A recent New York Times article details the circumstances surrounding Phillip Purcell’s resignation from Morgan Stanley. According to most accounts, the now former CEO and President was an autocratic leader. He was intolerant of dissent, played power games and had little time for his frontline staff. Not surprisingly, an exodus of the firm’s top people occurred under his watch. Purcell inspired such enmity within the organization that even a sympathetic Board consisting primarily of his people couldn’t protect him. He had become a liability and the Board knew it. Purcell, realizing that he was skating on thin ice, chose to resign before he was asked to step down. In short, Purcell was a bully who got his comeuppance, going the way of such notable tyrants as Sunbeam’s “Chainsaw” Al Dunlop, Hewlett-Packard’s Carly Fiorina and the New York Stock Exchange’s Richard Grasso.
Interestingly, the Times article hails Purcell’s departure as evidence of a deeper management trend, away from autocratic leadership and towards the kind of progressive leadership Winning Workplaces has always promoted. True enough, the Purcells of the world appear to be a dying breed. In fact, the article, entitled “The Legacy of Purcell: Tough Guys Finish Last,” gets a lot right. It is refreshing to see the media recognize that this kind of management is no longer viable in today’s business environment. Ultimately, however, the New York Times‘ take on the story was disappointing, because it seemed to conflate autocratic leaders and bullies with tough leadership. Its title, for instance, harkens back to the old FORTUNE list of “America’s Toughest Bosses” which often equated tough leadership with rigidity, ruthlessness and cruelty.
It seems there remains an underlying notion that progressive leaders are soft, that open communication and a belief in fair play are somehow signs of weakness. Through our work with enlightened employers for our Best Bosses recognition program and our Success Stories, it is clear that progressive leaders are nothing if not tough. Isn’t protecting your people even if it means having to make a personal sacrifice the sign of a “tough” leader? Isn’t talking straight with employees and facing their questions, no matter how difficult, a sign of toughness? Shouldn’t a tough leader be secure enough to delegate authority and thick-skinned enough to listen to voices of dissent?
Almost without exception, the executives we have profiled created an environment of accountability, which is the furthest thing from soft. Accountability means focusing on results. After all, when all is said and done, aren’t results the measure of a business? And it is unrealistic to expect an atmosphere of accountability to flourish in an environment where all decisions of import are centralized in one person. Employees always have the built-in excuse of “Well, that wasn’t my idea,” when something goes wrong under autocratic management.
Progressive leadership is often merely a matter of common sense or what our chairman likes to call “enlightened self-interest.” Progressive leaders give employees the tools and training they need to succeed in their jobs. They are willing to delegate and ask others for their opinions, recognizing that to do anything less is cheating their organization of their staff’s talents, knowledge and creativity. Above all else, progressive leaders inspire loyalty and respect through treating employees honestly and fairly.
A strong sense of fairness was among the most common traits held by our Best Bosses. For example, when Diana Pohly, CEO of Pohly and Partners and a Best Bosses winner, faced drastic cost cutting to keep her doors open, she and her management team communicated openly with the staff about the hardships the organization faced and shared the pain – cutting all executives’ pay, including her own by 15 percent while reducing the staff’s by 10 percent. As a result, the firm managed to survive without layoffs and was able to retain key talent. Today the company is not only surviving but growing and the salary reductions have been lifted.
The fact of the matter is that an autocratic leadership style is more costly than tough. The low morale seen at Morgan Stanley under Purcell’s leadership is common to autocratically run firms and low morale is almost always costly in terms of higher turnover, frequent absenteeism and lower productivity All the evidence suggests that companies with high levels of employee satisfaction outperform companies with low levels of employee satisfaction. For example, the stock of the companies identified in FORTUNE magazine’s “100 Best Companies to Work for in America” list outperformed that of the Standard and Poor’s 500 by over 430 percent between 1997 and 2003. A recent study from Northwestern University’s Forum for People Management & Measurement found that there is a direct correlation between employee satisfaction and customer satisfaction, and customer satisfaction and financial performance.
If the Morgan Stanley story teaches us anything, it is not that “tough guys finish last,” but that there is a difference between being a tough boss and being a tyrannical one. Morgan Stanley has seen both. In fact, their story is distinguished by two executives with contrasting leadership styles. Purcell’s predecessor, the late Richard Fisher, provided a very different brand of leadership than Purcell, one much more in line with contemporary management practices. According to the New York Times, under Fisher’s management, Morgan Stanley was a place in which “anybody could walk into the boss’s office and disagree with a decision.”
Fisher made himself available to employees. As New York Times writer Joseph Nocera put it, “He made people feel good about themselves, and about the firm.” It is little wonder that Morgan Stanley enjoyed some of its best years under his direction.
In contrast, Purcell surrounded himself with yes-men and didn’t even pretend to consider other’s opinions. He took a my-way-or-the-highway approach to management. It should come as little surprise that so many opted for the highway.
In fact, autocratic leaders like Purcell often find that it’s lonely at the top, particularly when things go wrong. They have no good will to trade on during hard times. They cannot do as Diana Pohly did and ask the staff to make sacrifices in a moment of crisis. That’s one reason they’re a dying breed, and there’s nothing tough about becoming extinct. As the saying goes, only the tough survive.