The leaders who changed HR

Some the great captains of industry have had a profound effect on people
management. Jane Lewis examines the legacy they have left to HR

Thomas Carlyle’s view of history as "the biography of great men"
has become a ubiquitous debating point among A-level students. The question
here is its relevance to the world of business. More specifically: to what
extent have the contributions of individual business leaders shaped the
development of people management over the decades?

Recently, it is true, the credibility of captains of industry as forces for
good has reached an all-time low – the shiny sea of the 1990s boom has receded
to reveal a very ugly landscape indeed.

With plummeting company values have come widespread revelations of ethical
violations in the boardroom, countless examples of personal greed in the face
of corporate failure, and the continuing exposure of unscrupulous,
short-termist business plans. No wonder there is such disillusion in the air.

This was demonstrated in a recent survey, which found that the cartoon
character Dilbert – a man who stands for the ordinary office worker against the
forces of modern management – is now ranked higher as a business model than
even that secular saint Sir John Harvey-Jones.

Here we attempt to restore the balance by singling out individuals
(Harvey-Jones included) who have made a difference – both to the development
and welfare of their own employees and, more generally, to the evolution of HR
practice over the years.

They range from out-and-out paternalists, through aggressive downsizers, to
new economy prophets. Although not all their legacies have necessarily been
happy ones, they have all helped shape the Anglo-American business environment
as we know it today.

William Hesketh Lever, founder, Lever Brothers

Background: A one-time Bolton
grocer and devout Congregationalist, Lever founded Lever Bros in 1885 and
pioneered the use of modern branding and advertising techniques to establish
his Sunlight soap as one of the bestsellers of its day.

In the 1920s the company merged with a Dutch margarine
manufacturer and became Unilever – now a global brand giant with annual sales
of £29bn. Elevated to the peerage, Lever became Lord Leverhulme.

How he changed HR: Lever’s
policy of enlightened paternalism developed and extended ideas pioneered by
Victorian industrial reformers like George Cadbury. He was one of the first to
blend together social and employment contracts. The most tangible expression of
this was Port Sunlight, the model workers’ village he built next to his
Merseyside factory.

With its church, sports festivals and school, Port Sunlight
imitated the tradition of a rural village and most events were presided over by
‘Uncle’ and ‘Aunt’ Lever.

For those used to the slums of Birkenhead and Liverpool it was
Arcadia, and Lever was rewarded with unified loyalty from a grateful workforce.

But the idyll couldn’t survive the free-thinking forces of the
20th century -by the end of the 1930s it was alleged that "no man of
independent mind" could "breathe for long in the atmosphere of Port
Sunlight".

How the legacy lives on:
Lever’s paternalist outlook, together with his emphasis on religious duty,
found echoes in the US, particularly in the early years of IBM and later in the
Mormon hi-tech companies WordPerfect and Novell.

Within Unilever itself, the ethos moved on to embrace a more
modern corporate outlook, but the company is still renowned for its high
ethical standards and the Lord Leverhulme Trust continues to finance research
on reform in the workplace.

John Spedan Lewis, chairman, John
Lewis Partnership

Background: When Lewis
inherited his stores from his father in 1929 he immediately set about
remodelling them. Convinced the ideas of the Russian revolution would spread to
Britain, he hedged his bets against the introduction of Soviet-style
co-operatives by setting up a trust which turned the stores into a
profit-sharing partnership for all employees.

How he changed HR: Among the
founding principles of Lewis’s trust was the proviso that it must secure
"the happiness in every way of its members". The democratic ethics
established then continue today – employees elect workers councils which
monitor the day-to-day implementation of management decisions.

They also elect a central council that acts as an alternative
board of directors and share company profits. Other perks include thriving
social clubs, universal access to corporate yachts and holiday houses and
non-contributory pensions. The in-house newspaper, The Gazette, is a paragon of
free speech.

How the legacy lives on: Few
companies have imitated this unique corporate structure, but many have adopted
profit-sharing schemes similar to those first enacted by Lewis. More than 30
years after his death, the group – which now includes Waitrose – is much bigger
but largely unchanged in ethos.

Staff are among the best paid on the high street and the
company has never made redundancies. In 1999, however, there was a near revolt.
Some staff members, keen to scoop a possible £100,000 each, wanted to float the
company – but Lewis’s original trust was so water-tight that it would need an
Act of Parliament to change it. As one of the UK’s most resilient retail
groups, the John Lewis Partnership continues to demonstrate against the odds
that capitalism and Marxist ideology can be combined successfully.

Jack Welch, CEO, General Electric

Background: Welch joined GE in
1960 and rose quickly through the ranks to become CEO in 1981. An abrasive
personality, he once conceded that he needed to improve his socio-political
relationship skills – he was said to be so anti fat people ("undisciplined
slobs") that they hid when he did the rounds.

How he changed HR: Within
months of taking charge, Welch fixed a company that many had been unaware was
broken, selling off vast tracts of the business and laying off 132,000 workers
in one of the largest corporate downsizing exercise yet seen, for which he
earned the nickname Neutron Jack.

But the financial results soon spoke for themselves and Welch
remained unrepentant – the real job killers, he remarked, were "weak
managers". The hatchet-job accomplished, Welch turned to HR reform,
personally devising and introducing a wealth of new measures – including
360-degree management, boundarylessness, employee work-outs, six sigma quality
control, reverse mentoring and, latterly, forced grading.

He succeeded in creating a remarkably cohesive culture, the
glue of which was the corporate study centre he founded at Crotonville where he
regularly lectured.

How the legacy lives on: A measure of Welch’s enormous
influence is that many of the radical messages he began preaching 20 years ago
are now business cliches.

He was the most admired and imitated CEO of his time and
heralded a sea-change in corporate culture, particularly in terms of
legitimising huge downsizing programmes.

Ironically, given his own lengthy tenure at GE, which only
ended this year, he was the man who did more than any other to end the
"jobs for life" culture.

Sir
John Harvey-Jones, chairman, ICI

Background: Swashbuckling
Harvey-Jones, spent the Second World War in a Royal Navy submarine before
serving with British Intelligence as a Russian interpreter. His 30-year
relationship with ICI, then the bellwether of the UK economy, began without
fanfare – he claims he only joined so he could spend more time with his family.
Lacking either a degree or technical training, he was a misfit initially
unprepared to tow the company line. In 1982, when he got the top job, many
considered the move a foolish gamble.

How he changed HR:
Harvey-Jones swept through the "drab and introverted" ICI,
restructuring management right up to board level and dislodging the
"baronies" that were impeding the company’s ability to change and
grow.

An inspirational leader, he was one of first to stress the
importance of breeding entrepreneurial flair and project-based teams. These
tactics helped transform a loss-making operation into one boasting profits of
£1bn by the time he left.

Harvey-Jones was equally active in promoting "human rights"
within ICI, introducing a series of progressive personnel policies. These,
combined with his cheery, approachable manner, are one reason why it is often
forgotten that during his tenure he sacked over half the workforce

How the legacy lives on: Harvey-Jones
did more than any other UK business leader to remove the dominance of command
and control culture.

ICI may no longer be Britain’s largest company, but he
positioned it for sustainable growth. His HR policies heralded a new
preoccupation with work-life balance, which he continued to stress after
leaving ICI to take up a consulting role as "Britain’s most expensive
temp".

His long-term legacy was to put a human face on big business
and promote a common sense-based approach to the way companies are managed.

Herb Kelleher, chairman,
South West Airlines

Background: In 1971 Kelleher
quit a Texas law practice to launch South West Airlines, the first low-cost,
no-frills carrier. A zany individual with considerable chutzpah, Kelleher is
the American entrepreneur straight out of central casting – chain-smoking, hard
drinking, and generally credited with a heart of gold.

How he changed HR: Kelleher’s
brilliance wasn’t just seeing a hole in the market, it also lay in fostering a
new kind of corporate culture to tap it.

His philosophy had everything to do with size – "think
small, act small, get bigger". He considered humour a strategic advantage
in business and made it a central requisite in the hiring process.

When flight attendants and schedulers sparred over flight
schedules, Kelleher had them swap jobs for a day to get some perspective. The
time and money devoted to employee recruitment and assimilation paid dividends
in terms of South West’s low churn rate and "collegial" culture.

Kelleher believed in grooming talent in the long-term – the
best example of this is the company’s president, Colleen Barratt, who joined as
Kelleher’s secretary.

How the legacy lives on:  Kelleher was one of the earliest models for
the kind of anti-corporate, iconoclastic leader lionised in the 1980s by gurus
such as Tom Peters.

But his real legacy is the huge number of successful copy-cat
operations (from EasyJet to Ryanair) which followed Kelleher’s culture-based,
people-centric approach to management.

Sir John
Browne, chairman and CEO, BP

Background: The son of a BP
man, Browne joined BP on graduation and has been there ever since. He took
control in 1995 when BP was worth £20bn and steered it into the big league – it
is now a £138bn business. "It’s up or out", he said.

Although it is sometimes claimed he is autocratic and rules by
fear, Browne is quietly unconventional and has gained a reputation for his
radical proposals.

"The more you grow up the more you understand that no one
really conforms and everyone has something slightly different to offer,"
he says.

How he changed HR: Browne
demonstrated, through his policy of aggressive growth via mergers and
acquisitions, that it is possible to marry huge conglomerates speedily and
successfully.

In the past three years he has led three mega-mergers,
assimilating 100,000 new employees worldwide. But his greatest contribution to
the history of HR has been his wholesale push into outsourcing.

BP was the first major organisation to sign up with HR provider
Exult and its endorsement of the new model sparked a flurry of similar
announcements. In an ideal world, says one BP insider, Browne would
"outsource everything". Even BP’s finance and accounting is now
managed by PricewaterhouseCoopers.

How the legacy lives on: Browne
will always be remembered for achieving one of the most radical shake-ups in
the oil industry. He has also achieved a remarkable PR transformation for BP –
from global despoiler to environmental champion in a few short years.

Nonetheless it is still too early to gauge his real impact on
the development of HR – that will depend on the success, or otherwise, of his
outsourcing programme. One thing is clear, however: whatever happens at BP will
prove a decisive factor on the path taken by the rest of the HR community.

John Chambers, CEO,
Cisco

Background: Chambers cut his
teeth at IBM and Wang before joining Cisco in 1991. Under his leadership, the
company swiftly outstripped competitors to become the world’s leading provider
of networking infrastructure and a key founder of the Internet age.

Beloved on Wall Street, as much for its revolutionary supply
chain management and reporting systems as for actual sales, Cisco was seen as a
paradigm of the new economy business model.

Between 1997 and 2000 its share price rose by 916 per cent and
it briefly overtook Microsoft as the world’s most highly valued company.

How he changed HR: Chambers
was one of the most vociferous and successful exponents of the 1990s
customer-centricity movement. His unbending focus on customer service went way
beyond the Dedicated to Customer Success slogans he made employees wear on
their ID badges.

He linked management compensation directly to Cisco’s
twice-yearly customer satisfaction polls. Cisco was also a leading force behind
the practice of rewarding staff at all levels with share options.

Chambers’ strong emphasis on the importance of corporate
culture in determining financial outcomes was also ground-breaking. Despite
aggressive acquisition, he established a "cult-like" cohesion at
Cisco. He also spent lavishly on staff education and apprenticeships.

How the legacy lives on: With
both Cisco’s revenues and its share-price in free-fall this year, Chambers has
had to do the unthinkable and is cutting 8,500 jobs. He nonetheless continues
to inspire fervent devotion from the workforce.

But his greatest HR legacy is the way he put alternative pay
and benefits schemes firmly on the map. Some of these – most notably share
options – have now been called into question. But it was Chambers above all who
opened the debate.

Meg Whitman, CEO, eBay

Background: highly regarded as
the dotcom that bucked the trend, online auctioneer eBay continues to go from
strength to strength and is on track to pull $1bn in revenues next year under
CEO Whitman.

It now trades in everything from Beanie Babies and Elvis
memorabilia to high-end computer servers and auto parts. Whitman joined the
firm in 1998 after a career taking in both Procter & Gamble and Hasbro.

She is acclaimed as an excellent example of "how
successfully management practices developed under the old rules can be applied
under the new".

How she changed HR: The HR
challenge inherent in eBay’s revolutionary business model (it is the
marketplace for some 37.6m buyers and sellers worldwide) cannot be overstated.

The company began with two strong values: egalitarianism and
community, or – as one user puts it – "capitalism for the rest of
us". Whitman’s strength was to make these values explicit in simple rules
that helped managers perform.

She once described her most important contribution to the
company’s success as "developing the work ethic and culture of eBay as a
fun, open and trusting environment."

How the legacy lives on: By
dint of simply surviving the dotcom collapse, Whitman’s place in HR history is
assured.

 The question now, as
eBay moves away from its "touchy-feely communitarianism" into big
business, is whether she can scale up the business without losing the ethos
that has made it such a worldwide hit.

Two
to watch

It’s all very well and good to practise enlightened Hr when times are good,
but maintaining morale and a cohesive culture in the face of retrenchment in a
declining economy is a more difficult act to get right. Here are two CEOs who
are tackling the issue rather well at the moment.

Andrea Jung, CEO, Avon

Background:  When Andrea Jung took the reins at Avon in
1999 the company (founded 1886) had withered to become the grey old lady of the
cosmetics industry – its last memorable slogan – "Ding dong, Avon
calling" dates back to 1953.

Amid plummeting sales, the company further alienated its army
of reps by establishing a dotcom arm that bypassed them and sold direct to
customers.

How she changed HR: In the past two years Jung has
overhauled virtually everything about the way Avon does business and has
restored the operation to profit and self-belief.

She began by tackling the morale of its reps – returning them
to a central role in Avon’s strategy, either advising clients one-to-one or
communicating with them online. Jung signed on as an Avon lady herself just to
get a feel for the job.

Her own glamorous appearance (poised and impeccably turned out)
means she is treated more like a rock star than a Fortune 500 company boss when
she travels to meet reps. And her willingness to share her
"experiences" Oprah-style has done wonders for staff loyalty.

Under Jung, Avon has also achieved the highest ranking on the
US Council for Social and Economic Priorities – which measures issues such as work-life
balance, environmental friendliness and philanthropy.

Craig
Conway, CEO, PeopleSoft

Background: Conway underwent a
fiery baptism in the dog-eat-dog environment of Larry Ellison’s Oracle before
gaining a reputation as a turnaround specialist.

In 1999 he joined PeopleSoft – the firm founded by David
Duffield that arguably invented HR software – at a low point in its fortunes.

Once a darling of the stock markets, PeopleSoft crashed to
earth in 1999, unable to withstand the downturn in enterprise-wide software
sales.

How he changed HR: PeopleSoft
under Duffield was the epitome of the kind of cosy, geekish, familial culture
that came to represent a new kind of paternalism in many hi-tech operations –
Duffield even signed his e-mails by his initials DAD.

Conway’s challenge on taking over, was to eliminate the
sloppiness that had seeped into the company’s processes, and completely rewrite
its software offering.

His achievement is that he has managed to accomplish this
without destroying PeopleSoft’s tightly-knit culture, or causing morale to
plummet even further.

His solution was to stem the defection of talent with
innovative new pay structures and introduce strict new procedures.

Weak foreign sales doubled when he hired a French national to
handle international tasks such as local tax rates. By bringing discipline to
PeopleSoft, Conway has pulled it back from the brink.

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