Part of our research are cases about companies in which we used our MEL-Index methodology and conducted a series of face-to-face interviews with top-managers and high potentials from middle management. The results laid down in company cases. Read more about the cases :
German Automotive Supplier
The participating company is a more than 200 year-old family-owned and family-run Germany-based supplier to the automotive industry with current customers in Germany, France, Spain, UK, Japan, USA and Brazil and production facilities in Germany, France, Spain, UK, Brazil and the USA. Their revenue was about 450 Mio € in 2008 while employing nearly 4000 employees worldwide. Their strategic goal, established in 2005, is to become a 700 Mio € company by 2010. At the time this required an ambitious growth rate of almost 10% per year.
Continued family control of the company very much determines institutional beliefs and values which, in turn, greatly impacts the way operational activities are undertaken. They focus strongly on remaining independent from outside investors, which requires a healthy cash flow position and above-average returns on capital employed. Their values emphasize long-term-sustainability for the company and the creation of trust with their customers, suppliers and employees.
To help reach their growth targets, the company launched a leadership development program to be attended by senior and mid-level managers. It was during this program that the MEL-Index was administered to all managers present. The Management group of the company had the following structure. The two managing directors, who also had the titles of CEO and CFO, were legally the sole management team of the company. The CEO was a family member who had taken over from his father in 2003, the latter having run the company for some 25 years. The operational management team contained another 5 members including the heads of production, research and development and HR. A broader management group — including the operational management team — of 18 people was formed to contain all country heads and some corporate functions.
The leadership development program was designed for the 18 members of the broader management group plus another group of 24 direct reports (“middle managers”). In the total group of 42 people, 7 nationalities were represented. These senior and middle managers formed the sample for our research in this company.
We asked all attendees to do a self evaluation of their own MEL capabilities along with a peer MEL evaluation for each of their colleagues in their specific group (management group vs. direct reports). In addition, we requested that the middle managers do an evaluation of all members of the management group, included their direct superior.
A key initial observation was that there was some considerable deviation between the self evaluations and the peer evaluations of the two managing directors. In particular, the CEO saw himself as a leader, while his peers saw him as much more of a manager. This could be a serious concern, because the general expectation of a CEO is for him/her to be a strong leader. But in this case, other members of the operational management team are probably expressing a perceived gap between expectation and their experienced reality. As the CEO saw himself as a strong leader, he feels no need to change. However, when asked to explain their ratings the management team felt that the real feature of the CEO’s leadership style was a lot of day by day micromanagement. On the other hand, the direct reports (“middle managers”) rated the CEO quite strongly on the leader and entrepreneur dimensions. This was possibly because ratings were based on expectations rather than direct experience.
The CFO ratings were a little different, but no less worrying. He saw himself to be an even stronger leader than the CEO, a very week entrepreneur and an average manager. His peers evaluated him as average on all three dimensions. The middle managers saw him as a strong manager and average on the other two dimensions. The CFO’s self perception as a strong leader resulted – according to his peers and the middle managers — in numerous misunderstandings and difficulties in the operation of the day to day business.
Another notable observation was that the weakest dimension on individual ratings for the management team was for the entrepreneur. There are at least two plausible explanations for this. The first is that senior managers are unlikely to be strong entrepreneurs themselves, but act as influential leaders to facilitate entrepreneurial activity in other parts of the organization. There may be some support for this point of view as the middle manager rating was higher on the entrepreneur trait. A less positive explanation is that senior managers did indeed lack the entrepreneurial mindset and this was reflected in their weak entrepreneur scores. This would not bode well for future innovative company initiatives.
After all participants were confronted with the MEL results, the middle manager group commenced a discussion about the level of innovation in the company. Several high potential opportunities generated by this group were rejected by the top team, including the head of research and development. These ideas were in the area of platform innovation involving new materials, new product versions, etc. The top-team felt that the company had been innovative for more than 200 years and continued to be so.
The MEL-evaluation of the head of research and development shows that he sees himself as a very strong manager. This view is shared by his peers. However, the middle managers evaluate the R&D head as just average on all three capabilities. If the R&D head focuses on his perceived management skills, then it is quite possible that he will not take too much risk to find out the potential of new ideas and will emphasize a rigid and cautious development process. Indeed, the middle managers described this approach as the core of the innovation process in the company. Such a reserved view of opportunity search is supported by the weak entrepreneur scores of the entire top team (see figure 8).
The first reaction of the senior management team was to voice surprise at their individual and peer evaluations on the leader- and manager-dimensions. In particular, there was general agreement that stronger leadership was needed at the top of the company (despite the self-evaluations of the CEO and CFO!). In addition, concern was raised at the weak entrepreneur scores. It was felt that the company’s most senior executives should be much more future oriented, exhibiting stronger leader (and perhaps entrepreneur) than manager traits. The program participants immediately started the discussion as to how they got into the present position and how their promotion and selection procedure should be modified. Unlike the opposition to R&D improvements, changes were quickly approved (a less threatening action to top managers?) and the decision made to aggressively look for leader quality middle managers to move into top positions in the near future. Subsequently, two leader oriented people have been promoted recently into the top team.
Company developments since the research
Because of a strategic decision to concentrate mainly on the German and Japanese car manufacturers, all other operations were sold and the company reduced to nearly half the size. They are now in the range of a 250 Mio € company with less than 2000 employees. At present they are struggling with the current financial crisis along with all other players in the automotive industry.
Just prior to the crisis taking hold, the CEO and the CFO were asked to leave and a new CEO and CFO appointed. This move was initiated by the head of the advisory board, a family member and the previous CEO, out of concern for the company’s health and progress. He had run the company for about 25 years and was evaluated as a strong entrepreneur and leader. Of course our findings about the weaknesses of the CEO and the CFO did not directly precipitate their leaving, but it did draw to the attention of others the need for more leader-and entrepreneur-capabilities at the top of this company. And so the head of the advisory board acted.