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Level 5 Leaders Characteristics and Operating Style

Discipline Vs Freedom

And when a culture of discipline is combined with a spirit of entrepreneurship the organization performs extraordinarily¹. (Refer Exhibit 9.5 for a culture of discipline at Abbott Laboratories).

Exhibit: 9.5 The Culture of Discipline at Abbott

Under the leadership of George Cain (Cain), Abbott laboratories (Abbott) adopted a system called “Responsibility accounting” in 1960s. Under this system the managers were held responsible for all the items of the cost, income, and investment which come under their sphere of activities.

Every manager, no matter what job he is responsible for, was assessed for return on investment (ROI). The organization was more like an investor and the managers were like entrepreneurs. This system promoted rigor and discipline while stimulating creativity and sprit of entrepreneurship. George Rathmann, the former Cofounder & CEO of Amgen² who was a former employee of Abbot, says “Abbott developed a very disciplined organization, but not in a linear way of thinking.

It was exemplary at having both financial discipline and the divergent thinking of creative work. We used financial discipline as a way to provide resources for the really creative work.”³ As a result of these creative efforts, the company’s administrative costs as a percentage of sales declined to the lowest in the industry. The company also highly innovative. By early 1980s, 65% of revenues flowed from new products that were launched in the previous four years.

Adapted from “Onward and Inward”, Across the board, Sep/ Oct 2001, Vol. 38, Issue 5.

In the example mentioned above, Cain recruited entrepreneurial leaders and gave them enough freedom to follow their own ideas in attaining objectives. However, he expected tremendous commitment from them, and made them rigorously accountable for their objectives.

Leaders thus recruited had freedom, but within the specified boundaries. He discouraged ideas that did not fit with Hedgehog concept (contributing to cost-effective health care) of the organization. Cain thus retained entrepreneurial zeal, discipline and opportunistic flexibility in the organization.

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[1] JCollins Jim “Level 5 leadership,” Harvard Business Review, Jan 2001..
[2] Amgen is one of the first biotech companies to deliver profits and growth consistently. The company’s stock performed 13 times the general market between 1983 and 2000.
[3] Research interview conducted by Jim Collins.

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