Business leaders in an increasingly unstable global economy must switch from a traditional hierarchical corporate structure to a flat network that encourages employee cooperation, Nestle Board Chairman Peter Brabeck-Letmathe said in a Thursday lecture at the Tuck School of Business. Brabeck-Letmathe described his 40 of years of business experience at the event, "Inspiring Leadership in Today's Global Economy," held in the newly completed Raether Hall of the Tuck Living and Learning Center.
Under the traditional hierarchical structure, which mirrors that of the military, business leaders can achieve short-term goals, but this system focuses on tasks and obedience rather than results, innovation and initiative, Brabeck-Letmathe said.
This way of organizing companies promotes competition, as staff members believe the way to be promoted is to "step down on" the people below, Brabeck-Letmathe, said.
"We see this right now with the United States struggling to find leaders who can achieve sustainable peace, as is evidenced by Iraq and Afghanistan," he said, pointing out that the structure is also unsuccessful in creating sustainable results.
Companies like Nestle are adapting and using technology to make their business methods more stable and sustainable, Brabeck-Letmathe, who stepped down as Nestle CEO in April 2008, said. These new "flat networks" eliminate job descriptions and achieve objectives and efficiency by providing positive encouragement to workers. Staff members are promoted through hard work and the number of connections they make with colleagues, Brabeck-Letmathe said.
"The value of your work depends on its effect on other people in the organization," he said.
For this cooperative method to be effective, leaders must trust employees and promote standard values, including integrity, tolerance and mutual respect, Brabeck-Letmathe said.
"You can manage for a time without trust, but you cannot be a leader and achieve sustainable goals," he said.
Brabeck-Letmathe said he first understood the difference between management and leadership when he was promoted from his position as an ice cream salesman to be a supervisor. A manager is simply in charge, while a leader influences others, directs a company and guides opinion, Brabeck-Letmathe said.
"Managers are people who do things properly, and leaders are the ones who make sure managers do things," he said.
A successful leader must demonstrate to his or her staff how their work contributes to the company's success as a whole, and commend them for their efforts, Brabeck-Letmathe said. A good leader aligns the goals of all levels of a company, providing a vision that is "clear, attractive and attainable," he said.
When Brabeck-Letmathe served as Nestle's CEO, he said he aimed for Nestle to grow by 5 to 6 percent each year and increase its profit margin. This objective was not spectacular, but encouraged workers and also helped promote the company's values and principles, he said.
Nestle surpassed its goal in the past two years, Brabeck-Letmathe said.
The event was part of the International Arena Speakers series sponsored by the Center for International Business at Tuck.
