Journal of Leadership & Organizational

Studies
http://jlo.sagepub.com

From Leaders to Leadership: Managing Change

Mark J. Ahn, John S.A. Adamson and Daniel Dornbusch
Journal of Leadership & Organizational Studies 2004; 10; 112
DOI: 10.1177/107179190401000409
The online version of this article can be found at:
http://jlo.sagepub.com/cgi/content/abstract/10/4/112

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From Leaders to

Leadership: Managing Change

Mark J. Ahn, Hana Biosciences, Inc., South San Francisco, CA

John S.A.

Adamson, Cambridge University

Daniel Dornbusch, Genentech, Inc.

The

of change in
globalization, communications, disruptive
technologies, capital flows and alliances have
created fundamental shifts in business
operations. Where many popular leadership
models may provide formulae to help solve
some business problems, they are insufficient
to deal with the pace and polyvalent character
of constant, rapid change. Managing change its impact on organizational structure, group
culture, and personal management styles - is
one of the most fundamental and enduring
aspects of leadership. Paradoxically, while
the relative value of the once-celebrated
accelerating

individual leader

pace

as

superman

or woman

being questioned, great leadership

been

more

has

is

never

urgent or more difficult.

The established order has invented various

lightening rods. And it succeeded. Yes, it
certainly did succeed; it succeeded in making
the next thunderstorm all the more serious.
Soren Kierkegaard (1813-1855)
The increased visibility of business
leaders in the modem economy has created a
new form of social theater. In it, highly
publicized corporate leaders - a new cast of
management celebrities - drive organizational
change, boldly and purposefully, either to
fame or (no less conspicuously) to failure. The
business press has been complicit in this
of
dramatization,
process
providing
stereotyped roles and scenarios. Faced with
daunting complexities and uncertainties, the
heroic leader appears as the central actor in
the companys success, the dynamic genius
guiding less far-sighted colleagues towards a
destination which, at the outset, they can only
imperfectly discern. Yet this highly
characterized style of leadership, in which
leaders appear as supermen or superwomen,

has been called into question in recent years,

as the reputations of many such &dquo;heroic&dquo;
CEOs have exploded almost as rapidly as the
inflated market valuations of the dot-com era.
The exposure of instances of dubious ethical
and
standards
malfeasance,
corporate
however, prompted a general questioning of
the
prevailing assumptions regarding
leadership, and a reexamination of where
responsibility for leadership decisions in
corporations actually resides.
Paradoxically, while the relative value of
the once-celebrated individual leader is being
questioned, effective corporate leadership has
never been more urgently in demand or,
arguably, more difficult to achieve. Leonard
Schaeffer, the CEO who transformed the once
bureaucratic, money-losing Blue Cross
California into a thriving WellPoint Health
Networks, describes the elusiveness of
effective leadership: its need for a concurrent
multiplicity of forms, and the way in which it
pivots on the need for responsiveness to
external and internal change.
Leadership is more than heavy-handed
action
at
the
top. Its defining
characteristics change according to the
needs and vagaries of the individual, the
organization, the industry, and the world
at large...by thinking clearly about the
roles Ive needed to assume at different
times, Ive been better able to tailor the
way I make decisions, communicate with
people, and manage my time so that I can
address the most pressing needs of the
organization at the moment (Schaeffer,

2002).

change management itself

series of related dangers. Keeping to
an already set course often seems to be the
easier and seemingly less risky decision. But
the avoidance of change is the opposite of
However,

poses

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113
Dantes vision of hell as &dquo;the
miserable way taken by the sorry souls of
those who lived without disgrace or without
praise&dquo; provides a warning to the executive
who blindly maintains a course of spuriously
secure mediocrity. Change management takes
courage precisely because it can be a high-risk
undertaking both for organizations and the
careers of the decision-makers involved. In
consequence, many initiatives nominally
supposed to manage change are either
ineffective in their original formulation or
rendered so by the process of implementation
often as a result of internal resistance to new
initiatives. Studies indicate that some 50-70%
of change management initiatives fail to make
any lasting impact on the organization they
purport to reform (CLC, 2002; LaClair and

leadership.

Rao, 2002).
The

central argument of this paper,

however, is that change is central and intrinsic

to the corporate condition, and thus to global
economic conditions as well.
This article
seeks to highlight three principal aspects of the
problem: how effective leaders can identify
the need for change; manage sources of
resistance to it; and create paths for successful
development for both their organizations and
themselves. Finally, we present the case study
of a business unit at the biotechnology
pioneer, Genentech, Inc., a company that has
implemented a series of novel changes that
continue to revolutionize its business model.

Leading Corporate Culture

Leadership neither begins nor concludes
simple, bullet-point lists of good
leadership qualities. Many discussions of
leadership - particularly cliched lists of
obvious corporate realities - actually inhibit
effective leadership when it comes to
discerning the need for, and implementing,
cultural change. To cite but one example: one
leading management consulting firm recently
published a report entitled Profile of the
Global Leader of the Future, detailing how the
effective leader of today &dquo;thinks globally,
anticipates opportunity, creates a shared
vision, develops and empowers people,
appreciates cultural diversity, builds teamwork
and partnerships...&dquo; - but to name a few of the
ideal leaders qualities (AISC, 2001). Yet,
these trait-based leadership models can

with

actually
to

create

change.

The

an

environment that is resistant

is that they are often

problem

too vague and

generalized to be actionable. On
the other hand, this &dquo;attribute approach&dquo; - in
positing simple check-lists of &dquo;correct&dquo;

qualities - can create organizational myopia

through &dquo;Russian Doll&dquo; management: the
phenomenon in which managers repeatedly
hire or promote miniature versions of
themselves.
Russian Doll management
decreases diversity of thought processes and
perspectives, as well as induces a tendency
towards organizational denial of competitive
threats (Bartlett and Ghoshal, 1998).
Arguably one of the most recent
successful
of
examples
high-profile
organizational and cultural change is the
turnaround affected by Lou Gerstner, Jr. at
IBM. For decades, IBM employees accepted
that a sales-and-marketing orientation, as
opposed to a customer-needs and product
focus, was what propelled growth. At the
height of IBMs success, their paternalist
culture of respect for individuals also
translated into both the expectation and the
reality of lifetime-employment. Yet as shifts in
market forces were accelerating and price
competition was intensifying, IBMs internal
processes and received corporate values
impeded its ability to respond to technological
and market changes.
IBM achieved its transformation by
jettisoning its internally protective culture and
becoming externally focused on customers and
in effect by systematically
competitors
and
to,
facing up
overcoming, the
As
collective
fears.
corporations
organizational psychologists Kegan and Leahy
(2001) posit, cultural change can be difficult
because of deeply held apprehensions that they
describe as &dquo;competing commitments.&dquo; To
facilitate the creation of new and effective
-

operating models, they prescribe recording

observed

behaviors,

and

process

of

uncovering and testing the corporations

deeply held assumptions. As IBM entered the
twenty-first century, CEO Lou Gerstner, Jr.
led a cultural and strategic transformation that
converted the firm from a &dquo;mainframe
mindset&dquo; to what was termed the &dquo;Big Dot in
the New Economy&dquo;: entering new markets and
service sectors; replacing lifetime emplovment
with large-scale internal training initiatives in
order to increase adaptability; shifting beliefs
about competitiveness and highlighting the
importance of an external focus: and
significantly evolving the corporationss
cultural

Downloaded from http://jlo.sagepub.com by kimbao bao on August 15, 2009

norms.

The IBM

experience

directs

us

114
a fundamental distinction between the
interrelated themes of leadership and
management. Where is the distinction to be
drawn? And how important is it to the task of

to make
two

implementing corporate change?

Leadership Versus Management:

Defining The Role Of Individual
Leadership
The

convergence of a series of
contemporary forces - the globalization of
markets, the increasing rates of competitive
pressure, and the flattening of organizational
structures - has increased the distinction
between
leadership and management
(Steingraber, 1996). The differentiation can
be characterized as follows. Management is
based on &dquo;process&dquo;, in that it focuses on
maintaining systems to provide goods and
services
For
efficiently.
example,
tasks
include
management
planning,
and
staffing,
budgeting,
organizing,
towards
achieving firmly
controlling progress
defined
objectives. The elements of
management therefore create predictability in
anticipating future developments and assessing
on-going operations. Leadership, on the other
hand, is prospective: it defines what the future
should look like, aligns the organization with a
common vision, and provides inspiration to
achieve transformational goals (Kotter, 1990;
Yet despite their very different
1996).
functions and attributes, leadership and
management are not antithetical, but
complementary. Both sets of skills are
required if corporate success is to be achieved
and driven forward.
Each set of qualities exists in a mutually
reinforcing relation with the other. Effective
leadership, for example, can be the catalyst for
new strategic management initiatives. Adept
leader-managers often make decisions to
resources
with
allocate
incomplete
information, but do so in ways which ensure
that they are able to adjust to altering
conditions and, consequently, achieve their
objectives notwithstanding. Successful leaders
understand that there is no single &dquo;best
management style&dquo;. The correct form of
management will always be contextually
defined: a series of individual ways to adapt to
situations and capabilities of their staff rather
than a fixed template for action (Levinson,
1994). Marmol and Murray (1995) found that
successful companies often had leaders who

achieved

performance
extraordinary
aspirations by pursuing their strategies
relentlessly, simplifying core processes, and
honing their organizations development
systems. But beyond these common traits lay a
wide variety of modes of implementation.
Goold and Campbell (1987) found,
perhaps unsurprisingly, that ideal corporate
management implicitly integrates leadership
and management. They concluded that
&dquo;virtually all executives want strong leadership
from the center, coordinated strategies that
build in a variety of view points, careful
analysis of decisions, long-term thinking and
flexibility. But they also want autonomy for
unit managers, clear accountability, the
freedom to respond entrepreneurially to
opportunities, superior short-term results, and
tight controls.&dquo; The problem is that these two
sets of desiderata contain mutually competing,
if not mutually contradictory, demands on the
leader-manager.
Thus, as business dynamics and contexts
change, corporate leaders must adapt
themselves fundamentally in order to maintain
an effective integration of the leadership and
roles, and some form of
between
the
simultaneous
equilibrium
of
them:
of
held
expectations
strong central
direction coexisting with unit-level autonomy;
and of central long-term strategic thinking
coexisting with a measure of tactical flexibility
and freedom of action among subordinates.
In
this
achieving
equilibrium,
responsiveness to context is key. Farkas and
Wetlaufer (1996) studied 160 chief executive
officers around the world to determine the
attitudes, activities and behaviors that shaped
their respective leadership approaches. The
authors concluded that CEOs in successful
companies tended to adapt their leadership
approach to specific strategic situations, rather
than sticking with any single approach. As so
often the case, the template of &dquo;attributedefined leadership&dquo; is either redundant or even
counter-productive. And in the case of
successful CEOs, it was their responsiveness
to company culture - and their ability to refine
and adapt it to new strategic needs - that was
one of the critical elements of their success. As
the Center for Leadership Development
concluded &dquo;...reengineering company culture
is often a necessary component of companies
change strategies&dquo; (CLC, 2001). How, then is
this reengineering of company culture - the

management

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115

central component of change management effectively to be achieved?

most

Managing Change: The

Centrality Of Corporate Culture
Moran and

Averguns definition (1997)

change management provides a starting
point, defining it as &dquo;the process of continually
renewing the organizations direction,
structure, and capabilities to serve the everchanging needs of the marketplace, the
organization, and employees.&dquo; This does not
go far enough; for, as we have seen, successful
change management requires the alignment of
an
organizations internal architecture,
individual actions, and collective goals in
order to achieve optimal results.
Clearly,
achieving this is unlikely to be an entirely
smooth process. Every change-management
initiative is likely to face internal resistance.
To create initiatives effectively for corporate
growth and competitiveness, we must first
analyze the likely sources of resistance to
change.
of

Resistance to

Change

Carroll (2002)
explored
phenomena behind why
organizations experience powerful inertia
when it comes to the realization of change.
Organizations, the authors argue, consistently
underestimate the time and cost required in
dealing with change-related initiatives for two
reasons: complexity and opacity. Complexity
is defined as the cumulative number of people
and organizations in the work group network;
opacity as the degree to which specialization
makes the work of one group difficult for
others to penetrate and incorporate into group
work. Thus, change-related initiatives become
increasingly difficult as complexity (for
example, more languages, cultures or
alliances) and opacity (enhanced data in
specialized programming languages, for
example, or the nature of protein interactions
in genomics) increases.
Rather than improvement, the result can
be a vicious circle in which each new initiative
strengthens the resistance to further change.
Abrahamson (2000) suggests that &dquo;change, as
it is usually orchestrated, creates initiative
overload and organizational chaos, both of
which produce strong resistance from the
people most affected.&dquo; Marshall and Conner
(2000) extend this idea further by asserting

Hannan,

Polos,

the social

and

that the critical mistake often made by

managers in change-related programs is to
focus on the abstract process of change rather
than dealing with the practical problems
entailed in helping people to assimilate the
changes that are required. The authors
conclude that resistance to change is
inevitable, that individuals express resistance
both covertly and overtly, and that an
emotional cycle of change resistance and
acceptance should be expected and actively
managed. Preparedness for resistance is the
first condition of its effective management, but
even so - only one element of several that
are required for the successful implementation
of change. Studies of change-management
initiatives help to identify some of the other
elements involved.
-

Initiatives
have seen, the high failure rates of
change-management initiatives indicate the
difficulty and complexity entailed in the
successful realization of any process of
change. In a study of 40 major change
management programs, LaClair and Rao
(2002) found that 58% failed and 20%
captured only a third or less of the value
expected. Some of the reasons for this are
predictable. The unsuccessful companies were
characterized by a lack of commitment on the
part of senior management, poor project
management skills, lack of training, and
confusion about rationale for change. In
contrast, the successful companies reveal not
only the substantial rewards that accompany
effective leadership
the successful gained
an average of 143% of the expected return on
also
reveal
the
investment;
they
of
effective
and
interdependence
leadership
sensitive management in the realization of
their goals. The successful companies were
characterized by engagement at all employee
levels (no level was more critical than any
other), delineation of clear responsibilities, and
communication of the reasons for change

Failure of
As

Change

we

throughout the organization.

Conversely, Kotter (1998) contends that
four key mistakes impede change initiatives:
complacency; not communicating with words
and actions; celebrating too soon. and
assuming that all middle managers are against
change. This last conclusions acts as a caveat
against over-estimating the degree of internal
resistance to change. Overt pessimism as to a
workforces attitudes

Downloaded from http://jlo.sagepub.com by kimbao bao on August 15, 2009

to

change is

in

danger of

116

being self-fulfilling. To overcome these four

problems, Kotter suggests three principal
solutions: focusing on short-term wins to build
momentum; developing a coalition in favor of
the proposals; and engaging employees
emotionally behind a common vision.
Other explanations for failures in
managing change include the development of
a selection process that favors seniority,
promotion of new managers without proper
training, and hiring of similar managers as
successors (Useem, 2002). If the last two
problems are managerial failings, the question
of introducing selection processes that favor
performance (and excellence) over seniority
encapsulates the conundrum of balancing the
potentially conflicting objectives of leadership
those of management. The leader will
wish to promote individual excellence and
reward performance; yet the manager is aware
that the wholesale disregard for seniority can
produce low morale and a sense of insecurity
within the corporation that can jeopardize
overall
performance and render the
introduction of change self-defeating.
There are other pitfalls. Ironically,
organizational success can also serve to
impede effective change management.
Christensen and Overdorf (2000) suggest that
three
factors
organizational
shape
effectiveness: resources, processes, and values.
versus

Companies develop sequentially: first, through

(such as a new products); they then
devise processes and capabilities to scale the
replication of products or service offerings;
and finally use corporate values to transmit
behaviors and decision-making processes
within the company (for instance, attributes
such as margin requirements and the way in
which new features and benefits are assessed).

resources

This sequence of resources, processes, and

values - the authors argue - results in an
evolutionary development of the corporate
culture that is best suited to serve defined
customers and thus to capture increasing
value.
It

sequence that acquires a

of its own. Hence we are
confronted with a paradox. The very
infrastructure that is created from aligning
organizational architecture, actions and goals a necessary and, in many respects, highly
beneficent infrastructure - can inhibit a
successful corporations ability to handle, let
alone initiate, disruptive change. As a result, a
seemingly effective business may be left
is

momentum

vulnerable to attack by smaller, nimbler

companies that can create new resources,
processes and values targeted to address the
new - and often rapidly changing - needs of
an adapting industry. By strengthening and

aligning

companys

organizational

architecture, actions and goals, this apparently

virtuous process - the process on which a
corporations achievement of performance
results crucially depends - may actually
reduce, or inhibit entirely, a companys
capacity for &dquo;breakthrough innovation&dquo;.

Achieving Sustainable

Results-Focus
and Coordination
It follows that achieving performance
results while shaping the future is perhaps the
most ambitious challenge and elusive dynamic
that can be encountered in business. As Jack
Welch, former CEO of General Electric, put it
with characteristic bluntness: &dquo;You cant grow
long-term if you cant eat shortterm...Anybody can manage short. Anybody
can manage long. Balancing those two things
is what management is&dquo; (Byme, 1998).
This dynamic tension can be represented
through the figure below that provides a means
of conceptualizing the elements involved in
achieving sustainable results. First, the upper
left-hand side of the quadrant depicts high
strategic focus. As is well known, large,
complex organizations use strategic focus to
evolve systems and processes to fulfill their
target customer needs. The risk of focus, as we
have already noted, is that it can impede
innovation and increase the risk that a series of
small errors will eventually lead to a
catastrophic organizational failure. Achieving
a
narrow
functional
focus
while
a
broad
simultaneously
maintaining
organizational awareness is a key antidote for
this type of corporate myopia. In practice,
however, this is a difficult balance to achieve
precisely because team and individual
&dquo;integration is an on-going accomplishment
and partly because rules, orders, directives,
procedures, checklists, and instructions are
largely static tools, ill-fitted to meet the everchanging requirements of a dynamic system

(Snook, 2000).&dquo;
The lower

right-hand side of the quadrant

high organizational coordination.
Coordinated communication can improve the
efficiency of processes. On the other hand,

depicts

internal focus may also limit innovation and

lead to misallocation of resources.

Downloaded from http://jlo.sagepub.com by kimbao bao on August 15, 2009

117

The ideal dynamic balance between focus

and coordination is found in the upper right
hand side of the quadrant. By balancing

strategic focus with structural alignment,

organizations can maximize both operational
efficiencies and innovation.

Achieving Sustainable Results: Dynamic

Tenison Between Focus and Coordination

Indeed, change management is

a difficult
because
it
balancing
precisely
requires
companies to combine both incremental and
revolutionary change in order to achieve what
can be termed &dquo;dynamic stability&dquo; while
avoiding the related perils of organizational
cynicism and burnout (Abrahamson, 2000).
This, in turn, has implications for the way
in which the process of change can be
conceptualized (and applied) within the
corporate context. As Moran and Avergun
(1997) have concluded, &dquo;change is nonlinear;
often it has no clearly defined beginning or
end... [it] interweaves multiple improvement
efforts...is [both] top-down and bottom-up.
Organizational change [also] has an important
personal dimension.&dquo;
The following case study of a complex
change initiative at a highly innovative
in
the
company
biotechnology field,
Genentech, Inc., serves to illustrate many of
the aspects that have been reviewed here: not
only areas of resistance, but also the
characteristics and internal dynamics that
allowed the company to build its flagship
product from relatively small beginnings into
the best-selling cancer therapy in the U.S.

act

GENENTECH INC. HEMATOLOGY:

POSITIONING A COMPANY FOR
GROWTH AND CREATING THE
BEST-SELLING CANCER
TREATMENT IN THE U.S.

During the period 2001-2003, Genentech,

Inc.s Hematology business unit instituted a
number of organizational, strategic and
cultural changes to position the company for
rapid, continued growth. During that time,
their anticancer product, Rituxan, surpassed $11
billion in sales and became the top-selling
anticancer product in the U.S. Genentech. Inc.
entered the biopharmaceutical market in
oncology (or anticancer) in November 1997
with the introduction of Rituxan (rituximab), a
monoclonal antibodv treatment for nonHodgkins lymphoma (NHL), a highly targeted
molecule that attacked only a single type of
cell of the lymphatic system.
Rituxan is a breakthrough innovation for
treating NHL. a disease that went over 25
years without a change in standard of care and
survival (Coffier, 2002). Due to the innovative
nature

of Rituxan. the FDA (Food and Drug

treatment in less

Administration) approved the

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118

than 7 years after it was discovered versus the

industry average of 12 years (Grillo-L6pez,
2000). Five years after Rituxan was launched a
clinical review of NHL therapies concluded,
&dquo;because of its activity, coupled with a
favourable toxicity profile, rituximab has
become almost ubiquitous in the treatment of
most B-cell malignancies (Cheson, 2003).&dquo;
Rituxans commercial success reflects its
clinical efficacy of improving survival
sales
went from $5 million in 1997 to $1.1 billion in
2002, representing over half of Genentechss
product sales in that year.
Genentech
uses
human
genetic
information to discover, develop, manufacture
and
commercialize
biotherapeutics for
significant unmet medical needs. The founder
of the modem biotechnology industry, South
San Francisco-based Genentech, Inc. was by
2002 the worlds second largest biotechnology
company, with total revenues of $2.7 billion.
-

Resistance to Change
Amidst the success that greeted Rituxan,
one of the authors was hired from a company
in

the

traditional pharmaceutical
the
Vice
President to head the
industry
newly formed Hematology business unit.
Contemporaneous business-unit reorganization
combined sales, marketing, and medical affairs
for therapeutic areas for the first time. Until
then, all functional areas reported only to their
respective section heads, in the process
creating what amounted to organizational
&dquo;silos&dquo;, with little lateral contact or
communication.
Flushed with their commercial and
clinical success, however, the various elements
of the Hematology team felt confident about
the virtues of the status quo and fiercely
defended their functional independence. The
organization was strongly resistant to the
suggestion of change. Moreover, loyalty and
commitment were
strong within each
functional area, even if there existed little
between the constituent areas. The fact that no
person had transferred from sales to marketing
or vice versa in the four-year history of the
product testified eloquently to the strength of
the silo mentality. This was highly unusual,
for in the biopharmaceutical industry more
generally team members commonly transfer
cross-functionally to enhance collaboration
and insight into customer expectations and
needs.
As a result,
cross-functional
cooperation, communication, and trust were

larger,

as

tenuous at best.

national

Anonymous feedback during a

force meeting posed an
logical question: &dquo;why does

sales

apparently
[Genentech] management keep bringing in
senior management from big, mediocre
pharmaceutical companies when weve been
successful?&dquo;
The Need for Change: Changing
Business Environments and Emerging
Threats
As with any intelligent and highly
educated constituency, it was clear that
establishing a compelling case for exogenous
conditions that necessitated change - and the
internal benefits that would accrue through
was an essential first step
affecting it
towards
successful
of
any
process
implementation. The exogenous influences
were clearly definable and growing more
urgent by the day. There were three key
strategic changes facing the companys
Hematology franchise as it entered 2002:
dramatic shifts in the sources of sales growth;
an
increasingly conservative regulatory
environment; and new competition on the
horizon.
Of these considerations, the shifts in the
sources of sales growth were easily the most
pressing. In 2002, 70% of the sales and 90% of
Rituxan growth were projected to be beyond
the original FDA approved uses or indications.
The companys sales expectations were based
on simultaneous growth in multiple areas of
use, and it was already evident that this would
require the effective use of all the companys
functions if it were to succeed in being
successful in commercial operations while also
ensuring strict regulatory compliance. In other
words, cross-functional teamwork would be
imperative to achieve the units aggressive
-

goals.
The most obvious external threat was
competition. There were eighteen
competitors in various stages of clinical trials
with both complementary and cannibalizing
products. Significant commercial rivals (such
as Amgen and Aventis), with proven and
highly innovative technologies such as
antisense and nanotechnology, were making
rapid advances. Moreover, Genentechs copromotion partner for Rituxan, IDEC
Pharmaceuticals, was on the verge of
from

introducing
with the

same

competing product, Zevalin,

indication

Downloaded from http://jlo.sagepub.com by kimbao bao on August 15, 2009

or

target market.

119
After a series of internal reviews, the
need for change within several areas of the
company became apparent to all concerned.
First, the marketing teams structure was too
general and with individual roles unspecified.
Ten marketing personnel worked on 31
distinct activities and projects. All team
members were equally responsible for these
activities, hampering a sense of empowerment
and ownership, and effectively centralizing
decision-making. In addition, the sales group
was understaffed to the point that it was
unable to research and monitor its own
activities. As the new strategy emerged, it also
became clear that questions of accountability
needed to be viewed from a variety of
perspectives. For the first time, the sales
organization would need to be accountable in
areas other than revenue.

Initial Change:
Coordination

Alignment, Focus,

and

The first step was to identify the need for

change - and the urgency with which it was
required - by engaging the entire operation in
dialogue. This had to operate at two levels:
both cognitively and emotionally, each
member of the team needed to acknowledge
and internalize the fact that the business
landscape was altering as a result of
innovations in markets, competition, and
regulation. One of the most effective ways of
making that case was by seeking the responses
of a target group of customers: the key 30% of
the customer-base that generated 85% of all
sales. These key customers were consulted as
to their views on the process of developing an
overarching strategy; in particular, this
involved identifying Genentech Hematologys
key competencies, and served the purpose of
creating an external focus that the most
change-resistant member of the team was
forced to acknowledge. Moreover, the
approach significantly enhanced customeras those approached were ready to
help and flattered to have been asked (a
disposition that is often underestimated).
Newly instituted customer surveys revealed
four areas of critical importance to this key

relations,

These
trials; unbiased and

clinical
sophisticated medical
education programs;
a
responsive and
knowledgeable sales force; and reimbursement
support. In addition, analysis of the business
units expenditure revealed that it was
spending 24% of overall expenses in areas that

customer group.

were access

to

accounted for only 2% of sales (something that

all the more anomalous as these were not
expected to grow significantly). Resources
were
rationalized in a way that. after
reallocation, 100% of expenses were aligned
towards initiatives that drove 98% of current
sales and anticipated future sales growth.
Next, multiple modes of communication
created transparency and initiated candid
feedback.
Monthly &dquo;town hall meetings&dquo;,
quarterly sales-force advisory boards, and
web-based
communications
through
newsletters and other media began to unite the
business units formerly disparate areas. It was
also made mandatory that the entire marketing
department spend at least one day per quarter
in the field with a sales representative, the
better to understand customer behavior, to
and
the
foster
enhance
teamwork,
departments credibility with the sales force.
The team then reorganized around key
competencies that the major customers had
identified as critically important: brand
management, medical education, and key
customer management. Three team leaders,
one for each competency, were established to
create
ownership, accountability, and
responsibility for each competency area.
Team members and resources were allocated
to each team partly according to the relative
importance attached to each by customers, and
partly according to the impact of each on sales
and growth. The goal for each competency
team-leader was to become number one in
their area-brand management, medical
education, and key customer management-as
defined by the top 30% of customers who
comprise 85% of sales in a survey conducted
by a third party on a biannual basis.
To reinforce this process of integration
medical
further, all support functions
affairs who conduct post-approval clinical
care
who
trials,
managed
support
reimbursement, and nurse-educators who
provide training to ensure safe and effective
product use- were aligned exactly with the
competency areas. For example, before the
reforms, the managed-care team had dedicated
5% of the time of 40 people to supporting

was

Hematology.
units

After

structures,

refocusing the
the

business

hitherto dispersed
to dedicate six team

changed
to Hematology. assigned
according to geography and customer.

organization

was

members fulltime

Frank internal communication was also

deemed to be critically important. One

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120

important step taken was a Gallup Q12 survey

implemented to monitor the level of1
employee engagement and satisfaction.

was

Management then made direct, immediate and

transparent changes in response to low scoring
categories, in order to communicate its own
commitment to responding to employee
opinion and indicating the importance that
to remedying areas of
discontent.
During each period between
surveys, the teams reported scores increased
substantially from the 60th percentile in April
2002 to the 82nd percentile by November 2002,
and a further increase to the 86th percentile in
October 2003: an externally assessed index of
high (and steadily improving) morale that
materially contributed to the driving forward
of the momentum for change.
Beyond these questions of morale and
personal fulfillment, a further study was
instituted in an effort to identify the &dquo;cultural
norms&dquo; - the workplace culture - that
prevailed within the Hematology business
unit. The method employed for this was a
series of confidential individual interviews,
focus groups, and finally a survey of the entire
business unit to confirm findings. The survey
showed a high degree of consensus as to
Hematologys workplace culture including
these key themes: making a difference in
patients lives; pride in being science-led; an
emphasis on speed of execution and
performance; mutual respect and trust among
belief
in
individual
co-workers;
and
a
tradition
of
collaborative
empowerment;
decision-making. On the debit side, there was
extensive concern about the potential risk that
too much &dquo;process&dquo; or bureaucracy was an
almost unavoidable concomitant of major

management attached

organizational growth.
Perhaps
importantly, addressing all of these
1

The

most

issues

that measure employee

follows: "I know what is expected of
me at work. I have the materials and equipment I need to
do my work right. At work, I have the opportunity to do
what I do best every day. In the last seven days, I have
received recognition or praise for doing good work. My
supervisor, or someone at work, seems to care about me
as a person. There is someone at work who encourages
my development. At work, my opinions seem to count.
The mission/purpose of my company makes me feel my
job is important. My associates (fellow employees) are
committed to doing quality work. I have a best friend at
work. In the last six months, someone at work has talked
to me about my progress. and This last year, I have had
opportunities at work to learn and grow (Buckingham,

Gallup Q12 questions

engagement

are as

recognizing that there was no single

Rather, shaping a corporate culture
requires relentless nurturing through example
and consistency.
Rewards and recognition were also realigned to serve the new strategy. A critical
for
was
the
initiative,
example,
implementation of a transparent, crossfunctional, all-personnel review process that
was conducted semi-annually. This moved the
review process from an essentially hierarchical
and linear process - in which the employee

meant

answer.

dependent on his or her direct manager

and chain-of-command - to a broader and
more lateral (and also more transparent)
process of assessing performance and talent.
new
This
involves
process
managers
presenting their reports of performance results
and promotional potential in conjunction with
peer-review input and feedback. It is these
reviews that form the basis for promotions,
merit-related salary increases, and stockoption awards.
The conceptual strategic framework of
this change-management process can be
summarized as a sequence of two phases: first
focus, and then coordination. In the first phase,
in 2002, strategic focus was applied to provide
an external perspective on key customers
attitudes and needs, to develop a clear and
consistent strategy, create competencies to
position the Hematology business unit
uniquely in relation to its competitors, and to
align internal structures so that they reinforced
efficiency and effectiveness. In the next phase,
in 2003, a new agenda was defined in order to
consolidate the gains made in the previous
year. Here the focus was on coordination: the
coordination of a bold and continuous program
of innovation designed to achieve strategic
ends, while simultaneously affirming the
importance of maintaining &dquo;individual
empowerment&dquo; - the antidote to centralizing
bureaucracy - as the primary means of
achieving team efficiency and transactional

was

speed.

1999)."

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121

In this

context, leadership has

from
the Romantic image of
long way
the imperious corporate chief imposing his
will - some supposedly far-sighted and almost
certainly flawed vision - on his submissive
followers. Rather it has become, in part, a
corporate, collegial relationship. In place of
linear, top-down management, there is
dialectic that enables a number of potentially
conflicting interests to be maintained in a state
of dynamic and creative tension.
By choosing and implementing this
approach, the Hematology team is attempting
to achieve a synthesis - or rather, a form of
carefully poised balance - between focus and
coordination in order to create the strategic
and tactical agility that is required to deal
nimbly and effectively with the challenges that
will come with future external change. For that
the future will bring various forms of
exogenous change is almost the one item of
certitude in a highly volatile and otherwise
unpredictable environment. No single
leadership style - still less the particular vision
of any single &dquo;leader&dquo; - will be self-sufficient
in this world of unavoidable change.

practical

come a

Conclusions
The accelerating pace of globalization,
and
communications,
technological
innovation; the changing patterns of crossborder capital flows; the fluid state of
corporate mergers and partnerships; all these

have created - and will continue to create for

the foreseeable future - fundamental shifts in
the ways in which business is conducted.
Where many old-fashioned - and still widely
current - leadership models may provide

perspectives from which to solve specific

business problems (particularly the challenge
of change within the contemporary business
world). The task of discerning external
changeand translating that discernment into
strategies for internal corporate change - in
terms of evolving organizational structures,
group culture, and styles of personal
interaction - stands as one of the most
enduring challenges of leadership.
Yet the leader who believes that
leadership is about the leaders qualities alone
looks almost certain to fail. As we have
suggested here, even the task of discerning
what needs to be changed can - and arguably
ought to be - a collegial endeavor. It requires
participants to analyze problems from multiple
viewpoints, to think imaginatively, and tease
out the complexities of the problem.
This
approach may make the required action seem
more complicated and intractable rather than
less. Ultimately, however, only by beginning
with (and facing up to) the complexities of the
challenge of change can we create any
practical and useful conclusions, as opposed to
virtuous-sounding - but in the end, simplistic
and unhelpful - generalities about the nature
of leadership qualities.
The case of the Genentech Hematology
business unit illustrates a successful instance
of discernment of the need for change and the
effective implementation of a response to that
need. The result of the transformation,
however, was not the creation of yet another
different, but - in time - equally inflexible,
series of structures. equally doomed to
the
cultural
obsolescence.
Instead,
transformation produced an environment in
which the uncertainty of the future is taken as

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122 ,

given, and new arrangements have been

created that are inherently Protean: able to
adapt and respond to new circumstances as
they arise. Instead of seeking a single, oncefor-all solution, the new structures foster and
manage a dynamic tension between &dquo;focus&dquo;
and &dquo;coordination&dquo;: between the ongoing tasks
a

Three findings may be highlighted. First,

the &dquo;focus&dquo; side: becoming a customer-led
organization raises the debate from turf battles
to teamwork; customers or markets are often
useful guides precisely because they transcend
the
functional
corporations
existing
boundaries and allow teams to analyze
and
allocate
resources
opportunities
objectively. Second, if the focus is correctly
on

adjusted - through strategic simplicity,

relentless prioritization of the questions that
matter most, and the alignment of the
organizations resources to actual needs - then
the benefits

substantial. This internal

will
in turn drive innovation,
change
improve transactional speed, and produce
substantive results. Third, cultural change is
fundamentally a collective, collegial exercise
in which sensitivity to the particularities of
context is all-important. No single approach
will be effective in all circumstances.
Yet if success is a matter of shared
responsibility, it would be naive to suggest
that responsibility is shared equally. In
instigating the process of re-assessment and
managing the dynamic tension that results
from initiating reforms - determining the point

cultural

are

of external and internal analysis (with its

tendency to explode current expectations and
assumptions), and the need to devise and
implement responses to those findings in such
a way that both utilizes most effectively - and
also inspires the confidence and enthusiasm of
the companys human resources.
-

where

countervailing forces are counterpoised

beneficially and creatively - there
remains a role, albeit a heavily modified one,
for &dquo;heroic&dquo; leadership. Personal courage is
inevitably required to inaugurate (and
maintain) any process of change management,

most

not least because a decision to retain the status

quo, or to resist calls to change course, often

the easiest and least risky management

decision. While change for changes sake can
often be a spurious substitute for properly
focused leadership, the avoidance of change
can be equally culpable: the result of either
timidity or complacency, and the very opposite
of effective leadership. However, once a
properly informed decision has been made as
to the need for change - usually a moment that
requires individual leadership - the paradox is
that, when it comes to implementation,
&dquo;leadership&dquo; is fundamentally a group
exercise. Leaders are constantly asking the
seemingly unreasonable by requesting that
individual team members make a total
seems

commitment to a particular program

of action in the context of a future that is
predominantly uncertain.

personal

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123

Finally, effective leadership can be about

the construction of beneficent illusions - at
times, for instance, minimizing the impression
that instigation of change is the consequence
of a fiat from on high in order to foster a
corporate sense of empowerment. Successful
leadership may even depend on concealing the
extent to which the leader is responsible for
the new directions taken by the led. Hence,
leadership is also a network of relationships, a
polyvalent phenomenon that can only be
defined in the context of the leaders
relationship with his specific constituency. It is
unsurprising, then, that most change
management initiatives fail - not least because
they rest upon flawed or simplistic
expectations as to the varieties of leadership
on
which effective change-management
depends. Somewhat ironically, this survey of
the tempests of organizational change
reaffirms the importance of the traditional
&dquo;heroic leader&dquo; in at least one respect: if
managers are to be effective in leading others,
they must start from a position of authentic
self-knowledge and the acknowledgement that,
however extensive their powers, the successful
implementation of change will always partly
rely on the co-option rather than the
compunction of the led. As Henry David
Thoreau reminds us, &dquo;things do not change, we
do.&dquo;

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