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Drake At IGIA: Leadership Is All About Relationships

Posted By: Terrie   |   Posted On: August 7, 2012

by Terrie Ellerbee/associate editor

Leadership development is not a luxury, according to Bill Drake, a faculty member and the director of executive education for the Food Industry Management Program (FIMP) in Cornell University’s Department of Applied Economics and Management.

“I hope to convince you that leadership development is not really an option,” he told attendees at the Iowa Grocery Industry Association (IGIA) annual convention in Dubuque July 11.

Drake is “not an academic by trade,” and has retail experience as a former employee of Supervalu, where he served as VP of marketing and real estate for Cub Foods, VP of strategic planning and key wholesale customers and VP of strategic planning, marketing and real estate, Save-A-Lot. He currently serves on the board of directors for Coborn’s Inc.

His IGIA presentation was entitled “Preparing for the Future: Are Your Leaders Ready?”

Today’s environment is difficult for grocery retailers, even more so than it appears, he said, because, while there have been baby steps in terms of growth and dollar sales, there is a “more ominous trend of unit decline … over the last couple of years, our industry has declined in real terms for everyone, and that’s the point we’re starting from today.”

Change is continuous, and people, businesses and societies must adapt or die. On top of that, change is happening in real time.

“We turn on our computers, turn on our smart phones, we turn on our televisions, and we aren’t reading about change or seeing change after it happens,” Drake said. “We’re seeing it as it happens. As a result, as a society and as businesspeople, we become calloused to change.”

He described current changes as being “outside the experience set of our executives.”

One change taking place now is the aging of the population.

He gave the example of Florida, where the population is on average older than in other states. Lakeland-based Publix has adapted its stores to that population, equipping them with brighter lights, places in the store to rest and larger signs that are easier to read as well as employing many seniors in its workforce.

“They very much cater to the kind of environment they’re operating in. In the last census, 17.3 percent of the population of Florida was age 65 or older,” Drake said. “What we fail to realize is that in 12 years—2024—the entire country is going to be older than Florida is today. This is going to have an absolutely profound effect on our business and on the grocery sector across the nation in terms of the customers that you serve, in terms of the people that you employ and the way that you run your business. We need to get ready.”

Another big change is the recession.

“This is something that the leaders of most retail companies, most CPG companies, have never experienced,” Drake said. “We have never experienced a downturn of this length and of this depth. And this is what we have to get used to—because this is going to be with us for a long time.”

Consumer sentiment is historically low, too, and has been heading downward for 12 years, he said, even before the recession.

All of this adds up to a “new normal,” a term he said is overused. The consumer is leery, restrained and skittish—but most importantly in play.

“They’re there to grab if we have the right strategies and we’ve adapted to this environment in an intelligent way,” he said. “We’re going to have a very difficult consumer environment, which is going to cause us to have to adapt in many, many new ways.”

As the industry copes with these changes, “the plate is full of new initiatives,” Drake said, “which all the more calls for new kinds of leadership.”

Another important aspect of the changing retail landscape is technology. Last year, Cyber Monday, which is the Monday after Thanksgiving, had larger increases than Black Friday, the day after Thanksgiving and typically the biggest shopping day of the year. Brick-and-mortar stores saw a 6.6 percent increase in sales while online sales grew 33 percent to $1.3 billion vs. the prior year. Sales made from mobile devices accounted for 6.6 percent of online sales vs. 2.3 percent in the prior year.

Smartphone penetration reached 44 percent in 2011, and “is moving faster than we can measure it,” Drake said. “The latest statistic that I have from earlier in 2010 is around 53 percent and rising by the day. This has huge implications for the way we behave, the way we communicate and the way we shop.”

Retailers like Tesco and Peapod are adapting and making inroads with technology, he said. Both have digital representations of stores with digital items displayed on digital shelves. Shoppers use their smart devices to select items and place orders, which are then delivered to their vehicles. Amazon Fresh is an online ordering and delivery service in Seattle that Drake said is now quietly being put in place in other locations around the U.S.

“This is stuff that a guy my age, 55 years old—this just makes me want to go home to the farm and get on the tractor and drive,” Drake said. “This is not something I want to deal with. This is what leaders all over the country in the industry are thinking about. This is the stuff we’ve got to deal with in the future.”

Another challenge for leaders in the retail food industry is not new. It is Wal-Mart. The important statistic, he said, is that it now sells 20 percent to 22 percent of the food sold in the U.S.

“After a rocky start our industry … has learned to exist pretty well with Wal-Mart. As a matter of fact, over the last couple of years the rest of the industry has taken some market share back from Wal-Mart,” he said. “That’s the good news.

“The recent news is that Wal-Mart has righted its ship a little bit,” he said. “They’ve returned to their roots in terms of the productivity loop, in terms of emphasizing what they do well, which is supply chain-based low prices, and they’ve righted their sales trends. Over a period of more than a decade, Wal-Mart has raised gross margins, and, not surprisingly, got a little bit less price competitive. But very recently it reversed this trend, and it is not good news for the rest of the industry that it is becoming more price competitive.”

Another challenge is the proliferation of grocery offerings at non-traditional outlets like dollar and drug stores.

“The changes in the operating environment are more than ever before taxing or exceeding the capabilities of some of our leaders,” he said.

He said independent retailers have a bit of a different leadership imperative—and perhaps one that is more significant. These operators are competing in many cases against retailers with much deeper pockets, so they have resource constraints.

Entrepreneurialism, which he described as “both the curse and the strength of the independent retailer,” allows them to “turn on a dime and out-localize competitors,” but it also can take away the focus. An independent may be concerned about opening a new location or different type of store, and lose sight of core issues.

Independent operators lay it on the line every day, he said, without the insulation publicly held companies enjoy. Also, independent retailers’ leadership can be “particularly complex” when it comes to succession because of the family dynamics in play.

Leadership is all about teamwork

In his program, Drake asks students to come up with a list of great leaders. The results have a “remarkable consistency,” he said. Among the answers: Patton, Churchill, Lincoln, King and recently, Steve Jobs.

Then Drake puts up a slide of a tiny portion of the Sistine Chapel and asks students to guess what it is. Michelangelo is credited with the 500-year-old masterpiece, but he didn’t do it alone as many believe.

“What the history books don’t tell you is that Michelangelo was basically a general contractor,” Drake said. “He was the boss of 200-some artisans, the best that Europe had to offer—the best painters, the best plasterers, the best technicians—and he orchestrated this, but he didn’t single-handedly by any stretch of the imagination construct this magnificent work of art. We can’t even at this state tell the parts that he did and the parts that his subcontractors did.”

The lesson is that leadership isn’t about the individual. It’s about achieving great results through the work of a team.

“We have in our hearts and our minds this notion of what we call the ‘myth of the great man,’ that leadership is a singular activity that’s reserved only for those who can give great speeches and can exhibit courage against daunting odds,” Drake said. “That is a 19th century theory of leadership that pervades to this day.”

“What the history books record is great accomplishments … the iceberg that you see above the water,” he said. “The rest of leadership, the tough part of leadership, the managing of relationships, managing conflict, forming a team, providing feedback, adapting to change, all of that stuff is below the water. That’s the part that makes leadership tick. Leadership is absolutely about teamwork.”

There are leaders and there are managers

There is a difference between management and leadership, although the terms are used interchangeably.

“Management is all about coping with complexity,” Drake said. “Leadership is all about coping with change.”

Management involves budgeting, planning, organizing, staffing and problem solving.

“Leadership is about the bigger picture, longer term, things that we tend to spend much less time on as individuals in our companies,” he said. “We need both.”

He asked what happens when an organization is 99 percent management and 1 percent leadership.

“You get the department of motor vehicles,” he said. “The organization that has run the same way forever and is a very unsatisfying experience for all involved. People don’t like to work there. People don’t like to go there.”

Conversely, he held Webvan up as an example of 99 percent leadership and 1 percent management.

“This was the internet grocer of the early 90s,” he said. “They had an absolutely brilliant idea, very visionary, way ahead of their time, but they burned through about $2 billion in cash in six months.”

The leadership didn’t understand cash flow and profit and loss. There was no planning, no budgeting, Drake said. High-performing companies, like Apple, reach a balance between the two.

‘Groupthink’ a great danger to leaders

Drake showed attendees a photo of the space shuttle Challenger, which exploded 73 seconds into launch on Jan. 28, 1986. He said it is one of the most studied leadership phenomena in business schools today.

“Putting the tragedy aside, the data was on the table in front of NASA, in front of Morton Thiokol (who designed the solid rocket boosters with the catastrophic O-ring flaw) that clearly showed that in freezing temperatures, the O-rings on the primary rocket booster stood a very good chance of failing. They made the decision to launch in freezing temperatures, and lo and behold, it failed,” Drake said.

The commission that studied the incident said the cause was the O-ring But more than that, the fault laid with the organizational structure, the decision-making process and the leadership of NASA in allowing it to happen, a phenomenon called “groupthink.”

Drake describes it as faulty decision making that results from a group of people whose desire is to maintain cohesion and goal orientation at the expense of making the right decision.

“The decision makers at NASA and Morton Thiokol literally talked themselves into this launch,” Drake said. “They were under pressure from the media; they were under pressure from the presidency. They had an on-time launch, and they talked themselves into it, despite the fact that there were scientists who were pounding their fists on the table saying, ‘This is the wrong thing to do.’”

This happens in business every day, he said, not to the tragic end of Challenger of course, but leaders must find ways to avoid groupthink.

For starters, leaders shouldn’t walk into a room and start a conversation with employees by saying, “Folks, this is the best idea that’s come across my desk in 20 years … this is going to be great for our company. Now, what do you think about it?”

Drake said, “One of the greatest dangers leaders face in their organizational life is people telling them what they want to hear.”

 Leaders must know themselves

In the Food Industry Management Program (FIMP) at Cornell University, executives must go through a rigorous assessment process involving 360-degree feedback, which means it comes from superiors, bosses, owners, peers, subordinates, and so on.

“This is a life-changer for most people because you learn about how you interact with people, and it has impacts on your personal life as well as your professional life,” Drake said. “So you need to do this.”

Drake shared the Hans Christian Andersen fable “The Emperor’s New Clothes,” to explain the first commandment for leaders: know thyself. In the story, two swindlers convince a vain and somewhat ignorant emperor that they’ve got magic thread that only the most sophisticated and smartest people can see. They convince the emperor to let them sew a beautiful suit of clothes for him out of this magic thread. Once they give him the “suit,” the emperor parades around naked and no one says anything about it for fear of appearing ignorant or incurring his wrath. Finally a child shouts that the emperor is wearing nothing at all.

“This is what we say is the biggest danger that leaders face in their organizational lives, and that is not recognizing that you typically are not getting clear feedback from folks,” Drake said. “Folks have a tendency, particularly subordinates, to tell you what you want to hear.”

Leaders must be themselves, and not fall prey to the myth of the great man.

“Leadership doesn’t require you to become a great speaker,” Drake said. “Leadership doesn’t require you to be the smartest man or woman in the room. It doesn’t require you to be the greatest person in the room. You will get much further in your leadership journey if you are authentic.”

People respond to authenticity. The only thing that cannot be overcome in a person’s career journey is a betrayal of trust.

“Trust means everything,” Drake said.

The final point he made in the presentation at the IGIA convention was about whether or not people can change. Can someone develop leadership skills they weren’t born with?

Drake said the perspective in the Cornell University program that there is a “chain of relationships” that begins when personality is formed at about the age of six or seven.

“Your personality determines your preferences, whether you like crowds, whether you like to be alone, whether you’re introverted, whether you’re extroverted, whether you like spicy food or you don’t like spicy food,” Drake said. “You act according to your preferences, and your preferences are defined by your personality.”

Preferences guide behavior, and that is what people are measured by. People form their perceptions of others based on their behaviors. It is possible to alter behavior—an introvert can learn to speak in front of crowds, for example—that isn’t necessarily in line with preferences.

“Remember, leadership is all about relationships,” Drake said. “We take the tact that leadership is an observable and measurable set of skills that can be altered and changed for the positive over time once we understand where you’re starting from.”

In the feature photo at top: Bill Drake, a faculty member and the director of executive education for the Food Industry Management Program (FIMP) in Cornell University’s Department of Applied Economics and Management, speaks to attendees at the IGIA annual convention.

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