ONE THOUSAND LEADERSHIP POSTS: WATCH THIS SPACE

August 28, 2013

Leaders We Deserve will shortly reach its one thousandth leadership post. We review highlights since the blog started in 2006

Within the next week, Leaders We Deserve will publish its one thousandth post. In celebration we will be looking back and perhaps looking a little ahead at the leadership issues of our age.

The start

In 2006, as we started publishing, the Iraq war had ended, and Saddam Hussein was executed. Later, leaders Tony Blair in the UK and George Bush in the USA, were to be embroiled in controversies on the information that informed the decision to attack Iraq, particularly the Weapons of Mass Destruction that were never found there. At that time, there was a sense that political change was achievable by regime change, and the removal of a dictator. [Later, LWD reviewed Tony Blair’s biography]

Dashed hopes

Belief in aggressive regime change as a strategy continued into the period of the Arab Spring of 2012, although with increasingly evidence to the contrary. The sequence of revolutions and dashed hopes seemed to me to demonstrate the difficulties in the concept of a tipping point. The recent counter-revolutionary crises in The Middle East are the latest illustrations of how the evidence of history warns us against the complete acceptance of simple models of change.

The financial crisis

Economically, the financial crisis of 2008-9 was the dominant feature of the period. The world is still struggling today with the impact of the credit crunch, and the dilemmas of a system globally in which banks are said to be too big to fail, and their leaders who were found in hindsight too often wanting in judgement and ethics. [See Lehman Bros and the Limits of Leadership]

Some of the leaders were humiliated and stripped from office. There are increasingly calls for more criminal charges to be brought about. Perhaps unsurprisingly, the concept of a leader’s moral compass has attracted attention.

The most charismatic leader?

The most visited post in LWD has been the one examining the nature of Che Guevara’s leadership style. If popularity among subscribers is the criterion, the iconic poster-boy of a former revolutionary era could be nominated the most charismatic leader to be written about in the thousand posts.

Zimbabwe

Another in the top ten of all posts for visits was an account of the situation in Zimbabwe, and the increasingly dubious methods deployed by Robert Mugabe to retain power. [There are no winners in Zimbabwe] Mugabe has retained power through several elections since. Subsequent posts have been less frequented.

Sporting leadership

LWD concentrated on two sports, football and tennis, with less frequent forays into cycling, American Football and Rugby union. If you count chess as a sport, there were also quite a few attempts to present chess as a means of understanding strategic leadership.

Apple, Steve Jobs and Foxconn

Steve Jobs founder of Apple died leaving a hugely successful global company. A biography released shortly after his death gave a richer picture of the design genius as a difficult person to work for. The succession challenge was made more difficult by supply chain crises. A post written in 2012 documenting problems at its major supplier Foxconn, was another which continues to attract substantial numbers of visits to LWD.

Teaching from LWD cases

LWD posts have become increasingly used as teaching aids on executive programme.

The Apple Foxconn case is a recent successful one. [Apple’s new leader faces ethical dilemmas at Foxconn ] Others widely used around the world include Peace One Day: The Adidas Puma Story , and Emirates Airline: the Secret Story of a Successful Company .

Acknowledgements

There have been many contributors to the 1000 blogs as well as over a thousand subscribers, and supportive colleagues. I am grateful to you all, you know who you are. I will risk errors and omissions acknowledging you in a future post

To be continued [including those acknowledgements]


HBOS Leadership without the benefits of hindsight

May 10, 2013

180px-ripvanwinkle.jpg The following post anticipated the financial crisis of 2007-8 under an earlier title. HBOS changes: Too little, too late? It is reissued following the news this week of the fall from grace of the bank’s three leaders

Over the last few weeks, pressure has increased on HBOS executives following a government report and calls for former CEO James Crosby to give up his knighthood and part of his pension rights. The Original post indicates the perspective in 2007.

ORIGINAL POST

This week [Nov 2007] saw a little-heralded leadership change in the retail division of the financial giant HBOS. When a bank changes one or two members of its management team, it does so to reassure investors of continuity as well as to signal change. Has HBOS been too complacent over its business environment? Are the changes too little, too late?

According to a BBC report this week:

HBOS has announced a revamp of its retail division, including the departure of its head Benny Higgins … finance director Phil Hodkinson will [also] retire at 50 next year, and will be replaced by a former incumbent, Mike Ellis …”The structural changes we have introduced in our retail business are right for the group,” said chief executive Andy Hornby. Mr Higgins, who moved from Royal Bank of Scotland last year to head the retail unit, will leave HBOS at the end of 2007. [CEO] Mr Hornby told the Reuters news agency that Mr Higgins’ departure was not related to a recent 8% drop in profits at the retail unit. The business was hit by a sharp drop in its share of mortgages earlier in the year after a new pricing strategy went wrong, although the bank says its share has since recovered.

So there we are. No change there, then. Banks are as prone to jolts and change as any other business. Arguably they have become as accustomed to dealing with change as companies in many other business sectors. Their corporate advertising increasingly seeks to present images of innovative and dynamic set-ups. Yet, they also work hard at maintaining a corporate image of stability and reliability. Which just goes to show that effective creativity in advertising can be pretty challenging. How would you send out a convincing signal that you are reliable and adventurous, dynamic and prudent?

HBOS doesn’t stand for anything

I used to think of HBOS as an abbreviation for two big names in Banking after a recent merger, namely the Halifax and Bank of Scotland. Wrong. The (usually) reliable Wikipedia tells me we shouldn’t connect it with some earlier entity or entities. Same with ICI. which is initialized not an abbreviated Imperial Chemical Industries. Anyway, let’s just say that what is now HBOS used to be the Halifax Building Society of Halifax, Yorkshire, and The Bank of Scotland of Edinburgh.

Background to the story

Earlier this year [2007] the bank announced satisfaction with its profits. CEO Andrew Hornby said HBOS was optimistic about the UK economy and growth in its main markets, and that the UK business environment was “generally benign”.

How benign is benign?

Hornby’s view was not widely shared

“Overall the quality of these figures looks poor and the guidance of 2007 on loan growth, margin, costs and bad debt looks disappointing,” analysts at Fox-Pitt, Kelton said in a note

. AS it turned out, the HBOS retail business environment was to prove far from benign. Over Christmas 2006 there had been unfortunate publicity for the bank’s role in the sad tale of the collapse of Farepak. In 2007 it became clearer that the shared business model of the retail banks was failing. This relied on offering ‘free’ retail banking, partly subsidized by high charges for non-agreed overdrafts. HBOS faces substantial losses. It also proved non-competitive in mortgages, and failed in its retention strategy.

Anatomy of a high flier

In 2005, CEO Andy Hornby was assessed as one of the FTSE’s ‘power players’ for among other things being remunerated with ‘biggest directorship’ of the FTSE 100 at around £ one million sterling for his HBOS responsibilities. The young city high-flier was a former Blue Circle and Asda executive, and could take credit for his part in steering through the HBOS merger successfully. The deal was a coup for The Halifax. However gently the merger was presented, Halifax emerged with the better hand. Hornby became its CEO, and Lord Dennis Stevenson (another Halifax man) became Chairman of the new company. The Bank of Scotland had recently lost out in several take-over bids, including its wooing of National Westminster Bank, when it had lost to its bitter rival, the Royal Bank of Scotland.

What’s going on?

Perhaps researching this blog has made me over-sensitive to leadership battles. But the story leaves me with just that suspicion that there is more to unfold. Has HBOS been complacent over its business environment? The kindest that can be said was that it did not rush into hasty action recently. More unkindly, maybe it could be accused of being too reactive. I haven’t picked up the signals of stakeholder discontent that indicate real ‘trouble at the top’. No comments about excessive remuneration packages. But those city analysts have already sent out signals suggesting the business environment is not as benign as HBOS would like it to be. I have a very small shareholding in one of the group’s financial products. I’m not planning on selling. I’m not planning on acquiring any more either. And maybe there will be a business case to be written on leadership style and proactivity.


Robert Peston interviews Andy Hornby of HBOS

October 5, 2008

Andrew Hornby, head of HBOS, is notoriously discrete. In a rare interview with Robert Peston after the tsunani week of mid September 2008, he predicts an 18-month long haul in financial markets, and house price deflation, and identifying shortage of credit as the primary causal factor of the credit crunch

The interview took place in advance of the Tsunami week in the world’s finance markets, and makes no mention of the dramatic events that were about to befall HBOS and its leader. It retains merit because it permits a ‘before and after’ analysis

Pressed on the bank’s treatment of customers, Mr Hornby identified a triple whammy for consumers of food prices, fuel costs and utility bills, resulting in less discretionary income to save. The key to an unblocking of illiquidity will be the US housing market, where a return to health will then accelerate global confidence.

Hornby disagreed that HBOS had irresponsibly managed leading over the last few years, but defended its current cautionary stance and restricted lending.

Peston: Not a single senior banker has resigned or been fired [That can’t be right unless Peston is referring to HBOS rather than bankers in general].
Hornby: We are taking responsibility, which is different from being fired.

Peston: Morgan Stanley at the end sold short.
Hornby: No comment, [but pointed to how quickly the markets cleared.]

RP outlines AH’s his glittering career What had been learned? Planning for (and dealing with) uncertainties. Later in the interview AH returned to the inter-connectedness of global factors, and need to keep a five year planning perspective [by which time the long-term trends in housing and finance will have been restored.

Peston: Are you profiteering in current circumstances? [By increased charges to customers]
Hornby: No, we in UK are competitive internationally.

The interview format remains a one-dimensional glimpses of leaders and their competencies Overall, a competent but unremarkable rather low-key performance. Strengths. Reminded me in assuredness and confidence of an interview by Louis Gallois of EADS. A leader able to reassure and communicate trust in his competence. The style seemed particularly appropriate for the current circumstances.

Within a week he was defending the proposed takeover of HBOS by Lloyds TSB


Lehman Bros and the Limits of Leadership

September 17, 2008

Dick Fuld

Dick Fuld


Lehman Bros collapses as the Fed refuses the bank a bale out. To what degree might more inspired leadership have avoided this?

This week I changed my mind about an important aspect of leadership. I now believe I have been on the wrong track and asking the wrong sort of question. It is not a particularly good question to ask ‘did Lehman’s fail because they had a bad leader?’. Absence of Dick Fuld, another leader favoured for the same kind of things would have been in place. Lehmans, as with the other financial giants, acquired the leaders judged best in the wider financial marketplace. They got the leaders they deserved.

Background to a global financial crisis

September 15th 2008 marked the signal that the credit crunch turbulence had turned into a full-scale tsunami, almost a year to the day after of the collapse in confidence at Northern Rock hit the UK headlines.

Today, financial markets around the world plunged. There was a remarkable degree of consensus among informed commentators. Earlier predictions of the scale of the crisis were now believed to have under-estimated the likelihood of a shock of such magnitude.

One of the trigger events was the decision of the US Federal Bank to withhold funding to Lehmans. The US Treasury Secretary Henry Paulson said that the US was “working through a difficult period in our financial markets right now as we work off some of the past excesses”.

A more general view has the following elements. The global economy will suffer into the foreseeable future. The financial conditions are worse than any since the great slump of 1929. Maybe, just maybe, the economic consequences will not be as awesome, but they are almost certainly going to be from unpleasant downward for most people on the planet.

I will leave financial analysis to others, and pick up the leadership story. The hero to zero game is in full swing. The leaders of the greatest financial institutions in America stand charged with greedy foolishness. Cupidity and stupidity, as someone put it.

So what can be made of the leadership or lack of it among the biggest players?

In the glory years, Lehman Bros seemed to have had inspiring leadership. Or, at least, winningest leadership from Dick Fuhl. Inspiring but scary, earning him the label of the Gorilla, the scariest man on Wall Street.

A lifer, he joined the company as a young man nearly forty years ago. According to The Times, he left a career as an air force pilot after brawling with a commanding officer. His progress in the Bank was then upward, but always characterised by a pugnacious edge that would involve more brawls and near brawls.

Under his stewardship, Lehmans became more and more successful and in 2006, Institutional Investor magazine named Mr Fuld America’s top chief executive. Companies clamoured for his services, and he took positions on everything from the Federal Reserve Bank to the Robin Hood Foundation, a New York antipoverty group. His activities brought him billionaire status

He was also acknowledged as someone who offered generous rewards to staff who met his demanding targets. Say what you like about Dick, he looked after his people. Well, yes, up a point. And that point was sometime in the last few months. The Times continued:

Some say that the countless accolades encouraged Mr Fuld to take more and bigger risks, in particular piling into high-risk mortgages. Over the past few months he refused to acknowledge that Lehmans was in difficulty – despite frequent warnings from leading analysts. Had he acted sooner, he would have been able to avoid bankruptcy. A series of interested buyers surfaced in recent months, but Mr Fuld would not sell at the prices offered. By the time he appeared to face up to the situation at the end of last week, it was too late: Lehman was past the point of no return. Lehman staff say that Mr Fuld is broken and shell-shocked. He has lost a fortune, but for such an ambitious man, the biggest loss is to his pride.

Was Fuld’s a bad leader?

When I thought a little harder I had to admit that such a question is unanswerable in any covincing way. Why? Because it presupposes a set of criteria which identifies what a bad leader is or does.

Mr Fuld was by repute a bully. But that doesn’t make him a bad leader, of itself. His aggression may have been an asset to his organization for the better part of forty years, if he is judged on corporate performance.

Was he greedy? Not in the sense judged unacceptable to many of his peers, and compared to other leaders documented in earlier blogs.

Was he competent? In terms of delivering results, yes again.

So what went wrong?

The mother of all crises, arguably triggered by the unintended consequences of the decisions of leaders such as Fuld of Lehmans, Coyne of Bear Sterns, Crux of Morgan Stanley and Applegarth of Northern Rock.

The actions of the leaders of financial institutions have to be studied very carefully to see what might have been done to have made a significant and positive difference.

I am inclined to see a series of dramatic stories in which the leaders are not so much stupid as unable to recognize the risks they were taken. Not so much reckless or greedy as stuck in the comfort zone which was continuing to bring success. Their actions had contributed to the establishment of financial structure and norms of behaviour which worked. Unfortunately, they were not the bountiful and benign structures that they were taken for.

These leaders had made it by a Darwinian process that had selected them, because they were trusted to deliver the numbers. They were the leaders that the financial system deserved. Now it is paying the price.

Can leaders make a difference?

They sure can. These case examples suggest leaders can fail to break out of dominant beliefs about their businesses.

Might there be leaders out there in financial institutions who conform more to the Jim Collins picture of a creator of companies built to last? Who will overcome the overpowering effect of denial? I think so. But I’m not going to name any names.

Postscript

This week I changed my mind about an important aspect of leadership. I now believe I have been on the wrong track and asking the wrong sort of question. It is not a particularly good question to ask ‘did Lehman’s fail because they had a bad leader?’. Absence of Dick Fuld, another leader favoured for the same kind of things would have been in place. Lehmans, as with the other financial giants, acquired the leaders judged best in the wider financial marketplace. They got the leaders they deserved.

I also believe there has been a consistent prevailing set of conditions in which leaders are judged on operational success to an extent that there has been a splitting of the moral and the operational dimensions. It is similar to the belief about keeping politics distinct from sport, when a moment’s reflection should be enough to show the impossiblity of such a belief translating into the world of human events. (We even forgot the recognition of the short-termism the system was encouraging).

And yes, as my colleague Professor Peter Kawalek has been arguing, business educators risk standing accused of ignoring the banality of the bottom line, as we collude in preparing our graduates to fit into a financial system that has been a significant factor in the conditions that have unleased this economic tsunami around the globe


AIG plumps for Willumstad: What took them so long?

July 14, 2008

Update

AIG came to the brink of disaaster in the credit crunch of September 2008. Its newly appointed leader Bob Willumstad may be just the sort of person to steer them out of the current crisis. But will he be given the opportunity?

Original post follows

Bob Willumstad at 62 seemed to have missed out on his dream of running a major corporation. Now he heads the troubled giant AIG. His track record is admirable. Which raises the question: what took appointment boards so long to pick him?

Robert Willumstad was one of the names in the hat in the leadership merry-go-round at City Group with Chuck Prince and Vikram Pandit. He then became part of AIG, another company with leadership difficulties, but still not in the top job.

The Economist

The Economist picks up the story

On June 15th [2008] Mr Willumstad was hastily installed as chief executive of AIG, following the forced resignation of Martin Sullivan after only three years at the helm. He comes with a pedigree few can match. He played a big part in assembling Citi, smoothing over difficult takeovers…But he was also good at the less glamorous stuff largely thanks to tight cost control.

He seems to have ruffled very few feathers along the way. Former colleagues put this down to a combination of unobtrusiveness and honesty. “He’s quiet but very effective,” says Jamie Dimon, chief executive of JPMorgan Chase, who worked alongside Mr Willumstad at Citi. “You get the truth with him. There’s no political agenda.”
Many Citibankers had hoped he would return to take the top job when Mr Prince resigned [November 2007 when]the board approached him but eventually plumped for Vikram Pandit. These qualities set the “quiet giant”, as the six-foot-three Mr Willumstad was once dubbed, in contrast to the blokeish Mr Sullivan and the imperious Mr Greenberg

What took them so long?

One possibility is that quiet competence is often trumped by the more visible characteristics and extraverted style associated with so-called charismatic leaders.

Leaderswedeserve has from time to time returned to the idea of the non-charismatic leader, modest and of fierce resolve. These features were considered to be under-appreciated in many successful leaders, who remained relatively invisible in the heroic accounts in the business press.

Willustad, the quiet giant, may be one more exemplar of the fifth level leader, (Jim Collins) who eventually succeeds, where more blokeish or imperious figures fail. If he does, he also illustrates how so often boards acquire the leaders they deserve.