Wounded Leaders: How Their Damaged Past Affects Your Future. Allan Bonner

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      During his 20-year stewardship of GE, the company’s value rose 4000%. When he retired from GE in 2001 he took a severance payment of $417 million, the largest such payment up to that point in history. In 2006, Mr. Welch’s personal wealth was estimated at $720 million. However, in spite of all the accolades he received and wealth he accumulated for shareholders and himself, all was not entirely well at GE.

      When he became CEO, General Electric had just made a billion and a half dollars in annual profit, with Reginald Jones at the helm. Mr. Jones was one of the most admired businessmen of his generation. However Jack Welch, who was personally selected by Mr. Jones to be his successor, promptly cut back on General Electric’s Research & Development efforts to reduce expenses and increase profits. The result has been that a company that takes credit for first marketing the incandescent light bulb, the x-ray machine and unbreakable plastic, hasn’t come up with many revolutionary products in years.

      A chemical engineer by training, it turned out Mr. Welch’s real strength was not R&D, but appealing to Wall Street with what has been called financial engineering. His wizardry is explained in this way by John Cassidy in The New Yorker:

      “Say that G.E. has a stock-market valuation of four hundred billion dollars and profits of ten billion dollars, which means that its stock is trading at forty times its earnings. ...Now assume that G.E. buys another company with a stock-market valuation of twenty billion dollars and annual profits ...of two billion dollars. What is the value of the combined company? You might think the answer should be four hundred and twenty billion, but that’s not how Wall Street sees it. If investors continue to believe that G.E. is worth forty times its earnings, the new valuation will be four hundred and eighty billion dollars. As if by magic, sixty billion dollars will be created.”

      Mr. Welch’s legacy as a wheeler dealer is secure. GE Capital was the real engine of profits for Jack Welch, accounting for almost half of the revenues of the parent company. It is really a bank—one of the world’s largest. Indeed, it now calls itself a bank. When Mr. Welch took control of GE, it was an industrial powerhouse. Now it’s something different.

      In 1951, the CEO of General Electric commissioned a high-level task force to identify key corporate performance measures. In addition to profitability, the list included market share, productivity, employee attitudes and public responsibility. The report was silent on how these should be judged and it doesn’t seem as if GE valued these other metrics as much as the immediate bottom line.

      Times change, but even if corporate profits were the only manifestation of success, how do we explain that despite the dubious track record of acquisitions and mergers so many corporate leaders continue to pursue this very risky strategy? Corporate officers have access to the same information as academics and journalists. Their lawyers and accountants can investigate mergers and acquisitions in similar industries over time, or read of the celebrated failures that are frequently in the news. Why then would this trend of mergers and acquisitions continue for so long, despite evidence of its dubious benefits? What is it in today’s business culture that allows, and perhaps encourages, many top executives to follow a path that they know (or should know) to be strewn with financial and personal land mines?

      We know that senior people make decisions in different ways and these can affect business outcomes. Emotion, ego and even childhood trauma may be involved. In order to understand and explain the business and communication failings of modern managers and leaders, it may help to take a closer look at what constitutes leadership and the types of individuals who aspire to lead.

      THE NATURE OF LEADERSHIP & MANAGEMENT

      How do we define the terms “leader” and “leadership? A dictionary tells us the former is “a person or thing that leads...a person who is well fitted to lead”, while leadership is defined as “the state or position of being a leader...the qualities of a leader...the ability to lead”.

      That seems straightforward at first glance but let’s look deeper at a business organization. It also uses the term “management”, defined by the dictionary as “control, handling, direction”. Yet a leader may also control, handle, and direct and a manager may be in a state or position of leading.

      If we make a broad generalization, we can perhaps say that leaders are at the top of organizations and managers are one step lower in rank. The term “managing director” is used more in Britain than North America, but I know of at least one Canadian company in which the President reported to the Managing Director. The terminology begins to obscure simple distinctions such as giving and taking orders-or position on the organizational chart.

      If leaders are above managers, then it might also be true that managers are more often in the trenches, dealing with issues, people, assets, and systems, while leaders concern themselves with more motivational and conceptual matters. This might be consistent with some schools of thought which hold that management is the implementation of known systems, whereas leadership involves breaking new ground. Standards can address known systems, but breaking new ground is an adaptive challenge needing new approaches. Once those new approaches are mastered, they become standards to be implemented with management and supervision. So, even a good working definition changes over time, with the people involved and with the task at hand.

      I still find these distinctions unsatisfying because we know that a leader may regularly perform management functions and vice versa. So let’s broaden our search to look at leadership in history and in non-business settings.

      As noted earlier it is not uncommon to hear the names of Winston Churchill, General George S. Patton or Charles de Gaulle in general discussions of leadership. These are just three well-known leaders from three different cultures, and others may come to mind, depending on context. Perhaps, ironically, it is also hard to imagine a detailed and analytical discussion about the leadership styles of these icons while they were in their prime. Perhaps it is the benefit of hindsight, but these leaders seemed to make decisions and act on them; their actions did not need validation by the word “leadership”. Their leadership was self-evident. Yet today, corporate executives discuss their leadership styles at length and the business literature examines how various senior executives fit into leadership categories.

      Given the violent history of the world, it is no surprise that the imagery associated with leadership often concerns the military. Both de Gaulle and Patton were generals and Churchill began his career in the cavalry. Even today military terminology such “lock and load”, “take no prisoners”, “in the trenches”, “troops” and so on is heard regularly in the workplace.

      It seems natural, then, to draw parallels between business management techniques and command and control practised by the military. The concept was borrowed from the military around the turn of the twentieth century and is still in vogue in many organizations. The irony is that my work with approximately 2,000 senior military officers as well as studies of the military literature show that this top-down decision-making concept has never been as universally useful as the doctrine implies.

      THE MILITARY MODEL

      The bayonet has been an instrument of war for hundreds of years of recorded history and was probably one for thousands of years before that. It may have had its beginnings as a sharp stone on the end of a stick. However, for the last three hundred years, the bayonet has been of limited use.

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