Vol. 38, No. 18

3-4-2009
By:

Ask the Expert, 3/5/09

What makes a good leader?
With events in the world right moving at such tremendous speed now, there is far less consensus on what constitutes a good leader in today’s environment. What is clear, however, is I think that our leaders have let us down. With companies confronting huge numbers of layoffs, with issues surrounding executive compensation, with the need to reassess risk and with the requirement that companies reposition themselves, leadership is more important than ever before. One of my colleagues talks about how the prevailing leadership models in many organizations has tended to be based upon the military model of leadership, with the leaders focusing on initiating structure, giving commands and so forth. I agree with him; most organizations have recruited individuals who act in this dominant way, showing that they control everyone, and asking them to make decisions for the company. There is nothing fundamentally wrong with this model, but given the upheaval in the corporate and political world, one has to wonder if it indeed is dated. The world we live in is a far more complex place than it was 20 or 30 years ago and it also is clear that, as I stated, the models have simply not worked as well as we would have liked. So, what I think we should take away is the following. First, we have not had either the corporate or political vision that is required, and yet this is essential for success. Second, leaders must be much more skillful in utilizing the talent within their organizations both to identify problems and to create new solutions. Third, there has to be a dramatic increase in leader’s accountability.
 
How should a leader lead in this economic climate?
Leaders need to focus on: Creativity, compassion and direction. With the tremendous uncertainty we face, it is incumbent that people approach their business creatively. The old models for running organizations, for creating business strategies, even for operating in broader industries, simply, do not work now. Leaders may have some ideas but in many cases, they rose to their positions because of their performance in reproducing what others had already done. The take-away from the mess in the automobile industry is that the Big Three insulated themselves and replicated what the counterparts were doing. Thus, in the new world, the organizations that outperform will be those that can be innovative, translate these into plans and then implement these successfully. The leader must rely more upon others to develop these new ideas and strategies by creating a culture in which he or she listens. Individuals have to believe that there is someone in a position of power who is interested in their ideas and they also have to see that this individual will incorporate their ideas in his or her vision. To put this another way, there has to be a culture of engaging individuals in a cooperative environment. With the depth of the problems and the long timeframe, we will need to grow out of this and we need leaders also to be compassionate. As they lay off individuals and even have to resort to forced days off or other means of reducing compensation, they cannot risk losing all of their top talent. Leaders have to convey a sense of sharing and understanding what their employees are going through and constantly remind individuals of their criticality and importance. Finally, I cannot overemphasize the importance of the leader creating the vision. If you were to ask people what they think is the key attribute of a leader, I think most would state that they expect the leader to create and articulate where the organization is going. President Barack Obama’s poll numbers are high because individuals see him as having a vision. He hasn’t been able to implement it as well as some have expected, but people see him as someone who has a sense of where he wants the country to move. Corporate leaders must also be able to craft and communicate a new vision for the company.
 
 
How should leaders be held accountable?
There are a few ways. First, I think that one of the underlying causes of the financial crisis has been the obsession we have with quarterly numbers. If you speak with people in privately held organizations, where they do not have to report numbers every quarter, you will find that the decision-making process is dramatically different than in publicly-traded ones. The short time horizon is reinforced by the tenure expected in each position. Specifically, we must move away from the model in which people look to be in positions for only 12-18 months. When you have 20 layers and aspire to move into a senior management position over a 25-year career, you have to move every 18 months to get up that ladder. In flatter organizations, people necessarily must stay in positions for longer periods of time. When you know that you will be in a position for four or five years, this tends to force accountability because you know that you, rather than your successor, will have to live with the consequences of your decisions. Second, you have to look at a new role for the board of directors. There has to be greater oversight and this means having those individuals more involved on an ongoing basis. Moreover, the board should have paid advisors who are independent of the organization, can objectively look into the questions of performance, and report directly to them. The key is that they would be accountable to the board rather than the company. Third, it goes without saying that compensation systems must reflect actual individual, group and organizational performance. So, there have to be excellent metrics to assess performance and these have to be tied directly to compensation. If people were held accountable for decisions they make, even if the impact takes a few years, I suspect we would not have had the rash of incredibly risky decisions.

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