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Leadership is an important organizational performance driver

Having worked with more than 300 companies over two decades, one begins to understand that there are some fundamental principles about organizations that seem not to be written in texts or articles.

People who study cognition refer to this type of information as experiential or tacit knowledge, sailors call it “local knowledge.” It is clear that people with a large fund of tacit knowledge perform better in organizations because of this deeper understanding. Virtually all of this type of information about organizations is learned “on the job” of becoming an executive. Such principles as, “it’s usually better if an employee has one boss,” “the flatter an organizational structure the easier to communicate vertically,” “organizations change only from the top down” and “if the business model is simple and widely understood, people and the organization will perform better,” are often unspoken but understood at a intuitive level by high-performing persons.

Perhaps the premier of these chunks of tacit wisdom is “the most powerful variable driving organizational performance is leadership.” I once heard an internationally respected consultant note that the best and quickest manner to assess the performance of a company is to spend an intense half-day with the CEO. Needless to say the person running such an interview must be highly skilled and have a huge fund of tacit organizational knowledge to obtain this result.

It is widely understood that an organization is only as good, or as bad, as its leader. When we read about deeply troubled organizations one need only look to the values and behavior of the leader. Great organizations are led by executives that behave consistently from a set of pristine values.

It is widely understood that an organization is only
as good, or as bad, as its leader.

Successfully running an organization of any size and type is an exercise in the wise use of power. The wise use of power is perhaps the best definition of leadership. Studying a person’s ability to deploy this power is the study of leadership.

Americans in general are uncomfortable with the idea and exercise of power. This is largely because of our history and belief in equality and individual opportunity. Becoming an effective leader means beginning to understand the nature of power in organizations and how to use it in the best interests of the stakeholders.

Thoughtful people moving into executive positions often struggle with this issue. To them they are still the same person they were the day before the promotion. However, to many people in the organization they have now assumed a role that carries with it some mythic significance. The most immediate and troubling manifestation of this phenomenon is that many people start telling them what they want to hear not what they need to hear. Close and trusted colleagues begin to “spin” their communications with the leader. This is even more the case when the leader is also the owner. One of the reasons executives engage consultants is that they need someone to confide in who will speak the truth with them.

Helping executives to fully comprehend and deploy this invisible but powerful tool is a significant challenge for a consultant. I have worked closely with many people moving into organizational leadership positions and almost all underestimate the power of their new position. Those who come to understand the power of the position and learn how to deploy it wisely become leaders. Those who deny the existence of this power are the greatest abusers of their power. Carry out a personal experiment. Ask yourself, “Which executives in my organization comprehend and deploy their power wisely?” Applying this new mental model can lead you to some striking insights about leadership.

What are the effects of leadership? Warren Bennis, who has written widely and deeply about leadership, and who we will discuss in some depth in a future column, notes that organizational leadership has four profound effects.

Leaders create an environment where:

  • People feel significant
  • Learning and competence matter
  • People are part of a community
  • Work-life is exciting

I find it interesting that two of the four criteria are about how people feel. Food for thought.

Keeping these in mind and using this set of criteria for leadership is a worthwhile exercise as we embark on this multi-column journey of discovery about leadership.

 

 

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