From Leaders to Leadership: Managing Change

Abstract

The accelerating pace of change in globalization, communications, disruptive technologies, capital flows and alliances have created fundamental shifts in business operations. Where many popular leadership models may provide formulae to help solve some business problems, they are insufficient to deal with the pace and polyvalent character of constant, rapid change. Managing change- its impact on organizational structure, group culture, and personal management styles - is one of the most fundamental and enduring aspects of leadership. Paradoxically, while the relative value of the once-celebrated individual leader as superman or woman is being questioned, great leadership has never been more urgent or more difficult.

Full text

The Journal of Leadership and Organizational Studies, 2004, Vol. 10, No. 4
From Leaders to Leadership: Managing Change
Mark J. Ahn, Hana Biosciences, Inc., South San Francisco, CA
John S.A. Adamson, Cambridge University
Daniel Dornbusch, Genentech, Inc.
The accelerating pace of change in
globalization, communications, disruptive
technologies, capital flows and alliances have
created fundamental shifts in business
operations. Where many popular leadership
models may provide formulae to help solve
some business problems, they are insufficient
to deal with the pace and polyvalent character
of constant, rapid change. Managing change –
its impact on organizational structure, group
culture, and personal management styles – is
one of the most fundamental and enduring
aspects of leadership. Paradoxically, while
the relative value of the once-celebrated
individual leader as superman or woman is
being questioned, great leadership has never
been more urgent or more difficult.
The established order has invented various
lightening rods. And it succeeded. Yes, it
certainly did succeed; it succeeded in making
the next thunderstorm all the more serious.
Søren Kierkegaard (1813-1855)
The increased visibility of business
leaders in the modern economy has created a
new form of social theater. In it, highly
publicized corporate leaders – a new cast of
management celebrities – drive organizational
change, boldly and purposefully, either to
fame or (no less conspicuously) to failure. The
business press has been complicit in this
process of dramatization, providing
stereotyped roles and scenarios. Faced with
daunting complexities and uncertainties, the
‘heroic leader’ appears as the central actor in
the company’s success, the dynamic genius
guiding less far-sighted colleagues towards a
destination which, at the outset, they can only
imperfectly discern. Yet this highly
characterized style of leadership, in which
leaders appear as supermen or superwomen,
has been called into question in recent years,
as the reputations of many such “heroic”
CEOs have exploded almost as rapidly as the
inflated market valuations of the dot-com era.
The exposure of instances of dubious ethical
standards and corporate malfeasance,
however, prompted a general questioning of
the prevailing assumptions regarding
leadership, and a reexamination of where
responsibility for leadership decisions in
corporations actually resides.
Paradoxically, while the relative value of
the once-celebrated individual leader is being
questioned, effective corporate leadership has
never been more urgently in demand or,
arguably, more difficult to achieve. Leonard
Schaeffer, the CEO who transformed the once
bureaucratic, money-losing Blue Cross
California into a thriving WellPoint Health
Networks, describes the elusiveness of
effective leadership: its need for a concurrent
multiplicity of forms, and the way in which it
pivots on the need for responsiveness to
external and internal change.
Leadership is more than heavy-handed
action at the top. Its defining
characteristics change according to the
needs and vagaries of the individual, the
organization, the industry, and the world
at large…by thinking clearly about the
roles I’ve needed to assume at different
times, I’ve been better able to tailor the
way I make decisions, communicate with
people, and manage my time so that I can
address the most pressing needs of the
organization at the moment (Schaeffer,
2002).
However, change management itself
poses a series of related dangers. Keeping to
an already set course often seems to be the
easier and seemingly less risky decision. But
the avoidance of change is the opposite of

From Leaders to Leadership Volume 10, Number 4, 2004 113
leadership. Dante’s vision of hell as “the
miserable way taken by the sorry souls of
those who lived without disgrace or without
praise” provides a warning to the executive
who blindly maintains a course of spuriously
secure mediocrity. Change management takes
courage precisely because it can be a high-risk
undertaking both for organizations and the
careers of the decision-makers involved. In
consequence, many initiatives nominally
supposed to manage change are either
ineffective in their original formulation or
rendered so by the process of implementation
– often as a result of internal resistance to new
initiatives. Studies indicate that some 50-70%
of change management initiatives fail to make
any lasting impact on the organization they
purport to reform (CLC, 2002; LaClair and
Rao, 2002).
The central argument of this paper,
however, is that change is central and intrinsic
to the corporate condition, and thus to global
economic conditions as well. This article
seeks to highlight three principal aspects of the
problem: how effective leaders can identify
the need for change; manage sources of
resistance to it; and create paths for successful
development for both their organizations and
themselves. Finally, we present the case study
of a business unit at the biotechnology
pioneer, Genentech, Inc., a company that has
implemented a series of novel changes that
continue to revolutionize its business model.
Leading Corporate Culture
Leadership neither begins nor concludes
with simple, bullet-point lists of ‘good
leadership qualities.’ Many discussions of
leadership - particularly clichéd lists of
obvious corporate realities - actually inhibit
effective leadership when it comes to
discerning the need for, and implementing,
cultural change. To cite but one example: one
leading management consulting firm recently
published a report entitled Profile of the
Global Leader of the Future, detailing how the
effective leader of today “thinks globally,
anticipates opportunity, creates a shared
vision, develops and empowers people,
appreciates cultural diversity, builds teamwork
and partnerships…” – but to name a few of the
ideal leader’s qualities (AISC, 2001). Yet,
these trait-based leadership models can
actually create an environment that is resistant
to change. The problem is that they are often
too vague and generalized to be actionable. On
the other hand, this “attribute approach” – in
positing simple check-lists of “correct”
qualities – can create organizational myopia
through “Russian Doll” management: the
phenomenon in which managers repeatedly
hire or promote miniature versions of
themselves. Russian Doll management
decreases diversity of thought processes and
perspectives, as well as induces a tendency
towards organizational denial of competitive
threats (Bartlett and Ghoshal, 1998).
Arguably one of the most recent
successful examples of high-profile
organizational and cultural change is the
turnaround affected by Lou Gerstner, Jr. at
IBM. For decades, IBM employees accepted
that a sales-and-marketing orientation, as
opposed to a customer-needs and product
focus, was what propelled growth. At the
height of IBM’s success, their paternalist
culture of respect for individuals also
translated into both the expectation and the
reality of lifetime-employment. Yet as shifts in
market forces were accelerating and price
competition was intensifying, IBM’s internal
processes and received corporate values
impeded its ability to respond to technological
and market changes.
IBM achieved its transformation by
jettisoning its internally protective culture and
becoming externally focused on customers and
competitors — in effect by systematically
facing up to, and overcoming, the
corporation’s collective fears. As
organizational psychologists Kegan and Leahy
(2001) posit, cultural change can be difficult
because of deeply held apprehensions that they
describe as “competing commitments.” To
facilitate the creation of new and effective
operating models, they prescribe recording
observed behaviors, and a process of
uncovering and testing the corporation’s
deeply held assumptions. As IBM entered the
twenty-first century, CEO Lou Gerstner, Jr.
led a cultural and strategic transformation that
converted the firm from a “mainframe
mindset” to what was termed the “Big Dot in
the New Economy”: entering new markets and
service sectors; replacing lifetime employment
with large-scale internal training initiatives in
order to increase adaptability; shifting beliefs
about competitiveness and highlighting the
importance of an external focus; and
significantly evolving the corporation’s
cultural norms. The IBM experience directs us

114 Journal of Leadership and Organizational Studies Hudson, Adamson, & Dornbusch
to make a fundamental distinction between the
two interrelated themes of leadership and
management. Where is the distinction to be
drawn? And how important is it to the task of
implementing corporate change?
Leadership Versus Management:
Defining The Role Of Individual
Leadership
The convergence of a series of
contemporary forces – the globalization of
markets, the increasing rates of competitive
pressure, and the flattening of organizational
structures – has increased the distinction
between leadership and management
(Steingraber, 1996). The differentiation can
be characterized as follows. Management is
based on “process”, in that it focuses on
maintaining systems to provide goods and
services efficiently. For example,
management tasks include planning,
budgeting, organizing, staffing, and
controlling progress towards achieving firmly
defined objectives. The elements of
management therefore create predictability in
anticipating future developments and assessing
on-going operations. Leadership, on the other
hand, is prospective: it defines what the future
should look like, aligns the organization with a
common vision, and provides inspiration to
achieve transformational goals (Kotter, 1990;
1996). Yet despite their very different
functions and attributes, leadership and
management are not antithetical, but
complementary. Both sets of skills are
required if corporate success is to be achieved
and driven forward.
Each set of qualities exists in a mutually
reinforcing relation with the other. Effective
leadership, for example, can be the catalyst for
new strategic management initiatives. Adept
leader-managers often make decisions to
allocate resources with incomplete
information, but do so in ways which ensure
that they are able to adjust to altering
conditions and, consequently, achieve their
objectives notwithstanding. Successful leaders
understand that there is no single “best
management style”. The correct form of
management will always be contextually
defined: a series of individual ways to adapt to
situations and capabilities of their staff rather
than a fixed template for action (Levinson,
1994). Marmol and Murray (1995) found that
successful companies often had leaders who
achieved extraordinary performance
aspirations by pursuing their strategies
relentlessly, simplifying core processes, and
honing their organization’s development
systems. But beyond these common traits lay a
wide variety of modes of implementation.
Goold and Campbell (1987) found,
perhaps unsurprisingly, that ideal corporate
management implicitly integrates leadership
and management. They concluded that
“virtually all executives want strong leadership
from the center, coordinated strategies that
build in a variety of view points, careful
analysis of decisions, long-term thinking and
flexibility. But they also want autonomy for
unit managers, clear accountability, the
freedom to respond entrepreneurially to
opportunities, superior short-term results, and
tight controls.” The problem is that these two
sets of desiderata contain mutually competing,
if not mutually contradictory, demands on the
leader-manager.
Thus, as business dynamics and contexts
change, corporate leaders must adapt
themselves fundamentally in order to maintain
an effective integration of the leadership and
management roles, and some form of
equilibrium between the simultaneous
expectations held of them: of strong central
direction coexisting with unit-level autonomy;
and of central long-term strategic thinking
coexisting with a measure of tactical flexibility
and freedom of action among subordinates.
In achieving this equilibrium,
responsiveness to context is key. Farkas and
Wetlaufer (1996) studied 160 chief executive
officers around the world to determine the
attitudes, activities and behaviors that shaped
their respective leadership approaches. The
authors concluded that CEOs in successful
companies tended to adapt their leadership
approach to specific strategic situations, rather
than sticking with any single approach. As so
often the case, the template of “attribute-
defined leadership” is either redundant or even
counter-productive. And in the case of
successful CEOs, it was their responsiveness
to company culture – and their ability to refine
and adapt it to new strategic needs – that was
one of the critical elements of their success. As
the Center for Leadership Development
concluded “…reengineering company culture
is often a necessary component of companies’
change strategies” (CLC, 2001). How, then is
this reengineering of company culture – the

From Leaders to Leadership Volume 10, Number 4, 2004 115
central component of change management –
most effectively to be achieved?
Managing Change: The
Centrality Of Corporate Culture
Moran and Avergun’s definition (1997)
of change management provides a starting
point, defining it as “the process of continually
renewing the organization’s direction,
structure, and capabilities to serve the ever-
changing needs of the marketplace, the
organization, and employees.” This does not
go far enough; for, as we have seen, successful
change management requires the alignment of
an organization’s internal architecture,
individual actions, and collective goals in
order to achieve optimal results. Clearly,
achieving this is unlikely to be an entirely
smooth process. Every change-management
initiative is likely to face internal resistance.
To create initiatives effectively for corporate
growth and competitiveness, we must first
analyze the likely sources of resistance to
change.
Resistance to Change
Hannan, Polos, and Carroll (2002)
explored the social phenomena behind why
organizations experience powerful inertia
when it comes to the realization of change.
Organizations, the authors argue, consistently
underestimate the time and cost required in
dealing with change-related initiatives for two
reasons: complexity and opacity. Complexity
is defined as the cumulative number of people
and organizations in the work group network;
opacity as the degree to which specialization
makes the work of one group difficult for
others to penetrate and incorporate into group
work. Thus, change-related initiatives become
increasingly difficult as complexity (for
example, more languages, cultures or
alliances) and opacity (enhanced data in
specialized programming languages, for
example, or the nature of protein interactions
in genomics) increases.
Rather than improvement, the result can
be a vicious circle in which each new initiative
strengthens the resistance to further change.
Abrahamson (2000) suggests that “change, as
it is usually orchestrated, creates initiative
overload and organizational chaos, both of
which produce strong resistance from the
people most affected.” Marshall and Conner
(2000) extend this idea further by asserting
that the critical mistake often made by
managers in change-related programs is to
focus on the abstract process of change rather
than dealing with the practical problems
entailed in helping people to assimilate the
changes that are required. The authors
conclude that resistance to change is
inevitable, that individuals express resistance
both covertly and overtly, and that an
emotional cycle of change resistance and
acceptance should be expected and actively
managed. Preparedness for resistance is the
first condition of its effective management, but
– even so – only one element of several that
are required for the successful implementation
of change. Studies of change-management
initiatives help to identify some of the other
elements involved.
Failure of Change Initiatives
As we have seen, the high failure rates of
change-management initiatives indicate the
difficulty and complexity entailed in the
successful realization of any process of
change. In a study of 40 major change
management programs, LaClair and Rao
(2002) found that 58% failed and 20%
captured only a third or less of the value
expected. Some of the reasons for this are
predictable. The unsuccessful companies were
characterized by a lack of commitment on the
part of senior management, poor project
management skills, lack of training, and
confusion about rationale for change. In
contrast, the successful companies reveal not
only the substantial rewards that accompany
effective leadership — the successful gained
an average of 143% of the expected return on
investment; they also reveal the
interdependence of effective leadership and
sensitive management in the realization of
their goals. The successful companies were
characterized by engagement at all employee
levels (no level was more critical than any
other), delineation of clear responsibilities, and
communication of the reasons for change
throughout the organization.
Conversely, Kotter (1998) contends that
four key mistakes impede change initiatives:
complacency; not communicating with words
and actions; celebrating too soon; and
assuming that all middle managers are against
change. This last conclusion acts as a caveat
against over-estimating the degree of internal
resistance to change. Overt pessimism as to a
workforce’s attitudes to change is in danger of

116 Journal of Leadership and Organizational Studies Hudson, Adamson, & Dornbusch
being self-fulfilling. To overcome these four
problems, Kotter suggests three principal
solutions: focusing on short-term wins to build
momentum; developing a coalition in favor of
the proposals; and engaging employees
emotionally behind a common vision.
Other explanations for failures in
managing change include the development of
a selection process that favors seniority,
promotion of new managers without proper
training, and hiring of similar managers as
successors (Useem, 2002). If the last two
problems are managerial failings, the question
of introducing selection processes that favor
performance (and excellence) over seniority
encapsulates the conundrum of balancing the
potentially conflicting objectives of leadership
versus those of management. The leader will
wish to promote individual excellence and
reward performance; yet the manager is aware
that the wholesale disregard for seniority can
produce low morale and a sense of insecurity
within the corporation that can jeopardize
overall performance and render the
introduction of change self-defeating.
There are other pitfalls. Ironically,
organizational success can also serve to
impede effective change management.
Christensen and Overdorf (2000) suggest that
three factors shape organizational
effectiveness: resources, processes, and values.
Companies develop sequentially: first, through
resources (such as a new products); they then
devise processes and capabilities to scale the
replication of products or service offerings;
and finally use corporate values to transmit
behaviors and decision-making processes
within the company (for instance, attributes
such as margin requirements and the way in
which new features and benefits are assessed).
This sequence of resources, processes, and
values – the authors argue - results in an
evolutionary development of the corporate
culture that is best suited to serve defined
customers and thus to capture increasing
value.
It is a sequence that acquires a
momentum of its own. Hence we are
confronted with a paradox. The very
infrastructure that is created from aligning
organizational architecture, actions and goals –
a necessary and, in many respects, highly
beneficent infrastructure – can inhibit a
successful corporation’s ability to handle, let
alone initiate, disruptive change. As a result, a
seemingly effective business may be left
vulnerable to attack by smaller, nimbler
companies that can create new resources,
processes and values targeted to address the
new – and often rapidly changing – needs of
an adapting industry. By strengthening and
aligning a company’s organizational
architecture, actions and goals, this apparently
virtuous process – the process on which a
corporation’s achievement of performance
results crucially depends - may actually
reduce, or inhibit entirely, a company’s
capacity for “breakthrough innovation”.
Achieving Sustainable Results—Focus
and Coordination
It follows that achieving performance
results while shaping the future is perhaps the
most ambitious challenge and elusive dynamic
that can be encountered in business. As Jack
Welch, former CEO of General Electric, put it
with characteristic bluntness: “You can’t grow
long-term if you can’t eat short-
term...Anybody can manage short. Anybody
can manage long. Balancing those two things
is what management is” (Byrne, 1998).
This dynamic tension can be represented
through the figure below that provides a means
of conceptualizing the elements involved in
achieving sustainable results. First, the upper
left-hand side of the quadrant depicts high
strategic focus. As is well known, large,
complex organizations use strategic focus to
evolve systems and processes to fulfill their
target customer needs. The risk of focus, as we
have already noted, is that it can impede
innovation and increase the risk that a series of
small errors will eventually lead to a
catastrophic organizational failure. Achieving
a narrow functional focus while
simultaneously maintaining a broad
organizational awareness is a key antidote for
this type of corporate myopia. In practice,
however, this is a difficult balance to achieve
precisely because team and individual
“integration is an on-going accomplishment
and partly because rules, orders, directives,
procedures, checklists, and instructions are
largely static tools, ill-fitted to meet the ever-
changing requirements of a dynamic system
(Snook, 2000).”
The lower right-hand side of the quadrant
depicts high organizational coordination.
Coordinated communication can improve the
efficiency of processes. On the other hand,
internal focus may also limit innovation and
lead to misallocation of resources.

From Leaders to Leadership Volume 10, Number 4, 2004 117
The ideal dynamic balance between focus
and coordination is found in the upper right
hand side of the quadrant. By balancing
strategic focus with structural alignment,
organizations can maximize both operational
efficiencies and innovation.
Indeed, change management is a difficult
balancing act precisely because it requires
companies to combine both incremental and
revolutionary change in order to achieve what
can be termed “dynamic stability” while
avoiding the related perils of organizational
cynicism and burnout (Abrahamson, 2000).
This, in turn, has implications for the way
in which the process of change can be
conceptualized (and applied) within the
corporate context. As Moran and Avergun
(1997) have concluded, “change is nonlinear;
often it has no clearly defined beginning or
end…[it] interweaves multiple improvement
efforts…is [both] top-down and bottom-up.
Organizational change [also] has an important
personal dimension.”
The following case study of a complex
change initiative at a highly innovative
company in the biotechnology field,
Genentech, Inc., serves to illustrate many of
the aspects that have been reviewed here: not
only areas of resistance, but also the
characteristics and internal dynamics that
allowed the company to build its flagship
product from relatively small beginnings into
the best-selling cancer therapy in the U.S.
GENENTECH INC. HEMATOLOGY:
POSITIONING A COMPANY FOR
GROWTH AND CREATING THE
BEST-SELLING CANCER
TREATMENT IN THE U.S.
During the period 2001-2003, Genentech,
Inc.’s Hematology business unit instituted a
number of organizational, strategic and
cultural changes to position the company for
rapid, continued growth. During that time,
their anticancer product, Rituxan, surpassed $1
billion in sales and became the top-selling
anticancer product in the U.S. Genentech, Inc.
entered the biopharmaceutical market in
oncology (or anticancer) in November 1997
with the introduction of Rituxan (rituximab), a
monoclonal antibody treatment for non-
Hodgkins lymphoma (NHL), a highly targeted
molecule that attacked only a single type of
cell of the lymphatic system.
Rituxan is a breakthrough innovation for
treating NHL, a disease that went over 25
years without a change in standard of care and
survival (Coffier, 2002). Due to the innovative
nature of Rituxan, the FDA (Food and Drug
Administration) approved the treatment in less

118 Journal of Leadership and Organizational Studies Hudson, Adamson, & Dornbusch
than 7 years after it was discovered versus the
industry average of 12 years (Grillo-López,
2000). Five years after Rituxan was launched a
clinical review of NHL therapies concluded,
“because of its activity, coupled with a
favourable toxicity profile, rituximab has
become almost ubiquitous in the treatment of
most B-cell malignancies (Cheson, 2003).”
Rituxan’s commercial success reflects its
clinical efficacy of improving survival — sales
went from $5 million in 1997 to $1.1 billion in
2002, representing over half of Genentech’s
product sales in that year.
Genentech uses human genetic
information to discover, develop, manufacture
and commercialize biotherapeutics for
significant unmet medical needs. The founder
of the modern biotechnology industry, South
San Francisco-based Genentech, Inc. was by
2002 the world’s second largest biotechnology
company, with total revenues of $2.7 billion.
Resistance to Change
Amidst the success that greeted Rituxan,
one of the authors was hired from a company
in the larger, traditional pharmaceutical
industry as the Vice President to head the
newly formed Hematology business unit.
Contemporaneous business-unit reorganization
combined sales, marketing, and medical affairs
for therapeutic areas for the first time. Until
then, all functional areas reported only to their
respective section heads, in the process
creating what amounted to organizational
“silos”, with little lateral contact or
communication.
Flushed with their commercial and
clinical success, however, the various elements
of the Hematology team felt confident about
the virtues of the status quo and fiercely
defended their functional independence. The
organization was strongly resistant to the
suggestion of change. Moreover, loyalty and
commitment were strong within each
functional area, even if there existed little
between the constituent areas. The fact that no
person had transferred from sales to marketing
or vice versa in the four-year history of the
product testified eloquently to the strength of
the silo mentality. This was highly unusual,
for in the biopharmaceutical industry more
generally team members commonly transfer
cross-functionally to enhance collaboration
and insight into customer expectations and
needs. As a result, cross-functional
cooperation, communication, and trust were
tenuous at best. Anonymous feedback during a
national sales force meeting posed an
apparently logical question: “why does
[Genentech] management keep bringing in
senior management from big, mediocre
pharmaceutical companies when we’ve been
successful?”
The Need for Change: Changing
Business Environments and Emerging
Threats
As with any intelligent and highly
educated constituency, it was clear that
establishing a compelling case for exogenous
conditions that necessitated change – and the
internal benefits that would accrue through
affecting it – was an essential first step
towards any successful process of
implementation. The exogenous influences
were clearly definable and growing more
urgent by the day. There were three key
strategic changes facing the company’s
Hematology franchise as it entered 2002:
dramatic shifts in the sources of sales growth;
an increasingly conservative regulatory
environment; and new competition on the
horizon.
Of these considerations, the shifts in the
sources of sales growth were easily the most
pressing. In 2002, 70% of the sales and 90% of
Rituxan growth were projected to be beyond
the original FDA approved uses or indications.
The company’s sales expectations were based
on simultaneous growth in multiple areas of
use, and it was already evident that this would
require the effective use of all the company’s
functions if it were to succeed in being
successful in commercial operations while also
ensuring strict regulatory compliance. In other
words, cross-functional teamwork would be
imperative to achieve the unit’s aggressive
goals.
The most obvious external threat was
from competition. There were eighteen
competitors in various stages of clinical trials
with both complementary and ‘cannibalizing’
products. Significant commercial rivals (such
as Amgen and Aventis), with proven and
highly innovative technologies such as
antisense and nanotechnology, were making
rapid advances. Moreover, Genentech’s co-
promotion partner for Rituxan, IDEC
Pharmaceuticals, was on the verge of
introducing a competing product, Zevalin,
with the same indication or target market.

From Leaders to Leadership Volume 10, Number 4, 2004 119
After a series of internal reviews, the
need for change within several areas of the
company became apparent to all concerned.
First, the marketing team’s structure was too
general and with individual roles unspecified.
Ten marketing personnel worked on 31
distinct activities and projects. All team
members were equally responsible for these
activities, hampering a sense of empowerment
and ownership, and effectively centralizing
decision-making. In addition, the sales group
was understaffed to the point that it was
unable to research and monitor its own
activities. As the new strategy emerged, it also
became clear that questions of accountability
needed to be viewed from a variety of
perspectives. For the first time, the sales
organization would need to be accountable in
areas other than revenue.
Initial Change: Alignment, Focus, and
Coordination
The first step was to identify the need for
change – and the urgency with which it was
required - by engaging the entire operation in
dialogue. This had to operate at two levels:
both cognitively and emotionally, each
member of the team needed to acknowledge
and internalize the fact that the business
landscape was altering as a result of
innovations in markets, competition, and
regulation. One of the most effective ways of
making that case was by seeking the responses
of a target group of customers: the key 30% of
the customer-base that generated 85% of all
sales. These key customers were consulted as
to their views on the process of developing an
overarching strategy; in particular, this
involved identifying Genentech Hematology’s
key competencies, and served the purpose of
creating an external focus that the most
change-resistant member of the team was
forced to acknowledge. Moreover, the
approach significantly enhanced customer-
relations, as those approached were ready to
help and flattered to have been asked (a
disposition that is often underestimated).
Newly instituted customer surveys revealed
four areas of critical importance to this key
customer group. These were access to clinical
trials; unbiased and sophisticated medical
education programs; a responsive and
knowledgeable sales force; and reimbursement
support. In addition, analysis of the business
unit’s expenditure revealed that it was
spending 24% of overall expenses in areas that
accounted for only 2% of sales (something that
was all the more anomalous as these were not
expected to grow significantly). Resources
were rationalized in a way that, after
reallocation, 100% of expenses were aligned
towards initiatives that drove 98% of current
sales and anticipated future sales growth.
Next, multiple modes of communication
created transparency and initiated candid
feedback. Monthly “town hall meetings”,
quarterly sales-force advisory boards, and
web-based communications through
newsletters and other media began to unite the
business unit’s formerly disparate areas. It was
also made mandatory that the entire marketing
department spend at least one day per quarter
in the field with a sales representative, the
better to understand customer behavior, to
foster teamwork, and enhance the
department’s credibility with the sales force.
The team then reorganized around key
competencies that the major customers had
identified as critically important: brand
management, medical education, and key
customer management. Three team leaders,
one for each competency, were established to
create ownership, accountability, and
responsibility for each competency area.
Team members and resources were allocated
to each team partly according to the relative
importance attached to each by customers, and
partly according to the impact of each on sales
and growth. The goal for each competency
team-leader was to become number one in
their area—brand management, medical
education, and key customer management—as
defined by the top 30% of customers who
comprise 85% of sales in a survey conducted
by a third party on a biannual basis.
To reinforce this process of integration
further, all support functions — medical
affairs who conduct post-approval clinical
trials, managed care who support
reimbursement, and nurse-educators who
provide training to ensure safe and effective
product use— were aligned exactly with the
competency areas. For example, before the
reforms, the managed-care team had dedicated
5% of the time of 40 people to supporting
Hematology. After refocusing the business
unit’s structures, the hitherto dispersed
organization was changed to dedicate six team
members fulltime to Hematology, assigned
according to geography and customer.
Frank internal communication was also
deemed to be critically important. One

120 Journal of Leadership and Organizational Studies Hudson, Adamson, & Dornbusch
important step taken was a Gallup Q12 survey
was implemented to monitor the level of
employee engagement and satisfaction.1
Management then made direct, immediate and
transparent changes in response to low scoring
categories, in order to communicate its own
commitment to responding to employee
opinion and indicating the importance that
management attached to remedying areas of
discontent. During each period between
surveys, the team’s reported scores increased
substantially from the 60th percentile in April
2002 to the 82nd percentile by November 2002,
and a further increase to the 86th percentile in
October 2003: an externally assessed index of
high (and steadily improving) morale that
materially contributed to the driving forward
of the momentum for change.
Beyond these questions of morale and
personal fulfillment, a further study was
instituted in an effort to identify the “cultural
norms” – the workplace culture – that
prevailed within the Hematology business
unit. The method employed for this was a
series of confidential individual interviews,
focus groups, and finally a survey of the entire
business unit to confirm findings. The survey
showed a high degree of consensus as to
Hematology’s workplace culture including
these key themes: making a difference in
patients’ lives; pride in being science-led; an
emphasis on speed of execution and
performance; mutual respect and trust among
co-workers; belief in individual
empowerment; and a tradition of collaborative
decision-making. On the debit side, there was
extensive concern about the potential risk that
too much “process” or bureaucracy was an
almost unavoidable concomitant of major
organizational growth. Perhaps most
importantly, addressing all of these issues
1 The Gallup Q12 questions that measure employee
engagement are as follows: “I know what is expected of
me at work. I have the materials and equipment I need to
do my work right. At work, I have the opportunity to do
what I do best every day. In the last seven days, I have
received recognition or praise for doing good work. My
supervisor, or someone at work, seems to care about me
as a person. There is someone at work who encourages
my development. At work, my opinions seem to count.
The mission/purpose of my company makes me feel my
job is important. My associates (fellow employees) are
committed to doing quality work. I have a best friend at
work. In the last six months, someone at work has talked
to me about my progress. and This last year, I have had
opportunities at work to learn and grow (Buckingham,
1999).”
meant recognizing that there was no single
answer. Rather, shaping a corporate culture
requires relentless nurturing through example
and consistency.
Rewards and recognition were also re-
aligned to serve the new strategy. A critical
initiative, for example, was the
implementation of a transparent, cross-
functional, all-personnel review process that
was conducted semi-annually. This moved the
review process from an essentially hierarchical
and linear process – in which the employee
was dependent on his or her direct manager
and chain-of-command – to a broader and
more lateral (and also more transparent)
process of assessing performance and talent.
This new process involves managers
presenting their reports of performance results
and promotional potential in conjunction with
peer-review input and feedback. It is these
reviews that form the basis for promotions,
merit-related salary increases, and stock-
option awards.
The conceptual strategic framework of
this change-management process can be
summarized as a sequence of two phases: first
focus, and then coordination. In the first phase,
in 2002, strategic focus was applied to provide
an external perspective on key customers’
attitudes and needs, to develop a clear and
consistent strategy, create competencies to
position the Hematology business unit
uniquely in relation to its competitors, and to
align internal structures so that they reinforced
efficiency and effectiveness. In the next phase,
in 2003, a new agenda was defined in order to
consolidate the gains made in the previous
year. Here the focus was on coordination: the
coordination of a bold and continuous program
of innovation designed to achieve strategic
ends, while simultaneously affirming the
importance of maintaining “individual
empowerment” – the antidote to centralizing
bureaucracy – as the primary means of
achieving team efficiency and transactional
speed.

From Leaders to Leadership Volume 10, Number 4, 2004 121
Genentech, Inc: Hematology Employee Engagement Survey
Wave 1 Wave 2 Wave 3
Gallup Q12 Questions v. Percentile Ranking in Gallup Dbase 4/02 11/02 10/03
This last year, I have had opportunities at work to learn and grow. 68th 69th 82nd
In the last six months, someone at work has talked to me about my progress. 52nd 71st 85th
l have a best friend at work. 79th 83rd 66th
My associates or fellow employees are committed to doing quality work. 84th 92nd 92nd
The mission or purpose of my company makes me feel my job is important. 77th 92nd 94th
At work, my opinions seem to count. 39th 77th 74th
There is someone at work who encourages my development. 53rd 65th 79th
My supervisor, or someone at work, seems to care about me as a person. 51st 69th 73rd
ln the last seven days, I have received recognition or praise for doing good work. 54th 65th 78th
A
t work, I have the opportunity to do what I do best every day. 40th 78th 73rd
l have the materials and equipment I need to do my work right. 40th 67th 73rd
I know what is expected of me at work. 29th 45th 47th
Overall Percentile Ranking 60th 82nd 86th
In this practical context, leadership has
come a long way from the Romantic image of
the imperious corporate chief imposing his
will – some supposedly far-sighted and almost
certainly flawed vision – on his submissive
followers. Rather it has become, in part, a
corporate, collegial relationship. In place of
linear, top-down management, there is
dialectic that enables a number of potentially
conflicting interests to be maintained in a state
of dynamic and creative tension.
By choosing and implementing this
approach, the Hematology team is attempting
to achieve a synthesis – or rather, a form of
carefully poised balance – between focus and
coordination in order to create the strategic
and tactical agility that is required to deal
nimbly and effectively with the challenges that
will come with future external change. For that
the future will bring various forms of
exogenous change is almost the one item of
certitude in a highly volatile and otherwise
unpredictable environment. No single
leadership style – still less the particular vision
of any single “leader” – will be self-sufficient
in this world of unavoidable change.
Conclusions
The accelerating pace of globalization,
communications, and technological
innovation; the changing patterns of cross-
border capital flows; the fluid state of
corporate mergers and partnerships; all these
have created – and will continue to create for
the foreseeable future – fundamental shifts in
the ways in which business is conducted.
Where many old-fashioned – and still widely
current – leadership models may provide
perspectives from which to solve specific
business problems (particularly the challenge
of change within the contemporary business
world). The task of discerning external
changeand translating that discernment into
strategies for internal corporate change – in
terms of evolving organizational structures,
group culture, and styles of personal
interaction – stands as one of the most
enduring challenges of leadership.
Yet the leader who believes that
leadership is about the leader’s qualities alone
looks almost certain to fail. As we have
suggested here, even the task of discerning
what needs to be changed can – and arguably
ought to be – a collegial endeavor. It requires
participants to analyze problems from multiple
viewpoints, to think imaginatively, and tease
out the complexities of the problem. This
approach may make the required action seem
more complicated and intractable rather than
less. Ultimately, however, only by beginning
with (and facing up to) the complexities of the
challenge of change can we create any
practical and useful conclusions, as opposed to
virtuous-sounding – but in the end, simplistic
and unhelpful – generalities about the nature
of leadership qualities.
The case of the Genentech Hematology
business unit illustrates a successful instance
of discernment of the need for change and the
effective implementation of a response to that
need. The result of the transformation,
however, was not the creation of yet another
different, but – in time – equally inflexible,
series of structures, equally doomed to
obsolescence. Instead, the cultural
transformation produced an environment in
which the uncertainty of the future is taken as

122 Journal of Leadership and Organizational Studies Hudson, Adamson, & Dornbusch
a given, and new arrangements have been
created that are inherently Protean: able to
adapt and respond to new circumstances as
they arise. Instead of seeking a single, once-
for-all solution, the new structures foster and
manage a dynamic tension between “focus”
and “coordination”: between the ongoing tasks
of external and internal analysis (with its
tendency to explode current expectations and
assumptions), and the need to devise and
implement responses to those findings in such
a way that both utilizes most effectively – and
also inspires the confidence and enthusiasm of
– the company’s human resources.
-3-
Genentech, Inc.: Hematology Franchise
Genentech, Inc.: Hematology Franchise
Organizational Evolution
Organizational Evolution
High
FOCUS
Low Low High
COORDINATION
2002
•Customer led
•Strategic simplicity
•Relentless key
competency focus
•Organizational
alignment
+ 2003
•Bold and continuous
innovation
•Individual engagement/
Team speed
•Sustainable high
performance results
Three findings may be highlighted. First,
on the “focus” side: becoming a customer-led
organization raises the debate from turf battles
to teamwork; customers or markets are often
useful guides precisely because they transcend
the corporation’s existing functional
boundaries and allow teams to analyze
opportunities and allocate resources
objectively. Second, if the focus is correctly
adjusted – through strategic simplicity,
relentless prioritization of the questions that
matter most, and the alignment of the
organization’s resources to actual needs – then
the benefits are substantial. This internal
cultural change will in turn drive innovation,
improve transactional speed, and produce
substantive results. Third, cultural change is
fundamentally a collective, collegial exercise
in which sensitivity to the particularities of
context is all-important. No single approach
will be effective in all circumstances.
Yet if success is a matter of shared
responsibility, it would be naïve to suggest
that responsibility is shared equally. In
instigating the process of re-assessment and
managing the dynamic tension that results
from initiating reforms – determining the point
where countervailing forces are counterpoised
most beneficially and creatively – there
remains a role, albeit a heavily modified one,
for “heroic” leadership. Personal courage is
inevitably required to inaugurate (and
maintain) any process of change management,
not least because a decision to retain the status
quo, or to resist calls to change course, often
seems the easiest and least risky management
decision. While change for change’s sake can
often be a spurious substitute for properly
focused leadership, the avoidance of change
can be equally culpable: the result of either
timidity or complacency, and the very opposite
of effective leadership. However, once a
properly informed decision has been made as
to the need for change – usually a moment that
requires individual leadership – the paradox is
that, when it comes to implementation,
“leadership” is fundamentally a group
exercise. Leaders are constantly asking the
seemingly unreasonable by requesting that
individual team members make a total
personal commitment to a particular program
of action in the context of a future that is
predominantly uncertain.

From Leaders to Leadership Volume 10, Number 4, 2004 123
Finally, effective leadership can be about
the construction of beneficent illusions – at
times, for instance, minimizing the impression
that instigation of change is the consequence
of a fiat from on high in order to foster a
corporate sense of empowerment. Successful
leadership may even depend on concealing the
extent to which the leader is responsible for
the new directions taken by the led. Hence,
leadership is also a network of relationships, a
polyvalent phenomenon that can only be
defined in the context of the leader’s
relationship with his specific constituency. It is
unsurprising, then, that most change
management initiatives fail – not least because
they rest upon flawed or simplistic
expectations as to the varieties of leadership
on which effective change-management
depends. Somewhat ironically, this survey of
the tempests of organizational change
reaffirms the importance of the traditional
“heroic leader” in at least one respect: if
managers are to be effective in leading others,
they must start from a position of authentic
self-knowledge and the acknowledgement that,
however extensive their powers, the successful
implementation of change will always partly
rely on the co-option rather than the
compunction of the led. As Henry David
Thoreau reminds us, “things do not change, we
do.”
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