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Oct, 1996, Vol. 1, No. 1
Leadership and Uncertainty
We remember wartime prime ministers and presidents better than
peacetime leaders, and the same is true for company executives.
Organizational leadership matters most during a period of stress
and uncertainty. This conclusion emerges from a recent study of
48 firms among the Fortune 500 largest U.S. manufacturers. Wharton
Professor Robert J. House and colleagues asked two direct subordinates
of each of the firm's chief executives to assess the extent to
which the CEO...
- is a visionary
- shows strong confidence in self and others
- communicates high performance expectations and standards
- personally exemplifies the firm's vision, values, and standards
- demonstrates personal sacrifice, determination, persistence, and
courage
The researchers also assessed the extent to which the firms face
environments that are dynamic, risky, and uncertain. Taking into
account a company's size, sector, and other factors, they find
that these CEO leadership qualities make a significant difference
in the firm's net profit margins when the company is facing a
highly uncertain environment. When the firm is not so challenged,
however, such leadership qualities make far less of a difference.
Several practical implications follow. Your leadership matters
most when it is least clear what course you should follow. The
decisions and actions of those above, beside, and below you also
matter most when the organization is facing intensified competition
or requires strategic redirection. Yet these are the very moments
when developing leadership is least practical. Periods of normalcy
-- when strategies are working and performance is strong -- are
therefore those when the need for leadership development is least
evident but best achieved.
Source: David A. Waldman, Gabriel G. Ramirez, and Robert J. House, "CEO
Charisma and Profitability: Under Conditions of Perceived Environmental
Certainty and Uncertainty," 1996.
For requests: Professor Robert House, Department of Management, Wharton School,
University of Pennsylvania, Philadelphia, Pa. 19104-6370; tel.
215-898-2278; fax 215-573-5613.
Leadership and Story Telling
Psychologist Howard Gardner offers detailed comparison of the
leadership of Alfred P. Sloan, Eleanor Roosevelt, George C. Marshall,
Martin Luther King, Pope John XXIII, Margaret Thatcher and others.
He reports that a defining element across all is their ability
to convey persuasive stories to their followers. They achieved
their great influence through compelling accounts of where their
organizations or followers are coming from, what is to be feared,
what can be dreamed, where they ought to be going, and how to
get there.
Source: Leading Minds: An Anatomy of Leadership (New York: Basic Books/HarperCollins, 1995; paperback edition,
1996).
Leadership and Change
Wharton Executive Education is offering an open-enrollment program
in "Leading Organization Change" on November 17-22, 1996, and
June 1-6, 1997.
Information:execed@wharton.upenn.edu
In response to a summary of the paper on "CEO Charisma and Profitability:
Under Conditions of Perceived Environmental Certainty and Uncertainty"
(October, 1996, issue of the digest):
"I agree with the general premise that in times of crisis, true
leadership can be readily seen, since there may be some new steerage
of the ship that can readily be seen. But the times of crisis
are, or should be, the exception, not the rule. Programs that
are planned and executed in a non-crisis mode can also demonstrate
leadership, but it takes longer and perhaps better vision to see
it.... I know of many instances where excellent leadership was
exercised in a non-crisis environment. I would cite the leadership
of Arnold Weber at Northwestern University as an example."
-- Michael Aiken, Chancellor, University of Illinois, Champaign-Urbana
"Effective leaders delegate a good many things; they have to or
they drown in trivia. But they do not delegate...the one thing
that will make a difference, the one thing that will set standards,
the one thing they want to be remembered for. They do it."
Peter Drucker, "Not Enough Generals Were Killed!" in The Leader of the Future, edited by Frances Hesselbein, Marshall Goldsmith, and Richard
Beckhard (San Francisco: Jossey-Bass Publishers, 1996).
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