The Leadership Dilemma

Back in the 1970s, a discussion started in the U.S. about the need for a new leadership culture. The economy was in crisis. Most commentators felt that the reasons – the oil price shock, coupled with intensified competition from Europe and Japan – were external. But companies needed to find solutions, and had no option but to home-grow their own.

It was clearly time for a change of perspective. Prior to the crisis, the term “management” had been synonymous with working successfully in a company. Now it had become synonymous with an excessively simplistic leadership model in which clarity was more highly rated than functionality, and adherence to rules took precedence over creative manipulation of the surrounding environment. Warren Bennis used trenchant comparisons to explore these management issues: while managers might tackle things the right way, for example, leaders were more likely to tackle the right things. He equated “right” with ensuring the survival of the company in the face of ferocious competition – in operational terms this was swiftly abbreviated to “increasing shareholder value”. Senior executives were saddled with new duties and consequently new demands – in particular, the responsibility for assuring the company’s success in environments extending beyond the normal sphere of operations.

As an immediate upshot of this shift in perception, CEOs of major enterprises were measured by their ability to lead employees in such a way as to inspire them to do more than they were contractually obliged to do. Transactional leadership became transformational leadership. By setting ambitious goals, senior executives were supposed to motivate employees to explore their own limits and achieve satisfaction by successfully attaining goals that had initially sounded Utopian. “Going the extra mile” promised to pave the way to a win-win situation: employees would be freed from the fetters of over-prescriptive instructions and become entrepreneurs in their own right, while executives would be rewarded for the successes they chalked up for their companies. High-performance management became the buzzword of the day.

And indeed, the obvious successes appeared to justify this new culture: exponential growth was reported by every company where people discovered effective ways to apply these new freedoms. But as the new millennium dawned, crisis followed crisis at an ever-accelerating pace, casting doubts upon the sustainability of the new performance culture: confidence in this previously promising approach was shattered.

Once again, the problems involved were not foreseen or anticipated: mental disorders are increasing on an unprecedented scale, and while people were previously aware of the demographic trend, its impact is only now becoming acute. Management by objectives is foundering on the limits of human performance; it is no longer easy to motivate the entire workforce to pursue every opportunity for growth. The media appear to prefer to report on failures – and the solution is widely viewed as the imposition of new rules, a viewpoint that is particularly salient in the debate on capping executive pay.

As usual, senior executives are being asked to find answers to these questions. But in demonstrating their ability to act, they must also run the gauntlet of apparent contradictions. Individual decisions must be based more obviously on adherence to rules and good practice, so that lost confidence can be regained. While executives remain responsible for success, their freedom of action is, once again, increasingly curtailed.

How can executive development make a difference and help individual managers deal with these challenges?

Henry Mintzberg advises us to remember that in a company, we are dealing with human beings, not human resources. Businesses must become tangible members of the community; leadership should be more about team participation and support, less about individual heroism.

These new criteria can be satisfied through improved training in self-perception and self-awareness. But also by strengthening individual managers’ personal values and helping them develop a genuine leadership style in tune with their own personal motivation. Coaching sessions and mentoring programs are helpful, but so are structured initiatives that encourage self-analysis and self-motivation.

Those who succeed are those who explore their own boundaries, and by transcending them, learn to experience and know them. But in the final analysis, satisfaction may also be found in conscious adherence to rules. Such rules may include, for example, recognizing the cultural significance of making Sunday a day of rest, or the importance of not making oneself available 24/7.

This new change of perspective promises exciting times ahead: we no longer have to do something simply because it is possible to do it. As a senior executive, it is also important to invest in structures and rules that may (at least appear to) restrict one’s own freedom of action.

—Erich Barthel is Professor of Corporate Culture & Human Resources Management at Germany’s Frankfurt School of Finance & Management. Reprinted by permission.