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Fallows: Our next speaker is William Esrey, who received his MBA from Harvard in 1964. I was having lunch next to Mr. Esrey and I was trying to strike up this rapport that is so important to the on panel atmosphere, and I had a number of misadventures. First I brought out my Sprint phone, thinking this would be a useful conversation starter. It turns out, this is the despised older model that only dorks have, and so I was told how to get a new model. Then I was talking about my previous life as editor of U.S. News, and we were talking about college rankings, and I was saying how hard I had tried in a couple of years to make this a much more defensible, not scientific, but defensible process than it had been before, and I discussed some of the mysteries of the college rankings; saying, for example, and I quote myself, "that Duke is always quite high for no discernable reason." It turns out -- I'll explain what I meant in just a minute -- it turns out that Mr. Esrey's wife is a trustee at Duke -- so here's what I actually meant just for those of you might take it -- U.S. News has a number of component rankings, class size, endowment, etc., etc., all of which have Duke ranking lower on any individual component than its overall ranking. So it was a kind of statistical anomaly that you can find explanations for, but that's what I meant, and then a third way to build my bond with -- this is the third way that Mr. Esrey does not yet know about to build a bond. I know a number of other Sprint executives; and, whenever they meet people, they hand out business cards, which include twenty free minutes on Sprint. If Mr. Esrey is as good as his subalterns, when he meets you, he will be passing out these twenty minutes cards, too, but I am sure that you won't even want twenty minutes on Sprint because you will feel as if you have gotten full value out of your Sprint experience by the speech we are about to hear by Mr. Esrey on the leadership in the next century. Here he is, William Esrey.

Esrey: I don't know what to say. I think I'll say, thanks. I am delighted to be here; and, before I do anything else, though, I would like to congratulate Harvard Magazine on its hundredth anniversary. For over a century now, the magazine has kept Harvard's alumni informed and engaged. So, if I can be so bold to say, on behalf of a hundred years of alumni, congratulations.

When Don Regan was Secretary of the Treasury back in the 1980s, he was once asked, how will Social Security be funded in fifty years, and he replied, I don't care. I'll be dead by then. So, this afternoon I have also been asked to talk about the future. Just kidding; but, to set the stage, I would ask you to consider this description of a global situation.

We have a divided government in Washington with one party controlling Congress and another the White House; and, in that White House, we have a president who retains his popularity despite relentless attacks from the media and political foes. Earlier this year, the president made a visit to China and Asia, which is obviously on our minds for other reasons, as well. The news of the day also focuses on anti-trust activity at the Justice Department and progress towards true European union, and hopes for peace in Northern Ireland. The year that I have just described is 1972, and the president is Richard Nixon, and the question that this raises is, are we making any progress?

Now, I suppose the cynical answer is no. Some might say that things are actually getting worse; but, in my opinion, the right answer is yes. We are making progress. Even if we sometimes take two steps backwards for every three that we take forward. After all, our friends across the Atlantic have made real progress towards European union, and great strides have been made towards stable peace in Northern Island. Despite its ups and downs, the world is, on the whole I think, more competitive and more prosperous, and I would argue that our national and our world leaders are better equipped than ever to cope with the thorny and dangerous economic and political issues that face us today. So, I come to this discussion about leadership in the next century both as an optimist and as a representative of the fast-growing and the fast-changing information industry.

I would like to talk today about the impact of communications technologies on how we lead, and how this technology both challenges and enables an evolving phenomenon where organizations and business relationship cut across the dimensions of space, time; and, indeed, culture; a phenomenon that I like to refer to corporate viscosity. Now, at the risk of boring any mechanical engineers in the room, technically speaking, viscosity is the degree with which a fluid resists flow under some type of an applied force and a low viscosity fluid, like water, flows more quickly and easily than a high viscosity fluid like molasses even when a very small force is applied to it.

Now think of your organizations, your employees, your vendors, and your distributors as a fluid and that you, as a leader, impart forces on this fluid. Now, before going into this a little more deeply, let's start with a quick look at how leaders, in particular U.S. business leaders, have performed in recent years. Their track record, to me, is rather impressive. Over the last ten years or so, U.S. leaders in business have exceeded in expanding into new markets at a speed and on a scale that has never before been possible. They have taken remarkable strides in creating efficiencies and in reducing costs, and in tapping new sources of talent through a whole variety of methods. They have learned how to make more information, more readily available, to their employees so they can work both smarter and faster. They have learned how to flatten their organizations and to drive decision-making closer to the front lines so that customers are being served better and faster, and corporate leaders have learned how to partner and outsource so they can take advantage of resources and subject matter experts in much more effective ways.

Now, I am proud to say that a primary enabler of all this is what I sell, advanced telecommunications. New technology has given us the speed and it has broadened the capabilities to make employees more effective and our companies more profitable, and let me give you some quick examples of how these technologies have been harnessed. A newspaper article not very long ago ran a piece about a group of computer programmers employed by IBM at a university in Beijing. At the end of the day, the Chinese programmers send their work over the Internet to other IBM facilities and programmers in the U.S. and Europe who work on it. Then they electronically beam it workers in India, who pass it back to Beijing by morning, and then the cycle repeats itself. This kind of ability has changed the economics of business. In fact, Fortune Magazine recently noted that, for certain jobs, the competitive edge might lie with people who live as far from the employer as possible, and it gave the hypothetical example of a California company whose controller had a number crunching task that had to be completed in very short order. Imagine how relieved this controller would have been if he could, at the end of the day, transmit his work all through a team of accounts, say, in Bombay, knowing that the work would be finished and waiting for him when he returned the next morning. This use of modern communications can, of course, be much more comprehensive than this in scope. You might consider the case of Cisco, which is a global leader in networking products. Cisco has developed a very wide and a very intricate web of suppliers, contract manufacturers, and assemblers; and, using their company's Extranet, an extension of a corporate Intranet, outside contractors directly monitor orders from Cisco customers and they ship the assembled hardware to buyers, often without Cisco ever touching the product. Now, one informed observer says that Cisco is quintessentiallu an outside-in company. They have mastered how to source talent, products, and momentum from outside their own walls, and a recent article in Business Week identified Cisco as a model of the corporation of the future, and I believe that business leaders would do well to study this model, not necessarily as a precise formula for success, and not because Cisco is in the telecommunications industry but because of how it uses communications to manage in an innovative way, how it ties diverse groups of people into one very flexible, low viscosity organization.

To me, it is very clear that the leaders of future-oriented companies will need to be innovative users of communications, and I can tell you that the power of communications is going to grow phenomenally, and it is going to yield potential opportunities to redefine your business, whatever you are in. The growth in this power is startling, even to me and I am in the business. Take note, for example, that the Sprint network today, on each day, electronically transmits data equivalent to three times the entire contents of the Library of Congress or consider this; it is estimated, in just two years, that the telecommunications networks in the United States will carry more electronic data traffic than voice; and, by 2003, voice traffic could be less than two percent of the total traffic that is carried.

Let me give you just one more example of the explosion in technology. Think about what we are witnessing with the Internet. The Worldwide Web is the fastest growing communications technology in world history. To reach an audience of fifty million people, it took radio thirty-eight years. It took television thirteen years; but, to reach fifty million people, it took the Internet just four years. Our traffic on the Internet today is doubling about every hundred to a hundred and twenty days. So, with these facts in mind, a person might be tempted to think that technological change is just a straight upward trajectory, a rocket that you simply jumped onto, and you would be okay; and, to the extent that technology shapes our leadership imperatives, I would be tempted to deliver a very simple message today. Be prepared to lead, as we already have in the '90s, but just at a much faster pace; and that, I think, would be very bad advice. I would propose to you that we are facing a shift in our leadership challenge that is much more profound than it appears on the surface, and that leaders need to prepare for a change in emphasis that our experiences and our education, perhaps, have not fully prepared us to consider. The heart of this shift lies in this fact, that all of the technological changes I have described are making the modern organization more farflung, more complex, more decentralized and more diverse. At the same time, information is exchanged and communicated in enormous volumes and at breathtaking speeds, and there is every reason to think that these trends are going to continue.

Now, let me ask you, what happens to leaders when the group that they are leading are spread out over greater and greater physical and psychic distances? Does there come a point when the tried and the true leadership approaches of the '90s are stretched too far, a point where these methods will simply not work anymore? Can you flatten your corporate hierarchy so far that your traditional systems of controls will break down? Can you spread your talent across such a wide swath of the globe that you create a tower of Babel where people can communicate and operate very efficiently, but where language and cultural barriers stifle ideas and creativity? Can you pass out your work to so many different independent sources that you lose the cohesiveness, and the vision, and the emotional commitment needed to make any team function well? Can you, as a leader, create the culture and the teamwork that acts as a glue to hold together an organization that, even if very fluid, will still function as one? Now, I think these are important questions, and questions that I don't think leaders can afford to ignore, because knowing the answer to these questions could define the difference between those who survive and thrive, and those who don't, and I don't pretend to have all the answers. In fact, I don't believe that any business leaders have all the answers.

I do believe, though, that the best answers can come from the people within our organizations, and the answers may only emerge over time. I do believe that how well we answer these questions may determine how well we respond as leaders to one profound challenge, and that is, how do we direct and manage a profusion of relationships between hundreds, thousands, even tens of thousands or people involved in running our business without getting in the way of those relationships. The challenge of letting thousands of widely disbursed people collaborate freely without losing critical control is no small one, but it also may not be as overwhelming as it first appears. I submit that the answer eventually comes down to giving people clear objectives, and then providing them with the right tools and incentives to break down the barriers of time, distance, and culture. In doing so, they can get the job done, and in a way that is right for the business.

Well, these changes are complex and they are not going to come easily, but it's not hard to imagine it happening. In my mind, the real problem isn't control, but understanding as leaders just how diverse groups of people do relate and work together more effectively, and also quickly seeing the signs and factors that are inhibiting progress. How can leaders open up the gates of communication and collaboration between diverse organizations, including suppliers and distributors, and customers, so that creative solutions will emerge naturally and continuously, and by applying as little force as possible to elicit these solutions; and, believe me, this is an issue that hits real close to home for me.

As many of you know, Sprint has entered into a global alliance with two of the world's leading telecom companies, Deutsche Telekom and France Telecom. This is already a successful partnership in many ways, and it is going to help us grow as a global enterprise, but I know that my friends in Germany and France would agree, you should never underestimate the challenge of operating a multi-cultural business enterprise in a very dynamic industry. In the end, working through our organizational and then cultural differences is going to make us more effective global competitors; but, frankly, it takes an unbelievable amount of energy, devotion, and patience, and a lot more than either I or my partners had ever imagined. All of us have had to change our perception of what it takes to be strong leaders, and we have learned to put relationships amongst ourselves as executives, as well as amongst employees, at a much higher level of priority. We learned that we have got to arm employees with timely access to accurate information if they are to effectively communicate and learn from one another, and grow together. In fact, these are very top priorities of our global partnerships, and increasingly for Sprint itself, and I don't think our experience is unique. It is just one manifestation of an aspect that can be found in corporations across the gamut of business enterprises.

Businesses are being stretched. We are intimately linked in the global economy. We are partnering with competitors, and we are competing with partners. We are interconnected with each other and each day we become more and more reliant on one another; and within this organizational (kludge?) is great potential for an organization to learn.

It reminds me of something that appeared last year in another Harvard magazine, the Harvard Business Review, in an article entitled, "The Living Company." It told sort of an interesting story about the behavior of birds, and it turns out that some birds learn much faster than others do, and the critical difference between the slow learners and the faster learners is interesting. The slow learners tend to be territorial and spend less time in a flock, and they sing, and they chirp, and they chatter, but they really don't communicate a great deal that's important, sort of like the political pundits that we see on TV on these days, I think. But, on the other hand, the fast learners flock together much more often, and birds that flock learn faster because, within all the flutter of that interaction comes an exchange of knowledge and learning by example and observation, and a similar dynamic exists -- needs to exist -- within a business organization. To learn quickly, to respond effectively to the marketplace, people within organizations must break out of their traditional, rather comfortable confines; confines which, in fact, have become somewhat limited in geographical or cultural breadth. Rather, they need to flock together, to communicate with one another clearly and often.

Now, I am very aware, for example, that the ultimate in success of Sprint's alliance, Global One, will come as people throughout our organizations communicate frequently, and on a much larger scale. The source of managing the farflung, diverse business, and the answer to managing it effectively is very simply the people that are already within your company and within the companies of your partners and your vendors, and your distributors, and I believe that we all, as leaders, must create the energy to inspire dedication, and to reduce the corporate viscosity.

Now, there are lots of suggestions that I could make as to how we can become such leaders, but I would like to cite just four points that may appear rather obvious to you. First is that leaders in this environment must be able to assimilate facts and ideas much more rapidly because of the sheer volume of data that is at our disposal, and you are absolutely going to need new tools to do this effectively. Second, leaders must develop the skills to work in an increasingly interconnected and often convoluted web of business relationships, and I believe that understanding and encouraging diversity is going to be critically important here; and, third, the effective leader needs to master the art of projecting goals and values, and strategies to many different people, with many different points of view, all of whom are listening, practically all the time, but they are listening both to you and to each other; and, finally and perhaps most importantly, I believe the leader of the future must learn how to utilize the tools of advanced communications, not just to expand their organizations, but to make their businesses more flexible and more agile; in essence, creating a low viscosity organization that can react quickly.

As I said before, today's advances in telecommunications are not just more of the same. We are now introducing technologies that offer more than just increased speed and capacity. They offer capabilities that are also different in what they can do for you. For instance, this summer Sprint announced something that we call ION, the Integrated On-demand Network, which I would like to take just a moment to explain because it says a great deal about how people are going to be connected in the years ahead. With ION, we explain how a home or business, both small and large, will be able to conduct multiple phone calls, receive faxes, run new advanced applications, use the Internet at up to a hundred times faster than a fifty-six kilobit modem, and we can do all this through one single connection. Even the distance between local and long distance will disappear because what is distance when communications travel at the speed of light? In short, you will be part of a network, you will be on the network all the time, and you will have blazingly fast communication speeds in your arsenal.

Now, what ION technology means is this, people are going to have a remarkable new tool for communicating, and it is going to enable us as never before to develop very close, more productive, personal relationships that will collapse both space and time, mainly because it is going to allow people to share so much more all at once, much more quickly than was ever possible. You can talk. You can see each other while you talk. You can collaboratively view documents, photographs and charts, and capabilities like this are certainly going to change what we can do at our businesses, or at our homes, and thus the leadership challenge increases.

As telecommunications instantaneously and intimately, and intricately interconnects us, it can take us well beyond what have been our limited horizons. It will allow us to communicate, not just faster and more frequently, but more fully as human beings with special talents and special perspectives, and ingenious ideas; and that, my friends, I think is the real power, and I believe that the best and the most effective, and the most influential leaders of the future will be those who recognize and employ that power effectively. They will be the ones to learn how to unleash and direct that power to the fingertips of their rather dispersed, diverse, and often global work force, and they will be the ones that will welcome and promote a significant decrease in corporate viscosity, creating a highly fluid and very flexible organization; but, at that same time, acting to develop teamwork and learning that ties the organization into one unit that moves in the same direction, your direction. Thank you.

Fallows: Thanks very much for this inspiring and useful talk. I am going to, once again, exert my prerogative of asking the first one while the microphones are going through the room, which would be this. Much of your presentation, Mr. Esrey, concerned breaking barriers of distance. This is something that is important to your company. This is something your company enables, and we all recognize the efficiencies that brings. At the same time, many skills of leadership are thought to involve actual economies of one location. There is a reason, perhaps, that the software industry is concentrated in three or four places in this country. There are personal skills that leaders have in making contact with their employees. In my own business, I used to make a point every day of walking through different floors of the building to see employees. Can you give us specifics of how you think this balance will be set between the transcendence of distance you think technology will bring, and these eternal human needs for actual person-to-person contact?

Esrey: That's a great question because I think that's really -- the inherent conflict. Let me start a little smaller and then broaden out in some thoughts on the answer. With the communications revolution that's coming by what we call ION, and others will be doing similar things, you are going to have, I think, over the next dozen years, rather profound changes in the way you organize, and let's say it on a simple level.

Say you have an accounting clerk, or somebody in a call center that is answering incoming telephone calls. They are there right now because they need access to a computer network, and to be able to access instantaneously different screens. So, we bring many of these people into a center where they are together to manage them, but the fact is, they are not particularly high paid jobs. There is a lot of commute involved for a lot of these people. There is expensive real estate to put them up in, and it is really because communications forced those people to be together in the past.

You can take that person and put them in their home now, and you put them on a network, you are literally connected to like the global network of Sprint from an individual's home, and they can have the same type of reaction on the computer screen. Now, they don't have to commute. You don't have to provide them real estate space. Maybe you bring them in once a week for some training and some interaction, and so forth. It has a whole effect on how you locate your buildings, how many people you bring together. It has got some ripple effects on probably the real estate market somewhere down the line. You can also stage your work force because you have a group of people, you may have someone that's taking care of a child, and really is available from ten to twelve. Well, that's your peak time, perhaps, and you hire them for ten to twelve in the morning, and two to four in the afternoon, or whatever it may be because communications makes that possible in a very easy way.

Now, it is pretty hard to walk down the hall and go visit those people when they are now scattered around. Just pick up the newspaper any day, whether it is in my industry or your industry, and people are getting together on a global scale because there are either efficiencies, global efficiencies, or because there are particular skills that are available somewhere. You don't need right now to bring power together to interact. Yes, it's better. Nothing will ever be like the personal interaction; but, if you have an expert, an expert can be in Bangladesh. As far as that is concerned, you can access that expert.

I happen to be a friend of a very famous knee surgeon. Unfortunately, I needed his services earlier this year, and this man flies all over the world giving lectures and performing operations because he is so well known; but, when you talk to him, he does most everything arthroscopically, which means he is really looking at a monitor, and operating a robot, and he can do that operation --you can be in Europe and he can be over here, and it really doesn't matter, as long as you have a reliable communications link going between you, but this is possible, and it is going to change. So, you get a person with expertise and particular knowledge, and this man happens to live in Vail, Colorado, and he can operate literally anywhere in the world, and we are talking to him about doing just that, and in many cases, as he says, my expertise is knowing what to do, not actually doing it. I can train a well-trained orthopedic person to carry it out, but it is my experience and judgment as to what to do. So he can be removed.

In terms of reliability of communications, we have had, I think, to date, twenty-two fiber cuts where we had a fiber cable that was physically severed in two by a backhoe, or a train wreck, or something like that. We have yet to have a customer have a conversation or a data session interrupted. They never knew that that fiber was cut, even though there was a person here and a person here, and it was cut in the middle. The fact is that the communications, our network now is in rings, and within nanoseconds, if it is cut here, it's reverted right around to the other side of the ring, and the communication is uninterrupted as far as the customer is concerned, and the networks are going that way. I think we are a little more advance than most, but having high speed, reliable communications is going to mean all sorts of different things. I know EDS was considering a merge at one point on a worldwide basis, and they were thinking about having no corporate headquarters, basically a virtual company where they would have their executives scattered at different places around the world, and they would communicate with the communications capability that exists today, but no matter how good it is, it's going to be less personal than some of the other things and that, I think, is going to be the conflict, and that's why I think you are going to manage differently. If your skills are being together, motivating people by your personal interaction, and so forth, you probably don't want to be a head of a virtual organization because your skills won't match that very well, but I think it is going in one direction and it is away from the traditional ways or organizing.

Questioner: Hello. My name is Jacqueline Spann. I am the president of In Honor of Mendela Fund. I have two very quick questions to ask. First of all, if you are interacting with the global community and their timeline is much slower than yours, they cannot afford the equipment that Americans can afford in terms of speed and reliability, and there is always a problem with the time change from one country to another, and if your equipment should get off line, or you have some sort of problem with the equipment from either this end or that end, I would like to know how -- what you would suggest, as a leader, to deal with that; and, also, how would you make -- how would you suggest that a leader could make decisions among the huge choices of technological equipment that is available today as to what would be the best and most suitable equipment for them in their organization:

Esrey: Well, I think there is good news and bad news here. If you look back at the first interview Lech Walesa gave after he was elected president of Poland, he mentioned three or four things, and one was to modernize the telecommunications infrastructure of Poland because, he said, if we don't, we are going to be seriously left behind and he recognized that to be in the global economy today, if you don't have effective, competitive communications, you are going to be in a lot of trouble, and Poland of course, at that time particularly, had a very low capability in communications. We had the same debate in this country, in Washington among policy makers, between the well-developed, the New York Cities, if you will, and some of the rural communities around the world, are the rural communities going to be left behind? In the U.S., I don't think that's the issue. I think the rural communities may actually have an advantage.

The good news though in that is, if you are in a less developed country with a very poor telecommunications infrastructure, you can jump very effectively to the most modern infrastructure that exists without going through the intermediary steps and the new stuff is much more reliable, and much cheaper to put in, and I think that is potentially very good news. You can put communications networks into an area much cheaper with vastly more capability than existed before. Now, if you absolutely have a situation and you have an economy where people are more worried about eating than anything else, then obviously you don't have the marketplace there; but, as soon as the market is there, even in a small way, the modern technology is a wonderful way to leap into the twenty-first century.

Questioner: John Reidy, Solomon. In these industries that you are involved with, we have got the Bells. We have got the (Seelecks?). We have got long distance. We have got cable, probably even electric utilities. Are you willing to say whether there will be any losers or winners, and what do you do if you are on the losing side, as it looks now, to get to be a winner if you are the leader?

Esrey: Well I think, in our industry, we are going to have significant losers and winners, and that's great. That's the way it should be. In the past, it has been sort of regulated. You were a local company or a long distance, or a wireless company, and you were kept in your little regulatory box because, historically, that's how we evolved. Now people can get into all different areas. Once we open up the local markets to competition, then they will be able to get into long distance and society and the American public will be much better off. I mean, if you think of what's happening, it wasn't that long ago before the break up of the Bell system, a little less than fifteen years ago; and, at that time, you had very little choice on phones. When we won in 1989, the U.S. government was paying, it was AT&T at that time, I think about thirty-eight cents for a long distance per minute, and the government got a good deal back there then. Competition now, I don't know what the government is paying, but probably a nickel, with their volume. So competition is going to bring enormous changes but, within the industry, there are going to be people that make bets and make decisions on how to best serve their customers in the future, and some people are going to make good bets, and be rewarded, and some people are going to make bad bets, and go by the wayside. So be it.

Questioner: Ellen Hart with Gemini Consulting. I definitely agree with your view of the future. I have two questions. One is, the historical ways to create alignment among leadership teams was either the homogeneity of the team, or they had worked together for a long time, or sheer physical proximity. In the example you gave of the kind of alliance that you are in, how will you, in fact, create leadership alignment given geographic dispersion, and the second one, if you wouldn't mind, you did share four learnings in general, but I sure wish you would be willing to share your personal learnings that you had to go through as you tried to pull off the alliance with Deutsche Telekom and France Telecom.

Esrey: Well, I think that what we have done with Deutsche Telecom and France Telecom and Sprint, we have three companies, people on two continents, three languages, very, very different cultures; and, yet, a common vision of what wanted to be created. The first thing we did was get together on the division and the concept, and so on, to get alignment there, and then figured out how we were going to implement it. There were compromises. Some compromises we made, for instance, we insisted at the beginning that it be a separate company, not three parents mucking around, but a separate company with one guy in charge. Well, we convinced our partners on separate companies, but we didn't convince them of one person in charge; and, again, I think that was a lot of the German influence. I won't go into detail; but, if you look at the German governance systems, corporate business governance system, it is very different than ours, very hard for us to understand. So, we actually had sort of three people running it. Well, guess what? That was a disaster, predictably, and then we moved to one. Because of the communications, the three, myself and the other two chairmen, we spent an enormous amount of time together, got to know each other's families, spent time --

Fallows: You mean physically, right?

Esrey: Physically, yes, correct. Well, I mean, sort of. You know, we were together in one place.

Fallows: Right, but not virtually.

Esrey: Not virtually. We spent a lot of time together with families, getting to know each other as people so we could communicate effectively, so somebody could call me up and say, Bill, you know, you just said something, or I just read where your people said something that is causing us problems over here. It's gnawing the hell out of me, and you could talk about it because you had established that type of rapport. I think you have got to have that. We spend a lot of time, people going back and forth, and spending time together, getting to know each other as people, how they think and the ability to communicate effectively, and then we have put in some fairly advanced communications to aid us in this. We have a video teleconferencing system that was actually developed, the prototype system developed by the French, and it is in a small room. It's not in a big room, but the screens are very big, and it is very impressive. The people are bigger than life size. The sound comes out from the person speaking so you really feel like you are meeting with them, and it enables a meeting to be very productive and very comfortable. People say sometimes in teleconferencing, you need a formal agenda, and it has got to be organized, I disagree. It's just sitting down and talking with people and we have high speed communications links going between to facilitate that type of opportunity. So, I think you need the combination. If you don't know each other well as individuals, it is going to be hard to understand the nuances and that type of thing. High speed communications is great, but video becomes, I think, very essential. I mean, you are nodding as I am talking. You are giving me feedback that you are nodding this way rather than this way, so that you are basically understanding or agreeing with what I am saying. That is terribly important, that you can't do just with a telephone call, or a fax, or an E-mail; but, then again, anybody that is involved with a worldwide organization, my Lord, without E-mail and voice mail, I don't know what we would do because they work on their hours. We work on our hours, but you insert a delay in there that we have all used, and it is really pretty effective. Then you get on the phone or video if you have to at some point, so the tools are out there to make it work, but you have to work at it, and it has been a real learning curve, I think, for all three of our organizations.

Questioner: I am Ellen Roy with Intercontinental Energy. I help run an electric power company which is going through a transition not unlike telecom; and, traditionally, I have been in the unregulated box, but now everybody is moving to the unregulated box. The whole nature of our industry is changing. So my question, from a telecom perspective where you are ahead of us on this is, what do you do differently today? How has your vision changed today than say a year ago, or five years ago, and then how do you anticipate that you will change again in the next five years out? How fast is it moving? What's happening and how are you specifically reacting to that change in your organization in what you do in your day-to-day job?

Esrey: Well, I think there are a lot of things that we are doing in our own company, moving from an industry that was not very competitive to one that is very competitive, particularly in the long distance arena. We are thought of as a long distance company, but actually more than half of our profits come from our local telephone operations. We have monopolies in parts of nineteen states, and the people, and the way they have been trained, and the way they think are very different in those two types of businesses.

So, we have been preparing our local people for what is coming, and what is really basically here now, intense competition. You are not just given the customer. You have to earn the customer. We have done a lot of things organizationally within the company. We have used information tools very differently. In most large organizations, say I am sitting home at night and I am reading a report, and I don't understand or I wonder why we are doing something, what I have typically done is torn out the page of the report, made a note on it, sent it maybe to our president, who sends it to the executive vice-president, who sends it to a vice-president, who sends it to an assistant vice-president and finally you are down to the subject matter expert who can answer the question like this, and so writes a little memo, let's say, and it comes back and the vice-president says, "Gee, I don't understand this and Esrey asked, so I better understand it." So he goes back and forth, and back and forth, and everybody up the chain. Well, by the time it gets to me, I probably forgot the question I asked and why I wanted to know because there has been such a delay in there, but everybody wanted to be sure, because it came from higher up in the organization, that they understood the question and the answer.

Well, what we do now is, almost all of our reports are electronically available. If there is a chart or a graph, the subject matter expert is indicated on that. I pick up the phone and I call that subject matter expert, or click on his or her name, send an E-mail back and say, why is this or why is that. I probably have my answer, sometimes instantaneously, but usually in a very short period of time. I bothered no one in between because I think many organizations have very, very expensive mailmen. They are called vice-presidents and senior vice-presidents, that do this type of thing. You get rid of all that.

Now there has to be a trust. If I have information, I can't walk into the executive vice-president's office and say, how come we are doing this because I didn't know ten minutes ago, so why should he know? So there has to be a way that you deal differently in that, and get the organization comfortable with that way of working. We are not there yet, but we are making significant progress: just because I know something, that's fine, or I've got the question. It doesn't mean that three other people have to know it unless I think it is important enough to raise the issue with them, or cause some change to happen, but it is a lot of different relationships. It is much easier, for instance in our long distance division, which is a newer division, younger people, more fast moving than it is in our traditional local telephone operations where everything has been hierarchical in the past, very hard for people to adjust to that change and break those barriers.

Questioner: The virtual corporation already exists and one example is the NASDAQ. The NASDAQ is sort of a poker system, and it is a virtual reality where the New York Stock Exchange is an auction system, where you have to have a specialist in place taking the responsibility for the buying and selling directly, and it still is. But the NASDAQ is a virtual market, and you have market makers that are basically connected by a communication system where not only are they not at work -- they are working together in some sense, yet they are competing with each other. So, both structures do exist and do function in the exactly the same type of arena, and obviously the NASDAQ is growing by leaps and bounds,and that is the virtual marketplace, and it was set up already in 1953.

Esrey: It's a great example. The New York Stock Exchange hasn't changed, but the specialist was there to make a market when other orders didn't come in. There was a seller but no buyer. So he stepped in momentarily, and what has happened on the New York Stock Exchange, with the institutionalization of the market, the orders are so large that the specialist doesn't have the capital to basically step in and make that market, and that's why you see, in the last month or so with the market volatility, there is no book. You can go down and look at a specialist book on the floor of the Stock Exchange, most of them have no sell a little above the price, so he drops the price two or three points to take the order, hoping he can bounce it back up and make more than his eighth, but make a couple of points out of it, and you are getting these huge swings in volatility in the market. I will probably have my friend here from Salomon and others come and jump down my throat. I think the whole system, the world has passed it by, and a concept like the NASDAQ and a virtual market make sense. There was a fellow from Merrill Lynch -- there's probably somebody in the audience and I will get in trouble all across the board here, commented that they were upset with day traders in the marketplace. Well, heck, day traders are providing that type of liquidity, people willing to step up and make their bet, and provide liquidity, which is the way markets work, what the specialist used to do but he can't anymore, and yet the stock exchange still has the old system, the New York Stock Exchange still has the old system in place. Unfortunately, you asked the question, I was once an allied member of the New York Stock Exchange.

Fallows: -- in the lobby,please come join us so you can hear the next installment in the trip to excellence, which is the way we describe today's seminar. We have -- oh, we have our full quota of speakers. I'll introduce them seriatim as they make their presentations. Again, for those of you following along from the seats, we have been through this stage in the day, we have talked about some historical lessons of leadership. We have had future orientation about what technology will mean for different styles of leadership. In this session, we are going to have, I hope, a number of more or less practical discussions on how a number of the theories we have heard already today, and other ones we may not yet have heard, can be applied to the actual work of running corporations, of developing leadership, of applying leadership for the future.

The first of our three speakers is Bruce Pasternack. Mr. Pasternack asked me to point out his pride in saying he believes himself to be the only Harvard-free participant in the day's events. He, in fact, has his undergraduate degree from the Cooper Union, which he also asked me to point out, as I do freely, is harder to get into than Harvard College. So we all are glad to have him here. He is a senior vice-president of Booz Allen Hamilton, a member of the firm's executive committee, managing partner of its San Francisco office, and his specialty has been various strategic leadership studies, that is, how the subjects we have been discussing through the day are applied across corporations. So, I turn the floor over to Bruce Pasternack.

Pasternack: Thank you, Jim. I know you like to have something to have insulted everybody with at some point. That's why I told you about that, and I guess I would say, if I could have afforded Harvard, I probably would have liked to have gone, but the experience of going to school in The Bowery in New York, and taking the train from Brooklyn every day was not exactly a wonderful campus experience. But I think this is a time to shift gears a little bit in this meeting; and, hopefully, we will be able to do that in this panel because we have heard today from various outstanding leaders who talk a lot about what drives leadership, what are the challenges for leaders, and I think it is fair to say that a single leader is almost always required to act as a prime mover of change, and I think we should recognize that. But the premise that I want to pursue at the beginning to set up some of the discussion is that single leaders are important. They are necessary, but they are not sufficient; and, in fact, high performing and self renewing organizations need deep reservoirs of leadership with bench strength throughout the organization; and, as the capacity of leadership cascades through an organization, that's what creates the ability to innovate, as Ray (Gilmartin) talked about this morning, to grow and to renew yourself, and to think a little bit about some of the issues that were raised in a question to Bill Esrey a few minutes ago, why is it that some companies will win and some will lose, and it is not just that some win in certain industries and lose in other industries, but rather even within the same industry.

When I finished my free education in college, I had a chance to look at a number of companies, and among the companies I looked at were General Electric and Westinghouse. This was, I hate to say, thirty years ago, and I went to General Electric, but I could have just as easily joined Westinghouse at the time because they looked almost the same. They both made light bulbs. They both were in household appliances. They both had military and aerospace businesses, and some other things; and now, thirty years later, General Electric arguably is has the highest market capitalization any company. It is recognized as a leading company around the world and is one of the few companies that has figured out how to manage the complexity of being a conglomerate, and Westinghouse is gone, doesn't exist. There is no name. It is CBS and barely that.

So, you look at those two companies and you say, what made one succeed and one fail? What made Lucent, when it spun off from AT&T, become a company that was viewed as a high growth company, has tremendous increase in revenues, profits, and stock price in just the time that it has been separated from AT&T, and then my third example I would like to use is in the retailing business, if you go back twenty years ago and you look at two companies, Montgomery Ward and Wal-Mart, in those days Montgomery Ward was almost ten times the size of Wal-Mart. Today, Montgomery Ward is the same size it was twenty years ago, and Wal-Mart has over a hundred billion dollars in revenues.

So, why do some companies succeed and why do some companies fail? My premise, my argument that I want to start this panel off with is to say that it is organizational capacity to lead and grow, not individual capacity of leaders. Now, clearly again, you need individual leaders and I know that during the break I noticed people passing out summaries of an article which was the first chapter of our book called The Centerless Corporation, and I thank Bill Esrey for talking about corporations that had no center, and the model of the centerless corporation, I think, is what we are all about, what we are going to talk about. It's a model for tomorrow, not today, and it is a model that really recognizes that, in today's world, it is hard to imagine that what existed and was successful when Sloan talked about it in an earlier part of this century would still be the successful model that exists today, and would exist today; and, in fact, many companies still operate much the same as they did, if they were around, sixty or seventy years ago. So it is, in my view, an important model for the future. Centerless does not mean leaderless. In fact, as we started talking about our book, as we went around and described the centerless corporations, there were a number of people who assumed that meant there were no leaders, and also there were some people who accused us of actually killing the corporate center ourselves, or trying to kill the corporate center, and we argued that, even though we might have had a few drive-by shootings, we didn't actually kill it. It was really you, shareholders, institutions, and others who realized that the corporate center was not adding value, but rather adding cost in many cases.

Now, I am going to do something a little different here. I am going to use a few overheads. I want to take just one minute to describe the model and then I want to talk about organizational leadership as part of that.

So, the model that we are going to discuss is, in fact, a role or a different model for a corporation which we termed the centerless corporation, and we termed something in the center as the global core. It is a different model for the old headquarters. It is a model where information flows in and out, and flows where it belongs naturally, and there are various roles that people play, but I think the key thing that leaders have to worry about are the three things surrounding this core, and that is: people, how you build the capacity for leadership in people; knowledge, which is really how you transfer what is the important asset of the company, which is your knowledge; and then what we term coherence, which I think is a really critical factor in companies, and that is how do you have a system as a corporation or as a non-profit organization, or a university that operates in a coherent fashion where the pieces flow together so that everything from how you recruit and develop people, and build leaders is consistent with also how you pay them, and what your vision and your strategy is; and so, when companies have to go through this change, what they need to worry about are really three things.

One is vision, which is really what you are trying to do. The second we call architecture, which is how you structure yourself, what's the business model that you operate in; and then, the third where I am going to focus is on the ability and processes to translate vision into the kind of behavior you want,and you can't have one without the others. If you want to have successful change, and you want to do the kind of things that some of our speakers have talked about, you need vision, you need architecture, and you need leadership. If you are lacking some of these, you don't have what it takes.

In particular, if you are lacking leadership and all the great vision in the world, and all the architecture and organizational models in the world, you are not going to get the change that you need down to the level where it really matters.

Well, let's talk about leadership and let's talk about leadership questions. When we are talking about leadership, I would pose the following questions that you ought to be asking yourselves in whatever you do. What is meant by leadership? Is it the personal trait of the CEO or the collective behavior of the executive team however far down in the organization you carry it? Secondly, is it related to strategy? What's the link between leadership and a successful company's structure, products, people and assets? Thirdly, what do leaders do in successful corporations or organizations? You can read anything you want into the word organization or corporation. What are the respective roles and tasks of leaders at each level? How do you create the capacity for leadership? How is it learned and how is it passed on to successive generations; and then, how do you reward it and do you actually encourage it because you can say all these things; and, if you don't reward it and you don't encourage it, it doesn't matter because all people worry about.

Here are some metrics that have been developed, and I am just going to give you a couple of examples to ask yourself about your company's performance or your organization's performance. Are you one of the top competitors in your industry? Do others benchmark against you? Very simple statement; but, if you are always benchmarking against the leader, you aren't. And so, what you want to do is find a way that others benchmark against you; and, in fact, aspire to achieve your levels. Are you the industry pacesetter in how you apply people, technology, and business practices? Does you company define the rules of competition in your industry? We heard Bill talk a little bit earlier about how his company is trying to do that, but are you defining the rules of competition, and then something which is sort of a double-edged sword here, which is, how often do other companies seek to recruit top management talent from your ranks? Now, that's good news and bad news, but I would rather be a company -- I am in a company, actually, where people are always trying to attract top talent from our ranks than be in the reverse.

And, in fact, it's interesting just doing a recent study, if you look at all the companies that exist in America today, and you look at the Fortune 500 and where the CEO's come from, if you take people who have worked at a company for more than just a year or two out of school, there's one company that has spun out more CEO's than any other company, and it won't be a surprise to you. It's General Electric, and you win. You get the prize; and, if you think about it, is your company able to move fast? Does it master the art of self-renewal, and I guess two last questions on this page; are best practices quickly replicated across your organizational boundaries? That's knowledge and that's making knowledge work for you, and is your current leadership team creating a strong legacy to leave for their successors?

As a consultant I can tell you, one of the most frustrating things that we face is when a board or a client talks to us and says, there isn't anyone to succeed the CEO. We are in a situation where we have nobody who has been groomed for that job. That's true failure in a company.

So, how do you assess your company's performance? We have defined a little buzzwordy thing here called the strategic leadership quotient, and it is a thing that can be measured; and, in fact, that is something we are now doing in a joint study with The World Economic Forum where we are actually trying to take companies and look at their strategic leadership quotient; and, again, I am not going to go through all the questions here, but a couple of these, I think, are examples that are worth looking at. Can everyone in your organization explain the meaning of the corporate vision? Not can they read it on the walls, or they carry it on a card, but do they know what it means? Secondly, do they have a clear understanding of what they need to do to realize the vision; and, as I go down the line here, do people on the front line routinely do the things necessary to achieve corporate goals and objectives? A CEO of a prominent petroleum company told me recently that, in his view, the question of what is a culture is "Do people do the right things when nobody is watching them," which is an interesting way to think about it, and is behavior consistent with your aspirations? Are the best people in the company working on the most important priorities?

I asked this question recently at a company where we were talking to the top hundred, or so, executives about our book, and it was amazing how many people looked around at each other when that question came up, and they told me later that the real issue is not whether they are working on the top priorities, it's whether they know what the top priorities are. Everything was number one per the CEO of that company, and how do you reward and evaluate leadership?

So what's the job of leadership in a company like this, or in an organization like this? How do you add value as leaders, and I think there's three things you need to look at. First, which is probably most important is, how do you engage followers? As one of my colleagues says, all great leaders have one thing in common. They have followers. And, if you can't be a great leader, if you have no followers, the converse is not true. There are lots of people who had lots of followers but were not great leaders; but, if you look in history, whether it is Ghandi or you look today at leaders, they have followers, and they do that, I think, number one, by earning trust. Ray Gilmartin talked about that this morning, and I think it is absolutely critical.

Second, what do they do? They have vision, which they share. They have values that people believe in, and they have a strategy that is consistent or coherent with those, and we quote in our book one of our panelists here, Bob (Shapiro), who at least told us at one point that, core values were what linked his company together, and he felt it was critical to their success. Thirdly, leadership process, which is how do you make it work? How do you communicate? How do you develop people? How do you build those kind of leaders. What leaders do is create this vision of values, they create the conditions that empower other leaders, they overcome resistance to change, and create disciples who can themselves build capabilities and build leaders, reward appropriate behavior, and achieve renewal.

So those are some of the principles around leadership, but I want to just close by asking you a question. It's something that I borrowed from one of the academic colleges we work with, and you have to ask yourself, what characterizes your organization? Does it look like the company on the left, the company that has control, constraint, contract, and compliance, or does it look like the one on the right, which has stretch, support, trust, self-discipline, collaboration, etc. Now, not every company or organization can be all the way to the right. I showed this once to a petroleum company and he pointed out to me that he was in an industry that had the Exxon Valdez, so stretch, support and self-discipline were not necessarily the way they wanted to go. I argued the point, but it didn't work, but I would say, when you look at companies that get through crises, and you compare, say, the Exxon Valdez to the Tylenol crisis at Johnson & Johnson, and you think about how those companies operated differently. They didn't have to send out a lot of memos to tell the people at Johnson & Johnson what to do when the problem hit. They did the right thing because it was intuitive and instinctive, and they were trained to be leaders, and I would argue again, that where you ought to be aiming is to create the kind of organization that builds the kind of capabilities that look like the organization on the right, not the left. Thank you.

Fallows: Thank you very much, Mr. Pasternack. I think almost all of you here know Robert Shapiro, the Chairman and Chief Executive Officer of Monsanto for the last three and a half years, and with Searle, which became part of Monsanto for many years. In business, in public life, he has both exercised and exemplified leadership ways. He has been very much in the news in the last while for the leadership challenges that come with merging large corporate cultures, or attempting to make that merger, and he is now going to give us his perspective on the modern leadership.

Shapiro: Thank you, Jim. That's pretty radical stuff, going to that end of the panel I'm impressed. As Jim said, I have been in my job for about three years now, and those three years fall into very distinct phases, and part of my purpose today is to try to explain those. In the first year I was in the job, I really felt that I was driving Monsanto. I was driving the company. I had an agenda. I knew what I wanted to accomplish. It was exhilarating. It was exciting work. I felt I was pushing against some degree of resistance. Very clearly, I was driving the company.

In the second year, and it was amazing how quickly this happened, I no longer felt I was driving the company. Others were doing that. I did feel I understood what they were trying to accomplish. I felt we were in synch on purposes, and I supported what people were doing.

In this most recent year, my third year, I am frank to admit I no longer understand what people are doing in the company, but I support it anyway, and what I want to spend some time on today is trying to explain why I think that is progress, and some of the clues that I think were given in Bruce's presentation.

The issue of definition of leadership is just linked to the definition of culture, which is linked to the definition of strategy, and so on. All seem to me to grow out of some fundamental understanding of what you think the institution is there for in the first place, and what you think the particular historical circumstance is that requires action on the part of the organization.

We have defined ourselves, for reasons I would be happy to explain to anybody who is interested, as a so-called life sciences company which, in its simplest terms, means that we are interested in the application of the revolution that is taking place in our understanding of biology today, the application of that to agriculture, to nutrition, to human health. That is our definition. Others may have different definitions.

What it comes down to, though, when you start asking, what does it take to succeed against that self-definition? What it fundamentally takes to succeed is, you have to introduce big products, and you have to introduce them ahead of anybody else. If you want to ask, where's the money in this industry, it is fundamentally in that, and that in turn drives the characteristics you want an organization to possess. Those are the things that determine how you are going to make your living. What it requires for us is characteristics like great technological innovation and creation, great speed to market, a set of flexible networks that enable us to apply and focus resources exactly when and where they are needed, and then redeploy them very quickly because you can't build the total infrastructure that is going to deal with all the possible applications in the world and maintain that on a permanent basis. So you have to have a degree of flexibility.

Now, as we thought about what sort of organization one would want to have that might exhibit that set of characteristics; and, therefore, might make us all wealthy and famous, and successful, and so on, we thought very consciously about some traditional models which Bruce eluded to of how Alfred P. Sloan and others thought organizations ought to work, and we have characterized them somewhat disparagingly, the traditional models -- I don't mean to be disparaging about them -- as essentially models based on machine metaphors. They are based on mechanical metaphors. They see the institution as essentially a machine consisting of parts; i.e., people or, more precisely, jobs that are linked together, designed by some engineering genius so that, given reasonable constant input, uniform high quality output comes out the other end on a consistent basis, and that's not a bad model for certain sets of circumstances.

It is a model that avoids error. It is a model that reduces cost. It is based on some premises. The premises are that you understand your situation. You understand the technologies that you deal with. You understand your customers. You understand your competitors; and that if something is going to change in that world, you can see that change coming far enough in advance to be able to reengineer the machine because one of the things machines don't do is adapt all by themselves. They give you the virtue of control and consistency, but they don't give you the virtue of adaptation.

We decided that wasn't a useful model for us and I really do want to emphasize that that model is a caricature. It is not -- it was never viable in exactly those terms, but those boxes that Bruce had on that last slide about contract and control, and so on, essentially get to the same point in a somewhat different way. So we began looking for metaphors that we thought would work better than machines and the obvious answer, one that now other people have come with as well is, we look at biological systems and ecosystems as the fundamental source of our metaphor generation because what ecosystems essentially do is process huge amounts of information, try to interpret -- taken as a whole, try to interpret its significance, and respond.

Still better, and there is something that we can do perhaps that ecosystems themselves don't do terribly well, is anticipate. There may be some possibility of great models that enable us to anticipate as well as to respond; but, at the very least, we want an institution that is acting on the basis of current information, the information that is permeating the outer membrane of the system and we want it to be able to take action immediately. The example Bill Esrey gave: he writes a memo, and it gets passed down a chain, and somebody finally knows the answer, writes a memo, and it feeds all the way up the chain, and it is totally irrelevant by the time anything can be done with it, is exactly what we are trying to avoid. In fact, I think the situation in hierarchical organizations is even worse than Bill described it because, to the extent that you have concentrated decisional power at the "top" of that organization, you are by definition operating on bad information and archaic knowledge. That is to say, most of us at the top of organizations last did something in the real world when we were much younger than we are today, and the real world has gotten older as well as we have, and the consequence is, we tend to make decisions on, well, when I had that problem back in the year after the flood, here's what I did. It's a lousy basis for making decisions. You just don't have a good sense of what is going on. So we really don't like that notion.

We have looked a lot, and this may sound a little precious or overly intellectual, but we have looked a lot at some interesting literature that is coming out of the study of complex adaptive systems, and I don't want to spend too much time on that buzzword now unless anybody is really interested during the Q&A's, but I would urge you to see if you can find some of the literature. Most of it comes out of the Santa Fe Institute and people who write about them. The catch phrase is that, in complex adaptive systems, there are certain self-organizing tendencies and one of the interesting questions is, how do you define a role of leadership if you are going to try to organize around self organizing tendencies? The phrase that Stuart (Kaufmann?), who was one of the leaders of the Santa Fe Institute, uses is that complex adaptive systems give you order for free. No one has to decree it. No one has to make it happen. It occurs and we are very interested in that because, if that's the case, it does create a set of possibilities that mechanistic models don't create.

So, the characteristics that systems like that tend to have are characteristics in which individual intelligent agents make a set of local decisions under a set of decision rules that optimize for the system as a whole, and they get lots and lots of feedback, and very fast feedback so that, if something goes wrong, there are ways of telling it quickly in that process. There is an enormous emphasis on the flow of information, but we are starting to conclude that the notion of quantity of information flow is not the same as useful flow of information; and, indeed, if you look at biological systems and at how, say, messages are transmitted in nervous systems, and so on, it isn't that all information gets sent to all places at the same time, but we don't yet know what the decision rules are to sort out that information. We are having a hard time with it, but it is clearly a key factor.

Just to sketch an impractical illustration for you, and since we were told to do practical illustrations, I'll give you an impractical one and you can generate your own practical ones off it. When I look at how we have traditionally done things, like resource allocation, particularly budgeting, it has been a hierarchical process. Plans are made, usually in conformance to some set of beliefs about the future. Plans are made at a set of levels. They are aggregated. They are brought up. They never add up to acceptable numbers and someone on the top says, do this, don't do that, whatever. It goes back down. People make whatever accommodations, and so on. It is a process. It results every year in something called a budget that has more or less use in a system, and may have real consequence. It may do great good. It may do great damage, but I'm much more interested in a system that is based on the notion of initiative, leadership perhaps, and followership, as well, in which the way you budget for a project is, somebody posts on the Intranet something that says, here's what I am interested in doing this year. Does anybody want to work on this; and, if a lot of people say, yes, boy, that's really exciting, I want to work on it, that's the budget; and, if a lot of people say, that's really dumb, that doesn't interest me, then it doesn't have a budget. Now, there are a few bugs to be worked out in that model, but I am offering it as an impractical ideal type of a self-organizing system in which the people who have the best knowledge are the ones who end up making the decision about what gets supported and what doesn't. It is worth thinking about if only to try to figure out what is wrong with it, and how you can modify it to make it practical.

So let me conclude by talking about myself, personally, and how I think about my role in this process. I do not think of it as leadership. I don't find the term very interesting or useful. Its resonance doesn't help me do anything in particular, but what I do try to ask is, what are the kinds of things I can take initiative on that are likely to make a contribution? One of the distinctions between a machine model and the kind of model that I am trying to work on is a machine model has jobs in it, and the model I am more interested in has contribution in it. I don't like the idea, when people come into an organization, their being told, here's what the job is. Can you do it? Can you fit in this particular odd-shaped box? Do you have that flexibility or that set of skills, whatever? I am much more interested in a system in which people come on and you explain to them your circumstance, and you explain to them what you are trying to accomplish, and what the challenges are that confront you, and what the difficulties are, and you ask the question, how can you help? Now, again, there are a few bugs in that because somebody has to be there at 8:00 in the morning to answer the phones; and, if nobody feels like making that contribution that day, you may have some customers who are annoyed. The notion of anyone can fill this job as long as you meet the job description on the one hand, versus the notion of saying, what is it you bring to this, what is it you can contribute that has something to do with you, not something to do with the machine. It seems to be a question that is productive of some benefits.

So what I asked myself is, how am I going to -- how can I make a contribution? I found a few things that I can do that generally derive not only from my interests and my experience but also from the fact that, given this particular job, I get a perspective on things that is somewhat different from the perspective that a salesman who is in a customer's face all day doesn't have. He knows things or she knows things I don't know, but I know some things that he or she doesn't know and so I want to take advantage of that, of the perspective that my job offers me, and here are things I try to do. First, I try to help define issues. I try to describe to people some ideas I have about what a desirable future for us might look like. I try to describe some of the difficulties that occur to me as I think about the path between where we are today and that desirable future, and I invite people to help solve that set of problems to contribute to getting us there if they find that description interesting, energizing, or even inspiring. It's really, in a sense, a bully pulpit sort of thing. It means that I can have some influence on the subjects of the conversation that takes place around the company; and that, to me, is a very powerful form of influence.

Secondly, I can and do encourage initiative even when it goes awry. Third, I can push and do for information flow and transparency; although, with the caveats I described earlier, we have had so far to go because people do hoard information, and people are concerned about putting out imperfect information. The issue Bill Esrey was talking about -- just overcoming that -- is enough of a challenge. I can and do, but rarely, try to define limiting conditions, what some might call rules, the circumstance under which we really don't want much initiative taken without careful thought and consultation.

Something on Bruce's slide reminded me of this. I try and work to create at least the possibility of coherence in the organization. Bruce used that word. We actually have an institution called The Life Sciences Business Team, whose mission is stated in that one word, coherence. Its purpose is to take, get a sense of what is happening around the company and figure out where are we going with all this, what parts of that fit, what don't fit, how do you transfer learning, how do you make these things resonate appropriately; and, finally, and this also comes from something Bruce said, I am trying to address the very difficult issue of surfacing conflict and resolving conflict in a way that doesn't hurt people, in a way that sees conflict as a source of creativity, and as a way to get us to better decisions rather than as a zero-sum struggle in which somebody gets hurt, and this one is real hard, and I would be misleading if I told you we were very far down the road. That's as far as I want to go right now, and I would be happy to answer questions later.

Fallows: Thank you very much. So far this afternoon, we have heard from the perspective of a consultant, Mr. Pasternack, who has considered a wide array of companies and seeing what principles can be derived from them. We have heard from a practitioner, Mr. Shapiro, with at least twenty years experience in more or less one firm. I was touched by the last few minutes. He made it sound as if the job of a CEO at Monsanto was essentially that of the kindly uncle, and just sort of watching as the process goes on, and that may be the desired effect. We can hear more later on.

Now we are going to hear the academic perspective from Ronald Heifetz, who like Laura (Nash) earlier has made an academic specialty of studying the ingredients of leadership. He is director of the Leadership Education Project at the Kennedy School at Harvard. For the last fourteen years, he has been responsible for developing a theory of leadership, and a method for leadership development. His widely acclaimed book is called Leadership Without Easy Answers. Were I back in the newsstand business, I would have some suggestions for the title, but I guess Without Easy Answers, maybe that attracted people. He has a undergraduate degree from Columbia and degrees from Harvard Medical School, and from the Kennedy School, so Ronald Heifetz.

Heifetz: It's a real pleasure to be with all of you today, and sort of inspiring to try to build on what Bruce and Bob had to say. There are so many different ideas that their comments trigger in my mind that I am not exactly sure what I should focus on, but I think that what I would like to begin with is to talk about sources of adaptive failure.

You know, when we talk about leadership, we tend to talk with a smiling face, frequently, because we like to focus on that aspect of leadership that is inspiring, that's happy, that's full of energy; but, if leadership were really about simply telling people good news, it would be an easy job, and we wouldn't need any courses or discussions about it. We would simply need to learn how to celebrate better. What makes leadership dangerous and risky, as I think it often is, is that you are frequently engaging people in questions that are frustrating, that are difficult. You are asking them to stare at walls where they don't see the foot holes, and where you don't have the foot holes either. You are asking them to create into a void, and that's difficult. Sometimes you are asking them to accept losses. Loss isn't a familiar way of living.

So, if we think of sources of adaptive failure, and I like Bob's metaphor, biological metaphor of adaptation, that is how do we somehow narrow the gap between our aspirations, our values, and the reality that we are currently living? That gap between our values and that reality could be called an adaptive challenge. Well, there are many reasons why organizations, societies throughout human history have encountered failure. The first reason for adaptive failure is that the organism doesn't even see it coming. Now, that happens frequently in human history. A society has been robust, and then all of a sudden another society happens to start to infringe on the border of that community, and takes them on by surprise. They don't even see it coming; and, before they know it, they are vanquished. Their houses and their villages are destroyed and burned. Well, there's not much we can do about that theoretical possibility. If you don't see it coming, you can't do anything about it. So, we can put that one aside.

The second major source of adaptive failure is that you see it coming but it's beyond your adaptive capacity. You just can't do anything about it. We can imagine the dinosaurs got cold. They saw it was getting cold. They noticed that it wasn't light out anymore, but they had no capacity to do the adaptive work to thrive in that new, cold environment. Other organisms figured out how to do it through the trial and error that we call evolutionary design, but the third source of adaptive failure is something we can do something about, and that source of adaptive failure is very, very common. Some salesperson ten thousand miles away from headquarters notices that within his or her local environment something is changing. The customer is no longer happy. Now he is supposed to, or she is supposed to go out there and sell that product, but she notices that the micro-environment is changing and some adaptive work is required.

So what is she supposed to do? She sees it coming. Whether or not it is within the organization's adaptive capacity is an open question. We don't know yet. She doesn't know it yet but she is faced with this very difficult problem; how does she mobilize people upstream, across boundaries, within the same company to face what to them will seem like a harsh reality? The harsh reality is, we are making the wrong product. We have it priced wrong. We packaged it wrong, and so forth. Maybe she's had got to find a way to communicate with the people in R&D to say,look, you might be fascinated by your new product. You might be delighted in its innovative qualities from a scientific perspective, but I have no way of making it work in this particular micro-environment.

It seems to me that that source of adaptive failure is very common. The information is there but people do not know how to engage constructively in the conflicts required to digest and process that information, and this leads me to the first major point. Leadership is not the same as authority. In our common language, we commonly -- we always nearly equate leadership with authority. If you ask a journalist, or read a journalist's account, we talk about the leadership of the gang, the leadership of the country, the leadership of the House or Senate, the leadership of the corporation; and, in all of those cases, we are really talking about people in top positions of authority. We know intuitively that leadership is not the same as authority because, in the very next breath, we complain about the lack of leadership we get from these very same people.

Why isn't leadership the same as authority? Well, in many cases, if leadership is simply defined as moving the ball forward, getting the problem solved, they could be one and the same. As long as we are operating in a stable ecosystem where the authority figure really does know, in gorilla terms, where the berries are to be found, and can beat on his chest and say, off we go here, and the band can follow in single file as gorillas tend to do in dense, wooded mountains, this silverback knows where the berries are to be found because he is experienced. He is older. That's why he has got silver hair on his back and neck. Some of you have become silverbacks already. He has a particular expertise that derives from his experience so he knows where the food is to be found. There are a whole host of situations that we could call technical problems, problems that are within our repertoire, problems where the knowhow exists already, where we can reliably look to authorities to know the way; but, in the future and even now, we face a whole array of problems.

We look for the "right leader" who will save the day; and, of course, when that person can't pull the rabbits out of the hat, we then kill that person off, and look for another. Some countries have revolving dictators every twenty years, but the patterns of dependency don't change.

So we need to distinguish leadership from authority so that we can begin to understand that we need leadership, not simply from people in top positions of authority, but we desperately need leadership without authority, that adaptive challenge is required, creativity from all over the place. It requires that salesperson to figure out, how is she going to mobilize people to confront a reality that they don't want to face up to, and how can she do that without getting herself killed off, or getting herself marginalized as a whistle blower, or as a trouble maker, or as a hysteric. So we need strategies of leadership with authority, and we need strategies of leadership without authority because they have different advantages and disadvantages.

People like Bob operate in a straitjacket. Sure, he has lots of tools and resources at his disposal, but people expect wild things from him. They expect him to know answers which he can't possibly know, and every day he has to confront frustrating people's expectations for answers at a rate they can stand before they spit them up because they are just disgusted at his ignorance; and, in the future world that he faces where it is about creativity and discovery every day, where micro-environments around the world each pose their different adaptive challenge, there is no way he can know.

Let me illustrate this with a little story just to make it real clear that you can lead without authority. This doesn't come from business, but a few summers ago I was taking care of our children while my wife was interviewing various Native American tribes in Montana and in Canada, British Columbia. She was doing her doctoral research on Native American poverty and alcoholism, and I was taking off a month, driving this van and hanging out with the kids in God's country.

She came across one community that had gone from ninety-five percent alcoholism to ninety-five percent sobriety, which means everybody over the age of fourteen used to drink and now they don't, and they did that in about fifteen years. She went and talked to a woman who was instrumental in making this happen and she said to this woman, where did you even get the idea that this would be possible? I mean, you have grown up in a community where alcohol is part of the culture, almost.

So, she told my wife a story. She said, you know, about fifteen years ago, I used to babysit up the road for a woman named Lois; and, after a few months of babysitting for Lois, I sort of got curious, what the heck could Lois be doing every Tuesday night because there is nothing to do around here. So, one night I packed up the kids after Lois went off, and I followed Lois over to the meeting lodge, and I looked through the window of the meeting lodge, and I saw that there was Lois sitting there in a large circle of chairs all by herself. Well, when Lois came home, I asked her, now, come on, Lois. What were you doing, and Lois said, well, I was holding a meeting over at the meeting lodge, and I said, what do you mean you were holding a meeting? I looked through the window, and Lois said, well, no. I was holding an Alcoholics Anonymous meeting, and this woman said, well, wait a second. I looked through the window and I saw you were sitting there all alone, and there was this large circle of chairs. There was nobody else there, and Lois says, I wasn't alone. I was there with the spirits, and the ancestors, and one day our people will come. Lois held this meeting every week, and it was a year before anybody showed up, and it was two years before there were more than five people there; and, in ten years, that room was filled with people working their issues.

I liked almost everything Bruce said except I think our language no longer serves us. The terms leadership and followership are bankrupt in my opinion. You can lead without followers. In fact, the best leadership doesn't generate followers. It generates other leaders. It generates people who are willing to take responsibility.

When Martin Luther King mobilized people in Black communities in the south to stand up for themselves, they didn't experience themselves as followers. They experienced themselves as stimulated into taking responsibilities, stimulated into action. Now, I know that's what Bruce actually means, but the word follower doesn't serve us in that way. It really is an archetype that goes back to the silverback imagery of the silverback, the authority who knows the way and all the rest of the band follows behind expecting the berries to be found. So, we need leadership without authority as well as with authority.

The classic error for people in Bob's position is that they treat adaptive challenges as if they were technical problems because there is so much pressure on them every day to know the answers. Indeed, when was the last time you saw a senior manager stand up before a group of people and say, boy, I don't know. I mean, that's a great question. I don't know.

I mean, at lunch I heard Mr. Esrey pitched a question that was an incredibly difficult question about developing countries, what to do in countries where the technology is very different, where the absorption rate, where the learning rate is different. Well, he felt under enormous pressure to provide an answer. I mean, it would be much more difficult for him to say, hey, you know, boy, that question is so much more difficult than I have the knowhow to think about, but look at the pressure he is under. He is standing in front of a couple of hundred people who have come to hear him speak and he is the lunchtime speaker, and you see? I mean, and this is just a small microcosm of the pressures he is under, and Bob is under every single day to pretend that they know more than they know, to treat adaptive challenges as if they were technical problems.

I mean, it's a heck of a lot easier for the President of the United States, for example, to get up on TV and say, when we facing the problem of drug abuse as we have been facing, President Bush got on in front of national TV in 1989 to speak to the war on drugs. It would have been very difficult for him to say, ladies and gentlemen, we have got a real problem, and I wish I could solve it, but I can't because the problem exists in your families, in your neighborhoods, in your schools, in your churches and synagogues, mosques, and temples; and, furthermore, in your business practices, and in your attitudes towards taxes. So, if we are going to work this problem of drug abuse, we have all got a lot of work to do; and, if you think I can solve this problem with the Marines in Panama or Bolivia, or Colombia, I mean, I wish I could, but it is not a technical problem. So, good luck, and keep me posted. No. He has got to get up on TV and say, I've got a plan. I have got a program intact. He introduces Bill Bennett, his drug czar and, nine billion dollars later every year for the last ten years, what can we say for ourselves?

Let me close by saying just one or two things about staying alive because leading when it requires asking people to face up to frequently tough changes, painful adjustments in their lives, their ways of doing business has risks. There are many things to say about staying alive,but I want to just leave you with two thoughts. The first is that it is critically important to distinguish your role from yourself. Many of us spend twenty, thirty, forty years in professional life; and, after those many years in professional life, we actually begin to think we are that role, but there is no role big enough for expressing and conveying all of who we are as human beings.

The role of chief executive is a vehicle for expressing some of who you are. The role of parent is a vehicle for expressing another whole dimension of who you are, and the role of volunteer, and the role of friend. Each social role is a vehicle for expressing a different aspect of yourself, and none of it is sufficient. So, when we begin to equate ourself with our role, not only do we rob ourselves of staying in touch with something much more essential in terms of our worth, but we then frequently set ourselves up for making a classic diagnostic error. We take personally what isn't personal. Even the attacks that come at us, which are very effectively made because they are so personalized, these attacks, are rarely personal.

So, when we take it personally, we make a fundamental error and then we respond wrongly. The easiest example of this comes from parenting. I know when I started parenting a friend of mine said, you'll know you have really made it as a parent when your child slams the door in your face, or says, I hate you, Daddy, and you don't take it personally, and it will take you to the second child before you figure it out, and we all know when we are at our best. We know what it is like when we are at our worst; but, when we are at our best we say to the child, now, child, you don't get to behave that way, and we set limits in whatever way we think is necessary, but then we maintain a diagnostic mindset. We stay diagnostic and we keep probing. We keep probing and trying to figure out what's really going on with that child. What is really upsetting them that is generating this attack, this pressure, this expectation? Did they fail a test in school? Did their boyfriend or girlfriend just jilt them? Sometimes we ask, we probe, and the child says, I'm fine, Daddy. The problem is you. You know, but then sometimes late at night you begin to hear the real story; and then, because you have maintained the diagnostic mindset, you can be listening to what's the real issue here.

Finally, to stay alive, it is critically important to manage your own hungers. We all have normal, human needs. In fact, for four million years, we lived in small hunter and gatherer societies of fifteen or twenty individuals, and where being the head man or the head woman wasn't terribly stressful because there was never more than a dozen or two people looking at you at any one time, and you lived in a fairly stable ecosystem. That's how we lived for four million years. I mean, that's how we are hardwired. Only for ten thousand years, a very short time in evolutionary history, since the advent of agriculture, have human beings begun to live in single places, collect wealth, develop large communities, villages, cities; very short time in human history have we lived in large communities. So now, here we are with our hard wiring, plugging ourselves now into these electric circuits, licking our fingers and toes, plugging our hands and conducting electricity, thousand of volts more than we are really designed to conduct and many people in positions of authority short circuit because their own hungers become amplified to the point where they don't knowhow to contain themselves. We have seen that in the White House.

There are many such hungers; the need for intimacy and sexual gratification is only one such hunger that people, at times, have difficult containing when there is nobody holding them, and they are busy holding everybody else, and that need to be held becomes overwhelming. There is also the need for power, a deeply normal human need. I don't know anybody who likes to feel powerless or out of control in their life, and yet some of us are vulnerable to the need for power or control, and you plug us into certain organizational circuits that are desperate for order and this person comes riding in to the rescue, initially doing a real service by restoring order; but, over time, order becomes the name of the game and they lose sight of what they are really trying to do, or importance, and I will leave you with this; we all have the normal human need for importance. I don't know anybody who wants to not matter. Everybody wants to matter to somebody in their life, and yet some of us are tuned -- my guess is many of us are tuned, and I know this is my problem, with a real need to be needed. We love to feel important, so much so that we even develop enormous expertise so that we can go around saying, you have got a problem and you need me, don't you? I mean, when was the last time you had lunch with a consultant where the consultant said, boy, you are in great shape.

So, we all want to be needed and that's a wonderful thing because we develop the capacity to serve, but sometimes the need to be needed gets out of hand, that need to feel important. So, you take somebody who has worked really hard to know the answers, to have expertise, to have knowhow you take somebody who has really worked hard to have the knowhow. You plug them into an organizational circuit that is desperate for somebody who knows the way, who has got the vision; and, lo and behold, they are so smart that they do pull a rabbit out of the hat the first time, and then everybody in the organization is kind of mesmerized. Wow. Aren't we blessed? Sure enough, they pull a rabbit out of the hat the second time. By the third time, nobody is thinking critically anymore. The state of dependency becomes profound, and now you have the blind leading the blind because the person who is invested in their own self-importance becomes grandiose, and they can't tell the difference between what they know and what they don't know, and then they become dangerous, and we have seen that a lot in societies, and in businesses.

Well, we should talk about anchors, anchors to keep us from being swamped by some of these currents, and perhaps during the Q&A we can get to that.

Fallows: Thanks very much, Mr. Heifetz. I think that was valuable for adding a dimension that has been missing from the other discussions we have had today, that is the inner psychological dimension of leadership, its pluses and minuses. I am, again, going to exercise my prerogative of starting off with a question. This is for Mr. Shapiro, I wanted to go into the biological model you were proposing because, even though I was trying jocularly to say you were having the kindly uncle model of leading Monsanto, actually the biological model implies leadership as God, or leadership as divinity because, if you have a biological, complex, self-organizing system, it works because all the pieces are there for some reason. There is DNA. There is ribosomes. There's all sorts of things that work and we know not how they came there, but they came, and it works. As you try to recreate that in a human situation, either you have to be God-like in being able to devise some complexity like that, or you have to do something more practical. Assuming that's an alternative for you, are you God like in putting this together or, more practically, how have you tried to do this at Monsanto?

Shapiro: Mostly God-like. No. I don't think a creation myth is the only valid metaphor for what I am trying to describe. I mean, we are all living in ecosystems. We all influence them in one way or another without being God. We all can have some vision, for example, of what we want our neighborhood to be like, or want our family to be like. You don't have to be God to design it. You just have to acknowledge that it is a complex system and that what you do has implications, or you try to be conscious of what you are doing and what you think those implications are; and, most importantly, you listen for the feedback because if I am doing something over here in the belief that it is going to produce some effect that will be valuable for myself and others in that system, and it turns out that is not what it is doing, I better stop doing that because, I mean, the thing about complex systems is that none of us has a very good model of how they work and an awful lot of damage has been done to cities, to ecosystems, and political systems, and so on. It has been done because we operate on this engineering model that says, we understand how things work; and, if you just tweak this piece of it, it's going to happen. Consultants make a good living telling you which things to tweak, but the truth is, we don't really understand these systems very well and God perhaps does. We don't, but we can have influence on them nonetheless, and we can learn from them as they learn from us. It's an interactive process and a constant process.

Fallows: I am going to now take the further bold step of making a comment, apart from asking a question, before letting you ask the questions. As I was listening, again, to your biological model, the analogy that most came to my mind was, in fact, the military at its best. One of the most effective, or most insightful stories I have come across is a man named John Boyd, who was an Air Force colonel who died about a year ago. He was a renowned fighter pilot in the Korean War, but he spent his time after the war trying to understand how large organizations can adapt to the constant stress that Professor Heifetz was mentioning, but even more immediate because it is battlefield stress. He said there were two extreme models of military organization, very much like Mr. Pasternack's model. On the one hand, you have top down control where say the Japanese Imperial Army in World War II had orders coming out of Tokyo, which the troops on the field followed with great precision, but they were in bad shape whenever things were not as they had expected. The other is trying what you might think of the Saving Private Ryan model, where every individual cell of a large organization tried to have a sense of what the goal was, and you then entrusted each one with little cells to be moving towards that goal, and I think the military at its best has tried to develop training methods to try to pass that on to the lowest level, to concentrate on the lieutenants as the real sources of leadership in the military. So that's my comment.

Questioner: Mike Sanyour, CMS Companies. Would you discuss the factors that led to the dissolution of this coming together that we all anticipated, and would you, Dr. Heifetz, discuss the anchors that would have prevented this from coming apart?

Heifetz: I don't know.

Fallows: Talk about your adaptive system.

Heifetz: And if I did, I probably would comment any further anyway, so -- sometimes it is better to break up before you get married than it is to break up after you get married. I mean, a merger is an extremely difficult, challenging endeavor and a lot of companies do it badly. There aren't that many that do it well, and there are a lot of technical dimensions that can be analyzed beforehand by your technical experts, the financial people, and the marketing people, and so forth, but there are many less tangible dimensions of a merger that generate adaptive challenges for these two companies in coming together, and sometimes you don't know what those are until

Questioner: In the self-organizing system biological models can't know beforehand what the changes are going to be. You will have adaptive solutions but they won't be adaptive with what you wanted to select for a priority. You have to see what they were selecting ?? the system ?? I don't know if that's clear.

Shapiro: Let me offer a brief comment. An evolutionary model doesn't raise the question of purpose except perhaps at the level of the individual gene, as Richard (Dawkins?) has argued, but certainly at the level of the organism. Some argue at the level of group; although, I think that's a discredited view on the part of most biologists. It doesn't deal with the issue of purpose because it doesn't take into account the question of consciousness. Consciousness is a phenomenon that exist at the level of individual genes. It's on a molecular -- well, if you are enough of a reductionist, you believe it is an emergent property from things like genes and molecules, but it is a different kind of thing. So organization can, in fact, do something that is different from a blind, random, evolutionary process. That doesn't mean that their ultimate success is guaranteed, but they have ways of checking feedback against a mental model, a conscious model that they have so that, if somebody working at IBM happens to stumble across the PC at some earlier stage in history there is, at least in principle, a choice that can be made. It's like Ron's story about a salesperson who says, what I am trying to sell isn't selling. You have a choice. You can either accept that that doesn't conform to this organization, or you can say, I want to make change occur and the task that I think those of us who are operating on this set of principles have undertaken is to try to help influence our environment so that it makes it more likely that if somebody stumbles across an important piece of data, a new source of berries, or whatever it is, that that can be heard,listened to, assessed, evaluated, have a chance to compete for people's allegiance, and people's commitment rather than simply rejected a priori, and that seems to be the fundamental difference between a human organization and a blind watchmaker working through evolution.

Questioner: Anita Jensen from Citibank; and, Ron, I would be real interested in hearing what those anchors are.

Heifetz: I think everybody has got to develop their own anchors, but I will tell you one of mine. I mean, some anchors are sanctuaries, structures in your life, where you can get away from the music and where you can hear yourself think again, and feel, but here's my sanctuary. This is a bit of a confession, but when my book came out, it was the end of a twelve-year process of work, and it would have taken longer if my wife hadn't finally said, either that book leaves the house or you leave the house. So, finally it got out the door and I was incredibly excited that this book finally came out, and not only did it come out but I was invited to give a lot of talks, and it started taking on a life of its own, and at the publisher, Harvard University Press, they said, well, don't expect it to ever get past the first printing, and it went into second and third, fourth and fifth. Now it's in, I think, the eighth or ninth printing, and I was very excited at the end of that year to invest a lot in disseminating it, going around and telling people, because I need to be needed, how much they needed my book. Finally, after about six months of being on the road promoting, and then teaching at the same time, and kind of running ragged, one night my wife fills the bathtub and she says, let's take a bath. At first it sounded kind of like a nice invitation, but I soon discovered it was really a meeting. So, two hours later, the water is getting cold, but I am not allowed to leave because this is an important conversation. You know what I mean, and she said basically to me, she said, Ronnie, you know, you are losing yourself. I mean, you get into this magazine and there's five more that you are worried that you haven't gotten into, and you get on that television show, and there are all these others you haven't gotten into, and you are in the New York Times, but you haven't yet been in the Washington Post, and it seems to be neverending. I mean, you are just swept away, and you don't even seem to be making yourself happy with it. Furthermore, I am never going to finish my Ph.D. if you don't start spending more time at home and helping more with the kids.

So, the following year, I start picking my children up every day from school at 3:30 and then on Fridays at 12:30 -- they get out early -- and I have to tell you, for the last three years of doing this, it has been an extraordinary experience. In part, it has been horrible because when I, at 3:00, try to get out of my office with all of these important calls to answer, and this money on the table, it is excruciating. I mean, it is incredible. It's impossible, and I never get out by 3:00. By 3:10, by 3:11, I finally am out the door. I get to my car. I race like a lunatic. I get to this long line of cars because, where my kids go to school, you wait in the car, and you inch up through the line, and finally you get them at the curb, and all that time I am fuming. Every single day, the same thing happens. I'm fuming. I'm saying, what am I doing here? I am the only man in the line, virtually, and I am really discovering what it means to be a traditional woman, and, of course, all my buddies are writing articles and giving talks, so finally I get to the front of the line. Of course, I am never at the beginning of the line because I never get there early enough. I finally inch to the front of the line, and then I see their faces, these little round faces, and I open up the window on the passenger, and they throw in their bags, and then I say, okay, now. Anna, you get in first and, David, you get in second. They never listen to me. They just willy nilly crawl all over themselves in disorder, and out come the stories, stories I never heard at dinnertime because they only tell it once, I have learned. Sometimes at bedtime you can hear, you can get an echo of the story, and so my children have, for me, become this anchor, this hedge against the grandiosity of Harvard University, and the grandiosity of being a leadership scholar, where people make wonderful invitations with a lot of money attached for me to speak, and workshop, and consult, and so forth. It's a real hedge against that grandiosity, and I need it. Personally, I need it because it is very easy to get swept away in it.

We all need anchors. Whatever anchor would be your anchor, but imagine that you could lead without anchors is imagining that you could survive Boston without a winter coat, and many people think they can lead without sanctuaries and anchors of this sort, and they find themselves five, ten, fifteen years down the road having lost really a critically vibrant part of their own heart and spirit.

Fallows: Are there other questions or have we satisfied all the thoughts in your mind? Yes?

Questioner: Could we ask that of the rest of you? What are your anchors?

Pasternack: Why don't I start? Thanks a lot, Bob.

Shapiro: When you are done, I'll talk.

Pasternack: I was sitting here thinking, what a wonderful story. I'm glad I don't have to follow that. Thank you, Kathy. We haven't seen each other for almost twenty years, and this is what you do to me. Well I mean, truthfully, I believe that is the anchor,and it is for me, too. At some level, it is dealing with the things that take you away from your day to day because it is very hard in your day to day life, whether it is teaching leading a company, trying to tell the companies all the things they could do better, that will ever bring you back down to earth. Now, we do a pretty good job of it in our firm because we have so many bright people that consistently know more than you and that helps you realize that you are not very smart, where you have to keep running to get smarter; but I think, ultimately, you have to find anchors outside your day-to-day because, in your day-to-day existence, it is very hard to have that. So, I look for it in family. I look for it in friends. I look for it in things that I do that bring me into the community and I realize that the community at large is bigger than I am.

Shapiro: Personally, family is obvious. I meditate. I don't want to make a whole deal out of it but I find it real important. The amount of time I spend meditating is in inverse proportion to my need for it because you get these crazy days and you say, oh, I have got just fifteen minutes. But I do that and the other thing I do is I play music, and all those help because they get you out of it. You step back from it and you experience your life a little differently.

Fallows: And I will pile in on this, too, because I had a recent sort of trial, almost a controlled experiment. Two years ago, I had spent almost twenty years working, more or less, on my own as a writer, but on my own in the sense that I travel almost every place with my family. My wife and I, and our two kids were then very little, traveled all through Asia for about five years. It made us extremely close as a family, and for most of that seventeen or eighteen year period of working on my own, I worked out of our house, and so I had neither the comforts nor the distractions of organizational life that I think most of you probably have. Then, for two years when I was the editor of U.S. News, I had the extreme opposite experience where my leadership challenge, at least as stated at the beginning, was to entirely change the culture there, and I did that by spending twenty hours a day at the magazine, basically trying to be involved with all the people there. One of my sons was in college. The other one was already very much involved in his high school activities, and so my wife and assumed that we could build on the cushion of our many happy years of matrimony and parenthood, and I basically would be away at war, more or less, for two years. I would have found it very hard, even if the choice had been entirely mine, to keep it up for a long time because it was a sort of a sprint leadership activity, and if I had been in that situation for a while, I would have tried to find one of the anchors.

I am back now in the life I had before of working on my own, and the anchors I find here are the essence of the work. When you travel around as a journalist asking people things, you are very rarely made to feel grandiose. You are sort of going from one situation to another where you don't know as much. You never know as much about the thing as the person you are interviewing so you are never the grandee in the situation. This will sound peculiar and may lead to thoughts of mid-life crisis, but until a year or so ago, my main recreational anchor was playing tennis, which I had done seriously since I was a little kid. A year ago, I started doing something I had wanted to do since I was a little kid, which is flying airplanes, and I find that a completely liberating experience in that, when you are doing it, you can't think of anything else. You shouldn't be thinking of anything else, and that I find deeply satisfying as a way to just be free from other concerns, and looking down with God like splendor on the mere mortals who walk on the earth. So those are my answers.

I think, unless there are other pressing questions you have, perhaps we should wrap up this panel on that note, and I will ask, with our thanks, Mr. Shapiro and Mr. Pasternack to leave the stage, and Mr. Heifetz will stay on the stage because he is going to take us through the final wrap up session. Please join me in extending thanks to our panelists.

So we are going to go, with lightening speed, into the wrap up session. Let me give you my sense of where we stand at the end of this day.

I have been impressed in hearing the range of experience from practitioners, from consultants, from academics, from public officials, from journalists at a very large number of balancing acts. You know, life always is finding the right balance between different things. I have been impressed by how many different balances we need to strike in thinking of leadership over the centuries and leadership for the next century. One of those balances is that between the conflict and the cooperation model of leadership. All leaders, it seems to me, need at some point to be in conflict with somebody, or at least to say, I am going in a certain direction. Leaders, by definition to me, don't just drift with the tide. So there is a certain amount of spine, a certain amount of truculence, a certain amount of stubbornness that goes with leadership; and, yet, we have heard from many people about the way you need to cement leadership with some kind of consensus, some kind of coherence, some kind of conciliation. So, I am curious to hear from our scholars and to think about, in the days ahead, where that balance is set. Is there any general role or is it a purely existential where we all have to find a certain a situation? Does it require more confrontation, or does it require more conciliation? Are there cycles of these things we have to go through?

I am impressed, also, by the balance or tension between the virtues of stability and continuity, and the virtues of renewal and change. We heard this morning about Merck where Mr. Gilmartin's role was to furnish, maintain, and continue a great heritage, versus Mark (Gearan) from the Peace Corps where there have been directors, I guess, in average every two or three years since it was founded thirty years ago, and where the question is to sort of manage a constant flux. I, again, it was my leadership challenge, was to try to change a corporate culture; and so, again, are there any rules we can deduce here, or that we can pull out about how much leadership involves building on continuity, how much it involves finding sources of renewal; or, again, is this something that depends on the circumstances of each particular case?

One of the most interesting paradoxes or tensions to me is that between individual leadership and sort of organization to scale, organism whole, institution style leadership. That is, you can sometimes have great individual leaders without any kind of surrounding culture that magnifies those powers. Other times you can have organizations that seem very flexible, seem to be able to lead within their field without having any detectable great leader within them.

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