How to Train Ordinary Heroes?

When thinking back at the last 13 weeks of this class, the case “The Ordinary Heroes Of the Taj” is definitely the one that made me and still makes me think the most. This story seems to come directly from the mind of Hollywood’s best writers.  Unfortunately this story dramatically happened. That day, ordinary people became ordinary heroes and part of it can be explained with a not so ordinary company: The Taj.  Everybody would like to think that he or she would have done the same. I have my doubts about that. Honestly I can say that I would not have reacted as well as the Taj’s employees.

What is really striking in this case is the number of people who became heroes. Usually in this kind of drama it is possible to find a person who acts as a “hero”. In this case all the employees have reacted as if they had been training their whole life for this event.

It is difficult to understand how this reaction happened. But we can be sure that the culture of the country and of the company played a huge role. I am convinced that this case can be the basis to improve our companies. Obviously all the companies cannot go to India to have the Indian culture but it is possible to replicate some points of the Taj Approach to HR.

Teach people to improvise rather than to do thing by the book.

In my opinion this is definitely the most important point. It is impossible to train the employees for every possible event, the company have nor the resources nor the time to do it. In addition our imagination is limited. Therefore the only viable solution is to train the people to improvise. This is obviously difficult and will ask time (Taj’s workers trained for 18 months instead of 12), but I am convinced it can have a huge impact on the company.

Ensure that employees can deal with guests (clients) without consulting a supervisor.

This point is closely linked with the previous one. It is worthless to train people to improvise if they need their supervisor’ authorization to act.  Giving more responsibility and more room to take decisions valorizes the employees which in turn can better serve the clients. As explained by a manager in the case :”if you empower employees to take decision

Insist that employees place guests ‘interests over the company’s.

This is difficult to implement because even in companies where “the client is king”, employees have a tendency to protect themselves and therefore to protect the company. This is a natural behavior but it is really shortsighted. The company needs to make totally clear that guest’s interests are over the company’s. This may have short term costs but it is nothing compared to what it can bring in the long run. In addition it is also good for the employees. As explained by a manager in the case:”if you empower employees to take decisions as agent of the customer, it energizes them and makes them feel in command.”

In conclusion, I am sure that those three points are the basis of the Taj employees’s reaction. I am even more convinced that just those 3 principles could lead to tremendous improvements in clients’ satisfaction, employees’ satisfaction and finally overall return for every company in the world.

 

The paradox of tyrannical leadership

Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves” – William Pitt

During the class on Leadership, we have seen the different styles of leadership that get results. More importantly, through the case of Raising Haier, we learnt that good managers do not have merely one “style” but they are able to switch from one to the other when needed. Finally, it has been shown that Coercive and Pacesetting have a negative impact on the climate. Therefore, does it mean that that those two styles are bad for the company?

The first reflex is to think that on the long run a hostile work environment will have a negative impact on the bottom line of the company. This is theoretically sound and my thoughts would not have gone further if Bill Gross had not been in the news recently.

Bill Gross, the tyrannical leader.

Bill Gross co-founded PIMCO (Pacific Investment Management Company) in 1971. Over the last 43 years, the company went from $12 million to $1.93 trillion in assets under management.[1] Nowadays PIMCO is one of the largest fixed income managers and Bill Gross has been named the “Fixed Income Fund Manager of the Decade”[2]. But if Bill Gross is in the news recently it is more for his “aggressive” leadership style that presumably pushed Mohamed El-Erian’s resignation as CEO and co-CIO.

The Wall Street Journal has recently interviewed many current and former employees to paint a better picture of Bill Gross’s presumably “aggressive” leadership[3]. By his own words, Bill Gross is a demanding boss and asks the best of his. In reality, it appears that he is really a tyrannical leader. According to the article, employees are asked to be at the office at 4.30 am and speaking or even making eye contact with him is discouraged, especially in the morning. In addition he gives “communication demerits” (for example when people forget to number the pages in a presentation) and keeps track of it to determine year-end bonuses. Finally, 10 years ago happened the famous story that depicts the best his behavior.  He actually asked an employee to pay $10,000 to a PIMCO’s charitable foundation because he did not stand when a client visited the trading floor. With the exception of Bill Gross, no one could argue that this is not tyrannical. But at the same time no one could deny the stellar results achieved by Bill Gross.

Bill Gross, the exception to the rule?

We do not need to think far away to find other tyrannical leaders that get results. Steve Jobs, Bill Gates and Jeff Bezos are three other examples of tyrannical leaders that build huge empires and revolutionize our world. In the book: The Everything Store: Jeff Bezos and the Age of Amazon, the founder and CEO of Amazon is also described as a tyrant. Employees say that he is known for his outbursts and to direct his anger towards them.[4]

“Are you lazy or just incompetent?”

“We need to apply some human intelligence to this problem.”

“This document was clearly written by the B team. Can someone get me the A team document? I don’t want to waste my time with the B team document.”

This is the kind of comments Amazon’s employees can expect when they are not fully committed and their work is not at the level required by Jeff Bezos.

However, in addition of building empires, those leaders have many points in common. They have huge ambitions, high intelligence and full commitment to their job. Therefore they expect the same of their employees.

For companies to become ridiculously successful, do they need to have a tyrannical genius at the top?[5]

This question has been raised by Forbes and many other people especially after the death of Steve Jobs, the biography that followed and now the bestselling book on Jeff Bezos. Without a doubt, those people are “genius”. However it is more difficult to determine to what extent the tyrannical leadership played a role.  In my opinion, in our increasing competitive world, building empires such as Amazon, Apple, Microsoft and PIMCO would not have been possible without a tyrant at the top.

The authors of “The Paradox of Managerial Tyranny”[6] have analyzed this question and they concluded that the “the best leadership style is the one that produces the desired result” and that in certain cases performance matters more than leadership style. As they explained, in a “Schumpeterian world” with cut-throat competition, only leaders with “an obsessive drive, a crystal-clear vision and a well crafted strategy” will be able to build empires.

In conclusion, I am now convinced that under certain conditions, tyrannical leadership is a necessary evil and the resulting difficult working environment is a very small price to pay.



[1] http://www.pimco.com/EN/OurFirm/Pages/OurFirmOverview.aspx

[2] http://www.reuters.com/article/2010/01/12/fundmanagers-morningstar-idUSN1212839920100112

[3] http://online.wsj.com/news/articles/SB10001424052702303636404579393131430361274

[4] http://www.forbes.com/sites/retailwire/2013/10/22/is-jeff-bezos-a-horrible-boss-and-is-that-good/

[5] http://www.forbes.com/sites/retailwire/2013/10/22/is-jeff-bezos-a-horrible-boss-and-is-that-good/

[6] H. Ma, R. Karri, K. Chittipeddi “The Paradox of Managerial Tyranny”; Business Horizon (2014)

Culture as Liability: The Case of UBS

The important role of culture in a company has been long discussed. It can clearly differentiate companies and it is considered by many people as the only truly sustainable competitive advantage.[1]  Indeed, process can be duplicated, the best employees can be hired and idea can be copied.  This could be done by any competitor with the will, money and time. However, it is extremely complicated to duplicate the culture which explains why the culture is an invaluable asset.

In some cases, a strong culture could become a liability. During the class, we have seen that M&A failures can largely be explained by a clash of cultures. A good example is what has been called the worst deal in history: the merger between AOL and Time Warner in 2001[2]. Moreover, in their book Robbins & Judge draw attention to the fact that a strong culture could potentially lead to other dysfunctional behavior, namely institutionalization, barriers to change and barriers to diversity[3].

I would like to shed light on a case where a strong but dysfunctional culture is becoming a huge liability for a respected financial institution: UBS. The facts are simples: UBS has been involved in a new financial scandal almost every year for the last several years. Those scandals include tax evasion, money laundering, rogue trader[4], LIBOR rigging[5] and municipal bond market rigging[6]. It is worth noting that UBS is not the only financial institution being involved in scandals. However, the diversity and the repetition of the scandals over a long period of time make of UBS an interesting case for this class.

One could argue that it is largely a question of bad risk management. In my opinion, this argument fails to explain the repetition and the diversity across all the divisions of the scandals. Therefore, many experienced financial commentators have suggested convincingly that UBS strong culture is at the root of the problem.   

My view on that argument is that we have to distinguish between the culture of UBS and the culture of the whole industry. The financial industry is based on money and taking/managing risk.  As a result it attracts risk-takers and people for whom money is a crucial motivator. In addition, the financial world is known to attract brilliant people with a highly competitive mindset. This selection keeps alive the “Wall Street” culture.  I am convinced that those characteristics are not enough to lead to so many legal and ethical lapses[7]. In addition, no other financial institution has been touched to the same extent as UBS. Therefore it is seems that there is a specific culture at UBS.

Some Investment Banks are renowned to really prone teamwork. Goldman Sachs is the best example of this teamwork culture. At the opposite, some banks have an individualistic (which is not the same as independent) culture.  It seems that UBS is a very good example of a place where individuals matter more than the company. People close to the situation suggest that Mr Adoboli (the rogue trader who cost UBS around $2.3 billion in trading losses) unauthorized trading seems consistent with a culture at UBS that stressed individual advancement over team efforts[8]. Another investment baker explained to the New York Times: “Everyone is separate. People cut their own deals, and it’s every man for himself. A lot of people made a lot of money that way, and it fueled jealousies and efforts to get ever better deals. People thought of themselves first, and then maybe the bank, if they thought about it at all[9].

Interestingly, some people have argued that this is not a sign of a strong individualistic culture but rather a lack of culture.  I understand the reasoning but because this behavior seems to be (unofficially) encouraged by the top management, I still believe that there is a strong culture at UBS. Anyway, at the end the result is the same: UBS is a place where individuality and profits at any price are the rules.

For me the strong individualistic culture is without any doubt the main reason for UBS failures. But fortunately for UBS, I am also convinced that it is the solution. No software, risk management team or process will be able to prevent every rogue trader. The only solution is to build a culture where the company is more important than the individual. This will be extremely difficult and will take time. But it begins with a strong commitment and support by the top management (and not only officially) and also new criteria for the hiring of new employees. It may reduce profits on the short term, but will undoubtedly be beneficial for all the stakeholders on the long run.