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Level 5 Leaders Characteristics and Operating Style

Welcome arguments and debates:

Level 5 leaders encourage dialogue and debates before taking any decision. To create the right environment for the dialogue they establish ongoing series of general manager meetings.

They used to debate on various issues such as whether to sell Nucor’s nuclear business, focus on steel joists and manufacture own steel, invest in their own mini-mill, build a second mini-mill.

Learn from mistakes:

Level 5 leaders say something like this: I will take responsibility for this bad decision. But we will take responsibility for extracting the maximum learning from the tuition we’ve paid² . For example, in 1978 Phillip Morris acquired Seven-Up Company. But after 8 yrs it was sold at a loss. Though the loss was negligible compared to Phillip Morris’ total assets, but the management discussed it openly and tried to learn from their mistake.

But no one blamed each other for the decision to sell Seven-Up Company. It was only the company’s CEO Joe Cullman who squarely blamed himself for the mistake, mainly for not paying enough attention to people who were opposing the buyout in 1978. But he along with senior managers spent hundreds of hours learning from this mistake.

Use red flags:

Level 5 leaders also use red flags or early warning mechanisms. For example, Bruce Woolpert employed a method called “Short pay” at his organization, Graniterock. Short pay allowed customers to pay on an invoice based on their satisfaction with the product or service. They did not return the product or take permission to use this option.

All they had to do was to circle the offending product or service on the invoice deduct its amount and pay for the balance. Short pays acted as early warning mechanism and made managers take corrective actions before more customers were dissatisfied, and deserted the company. This is useful because, managers otherwise come to know of the problem only after it becomes unmanageable.

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[2]"Good to Great" by Jim Collins, Harper Business, 2001, p 78.

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