The Leader's Checklist, 10th Anniversary Edition

16 Mission-Critical Principles

Michael Useem

• Publisher: Wharton School Press
• Year: 2021
• Print ISBN: 9781613631188
• eBook ISBN: 9781613631171
• Topic: Business
• Subtopic: Decision Making
• Index: Business

Envision this scenario: An industrial manufacturer is breaking itself in three, and its board chair asks you, the chief financial officer, to step up to the helm of one of the spin-offs. You will take charge of everything, from plant operations and product marketing to human resources and governance practices. Are you ready to lead? In The Leader's Checklist, 10th Anniversary Edition: 16 Mission-Critical Principles, world-renowned leadership expert and Wharton professor Michael Useem shows you how to lead through any challenge—and shares how ITT's Denise Ramos did just that when she encountered this situation.In this illuminating guide, Useem offers a Leader's Checklist that will help you develop your ability to make good and timely decisions in unpredictable and stressful environments—for those moments when leadership really matters.To illustrate the principles, Useem examines where leaders go right—and wrong. He looks at: How Ramos, the former CEO of ITT, turned around the once-struggling enterprise; How AIG's tone-deaf response to the tumultuous events of the global financial crisis left the company vulnerable to one of the greatest corporate collapses in business history; andHow Virginia Rometty, the former executive chair of IBM, acquired and integrated a cloud-computing company to help turn around IBM's fortunes. Based on Useem's own research experience and an array of leadership investigators, thinkers, and practitioners, The Leader's Checklist offers actionable insights you can put into practice as a leader today.

PART I

Building Your Personal Checklist

Chapter 1

Constructing a Checklist

Imagine yourself in this situation: Less than five months ago, you were summoned from the private sector to join a newly formed national government. Your background is in consumer retail; now you are regulating the nation’s mining industry. You are abroad on a state visit, still working up to speed, when word reaches you from your home office that there has been a mining disaster—a cave-in deep below, death toll unknown, with nearly three dozen people missing.

Or envision this: For decades, your financial services firm has sailed along. Not only have revenues soared, but your company has earned a treasured AAA credit rating while creating an extraordinary wealth engine: a little giant of a division that insures against debt defaults, including subprime mortgages. Continuing prosperity seemed assured, but suddenly the market implodes. Subprime mortgages turn noxious, an investment bank fails, and your AAA rating slips to AA, then A-minus. With those downgrades, you are required to post billions of dollars in collateral that you simply do not have. Your boat is heading for a cataract, and you seem helpless at the tiller.

Or this one: The enemy has surrendered after a four-year conflict that has left more than 700,000 dead, and your commander has ordered you to arrange one of the war’s crowning moments, the formal surrender of the enemy’s most venerated army. The tone, the texture of the ceremony, the formalities of receiving the adversary—they are for you to craft.

And still one more: An industrial manufacturer is breaking itself into three entities and its board chair asks you, the chief financial officer, to helm one of the spin-offs. Having minded the parent’s financial shop, you are now summoned to take charge of everything in the new offspring, from plant operations and product marketing to human resources and governance practices. Worse, it is a troubled enterprise with asbestos liabilities and without a cohesive identity. Are you ready to turn it around and master it all?

These are not, of course, hypothetical situations. Laurence Golborne, the new mining minister for the Republic of Chile, was visiting Ecuador when his chief of staff in Santiago sent him a simple but urgent text. “Mine cave-in Copiapó,” she wrote, with “33 victims.” Twenty-eight hours later, at 3:30 a.m., Golborne arrived at the site of the mining disaster in the remote Atacama Desert of northern Chile. Soon, hundreds of millions of people around the globe would be witnessing one of the greatest mine rescues of all time.

Like the miners in Chile, American International Group (AIG)—a financial services giant heading for a cascade—was ultimately rescued through government intervention. When the subprime mortgage market in which AIG was deeply invested began to implode, its chief executive found he had put in place too few protective measures. His tone-deaf response to the tumultuous events leading up to the global financial crisis left the company vulnerable to one of the greatest corporate collapses in business history. The company had been deemed “too big to fail,” and now it seemed almost too toxic to save.

How different were the actions taken by Union officer Joshua Lawrence Chamberlain when General Ulysses S. Grant handed him the historic duty of coordinating a follow-up ceremony to Confederate general Robert E. Lee’s surrender at Appomattox, Virginia. Instead of humiliating the Confederate army, as might have been expected after four years of deadly conflict, Chamberlain ordered a reunifying salute and launched a healing process that helped rejoin a nation.

Then there’s Denise Ramos, the former chief financial officer of ITT. She had a head start, in the view of the chair of her governing board, thanks to her acquired ability to think and act as a general manager—taking responsibility for everything even before she had taken formal responsibility for all. In the years ahead, once fully in charge, she revamped and redirected the spin-off to outperform its market, taking the company, in the words of one equity analyst, to a “very healthy” place.”¹

Three of the leaders we have just met were well prepared when summoned to their moment in history, but one was obviously not. To be sure, few of us are likely to have our leadership tested in such trying ways. But all of us can and should prepare for less public setbacks and turning points in our own ways of serving, and it calls us to ask: Why did Joshua Chamberlain, Laurence Golborne, and Denise Ramos rise so effectively to their challenges? Why, by contrast, was the AIG executive unable to fashion a calamity-preventing or life-saving response? And is the skill set that served Chamberlain, Golborne, and Ramos learnable, transferable, and applicable to other leaders who may never be called to scale the same kinds of mountains that these leaders ascended, but who are sure to face daunting terrains of their own?

A central premise for this book is that we each should be able to offer an affirmative response to those questions. Effective leadership for the personal challenges ahead can be mastered, in my view, by all readers who carry any responsibility for the performance of their enterprises or their teams. That is why I advocate, and in these pages lay out, a mission-critical checklist, a set of the most impactful and essential leadership principles that are tried, tested, and true.

The leader’s checklist, we shall see, is composed of a limited set of principles applicable to most managers, in most endeavors, in most circumstances. Given the vast variety of leadership roles, one size does not precisely fit all, but the checklist and its broadly defined components can nonetheless help prepare you for guiding your own enterprise or team through both good times and worst-case scenarios, even if (thankfully) you are never forced to face the latter.

Building the Checklist

To build the leader’s checklist, I have tapped not only my own research experience but also that of an array of investigators, thinkers, and practitioners. Working with hundreds of managers and executives in Asia, Europe, North America, and South America, interviewing managers in the United States and abroad, and witnessing managers facing a range of critical moments, I have concluded that their thinking and experience point to a core of mission-critical leadership principles that vary surprisingly little among companies or countries.²

From my own reading, too, I have become convinced that with leadership, as with so much else, brevity is the soul of wit. But the checklist also cannot be too skeletal or minimalist. Albert Einstein once described the calling of modern physics as an effort to make the physical universe as simple as possible—but not simpler. The leader’s checklist is likewise at its best when it is as bare-bones as possible—though not more so.³

My own engagement with participants in a wide range of leadership programs has been critical to identifying these principles. I have asked many managers and executives, for instance, how they would lead or have led, and to test those ideas I have frequently placed managers and executives in a leader’s shoes at a particularly challenging moment. I elicit their pragmatic, experience-based knowledge of what is essential for effective exercise of their own leadership during that instant.

One such moment centered on the chief executive of IBM, Virginia Rometty, as she acquired the hybrid cloud-computing company Red Hat for $34 billion. “Most companies today are only 20% along their cloud journey,” renting computer power to “cut costs,” she explained. The “next 80% is about unlocking real business value and driving growth,” and that, she said, “requires shifting business applications to hybrid cloud” and “extracting more data and optimizing every part of the business.” On the flip side, Red Hat CEO James Whitehurst explained his embrace of IBM’s overture for that purpose while at the same not giving up his firm’s identity: “Joining forces with IBM will provide us with a greater level of scale, resources and capabilities,” he said, yet at the same time it will also preserve “our unique culture.”⁴

By the deal’s terms, Red Hat would remain a distinct operation within IBM’s Hybrid Cloud Team, though Whitehurst was to report directly to the IBM CEO. Red Hat would maintain its North Carolina home office, even though IBM was headquartered nearly 600 miles north. Many of Red Hat’s 13,000 employees were no doubt skeptical about the takeover by a distant company with a different culture that had so far found little traction in the cloud, one of the era’s premier emergent technologies; at the time Microsoft held 15% of the cloud-computing market, Amazon 34%, and IBM just 7%.⁵

Imagining that Rometty met with an assemblage of Red Hat—now IBM—employees a few days after their acquisition, I ask a manager or executive to play the role of CEO Rometty at the gathering. I ask others to respond as newly concerned or even reluctant employees of IBM. After a round of questions for the IBM chief executive, I query participants on what they would want and expect to hear from the CEO, their new superior, if they were to remain with the merged companies and devote themselves with gusto to building and running the combination during the months ahead.

Chapter 2

Principles for the Checklist

More than a dozen leadership principles emerge from this exercise (see box 2.1), and they do so consistently—whether the managers are working in high technology, investment banking, or public service; whether they are functioning in good times or bad; and whether they are managing in China, India, Japan, or the United States.

Other sources affirm the standing of each of these core principles, including studies of the qualities of leadership by academic investigators, appraisals of leadership development programs by independent parties, and what leaders report has served them well. Here is a brief sampling of such source...

Table of contents

• Copyright
• Contents
• Introduction: Why a Leader’s Checklist
• Part I: Building Your Personal Checklist
• Part II: The Leader’s Checklist in Action
• Part III: Building Out Your Company Checklists
• Conclusion: The Owner’s Manual
• Notes
• About the Author
• About Wharton School Press
• About the Wharton School