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April 11th, 2017

Leadership: What Works

 

Our last post looked at the different styles of leadership that exist. We argued that the situation largely dictates which style would be most successful, and that there isn’t one style that is ultimately correct. In this post, we look at the direction that leadership styles are trending in, and which have proved to be the most successful.

 

Business Basics & Agility

Harvard Business Review has provided valuable insight into topic through their ten-year longitudinal study that involved over 2,700 interviews with leaders of several firms.

A recurring pattern in successful leadership was knowledge of business basics, which seems like common sense, but it is often overlooked because of its seeming simplicity. Understanding the whole business – from front line operations, to top-level management strategies is a must. The same goes for the industry and the community that you are operating in. Being an expert in marketing women’s fashion is vastly different from marketing in the oil and gas industry.

Great leaders are also distinguished by the fact that they form deep and trusting relationships with their employees at all levels of the organization. From clients, to frontline workers, to top level managers, to even peers from other firms. Maintaining this kind of relationship is important because trust builds better business when people know who you are, what you stand for, and the product you are providing. This type of loyalty was found to be much longer lasting than that which is created out of fear or coercion.

Another insight was that great leaders are also great decision-makers. “They are able to declare their views, engage others’ ideas, analyze data for insights, weigh alternatives, own the final call, and communicate the decision clearly.” (Carucci, 2016)

However, the key take-away was the importance of agility in strategy and leadership style. Changing conditions requiring action can range from more slow-paced situations such as shifting demographics in the workforce, and technological developments, to fast-paced PR nightmares, and natural or man-made disasters.

A noteworthy point that was made in these studies is that these attributes are deemed to be learnable/teachable. This idea goes against the traditional view that many of the traits found in great leaders are innate, which is a departure from the “Great Man Hypothesis” mentioned in our previous post.

 

“4+2”

Nitin Nohria, William Joyce, and Bruce Robertson believe that they have worked out a formula that provides a 90% chance at sustaining successful business performance. Their formula is the “4+2” method and it involves businesses and their leaders excelling in the four primary management practices – strategy, execution, culture, and structure – as well as in any two of the secondary management practices – talent, innovation, leadership, and mergers and acquisitions. The authors make a point to express that their study did not reveal any difference between the secondary practices in terms of which provided a better chance of success. As long as two are mastered, the 4+2 formula is met.

That being said, knowing about this formula and being able to execute it effectively are two completely different things. As it was mentioned earlier, business and the community in which it operates are continually changing, this makes it is extremely difficult to excel perfectly in all six practices over the long term.

In short, how the six practices are performed must change as well, and there is no set formula the execution of the 4+2 method. Nohria et al. made it very clear in their article that even a single misstep could be fatal. It was found that “less than 5% of all publicly traded companies maintain a total return to shareholders greater than their industry peers for more than 5 years.” (Nohria et al., 2003)

The key to achieving excellence in each of these key business and leadership areas is to be clear about what your strategy is, how you aim to accomplish it, and to consistently communicate this to customers, employees, and shareholders. An example of this is keeping your core business tight and not expanding either in scope or size before being one hundred percent ready. Moving into areas that are unrelated to the heart of what your business is inevitably creates strategic drift. It is also important to have a culture that encourages outstanding individual and team contributions, one that holds employees and managers alike accountable for the firm’s overall success. Too much red tape can hinder progress and stifle employee enthusiasm; the structures and processes surrounding business practices should be as simple as possible.

 

Development

Successful leaders understand that the philosophy of development should also be applied to both business practices and products. They have the confidence to train and develop their products through investment in R&D, and are unafraid to cannibalize products that are not performing or selling to standard, instead of letting them fail slowly. Like a plant that needs pruning so as not to expend energy and resources on a dying flower, so too should a company prune products that are leeching, rather than making money. Again, agility plays an important role in being able to fine-tune your focus in response to new technologies, social trends, and government regulations.

 

 

Organizations and how they are run change over time. Because of this, leadership styles and theories as to which methods are the most effective change as well. Effective leaders are quick to adapt to these changes by identifying and then embodying the kinds of behavior needed to transition a company from its present state to a stronger one. And, while there may be an abundant amount of information on what should be done to be successful, it is impossible to outline a fool proof formula on how to actually do it. Understanding the kind of company you have and the cultures that it operates in, both internally and externally in the surrounding community is most important. It allows for the creation and expression of a strategy that is a clear vision and is easily identified and implemented by your team.

“Top-management teams that are serious about developing vibrant businesses and effective leaders must be prepared to look inward, assess the organization’s health objectively, and ask themselves frankly whether their leadership behavior is strong enough in the ways that matter most at the time.” (Nohria et al., 2003)

 

 

Sources used for this post:

Bazigos, M., Gagnon, C. and Schaninger, B. (2016). Leadership in context. [online] McKinsey & Company. Available at: http://www.mckinsey.com/business-functions/organization/our-insights/leadership-in-context [Accessed 22 Mar. 2017].

Carucci, R. (2016). A 10-Year Study Reveals What Great Executives Know and Do. [online] Harvard Business Review. Available at: https://hbr.org/2016/01/a-10-year-study-reveals-what-great-executives-know-and-do [Accessed 31 Mar. 2017].

Crowley, M. (2015). How The Wrong People Get Promoted And How To Change ItFast Company. Retrieved 30 March 2017, from https://www.fastcompany.com/3045453/how-the-wrong-people-get-promoted-and-how-to-change-it

Nohria, N., Joyce, W. and Robertson, B. (2003). What Really Works. Harvard Business Review