Amid organisational plans and charts, never underestimate the importance of one man's leadership

PUBLISHED : Tuesday, 07 January, 2014, 11:44am
UPDATED : Tuesday, 07 January, 2014, 11:44am

This is a tale that should warm the hearts of everyone who is sceptical about the ability of business schools to teach you the essentials of business or sufficiently naive to put a modicum of trust in company reports from investment analysts.

The reason I like this story is that it concerns one company written off by the bankers as being dead and another that was supposed to be dying. However, someone prepared to dirty his hands at the sharp end of business challenged these widely held assumptions.

On January 20, the Italian Fiat group is expected to complete its takeover of America’s Chrysler.

Yes, you read that right: the carmaker based in basket case Italy, famous for making tinny motors that are the subject of many jokes, is poised to take full control of an iconic American motor company.

Well, that’s how it may have looked, but the facts suggest another story.

No doubt Italy’s economy is far from peachy, and no one can argue with the dysfunctional state of its government, but funny old Italy continues to be an economic powerhouse and world leader in design despite the cacophony of discordant background noise.

Moreover at Fiat-Chrysler, a new range of innovative and well-received vehicles has emerged, demonstrating that this company has managed to roar back under the leadership of Sergio Marchionne, its Canadian-Italian chief executive.

He is frequently described as a risk taker and egotist and is not what Americans call a “car guy” but has a background as a lawyer and accountant. It comes as little surprise to learn that he did not go to business school and has shown a notable disregard for the financial sector’s ways of doing things.

Instead, he has demonstrated how some seemingly obvious yet widely ignored business fundamentals can lay the foundation for a turnaround in rescuing a bankrupt company in the shape of Chrysler and an ailing conglomerate in the shape of Fiat.

Marchionne, the former accountant, could easily have been distracted by concentrating on the company’s messy financial affairs. Instead he focused on the product range and quality issues. The cars made by the company in the United States and Italy not only look different in rather cheeky ways but are also built to higher standards than before.

He spent a great deal of time outside the boardroom and was frequently seen on the shop floor talking to the people who make the products, both infuriating and inspiring them while also being smart enough to understand that much corporate wisdom lay in the minds of staff members who previously rarely got a hearing in the upper echelons of the company.

Moreover, Marchionne has not been afraid to devolve power and power structures, making Fiat-Chrysler the sum of its parts as opposed to being run as a monolith lumbering in a single direction.

And he has a healthy disrespect for bankers. When he pulled off the impressive Fiat-Chrysler merger, the bankers were dismayed to find themselves expelled from the negotiating table. Marchionne fully understands that their priorities and those of the companies are not necessarily aligned.

In some ways, there is nothing remarkable here, but anyone who has the smallest experience of working in companies, even those infinitely more modest than Fiat, will understand that Marchionne’s way of doing things is easier to appreciate in retrospect than to achieve in practice.

And here’s the rub: this turnaround did not emanate from some fancy new way of doing things nor from some clever corporate restructuring but from a kind of mercurial leadership.

Like all great companies, the reborn Fiat-Chrysler is essentially the product of one man’s drive and imagination. The influence of personalities in business is frequently commented upon, often without fully understanding how people are much more important than structures.

Yet corporate structures and organisational plans are the raw meat of many business school programmes. And over in the funny world of investment analysts, you will notice how they tend to be suspicious of strong personalities because they cannot precisely quantify how they work.

Thus people like Marchionne are patronisingly described as being “mercurial” or maybe “temperamental”, with the underlying assumption that what they do is impressive but hardly sustainable.

There may be something in this assumption, but businesses are run by people not by systems. Those that excel generally do so under the hand of a guiding genius, who may occasionally need to be reined in but can never be discounted.