Leadership and Strategy

Andrew Milton-Thompson looks at the impact of different leadership styles on company strategy
Half a century ago the great management theorist Chandler studied the relationship between an og n ai sr tr a d i ra i t n s o s t cue u n t s strategy. Chandler was credited with the idea that structure f ollows strategy, or that a coordinated strategy was necessary to give a company (1) structure, direction, and f ocus . More (2) recently Hamel and Prahalad p i e o tht c mp nsr e i o td u ta a o ay t tg n s a c options derived f rom its so-c ldc r ae e l o c mp tni i oh r w rs a o eec s n te e; od company should aim to do what it does best. Its strategy should f ollow its structure. T d ysme ia pref er to tell us about oa d prominent individuals rather than important companies. Personalities make a story and sell newspapers; og n ai sd n. o n h w may ra i t n o C u t o s o t n books on leaders and leadership there are in y our local bookshop, and see if y ou can f ind a single one since Tom P tr I S ac o E c ln e i ees e rh f xee c n n l praise of organisations. So, f or better or worse, leaders get exposure, f ame, praise and derision. Certainly leaders hav e an important impact on organisations today. So I thought it would be interesting to consider the relationship in our i ut n sr b te n a c mp n d y ew e o ay s strategy and its leader. Do leaders d tr n a cmp n s aey o eemi e o ay t tg, r s r does a company require a leader who can adapt to the situation in which it f inds itself? owners looking f or perf ormance at a different lev el will seek to inject new management capabilities into a business. Another important f actor has been the pref erence of companies to dev elop talent internally and to promote from within. Howev er middle managers often lack the breadth of experience and leadership skill required for senior roles. The recent driv e for f latter structures and the acceleration of change in the business env ironment exacerbate this effect, leav ing many companies without managers capable of bridging the gap from relatively narrow management roles to carry ing the baton of leadership. By contrast, some other organisations which hav e maintained a programme to dev elop leadership talent through frequent lateral and upward mov es f or their brightest executives, now f ind that they have more qualified leaders than senior positions. Such organisations hav e v ery small leadership teams, and the most senior roles are already occupied by capable people in their prime. minded people with strong f unctional skills, engaging in considerable internal discussions and negotiations, often working across international boundaries. Within small organisations, leaders are more autonomous, and work with less corporate resource. Howev er managing part of a large organisation in a country or div ision well away from headquarters does hav e similarities to running a small business. One option f or small and medium sized companies is to f ind senior managers with experience within similar types of company and organisation, but possibly from another sector. After all, general management skills are transf erable across industry sectors, and specific industry knowledge can be readily learned by intelligent people. In practice, f ew companies consider importing leadership talent from outside the sector, ev en where the role does not apparently require specialist industry knowledge. The argument is that there is a risk in appointing a leader without industry experience who consequently may lack the personal credibility with those they need to lead. In contrast, major companies with businesses in a v ariety of sectors frequently mov e senior managers f rom one business to another to giv e them experience and breadth. The argument here is that the manager is already known, so there is less risk than hiring a stranger ev en if that stranger possesses the relevant sector knowledge.

Fishing in the talent pool Industrial organisations in the past tended to be conservatively managed, with leaders of ten remaining in their roles f or many y ears. Leadership positions often only became vacant on retirement. Other driv ers f or change at the top included new business initiativ es such as geographical expansion, the need to manage or integrate an acquisition, or the need fr a r-ao n rs l g f m o t n ru d e u i u t n r o declining business perf ormance. Recently, leadership changes hav e arisen more often as a result of changes in ownership, a mov e from priv ate ownership or corporate ownership to ownership by private equity or v enture capital. Often new

T efu Cso Ma a e n h o r f n g me t Style

Andrew Milton-Thompson is Principal of In2Search, an inter national exec utive search fir m bas ed i n London. He specialises in s eni or international industrial appointments.

The obv ious question is whether people f rom such organisations hav e skills and experiences relev ant and transf erable to other, perhaps smaller, companies. Managers in large organisations ty pically work in teams with like

It is also interesting to consider the sty le of leadership appropriate to the situation a company finds itself in. For example the skills needed f or geographical expansion differ from those required f or consolidation or cost reduction. A recent study of the chief executives o E rp ma rmo i tl h n f uo e s j o be e p o e l e (3) companies identified f our distinct sty les exhibited by the leaders. The chart below plots them on a grid illustrating the strategic situations

In2Search, 42 Berkeley Square, London W1J 5AW - Tel: +44 (0)207 193 8035 - www.in2search.com International Executive Search for Industry

which best match each management sty le. The largest group were Chameleons. These leaders adapt to the env ironment, make changes only gradually, and manage to meet expectations. Often they have been promoted from within. Captains are differentiated by v irtue of their f ocus on sales and f uture rev enues rather than cutting costs. Some came f rom other companies within the same industry. Others brought ideas and experience f rom other sectors. Cav aliers and Chainsaws are the rev olutionaries, being in the minority in the mobile telephone industry. They were adv ocates of f aster change. In the past, many industrial businesses have been managed by indiv iduals fitting the pattern of Captains or Chameleons. Low market growth in Europe drov e companies into geographical expansion or cost control modes. An increasing pace of change, and new ownership models hav e now placed a number of indiv iduals with the characteristics of Cav aliers in positions of responsibility. Chainsaws have conducted rapid costcutting exercises in some businesses. While most industrial sectors may not enjoy the meteoric growth path of mobile operators, we hav e started to see more managers with profiles adapted to f aster change both to aggressiv ely cut costs and to pursue radically new opportunities.

excellent people with extensive, if accelerated experience. A y oung manager educated technically in Germany , may not f inish his or her education until an age approaching thirty. It is hard to imagine that in 12 to 15 y ears enough work experience can be gained to prepare f or managing a large and complex international business. Howev er, in some organisations fast-tracking a few indiv iduals, it has been done. Smaller organisations are more sceptical about this, and of ten place a higher v alue on long experience. Ev ery air passenger knows that a captain with a f ew grey hairs inspires

Ownership of the industry will remain in a state of f lux. There is increasing interest from international inv estors and priv ate equity companies in the f amily owned small and medium sized industrial base of many European countries. This, added to the pressure on corporations to optimise and f ocus their portfolios, will maintain the flow of corporate restructuring activ ity. Careers in industry will no longer represent a conservative choice. It is possible to attract intelligent and ambitious graduates from top business schools to careers in industry, though the traditional f or life job expectation has gone. Industry can now compete effectiv ely for excellent people with sectors such as f inancial serv ices and consulting which were prev iously considered more sexy. There will be challenging leadership roles f or a select few. There is a trend to select leaders at an ev er younger age, but this prov ides opportunities for companies who choose to buck the trend by f ishing in the pool of the more experienced and capable.

conf idence. In recent y ears post-graduate business qualif ications (the MBA) hav e become more accepted and f amiliar within industry. During the boom in stock markets and dotcom companies, graduates from top business schools would seldom consider careers in basic industries, pref erring financial services, high tech and management consulting. With increased competition for good career opportunities, more y oung people are inv esting in a business education and setting their sights on industry.
(1) Strateg y and Structure (1962), Alfred Chandler (2) Harvard Busi ness Revi ew Hamel, G. & Prahalad, C.K. (1990)

(3) A cnue uo k Ma 2 0 h cetr O t o l y 04 Te

first half is up: Evaluati ng leaders hip styles and perfor mance in the European mobei ut i n sy l d r

Youth or Experience?
Another discussion which arises frequently concerns the appropriate age and education profiles for aspiring leaders. Companies look f requently f or general managers f or major businesses in their early to mid forties. And indeed it is possible to f ind

This article first appeared in the Nove mber 2004 edition of PPCJ Polymers Paint Colour Journal

The future
As the industrial sector adapts to new ownership models and enjoys strong and more stable markets, it f aces some challenges to f ind and dev elop its managerial talent.

In2Search, 42 Berkeley Square, London W1J 5AW - Tel: +44 (0)207 193 8035 - www.in2search.com International Executive Search for Industry