I’ve spent all of my life working in industry, first at Procter & Gamble, then as COO at Microsoft, and for the last ten years as a consultant. Along the way, I’ve met hundreds of high-level business leaders and I’m here to tell you, this captain’s behavior mirrors failures I’ve witnessed on a first-hand basis far too often over the course of my career.

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The Parent mode is when we are applying thinking that we accept as true since we have gathered it from an authority figure or from conclusions we reached after analysis or experience. When in Parent mode, anything that conflicts with our views is rejected. Adult mode is where we are collecting information, learning and drawing conclusions, and are willing to questions prior conclusions if new information says we should. It is Adult mode that solves problems and objectively sorts out options. Child mode is where we are simply exhibiting feelings as we react to situations; feelings of anger, love, greed, empathy, etc. When someone in Parent mode tries to force some thinking on us, we often move to Child mode and react defensively.

In the late 1980’s, IBM management was in the Parent mode, blindly sticking to their old conclusion that big main-frame machines are what computing is all about, and they down-played the PC and the mini- computer, driving the company to the brink of bankruptcy. In stark contrast, Lou Gerstner was clearly in Adult mode when he came in and saved the company from bankruptcy by leading the company into the services business. So was Sam Palmisano who took over from Gerstner when he retired and led the charge into the software/analytics business. Today IBM’s revenue is about 15% hardware, 25% software/analytics and 60% services, thanks to those two “Adults.”

RIM management has been primarily in Parent mode over the past four years clinging to their once-dominant Blackberry phone/e-mail service (but weak internet capabilities), and turning up their nose at touchscreens and the downloading of apps. Then at times they move into Child mode, like when RIM was introducing its PlayBook a year ago in response to the iPad. At the unveiling, when one of the company’s two CEO’s was asked about its features versus the iPad, he responded “I’m going to frame our mobile architectural distinction. We’ve taken two fundamentally different approaches in their causalness. It’s a causal difference, not just nuance. It’s not just a causal direction that I’m going to really articulate here—and feel free to go as deep as you want—it’s really as fundamental as causalness.” What is this guy saying? He is clearly in Child mode, reacting defensively. No wonder RIM’s very existence is threatened.

So what is the learning? Great leaders are remarkably objective. They are almost always in Adult mode, seeking new information and insights and telling the troops what the latest conclusions and resulting plans are, the thinking behind them, and indicating a willingness to modify if additional information suggests that is appropriate.

It is human nature that we are all much more comfortable about talking about what has gone well. In fact, we are quite skilled at taking things that have gone ok and dressing them up so they seem even better that they actually are. It is somewhat embarrassing to talk about the things that didn’t go well. Hence, we put off the discussion and couch them in the context of excuses that make them not to appear so bad. Even better, we find extraneous factors that we had no control over, and note how they were a factor in the disappointing results.

Why talk lowlights first? Because the first priority should be improving things. Fix what is not going well and figure out how to take advantage of key trends before your competitor does. If you don’t talk those things first, you will have less time when you eventually get to them. It doesn’t hurt if you run out of time and don’t discuss highlights. Nothing is lost. A lot is lost if you don’t get plans in place to fix the lowlights.

Let’s look at an example. Sony has been in a tailspin for the past decade. First it was the iPod wiping out the Walkman. Then it was Samsung, LG and many others dethroning the market leading Sony Trinitron TV’s causing Sony’s TV business to crater and lose $8 billion over the past eight years. Then the once dominant Sony PlayStation was driven to the #3 position behind Nintendo Wii and Microsoft Xbox. In 2011, ten Sony plants were temporarily closed due to the Japanese tsunami and embarrassment was caused by the recent incident of hackers bringing down the PlayStation Network.

Finishing up 2011 with a $3 billion loss and the share price sitting at a twenty four year low, the CEO recently wrapped up a Business Week interview by saying: ”I completely believe in the vision and I think we are getting there.” If you are an employee at Sony, it sounds like it is business as usual and we need to just keep doing what we are doing! No need to panic. All is right on course! What a missed opportunity for that CEO! Even worse, he appears to be out of touch with reality.

If you are leading people, every time you speak, you need to be totally objective. You should be optimistic about your vision for the future, but provide it in the context of a realistic assessment of the current situation.

In the past few years, music and movie downloads were added to the mix followed by the launch of the Kindle, the electronic book reading device coupled with books being offered in either electronic form or traditional paper form. Recently the Kindle Fire was launched, the first tablet that offers some very unique features versus the iPad. Estimated revenue for 2011 is $49 billion.

What drives this company to generate a constant stream of fresh ideas, each executed beautifully? Here is what Jeff Bezos, the founder and CEO said recently in an interview: “Everything we do is driven by seeing opportunity rather than being worried about defending.” It is a terrific culture of winning that Amazon Jeff has created.

Great leaders set the expectation that the organization will do exciting things and execute with excellence. Specifically, here is what gutsy leaders do:

1.) Remind the organization regularly that the goal is finding and executing fresh ideas and winning.

2.) Celebrate successes very visibly within the organization and use them to reinforce the goal.

3.) Take a long term perspective; doing things will result in some failures. Tell the troops that some setbacks are to be expected.

Only four years ago, when you went to a business meeting, virtually everyone was checking their BlackBerry. At that time, it was a badge of modernity! RIM’s stock price matched that leadership reputation, having soared from just over $10/share in early 2004 to $130 in early 2008.

While the company still has 70 million users worldwide, RIM is a company that is in a sever tailspin. Its stock is at $17/share and now when you go to that business meeting, the BlackBerry user is viewed as a dinosaur!

This sounds just like IBM’s near bankruptcy in the early 1990’s, the demise of DEC, and the recent GM bankruptcy. A key reason why this happens: Executives with deep experience in the areas of the company’s prior success! Humans tend to get proud when they are successful, they lose their sense of urgency and they get protective of what got them there. All of that leads to lack of competitiveness. RIM’s co-CEO’s have been in place since 1992; a huge risk for RIM.

Here are the lessons;

Insert Fresh Talent Regularly – You need to constantly select people for key assignments who come from very different areas.

Create a Culture of Change – Constantly preach that disaster is right around the corner and you are only as good as your latest new idea.

Protect Your Innovators - Your “experienced” employees will look for every opportunity to slow things down.

Employee A: this well-paid person describes what he believes are his great results, and they are very good, and pushes hard to get a big raise.

Employee B: this well paid person, who has similar results to Employee A, asks the boss: what am I doing well and more importantly, what are the areas where I need to improve.

I can tell you with certainty that bosses love type B employees. It makes the boss’s job so much easier. It can be difficult to convince a good-performing employee that they have improvement areas. We all have them. The type B employee wants to constantly improve and is clearly pushing for the success of the organization.

One reaction many bosses have to the type A employee is that it’s time to begin looking for a replacement. The employee is dissatisfied and may leave abruptly, creating a serious outage. Also, it appears that this person is primarily interested in themselves, not the success of the organization.

So…what is the learning?

1.) Think – How would you feel if you were the boss and were on the receiving end of the comments you are about to make?

2.) Threats have implications – Bosses tend to listen more carefully than you think. Nobody likes to be threatened, and your suggestion/complaint may come across as a warning that you are about to leave.

3.) Nobody is irreplaceable – we may think our contributions are huge, but there are a lot of talented people out there.

THE BEST

Sam Palmisano – CEO of IBM: This guy took the job from the highly successful Lou Gerstner who created a huge services business for Big Blue, and courageously took the company one step further, constantly picking up software/analytics companies in recent years. By the end of 2011, IBM stock was at $185/share, up from $75 when he became CEO in 2002. Amazingly, almost 25% of IBM revenue is now software/analytics. For the record, roughly 60% is in services and about 15% is hardware. Sam Palmisano has done an amazing job, when most thought he would suffer in comparison to Gerstner. Congratulations to Sam as he now moves into retirement.

Stephen Elop – CEO of Nokia: He joined the company on Fall of 2010 and in 2011 he scrapped Nokia’s in-house, antique Symbian operating system and made a deal with Microsoft to use their new Windows Phone 7 operating system in the new Nokia smartphones to try to catch up with the big guys; Apple iPhone and the Android phones. It is certainly not clear whether this late-in–the–game move will work, but you have to give Elop credit for not wasting any time and making a very gutsy bet.

Steve Jobs – CEO of Apple: The iPod, then iTunes, then the iPhone, then the iPad were driven by the creative drive and courage of this most amazing person. In 2011 the stock reached $400/share, and Apple is in a dogfight with Exxon Mobil as the most valuable company; an incredible achievement versus the near bankruptcy days of 1997 when it was down to $3.

THE WORST

The Dual CEO’s of RIM: makers of the Blackberry: RIM has had a dreadful couple of years, with 2011 being an absolute nightmare. The stock price has fallen 78% this year and they just can’t seem to catch up in the smartphone race, even though they are the ones that owned the business just a few years ago. They still have a very valuable set of business customers, but they are now seeing serious defections.

The CEO of Sony: Yes, they had to deal with the factory closings due to the tsunami, but they made little progress on the product front. Sony is registering their usual huge loss on TV’s ($8 billion over the past 8 years). Also, PlayStation is still #3 behind Nintendo and Xbox, and Sony is a non-player in the exploding smartphone and tablet markets. They have been in a tailspin for several years now, dropping to $17/share versus the $300 level in 2000 when the Play Station was super hot. For 2011 they are on track to lose $3.1 billion.

The CEO of MF Global: His recent statement to a Congressional committee that “I simply do not know where the money ($1.2 billion) is” says it all!
We end the year realizing the huge contributions of Steve Jobs, saluting IBM for a great example of a very large company acting nimbly, and wishing Stephen Elop the best of luck.

We end the year realizing the huge contributions of Steve Jobs, saluting IBM for a great example of a very large company acting nimbly, and wishing Stephen Elop the best of luck.

So who would you select as your Best and/or Worst Corporate Leader of 2011 and why?

Let us know your thoughts.

When I was at Procter & Gamble, I led a corporate effort to cut layers and broaden spans of control. This was in response to costs that had gotten a bit out of control, and excessive layers that were slowing down decision making. What we found shocked us. Too many managers at virtually all levels had too few direct reports. Many managers at the lower levels had only 2 or 3 direct reports. Many executives at high levels had only 3 or 4. In most of our divisions we had 9 or 10 layers from entry level to CEO. We had to do something.

The key principle that should underpin a spans-and-layers structure is that as managers gain more responsibility, they should be able to handle more direct reports. We concluded that a first level manager should have a minimum of four direct reports. That’s not a big load but it’s large enough to keep a less experienced manager busy. Then as you go up the chain of levels, you can slightly increase that minimum number of direct reports for each level. Certainly eight direct reports at the high levels should be quite manageable.

At P&G the above thinking caused us to move to 7 layers, with entry level people being level 1, level 2 was for first time managers and we required at least 4 direct reports. Level 3 managers had 6 or more, level 4 had 7 or more, and levels 5, 6 and 7(the CEO) had 8 or more.

For individual contributors didn’t manage people, we instituted a technical ladder (7 rungs, parallel to the management) so we could recognize talented individuals who didn’t manage, but were quite valuable.

Net, we reduced headcount by decreasing the number of managers, and we significantly decreased bureaucracy. Bosses were too busy to meddle, and there were fewer layers to fight through to get things done.

Check out the spans and layers in your organization; you may be surprised!