13. Leadership and the Partnership Culture

“It is a terrible thing to look over your shoulder when you are trying to lead and find no one there.”

—Franklin D. Roosevelt

What are the implications for leadership of a partnership culture? We have made reference to leadership—or “the CEO” or “senior management” or “executives”—many times in this book. It will come up again in some detail in the next chapter, where we discuss the implementation of a partnership organization, because without strong and continuing support from the top, no genuine culture change can be sustained. In this chapter, we explore in some detail leadership itself—including the evidence-based conclusions about the specific characteristics of great leadership—and the intimate relationship between great leadership and culture. More often than not, great leaders—those who build organizations with sustained high performance—do so through cultures of partnership.

Our conclusions about leadership are based on our own many systematic studies of leadership, our observations of the great and not-so-great (and some downright miserable) leaders we have worked with and otherwise observed throughout the years, and the research of others. Leadership has been one of the most extensively researched topics in the field of organizational behavior.

Here are some positive comments from employees about leadership:

All levels of leadership are very approachable, set a clear vision, display and expect high levels of ethical behavior, and expect excellent results.

Our CEO and leadership team has a strong and clear vision.

We have great leaders in top management, who can drive the company successfully.

I enjoy the fast-paced nature of the company and the goals that we’re working toward.... I greatly respect our CEO and Sr. Leadership team.

The executive team has intelligence, vision, passion, and openness. It makes me feel 100% confident in the product and future of our company. Though we have our growing pains, I could not imagine working anywhere else.

I like the stability that comes from strong upper management vision & leadership.

I appreciate the overall goal and focus of upper management. Through everything, the end result has remained constant.

Visionary leadership allows employees to trust the senior leadership and the direction the company is heading.

And now, here are some unfavorable comments from employees about leadership:

There is a lack of clear leadership—no one and everyone seems to be in charge, which results in factionalism, waste, and inefficiency.

Continual changes in Senior Management makes for a very unsettled feeling.

Decision making is so fragmented and unclear that when it comes down to crunch time, people are still weighing in on what to do... but when you’re supposed to launch a product the next day, we need clear leadership to break stalemates.

Everyone is on a power trip about who’s in charge.

Having three powerful leaders has led to disconnection in our strategies and will lead to poorer outcomes for [the company] overall. The CEO should lead us toward developing one strategy that we all execute off of, not a series of unrelated strategies to help disparate leaders meet their own individual goals.

Our leadership team is scared and uncertain in this time of change. They act young and inexperienced rather than as a beacon of confidence for the rest of us.

The loudest voice in the meeting room seems to win. Someone with real authority needs to step in with a real overall vision.

The organization is run bottom up and not top down. Too many levels, too many groups, and no clear leadership. Focus is constantly changing; what’s important this month is not important next month.

There is a desperate need for clear leadership and vision.

There is also not a clear leader that we have been able to rally behind.

In an abstract sense, leadership would not be required in a company that is completely steady-state—that is, where nothing changes, everything is routine and has been preprogrammed. But nothing in human endeavor is ever steady-state—only death is. External conditions change (in the economy, in competition, in customer preferences), and there are never-ending internal changes that require vigilance and constant adaptation (employees enter and leave the organization, new technology is introduced, things don’t work as they were supposed to, and on and on).

It’s not just a matter of organization functioning in the pure business sense. Leadership also sets the internal culture, the values that determine how things get done and how employees and other stakeholders are treated. A culture can require ethical behavior or wink at (or even encourage) misconduct. It can be dedicated to providing value and service to customers or tolerate indifferent treatment of customers. It can place value on employees as assets rather than as interchangeable “hands” to get the work done. It can be highly bureaucratic and rigid or encouraging of employee autonomy and creativity. The culture of an organization flows directly from the real values and the observable behavior of the company’s leadership. It is striking how greatly the cultures of companies differ and how, in company after company, the culture is virtually a direct reflection of what the CEO wants, and, indeed, of the type of person the CEO is (open or secretive, oriented to the short term or the long term, collaborative or competitive, ethical or unethical).

Followers follow for one of four reasons: they can be forced to follow; they can be paid to follow; they can be made dependent so they will follow; or, they can be inspired so that they want to follow. When someone is given formal authority over others in an organization, that authority includes the first three of these—that is, the power to apply negative and positive sanctions to influence behavior. When, however, organizations say they seek and want to develop “leaders,” they almost invariably mean the ability to inspire employees. The importance of that kind of leadership is universal, applying even to what on the surface appears to be the most top-down and force-reliant of organizations: the military.

“The first thing a young army officer must do is to fight a battle, and that battle is for the hearts of his men. If he wins that battle and subsequent similar ones, his men will follow him anywhere. If he loses it, he will never do any real good.”

—Bernard Law Montgomery, British Field Marshal

“You do not lead by hitting people over the head—that’s assault, not leadership.”

—Dwight D. Eisenhower

When discussing leadership, we and others tend to focus on the top of an organization—especially the CEO—but leadership applies at all levels, and it emerges even when not accompanied by formal authority. Think of informal groups—whether at work or not—and how leaders materialize spontaneously, those persons to whom others willingly look to for direction and approval. This is true even in children’s play groups. Within departments at work, individual employees will often be invested by their peers with leadership mantles that can work to reinforce or circumvent the formal supervisor. In other words, leadership is not simply about a position or title. An individual can have a high-sounding title such as CEO and not be considered a leader. And that, as we have said, is an enormous problem.

Who emerges spontaneously as a leader or acts or develops as a genuine leader when appointed to a formal position of leadership? We will soon describe what research and informed observation have taught us are the key elements of leadership. One way of comprehending the importance of these elements is that they are the foundation for trust in a leader. Voluntarily following a leader is, after all, making a bet on the future, relinquishing some degree of control over one’s fortune to someone else in the expectation that benefits will accrue from it. This soon becomes more than a rational calculation as an emotional bond develops—even in economic, supposedly rational, entities such as companies—between followers and trusted leaders.

Leadership, then, is not a solo act: it is a relationship between the parties with obligations on both sides. It is not simply the leader determining direction and telling his followers what he expects of them. Genuine leadership requires an understanding of what the followers want and how the leader can help them get it. This is not a matter of selfishness of followers as selfishness is normally conceived. Companies have needs and their employees have needs, and a fundamental premise of this book is that the right approach to management assumes the compatibility of most of these needs most of the time and, therefore, the possibility of a commonality of purpose. It is not, further, simply a question of employees’ financial needs. As we said, people are complex, and although a company ignores its workers’ financial needs at its peril, they are a part of a larger array of worker goals that great companies and great leaders understand and work to satisfy. Included in this array of goals, it will be recalled, is the need to be proud of your work and of the company for which you do it. In some companies, we can add to those sources of employee pride the accomplishments and character of the company’s leader.

It should be clear that genuine leadership, as we understand it and whose elements we will soon describe in detail, is congruent in all its aspects only with a Partnership culture. The primary control mechanism of a Transactional culture is money: we pay you to follow. An Adversarial culture relies on force (often stimulating counterforce as workers seek protection). Paternalism depends on dependency, like the trust a child has in its parent to lead the way. Partnership, too, depends on trust, but it is the trust between mature adults who, with mutual respect and admiration, have voluntarily joined together to achieve their long-term goals. This is not to say that a boss and his subordinates are equal in power in a partnership relationship—that is a fantasy, and it is dysfunctional when attempted. It is the use of the boss’s power that is dramatically different, most especially as it derives from the confidence the boss has in the intelligence and integrity of his subordinates. That confidence leads him to see his subordinates as much more than “hands” with little to contribute beyond what they are ordered to do and driven by a desire to do as little work as possible while demanding as much money as possible. The leader-as-partner, having trust in his subordinates, is comfortable distributing his power to them, which helps ensure both higher-than-average levels of performance from them and higher-than-average levels of financial and psychological return to them.

When we speak of the performance of a company in relation to great leadership, we mean, as we have said, sustained performance—sustained even after the leader retires or otherwise leaves. Many clever CEOs know how to achieve outstanding short-term results, such as by sharply and quickly reducing the workforce and otherwise cutting costs. We described in our chapter on job security the often negligible long-term gains of such measures. A key question for us, therefore, is whether the company’s leaders are building for the future—that is, even after they are no longer on the scene. That brings us to the topic of charismatic leadership and the indispensible leader.

Charisma is typically thought of as something mysterious, even magical. We propose to demystify it, at least in the business arena. In our view, when someone in business is described as having leadership charisma, it means, simply, that people sense strongly that following that person will take them in the direction they want to go. They sense that because that person possesses more than others a combination of the basic leadership characteristics we will shortly describe, such as being smart, visionary, decisive, energetic, and having a genuine concern for the well-being of his followers. Further, business leaders seen as possessing charisma have almost invariably been known to have achieved outstanding business results.

In other words, in our terms and simply, there is no difference between the qualities that are important for truly effective business leadership and the qualities that are typically used to describe a charismatic leader.

With one major exception.

You surely know by now that we will argue that a concern for the needs and interests of followers is a core characteristic of effective leadership. The term charismatic, however, is often applied to people for whom the needs and interests of their followers are irrelevant. They are the narcissists whose focus is entirely on what makes them compelling personally rather than on what makes the organization as a whole compelling and satisfying to its employees and other stakeholders. Indeed, some of these “leaders” are incredibly destructive—of their organizations, the people in them, and sometimes, ultimately, of themselves.

Everything has to be centered on these grandiose types: attention, prestige, decision-making power. They want the success of the company to be associated entirely with them and usually fail to prepare for the day they will leave. What good would it do, because they are indispensible? They are the flames around which the moths flitter.

Although those outside the organization may describe these persons as charismatic, most of those inside—those who have come to know them best—are not fooled for long. Rather than charismatic, these leaders are “egomaniacs,” “Napoleons,” “blowhards,” “manipulators,” and other terms not to be mentioned in a family book.

Some writers have therefore made a useful distinction between two types of charismatic leadership: Self-centered (or “personalized” or “unethical”) charisma and organization-centered (or “socialized” or “ethical”) charisma. The former is the type of leader who:

Uses power only for personal gain or impact; promotes own personal vision; censures critical or opposing views; demands that own decisions be accepted without question; one-way communication; insensitive to followers’ needs; relies on convenient external moral standards to satisfy self-interests.

On the other hand, the organization-centered leader uses power to serve others; aligns vision with followers’ needs and aspirations; considers and learns from criticism; stimulates followers to think independently and to question the leader’s view; uses open, two-way communication; coaches, develops, and supports followers; shares recognition with others; relies on internal moral standards to satisfy organizational and societal interests.¹

Jim Collins, in his widely read and influential book Good to Great, goes even further with his argument that the “great” leaders (he calls these leaders “Level 5”) tend to be persons of “deep personal humility.” “A company’s long-term health requires a leader who can infuse the company with its own sense of purpose instead of his or hers,” Collins argues. He has “ambition first and foremost for the company and concern for its success rather than for one’s own riches and personal renown.”²

The real world of people and organizations is, of course, more complex than the black-and-white portrayals encountered in the business press or management literature. Although there is no shortage of leaders at or near the extreme of self-centeredness, it is folly to think of the organization-centered leader as devoid of self-interest and ego. We are not dealing with self-effacing saints at the higher reaches of organizations, at least not in the experience of the authors of this book. The organization-centered leader understands his value full well and wants an equitable reward for it. He also understands the value of others—and wants them rewarded for that. Of great importance, he understands that his value is multiplied many times over because of the contributions of others. That is the essential difference between him and the narcissists.

We add that the organization-centered leader may not always act in the interest of others, and he doesn’t always appreciate how much they contribute to his own achievements. These leaders are, after all, human, so it is probably best to talk about degrees of organization-centeredness, rather than the organization-centered leader.

The situation is made even more complicated by the fact that the same person can act differently under different circumstances. For example, there is no dearth of political leaders who achieve a great deal for their constituencies but, in aspects of their private lives and simultaneously with their achievements, act recklessly with apparent contempt for others. In another context, our case study of former mayor Rudy Giuliani shows how key facets of leadership can change markedly with changing circumstances, in his case with the 9/11 attacks on New York City when he was transformed from the largely self-centered, indispensible man of his mayoralty to the community-centered, compassionate but still-strong mayor providing leadership and solace to a traumatized city.³

When does a leader’s vision for an organization generate enthusiasm in its members? We have written about this in other parts of the book (especially in Chapter 7, “Organization Purpose and Principles”) and need not revisit the subject in detail. In essence and for our purposes here, a vision should be credible—not platitudes or fantasies or academic theory; it should be inspiring, embodying goals and values with which followers can identify, including goals and values above and beyond profits; it should be long term: what we aspire this company to be like over a matter of years, not the next quarter or two; and, it should contain a conception of the aspired-to corporate culture, most desirably a partnership culture, through which the vision is to be achieved.

Deserving of some elaboration and emphasis is that the vision of an outstanding leader is truly long term. That leader wants to build an enduring organization, indeed—one that will outlast him.

“The final test of a leader is that he leaves behind him in other men the conviction and the will to carry on.”

—Walter Lippmann, journalist and philosopher

Of the organizations we have studied, Mayo Clinic probably comes closest to attaining this ideal. We described in the previous chapter how the Clinic, founded by the Mayo brothers more than a century ago, stands today dramatically altered except in its basic values—especially “the needs of the patients come first” and “uniting for the good of the patient”—and the basic structures and processes that flow from those values, such as the team approach to delivering care. The genius of the Clinic’s founders was to promulgate a vision of excellence in medicine and establish an institution that would fulfill that vision and far outlast the founders. This has meant for Mayo, as we noted, that leadership is not defined in heroic terms: the “star,” brought in from the outside and bent on remaking the institution and its culture in his own image, and often for short-term gain. A long-term perspective, even when faced with short-term challenges, is paramount in Mayo.

Mayo’s leaders are proud of the services their organization provides. Often associated with leaders with a long-term vision is a keen interest in—even a love for—the organization’s products and services. And so for that reason also they see the business as more than a financial undertaking and frequently display an intimate knowledge not just of the company’s profit-and-loss statements, but also of its offerings, its operations, and its customers. Of course, this can be a two-edged sword because in their ardor, they may be tempted to interfere with the work of others down the line. But we find that, by and large, workers down the line are immensely appreciative of such interest as a sign of a boss whose values and pride match theirs and who has a long-term view of what it takes to make a business successful.

• Basic ethics. He does not act unlawfully or otherwise unethically in his business dealings, such as falsifying financial records, misleading customers, or selling unsafe products.

• Credibility. He does what he says he will do. There is a reason terms such as “walks the talk” and “puts his money where his mouth is”—and their opposites—are heard so often in companies: the credibility of a boss is enormously important to employees.

It is almost oxymoronic to think of people willingly choosing to follow someone they see as dishonest: blatantly dishonest in his behavior (a cheat, a crook) or dishonest in the gap between his words and his deeds. They may remain in the company for a time—sometimes a long time—because of a lack of employment alternatives, but the relationship will likely be no more than transactional (you pay; I work). A lack of integrity—even from someone highly competent in his field—is toxic to the trust that is the foundation of the leader-follower relationship.

There is a positive relationship between strength and the attributes of a long-term perspective and integrity. Essential to integrity is having the backbone to say “no” when an action, which may produce a short-term profit, is clearly or even borderline unethical and would likely do harm to the long-term health of the business.

But don’t confuse modesty in these respects with shyness, or, as we have said, with a disinterest in financial reward. There is no shortage of eminent chief executives—people who built great, long-lasting companies—who, in the process, became rich. That has not been accidental, a by-product of loftier goals; the ones we have studied and have known personally have been clearly interested in building their wealth.

The essential differences between these great executives and others are that, first, they aren’t focused exclusively on wealth: other goals—building an enduring company, having great products—are also essential to them. Second, in line with their long-term term view of the business, they tend to have a long-term view of their personal wealth accumulation—they are not greedy to grab every penny they can and do so now.

The third difference relates to how they see their goals being achieved: do they see the realization of their ambitions to be a function solely of their intelligence and efforts, or have they come to understand that their success is in very large measure dependent on the intelligence and efforts of others? Central to the wisdom of great leaders is modesty in the sense of an understanding of their reliance—no matter how bright and strong and energetic they are—on others.

Great leaders, then, are open-minded in that they are aware that for many of their decisions, they have just a fraction of the information and the experience needed.

Failures and mistakes in the course of running a business are inevitable. An open-minded leader understands the human tendency—likely including his own—to look away from weaknesses, and he deliberately and consciously disciplines himself to face reality. And he ensures that the appropriate processes are in place to unearth the facts in the first place so that a steady stream of reliable, relevant information is available to him and other decision-makers. This cannot be done mechanically. For it to work, the proper climate has to be established—one where problem identification and problem solving are rewarded and problem avoidance and blame-placing are strongly discouraged. In the best of cases, this becomes the natural and normal mode of operation of the business—its mind-set, as it were. An example, applied to business processes, is the methods and mentality of “continuous improvement,” developed originally with great success by Japanese manufacturing companies. The underlying premises of continuous improvement are that improvement is always possible, that the problems identified are a result of the system in place and not the workers, and that the remedies, using a disciplined problem-solving approach, will come largely from the workers.⁴ The right culture—open, nonblame placing—is essential if continuous improvement is not to become just “another program.” And the establishment of such a culture depends, first and foremost, on the attitudes and actions of senior management.

As reiterated throughout this book, concern for employees has both economic and psychological facets. The economic side consists, in essence, of the degree to which the financial gains of success are shared equitably with employees and the sacrifices required in hard times also shared equitably. If it is a matter of executives raking it all in when times are good and suffering hardly at all during downturns (perhaps raking it in even then!), don’t expect much willing followership. Decisions need to be seen as motivated by mutually-serving rather than self-serving motives. On the psychological side, it’s difficult to follow a leader who, aside from job security and pay (which may be satisfactory because of a tight labor market or an aggressive labor union), treats employees as children or criminals. A leadership that doesn’t trust won’t be trusted.

“It used to be a business conundrum: ‘Who comes first? The employees, customers, or shareholders?’ That’s never been an issue to me. The employees come first. If they’re happy, satisfied, dedicated, and energetic, they’ll take real good care of the customers. When the customers are happy, they come back. And that makes the shareholders happy.”

—Herb Kelleher, former CEO, Southwest Airlines

“The greatest source of power available to a leader is the trust that derives from faithfully serving followers.”

—James O’Toole, professor of Leadership Studies, University of Southern California

A senior leader has three important responsibilities in this respect:

• To structure the organization to minimize conflict—for example, the team structure described in Chapter 11, “Teamwork”

• To gear rewards and penalties to reinforce cooperation—through both the formal reward system (for example, pay increases and promotions tied in a significant way to cooperative behavior) and informally (what the leader, through his day-to-day actions, indicates are the behaviors of which he approves and those of which he disapproves, in fact, will not tolerate)

• To model cooperation in his own behavior, especially with his senior management team

“The leaders who work most effectively, it seems to me, never say ‘I.’ And that’s not because they have trained themselves not to say ‘I.’ They don’t think ‘I.’ They think ‘we’; they think ‘team.’ They understand their job to be to make the team function. They accept responsibility and don’t sidestep it, but ‘we’ gets the credit.... This is what creates trust, what enables you to get the task done.”

—Peter Drucker

Again, we don’t have to take this to the extreme of ego-free sainthood to recognize how important teamwork is to performance and how it can be damaged by the need of the leader to be a one-man show, maintaining that status through a pattern of one-on-one relationships with his subordinates and encouraging competition among them and their organizations for his favor.

That is our summary of the key attributes of leadership, abstracted from a voluminous amount of leadership research, by ourselves and others. We did not, however, mention one attribute because it applies to every job, not just that of a leader: YaGottaWanna! We often assume that everybody in a company is interested in a leadership position, in being a boss. Not true. There are workers who see being a boss as a headache, and for some it is even a terrifying prospect. Think of the cookie and cracker packers described in Chapter 9, “Job Challenge,” most of whom liked their routine work and had very little interest in moving into a supervisory or management position. This is true of some people in all kinds of work, from low- to high-skilled.

What, at its heart, is the job of a boss? It is getting work done through others and accepting accountability for their performance. As with any job, its attraction for people is to a significant degree a function of whether a potential job occupant feels that he can do it well. One of the last things some people feel able to do well is manage others. They are especially wary of having to tell their subordinates things they don’t want to hear: about their performance, about changes in their hours, about an impending layoff, and so on. Perhaps underneath a lot of the discomfort about obtaining a position of power is, ironically, a sense of powerlessness: having to get things done through others represents some loss of control over outcomes because the boss is dependent for results on the performance of others. “I’d rather just do it myself,” say more than a few workers.

Many others, of course, can’t wait to be a boss. They not only like the extra money and status, they feel they can do it well, and they enjoy power. Enjoying the exercise of power is not necessarily a negative. To evaluate the desire for power, we need to ask: power for what and is power being monopolized. If it’s power just for power’s sake, there will almost surely be a problem. But if it is also power for a purpose—say, to build a department or total organization that gets admirable things done—then that is exactly the right drive. And, if the power, rather than being hoarded, is distributed to subordinates as “partners,” that is exactly the right allocation of power. A wise leader soon learns that that approach, rather than diluting his influence, significantly enhances it.