Time to declare

In May 1927, when the fifteen-millionth Model T was produced, Henry Ford closed the production line. The Model T was dead, but the trouble was that no one knew what was coming next. Silence reigned. Tension mounted. Finally, in November, Ford announced the arrival of the Model A which was first sold at the beginning of December 1927. Within six weeks there were 750,000 orders. As acts of marketing bravado go, Ford’s dramatic closure of the Model T line and the interregnum before the launch of the new model is difficult to match.

Calling time and moving on is a difficult judgment call. Few match Henry’s Ford’s bravery when it comes to their tenure as a leader. Human nature dictates that great boxers don’t retire at the right time, they keep fighting. Politicians fight one election too many, CEOs take on an acquisition too many, and so on.

For leaders, all leaders, there is a finite scale to their effectiveness. Jimmy Maymann, CEO of the Huffington Post, reviewed his career with us and noted: ‘Most of the things I’ve done have been in five-year intervals. It makes a lot of sense, because when you’ve done things for five years it starts to be repetitive, you’re starting to do too much of the same, you’ve done the improvement, you’ve done the optimizations. Unless you innovate, then it’s really difficult, for me at least, to keep doing the same thing.’

We met up with the charismatic Indian CEO Vineet Nayar as he was contemplating his own departure from HCL Technologies. At HCL, Nayar had overseen growth and the creation of a unique corporate culture. HCL’s philosophy is distilled down to two words – Employees First: ‘A unique management approach that unshackles the creative energies of our 85,335 plus employees, and puts this collective force to work in the service of customers’ business problems’.

When we spoke to Nayar, HCL’s revenues had reached $4.1 billion, up more than 17 percent in the previous year. ‘Six hundred percent growth in seven years, what else can you ask for?’ observed Nayar with a smile.

Vineet Nayar joined HCL in 1985 as a management trainee and worked his way up through the company, becoming president of HCL Technologies (there is also a sister company, HCL Infosystems) in 2005.

When we spoke, another member of the legendary Indian batting line-up had just announced his retirement. When would the great Sachin Tendulkar, the little master, announce the end of his glittering career? The Indian media was full of little else. ‘A huge debate is going on,’ said Nayar:

What is the right time to call it quits? And uniformly everybody said, at the peak – but how do you know that the peak has come? In the stock exchange people make a business of trying to exit quickly at the top of the market. Do they get it right? No, they don’t get it right despite the billions of dollars involved. So is the expectation that you will exit at the peak the wrong expectation? And my belief is that it is the wrong expectation.

Nayar pointed out that stock market traders have a stop-loss order to stop losses at a certain point. He suggested that a similar tool should be put in place among managers so that they do not overstay their usefulness.

And so the conversation turned to Nayar’s own role at HCL. ‘I truly believe that the CEO becomes obsolete in five years. He comes with a lot of gusto in the beginning, and brings about a significant change. And then he has to see it through.’

Nayar argued that the CEO needs to reinvent the job, and points to Bill Gates as a good – if rare – example of someone doing just that. We recall another CEO (Mike Critelli of Pitney Bowes) telling us that CEOs could only be really effective for seven years. Nayar’s calculation is that every five years the CEO should be spending 90 percent of their time on something different. His own emphasis is increasingly on three themes: being socially responsible; Employees First 2.0; and incubating new ideas and businesses.

To some extent, the leader’s job can be recast as to actually make leadership invisible, perhaps even redundant. Lao Tzu quipped ‘The best leader is one whose existence is barely known by the people.’ This is a line often quoted by Zhang Ruimin, the inspirational CEO of the Chinese appliance maker Haier. At Haier, the role of managers has been imaginatively reconfigured and the company recreated as an open marketplace for ideas and talent. The traditional pyramid structure has been all but flattened.

Crucially, this reinvents the role of managers. Haier regards them as entrepreneurs and ‘makers’. ‘It’s better to let employees deal with the market rather than rack our brains to deal with and control them,’ Zhang Ruimin has observed. Managers are effectively cut loose. Haier talks of its ‘Win-win Model of Individual-Goal Combination’ which means that the objectives of individual employees and the organization are on the same trajectory.

Haier also talks of moving from ‘complete obedience to leaders’ to ‘complete obedience to users’. Haier’s oft-stated belief is that users are more important than managers. ‘The bosses are not customers, why should the workers listen to them?’ asks Zhang Ruimin. Haier aspires to management without bosses. One of Haier’s core values is that ‘users are always right while we need to constantly improve ourselves’ and its professed future priority is to produce products to meet the personalized demands of consumers.

The results of this are already many and varied. In white goods it is no longer true that the only color is white. Haier makes mass customization work. Order a Haier product on the internet and you can specify the color and features. This is then relayed to the factory so that even washing machines are now customized. What Henry Ford would have made of this we can only guess.

Resources

The story of the emergence of Haier is told by Bill Fischer, Umberto Lago, and Fang Liu in Reinventing Giants: How Chinese global competitor Haier has changed the way big companies transform (Jossey Bass, 2013).