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Charles A. O'Reilly III

Charles A. O'Reilly III

Charles O'Reilly directs the Center for Leadership Development and Research at Stanford's Graduate School of Business, where he is a professor of management.

We Call It "Leadership"

The issue isn't what they've done in the past six-to-twelve months but what they haven't done in the last 20 years. In 1983 GM and Toyota entered into a joint venture (NUMMI,) whose purpose was to help GM learn the Toyota Production System. It took them 20 years to really commit to this system. Why? Saturn is failing. Why? In both instances the evidence suggests there was significant internal resistance on the part of many GM managers and an inability of senior management to overcome this.

Senior executives are paid to ensure that the company survives in the long-term by making -- and implementing -- choices that preserve the future. Over the past decade the auto executives chose to push larger, less efficient vehicles that provided higher margins at the expense of committing to actions that would preserve the future of the company. For this, they have been handsomely rewarded--but the evidence (bankruptcy and a bailout) indicates that they have failed as leaders.

Here are a couple of facts: In 1959, GM was the largest and most powerful U.S. manufacturing firm. Toyota was a small, struggling maker of motorcycles. Today GM is on the verge of bankruptcy and Toyota, although caught in the downturn, is fundamentally healthy and growing. Toyota has a Prius and the American automobile industry does not? What accounts for these differences? I suspect it is not because U.S. companies don't have the requisite technology or know-how. What accounts for this stark difference is the decisions that senior managers have made over the past 50 years. We call this "leadership."

By Charles A. O'Reilly III

 |  December 8, 2008; 9:19 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Leadership implies having a sense of future direction and of balancing short vs long term pressures/priorities

what we see today isn't a problem that is isolated to the BIG 3
the leadership of most public companies will freely admit they are chasing quarterly results
how can you have leadership that only looks 90-365 days ahead

I think that short-termism is the root cause
and we are just experiencing the BIG 3 (and the FI's) as symptoms

Posted by: miro slodki | December 12, 2008 9:32 PM
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Our publicly held corporations have little incentive to invest in long term gain. We who own the stock of our large corporations reward quarterly earnings. We have less faith in return on investment schemes.

The kings of England protected the elk in their forests because they wanted their children to enjoy the hunt. They had a sense of obligation to their families. Not true with we stock holders.

Posted by: Ken Jones | December 10, 2008 5:02 PM
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I fully agree. When advancing technologies (fuel efficiency, fuel type, safety performance, etc.) have been present to improve their products to benefit their consumers, they pocketed the investment.


Simple causes for complex problems.

Businesses would be wise to adopt a practice of providing VALUE to their customers.

Economy is based upon trust. One trusts an exchange is to occur for whatever is given. When that trust is eroded, the economy slows as the consumer starts to analyze the markets for value.

"Bailouts" fail to institute trust, in my humble opinion.

We need leadership. We need trust.

Posted by: Kringle | December 9, 2008 8:21 PM
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It strikes me as fascinating that we know, as a society, what constitutes good leadership and corporate governance. We know, in great detail, what characteristics make business leaders successful, and make companies thrive over the long haul. And we have the most advance project planning and financial management skills in our business class of managers.

And yet, there appears an abundance of extremely poor management decisions, that cause catastrophic failures to our economy. We know what is bad for us, but we choose to follow the wrong leaders anyway. In other words, we have a self-destructive component in our business psychology, wherein we handsomely reward failure in management and we starve those that actually perform productive work.

Why is this and what are the underlying causes of these self-destructive tendencies?

Posted by: AgentG | December 9, 2008 11:38 AM
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