Courage: The Defining Characteristic of Great
Leaders
Courageous leaders inspire employees,
energize customers, and position their companies on the front lines of societal
change. Bill George explains why there aren't more of them.
Courage is the quality that distinguishes great leaders
from excellent managers.
Over the past decade, I have worked with and studied more than
200 CEOs of major companies through board service, consulting, and research as
a member of Harvard Business School’s faculty. I’ve found the defining
characteristic of the best ones is courage to make bold moves that transform
their businesses.
Courageous leaders take risks that go against the grain of their
organizations. They make decisions with the potential for revolutionary change
in their markets. Their boldness inspires their teams, energizes customers, and
positions their companies as leaders in societal change.
The dictionary definition of courage is “the quality of mind or
spirit that enables a person to face difficulty, danger, pain, etc., without
fear.” Courageous leaders lead with principles–their True North–that guide them
when pressure mounts. They don’t shirk bold actions because they fear failure.
They don’t need external adulation, nor do they shrink from facing criticism.
Courage is neither an intellectual quality, nor can it be taught
in the classroom. It can only be gained through multiple experiences involving
personal risk-taking. Courage comes from the heart. As Buddhist monk Thich Nhat
Hanh once said, “The longest journey you will ever take is the 18 inches from
your head to your heart.”
It takes bold decisions to build great global companies. If
businesses are managed without courageous leadership, then R&D programs,
product pipelines, investments in emerging markets, and employees’ commitment
to the company’s mission all wither. These organizations can slip into malaise
and may eventually fail, even if their leaders can move on to avoid being held
accountable.
Why do some leaders lack courage? Many CEOs focus too much on
managing to hit their numbers. They avoid making risky decisions that may make
them look bad in the eyes of peers and external critics. Often, they eschew
major decisions because they fear failure. I know, because it happened to me.
In my first year as CEO of Medtronic, I passed up the
opportunity to buy a rapidly growing angioplasty company because it faced
patent and pricing risks. While those risks proved valid, Boston Scientific
bought the company instead, transforming both enterprises and creating a
formidable competitor for Medtronic. I didn’t have the courage to accept
short-term risk to create long-term gain. It took Medtronic two decades of
expensive research and development programs and additional acquisitions to become
the leader in this field.
Let’s look at some recent examples of courageous leaders whose
actions transformed their companies:
Alan Mulally When Mulally arrived at Ford, he found a
depleted organization losing $18 billion that year and unwilling to address its
fundamental issues. To retool Ford’s entire product line and automate its
factories, Mulally borrowed $23.5 billion, convincing the Ford family to
pledge its stock and the famous Ford Blue Oval as collateral. His bold move
paid off. Unlike its Detroit competitors, Ford avoided bankruptcy, regained
market share, and returned to profitability.
Mary Barra In contrast to Mulally, General Motors CEO Rick
Wagoner and his predecessors refused to transform GM’s product line, even as
the company’s North American market share slid from 50 percent in the 1970s
to 18 percent. When the automobile market collapsed in late 2008,
Wagoner was forced to ask President George W. Bush to bail the company out.
Even so, GM declared bankruptcy months later.
Mary Barra, GM’s CEO since 2014, demonstrates the difference
courage can make. Immediately after her appointment, she testified before a
hostile Senate investigating committee about deaths from failed ignition
switches on Chevrolet Camaros. Rather than make excuses, Barra took
responsibility for the problems and went further to attribute them to “GM’s
cultural problems.” Three years later, she is well on her way to transforming
GM’s moribund, finance-driven culture into a dynamic, accountable organization
focused on building quality vehicles worldwide.
Paul Polman When Polman became Unilever’s CEO in early
2009, he immediately began transforming the company, declaring bold goals to
double revenues and generate 70 percent from emerging markets. He aligned 175,000 employees
around sustainability, publishing the Unilever Sustainable Living Plan with well-defined metrics the following year. Polman’s efforts
in his first eight years returned 214 percent to Unilever shareholders.
Nevertheless, Kraft Heinz, owned by Brazilian private equity firm 3G, made a
hostile bid to acquire Unilever on February 17, 2017. Polman immediately
wheeled into action, convincing KHC to drop its bid two days later. Then he
announced seven bold moves to enhance shareholder value
without compromising the company’s ambitious long-term plans.
In comparison, Kraft CEO Irene Rosenfeld quickly capitulated
when confronted by activist Nelson Peltz in 2012. He wanted to split Kraft’s
global business by spinning off its North American grocery products unit, which
Rosenfeld wound up leading as an international business renamed Mondelez.
Without the ability to access global markets, the old Kraft went into a period
of decline, making it vulnerable to 3G’s 2015 takeover; meanwhile, Mondelez is
adrift with declining revenues and earnings.
Indra Nooyi: Named CEO of PepsiCo in 2006, Nooyi foresaw the
coming shift among consumers, especially the millennial generation, to
healthier foods and beverages. She immediately introduced PepsiCo’s strategy
“Performance with Purpose,” that focuses on complementing the company’s core
soft drink and snack business with healthy foods and beverages. In 2013,
PepsiCo was challenged by activist Peltz to split the company, but Nooyi
steadfastly refused. Instead, she restructured her leadership team to deliver
strong near-term performance while continuing to invest in her transformation
strategy.
Nooyi’s arch-rival, Coca-Cola CEO Muhtar Kent, decided instead
to concentrate on sugar-based soft drinks while ignoring these obvious trends.
As a result, Coca-Cola’s performance has consistently lagged PepsiCo’s. Since
2011, PepsiCo stock is up 70 percent, while Coca-Cola’s has increased only 15
percent.
The courage cohort
There are literally thousands of competent managers who can run
organizations efficiently using pre-determined operating plans, but few with
the courage to transform entire enterprises.
The courage cohort includes Delta’s Richard Anderson, Starbucks’
Howard Schultz, Xerox’s Anne Mulcahy and Ursula Burns, Nestle’s Peter
Brabeck-Letmathe, Novartis’ Dan Vasella, Tesla’s Elon Musk, Amazon’s Jeff
Bezos, Merck’s Ken Frazier, and Alibaba’s Jack Ma. They join the growing list
of authentic leaders that have made courageous decisions to build great global
companies.
To quote poet Maya Angelou, “Courage is the most important of
all the virtues, because without courage you can't practice any other virtue
consistently.” Boards of directors need to examine their leaders carefully to
determine if they have the courage to navigate their organizations through
turbulent times while enduring hardship, risk, and criticism to ensure they are
building sustainable enterprises.
With more courageous leaders like those cited above, the
business world will be able to create enormous value for all its stakeholders.
by Bill George
http://hbswk.hbs.edu/item/courage-the-defining-characteristic-of-great-leaders?cid=spmailing-14923631-WK%20Newsletter%2004-26-2017%20(1)%20A-April%2026,%202017
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