Feudal Values Boost Stock Price
Humility, loyalty, integrity are virtues frequently taken to be pre-capitalist in the sense that, having no exchange value, they cannot fetch a price. Yet, what if feudal virtues turned out to add value to a company's stock?
In a world leaning towards entertainment rather than information, the likes of Jack Welch, Lee Iacocca and Gianni Agnelli are bound to be better known than Darwin Smith, CEO of Kimberley-Clark. However, Smith’s tenure led to his company outperforming the stock market by almost twice than GE under Welch’s own tenure.
Indeed, under Smith, Kimberley-Clark, outperformed stars like Hewlett-Packard, 3M and Coca-Cola, let alone Chrysler or FIAT. Nonetheless, for six years running, Fortune declared the now notorious ENRON “the most creative company in America,” while Darwin Smith did not make even the specialized business press’ headlines.
Jim Collins led a five year study into almost 1500 American companies seeking to unearth what was it that leaders had in common when they succeeded in turning failing companies into great ones. The leaders themselves he called Level 5 Leaders.
Personal humility is one of the common characteristics and one of the reasons that the leaders were relatively ignored by the press. Neither Smith, nor Gillette’s Colman Mokler, nor Abbott’s George Cain sought the press. Neither did the eight other Level 5 Leaders. Further, when interviewed, those leaders would credit their collaborators more readily than themselves. When hard pressed to explain what made them so effective many of these non-celebrity business leaders would also claim that they were simply lucky.
Luck may have had some role, but it did not help their competitors as much. For instance, Abbott Laboratories outperformed the stock market permormance by twice as much as Merck or Pfizer did. Circuit City’s Alan Wurtzel helped that company outperform the stock market by almost 19 to 1; but Mr. Wurtzel claimed that luck also helped him find the right successor.
Why would humility be so important?
Perhaps because it allows for close collaborators to feel dignified by their work, for they are more likely to take credit for their own work than would, say, collaborators of FIAT’s Gianni Agnelli; too busy cruising “his car across red lights, with his chauffeur cowering in the back seat.”
Perhaps as important, the humility of the Level 5 Leaders also assures that lower-ranking collaborators will feel that their best efforts are made on behalf of something larger than themselves, even larger than their bosses. An impression that would not be borne as readily by the workers of Scott Paper under Al Dunlap, the “Rambo in pinstripes,” who pocketed $100 million for less than two years of downsizing at Scott Paper. The latter’s performance, incidentally, was surpassed by Kimberly Clark under Darwin Smith.
Besides personal humility, these Level 5 Leaders also displayed a relentless resolve. Darwin Smith worked through his radiation therapy to cure him from cancer. George Cain - himself an 18 year insider and heir of Abott Laboratories - had to wipe the company clean of the traits of nepotism that had stalled its creativity. Charles R. 'Cork' Walgreen III shifted his business out of the food service sector; where it had
invented the malted milk shake and where led the market with over 500 restaurants.
Where does their resolve come from? One may only speculate, but drawing on the Jungian foundations of Jaworski’s Synchronicity, one may admit that in this larger-than-human resolve there is a well of certainty that may stem from a feeling of “oneness” in which the individual leader flows in a river of unconscious determination, larger than himself. This allows us to better understand Collin’s appreciation of “an even stoic resolve” in the determination with which these leaders followed their destiny, and instilled “discipline” within the rank and file. Discipline, in this context, does away with the need for bureaucracy and puts each person at his own helm.
Under this approach “personal humility” makes more sense; because the leader feels he is only allowing himself and others to flow with a force beyond his control, which, in Collin’s study the leaders referred to as “luck”, perhaps for lack of a better word.
In this role, attuned with a force larger than oneself, the leader acts more as Greenleaf’s Servant leader; geared to serve his organization over himself; thus also helping to understand the readiness with which Collins’ leaders credited their collaborators for the company’s success; and the care they put into selection their successors. The latter is in itself a litmus test for stewardness, rather than personality cult.
You may disagree with my attempt to reconcile the seemingly disparate character traits and the behaviour of the most effective corporate leaders singled out by Collins, but one thing is for sure: celebrity leaders did not lead corporate performance as high as Collin’s Level 5 Leaders did. In fact quite a few celebrity leaders even tarnished the reputation of their companies much in the same way that, in politics, a comparable style of celebrity leadership helped wreck the economies of countries like Argentina, or Ecuador.
However, Collins’ work has returned the lost lustre to leaders who, holding precisely these old-fashioned virtues, have led their companies to unparalleled success; and in the process of doing so, these leaders paved the way for their own succession.
 Jim Colins, Level 5 Leadership, Harvard Business Review; Jan 2001, Vol 79 issue 1, page 66.
 Joseph Jaworski, “Synchronicity: The Inner Path of Leadership” with an introduction by Peter Senge. Berret-Koehler publishers, 1995.
Further reading on qualities of leadership: there is an endless list of psychological qualifications for leadership, but - given Jack Welch's standing in the leadership field - it is not a waste of time to see Jack's own list, in a reproduction of his Wall Street Jounal article of last January 23rd.