Recently, I bought some JP Morgan stock[NYSE: JPM]. Following my hero, Charlie Munger's advice, I did do my homework before purchasing the equity. Part of my homework was to read Jamie Dimon's letter to JPM shareholders. It is a very interesting read. I was impressed with the clarity and detail Mr. Dimon outlined how he thinks about developing leaders for a multinational corporation. I practically agree with everything he said in the letter. Following is the edited version of Mr. Dimon's thoughts on leadership:
Leadership is an honor, a privilege and a deep obligation. When leaders make mistakes, a lot of people can get hurt. Being true to oneself and avoiding self-deception are as important to a leader as having people to turn to for thoughtful, unbiased advice. Emotional Quotient [EQ] matters in management. EQ can include empathy, clarity of thought, compassion and strength of character.
Good people want to work for good leaders. Bad leaders can drive out almost anyone who's good because they are corrosive to an organization; and since many are manipulative and deceptive, it often is a challenge to find them and root them out.
Below are some essential hallmarks of a good leader. While we can not be great at all of these traits, to be successful, a leader needs to get most of them right.
1. Discipline: This means holding regular business reviews, talent reviews and team meetings and constantly striving for improvement - from having a strong work ethic to making lists and doing real, detailed follow-up. Leadership is like exercise; the effect has to be sustained for it to do any good.
2. Fortitude: This attribute is often missing in leaders: They need to have a fierce resolve to act. It means driving change, fighting bureaucracy and politices and taking ownership and responsibility.
3. High Standards: Abraham Lincoln said, "Things may come to those who wait...but only the things left by those who hustle." Leaders must set high standards of performance all the time, at a detailed level and with a real sense of urgency. Leaders must compare themselves with the best. Huge institutions have a tendency toward slowing things down, which demands that leaders push forward constantly. Ture leaders must set the highest standards of integrity- those standards are not embedded in the business but require conscious choices.
4. Ability to face facts: In a cold-blooded honest way, leaders emphasize the negatives at management meetings and focus on what can be improved.
5. Openness: Sharing information all the time is vital - we should debate the issues and alternative approaches, not the facts. The best leaders kill bureaucracy - it can cripple an organization - and watch for signs of politics, like sidebar meetings after the real meeting because people wouldn't speak their mind at the right time.
6. Setup for success: An effective leader makes sure all the right people are in the room - from Legal, Systems and Operations to Human Resources, Finance and Risk. It's necessary to set up the right structure. When tri-heads report to co-heads, all decisions become political - a setup for failure, not success.
7. Morale-building: High morale is developed through fixing problems, dealing directly and honestly with issues, earning respect and winning. It does not come from overpaying people or delivering sweet talk, which permits the avoidance of hard decision making and fosters passive-aggressive behaviors.
8. Loyalty, meritocracy and teamwork: Loyalty should be to the principles for which someone stands and to the institution: Loyalty to an individual frequently is another form of cronyism. Leaders demand a lot from their employees and should be loyal to them - but loyalty and mutual respect are two-way streets. Loyalty to employees does not mean that a manager owes them a particular job. Loyalty to employees means building a healthy, vibrant company; telling them the truth; and giving them meaningful work, training and opportunities. If employees fall down, we should get them the help they need.
Meritocracy and teamwork are also critical but frequently misunderstood. Meritocracy means putting the best person in the job, which promotes a sense of justice in the organization rather than appearance of cynicism: "Here we go again, taking care of their friends." Teamwork is important and often code for "getting along," equally important is an individual's ability to have the courage to stand alone and do the right thing.
9. Fair treatment: The best leaders treat all people properly and respectfully, from clerks to CEOs. Everyone needs to help everyone else at the company because everyone's collective purpose is to serve clients.
10. Humility: Leaders need to acknowledge those who came before them and helped shape the enterprise - it's not all their own doing. There 's a lot of luck involved in anyone's success, and a little humility is important. The overall goal must be to build a great company - then we can do more for our employees, our customers, and our communities.
The grey area of leadership
There are many aspects of the leadership process that are open for interpretation. This grey area contributes to the complexity of the challenges and leaders - and those who govern them - face.
1. Successful leaders are hard to find
While there are possibly innate and genetic parts of leadership (perhaps broad intelligence and natural energy), other parts ar deeply embedded in internal values of an individual; for example, work ethic, integrity, knowledge and good judgement. Many leaders have worked their entire lives to get where they are, and while perhaps some achieved their stature through accident or politics, that is not true for most. Anyone on a team knows when he or she encounters the rare combination of emotional skill, integrity and knowledge that makes a leader.
2. Successful leaders are working to build something
Leaders want to build something of which they can be proud. They usually work hard, not because they must but because they want to do so; they set high standards because as long as leaders are going to do something they are going to do the best they can. Leaders believe in things larger than themselves, and the highest obligation is to the team or the organization. Leaders demand loyalty, not to themselves but to the cause for which they stand.
3. Compensation matters
Money should not be the primary motivation for leaders but it is not realistic to say that compensation should not count at any level. People have responsibilities to themselves and to their families. They also have a deep sense of "compensation justice," which means they often are upset when they feel they are not fairly compensated against peers both within and outside the company. There are markets for talent just like products, and a company must pay a reasonable price to compete.
4. Big business needs entrepreneurs, too
Free enterprise, entrepreneurship and pursuit of happiness also exist in most large enterprises. Without the capacity to innovate, respond to new and rapidly changing markets, and anticipate enormous challenges, large companies would cease to exist. The people who achieve these objectes want to be compensated fairly, just as they would be if they had built a successful startup.
5. Performance isn't always easy to judge
Managers responsible for businesses must necessarily evaluate individuals along a spectrum of factors. Did these individuals act with integrity? Did they hire and train good people? Did they build the systems and products that will strengthen the company, not just in the current year but in future years? Did they develop real management teams? In essence, are they building something with sustainable long-term value? Making these determinations requires courage and judgement.
6. Sometimes leaders should be supported and paid even when a unit does poorly
If a company's largest, and perhaps most important, business unit is under enormous stress and strain, unlikely to make earn money regardless of who is running it, a manager might ask his best leader to take on the job. This may be toughest job in the company, one that will take years to work through before the ship has been rightened. When the manager asks a leader to take on the responsibility, she quite appropriately will want to know whether she will be supported in the toughest of times: "Will you make sure the organization doesn't desert me?" "Will you stop the politics of people using my unit's poor performance against me?" "Will you compensate me fairly?" The answer to all these questions should be yes. And, as long as she was doing a good job, she should be paid like the best leaders in the organization, profits aside. Conversely, we all know that a rising tide lifts all boats. When that's the case, paying that leader too much is possibly the worst thing one can do - because it teaches people the wrong lesson.