Prescott Keynote - David Lewin
Please. Join me in welcoming to, the stage professor. Emeritus, David, Villa. Thank. You Dean, Rankin, and good. Evening before, I get started, I've, been asked by several of you how long have I been in. Melbourne, and I have I been here before I have. Been here before but this time tomorrow, will be my 11th day and. Yesterday. I was at the point leo estate. Where. We have the six four six six, dollars for tasting six wines I'd never experienced. Anything like that in my life, but, I wouldn't, mind if that, when it comes to being dead and buried I wouldn't mind being buried in the sculpture garden that was a place. That caught my attention I. Did. Do the ARA Valley wine tour for a day did. Do Sovereign, Hill and they went. Into the mine and came out of the mine which I've considered. To be an accomplishment and of course the parallels between California. And Melbourne. In particular in. The Gold Rush experience, in the middle of the 19th century are well, known did. A city tour the day after I arrived here from Seoul, Korea where, the temperatures were about forty to forty one Celsius so I welcome the weather here went. To Byrd's basement. And heard a great five piece jazz group went. To the Melbourne Museum, and the immigration, museum, and squeezed a few other things in between so, this, time my trip to Melbourne I got to be exposed to some things that last. Time I wasn't, and knew little about. Well. Of. Course I'm highly honored to have been invited to deliver the Prescott, lecture, here, in Melbourne, I think I was asked about this either last December, or early January and, I said. Yes right away. I'm. Also in this capacity, here visiting the Department of Management as well as the Australian Consortium. For, research. In employment, and work, at Monash University. The co-director being Professor Bamber. That Dean Rankin, mentioned previously. My. Topic, tonight is as you've heard leadership, and management an, integrated, approach and I, want to try to lay out the approach bounce, it off of you I have one slide only that, I'm going to use or attempt to use for. This. Presentation. And. I think maybe I should begin by saying that this is an approach, that I. Developed. After decades, of teaching business, school, students. Executives. Serving. In some leadership, positions, in two major universities, Columbia, University. And UCLA. Consulting. With private, public and non-governmental. And nonprofit, organizations, and serving. On boards. Of directors in, this experience, it's this collective, experience, not any one component of it in particular has. Shaped my view about leadership and management an integrated. Approach a, view, that I want to share with you briefly, this, evening. The. Approach is also based on the, substantial. Rise in product, market capital, market and labor. Market, competition that. Has. Proceeded, worldwide, especially, since, the, breakup. Of the Soviet, Union and the fall of the Berlin Wall 1989. 1990, we're talking and perhaps, even before that, the. Triple revolution, that started in the early 1980s. Of a more rapid technological, change. Deregulation. In many parts of the world and of course substantially. Enhanced, global. Competition, and the, reason I cite these factors, is because I believe. They. Have contributed. To. An. Overly. Narrow, way, of conceiving, of, organizations. Not just business organizations, and of. Business. School curriculums. My. Approach features. An. Input-output. Framework. An input transformation. Output. Framework. That, basically, positions. An organization. On its side. Horizontally. And, I'll elaborate, it briefly, in a moment, the. Approach. Is meant as, a contrast. To the. Vertical, organization. And, structure of most, companies most, nonprofit, organizations. Public, agencies, and. Business. School, curricula. And these, specialized. Areas. Which, one might think of as silos, the word. Silo, has been converted into the verb siloed. They. Are narrow vertical, structures. Composed. Of specialties. So.
As Examples, every. Organization. Has an, accounting, department, and every business, school curriculum, undergraduate. And graduate has an accounting, course. Each. One a business, organization, and a business, school curriculum, is a finance, course an operations. Management's, course a human resource management or equivalent, course a strategy. Course and so on and. There. Is a long-standing, rationale. For having these particular, areas. Of knowledge and functions, in organizations, because, they're thought to be, germane, to operating. A business enterprise or, a not-for-profit enterprise. And they. Are germane but what's. Happened, is that, they, have become, even. More specialized. Each, one. Compared. To the other this. Is true in marketing, it is true in finance it is true in operations, management it's true across the board and this. Has been accentuated. By, the development, of so-called big, data or, data analytics, I was. Saying to some of you outside I think including, mr. Prescott when I hear the phrase big data it, makes me wonder what are small, data. It's. Like the phrase best practices, it's one of the most meaningless, phrases you could ever cite unless you can tell somebody what an average practice, is or what, a poor practice, is so, big, data and data, analytics. Are. The, rage today, and what, they have resulted. In is, in part is deeper, knowledge in. Each of the specialty, areas, and the. Experts, in them the, people who do marketing, in companies, or who teach marketing in business schools the, people who do finance in companies and teach finance in business, schools and so on with the other specialties, have, developed, much. Deeper, knowledge than, their predecessors, in part, using, big data or data analytics. So. What's, wrong with this. What. I believe is wrong with it is that these areas are increasingly, isolated, from. Each other, you. Go deeper, and deeper into a specialized, area and tend, to ignore and increasingly. Ignore, what, else is there either, in a business, enterprise or, in a business school curriculum. So. My. View is that we should step, back and think. About an organization. In a horizontal frame. Rather. Than in a vertical frame and that. Horizontal frame, basically is this input, transformation.
Output. Approach. Every. Organization, it doesn't matter where they are based in the world it doesn't matter how old or young they are it doesn't matter what products or services they generate, it doesn't matter how big or small they are have, four fundamental. Inputs. One. Of those is revenue, for, companies it's typically, from customers, or clients this, is sales revenue, for, governments. Its revenue. Generated, from taxes, and in some places user, fees for. Nonprofit. Organizations NGOs. At least in some countries it's heavily revenue. Dependent, upon donors, or patrons, revenue. Is an input for every organization that's. Input number one input, number two or financial, resources the. Capital, to seed a business, to. Grow a business or any other kind of entity and determining. The sources of that capital determining. Debt, versus equity ratios, determining. The deployment, of financial assets this, is financial. Resources, as a second, input to all organizations a, third, one is human resources the people who do, the work or perform the services. Input. Number three no matter what type of work that is or at what level we're talking about in an organization, that's, Human Resources and the fourth input is something. I refer to as operating, systems and processes, typically. Suffused, with, technology. Lots of it in the modern era. So. We have four inputs, and they. Look like this. And every. Organization, takes these inputs, and attempts, to do something, - or with, them this. Is the transformation. They, process, the inputs, doing. Things - and with them in order. To, convert them into outputs, now, generically. The outputs, take the form of goods. And services. And in any number of organizations both. Goods and services. But. This. Transformation. Of inputs, into outputs is. Constrained. Is, done within the parameters, established. By. Business. Goals or objectives, presumably. Coming. Out of a strategic. Planning, process. And, so. For, some, companies. Their. Main objective may, be. Increasing. Sales revenue, by a very specified, amount, the retail companies, tend to focus on that sort of metric for. Other companies manufacturing. Energy companies, it tends to be return on invested. Capital or, return on capital, employed. For. Still, other companies, its market, share and for, some companies it's, all of these. Parameters. Or objectives, that they have in mind and you can read them in the strategic plan and for, an increasing, number of companies if you read their annual reports, though this is generally not required to be reported by governmental. Regulatory authorities, customer. Satisfaction, is another, major. Objective. And for. Public, organizations, revenue, growth is often an objective, meeting. Budget is often an objective. This. One slide. Captures. This input. Transformation. Output. Within. Strategic. Objectives. Approach. And, most. People, working in organizations and. Most people enrolled, in business school programs, undergraduate. And graduate alike, they. Are specialists. In one or another of these areas they may not be experts although. Some are so. At a place like mounish, Business School you have experts who teach marketing, customers. And customer, relationship, management and. Brand equity, that's, their, mantra they know that part of the business extremely, well that's silo, you. Have others who teach finance and no. Portfolio. Theory, and the, specific. Decisions. Around risk and diversification, you, have others whose specialty, is in human resources and organizational behavior, the motivation, of people at work you, have others who are specialists. In operations. Management and management, science where optimization. Is their. Mantra, total quality improvement Six Sigma those kinds of ideas. Strategy. Has, its own set of experts to both in the formulation, of strategy, ending. With positioning, a company and identifying, the strategic, objectives, and especially.
In Strategy execution and in. The lower portion of this single, slide you see a few other areas. Mentioned as well disciplines. They're sometimes referred to they're. Represented, in business, school curricula, around the world that's, courses, in economics. Statistics. Accounting. And behavioral, science which. Are there not, to produce experts. In those areas, but. To. Get. Those, aspiring. Managers. And leaders to, understand, that statistics, and accounting and economics and, behavioral science, are tools, that can help one convert, the, inputs, into, the outputs to transform, those inputs into outputs, now, if. Most people are working in a specialized, component, area, of the type represented, on this slide. Then. Who. Is it that might see. The larger picture that. Might not be siloed. Into one of the specialties, that might. Have a more holistic view of organizations, my, argument, is that that ought, to be, leaders. And managers. In. Other, words if you're. Going to be a manager, or a leader especially, of the future not of the past, you're. Going to have to develop a threshold, level. Of knowledge and capability. About. Customers, so, that you can make informed decisions about, customer. Retention and, pricing. And. Determining. Which customers, we may want to divest because, they're caustic, see their value you. Have to have a threshold level of knowledge and capability, in finance, the, management, of financial assets, and not be a captive, of your finance staff and subcontract. The decisions, to them you. Have to have especially. These days when words like talent, are all the rage around the world a level. Of competency, and knowledge, and experience, in managing, people that. Puts you in the position to. Undertake, and execute, at a high level a leadership. Position in a management position and the same thing is true if you come from the area of operations, management and especially, if you don't if you come from one of the other areas, you, need to develop a threshold level of capability and knowledge in operations.
Management And then of course in strategy. Per se in other, words one. Has to outgrow. Their. Safe. Specialty. Silo. That, area. And body of knowledge that, we have where we typically, enter into a specific job, in a specific function very. Few people around the world and there are several people in this room who know a great deal about leadership and would know very. Few people are, hired for their leadership potential, it's, hard to gauge and hard to measure and usually most hiring processes have an immediate demand, for a specific work to get done that, guides the hiring process but. At some point people. Lead and manage, organizations, and. If. They continue, to have a siloed. Approach, they. Are basically, risking. The. Underperformance. Of their, organizations, now, it's been a tradition for many decades, for. Companies. In specific, sectors or industries, to. Promote to, senior, positions to the c-suite as, it is sometimes referred to people. Who come from the specialty area that, that company and industry is known for so, for example consumer products companies a Procter, & Gamble is a good example there are many others typically. The top 50, or 100 or 200, executives, in that company, all somehow, came through sales and marketing none. Of them came through operations, none of them came through finance now them came through IT, in. Aerospace, companies, and, the modern, high-tech company. That's. A good time to have dropped the clicker because I'm done with a slide that's, that's what that bang was in case you were curious and I was curious, in. Aerospace, companies, and in the more contemporary, high-tech, companies the, top 50, or 100, or 200 people somehow, always, seem to come through engineering, they. Don't come through sales and marketing they, don't come through IT they, don't come through operations, management, and. In manufacturing. Companies, all. Around the world the, tradition, has been that the people who rise to the top there have come through, operations. And what. I'm suggesting is, that that's the wave of the past it's. Not the, wave of the future, because. In future we have to develop, managers. And leaders who have threshold, knowledge, and capability, and hopefully. Experience, in, the main component. Areas both, in companies, and in business school curriculum, that, will allow, them to achieve, greatness. In leadership, and management, positions. There. Are some companies that, I think have. Demonstrated. At, least to some extent the, integrated, approach that I'm, referring to here and, a. Few, of them would, include ap, Moeller maersk which I believe is still the largest shipping. Company in the world Westfield. Which we have some considerable experience with in, the. Cities that I know best in the United States namely Los Angeles in New York, Adobe. Systems Incorporated. FedEx. Johnson. & Johnson. Unilever. Those, companies, would be on my list of companies, that have at, least in part attempted. To use this, integrated, approach to, leadership and management. Now, Japanese, companies, were, thought, to have used this approach or at least attempted it and I, think that they did if you look at the leadership and management literature of the 1980s, there, was a book that as a revocable wrote about this called Japan is number one and, Japanese. Management for a time was all the rage in other countries and books were written about it and people look to the Japanese company as a model. For others particularly. Total. Quality management. But. The Japanese, companies, if they did take the integrated, approach and I say if advisedly, because it's still an open question seem. To do. That less, so, today, and, I'm not sure if that has something to do with the slide in the Japanese economy over a couple of decades or simply, some other changes, I'm doing some work right now with. Nissan. Or Renault Mitsubishi, known. As the Alliance that's. The largest auto producer, in the world right now going, by the end of year 2017. Figures, and they. Have a very siloed, approach. The. Classical, siloed, approach, so. Nissan. Had been known for a more integrated, approach. Mitsubishi. To some degree red no less sell but, they seem to be in the silo, frame of mind, these days as opposed to the integrated, approach so, I think that's an interesting.
Circular. Example, in a way going from one practice, to, the other. The. Main benefit, of an. Integrated, approach to leadership and management in my opinion, is enhanced. Organizational. Performance, and. A. Companion. Benefit. Is developing. A strong. Bench. A strong. Inventory. Of successors, to leadership. And management, positions I. Understand. That in Australia I was just discussing is this with some of you in the corridor the. Average tenure of members. Of C Suites to C suite is a shorthand, phrase, for. CEO. Or managing director, chief, operating officer, or president, and major. Executives. In other functions, such as marketing, and finance and so forth these days everybody, seems, to be a chief you'll have noticed less. So a vice president, or director. But. The. Average tenure, of, people. Holding those positions in. US. Companies, and in. European, companies, has. Declined, significantly. Significantly. In the statistical, sense of the term so for example, the. Most recent studies of CEO tenure, United, states-based and managing director, peon based show. Average tenure of a little over three years, if. You go back to the year 1990. A little more than a quarter century ago the, average tenure was in double digits ten, point two years the. Average tenure of CFO's, is even shorter than that of CEOs, or managing directors it's about two and a half years and. Marketing. Which. Has relatively, recently, come, to adopt, the word chief, in the title, CMO. Chief. Marketing, officer, in place, of vice president, or director, one, recent study shows that their average tenure is of some 17 months. Compared. To the average tenure of over three years for heads of marketing with vice president and director, titles, and it appears according to the authors of the marketing study that companies go after, attempt. To poach as one phrase Chiefs. Of marketing because they think they know something that, vice president's of marketing and directors of marketing do not know and. Actually. If you go back into the history of management, titles there.
Were No chiefs until. Pretty. Much after, World War two if you want to read, a good book about this Alfred, Sloan, who, was president, not CEO of General Motors for many years and wrote a book called my, years at General Motors he, actually, wrote the book as opposed. To having a ghostwriter or an agent write it he wrote the book then. You had a presidents. Than you had maybe vice presidents, of functions and. Later. On it was only later on that heads of companies became. CEOs. And heads. Of Finance became, chief financial officers, and today, we have Chiefs, of everything marketing, human, resources chief human resource officers, chief, international chief. Information, technology, officers there, is one other study that shows that Chiefs relative, to VPS and directors of the same function, have. Significantly. Higher remuneration. Because. The word chief is in their title so, we have lots of Chiefs I don't know if this implies that we have lots of Indians, out there and that employees, are going to be renamed by that title I hope that they are not and as. A by the way you. Will have noticed that there is an increasing tendency. To. Not. Refer. To employees. As, employees. Bring, up a call center an employee. Won't be with you in four minutes if you get past the automated system a an. Associate, will. Be, with you a, representative. Will. Be with you if, you deal with Disney it's a cast member that. Is literally true it doesn't matter what position you, hold this, kind of attempt to. Mask. The, fact that there's an employment, relationship there. Is, endemic. And perhaps the biggest example. Of this is the, one most in the news right now in many countries and it's the use of independent. Contractors, versus. Employees, and if, you can get work done by. An independent. Contractor, you. Don't pay payroll taxes. That's. One advantage over having that same work done by an employee or for. The latest example, that we like to emphasize, you. Still have to pay independent, contractors, to get work done but. There are some people that companies and educational, institutions to boot don't pay at all for, the labor services, they render and, that's. You and me as customers. So. If you buy your airline ticket online and download the boarding pass somebody. Used to be paid to do that if. You check in and out of your hotel somebody. Used to be paid to do that if. You track your package in DHL, or FedEx, or one of the other services somebody. Used to be paid to do that this, is all about the competition, for. Keeping labor costs, down in markets and. Inherently. There's, nothing wrong with trying to compete in labor cost but, again that is only one component, of the business and we have been through this many times in the US especially in. Responses. To recession and more recently the Great Depression companies. Cut labor costs, because they want to try to increase the margin between revenue, and cost and report a positive, profitability, but, cutting labor costs, is not a strategy, it's, the tactic, typically, for the. Short term so. In. The, framework that I'm offering, here. It's. Important. To notice, what business, schools do. Not have as well as what they do have they. All have these specialized. Vertical. Courses, of the type I just before, but. What they don't have is a course that attempts, to integrate, across, these functions, and put them together and, businesses. Don't have anything like that either, they. Occasionally, venture into it by sending a few people to executive, programs where this kind of idea is broached but. In both instances the student, and the, manager, the, responsibility. Falls on them to, try to integrate across, these. Specialties. And that's, a very tall. Order. Isn't, it time approaching. 2020, for, business schools to think about turning, the specialties, on their side and providing, a deep. Immersion in integration, the horizontal, aspect, of managing, and leading especially. If you hope to produce managers. And leaders not. Just technical, analysts, or good, consultants, isn't. It time that business. Enterprises, and NGOs, and public agencies, make. A move in this same direction because, the. Low. And not so low hanging fruit, can. Be in my opinion enhanced. Organizational. Performance. And it. Can be the transformation, of organizations. And it can be the development, of this deep bench. That I'm talking about of people who are capable of moving up to management and leadership. Positions. I, noticed. In the opening. Slide. That was up here that advertises, Monash and, Prescott. Lecture there. Were three organizations. Listed, below that, are certification. Organizations. For, business, school curricula.
The, One that I'm the most familiar with is the American. Association of, collegiate Schools, of Business. What. These entities do, in countries, like yours. And mine is, to. Determine. Whether business, school curricula, meet these, organizations, certification. Requirements. Are. They legitimate in the eyes of, these certifying. Organizations. They. Are legitimate if they have a course in accounting a course, in marketing of. Course in finance, of course in. Either. Human resources or organizational, behavior of course in operations, a course in strategy a, course in economics of, course in statistics if. They, lack one of those courses they, won't be certified, and. These. Areas. Of specialization, are, what, drive not only the curriculums, of, these, schools but, the faculty who were hired this is true all around, the world. What. They don't require for certification, is, an. Integrating, course of. The. Type that I'm advocating, in, my approach to leadership and management nothing. That puts these things together. So. There is a challenge out there not, just to business schools on their own and not just to companies and nonprofit, organizations and, public agencies, but. To the certification, organizations. They need to take a step. Backwards. And stop. Going, down that path that they carved out so long ago on which, they are increasingly, dependent that. Is known as path dependence, in the research world and step, back and ask is. In a time that we think differently at least somewhat differently about these curriculums, that we, are, in the, business of attempting, to certify, so. In sum, I. Believe. That, the wave of the future is, different. From the wave of the past I offer, my, leadership, and, management. Integration. Perspective is, an idea for, you to consider, but. Also for something more than idea for a call, to action. To. Get us away from, where we are being driven increasingly. By big data and, to. Think about organizations. In. A more, holistic, integrated. Horizontal. Passion.