George Lucas on leadership, salaries and company culture

Paddy Miller interviews George Lucas
Paddy Miller interviews George Lucas at World Business Forum 2009

[This article is also shared on our Creative Cultures blog]

At the recent World Business Forum in New York, my co-author Paddy Miller and I had the opportunity to talk to George Lucas about his role as a leader and the interplay between trust, salaries and company culture.

Lucas, as most people are aware, has been a defining force within the mainstream movie business, if not on our cultural heritage as a whole; rare is the person who does not instantly recognise the theme music of Star Wars and Indiana Jones. His understanding of the business side of movie-making is equally renowned; his company Industrial Light and Magic fathered the digital effects revolution, and his early decision to keep and exploit the merchandizing rights to Star Wars was not just personally profitable, but also defined a new business model for the industry.

We decided to talk to Lucas about a lesser known aspect of his work, namely his role as the leader of LucasFilm, the now 2,000 person big organization he founded in 1971 on the outskirts of San Francisco. What is the relevance of Lucas’ experience for managers outside of Hollywood, in regular companies all over the world?

According to Lucas, a core element in managing people is the issue of trust, which influences the remuneration systems. Lucas pointed out that in his organization, even the top talent do not get very high salaries. Instead, from early on, the people who worked for Lucas would earn a regular salary – but would then also partake in the profits, should the movie succeed. Referring to his second movie, Lucas explains:

    American Graffiti cost 1 million dollars to make, and made more than 100 million dollars. So after the fact, I took a part of the profit from the movie and gave it to all of the actors and the people who had worked on the movie. And they all became millionaires. I can’t afford to pay a lot of money in advance – but if it pays off for me, it pays off for you. I have done this with all the movies I have produced since.

Lucas’ choice is an interesting counterpoint to the high (and possibly excessive) salaries that many CEOs make, and according to him, it has made LucasFilm into a very flat organization. But what is perhaps more significant is that this profit sharing is not governed by contracts – in direct contrast to the regular (and distrustful) way companies typically deal with their employees. As Lucas mentioned,

    Our way of operating creates a much more normal atmosphere than in companies where it is all about the HR department, the legal department, contracts – a place where everybody always fight with each other. You have to convince people that they can trust you, that you are on their side and have their interests at heart. We have managed to make this work in our relatively big organization because people know that we care about them. It is very simple, almost rudimentary, but it works.

There are probably some prerequisites for operating like Lucas, though. One is that LucasFilm is a private company, and as such, the top management is not subject to the whims of the stock market – an external influence that has likely forced many a CEO to do things they may not have condoned personally. And crucially, in a sense, it requires a George Lucas: a person with a track record of integrity, who leads the company over a long time, and who becomes the ultimate repository of the trust of the employees. People trust other people; they don’t trust a faceless Board of Executives whose members shift from year to year, or a CEO who is only in charge until he gets a better offer.

If Lucas were to hand over his ownership to someone else or, God forbid, step out in front of a speeding hovercraft – a particularly terrible scenario for those of us who still hope to see a ‘Star Wars Episode 7’ one day – would the company be capable of continuing like it has up until now? We, for one, hope so.

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