DOING THE RIGHT THINGS RIGHT.

OUR RESEARCH AND ANALYSIS IN OUR book, Lessons From the Top, indicates that when leaders succeed in doing the "right" things, both personally and within their organizations, the traditional measures of success inevitably follow. Analyzing the careers of 50 exceptional business leaders, we found, not surprisingly, that their stories were as different as the individuals themselves. What was surprising was that we discovered six principles that all of the leaders on our list, to a greater or lesser degree, shared.

THE SIX CORE PRINCIPLES

1. LIVE WITH INTEGRITY AND LEAD BY EXAMPLE

2. DEVELOP A WINNING STRATEGY OR "BIG IDEA"

3. BUILD A GREAT MANAGEMENT TEAM

4. INSPIRE EMPLOYEES TO ACHIEVE GREATNESS

5. CREATE A FLEXIBLE, RESPONSIVE ORGANIZATION

6. TIE IT ALL TOGETHER WITH REINFORCING MANAGEMENT AND COMPENSATION SYSTEMS

There is one other notion that underpins these six principles--and keeps the wheel moving steadily ahead. The best-managed companies led by the most successful business leaders apply every one of these principles constantly and consistently every day. There are no contradictions. While successful companies have different strategies, values and beliefs, different strengths and weaknesses, and different organizational approaches, they are thoroughly consistent within themselves.

1. LIVE WITH INTEGRITY AND LEAD BY EXAMPLE

Living with integrity and leading by example is the internal sense of right and wrong that should direct everything a successful person does. It is also, as Elizabeth Dole says, "the one thing that every person has 100 percent control over." Integrit builds the trust in senior management that is common among--and critical--for high-performing organizations.

2. DEVELOP A WINNING STRATEGY

Today's competitive environment increases the need for winning strategies. As Larry Bossidy of AlliedSignal told us, "I think the most significant challenge businesses will be facing over the next few years is the acceleration of intensity. Because of that, you need to be in a business where you have a competitive advantage or you are going to get killed. I don't think that any business franchise that I know of is secure.

In this environment, a leader must be the source of creating a winning strategy, based on a company's competitive ventures and fundamental customer needs. This demands careful listening to the customer and keeping a continuous eye on the competition.

3. BUILD A GREAT MANAGEMENT TEAM

The importance of this principle simply cannot be overstated as a core component in business leadership. As Michael Dell of Dell Computer says, "One person cannot do anything alone." Says Steve Case of America Online: 'There is a one-to-one correlation with the quality of the people on a particular project and the quality of the project's leader. Since companies are really a collection of people, results can be tied directly to the quality of the management team."

4. INSPIRE EMPLOYEES TO ACHIEVE GREATNESS

Employees today seem to seek a deeper meaning from their work. Another way to say this is if business leaders are to be successful, more than ever they need to tap into employees deepest motivations and desires. This is entirely consistent with how the best business leaders lead. "Management is what used to be required to run a company," says Bob Eaton of DaimlerChrysler. "Today it's leadership. A manager basically controls, establishes plans, makes a budget, allocates work, and tracks results. A leader is much more focused on vision and beliefs; he or she inspires people and breaks roadblocks so that people can accomplish more."

The basic concepts leaders on our list mentioned when they talked about inspiring people were remarkably consistent: Communicate, listen carefully, tolerate failure as a learning experience, build on people's desire to make a positive difference, and maintain commitment to innovation, creativity, diversity, social responsibility, and continuous development. In today's sophisticated workplace environment, actions speak louder than words. If those people are only going through the motions, corporate performance will be substandard.

5. CREATE A FLEXIBLE, RESPONSIVE ORGANIZATION

Much has been written about Jack Welch. But until now his invocation for organizations to become much more informal has not been discussed outside of GE. The concept will catch on; it has to. With today's information technology facilitating instantaneous global communications, the successful business leaders will be those who break down slow, overly formalized hierarchies and decision-making processes. Welch has coined a phrase to capture the concept. He calls it "the power of the informal." The key, in Welch's words, "is to have the right people solving problems, no matter where they are located geographically or hierarchically."

Once you have the right people, they must be able to move quickly. The best leaders have redesigned their organizations to make sure decisions can be made fast. "Everything today is speed," says Bill Steere, chairman and CEO of Pfizer. "Whether it's in finance, research, development, the regulatory process, or marketing, everything is oriented toward speed. For example, all of the things that we used to do sequentially in research, we now do in parallel. This increases the risk--and the expense. But if you win, you win faster and bigger." Of course, speed cannot be pursued outside of thoughtfulness, and analysis still counts. But companies no longer have the luxury of making decisions after all the facts are in and risks analyzed.

Having the company's values filly understood by everyone is another method of speeding up decision making, says Southwest's Herb Kelleher. "It makes everything a lot easier. If someone makes a proposal, we don't spend a lot of time on it if it's contrary to our values. We just say, 'No, we're not going to do that.' Yes. we might be able to make a lot of money, but it doesn't make any difference. It's nor what we stand for. We can move quickly and say, 'Okay, what's the next item?'"

6. TIE IT ALL TOGETHER WITH REINFORCING MANAGEMENT AND COMPENSATION SYSTEMS

To be most effective, management systems such as compensation practices, information systems, and performance measurement must be consistent with and reinforce the values and strategy of the organization.

At Pfizer, where shareholder value has increased at a five-year compounded annual rate of 51 percent, faster than any other pharmaceutical company, CEO Bill Steere says that 85 percent of his income is performance-based. His long-term incentives are tied to two measures, shareholder return, and EPS growth, compared to the company's peer group.

Compensation systems are also one of the main means for retaining key employees. At many companies highly valued stock options and restricted stock reach far down into the organization and represent incredible barriers for companies trying to recruit managers away. At GE, there are more than 2,000 employees who hold unexercised stock options worth at least $1 million, plus thousands of others who are millionaires due to the company's compensation programs coupled with the outstanding performance of GE's stock.

At Cisco, both the corporate strategy and culture is focused tightly on servicing the customer. As a result, John Chambers and his ream, just like Citigroup's Sandy Weill, measure customer satisfaction in a variety of ways. The company ties compensation to what it finds. "We have a customer survey once a year." says Chambers. "We also measure the satisfaction of every single customer contact on a scale of one to five. We pay every manager in our company based on that survey and these results."

It is easy to lose sight of what's important, especially under the relentless time pressure of today's IT-enabled world. But leaders who drive their companies based on the six core principles inevitably create substantial value for their shareholders, customers, and employees alike.