Changing the Nature of Conversations on Leadership: An Exploration into the Assumptions and Biases in Understanding Leadership
Leadership is considered an essential feature of any collective human endeavour whether organized informally, or in a more formal way, as in organizations. It is, therefore, not surprising that leadership itself is a leading management concept to understand consequential outcomes, and facilitate accomplishment of desired goals. It is also not surprising that leadership, along with culture and strategy, is among the most extensively written about topics in management literature. The extensive body of work developed over many years leads us to hypothesise that leadership has led to improved organizational effectiveness, built greater trust and resulted in higher employee engagement. Perhaps, this is indeed the case, and if this is so, it is yet to be recognised in a more effective way. Research and anecdotal accounts suggest that 87% employees globally are not engaged or actively dis-engaged1, trust has declined in business and other institutions2 and the half-life of U.S. publicly traded companies is 10.5 years, i.e., half of all the firms that go public in any given year will be gone in 10.5 years3. Assuming that this state of affairs is, in spite of, rather than ‘because of’ leadership advice and training from the last 50 years, there is still a need to reflect on this important topic.
In view of the extensive amount of leadership research, literature, and consulting available, it is perhaps reasonable to assume that most of the important leadership perspectives have been already studied at some level of detail. Though it does not mean that leadership research is out of insights, it does indicate that there is critical mass already available to suggest that there are gaps in our understanding and practice of leadership, primarily arising from inappropriate assumptions and systematic biases.
These assumptions and biases have an important role in shaping our understanding and practice of leadership. They provide frameworks within which leadership conversations happen. As times change, it is important to see, whether or not these assumptions and biases, and the frameworks they lead to, remain valid. As business context becomes more unpredictable and uncertain, leadership conversations based on weak assumptions and unhelpful biases could potentially limit leadership choices and effectiveness.
This paper identifies five main assumptions and biases4, which are as follows:
Unintended and Future Cost of Leadership Performance is negligible;
Leadership is a function of few salient attributes and behaviours;
Knowing about leadership leads to leadership;
Leadership is absolute and independent of context;
The purpose of leadership is to maximise achievement of desired goals
Assumption 1: Unintended and unknown Cost of Leadership Performance is negligible
Leaders have a difficult role, inter-alia, because expectations from them are ever so high, particularly at senior levels, across all domains of organizational life. These expectations are mostly normative and biased towards perfectionism. This bias is reflected in different forms, such as a commonly held assumption that leaders can achieve difficult goals with their extraordinary or heroic abilities, that they can do no wrong (mostly when they are still leaders), and they have a perfect judgement. It is generally assumed that leaders can do everything, small and big, right, and accomplish everything that stakeholders wish in a perfect way without any unintended or currently unknown future organizational costs. Or, to put it in another way, good leaders can produce successes at almost no or low costs. Costs are defined here broadly and include financial and non-financial costs including risks, impairments, consequences, and constraints on future organizational choices, arising from current choices of a leader or the leadership team. Milton Friedman’s observation that there is no “free lunch” does not seem to apply to successes that leaders achieve or claim to achieve until it is too late or too obvious to ignore.
1.1 Costs of Leadership Performance
It can be argued that all consequential organizational outcomes – whether good or bad – have tangible and intangible costs (often unknown at the time of decision), which become known at some point in time in future, and they impact various stakeholders in different ways. There are costs (unknown or unintended) when a leader makes the firm more community focussed or customer focussed or provides generous health-care, just as there are unknown or unintended costs when a leader produces seemingly superior financial results with job reductions and closure of businesses. When there is an upfront consideration of cost aspects, it relates mostly to the cost of business or cost structure itself (as in slashed operating costs by $…. millions) as opposed to the cost of success that leaders plan to achieve. The discussion of cost of success or leaders’ performance generally happens late, when the cost is too visible to ignore. It is assumed that producing organizational outcomes at an acceptable cost is built indirectly into what leadership should be, and therefore identification of good leaders means that the issue of cost of performance is automatically covered. For this reason, main stakeholders with responsibilities to oversee leaders provide a wide latitude, as an early assessment, particularly when it is critical, suggests a lack of commitment and belief in leadership. There is an asymmetry here, as early questioning could otherwise limit the long term view that good leaders need to make the impact, and yet it is the early assessment, which could uncover and address risks in the current strategy.
Leaders do not produce no-cost organizational successes, no matter how talented they happen to be and how a success is defined. A recognition of this bias can potentially change the nature of conversations while identifying and assessing leaders. This will make leadership processes –and leaders themselves – more realistic, as leaders will not be compared against the gold-standard of zero or low organizational cost impact; instead the discussion will steer towards what type of costs over what time-frame, risks undertaken, and their differential impact on various stakeholders.
1.2 Costs of “Perfect” Leaders
This “ideal and perfectionist” view of leadership has important implications in terms of how leaders decide, act, and are assessed. The desire to be seen as perfect or “superheroes” probably encourages certain type of leaders to act or decide in ways that may later, with the benefit of hindsight, be considered questionable. In the short run, it sets the odds against realistic and transparent leaders, who by comparison may look “average”. It also encourages the believability of “impossible” goals or “spectacular results”, as such events are seen solely as a function of leadership, which could over-ride economics and financial/risk trade-offs involved in real-life business decision making. Finally, it encourages potential leaders to disproportionately focus on “sales” mind-set and attributes and behaviours that go with it, because leaders are expected to “sell” vision and influence teams. Perhaps, an important implication is that it shifts the discussion and practice away from the “intangible” costs, risks, unintended consequences, and impact on future organizational choices.
There is already a recognition of this bias in different forms. Mintzberg5 observed that “great organizations, once created, do not need great leaders”. Cain6 drew attention to the value that quiet people bring in all walks of life, including in leadership and organizational contexts. In a counter intuitive way, perhaps this “heroic” leader’s bias is unfair to successful leaders too, as they are under pressure to become the “perfect” or heroic leaders that in a normal context they perhaps would feel less need for or put less of their resources in. This bias towards heroic leaders also provides a convenient way out for other stakeholders, in the event things go wrong, as all responsibility is put on a single leader. In theory, a well-functioning organization should not be subject to failure because of a single leadership failure, as robust and institutional processes should cover that risk.
This, of-course, raises the question that if achieving unrealistic goals and getting everything right is not expected from leaders, then what’s the raison d’être for leaders – after all, the purpose of leadership is to undertake endeavours that others do not or cannot. This is a legitimate question, as many organizational and economic processes, such as innovations, depend on leadership of founders, and involve a leap into the unknown with big risks and unknown costs. It can be argued that leadership research suffers from a hard to avoid sampling bias. It focusses on small number of visible leaders, who become successful (or unsuccessful) – though it is not uncommon for few of them to be seen later with questionable decision-making abilities. There is relatively less attention on leaders, at lower levels, who also pursue super-ordinate goals, probably demonstrate the same attributes and behaviours that successful founders do, but are not successful or their achievements come at a high cost. This suggests that if not done thoughtfully, relying on unrealistic leadership- worthy goals and success to identify and assess leaders could be a risky gamble as opposed to being a reliable leadership approach.
1.3 Costs of Successes and Failures may be different from Leader’s Strengths and Weaknesses
There are perhaps good reasons why likely “costs” of leadership achievements or performance do not receive attention until they are too obvious to ignore. While organizational politics and human failings are among them, another likely reason could be to equate leader’s weaknesses (which get considered at the time of identification and assessment) as costs of leadership. These are two different angles to leadership. A leader may have weaknesses, perhaps visible ones, but they may or may not result in high organizational costs. It is also likely that in conjunction with other strengths, the net impact may still translate into the asset side of the balance-sheet. Or simply, such perceived weaknesses could be addressed by having a team member or staff, who has perceived strengths in that area. Similarly, a leader may have visible strengths, but they could be negated by less visible or noticeable weaknesses, and may lead to decisions that add to the liability side of the balance-sheet. A leader’s weakness is an individual level attribute, and not the same thing as costs of leaders’ performance, which refers to its’ impact at organizational or sub-organizational level. They are related, but not the same and not a substitute for each other.
It is difficult to overcome this bias entirely, as it grew out of historic, perhaps evolutionary, contexts. Organizational experiences from the internet dot.com era, Enron, 2008 financial crises and new regulations (in financial industry in UK and Europe), have now influenced key stakeholders to pay more attention to the “cost” aspect of leadership, particularly while assessing senior leaders. This is a good beginning. It will be useful to also pay attention to leaders at mid- and lower levels. This may include an assessment of maximum- and average organization risk, costs, impairments, and unintended consequences their decisions could potentially lead a firm towards. This may lead to more realistic leadership assessments and behaviours, and hopefully realistic leaders, as they advance to more senior levels. Leadership performance, both good and bad ones, have their costs, which need to be analysed in the right way probably at the time of identification and assessment itself. Leaders do not – and perhaps cannot – provide a free lunch of a desired future.
Assumption 2: Leaders can be identified based on few salient attributes and behaviours
Our efforts at understanding leadership are largely based on what it consists of. This has led researchers and consultants to identify salient attributes and behaviours through various research methods and complex statistical methodologies. In practice, this has resulted in leadership identification and assessment becoming a formulaic framework. If human behaviour is complex, then it suggests that leadership behaviour, not to mention outcomes produced by it, should also be complex. Leadership research acknowledges this, as evidenced by emergence of multiple models, which draw attention to, inter-alia, situational leadership and contingency model of leadership. These models, while closer to reality, are also difficult to practice owing to sheer number and variety of variables that influence leadership.
2.1 Limitations of Formulaic Frameworks of Leadership
Given the incredible variety, range and complexity of factors that could bear upon leadership, it still, in practice, understood largely in terms of few salient attributes and behaviours. It is also based on an unstated assumption that it is possible to define and measure these leadership attributes in a near precise manner. This leads to false confidence that leadership is formulaic and leads to an arms’ race in using linguistic abilities to develop leadership recipes. It is also likely that having a focus on small number of salient attributes simplifies a complex phenomenon and encourages our notions of “heroic” leadership.
More importantly, a leadership approach that is influenced consciously or otherwise by keywords (i.e., salient attributes and behaviours) fails to make a distinction between absence of evidence7 (of a leadership attribute or a behaviour) and evidence of absence (of a leadership attribute or a behaviour). Thus, lack of experience in organizational restructuring (because it was not needed or it was decided in good faith that there is no need of it, as other options are equally good) is considered as inability to do restructuring if the situation really requires it. The reality, however, is more nuanced, as leadership behaviour is net of various salient (visible, known, and generally “recognised” as high impact) and “long tail” (large number of small impact and less visible) attributes, and also influenced by the context in which behaviour takes place. Since this combination (or eco-system) of salient and “long tail” attributes is specific to each person, leadership behaviour and effectiveness is largely individualistic. That perhaps is a simplistic reason, why two leaders (say, Steve Jobs and Bill Gates), though very different in terms of their approach, could both be effective, because each had a different mix of attributes in their repertoire, which together with context, netted out, and, while not eliminating the weakness itself, compensated for perceived weaknesses at the individual and/or organizational level.
2.2 Portfolio Approach to Leadership Attributes and Behaviours
An alternative is perhaps offered by the “portfolio approach to leadership attributes and behaviours”, which suggests that various attributes, behaviours and the context interact in complex ways (i.e., negating, strengthening or remaining indifferent) to produce a net leadership approach unique at an individual level, and this net style may contain visible strengths and weaknesses with varying levels of correlation to a leader’s overall effectiveness. This perspective suggests that it is unlikely that a single attribute determines leadership , and that visibility of an attribute may not always be the reason of leader’s effectiveness. It is open to debate as to how much can be known about an individual’s potential, leader or not, based on few attributes or behaviours only, unless they deal with integrity, moral and ethical aspects of the personality. Leadership success could in many situations be in spite of – rather than because of –attributes that are visible, expressive and measurable. These visible attributes could be compensated for by a “long tail” of attributes, which could exist below the threshold of awareness of either the system or the individual. It is perhaps a loose way of saying that if a leader does not have current weaknesses, if s/he may not have exactly the same strengths either, and the other way round, because in reality, this paper suggests, attributes and behaviours form an eco-system, which interact and influence the strength and visibility of individual traits. The effective leadership attributes, in a given context, may or may not be salient attributes, may or may not be visible, expressive and measurable, and may or may not be influenced to a noticeable degree by “long tail” of leadership attributes.
While focussing on few salient (visible as well as measurable) attributes has the advantage of simplicity and providing a consistent (and imperfect) basis for comparison among employees, this approach carries the risk of becoming an end in itself, rather than the means to an end. The idea here is not that the salient attributes or behaviours are not important or relevant, or that one salient attribute alone is not consequential. The key point is various attributes, characteristics and contextual factors interact in complex ways leading to high variety in “net” leadership behaviours, and this variety could sometimes also include a sub-set of situations where few main attributes play an important role or one attribute could indeed over-shadow other attributes.
2.3 Understanding Leadership using the Portfolio Approach
The above analysis brings up the question: Given the incredible variety in leadership behaviours, styles, and “long tail” of attributes, what could be an effective way to learn and understand leadership? While writing in a general context, Taleb8 pointed out that we can sometimes learn about a thing by understanding what a thing is not, and keep subtracting it until we can’t, to find what something is. This approach, when we apply to leadership, provides a different lens: Rather than trying to understand what leadership is by identifying attributes, such as vision, decision making, ability to influence, etc., it might be useful to understand what leadership is not – specifically what it could not be, rather than what it should not be. Viewed in this context, the negative “checklist” or keywords list could consist of lack of integrity, low morals and grey ethical boundaries, etc. This negative key word list is also expected to be long – after all, we are dealing with leadership – but could be shorter, if it mainly covers moral and ethical aspects, and care is taken to ensure that negative keyword list is not same as positive keyword list with a negative sign in front of it. There are other important questions as well: How does one decide whether or not a particular attribute – or lack of it – should be on the negative keyword list. Should impatience with employees be on negative list? Is it a moral or style failure? Perhaps, one option is to limit the negative list to moral and ethical failures, as they are perhaps easier to detect (if organization system is listening) and leave relatively a more objective trail than say a lack of influencing abilities.
2.4 Implications of Portfolio Approach
An important implication of the above is, in theory, everyone is a leader once the short list of negative attributes is checked out, as there are infinite combinations in which non-negative attributes could make a right impact. Once ethical and moral failures, which are at the core of what leadership is not, are excluded, each employee could appear as a potential leadership option as remaining behaviours and attributes could mix and combine in endless combinations. This gives organizations an access to a broader portfolio of leadership talents and styles – and diversity – consisting of very different attributes. Besides generating broader leadership choices, it possibly also reduces pressure on potential leaders to “sell” based on pre-specified list of attributes or check-list, and keep leveraging on that one particular attribute, say charisma, because that’s what got them there in the first place, or that is perceived as a key leadership attribute in the firm. There is another advantage in moving the focus away from leadership check-lists and “developmental” needs, and steering the discussion towards the range and variety of attributes. The impact of specific leadership traits and attributes could vary based on contexts, and if organizations experience constantly changing environments and contexts, as is common now in the digital context, then having a “portfolio” or “long tail” of leadership attributes is beneficial, i.e., potentially leaders could be flexible and adapt better. One implication of the portfolio approach to leadership attributes is that organizations should look for a range and variety in leadership attributes in digital contexts rather than focussing on few main or salient attributes. The “portfolio approach to leadership attributes” also allows for a commonly held observation that leaders develop and evolve, as it means that a different combination of attributes in their portfolio becomes salient as they gain further experience and expertise.
Assumption 3: Knowing about Leadership leads to leadership
Given the extent of research and training that exists on leadership – and this excludes advise available on LinkedIn posts – it is probably tempting to conclude that leadership know-how is not a constraint in fulfilling leadership roles, and yet it is not unusual to observe disappointments with leadership in business contexts. This is one example of the knowing-doing gap9.
3.1 Possible reasons for the gap between theory and practice of leadership
There could be various reasons for this gap to exist: Perhaps, our understanding of leadership is not as complete as available material suggests, or leadership is contingent on other variables, which are not yet well understood; or perhaps leaders are rewarded on behaviours that are peripheral to “real” leadership behaviours; or perhaps few high profile leadership failures crowd out many day to day leadership successes, or perhaps preaching and knowing is easier than doing; or perhaps there is over-use of leadership related language, and when poor leadership is “spotted”, it could actually a poor managerial behaviour, or perhaps given its’ nebulous nature, leadership – like organizational culture – has become a residual reason, or variable, to explain failures. When other reasons for organizational dis-functioning become complex and detailed, leadership can be taken as a “soft target”. This is not to suggest that there are no straight-forward leadership failures; it simply points to the possibility that leadership is invoked frequently to explain consequential outcomes because it provides the least common denominator in organizational performance and involves low transaction costs compared to analysis of other, presumably complex, causes of failure. It could be an easy way out of what are in reality complex failures.
The leadership knowledge and practice gap points to some of the core challenges in our understanding of leadership. Leaders are held to high standards of behaviour and performance in all domains of organizational life, but their continuation and rewards are mainly based on business achievements. Thus, criteria for their survival and upside are essentially aligned, and equally importantly, commercial success gives them personal and organizational capital. It is therefore hard to argue against their motivation to maximise commercial achievements. However, there are studies10 that suggest that firms that hold on to their values and purpose perform well in the long run. Viewed in this perspective – and this is one of the many possible perspectives– gap between knowing about leadership and practicing is a function of amount of time leaders are allowed to “perform”.
3.2 Collective leadership as a solution to minimize the gap
Assuming that knowing-doing gap can be reduced to some extent by increasing the performance-window for a typical leader, how long it should be? Is it simply a matter of increasing the time available, or improving processes that screen out leadership candidates who see short and long term as a zero-sum game, or it is a matter of increasing the skin in the game? It is perhaps a combination of various things, as opposed to one thing. While the idea of skin in the game is compelling, the experience from financial firms prior to 2008 financial crises suggest that leaders did have a significant part of their wealth tied in their firms. What perhaps matters is the alignment and locking in of the “skin in the game” of various stakeholders as opposed to one stakeholder type (e.g., leaders). The prospects of an interest alignment among main stakeholders increase, if they have similar skin in game locked in for similar time horizons and similar upside and downside exposure to performance. This skin in the game could be in terms of financial interest, or perhaps there could be other types of skin in the game, such as purpose, reputation, values, opportunities or constraints on future professional choices, or creative work. While the success of German Mittelstand is due to various reasons, consistency in thinking and similar skin in game probably also contributory factors to it. Family ownership is an important part, there is stake and supportive infrastructure in terms of workers’ training, social responsibility and commitment to long term11.
The above discussion suggests that gap in leadership knowledge and practice can be bridged more effectively by moving towards collective leadership, which would also imply higher consistency in terms of skin in the game. Collective leadership is generally understood in terms of having a set of leaders. This article takes a broader approach and suggests that leadership acts from all levels contribute to collective leadership, and such aggregated leadership acts can help to reduce the gap between the theory and practice of leadership. Collective leadership, as opposed to primacy of individual leaders, provides checks and balances, and by reducing psychological dependency on one leader, it indirectly encourages others to increase their own leadership output as well as input. In its extreme form, a successful case of collective leadership could just mean invisible or low-profile leadership, as suggested by Mintzberg in his reference to the example of Switzerland government12.
Assumption 4: Leadership is absolute and independent of context
Leaders are primarily seen as having responsibility for articulating vision, and influencing others to share and contribute towards realising it. By implication, this means a different desired future state, and therefore an important leadership task is to change the current state to a future desired state. From a practical perspective, the current state is not a passive state waiting to be changed to a new desired state, as numerous studies on change management, and power and politics have already documented. The role of context could be subtle and invisible, and may influence, if not determine, the type of leadership that emerges in the first place and the outcomes it achieves or outcome that are valued. Context therefore plays an important role at all points on a long leadership experience spectrum with one end-point denoting who gets identified as a leader and the other end-point (of spectrum) denoting the results that leadership can achieve. In between these end-points on the leadership experience spectrum, there are various points that denote behaviours, rationale, methods, etc., that are contextually influenced and considered acceptable.
4.1 Role of context in the identification of leaders
In general, the identification of leaders, in business contexts, is role or outcome dependent, i.e., individuals “become” leaders once they get a leadership role and/or lead to an outcome, which is seen as leadership worthy. While this provides useful insights, as mentioned earlier, it also suffers from a sampling bias; it is likely that some individuals are demonstrating the very same characteristics and behaviours as those of individuals identified as leaders, but because of situational biases or idiosyncratic contexts, did not “become” leaders, or, the other possibility, that individuals become “leaders” because of the idiosyncratic contexts, even though their behaviour and outcomes are no different from other employees. This raises the question as to how organizations could separate out the influence of situational or idiosyncratic influences in assessing a potential leader’s performance. While large organizations may have established processes, they mostly apply to stable and linear environments. If the immediate context changes frequently, or if an organization is small with little specialist help, there is an organizational instinct to increasingly move towards “System 1”13 thinking while identifying leaders, and it leads to outcomes consistent with System 1 features. Choosing a leader in such instances, particularly in absence of organizational processes, could be a function of transaction and agency costs. This by itself does not mean that leaders identified on the basis of System 1 are not effective; it is just that context plays an important role, as it also increases the probability that the leader’s identification and assessment is subject to behavioural biases. Though context is similar to culture, its influence could be more nuanced; context could be immediate and limited, as in a particular location or department or a manager, or it could be broader and external, as in case of senior leaders dealing with external stakeholders. Context could also subtly pre-determine the “leader types”, which are in the mix for leadership choices, to be assessed and chosen through System 2 processes at a later stage. Context may not determine whether or not a specific individual emerges as a leader, but it could influence types of individuals, who are seen as potential leaders.
4.2 Role of context in leaders’ performance
Context also influences goals and results that are seen as leader-worthy, believable, and the length of success window, i.e., the time from an accomplishment through to its recognition and its subsequent closure. This success window could also be negative (i.e., recognition of success before it is delivered) or fairly extended and long. This is partly because success window depends, inter-alia, on network effect and norms on the definition, boundary conditions, and the how and what of success delivered. This makes the relationship between leadership and organizational performance complex. Leaders’ relative role in organizational results, except in cases of start-ups and turnarounds, is increasingly a matter of attention. Cialdini 14 pointed out that business performance analysts “have demonstrated that other factors …have a greater impact on corporate profits than CEO actions do”. Jim Collins 15 shines a different light on it in the following way, “No decision, no matter how big, is any more than a small fraction of the total outcome. Yes, some decisions are much bigger than others, and some are forks in the road. But as far as what determines outcomes, the big decisions are not like 60 of 100 points. They’re more like six of 100 points. And there’s a whole bunch of others that are like 0.6, or 0.006. They add up to a cumulative result.”
It is generally recognised that success is a collective endeavour arising out of organizational and team efforts. For reasons yet to be understood fully, it is the leader, in most of the cases, that the success gets attributed to. It is not that leadership is unimportant – it is just that leadership alone is not sufficient, and organizational success is a combined effort. An organization, however, could be driven into a failure, because of individual leadership, i.e., organizational failure could also be for many reasons, but sometimes actions or decisions of an individual leader can cause or precipitate it unilaterally, as evidence from the dot-com and 2008 financial crises shows. This leads to an asymmetry and contributes towards principal-agent problem. Leader’s role in organizational upside, in most cases, is limited, but his or her role in causing organizational failure is unbounded, and can even outlast an organizational death. An important question, therefore, is: if context plays an important role, and leaders’ influence on organizational outcomes is asymmetrical (range bound in terms of upside, but unbounded in terms of downside), then what is the purpose of leadership itself?
Assumption 5: The purpose of leadership is to maximise achievement of the desired goals
The above discussion was based on intuitive notions about leadership held in practitioners’ and research communities. Leadership is a very broad area and arguably it is not one thing, but a mix and combination of various factors, such as styles, normative expectations, behaviours, outcomes, processes and the context itself. It can also be argued that for any leadership insight, there is generally a very different – or even opposite – insight that could also be true in another context, or could lead to achievement of same results, but at a different cost. That said, there is a common core in our general understanding of leadership: Leadership is about articulation of a future desired state (vision), means to achieve it, and influencing stakeholders to accept and contribute towards realising the desired state. This desires state is expressed in terms of goals, and leaders’ role, as is commonly understood, is to maximise performance on these goals.
5.1 Rational and institutional components in leadership
The stakeholders are likely to accept the desired future state if they believe, inter-alia, in the leader, and the cause-effect relationship proposed between ends (goals) and the means (strategy). The relationship between ends and means usually contains rational (transaction/analytical) and institutional (broader non-technical aspects that may not be related to performance in direct ways and also includes moral and ethical considerations) components. The rational component deals with the cost-benefits analysis, and the logic and efficiency of the ends-means chain. The institutional component provides success criteria, and legitimacy to ends and means used and the relationship between them. At a conceptual level, it also deals with purpose, values, legitimacy, overall risk-effects, and the unintended consequences. Both the rational and institutional components could have their own separate “what” and “how” components. Though it depends on the context, in the rational component, “how” generally deals with errors of commission and acceptance of positives, while in the case of institutional component, “how” may deal with errors of omission and the failings in the duty of care. It is likely that a leader meets the commonly used “how” test in the performance management processes by “passing” it on the rational as opposed to institutional component, which is where it is more salient and intended to be. Furthermore, rational and institutional components exist at all levels of leadership, and they influence and get influenced by each other. Finally, the institutional component, by its very nature, could be broad in scope and influence, depending on the nature of leadership and stakeholders. The institutional components of leaders collectively form the institutional core, which is also informed and influenced by internal and external stakeholders. Institutional core is an organizational repertoire of the institutional components perceived or actioned by various stakeholders.
5.2 Role of rational and institutional components for leadership determination
Since the institutional component of leadership could not always be documented in a comprehensive way, it gives an insightful way to identify and distinguish leaders from the managers. It is one of the hypotheses of this paper that an individual is a leader to the extent that s/he is guided by the institutional component and contributes to the institutional core of the organization. Fulfilling the rational component of a role to an acceptable performance level is a given for a leader in most of the contexts. Viewed in this context, a CEO who is given a mandate to increase the sales or market share or EPS and focusses on it in a purely rational manner, is probably the highest paid manager instead of senior most leader in the firm, and a junior employee who solves a customer’s unusual problem in the right way, because the organizational repertoire was not comprehensive, is demonstrating leadership. A leader connects the means to an end in a way that enhances the institutional core, and could sense institutional angles even in the most routine decisions. The institutional perspective on leadership or organizations is not new, and difference scholars have covered it in various contexts using different narratives16.
While both components, namely, rational and institutional, play an important role in organizational outcomes, it can be argued that the institutional component (and core) contributes to organizational outcomes (or success) in an asymmetrical way. In normal market and business conditions, weak institutional core could potentially expose an organization to irrelevance, including its’ decline, and when present, it is potentially may be seen as a constraint to the business success in the short run, but may contribute to it in the long run. This is similar to the asymmetry outlined in the previous section with respect to leadership, i.e., leaders can sometimes cause organizational decline, but are limited in how much of success they can create solely by themselves.
5.3 Purposes of leadership
Above analysis suggests that the primary role of leadership is to contribute to the institutional component in decision making (as opposed to rational component, which is important, but essentially a managerial task) and in strengthening the institutional core of the firm. If the institutional core plays an important role in mitigating risks of organizational irrelevance and decline (a hypothesis of this paper), it follows that the primary purpose of leadership is to pursue desired goals by following the principle of “no or least harm” to the organization, i.e., the purpose of leadership is similar to the one advocated in medical sciences, where the principle is to cause “no harm” to patients. Businesses are of-course different from a medical patient; businesses have to take risks to avoid becoming uncompetitive or irrelevant. That said, principle of least harm in long run provides a benchmark that may be useful to identify leaders, as, in complex and unpredictable environments with imperfect information, there is usually an arms’ race among leaders (and stakeholders) on desirable future states. The “harm potential” of a future desired state is a good reminder of what can be lost, if risks are not managed well. Closely related to the minimization of “harm potential” of decision making is leading the organization into a state, where its’ future choices and flexibility of making decisions are enhanced, which could be through building of organization slack, or other key resources. If current decisions by leaders result into serious organizational constraints for future decisions, it potentially means that organization has suffered some “harm” or setback, which effective leadership was expected to avoid.
While ensuring no or least harm is a normative and base-line expectation from leadership, the higher level purpose is to strengthen organizational processes that contribute to stronger institutional core. The strength of institutional core could be assessed on a leadership spectrum with one extreme being individual (and heroic) leadership, mid-portion being collective leadership and the other extreme being invisible leadership, which is a state where leadership makes itself less salient at least on the rational components of decisions. These organizational processes – of which leadership identification and assessment is one – could imply a shift from efficiency maximisation paradigm to building organizational resilience and capabilities. Leaders still would have an important role to play, but it will mostly be in the areas of reinforcing the organizational character, purpose and value, and getting stakeholders’ alignment to them.
Given that leaders are expected to perform, formally and informally, on large number of measures, some of which are trade-offs at least in the short run, it follows that perhaps it is unrealistic to expect them to excel on all the stated measures and unstated expectations at the same time. It is more of a wishful thinking, and increases the likelihood that an extreme performance on one or few measures could risk extreme risk or low performance on some other performance measure. This suggests that perhaps the effective leaders are invisible or seen as average, who do not excel on one or few chosen measures to the detriment of other measures, which are also important even though they do not seem like.
This article explores various assumptions and biases that influence our understanding of leadership from a practical perspective.
It is often assumed that leaders are a special talent, who are able to produce significant organizational outcomes at low or acceptable costs. It is further assumed that identification of right leaders automatically implies that the performance from them would come at acceptable level of risk and would have minimal adverse consequences. Since organizational performance is important to all stakeholders, and not just leaders, it is important to separate between costs of leadership performance from leadership itself. One way to do this is to recognise that all organizational performances, good or bad, incur costs (including risks and consequences) and to have conversations on that basis at all times instead of after the fact conversations about costs and consequences, when it is too late.
Effective leadership could be a result of many attributes, behaviours and contextual factors. It is likely that large number of low impact attributes and behaviours cumulatively play an important role. Appreciation of this “long tail” of attributes remain an important challenge, but perhaps could be addressed by increasing cognitive diversity in organizations at various levels.
Proliferation of knowledge on leadership leads one to assume that it will automatically lead to better leadership performance. However, leadership is a complex area and expecting a single individual or group of individuals to meet all expectations, particularly when the leaders are required to make difficult trade-offs, is nearly impossible. Perhaps one way to address this is not to view organizational membership in binary framework of whether each member is a leader or not, and instead work on the basis that everyone is a leader on a long leadership continuum and therefore can contribute to improving organisation performance. If more organizational members accept this mind-set and contribute, then there is higher probability that aggregated (organizational) leadership output will increase leading to a reduction in the gap between what leadership theory expects and what the practice delivers.
This article argues that context plays, sometimes unseen, an important role in leadership processes including identification and performance. Leadership roles have a rational (primarily performance based) and institutional (broader considerations that validate internal processes) components. It is one of the hypothesis of this paper that individuals are leaders to the extent they are address institutional components as opposed to rational components, which are managerially focussed. Perhaps an important step in terms of removing the gap between theory and practice is to de-industrialize the terms leaders and leadership, and use them in a careful manner, so that managerial behaviour or acts are not included in it. This will also include not using the techniques or frameworks for managerial effectiveness as “leadership” techniques. Leadership exists when institutional aspects in a role or organization are discovered and addressed on a preferred basis.
This paper suggests that the purpose of leadership is to achieve future desired state in a way that causes least or no harm in future. This implies, among other things, achieving future desired state in a way that does not constrain or limit organizational choices in future, and strengthening the institutional core through capability building, higher organizational resilience, improved sense-making, and articulating overarching organizational values and purpose. A key organizational challenge is to increase the institutional leadership output of organizations, and this is more likely to happen with collective leadership. Sometimes, a recognition that average leadership (as commonly understood currently and not considered as high performance or newsworthy) too has its merits.
Notes and References
- Gallup. (2017). State of the Global Workplace. New York: Gallup Press.
- Harrington, Matthew. “Survey: People’s Trust Has Declined in Business, Media, Government, and NGO”, January 16, 2017. < https://hbr.org/2017/01/survey-peoples-trust-has-declined-in-business-media-government-and-ngos>.
- West, Geoffrey. (2017). Scale: The Universal Laws of Life and Death in Organisms, Cities and Companies. London: Weidenfeld & Nicolson, The Orion Publishing Group Ltd.
- Leadership biases and myths are not new in leadership literature, and an internet search showed a range of perspectives including a recent work, “Leaders: Myth and Reality”, by Stanley McChrystal, Jeff Eggers and Jason Mangone. A short and insightful summary of this work is provided in the link https://www.businessinsider.com/gen-stanley-mcchrystal-says-there-are-3-common-myths-about-leadership-2018-11?r=US&IR=T. This article does not critique or build on these works, and seeks to present an independent perspective based on industry experience.
- Mintzberg, Henry (1996). Musings on Management. Harvard Business Review. July- August 1996. (https://hbr.org/1996/07/musings-on-management).
- Cain, Susan.(2012). Quiet. London: Penguin Books Ltd.
- The idea of distinction between absence of evidence and evidence of absence is taken from NassimTaleb’s work, Antifragile: Things That Gain from Disorder. Reference below.
- Taleb, Nassim Nicholas (2012) Antifragile: How to live in a world we don’t understand. London: Allen Lane.
- The concept “knowing-doing gap” is taken from the work of Jeffrey Pfeffer and Robert I Sutton, “The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action”, and applied into the general context of business leadership. Full reference is below. Pfeffer, Jeffrey and Sutton, Robert I. (2000) “The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action”. Boston: Harvard Business School Publishing.
- Few such examples are provided in the March-April 2019 article of Harvard Business Review by authors Julie Battilana, Anne-Claire Pache, Mertin Sengul and Marissa Kimsey, who referred to it as “The Dual-Purpose Playbook”. Full reference is below: Battilana, Julie, Pache, Anne-Claire, Sengul, Metin and Kimsey, Marissa (2019). The Dual-Purpose Playbook. Harvard Business Review. March – April 2019. Pgs. 125- 133.
- Reference to a recent article on Mittelstand, which covers their characteristics is as follows: Parella, Jordi Franch & Hernandez, Gemma Carmona (2018) The German Business Model: The Role of the Mittelstand. Journal of Management Policies and Practices, 6 (1). Pp 10-16.
- Mintzeberg (1996) explains, “Switzerland is an organization that really works. Yet hardly anybody even knows who’s in charge, because seven people rotate in and out of the job of head of state on an annual basis”.
- Daniel Kahneman is credited with bringing System 1 and System 2 methods of thinking into the mainstream. “System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2 allocates attention to the effortful mental activities that demand it…The operations of System 2 are often associated with the subject experience of agency choice, and concentration.” (pp 28). “…System 1 is generally very good at what it does; its models of familiar situations are accurate, its short term predictions are usually accurate as well, and its initial reactions to challenges are swift and generally appropriate. System 1 has biases, however, systematic errors that it is prone to make in specified circumstances”. (pg 33). The reference is as follows: Daniel (2011) Thinking, Fast and Slow. London: Penguin Books Ltd.
- Cialdini, Robert. (2016). Pre-Suasion: A Revolutionary Way to Influence and Persuade. London: Random House Books.
- Useem, Jerry (2005). Jim Collins on Tough Calls. Fortune. June 27, 2005. Pp. 49-52.
- An important work in this area is by Philip Selznick (below). Selznick, Philip (1957) Leadership in Administration: A Sociological Perspective. New York: Row, Peterson and Company.