Cranfield School of Management
Interview: Professor Andrew Kakabadse
Extraordinary Performance from Ordinary People
AK
Andrew, what prompted the book? You put a lot of emphasis
on the deliverance of value and how that fits in with leadership.
AKakabadse Really one of the key drivers of the book was Keith Ward, the
first author, and Keith has a very interesting history as a
Director of Finance and probably one of the youngest directors
of finance in the UK and he began then to question how using
financial levers and financial knowledge would then influence
the way organisations work and would influence people,
strategic thinking and so on. Now the extent to which Keith
was thinking about how finance then influences other subjects
of management was an interesting one and that is why Cliff
and I decided to work with him. Now, the critical question was,
people have been looking at organisations and what is
important is to look at the influence and the role and function of
the corporate centre and there were one or two books that
emerged in the United States about what it takes to be good
and great, but what sufficiently hadn’t been given attention was
the centre. And so we began to look at what is it about the
centre and the way it operates and the way it influences and in
many ways the way it dissects the organisation in particular
tranches, that then leads to success, failure, damage or
whatever.
AK
You describe different models of leadership to fit the right
context – can you describe how the model works in practice
and how does that tie in with the needs of the followers?
AKakabadse We took, for this particular book, an economic model, rather
than a people model – and we essentially looked at two
dimensions. What adds or makes for extra advantage? What
is the differentiator? And then what is the role and influence of
the centre? So we took a resource based view, which is not
an uncommon thing for many strategists to do, but then we
basically said to what extent does the centre get really involved
in what is happening? And to what extent does the centre sort
of stand back and almost act like a shareholder? And in terms
of differentiation what is really the difference between one bank
and another – is it brand? Is it that there is some sort of
unique knowledge, or is it that there is some sort of extra
discipline in terms of price? And what we have got here is a
more traditional two by two matrix and what emerged was very
Cranfield School of Management
Professor Andrew Kakabadse
different practices at both organisation, teams, departments
and people – and so by using this as the economic model to
drive the organisation, and people having to live in particular
contexts which may be more knowledge based, interesting,
more to do with delegation and more to do with giving your
opinion versus sitting in a box and driving costs and prices
through to the extent that you want, that is what determined
people’s behaviour and followership. So it was really
economics that was driving followers' behaviour and followers'
expectations.
AK
What are the implications for organisations and leaders,
particularly what does it mean for developing leaders?
AKakabadse From this particular perspective, of this book, it's do people see
the same thing in the same way? What I have described is a
fairly simplistic model – why are you different and what does
top management really do about it? Now the problem is that
you and I may not see why we are different, or you and I may
see an entirely different view as to why we are different. So
when we drew on early research, we were finding statistics
like, of the world’s top teams, about 35% could not even agree
on the vision and lived together for years undermining each
other and about 67% could not even talk about those issues
that were sensitive. So not only were they undermining each
other, they were pretending at meetings as if that wasn’t
happening and everybody knew what was happening and they
were walking out of the meeting breaking the rules that they
had just created in the meeting. So, one of the learning for
leaders is why does your colleague hold a different view to
you? And if we all have the same economic and financial
data, why do we interpret it so differently? Well, one reason
could be role. You could be the managing director of
Germany and you see the German market and all its influences
in a completely different way to the head of marketing, say, in
Chicago. You could be a director of human resources and so
you have an internal look of key functions and you are trying to
get consistency across the organisation and yet the head of
manufacturing for South East Asia just cannot understand
some of the personnel policies and systems that you are trying
to introduce which have a sort of North American or Anglo
American flavour in basically an Asian country that has
completely different issues around poverty and child labour.
So depending on your role and position, you may interpret the
same data in completely different ways. There is another
piece of learning which is just ego. You and I may see exactly
the same situation in the same way, but we are very
competitive as people. And so what we do is we try and take
positions in the top team or in board room discussions, or
wherever, that will undermine each other. So one of the key
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learnings is, if we share the same data, why do we see the
world in a different way? And if we see the world in a
different way, can we integrate those different perspectives?
And if we can’t integrate those different perspectives, is it
because there is something wrong with us as people or is it
because the organisation has now reached such a size that
genuinely parts of the organisation are in growth phase, and
parts of the organisations are in decline – almost sell – phase,
and so if you are sitting at the centre, trying to convince your
managing directors or general managers across the world that
what you are doing is right, it is going to be a very hard job
because they have a completely different economic reality to
live with day by day. So one of the learning points is how do
we communicate such diversity and tension and still bring
people on board and still have people think in a corporate way,
as opposed to a more localised, divisionalised or subsidiary
way?
AK
That is very interesting. The book came out at the end of last
year, how have the ideas been received?
AKakabadse Well I think one of the interesting aspects about being an
author is that you have no idea what is happening in the
market place. I tend to be contacted by the publishers,
probably two years later, and told this is how much you have
earned. And from that is the only way I can really deduce
what is really happening. But from teaching and from
consulting, the ideas go down very well. The most sensitive
role, where the ideas have met with blockage, tend to have
been the role of the chief executive. It's almost as if this
person is committed to the way they have defined, or the way
they have identified as the way forward, and then they see
there is a such a logic and such a reason why some of their
immediate subordinates may take different positions. And so
what you have there, is a chief executive that could be easily
threatened – a chief executive that can’t communicate, a chief
executive that doesn’t know how to deal with tension. And so
they have found some of the ideas behind the book alarming,
and the reality is that they are not. What it is, is a personal
inhibition that the individual has to overcome. Surprisingly,
equally, the person that has been most receptive to the book
has been the chairman and the chairman sits on the board and
takes this complete overview and that chairman can really see
the tensions on their own board, and the tensions in the
management team. And they are looking for a model which
helps explain why are these tensions not just people
problems? So it's not just negatively on each individual’s part,
there is actually a sound logic and if a whole number of people
– and as you can see from the statistics I quoted – about two
thirds of the world’s organisations are deeply divided and can’t
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discuss their issues. It's not because people are dumb, it''s
because there must be a good reason. So as far as we can
see, chairmen seem to like it, chief executives somewhat baulk
at it, but general managers who are trying to fight their chief
executive, love it.
AK
That’s great. What direction is your current research taking
you in? What are you investigating?
AKakabadse We are taking, if you like, all this leadership stuff and strategy
stuff one step further and we have just finished a survey of the
world’s boards. So a book is being written at present called
Leading the Board and that is a compilation of data from the
US to Russia to Germany, to all over about what it takes to
lead today’s world class boards and what are the
characteristics of being a top class board member and being a
top class chairman, and how do you bring the chief executive
and the management team on board. So there are still some
overlap lessons that I have described in our discussion, but
there is something else, and that something else is to really be
able to stand back and have that complete overview. Now we
thought at first that was more a mental problem – very few
people can have that overview. What we found on boards is
that very few people have the time to have that overview. So,
a disturbing statistic that emerged for the UK is that something
like 85% of non executive directors do not quite know the
organisation on whose board they sit. They don’t know what
differentiates it, they don’t really know what its competitive
advantage is and the best test for that is to go to a board
meeting and ask each of the board members to write down –
not talk to each other – write down what they think is the
competitive advantage and differentiating factor for that
organisation, collect those pieces of paper and read it out.
Now, having two different points of view I think is normal. But
when you start having five completely different points of view
on a board of eight, we have a problem. So what we are
finding is that many board directors are going to meetings not
quite knowing what they are doing and unfortunately spending
too much time on detail, and almost breaking the boundary
between what is board work and what is management work,
simply because the chairman hasn’t been able to stand back
sufficiently and almost educate their board, together with the
approval and commitment of the chief executive, on what really
makes this board and the organisation different. Now we
thought the Brits were bad – do you know the country where
this is absolutely the worst? US.
AK
Even more than the UK?
AKakabadse The Russians were better, the Germans were better. In fact
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what we found in the US were boards so deeply inhibited we
couldn’t believe it. What we found in the US were a few
outstanding heroes, either as individuals or as companies.
When you went below that level, you had something like 80 to
85% of American organisations were distinctly vulnerable and
should, for example, Europe become one country and one
market, under one government and one currency, and China
really take off in the world, the Americans don’t stand a
chance. The few outstanding American corporations do, but
not the bulk of American companies. So, we are finding there
that inhibition at board level without good chairmanship does
cause harm. The problem is identifying that harm.
AK
So the implication of this is harder to define?
AKakabadse It is harder to define, and why? There are only six to eight
board meetings a year – twelve maximum. How long does
each board meeting take? Three hours. We may have an
away day per year. Then each of the non executive directors
are external directors and go off and do something else – they
may be managers of other companies, they could be non
executive directors of six other organisations. So, their
attention on this company and the decisions they make, and
the longer term implications of those decisions take a long time
to work their way through the organisation and even then, it is
sometimes difficult to pinpoint that these decisions had this
effect. But if you live with a place long enough, and if you
exist with an individual organisation long enough, you can see
the sort of knock-on effect of poor boardmanship and poor
chairmanship.
AK
You mentioned Russia having a better percentage than the UK
and the US – that is was it a kind of fresh start with the fall of
the Berlin Wall transformation economy?
AKakabadse Very much a fresh start, it’s a transformational economy.
They have in a sense what the Americans had from about
1900 to 1920 – they have the owner-manager. In Russia they
call them the Oligarch. So, these are young men and when
you go to Russia today, in terms of business, you actually think
you are in the 1920s – despite certain depressions, there is a
lot of hope, there is this one guy driving this one organisation
through. And they are like the great heroes – the great heroes
of America that built the railway system or created the Ford
car, with the same possible problems in the future. So the
Americans have still not been able to sort of go away from the
great man, great woman image of both strategy and leadership
and in fact have created one failsafe mechanism after another
to control this great person and often those failsafe
mechanisms go wrong. So, at this point in time, Russia with
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all its hopes for the future and its young individuals and bright
young teams, living together for probably no more than a
decade, you can see the motivation bubbling through. Let's
see what they are like by 2020 and we will probably see much
the same situation that we find in the US today.
AK
What about China and India?
AKakabadse We are about to find out. We have got a whole series of
studies and interviews lined up in May of this year to go to
China. China is going to be a very different kettle of fish,
largely because of who owns what. So with many companies
the land on which your company is based and its buildings may
be owned by the state, if not the buildings definitely the land.
So we have an entirely different concept of ownership which
offends the concept of ownership and business that we know in
Europe, Africa, South America and North America. So it's
almost as if many of these organisations are renting time from
the state and so far that has not been a problem – but what
about when the growth stops. What about when people begin
to question a centralist party and want different viewpoints to
be heard at government level, and represented at government
level? Now that is already bubbling through in China – one of
the biggest issues is not so much religion, it's poverty. We do
have a massive divide in China just as much as you have in
the US and as you have in Russia. So, add to this the
different dimension of ownership of just simply the land, it will
be interesting to see what happens to China by 2020. India
really has a Western model and we can well see much of what
we saw happening in the UK, happening in India. The big
issue with India tends to be religious divides, but from a
business perspective and a growth perspective, I think we will
be seeing a sort of UK model, post World War II.
AK
Andrew, thank you very much indeed.
Transcript prepared by Learning Services for the Knowledge Interchange
www.cranfield.ac.uk/som
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© Cranfield University 2007