TOM WALSH: Time for Wagoner to show why GM needs him:
A lot has been written about the proposed deal between Nissan-Renault and General Motors. The myth of the “hero leader” (in this case Carlos Ghosn) and the myth of economies-of-scale purchasing leverage have already been discussed in other articles and on other blog sites.
I want to discuss the myth of setting goals. From the article:
“When Ghosn was dispatched by Renault to save the near-bankrupt Nissan in 1999, he laid out a 3-year revival plan that promised profitability in the first year, plus a 4.5% operating profit and 50% debt reduction within three years. Nissan met all the targets on or ahead of schedule.
In a Jan. 9 speech to automotive analysts in Detroit, shortly before being granted a seat on GM's board of directors, York praised the Nissan revival strategy under Ghosn and urged GM to set similar public targets”
If you believe this school of management, the only thing holding GM back is the lack of aggressive goals and targets. Set higher goals, hold people accountable, it all sounds so simple. Jack Welch was a master of that at GE, right? (Imagine what would happen if GM got out of any market in which they weren't #1 or #2, a favorite Welch strategy).
Anyway, the idea of just setting higher, more aggressive goals makes me think of W. Edwards Deming. He, of course, railed against Management by Objective. I'm paraphrasing, but I think he always said basically:
“If you could have done better just by setting higher goals, why didn't you do so earlier?”
A company's performance is more than the sum of its hero leaders and more than the sum of its profit plans (Mark Fields is playing the game of “return to profitability” goal setting at Ford). It's about people and processes. By people, I mean all of the employees. If you have the same people and the same processes, do you expect the hero leader setting higher goals to really turn things around?
I don't.
Sure, leadership is important. Leadership can rally people around goals that they previously thought unachievable. I just visited the Sixth Floor Museum in Dallas yesterday and was reminded of JFK's audacious goal of reaching the moon by 1970. But, that wasn't just a goal. The proper resources were committed to help make it happen.
I think that, half the time, these “hero” executives walked into a situation at the right time. Think of the Motorola CEO, Ed Zander, who got there just before the hot RAZR phone came out. Think of college football, when a coach recruits great players for four years, but doesn't have a winning record yet. The administration gets impatient and hires a new coach who sows what was reaped by the previous coach. How do we REALLY know that another executive (even Rick Wagoner) wouldn't have gotten the same success at Nissan by merely being there? Tough questions to answer. What do you think?
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Good post.
1) While targets and goals can distract from improvement some guidance can be useful. If the desire to is have incremental improvement one strategy may be reasonable but if the desire is to aim for huge improvement another strategy is likely required. In general target are far too specific and overused so as a general rule I am inclined to be biased against targets. for more see: targets and innovation
2) I agree our performance appraisal of CEOs is generally very poor. That no surprise. It is next to impossible to do accurately, at all. It can be pretty easy to see someone that just is completely out of their league.
Otherwise luck, economics, industry factors, currency moves, oil prices, long term effects… make it very hard to judge their value. And certainly for those outside that deal with the CEO a great deal… over short periods periods – say less than a decade – expecting it to be very accurate is pretty naive I think.
It is easier to judge individual actions such as accepting obscene pay packages, ethic lapses that are caught, simplistic solutions (outsources…). And looking at the quarterly earnings over a short period is no good. If you look at a track record of decades (say Warren Buffett) then earnings are one decent measure I think.
Sure some guidance can be useful, but I also agree with your general bias against targets. Too much of the old management style was based on setting targets and then sitting back to watch people scurry to hit them. As Deming might say, “substitute leadership.”