HP and Patagonia: Comparing leadership styles

Executives at the Wharton West Leadership Conference this month offered real-world answers to questions about how to manage diverse, eclectic corporate staffs.

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Patagonia, Inc. is privately held, makes high-performance outdoor and sports apparel, employs 1,200 people, and has annual revenues of about $240 million. Hewlett-Packard ranks eleventh among the Fortune 500, provides a variety of computer products and services, employs 150,000 worldwide, and boasts revenues of $80 billion. Other than the fact that both are headquartered in California, what could they possibly have in common?

Speaking at a Wharton West conference on leadership, Patagonia president and CEO Michael Crooke and HP executive vice president Ann Livermore proved that developing leadership has some common themes, regardless of an organization's type or size. Though vocabulary differed -- Crooke's style was more alternative (his keynote speech outlined a "mandala" for the 21st century) and Livermore's was more traditional -- a few essential ideas were remarkably similar.

Take, for example, HP's so-called Leadership Framework, consisting of four components which create the field within which an HP manager runs his or her business. Livermore ticked off the familiar four: strategy, "where you put your financial and people resources;" structure and processes that can deliver the strategy; metrics and rewards to support strategy, structure and process; and values and behaviours required to achieve goals.

"Our view is that the very best leaders are the ones who can manage all four of these simultaneously, get them all in synch and know which one to turn or change when something is going wrong," said Livermore. Those "best leaders" excel at six skills, she added. They have a winning attitude, a passion for customers, an ability to collaborate across boundaries, a global mindset, an ability to leverage diversity and a talent for working just "fast enough" -- getting the right balance point between overly rapid decision-making and paralysis by analysis. With those skills, "great leaders can make an organization work like a system. They can pick a direction; excite people to move in that direction and turn individual stars into a high-performing team, like a sports team. Then you get a really powerful group."

Livermore's philosophy of leadership will undoubtedly be looked at more than closely than before following speculation that she is one of a handful of contenders to take over former CEO Carly Fiorina's position. Fiorina was ousted by the HP Board on February 9, in part because of her inability to consistently deliver the operational results expected from HP's 2002 merger with Compaq. Livermore heads HP's Technology Solutions Group, a $30-billion business that supports the company's largest customers and encompasses enterprise storage and systems, software and services. She joined HP in 1982 and worked her way up through a variety of leadership positions in marketing, R&D, sales and business management before being elected a corporate vice president in 1995. She holds a bachelor's degree in economics from the University of North Carolina at Chapel Hill and an MBA from Stanford University.

"In the Flow"

Like Livermore, Patagonia's Crooke sketched a recognizable portrait of leadership. He spoke in terms of a dynamic "eco-system" within an organization: "Sometimes one part is thriving, while another part is dying." A leader sees the often subtle differences within the system, addresses the problems, gets things into balance and brings all elements into "a high-performance zone, into 'the flow.'"

The term "flow," Crooke explained, comes from University of Chicago psychologist Mihaly Csikszentmihali who has spent 25 years researching the state of mind often associated with athletes when they speak of being in "the zone" -- that is, a state of intense concentration, of exceptional mental and physical effectiveness, leading to peak performance. Csikszentmihali calls this state "flow" and, in interviewing more than 100,000 people in all parts of the world, he found that it exists in many areas, not simply sports. Crooke is studying for a doctoral degree under Csikszentmihali.

"I would argue that if your individual goals as a leader align with those of the organization, and you take a broad perspective, you can put together teams of people who will blow your mind," said Crooke. "They are in the zone, in the flow." He compared organizational teams to his experience as a 19-year-old in the Navy, working as part of a SEAL team, an experience that "has been the basis, or thesis, of my leadership style." There, he learned that when a group of people operate fully as a system, a team, "you get superior results."

Metrics are an important part of getting those results, added Crooke. "You develop the right metrics -- just a few, not too many -- and measure to make sure you are all focused on them. Then build into the organization those methods that allow people to see their relationships to metrics."

When Crooke joined Patagonia in 1999, he quickly brought in seven people with skills new to the organization, resulting in a management team of which half had been with the company for nearly 20 years while the other half were newcomers. Maintaining the strong, positive company culture while creating and building a cohesive management team was one of Crooke's leadership challenges: "Melding the new with the old, creating the next wave."

Naysayers and a Single Voice

Maintaining a stable organization and culture can also be an issue at HP, according to Livermore. "Leaders tend to want to change things, so the issue becomes keeping things stable long enough so people understand it and work well within in. It often takes four or five years of stability before we see an organization reach its peak."

A team that acts in concert to achieve goals doesn't mean one that thinks alike, at either Patagonia or HP, however. Diversity of opinion and viewpoint, challenging ideas and positions, is encouraged among managers. "The people closest to me are all naysayers," said Crooke, smiling. At HP, said Livermore, "a winning attitude can come across in different ways ... For example, we have one guy who always focuses on what could go wrong."

But, once a decision is made, a winning team acts with a single voice. "If leaders aren't all working in unison, there is no way line managers and staff will be," said Crooke. "I don't let anybody [be part of] management who can't put aside his or her own views and work as part of the team once we have made a decision."

As for Livermore, "We put the onus on the leader to make sure people understand the direction we are taking. If people can't follow that direction, we kick them off the bus." In her playbook, performance is built on creating and maintaining winning teams. That, in turn, demands the ability to attract great people. "One of HP's advantages is the fact that we have an excellent enough position in the marketplace that we can usually hire anybody we want. In my business, we have a 75% acceptance rate. You've got to have people want to work for you."

Adds Crooke: "If you want the best people, you better have the best work conditions and benefits." A critical part of Patagonia's culture is the care of its employees, and it has been consistently recognized as one of the best companies to work for by such publications as Fortune and Working Mother. Employee benefits include daycare facilities, cafeterias featuring healthy, organic food, subsidies for purchasing hybrid vehicles, and a "brain food" speakers program. Environmental internships that allow employees to work for up to two months at an environmental nonprofit, while still receiving a Patagonia check, reflect the company's commitment to both the environment -- Patagonia contributes 1% of sales to environmental causes -- and to its employees.

Any final words of advice from two leaders whose organizations are drastically different, but whose views on leadership are remarkably similar? "If you have any standard for excellence, strive to be the best, not second or third," said Crooke. "This year Fortune named us the 14th best mid-size company to work for. Well, I'm not thrilled with that. I don't want to be number 14; I want to be first."

A similar winning attitude is number one on Livermore's list of most important leadership skills. "You get a bunch of business people together and usually it's not that people aren't smart enough, or that they don't have enough capability. Very often -- particularly in the technology world -- attitude, enthusiasm, a belief that we can get over any mountain, go a very, very long way."


To read more articles like this one, visit Knowledge@Wharton, an online source for business analysis, information and research.

All materials copyright © 2003 of the Wharton School of the University of Pennsylvania.

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