Creative leadership: jazzing up business.

Want an asset your competition can't duplicate? Hire nonconformists; give them the tools to create; and set them free.

Some corporate leaders attribute their success to a critical core competency. They argue that their efforts at strategic reorientation create major competitive advantages or maintain that they have smoothed operations through cost reduction, improvement of quality and services, or reducing the development time of new products. Others credit cutting-edge technology or sophisticated information systems with driving the success of their firms. But at the root of each of these various advantages is the most valuable asset of all: creative talent.

Competitors can catch up on core competencies by adopting new technologies. Or they can close the gap by benchmarking and reengineering their way into the lead. But creative talent offers a corporation a long-term, unique, inimitable competitive edge. Individuals who consistently produce new, important, and exciting ideas allow companies to continually reinvent themselves and make corporate success happen. Yet, creative talent is one of the least realized workplace assets, perhaps because many leaders are not good at recognizing creative individuals or don't provide the right environment for channeling their abilities.

Although creativity is often thought to be the purview of painters, musicians, writers, and other artists, it exists in every field of human endeavor. To my mind, the discovery of penicillin belongs in the same class as a Mahler symphony. The airplane is an example of a truly creative idea, as was the concept of the wheel in its time. Truly creative people experiment constantly, and either apply knowledge in entirely novel ways or throw out preconceived ideas altogether.

Business itself has had its share of creative characters - though major contributions to the corporate world don't often elicit the same excitement as do those in, say, the arts. Creativity in organizational design tends to be of a much subtler nature. Does anyone remember the inventor of double bookkeeping? Time-and-motion studies? The designer of the matrix organization? Or how about the contribution of Alfred Sloan in introducing GM's divisional structure?

Furthermore, the business environment by nature can stifle creativity. While artists and scientists often work in isolation, organizations are composed of groups, and group dynamics are not always sympathetic to the nonconformist nature of a creative individual. As a result, truly creative types are often seen as troublemakers and fail to rise through the ranks or, worse yet, are driven out of the company.

What can corporate leaders do to attract, develop, and keep creative people in their organization? The leadership challenge lies in creating an environment that accepts diversity and offers a high degree of freedom where creative people can thrive.

"I'm absolutely certain that success is a question of the kind of people you have and the way you motivate them," says Richard Branson, founder and chairman of U.K.-based Virgin. "If you can motivate your people, use their creative potential, you can get through bad times and enjoy the good times together. If you fail, your company is doomed not to perform well."

For Branson, motivating employees means a loosely structured organization that embraces change, allows risk-taking, and rewards innovation. "Rules and regulations are not our forte. Analyzing things to death is not our kind of thing," says Branson, whose empire encompasses travel (Virgin Atlantic), communications (radio and television stations, books, and computer/video games), retail (Virgin Megastores), and hotels. "If someone has an idea, they can pick up the phone and talk to me. I can vote, 'Done. Let's do it.' Or better still, they can just go ahead and do it. They know that they are not going to get a mouthful from me if they make a mistake. I love new projects; I love new ideas."

In building Virgin's successful music division, which was later sold, Branson himself applied an innovative approach to expansion. "My philosophy was always that if there were 50 people in the building, I would go there and ask to see the deputy managing director, the deputy sales manager, and the deputy marketing manager. I would put them in a new building and say, 'You are now the managing director, the sales manager, and the marketing manager.' Then when that company got to a certain size I would do the same thing again until cumulatively they became the biggest independent record company in the world."

A similar type of decentralization is a hallmark of Percy Barnevik, chairman, CEO, and president of Stockholm, Sweden-based ABB AB (ABB), who in 1987 engineered the largest cross-border merger in history. Combining ASEA, a Swedish engineering group with Swiss competitor Brown Boveri and then adding more than 100 companies in Europe and the U.S., he created a $30 billion player with a portfolio that encompassed marketing electric power generation and transmission equipment, high-speed trains, automation and robotics, and environmental control to markets worldwide.

WALK THE TALK

"Obsession with decentralization has been a theme throughout my career," says Barnevik. "I've seen the deficiencies of the big corporation, the dangers of bureaucracy, the effects of the ivory tower where people sit in their rooms, far away from their customers. . .the absence of the creative, entrepreneurial spirit. I'm sure you've heard about the person who, on going into a big office and asking, 'How many people are working here?' receives the answer, 'half of them.' This may be a worn out old joke, but there's some truth behind it. I want my people to constantly test their imaginations, their ability to move further.

"To create this change mentality, this creative spirit, [I] have to show [my employees] that the environment, the competitors, and the customers are changing. Thus, in order to survive, we have to change. You know the expression, 'When you are through changing, you are through.'"

To boost creativity, he emphasizes leading by example. "The most important thing is to live that way yourself," he says. "If you talk about speed in action, yet procrastinate on difficult decisions, you are not believable. I and the members of my executive committee must 'walk the talk' and live up to what we say."

From the examples of Barnevik and Branson, we can observe several effective leadership traits, among them solid doses of emotional intelligence, playfulness, and curiosity, a receptivity to new ways of doing things, and a skill at getting the creative potential out of their employees. What can also be noticed is that effective leaders take on two roles, a charismatic one and an architectural one.

The first role involves the ways in which leaders envision, empower, and energize to bring out their employees' creative potential. The corporate vision, based on the leader's core values and beliefs, is the key building block for the creation of strategic goals and objectives. To entice others to take ownership of this vision, charismatic leaders express a general dissatisfaction with the status quo and present a viable alternative. They build alliances and use captivating imagery to engage employees. Branson, for example, uses a David-and-Goliath theme, invoking the threat of powerhouse competitors, such as British Airways and Coca-Cola to motivate his employees.

The charismatic leader fosters a sense of ownership among employees and enhances self-esteem by empowering employees throughout the organization, pushing authority, responsibility, and accountability from the upper echelons down to the lower levels of the organization. Energizing employees - and channeling that energy in the right direction - is the final element of the charismatic role of leadership. Barnevik has found that engaging employees in a lifelong battle against strong adversary companies can help focus employee attention on fighting outside competition rather than competing internally with one another.

The architectural role of leadership is more structurally oriented, encompassing organizational design and the institution of control and reward systems. For larger firms, economies of scale are not without serious diseconomies of size, which may include a sense of depersonalization and alienation. To minimize these negatives, effective leaders seek to, as Barnevik puts it "recreate small company dynamism and creativity," which means spinning off divisions in such a way that his organization consists of a number of small autonomous units. For this type of decentralization to succeed, leaders must seek out individuals who are inner-driven, eager to learn, and willing to adapt. Close customer contact also serves to increase employees' sense of ownership and emphasize the importance of superior customer service.

Speed is also essential for creativity. Product life cycles are growing ever shorter, and speed to market is increasingly important. As Branson says, "I can have an idea in the morning and have it implemented in the evening." At ABB, Barnevik has made it clear that it is permissible to make mistakes due to speed - losing opportunities because of a reluctance to make decisions, on the other hand, is unacceptable.

Both Branson and Barnevik realize that two elements make their loosely structured organizations function: sophisticated information systems - which pull geographically dispersed employees together - and shared common values. At ABB, these key values are summarized in a policy bible, while at Virgin, they are more subtly instilled, with new recruits indoctrinated to the corporate culture and all employees participating in workshops, seminars, and meetings, which reinforce the ideals and provide feedback on performance.

But an effective leader cannot stop at encouraging strong performance and instilling creativity in the workplace. High performers today are like frogs in a wheelbarrow - they can jump out at any time. To retain talented employees, leaders must offer material rewards that reflect their contribution to the organization. For example, Virgin's Branson doesn't want his top performers to leave the organization to start their own companies elsewhere, so he makes sure they can become millionaires under the Virgin umbrella. "As a result," he says, "we have made 15 or 20 multimillionaires." In this way, Branson retains aggressive, innovative thinkers by creating an environment that rewards employees who put their entreprenuerial spirit to work internally.

Furthermore, innovation and creativity can and should be applied to the challenge of attracting and retaining creative talent, points out Barnevik. "It's important that our people can feel pride in something beyond the numbers. This is particularly relevant for attracting young people to the company. They are not happy simply to work for a company with high profits. They also like to see a purpose that goes beyond numbers. For example, our company has been pioneering investment in Eastern Europe, spear-heading East-West integration. Many of our people are proud of participating in that process. The same can be said about our work in the environmental field. It's important that a company can be perceived as changing the world in a positive way."

Though unorthodox, these are two examples of companies that are flexible enough to harness the creative potential of their employees. It is this brand of loosely structured organization that will prosper in the global business world of the 21st Century. The era of the highly structured organization is a fossil of the past. Rigidity in design, a hierarchical structure, and power-hoarding are recipes for corporate disaster.

A metaphor for the progressive workplace of today is that of a jazz combo, where all musicians work together to produce harmonious music, yet each has ample room to improvise. The creative ability of every musician must be nurtured to draw out the best possible solo performance, and the most talented players rewarded for their skill and hard work. Only then will the whole group perform to the best of its collective capabilities.

Manfred F. R. Kets de Vries is the Raoul de Vitry D'Avaucourt professor of human resource management at Fontainebleau, France-based INSEAD, and is also a practicing psychoanalyst in Paris.