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Apply great leadership lessons

By Timothy F. Bednarz

Executive Summary
These days, the question of whether a leader is legitimate or illegitimate is not related to birth. Instead, it’s related to a matrix that includes credibility, trust and emotional bonds with key constituencies. Incorporating the qualities found from surveying great leaders can transform your organization into one that profits from doing the right things, not from cutting corners.

America is in a leadership crisis. Many of our prominent leaders in all walks of life view their positions of leadership as a right to power, money and privilege. They perceive their status as a mandate to loot, pillage and abuse those they are chosen to lead. They have the façade of leadership but are leaders in name only. As James Burke, former CEO of Johnson and Johnson, stated, being a business leader is about giving, not taking. Jon Huntsman, founder and CEO of Huntsman Chemical, identifies the core elements of leadership as talent, integrity, courage, vision, commitment, empathy, humility and confidence. The greater these attributes, the stronger the leadership. In a world where ethically neutral leaders thrive and prosper, there is a need to restore sound and ethical leadership to overcome our present crisis.

The mantle of leadership must be re-established. Over the course of its history, America has risen to the most prominent position of economic leadership. It has produced many great and prominent leaders, some who demonstrate their leadership excellence today. The roots of great leadership are embedded in our culture and reflect the “melting pot” that produced America’s economic greatness. There are lessons to be gleaned from understanding the roots of American leadership and the individuals who produced it. It is these lessons that can help in the revival of leadership.

What defines the great leader? If one reviews many of the prominent lists of influential leaders and CEOs, it is apparent that each applies different standards to the definition. Some list the best performing leaders, the most influential ones or the greatest business leaders of the 20th century.

While the published standards included in these lists provide insight into what describes and characterizes a great leader, they fail to arrive at a consensus that truly defines them. Many are based upon the profits that leaders generated. From a practical perspective, it is insufficient to gauge leadership performance by profits alone. Yet this seems to be the most applicable benchmark. If asked, the majority of the leaders included on these lists would not agree with this standard. Joyce Hall, founder of Hallmark, stated: “If a man goes into business with only the idea of making a lot of money, chances are he won’t. But if he puts service and quality first, the money will take care of itself. Producing a first-class product that is a real need is a much stronger motivation for success than getting rich.” Others have expressed similar sentiments.

My research has delved into the character, values, belief systems, personalities and other variables that shape an individual’s life and career. It examined the lives of 160 prominent and influential leaders who spanned 235 years, their successes, and the driving forces and factors that affected their lives. This resulted in the legitimacy matrix, a new perspective of identifying what made some leaders great and an understanding of why others failed.

The legitimacy matrix details the linkages of leaders’ legitimacy, credibility, trust and a balance of emotional standing and bonds with all key constituencies. The synergetic relationship between these key factors of success is the foundation of effective leadership and provides insight into its definition.

The fundamental essence of leadership is legitimacy, a notion based upon authority and validity. While authority is conferred, validity is earned through the development of credibility, trust and a balance of emotional standing and connections with all key constituencies.

Leaders who fulfill the conditions of the legitimacy matrix are endowed with the authority to lead, manage, execute, empower, effectively communicate, sell their vision, generate a passion for success and overcome adversity. Leaders who lack those attributes ultimately fail.

Legitimacy

Legitimacy is a cornerstone of effective leadership. All of the great leaders have it. However, legitimacy is seldom discussed, if even mentioned, in most leadership books. This leads to confusion as to what defines legitimacy. Its definition needs to be clarified and placed within the proper context.

Legitimacy is derived from two separate sources that give leaders permission to lead. The first source is authority, or the power granted to leaders by either election or appointment to an office. In the business setting, this is conferred by the stockholders through the board of directors.

The second source is validity. Validity is not conferred, nor is it automatically achieved once a leader is appointed to a position. It is earned and is a contributing factor to the authority granted to leaders, typically over the span of their careers. This defines a leader as genuine and authentic in the eyes of all key constituencies.

Both sources of legitimacy complement each other, but validity provides an enduring, yet fragile acquiescence of all the constituencies that give a leader the tacit permission to lead. It is built upon three critical factors: trust, credibility and emotional balance. These are the hallmarks of great leaders. Without the presence of these critical factors, the leader’s validity collapses. Once leaders lose their validity, their authority to lead is effectively undermined.

Credibility

When examining legitimacy as the foundation of leadership, then credibility is its pivotal point. Everything revolves around the leader’s credibility. It is the most important aspect of leadership, yet it is often ignored or minimized. It may be assumed that most individuals are aware of the importance of their credibility, but this is not always the case. However, the great leaders understood the critical importance of credibility in their lives.

A typical leadership development program teaches individuals about the necessity to establish a vision, communicate effectively, build strong teams and empower employees. Anyone exposed to these programs is familiar with these principles. Yet without credibility, none of the above actions can be undertaken effectively. The lack of credibility undermines every key activity required of a leader.

To understand what credibility means, one must explore the specific factors that contribute to establishing it within other people’s minds. Each factor needs to work toward fostering trust, confidence and believability.

Credibility is built upon the leader’s character. “Character is most determined by integrity and courage,” according to Huntsman in his book Winners Never Cheat Even in Difficult Times. “Your reputation is how others perceive you. Character is how you act when no one is watching. These traits, or lack thereof, are the foundation of life’s moral decisions. Once dishonesty is introduced, distrust becomes the hallmark of future dealings or associations.” This destroys a leader’s credibility and undermines the fragile bonds of trust.

Credibility is grounded firmly in a leader’s intellectual honesty. It is impaired if one fails to display intellectual honesty on multiple levels and to face reality and deal with problems as they arise. As Huntsman wrote: “Many leaders only want to hear the positive. … Those who never want to hear bad news don’t want to know when they are off course.”

Intellectual dishonesty breeds both cynicism and disbelief with all concerned, and undermines accountability with all key constituencies. This effectively destroys the levels of trust leaders require to be effective.

Trust

“The recession has diminished two important forms of business currency – trust and ethics,” according to the Deloitte LLP 2010 Ethics & Workplace Survey.

The survey reported that 48 percent of employed Americans who plan to seek a new job cite a loss of trust because of how their employer has managed business and operations. Workers based their judgment on how decisions were handled in the last two years. And 46 percent are driven to find new jobs because of a lack of transparent communication. Their counterparts in the executive branch also believe that trust (65 percent) and transparency (48 percent) will lead to voluntary turnover.

The two sides disconnect over ethics. Executives say they are considering how their decisions affect their workforce’s ethical behavior. But, according to the survey, 31 percent of the employees say the business environment makes it more likely that colleagues will behave unethically.

Trust has a synergetic relationship with credibility. If either one is missing or diminished, so is the other. Some of the elements that build trust with key constituencies include competence, reliability, courage, conviction, empathy and respect. These elements result in trust in the leader as a person, trust in his or her abilities, and belief that whatever the leader does or says is something that can be relied upon. Within the range of these relationships, key constituencies may trust the leader even if they don’t trust her abilities to complete a task or assignment. In other instances, since the leader has no credibility, there is no faith or confidence in anything that he does.

Emotional balance

In 1982, James Burke, CEO of Johnson & Johnson, was confronted with the news of seven poison-related deaths caused by Tylenol capsules that were laced with cyanide. He looked the facts in the face and immediately understood the gravity of the situation. Against vehement opposition from his management team, he went directly to the public. Backed with a $50 million product recall, he communicated a strong sense of concern, openness and accountability as he frequently appeared on the major television shows of the time. This contributed to restoring public trust and saved the Tylenol brand.

Burke was strong, bold and decisive, and this built a solid base of trust and confidence. He placed his legitimacy, personal stature and reputation on the line. His proactive communications brought his message to the public. By doing so, he controlled the crisis and accompanying expectations, ultimately protecting his company’s image and reputation.

My research illustrates that great leaders form a strong emotional connection to each key constituency. They incorporate both emotional ties and personal standing with each one of them. The leader’s success is attributable to this critical balance and he or she must pay close attention to maintain it. Emotional bonds with customers, employees, management and stockholders are the foundations of credibility, trust, validity and legitimacy, which are the hallmarks of great leaders.

There is a synergetic relationship and a balance between these emotional bonds. Each supports and reinforces the other. If one area fails, it contributes to the failure of the others. For example, many leaders made profit-enhancing decisions that deeply affected employees, reduced product quality and squeezed vendors and suppliers. In many instances, these decisions destroyed emotional bonds with those key constituencies while solely focusing on the emotional standing with the board and stockholders.

While in the short term these leaders were hailed and celebrated, in the long term they undermined the cohesiveness of legitimacy, validity and critical emotional bonds. Ultimately, performance suffered, and they lost their emotional standing with their stockholders. Once this occurred, they were removed from their positions unless they had the foresight to depart. Either way, they left a mess for someone else to clean up.

The great leaders make an impact through the emotional connections they have earned with their customers, employees, constituencies and stockholders. Analysis validates that emotional connections tend to begin early and continue throughout the leader’s career as she develops a personal standing with each group of key constituencies. Early emotional connections can develop into stronger bonds of trust, which give leaders the legitimacy, credibility and trust they need.

Great leaders are fallible. They make mistakes and often are subject to criticism – some valid, some triggered by an opponent’s agenda. But the analysis of the great leaders surveyed demonstrates that if they persevere and persist in their efforts, they ultimately will succeed. They do so because of the emotional support they are able to attain through the development of connections they took the time to nurture and foster throughout their careers.

The question is, “Can leaders be effective without these emotional connections?” My analysis illustrates that leaders who didn’t make all of the necessary emotional connections had their effectiveness diminished by the lack of support on multiple levels. For instance, profit-centric leaders like Al Dunlap of Sunbeam may have developed strong emotional connections with the stockholders, especially since they deliver short-term profits. But at what price?

Many of these types of leaders do so at the expense of their customers and employees. They reduce quality and dramatically downsize their workforce, only focusing on the bottom line. In the short-term they likely will be successful, but their actions undermine the legitimacy, trust and credibility required to build and manage a successful corporation.

In Dunlap’s case, he “turned Sunbeam upside down and inside out. [His plans] called for the elimination of half of the company’s 6,000 employees and 87 percent of its products. According to Sunbeam managers, it also resulted in near total chaos. In almost every case, numerous executives said, the restructuring plan cut not merely fat but muscle, leaving shortages of skilled and experienced talent throughout the corporation,” John A. Byrne wrote in Chainsaw: The Notorious Career of Al Dunlap in the Era of Profit-At-Any-Price.

Ultimately, this results in long-term problems with the loss of the customer base, along with their most productive employees. Both will vote on this leader’s performance with their feet. These actions place companies in financial jeopardy. After Dunlap was forced out of Sunbeam, the company was forced into bankruptcy.

Building emotional connections

It is not enough to state that great leaders create an emotional balance. There are primary methods they employ that directly contribute to their success.

Emotionally connecting to stockholders. One significant dimension that contributes to great leaders’ financial accomplishments is their practice of ruthless efficiency. They vigorously focused on the needs of their customers, while relentlessly concentrating on ways to improve the customer’s experience. They did this by continuously increasing quality and, at the same time, by constantly driving down costs. Many were described as ruthless and cutthroat in their business practices, but this does them a disservice. Many simply outperformed their competitors. They created a better and cheaper product, and it became the product of choice. They built both emotional and brand loyalty. They made reliable emotional connections with their customers. This is exemplified by Jeff Bezos at Amazon.

“Bezos’ strategy is one thing that hasn’t changed,” according to “The Charming Life of Amazon’s Jeff Bezos” in Fortune magazine. “Customers want three things, he says: the best selection, the lowest prices and the cheapest and most-convenient delivery. At Amazon, he explains, all decisions flow from those fundamentals.” To further emphasize this, Bezos told an interviewer at the Web 2.0 Summit in 2006: “We have to be very efficient at Amazon.com in order to offer the kinds of pricing, free shipping and things we do. We’ve always operated our infrastructure with that mentality. What we’ve done is take the things that we were really good at internally and figure out how to expose those and charge for them.”

The great leaders viewed profit as a result and not as an objective. As contrary as that seems to contemporary thinking, they perceived that if they practiced “ruthless efficiency,” the sales and profits would follow. They were correct. Their success and profitability were fueled further by growing economic trends and geographic markets.

According to Chief Executive magazine, FedEx founder Fred Smith likes to quote Pogo the Possum, who once said in a cartoon strip, “If you want to be a great leader, find a big parade and run in front of it.” Whether during the 19th, 20th or the 21st centuries, the markets were there to create great steel companies like Andrew Carnegie (Carnegie Steel) or massive online retailers like Jeff Bezos (Amazon). The great leaders have a sense of spotting Pogo’s “big parades” and capitalizing on them. Bill Gates (Microsoft) and Michael Dell (Dell Computers) did it in computers; Fred Smith (FedEx) in logistics; Sam Walton (Wal-Mart) in retailing; Herb Kelleher (Southwest Airlines) in transportation; and Kemmons Wilson (Holiday Inn) in hospitality. They consistently delivered the returns their stockholders were seeking. They made the emotional connections to their stockholders so they would provide the capital when companies needed to grow.

Emotionally connecting to employees. Great leaders spent an abundance of their time with their workers on the factory floor or directly in the workplace. They gathered and offered feedback, as well as observing working conditions. John Patterson dramatically changed the working conditions at National Cash Register after moving his office to the middle of his manufacturing facility. His original intention was to monitor quality, but working in the midst of his employees provided him with a new perspective that resulted in transforming his company.

So great leaders didn’t lead from their offices. They preferred to be on the front lines where their products were made and sold. They were accessible and observed firsthand what was going on. They looked and listened. They took advantage of the native knowledge possessed by their employees. They held a deep-seated appreciation of their employees’ contributions toward their success. Deep bonds of loyalty and trust were fostered. Over the long term, these bonds paid big dividends. When George Westinghouse of Westinghouse experienced financial difficulties in 1904, his employees rallied around him and offered to work at half-salary to help the company survive the crisis.

Great leaders also use social responsibility to connect with their employees. Before social responsibility was a popular concept, individuals like Westinghouse, Milton Hershey (Hershey Foods), Harvey Firestone (Firestone Tire), Joyce Hall (Hallmark), William Proctor (Proctor & Gamble) and John Patterson (National Cash Register) took their responsibilities to their employees very seriously.

A surprising number of leaders surveyed displayed a deep sense of social responsibility. They viewed it as good business. But more often than not, it reflected their deep-seated moral and religious values. They observed the common business practices of the time and often were repelled by existing working conditions. They introduced innovative workplace policies and incentives, such as medical and life insurance, paid vacations, employee pensions, improved wages and better working conditions, which were uncommon at the time. They respected the value of their employees and the contributions they made to their success. Samuel Gompers, founder of the American Federation of Labor (AFL), said of George Westinghouse, “If industry had been run by men like Westinghouse, there would be no need for unions,” according to George Westinghouse – Gentle Genius.

Emotionally connecting to vendors and suppliers. Great leaders believed in the partnership principle. They viewed vendors and suppliers as partners. Many leaders surveyed helped their vendors and suppliers build their businesses and improve their production facilities to serve their own needs better. They placed high expectations upon them to achieve the same quality and cost efficiencies they demanded of their own businesses. They created strong collaborative relationships to achieve this goal. Great leaders recognized that their suppliers and vendors needed to make an adequate profit so they could survive and thrive. They understood that by squeezing the profit from their vendor’s products, their own businesses ultimately would suffer due to diminishing quality. They treated vendors and suppliers with respect and built lasting emotional connections with them.

The necessary combination

No single emotional connection creates a great leader. It is the synergy created by the interconnection of all of them that makes for success. They are the sum total of who these people are as leaders. These connections show from their actions and decisions.

The final analysis reveals that the great leaders established the hallmarks of legitimacy, trust and credibility on all levels. They earned and deserved their accolades.

Timothy F. Bednarz is the CEO of American Management Development Group Inc. He has a B.A. in history from The Catholic University of America, an MBA in strategic management from Baldwin Wallace College and a Ph.D. in management from Pacific Western University. He is the author of Great! What Makes Leaders Great.

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