Does Leadership Make a Difference to Organisational Performance?: Does Leadership Make a Difference to Organisational Performance? Professor Andrew Μ. Pettigrew, FBA Dean School of Management University of Bath Phone: +44 (0) 1225 383052 a.m.pettigrew@bath.ac.uk


Our journey…: 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


The contrary position…: 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.


Fixing the System, Not Just the Person: 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.


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


Research method: Research method Four surveys in: UK Continental Western Europe Japan USA 18 Case studies in 8 UK 10 Continental Western Europe


Three dimensions of change: Three dimensions of change


The multiple indicators: The multiple indicators


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 Key Outputs


Dualities in changing: 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


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) Dualities in changing


 benefits  of complementary  changes?: benefits of complementary changes? What are the


Strategic complementarities: 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


Two key propositions: 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


Systemic change: Europe, Japan and US, 1992-1997: Systemic change: Europe, Japan and US, 1992-1997 The 3 Dimensions Structure Processes Boundaries The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B) Europe 30.3% 74.9% 44.9% Europe 13.0% 25.1% 34.2% 16.4% Very few companies adopting whole system of change 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%


Systemic change and performance: Summary of regression results: One symbol, + or -, indicates weak positive or negative significance; two symbols, ++ or --, indicate strong positive or negative significance. Systemic change and performance: Summary of regression results The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B) Pooled Sample of Western Firms ++ - - UK + -- - US + -- 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


Slide17: Performance gains require doing many practices together Performance effects depend upon whole system thinking and action


Slide18: How do firms acquire the capability to deliver system wide change?


BP: Context and Action: 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


BP:Complementary Change & Performance 1990 – 1999: BP:Complementary Change & Performance 1990 – 1999 H O R TO N S I M O N B R O W N E


Leading and Complementary Change: Leading and Complementary Change Key Messages: For Leaders For Leading Change


Key Messages (1): 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


Key Messages (2): 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


Key Messages (3): 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


Key Messages (4): 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


Fixing the System, Not Just the Person: 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.