Wednesday, April 6, 2016

The Executive Coherence Premium

                Reading through “The Coherence Premium,” and the accompanying “Southwest Airlines: In A Different World” case, a thought occurred: it is not very hard to find prominent examples of board-appointed executives struggling at companies because of what appears to be a lack of “fit”—a sort of Potter Stewart, “I know it when I see it” intangible quality. There are seemingly obvious examples of a lack of “fit”—what comes to my mind, as a Bronx native, is former Mayor Michael Bloomberg’s appointment of Cathie Black, a former Chairwoman of Hearst Magazines, to the then-vacant NYC Chancellor of Schools post, in 2011.
                A business executive lacking both a Master’s in Education and three year’s teaching experience, Black’s tenure elapsed all of 95 days.
                I bring this up vis-à-vis “The Coherence Premium” because I imagine the trouble Black faced likely is not due to a lack of coherence in the NYC school system (I make no judgment on the agency’s operations and capabilities), nor to her abilities as an executive—an agency with that level of personnel certainly always has room to benefit from the expert management capabilities she no doubt embodies. Rather, I believe the committee that selected Ms. Black for the job likely did not take thorough enough account of her coherence with the agency’s values and capabilities. Whereas Ms. Black thrived at Hearst, and had a combination of management skills and capabilities relevant to the magazine industry, her framework for important capabilities—having not been shaped by the kind of training that undergirds the NYC Department of Education—was not, to quote Leinwand and Mainardi, “aligned with the right product and service portfolio.”
                Meanwhile, if we look to Silicon Valley, we find many of the titans of technology exhibit business ethos nearly synonymous with the companies they lead. Take, for example, Facebook. To talk about how Facebook wants the internet to be more “open” and “social” is cliché to the point of parody.[1] However, these values, and the company’s associated capabilities, are not only fundamental to the exponential growth Facebook has experienced—they are inextricably linked to Mark Zuckerberg, the founder of Facebook. To be brief, Facebook benefits from an internal coherence matching the capabilities and values of its founder. Thus, it has made coherent acquisitions in keeping with its capabilities (purchasing Instagram and What’sApp, for example) positioning itself well vis-à-vis potential substitutes, and thus strengthening its competitive advantage.
                Moving past founding executives, however, it is not necessarily as easy to find examples of board-appointed leadership so perfectly linked to the capabilities and goals of an organization. The best example I can think of, though I admit it is likely low-hanging fruit, is the appointment of Tim Cook as CEO of Apple. Apple benefits from a coherence between the capabilities of its operations and the values of its executives that is so well known, it’s almost trite to mention: simplicity is king, and the graphical user interface should be aggressively tailored for ease of use.[2] Much like Mark Zuckerberg of Facebook, the founder of Apple, Steve Jobs, so completely embodied these values as the head of the company, it is tempting to think the key for Apple in its hiring of Tim Cook was simply promoting in-house: the coherence of the company was so well established, Cook was ready to become the face of Apple, and the embodiment of its vision, from day one.
                Regardless of whether companies promote internally or hire externally, the message seems clear: it is important for executives to embody the capabilities and vision associated with company coherence. Having said that, this is a topic about which, I believe, much more ink could be spilled than is available in the confines of this blog post.


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