for the
educational component of the initiative. Specifically, 60 executives and senior managers,
representing all functions and SBUs, participated in the program design. In addition, the
Johnson School team spent significant time with the management teams at seven plants.
Together, ACME and the Johnson School developed a four-week executive program with four
broad components--leadership development, manufacturing strategy, financial strategy, and
marketing strategy. The CEO and top team chose the program participants, who represented
multiple functions within ACME's operating and corporate groups. The program's ultimate
goals were to identify and develop the next generation of business leaders, energize ACME's
culture around a vision of the future, mobilize the company's resources, and renew its
commitment to world-class manufacturing.
Unique to this initiative was the CEO's and senior managers' extraordinary commitment to
directly participate in this transformation, rather than sit on the sidelines. This participation
took two forms--as content resources, and as faculty.


Leaders as Content Resources
In order to understand current practices at ACME and thereby develop relevant and accurate
course materials to support the transformation, faculty and staff conducted several weeks of
interviews with senior managers. The interviews were followed in many cases with telephone




ICEDR--Your Global Resource for the Professional Development of Management Development Professionals
Leader-Led and Action Learning Programs                                                  Michael Hostetler   3
    That Build Transformation Capabilities                                                 Working Paper


calls and the exchange of written documents as the course materials were being designed. The
commitment of time by the ACME executives to this process was crucial.


Leaders as Program Faculty
Both ACME and the Johnson School agreed that direct personal involvement of their executives,
as faculty in the classroom sessions would have a critical impact on the success of this effort.
Over the length of the four-week program an average of fifteen executives and managers
presented material. The presentations varied from full-blown cases to updates on the
company's strategies and goals. These executives committed significant time and effort to
preparing themselves for these sessions, including being briefed and coached by internal ACME
resources and the Johnson School. The positive impact of their contributions on the participants
was tremendous.


Outcomes
Five "classes" have now finished the program. In a recent review of the program, ACME noted:
    1. Employee turnover for program participants was 2%, whereas the average for all
       managers is 10%.
    2. The program has identified high-potential managers, and their career progress has been
       accelerated through stretch assignments at work.
    3. The cross-functional relationships developed by participants have improved
       communication and generated significant synergies impacting manufacturing. The
       report documented both cost savings and new initiatives.
    4. There have been significant positive changes in the leadership behaviors of the
       participants as documented through performance reviews.
    5. There is a strong sense of forward progress and enthusiasm for the future, as illustrated
       in the 360 surveys, climate surveys, and staff interviews.


Case Study 2--Power International
Power International, an electricity generating company, was founded 11 years ago. The
company was created to take advantage of the deregulation in the production and distribution
of electrical power, both in the US and oversees. It has grown from five employees and zero
revenue to 7,000 plus employees and US$2bn in revenue, with operations around the world.
During its rapid growth, Power International's culture was characterized as entrepreneurial,
free-wheeling, innovative, and anti-bureaucratic.
Without question, Power International was a tremendous success in the marketplace. But by
1999, the CEO and executive team agreed that major changes were needed. The culture,
appropriate for a start-up, was no longer the best fit for a large company. The investment
community, which was looking for more discipline in Power International's operations,
frequently made this point. As the industry continued to evolve globally, there was




ICEDR--Your Global Resource for the Professional Development of Management Development Professionals
Leader-Led and Action Learning Programs                                                  Michael Hostetler   4
    That Build Transformation Capabilities                                                 Working Paper


considerable friction around determining the appropriate tradeoffs between current results and
future investments, and between unstructured entrepreneurialism and the benefits of global
efficiencies. And finally, the senior team was concerned that company had not done an
adequate job in preparing the next generation of leaders.
Accordingly, the CEO and his team decided to launch a transformation effort to achieve the
following goals: shift the culture of Power International to value long term financial
growth/performance and the standardization of global systems, while still preserving the
entrepreneurial zest that stimulated its growth; encourage strategic-thinking from all parts of
the organization; provide managers with leadership assessments and development plans; and
identify the next group of corporate leaders.
A significant part of this effort was a partnership with the Johnson School. This partnership
created a two-module program for leadership excellence, with key themes of leadership
assessment and skills building, decision making, team effectiveness, strategic analysis, and
creation of individual development plans. Each participant was selected by the CEO and the
executive team. A total of 150 people have completed the program over the last three years. A
crucial program element is strategic, cross-functional team projects. The composition of every
team and each project is made by the CEO and the top team. The projects are designed to be
strategically important to the company and complementary to the transformation initiative. In
addition, a member of the senior team (including the CEO) is assigned as project sponsor to
each project team. The sponsor's roles are to clarify the project; provide guidance over the
course of the team's work; run interference internally, including disagreements over resources
and turf; access the effectiveness of the team and the individuals on the team; and reinforce the
new values and vision of the company. During the second module, project teams presented
their analysis and recommendations to the CEO and top team.
The CEO and the executive team then decided on the implementation of each recommendation.
It's hard to overemphasize the time commitment that senior executives made as sponsors. But
their participation was critical to communicating the importance of the initiative in general, and
of the projects in particular. At the start of the second "class," program graduates were co-
sponsors with senior team members. This assignment is considered an important development
opportunity for high-potential leaders.


Outcomes
    1. A significant amount of time and budget was invested in the projects. The overall
       quality was excellent, and most of the recommendations were implemented. Some team
       members received temporary assignments to oversee the implementation of their
       recommendations. This was also seen as an important development opportunity.
    2. There was a clear improvement in the processes used to manage teams and make
       decisions.
    3. Cross-functional relationships were enhanced and collaborations have become
       commonplace. There is also greater acceptance of lateral moves from one functional area
       to another.




ICEDR--Your Global Resource for the Professional Development of Management Development Professionals
Leader-Led and Action Learning Programs                                                  Michael Hostetler   5
    That Build Transformation Capabilities                                                 Working Paper


    4. The responsibility for strategic thinking has been distributed down to the plant level via
       formal and informal activities, e.g., budgeting, regional planning sessions, and surveys.
    5. Managers have been promoted, and in some cases derailed, based on their contributions
       during the program, and the projects in particular.
    6. Efficiency and long-term growth are accepted values within Power International. In fact,
       several projects were focused on this dilemma, and have resulted in concrete actions that
       received wide support.


Conclusions
Although the companies highlighted in these case studies had different goals and outcomes,
there are common learnings for both corporations and business schools.


Implications for Companies
    1. Leaders should do more than just announce transformation initiatives and occasionally
       wave the flag. They need to actively participate in the change process itself. The form of
       participation may vary, as in the case studies cited above. In both cases, company
       leaders had prominent roles that kept them connected to the process and visible to
       subordinates. They were thus able to reinforce the initiative's strategic imperatives and
       appropriately manage expectations.
    2. The reasons for pursuing a transformation must be clearly communicated, understood
       by the organization, and adopted as a strategic goal. In these cases, the initiatives were
       considered crucial to the company's competitive position, and ultimately, to its survival.
       Notably, Human Resources did not have the responsibility to make the business case,
       but the senior team did so.
    3. Internal resources don't always exist. Partnering with an external resource can quickly
       bring to bear a team of professionals, establishing credibility and trust in the process.
       Insofar as the initiative has a learning component, business schools can be an effective
       partner.
    4. The ability to learn, grow , and change, for both individuals and organizations, is
       accelerated when linked to the organization's business objectives and strategic goals.
       The conceptual underpinning and feedback provided by experienced faculty and
       consultants add further impetus to the process.


Implications for Business Schools
    1. True partnering to support a transformation effort is hard work. It requires significant
       commitment, over many years, by a dedicated team of professionals with a mix of skills
       including organizational assessment, curriculum design, the ability to present and
       integrate material, coaching and feedback, and a dedication to experimentation and
       continual improvement.




ICEDR--Your Global Resource for the Professional Development of Management Development Professionals
Leader-Led and Action Learning Programs                                                  Michael Hostetler   6
    That Build Transformation Capabilities                                                 Working Paper


    2. Just as corporations find value in partnering with business schools, business schools
       should also be willing to partner with outside resources to ensure they bring the right
       capabilities to the job. Effective partnering can create flexibility, reduce cycle time, enrich
       quality, and extend the learning over time. Unlike public programs and many custom
       programs, transformation projects have a momentum of their own. Business schools are
       not in the position to control or even manage these efforts. This fact is difficult for some
       faculty to accept. At their best, business schools facilitate and stimulate. The business
       school team needs to be both flexible and a learning organization, in and of itself.
    3. Everyone involved in a transformation program has expectations. Communications
       among the parties is essential, and business schools are well positioned to manage this
       key activity among the partners and stakeholders.




ICEDR--Your Global Resource for the Professional Development of Management Development Professionals