Does Leadership Make a Difference to Organisational Performance

1
Does Leadership Make a Difference to
Organisational Performance?

• Professor Andrew ?. Pettigrew, FBA
• Dean
• School of Management
• University of Bath
• Phone [phone]
• a.m.pettigrew_at_bath.ac.uk

2
Our journey

• The Contrary Position
• Fixing the System, not just the person
• Leadership, Complementary Change Performance
• Leadership, Change and Performance in BP
• Key Messages for Leaders and Leading Change

3
The contrary position

• Performance is largely shaped by external
  conditions economic, market and technological
  factors.
• Leaders are faced by many internal constraints.
  Leaders as pawns not potentates.
• People attribute and thereby exaggerate leader
  effects to make sense of complex, confusing
  events.
• Leaders magnify followers attributions by
  managing impressions.
• Luck and chance are key determinants of
  performance.

4
Fixing the System, Not Just the Person

• Being honest about the complexities of the system
  and recognising the complexities of being honest.
• Leader competence and effectiveness is only as
  good as organisational competence and
  effectiveness.

5
The primary questions
?
Progress
How far have new organisational forms
been implemented?
?
Performance
What are the performance effects?
?
Process
What are the managerial processes?
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Research method

• Four surveys in
• UK
• Continental Western Europe
• Japan
• USA
• 18 Case studies in
• 8 UK
• 10 Continental Western Europe

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Three dimensions of change
8
The multiple indicators
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Key Outputs

• The Innovating Organization
• (Eds) Andrew Pettigrew and Evelyn Fenton
• London, Sage, 2000
• Innovative Forms of Organizing
• An International Perspective
• (Eds) Andrew Pettigrew et al.
• London, Sage, 2003

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Dualities in changing

• Living with hierarchies and networks
• Greater performance accountability upwards and
  greater horizontal integration sideways
• Empowering and holding the ring
• Centralising strategy and decentralising
  operations
• Standardising and customising

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Dualities in changing

• Discipline to identify knowledge and the good
  citizenship to share knowledge
• Balancing continuity and change to change the
  world one must live with it
• Continuous innovation requires platforms of
  relative stability
• Delivering a complementary and contextually
  appropriate set of innovations (not latest fad)

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benefits of complementary changes?
What are the
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Strategic complementarities

• Doing more of one thing increases the returns of
  doing more of another
• Milgrom and Roberts, 1995

• Investing in one practice makes more profitable
  investing in another, setting off a potential
  virtual circle of high performance

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Two key propositions

• The Positive Proposition
• Changing only a few of the system elements at a
  time may not come close at all to achieving all
  the benefits that are available through a fully
  co-ordinated move
• The Negative Proposition
• Partial moves may drive down performance

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Systemic change Europe, Japan and US, 1992-1997

• The 3 Dimensions
• Structure
• Processes
• Boundaries
• The 4 Systems
• System 1 (SPB)
• System 2 (SP)
• System 3 (PB)
• System 4 (SB)

Europe 30.3 74.9 44.9 Europe 13.0
25.1 34.2 16.4
Japan 6.2 53.7 30.7 Japan 1.2 4.7 18.7 1.6

US 16.5 82.3 57.0 US 8.9 12.7 46.8 11.4

• Very few companies adopting whole system of
  change

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Systemic change and performance Summary of
regression results

• The 4 Systems
• System 1 (SPB)
• System 2 (SP)
• System 3 (PB)
• System 4 (SB)

Pooled Sample of Western Firms - -
UK -- -
US --
One symbol, or -, indicates weak positive or
negative significance two symbols, or --,
indicate strong positive or negative significance.

• The adoption of a full set of changes (System 1)
  increases the probability of improving corporate
  performance
• The adoption of partial systems (System 2 and
  System 3) is likely to reduce performance

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Performance gains require doing many
practices together
Performance effects depend upon whole system
thinking and action
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How do firms acquire the capability to deliver
system wide change?
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BP Context and Action

• Late 1970's 35 per Barrel Industry
  Diversification
• 1986 Oil Price Collapse to 13
• 1987 Acquire Standard Oil and Brit Oil
• Buy Back Kuwait Shares Debt Problems
• Employee Survey and Project 1990
• Attempt at comprehensive and holistic change
• 1990-1991-1992 Recession and Collapse of
  Profitability
• Horton asked to resign in June 1992
• Holistic intentions, but failure to justify and
  deliver
• 1992-1995 Simon Era of
• Performance Reputation Team Work Change and
  Continuity
• 1995- Relentless Performance Drive-All Targets
  Met
• Browne's strategic moves plus relentless pursuit
  of other complements drives up relative return on
  capital

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BPComplementary Change Performance 1990 1999
H O R TO N
S I M O N
B R O W N E
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Leading and Complementary Change
Key Messages

• For Leaders
• For Leading Change

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Key Messages (1)

• Leader Qualities of Holistic Thinking and
  Holistic Action
• Beware of Attempts to Improve Performance through
• Singular Changes
• Building the Complementary Changes
• The Integrated Systems of Mutually Reinforcing
  Elements
• This Approach Points to the Importance of
• Strong, Aware and Engaged Central Direction
• Bottom Up Approaches are Handicapped in
  Delivering
• Complementary Change

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Key Messages (2)

• Be Prepared for the Dangers of Transitions and
  the Perils of the 'J' Curve

Things may get worse before they get better Need
for strong leaders to survive transition processes
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Key Messages (3)

• Partial changes may be politically and
  emotionally easier
• to contemplate, but encourage long term declines
• Beware of complementary traps Sticking with the
  old
• system that works
• Learning is crucial, but it is also a challenge
  Complements may be
• Hard to Understand
• Hard to Implement
• Hard to Imitate
• Building the complements and the capabilities
  that
• underpin them takes time and courage

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Key Messages (4)

• Building complements requires customization
• The virtual cycle of complementary change needs
  to stay in motion
• Leading Change is a Continuous Process
• The crucial importance of
• Duration of leader in post
• Careful management of leader succession
• Leading continuity and change
• The importance of inter-generational leader
  effects

26
Fixing the System, Not Just the Person

• Being honest about the complexities of the system
  and recognising the complexities of being honest.
• Leader competence and effectiveness is only as
  good as organisational competence and
  effectiveness.