Case: Change Competency

Sir Richard Branson, Chairman, Virgin Group, Ltd.³⁷

Sir Richard Branson, founder and chairman of the Londonbased Virgin Group Ltd., has turned a lifelong disdain for conventional business wisdom into a multibillion-dollar global conglomerate and one of the world's most recognizable brands. The Virgin Group has ventured into many lines of business such as retail stores, air travel, financial services, books and music, and telecommunication. The Virgin Group consists of approximately 200 companies that operate in numerous countries. Virgin has approximately 50,000 employees and more than $20 billion in annual sales.

Some have suggested that Branson and the Virgin brand attract almost a cult following, and it works both ways-many people admire Branson, but some detest him. Many find it refreshing that Branson is willing to candidly reveal setbacks in his business career. Branson reflects: "Virgin has gotten it right when we've taken on a Goliath and offered a muchbetter-quality product at good value. We've gotten it wrong when we've taken on a giant with a product or service where we can't differentiate." Three of the significant setbacks, among others, that he discusses openly are:

• Virgin tried launching a portable MP3 player (the Virgin Pulse). It was a total disaster-they were crushed by the Apple iPod. It was a $20 million write-off.
• Branson ignored his top management's advice and insisted on holding onto the Virgin MegaStore retail outlets for too long. When he finally agreed to sell them, they lost the Virgin Group a "lot of money."
• Branson tried to take on the Coca-Cola company with Virgin Cola. Coca-Cola sent a SWAT team to the United Kingdom to systematically destroy Virgin Cola. Coca-Cola succeeded. Again, big losses for Virgin. Virgin Cola is "still the number one cola drink in Bangladesh!"

One aspect of Branson's philosophy is centered on finding the best people to run the diverse businesses in the Virgin Group. He is not as much concerned about industry-specific expertise as he is with recruiting employees with strong communication and teamwork competencies that mesh with the Virgin culture. Branson states, "What makes somebody good is how good they are at dealing with people. If you can find people who are good at motivating others and getting the best out of people, they are the ones you want. There are plenty of so-called experts, but not as many great motivators of people." Virgin tends to promote from within. The desired profile, not surprisingly, is someone like Branson-someone who gets charged up when told that something cannot be done; someone who is unafraid of industry barriers and will not take no for an answer.

Many executives devote their attention primarily to serving customers and shareholders. Branson thinks that the correct pecking order is employees first, customers next, and then shareholders last. His logic is this: If your employees are happy, they will do a better job. If they do a better job, the customers will be happy, and thus business will be good and the shareholders will be rewarded.

Branson is frequently on the road to visit Virgin businesses, talking with employees and customers. He is known for his ever-present notebook and pen, which he pulls out whenever he chats with employees and customers. Branson insists that this is a crucial element in his role as chairman. By writing things down, he creates a regular list of items for immediate action. He reads e-mail from employees every morning before he does anything else. This habit, which he started in Virgin's early days, influences company-employee dynamics. Employees do not hesitate to air their grievances directly to him. Branson has proved with his actions that he actively listens. Although Virgin has about 50,000 employees around the world, he gets only about 50 e-mails or letters each day from nonmanagerial employees. They vary from small ideas to frustrations with middle management to significant proposals. He addresses every one by answering personally or by initiating some action. Branson states, "Instead of needing a union when they have a problem, they come to me. I will give the employee the benefit of the doubt on most occasions."

For Branson, retaining the standards he has instilled as the company grows is his major task. He states, "You've got to treat people as human beings-even more so as the company gets bigger. The moment I start to think 'I've made lots of money, I'm comfortable. I don't need to bother with these things anymore,' that's when Virgin will be at risk."

David Rooke, a managing consultant at Harthill Consultants, states: "Branson is the consummate people's man. He is not a smooth operator that people may feel inclined to distrust, but a genuine strategist, who thinks outside the box, who achieves, and given some of his crazier pastimes, someone who manifestly enjoys life." In an article entitled Integrity to What Matters Most, three leadership experts make this comment, among others, about Branson: "Steadfast integrity to his unique sense of personal meaning has always been one of Branson's values."

In a recent visionary commitment, Branson pledged as much as $3 billion during the next 10 years (through 2017) to tackle global warming. The money is an estimate of his anticipated personal profits from his airlines and rail company, so the amount is not precise. But anything close would be a dramatic investment in a cleaner environment through developing new and cleaner sources of energy. Branson states: "We must not be the generation responsible for irreversibly damaging the environment."

Branson has other ideas on leadership:

Ultimately, the entrepreneur will only succeed if he or she has good people around them and they listen to their advice. My colleagues know me as Dr. Yes because I always find it hard to say "No" to new ideas and proposals. I rely on them to guide me but ultimately, I'm also prepared to trust my intuition, as long as I feel it is well informed. It is impossible to run a business without taking risks. Virgin would not be the company it is today if risks had not been taken.

I think one of the reasons for our success is the core values which Virgin aspires to. This includes those that the general public thinks we should aspire to, like providing quality service. However, we also promise value for money, and we try to do things in an innovative way, in areas where consumers are often ripped-off, or not getting the most for their money. I believe we should do what we do with a sense of fun and without taking ourselves too seriously, too! If Virgin stands for anything, it should be for not being afraid to try out new ideas in new areas

Whenever I experience any kind of setbacks, I always pick myself up and try again. I prepare myself to have another stab at things with the knowledge I've gained from the previous failure. My mother always taught me never to look back in regret, but to move on to the next thing. The amount of time that people waste on failures, rather than putting that energy into another project, always amazes me. I have fun running the Virgin businesses, so a setback is never a bad experience, just a learning curve. Loyalty means a lot to me. Working with people I know and trust makes me feel secure. I guess that's why I prefer to promote from within. People who join Virgin know that there are plenty of opportunities to progress in their careers.

Questions

1. What specific statements in this case appear to reflect individualized consideration, a core component of transformational leadership, by Branson?

2. What specific statements in this case appear to reflect intellectual stimulation by Branson?

3. What specific statements in this case appear to reflect inspirational motivation by Branson?

4. What specific statements in this case appear to reflect idealized influence by Branson?

5. Would you like to work for one of the Virgin Group companies? Explain.