A Conversation with Warren Bennis On Leadership in the Mitlst of Downsizing

Interviewed by Richard M. Hodgetts

arren Bennis is distinguished professor of business administrafion and founding chairman of The Leadership Institute at the University of Southern California. He has written 25 books, including the best-selling
Leaders and On Becoming A Leader, both trans-

and execufive vice president of State University of New York at Buffalo, and a past president of the University of Cincinnati. He serves on the boards of Claremont University Center, the Salk Institute, and the Foothill
Group. The Wall Street journal named him as

lated into 14 languages. In 1993, AddisonWesley published An Invented Life: Reflections on Leadership and Change, a collecfion of essays

that was nominated for the Pulitzer Prize. In the same year, Jossey-Bass republished his path-breaking book Beyond Bureaucracy. He has served on the faculty of MIT's Sloan School of Management where he was Chairman of the organizafional studies department. He is a former faculty member of Harvard and Boston University, former provost

one of the top ten speakers on management in 1993. He is currently complefing a book for Addison-Wesley, to be released in 1997, that deals with the dynamics of six extraordinary groups, including the Disney Feature Animafions Studio, the Manhattan Project, and the original Skunk Works at Lockheed. The interview was conducted by Richard Hodgetts, book review editor for Organizational Dynamics and a frequent contributor to this journal.

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Warren, as you know, this is Organizational Dynamics' 25th anniversary issue. In light of this, how do you think the challenges that are being faced by leaders have changed over the last 25 years? Well, two of the most obvious challenges are those of dealing with globalizafion and galloping technology. However, a third challengeeven more interesfing in my opinionis the whole area of employee involvement, employee participafion, and empowerment. Of course, today these are not new ideas. But 25 years ago, the concept of worker parfici-

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pation was just beginning to take off. HODGETTS: BENNIS: Has this idea developed the way you thought it would? Yes and no. It certainly has progressed from being an esoteric idea to one that is widely taken for granted. This certainly did not surprise me. However, at the same fime, there have been dramafic changes in the environmentand these have had a significant impact. In parficular, I see the notion of empowerment on a collision course with many of the ideas associated with downsizing, restructuring, and reengineering. What, in parficular, do you think is accounting for the conflict between these two developments? One of the primary problems is that when you downsize an organizafion, reengineer the work, and restructure the relafionships, you alter the culture dramafically. In particular, the organization's vision often changes. The values of its leaders are altered and the trust of the personnel begins to wane. Everyone starts asking, "What's going on here?" And they start getfing very worried about their jobs and future prospects with the firm. Do think this is more common in small firms than in large ones? No, I think it's common throughout industry. Let me give you an example. About six weeks ago I was giving a talk on leadership at a Fortune 100 firm. Among other things, 1 emphasized some of the tradifional aspects of leadershipa sense of purpose, the capacity to generate trust, and a bias toward acfion and risk taking. Most of the people in the audience were in their early 40s. And they listened to me very responsively, taking notes, and paying careful attenfion. However, when I finished and the quesfion-and-answer period began, there was a very disheartening dialogue on the disconnect between my "marvelous ideas" and their own reality. So they weren't totally sold on your comments about effecfive leadership? Well, I think it went beyond quesfioning whether my ideas were wellfounded. What they were saying was that because of today's downsizing and organizafional restructuring, they never know from one day to the next whether they might have a pink slip in their mailbox. So how do you generate the necessary trust to lead in an environnient like this? After all, this is a large organizafion where you would think people's jobs are secure. And they're not. So you think an organizafion's efforts to improve its compefifiveness by cutting costs and becoming progressively leaner can result in major leadership challenges. Absolutely! When trust declines, people start looking for other jobs; comSUMMER1996 73

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mitment to their current organizafion declines. So how do you create an empowered organizafion in a fime of radical reengineering and layoffs? I'm not sure, but I do think this is a problem that will be with us for another decade. HODGETTS: But hasn't it always been like this, i.e., organizations meet compefifive pressures and respond by downsizing, cutfing costs, and laying off people? Are the 1990s so much different from any other decade? That's an interesfing quesfion because it forces us to make a historical comparison. Are things really that much different now than they were before? In my view, they are. In the past, these downturns lasted only two or three years. If you were laid off today, you could count on getting picked up by someone else within 24 to 36 months on the outside. Moreover, when the economy picked up again, you might even get hired back by the very firm that let you go. However, today this no longer happens. Organizations are not trimming down in order to meet temporary downturns in the economy. They are trimming down for the long run. When they let someone go, there is no plan to rehire the individual. So the old idea about the "creafive destrucfion of capitalism"which held that those who were thrown out of work because of compefifive pressures would soon find posifions in new, innovative firms that could survive in this environmentno longer holds. In a recent arficle in the Los Angeles Times, you made reference to companies today that can generate more output and profit with fewer employees than ever. Is this an example of the new trend to which you're referring? Yes. In fact, Charles Handy wrote about a CEO who boasted that his equafion for success was "half fimes two fimes three equal success." The CEO was saying that, with half the work force, he could produce twice as much goods and generate three fimes as much profit. These are impressive numbers, but they fail to answer the question: What happens to the other 50 percent of the work force that gets laid off? And since no one knows for sure whether they're going to make the cut, trust and commitment of the personnel decline. Everyone's concerned about their own fate, and the organizafion suffers as a result. So when an organizafion is in a downsizing mode, even those who remain may not be giving 100 percent? Yes. Because the trust factor, or should 1 say lack of trust, is likely to impede their performance. This means that the company's intellectual capital is being diminished. So things like ideas, innovafion, invenfions and reinvention are going to be less than they would be under ideal condifions. Rather than feeling empowered, people feel disempowered, frightened, anxious, and scared. This will be the major challenge for leaders in the 1990s and beyond.

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AU of this sounds somewhat ominous. Are there any comparues doing a good job in meefing this leadership challenge? There are, but before talking about them let me point out one other disparity that is causing problems for today's leaders. It revolves around the goals and purposes of the corporafion and the quesfion, to whom is the business responsible? Many people might say the shareholderand no one else. But that overlooks other stakeholders including employees, customers, the community, etc. In recent years, however, it seems that many corporafions have been run for the sole benefit of the shareholders. Everything they do is to increase shareholder value by driving up the price of the compan/s stock. Has the fact that insfitufional investors now hold a majority of the stock in most large corporafions helped perpetuate this trend? Absolutely. And because these insfitufional investors are interested in increasing the wealth of their holdingsand they have the power to influence top management decisions in this direcfionthey have created a shift away from a stakeholder orientafion to a shareholder mind-set. This is why you see the emergence of people like Al Dunlap, former chairman and CEO of Scott Paper, who sharply downsized the company and then sold it to Kimberiy Clark. He walked away with $100 million, and the shareholders also made out well. However, what about all of the employees who lost their jobs as a result? Do you think the fact that senior-level managers have the opportunity to make so much money ends up negatively affecfing the trust factor? Sure, and these rewards don't have to be the result of a takeover or some other one-fime deal. Just a few years ago, the average CEO's annual income was 140 times more than that of the average worker. Today it's 187 fimes more than the average worker. Now this is obscene, because it helps create an "us vs. them" mentality within the work force rather than promoting teamwork. Now, I don't propose paying everyone the same. However, there are ways of prevenfing things from getting out of hand. For example, one company I know does not allow its top corporate execufives to get a bonus unfil all the workers are assured a 15 percent increase in their profit sharing. If the employees don't get a first cut at a percent of profit sharing, the executives don't get any bonus. But if a company puts greater attention on the long-run development of its employees, can it remain competifive in an era when so many leaders appear to be mofivated by short-run results? Yes. And there are companies all over the country that are doing just this. Perhaps the best example is Harman International Industries, which makes sound systems for car radios, computers, large concert halls, and stadiums. Harman's major manufacturing facility is here in Northridge, California, where they have been able to achieve tremendous increases
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in productivity. In fact, thanks to some of these breakthroughs, they have found that they have more people than they need. They could get by with two-thirds of their work forceand in the short-run they would probably have generated more profit if they did. But they put their people first, because they believed that this would provide even greater results than downsizing and firing employees. The first thing Harman International did was to train people so they could get jobs elsewhere in the company. They then stopped outsourcing many of the elements in the sound system and began producing them internally. They also began looking at the way they carried out operafions and studying ways to do things less expensively and with higher quality. They also began setting up discount stores countrywide to sell some of Iheir products that are not top-of-the-line. Today Harman sells goods to consumers right off the rack. As a result, they have generated a lot more revenue and, in the process, created more jobs for their people. HODGETTS: One of the ideas that you often discuss is value-based leadership. What do you mean by this term? Are you saying that a leader's values have to be in synch with those of the workers and the environment? Yes, but let me enlarge on that a bit. There are two aspects of value-based leadership. One is that the leader has to take into account al! of the stakeholder and not just the shareholders. The individual has to create a balance among these groups, despite the fact that, collectively, they may have conflicting objecfives. The other part of value-based leadership is that there are certain values and morals that leaders must possess. They have a sort of moral compass, and their vision and values are closely correlated. In the case of Harman Intemafional, for example, there is more to the firm's leadership than just increasing the wealth of the shareholders. You have a new book coming out in 1997 that deals with creafive coUaboration. What is the book about? Well, my early work and research was in small groups and in group dynamics. Since then, I moved toward more macro issues. This book is about Great Groups. I'm trying to understand excepfional, extraordinary groups that, to a certain extent, changed the world in which we live. And there's something about the dynamics of these groups that relates to something I said earlier, because the issue is how you generate intellectual capital. It seems to me that by looking at extraordinary groups we can learn important things, just as we learn about leadership by focusing on extraordinary, exemplary leaders. On which groups did you decide to focus your attenfion? I looked at six: the Manhattan Project, the Disney Feature Animafions Studio, the Clinton 1992 campaign (not his presidency but the campaign group), the Black Mountain College (which during its 23-year existence probably had more influence on the arts and music in America than any other group), the original skunk works at Lockheed (the group that cre-

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ated the Stealth Bomber), and the Macintosh Revolution. The book is about how these six groups began, operated, and ended. I've finished most of the book and am now in the throes of wrapping it up. HODGETTS: BENNIS: Did you find something special about these particular groups that distinguishes them from less influenfial groups? Good quesfion. And the answer is yes. I found two things that stand out. First, the members of these groups all believed that they were literally going to change the world. They felt that they were on the edge of something colossal and that the world was going to be different as a result of their efforts. In a way, you can call it grandiosity to the nth degree. All of these groups had a sense that what they were doing was significant and compelling. And they weren't doing it for the moneythey were doing it because they believed in it. As a person with the Clinton team put it, "There's a simple doctrine. Outside of a person's love, the most sacred thing they can give is their labor." Now when love and labor are merged, when there's no distincfion between the two, you get Great Groups. So that's the major thing about them. They have an unbelievable convicfion, a zany belief, and an unwarranted opfimism that they can change the world.. You said that there were two things that distinguished these groups. What is the other? The other is the presence of a deadline and a product. In fact, one member of a Great Group said that this project was a dream with a deadline. All of these groups had dates by which they wanted to accomplish their main objecfives. The Clinton people wanted to win the election; the Macintosh group wanted to get their machine into the market place before the compefifion; the Manhattan Project people wanted to develop the atomic bomb before the Axis did. Lockheed wanted to produce the Stealth Bomber before the Soviets were able to develop their own. The Disney Feature Animation Studio wanted to develop new product in record fime because the company at large was having serious problems. Only in the case of Black Mountain was a deadline not a critical issue. Warren, you've given us interesfing insights to leadership challenges of the fuhare and the past. In looking at all of this as a totality, are leaders good leaders regardless of the fime period in which they emerge? Or would a successful world leader, say Winston Churchill, fail in Great Britain today because he lacks the skills needed at this point in time? You've presented an interesfing dilemma, and in answering your question let me contrast the views of Leo Tolstoy, the Russian novelist, with those of Thomas Carlyie, the great Brifish historian. Tolstoy believed that men were always the effectrather than a causeof events. Events have their own historical force and, at best, a leader can guide the way. This viewpoint of situafionalism is sharply different from that of Cariyle, who believed that history is a succession of biographies. Every insfitufion is
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the "length and breadth of one great man." I, personally, lean toward Carlyle's view and believe that great leaders create the situation. And not necessarily where the situation is currently, but where it is headed. As my favorite management philosopher, Wayne Gretzky, put it, "It's not where the puck is; it's where the puck will be." An effective leader is an individual who can see through the fog of reality to interpret events and be able to make sense of the blurring and ambiguous complexity. And to be able to do this has nothing to do with whether we're living in 2010 or 1996. Moreover, even if you have the best vision in the world, if you can't generate trust, it doesn't matter. And it's not just trust in an abstract sense. It's the ability to connect with people in their gut and in their heart and not just in their head. There's a leader I know who runs one of the country's largest transportation firms. He read an article of mine where I quoted Gretzky and he said to me, "You know, I really appreciate your quote, but I run a company where I think we know where the puck is going to be, but I can't get the union, the work force, or anybody to actually go with me on that vision." He talked in very negative terms about his overall operation, but never acknowledged the fact that the people in the firm do not trust him. They see him as a "revolving SOB"an SOB regardless of the angle from which they look at him. So he has the vision and the ability to see through the fog of reality, but he can't get the people to follow him. He reminds me of Glendower, the Scottish seer in Shakespeare's Henry IV, Part 1, who boasts, "I can call forth the spirits from the vasty deep." And Hotspur deflates him by responding, "Well, so can I. So can any man; but will they come when you call them?" And this is the issue of not just interpreting and envisioning the future, or knowing where the puck is going to be, but being able to create the kind of meaning for people, the values that make sense to them, where there's enough trust in the system so it's going to stick. So I'm not sajdng that situations are not important. But I am saying that the effective leader has to be able to size up that situation, forge a new path to see where the puck is going, and then have a message and vision that has meaning to the work force. And there has to be trust in the system. Without that, you can call for the spirits from the vasty deep foreverand they won't come. HODGETTS: So, in closing, you feel that over the last 25 years the challenges of the leader remain similar to what they have been in terms of not just vision but the development of trust. Absolutely, and that's particularly true in this era of reengineering and downsizing, where trust continues to be a major concern for the employees. If leaders can't establish that trust, then participation and empowerment will be cynical relics of a distopian nightmare. The problem is squarely in the hands of management, and it's a challenge that will confront us well into the next century.

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